Tags: US | Sues | Deutsche Bank | Alleges | Mortgage | Fraud

US Sues Deutsche Bank, Alleges Mortgage Fraud

Tuesday, 03 May 2011 10:33 AM

The United States sued Deutsche Bank AG, accusing the German bank and its MortgageIT Inc unit of repeatedly lying to be included in a federal program to select mortgages to be insured by the government.

In a civil complaint filed in U.S. District Court in Manhattan, the government said that defendants recklessly chose mortgages that violated program rules "in blatant disregard" of whether borrowers could make mortgage payments.

The lawsuit seeks triple damages and other penalties for violations of the federal False Claims Act.

Deutsche Bank had no immediate comment on the complaint. The bank's shares were down 2.6 percent in late afternoon trading in Frankfurt.

According to the complaint, MortgageIT from 1999 to 2009 endorsed in excess of 39,000 mortgages with principal totaling more than $5 billion for Federal Housing Administration insurance, meaning they were backed by the federal government.

The government said the defendants profited from the resale of the mortgages, even as thousands of U.S. homeowners faced default and eviction. It said it has paid out more than $386 million of FHA insurance claims and related costs, and expects to pay out hundreds of millions of dollars more.

"Deutsche Bank and MortgageIT had powerful financial incentives to invest resources into generating as many FHA-insured mortgages as quickly as possible for resale to investors," the complaint said.

"By contrast, Deutsche Bank and MortgageIT had few financial incentives to invest resources into ensuring the quality of its FHA-insured mortgages."

Deutsche Bank bought MortgageIT in 2007, the complaint said.

The case is U.S. v. Deutsche Bank AG et al, U.S. District Court, Southern District of New York, No. 11-02976.

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The United States sued Deutsche Bank AG, accusing the German bank and its MortgageIT Inc unit of repeatedly lying to be included in a federal program to select mortgages to be insured by the government. In a civil complaint filed in U.S. District Court in Manhattan, the...
US,Sues,Deutsche Bank,Alleges,Mortgage,Fraud
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2011-33-03
Tuesday, 03 May 2011 10:33 AM
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