The U.S. is suing Deutsche Bank AG and subsidiary MortgageIT Inc. for repeatedly providing false certifications to the U.S. Department of Housing and Urban Development (HUD) in connection with the mortgage origination and sponsorship practices of MortgageIT. To date, the Federal Housing Administration (FHA) has paid insurance claims on more than 3,100 mortgages, totaling $386 million, for mortgages endorsed by MortgageIT.
The civil mortgage fraud lawsuit, which seeks damages and civil penalties under the False Claims Act, was filed in Manhattan federal court. It was announced Tuesday by officials from HUD and the U.S. Justice Department.
According to the government's complaint, underwriters with MortgageIT, a direct-endorsement lender from 1999 to 2009, wrongfully endorsed mortgages for insurance even though they were ineligible under HUD rules. Underwriters at the company falsely certified that they had conducted the due diligence required by HUD when they had not.
MortgageIT and Deutsche Bank also failed to implement quality-control procedures required of direct-endorsement lenders, but certified the QC steps had been taken, the complaint further alleges.
"As alleged, MortgageIT and Deutsche Bank ignored every type of red flag and breached every duty of due diligence before underwriting thousands of federally insured mortgages," said Preet Bharara, U.S. attorney for the Southern District of New York, in a statement. "While the homes the defendants issued loans for may have been built on solid ground, the defendants' lending practices were built on quicksand.’
The government's complaint seeks treble damages and penalties under the False Claims Act for the insurance claims already paid by HUD for mortgages wrongfully endorsed by MortgageIT through the false statements of Deutsche Bank and MortgageIT. The U.S. is also seeking compensatory and punitive damages.