Bank Hit with FCA Complaint over Mortgage Lending

more+
less-

On May 3, 2011, the U.S. Department of Justice filed a civil case against Deutsche Bank, Germany’s largest bank, asserting that Deutsche Bank was liable for more than $1 billion to the U.S. government for its statements and actions during the mortgage meltdown of the last few years.

This case is one of the few that has emerged from the mortgage crisis, and like many of the others, it’s a civil rather than a criminal case.

What’s particularly interesting is that the U.S. government is relying on the False Claims Act, a Civil War-era law that prohibits false claims against the government and that has been heavily relied on in contract disputes.

In this case, the government – this case, like many other recent filings, comes from the Southern District of New York, in Manhattan – asserts that the Frankfurt-based bank wrote mortgages for borrowers with dubious histories, then falsely certified to the Federal Housing Administration, a unit of the Department of Housing and Development that the loans were sound.

The complaint grows out of the conduct of MortgageIT, a subsidiary that Deutsche Bank owned at the time.

“Contrary to the certifications appearing on each and every mortgage endorsed by MortgageIT, MortgageIT engaged in a nationwide pattern of failing to conduct due diligence in according with HUD rules and with sound and prudent underwriting principles,” the complaint says. “MortgageIT knew that its certifications of compliance with HUD rules were false.”

Under the False Claims Act, the U.S. government can seek triple damages and penalties of more than $1 billion.

Prosecutors say that while HUD rules required Deutsche Bank and MortgageIT to implement quality control programs to prevent defaults by their borrowers, they “ignored quality control” and gave mortgages to almost anyone who applied.

Please see full article below for more information.

LOADING PDF: If there are any problems, click here to download the file.

Written by:

Published In:

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Jeff Ifrah | Attorney Advertising

Don't miss a thing! Build a custom news brief:

Read fresh new writing on compliance, cybersecurity, Dodd-Frank, whistleblowers, social media, hiring & firing, patent reform, the NLRB, Obamacare, the SEC…

…or whatever matters the most to you. Follow authors, firms, and topics on JD Supra.

Create your news brief now - it's free and easy »

All the intelligence you need, in one easy email:

Great! Your first step to building an email digest of JD Supra authors and topics. Log in with LinkedIn so we can start sending your digest...

Sign up for your custom alerts now, using LinkedIn ›

* With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name.
×
Loading...
×