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Deutsche Bank ($45.15 -1.215%) settled a lawsuit filed against it by the U.S. government for $202.3 million that alleged a Deutsche subsidiary failed to meet Federal Housing Administration underwriting guidelines.
The settlement is the latest development of cases involving FHA-backed mortgages.
The government’s suit alleged that a Deutsche Bank subsidiary, MortgageIT, led a “decade of misconduct” in the FHA program, according to a news release from the office of the U.S. Attorney for the Southern District of New York.
MortgageIT, through the settlement, acknowledged that it submitted loans that did not meet underwriting requirements and were not eligible for the FHA program.
Authorities announced the settlement Thursday, roughly a year after the government filed its suit against the two companies.
Deutsche Bank acquired MortgageIT in 2007, and the FHA has paid $368 million in insurance claims since 1999 on mortgages written by the subsidiary. The agency paid claims on roughly 8% of 39,000 MortgageIT-endorsed loans in that time.
The government has settled with at least three other companies regarding FHA claims — for $158.3 million with Citigroup ($49.63 -0.38%) and $132.8 million with Flagstar Bank ($13.63 -0.25%). The Department of Housing and Urban Development also announced a $500 million settlement with Bank of America ($13.29 0.02%) when the $25 billion mortgage servicing settlement was first revealed.
Another suit against Allied Home Mortgage remains outstanding.
The former head of Allied Home Mortgage, Jim Hodge, has reportedly already started a new company called AllQuest Home Mortgage Corp., originating loans sans FHA insurance.
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