Bloomberg is reporting Deutsche Bank is being sued by the U.S. government for $1 billion over mortgage fraud lending.
Deutsche Bank AG, Germany’s biggest bank, was sued for more than $1 billion by the U.S. government for allegedly selecting mortgages “recklessly” for inclusion in a government insurance program.
The Frankfurt-based bank and its MortgageIT unit violated the U.S. False Claims Act by presenting fraudulent data to obtain mortgage insurance from the Federal Housing Administration of the U.S. Housing and Urban Development Department
Seems Deutsche Bank hoodwinked the government and used them to insure a host of worthless mortgages and then collected on the insurance when those mortgages defaulted.
$1 Billion is a drop in the bucket, but the fraudulent amount in question is $386 million in FHA insurance claims, paid by HUD.
The Wall Street Journal reports mortgage reviews were stuffed into a closet by Deutsche Bank. And you thought your receipts in a shoebox were bad.
More than 39,000 mortgages that Mortgage IT endorsed for HUD’s mortgage-insurance program, FHA, about one third of them defaulted. The government says that when an outside auditor showed MortgageIT its findings about serious problems in its mortgages, the auditor’s findings were literally shoved in a closet.
In other words, an outside consultant group reviewed the underwriting of these mortgages and instead of even reading the reports, they were stuffed, unopened, into a closet.
Yes, this is our great global financial system at work.