The federal government has simultaneously filed and settled a civil fraud lawsuit against Flagstar Bank FSB, alleging that the lender improperly approved residential home mortgage loans for government insurance.
Under the terms of the settlement, the Troy, Mich.-based Flagstar agreed to pay $132.8 million to the government in damages and penalties under the False Claims Act.
‘[This] is another stark example of how certain lenders put profit ahead of responsibility by recklessly churning out mortgage loans without regard to the risk that those loans would default or the significant consequences for the individual homeowners who would inevitably default on their loans, the housing market, and in the aggregate, our nation's economy,’ says Manhattan U.S. Attorney Preet Bharara. ‘Flagstar has accepted responsibility for its conduct, and committed to reform its business practices to ensure compliance with [Department of Housing and Urban Development] requirements. Participation in this federally subsidized program is a privilege, not a right, and the cases this office has filed against banks that abuse this privilege should underscore our commitment to holding them to account.’