The US Justice Department has sued Deutsche Bank for more than $1bn (£600m) for defrauding the government. The bank responded that it would defend itself vigorously.The complaint says Deutsche's MortgageIT subsidiary lied in order to get Federal Housing Administration (FHA) insurance for its loans.
FHA rules say lenders must make sure the borrower will be able to repay the loan, but the Justice Department claims Deutsche did not do so.A Deutsche spokesperson described the claims as "unreasonable and unfair". "We intend to defend against the action vigorously," she added.
The lawsuit is one of the first targeting mortgage lenders under the federal False Claims Act.
The government says that between 1999 and 2009, MortgageIT endorsed more than 39,000 mortgages for FHA insurance.It says that the lender had powerful incentives to generate as many FHA-insured loans as it could so that it could then sell them on to investors.
Deutsche Bank bought MortgageIT for $430m in 2007.
The government said it had paid out more than $386m in FHA insurance claims and related costs.
The global financial crisis was sparked by mortgages being given to people who could not afford them, with the debt then being repackaged and sold on to investors. The US government has been trying to hold the mortgage industry responsible for the crisis as well as the housing slump and large numbers of foreclosures.
No comments:
Post a Comment