U.S. Government Sues Deutsche Bank
MICHELE NORRIS, host:
The government is accusing Deutsche Bank and one of its subsidiaries of mortgage fraud after a decade of what prosecutors describe as reckless lending practices. As NPR's Tamara Keith reports, the government says the fraud has cost hundreds of millions of dollars.
TAMARA KEITH: The civil fraud suit alleges that Deutsche Bank and its subsidiary, Mortgage IT, made thousands of bad loans through the Federal Housing Administration Mortgage Insurance program.
But Preet Bharara, U.S. attorney for the Southern District of New York says many of those loans never should have been made.
Mr. PREET BHARARA (U.S. Attorney, Southern District of New York): Borrower after borrower defaulted, often within just months of closing, because those loans were doomed to fail.
KEITH: The suit alleges Mortgage IT quote, "knowingly, wantonly, and recklessly permitted egregious underwriting violations to continue unabated." Bharara says it even continued after an outside auditor discovered problems.
Mr. BHARARA: But that auditor's findings were remarkably stuffed in a closet unopened and still sealed for months.
KEITH: The government says it has paid nearly $400 million in insurance claims as a result of Mortgage IT's bad loans. Deutsche Bank issued a statement saying 90 percent of the alleged violations happened before it acquired Mortgage IT. It said the claims are unreasonable and unfair.
Helen Kanovsky, general counsel of the Department of Housing and Urban Development, says there will likely be more cases like this to come.
Ms. HELEN KANOVSKY (Department of Housing and Urban Development): To the extent that there are those out there that are engaged in this kind of fraudulent activity, we're going to identify it, and we, along with the Justice Department, are going to pursue it.
KEITH: In this case, the government is seeking more than a billion dollars in damages.
Tamara Keith, NPR News, Washington.
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