FHA Lending Fraud Bust Leads to $202 Million Deutsche Bank Settlement

The Department of Housing and Urban Development announced a $202 million Deutsche Bank settlement this week for the bank’s actions in a civil fraud case involving Federal Housing Administration direct lending. 

The lawsuit, filed in May 2011, sought damages and penalties of Deutsche Bank for false certifications under the company’s Mortgageit subsidiary over a period of time beginning in 2007. 

“Among other things, the suit accused the defendants of having submitted false certifications to HUD, including false certifications that Mortgageit was originating mortgages in compliance with HUD rules when in fact it was not,” according to a statement from the U.S. Attorney’s Office. 

The company admitted to the fraudulent activity, which included stating certain loans were eligible for FHA mortgage insurance when they were not, and leading to HUD losses in the case of loans that defaulted. 

“Mortgageit and Deutsche Bank treated FHA insurance as free Government money to backstop lending practices that did not follow the rules,” said Manhattan U.S. Attorney Preet Bharara. “Participation in the Direct Endorsement Lender program comes with requirements that are not mere technicalities to be circumvented through subterfuge as these defendants did repeatedly over the course of a decade.”

Written by Elizabeth Ecker

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