Alleging “blatant disregard” for whether or not borrowers could make loans and “repeatedly lying” in order to get into a federal program to have mortgages insured by the FHA against default, the United States government is seeking triple damages and penalties, around $1 billion, from Deutsche Bank for violating the federal False Claims Act and common law[1]. The German bank stands accused of reselling mortgages backed by the FHA based on false information and reaping profits on those mortgages repeatedly even as the borrowers were defaulting. The U.S. has already paid out hundreds of millions of dollars in insurance claims and expects to pay out hundreds of millions more.
Between 1999 and 2009, Mortgage IT, a subsidiary of Deutsche Bank, was an approved Direct Endorsement Lender for the FHA. During this time it endorsed more than 39,000 mortgages totaling $5 billion for FHA insurance[2]. The lender not only did not meet quality control standards and neglected to address deficiencies when they were reported for those mortgages and the review process, but “Deutsche Bank and its subsidiary consistently lied to HUD” in order to keep MortgageIT active as a Direct Endorsement Lender.
Deutsche Bank has stated publicly that it will fight the lawsuit, calling the allegations “unreasonable and unfair.”
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How do you think Deutsche Bank should be punished?
[1] http://www.businessweek.com/ap/financialnews/D9N020G82.htm
[2] http://www.dsnews.com/articles/united-states-sues-deutsche-bank-for-1b-over-defaulted-mortgages-2011-05-03
May 4th, 2011 at 6:53 AM
As well as civil charges, criminal charges should be pursued. The personal assets of the individuals should be seized by any persons who contrived these criminal activities.
Jim Myers
May 4th, 2011 at 7:00 AM
How many other banks did the same thing!!!!!? Or something Similar?
May 4th, 2011 at 7:02 AM
If a German bank wrote 39,000 American mortgages, that means millions of American dollars left America and went to Germany. Now, I have nothing against Germany; in fact, my husband is first-generation American of a German father. However, it does not make logical sense to allow literally millions of dollars to be funneled out of our country and go elsewhere. I’m not sure the bank should even be punished; this is the same thing our American used car lots do (on a smaller scale, of course) and get away with it. I think the answer lies in keeping American money in America, at least for the next ten years. We are bankrupt.
May 4th, 2011 at 9:16 AM
I am president of an SBA 504 Certifed Development Company, and there is plenty that FHA can do in addition to a suit and request for judgment. First they have suspended their license,but they must deny the guaranty, and seize the records. Criminal fraud charges must be filed against both Mortgage IT and Deutsche Bank. DB is being allowed to buy US banks for pennies on the dollar, even as we speak. That should be suspended immediately. Where is the Inspector General in this?
May 4th, 2011 at 3:54 PM
The homeowners, who are in default to Deutsche Bank, are their homes still being foreclosed? Or is it null and void do to the bank’s violations?
From what I can tell, homes are still being foreclosed on. However the lender is facing unrelated lawsuits from the city of Los Angeles for illegally evicting tenants, failing to maintain properties, and forcing people out so it could sell foreclosures, so it does seem possible that this thing is going to get more complicated. We’ll update you if we find out any more information. ~Carole