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U.S. Sues Deutsche Bank Over Lending Practices

Wall Street Journal - May 3, 2011

U.S. authorities sued Deutsche Bank AG and a mortgage subsidiary for allegedly lying repeatedly about the quality of mortgages to be included in a government insurance program, so that they could profit from the resale of those mortgages.

The lawsuit, filed Tuesday in Manhattan federal court, alleges that Deutsche Bank and its MortgageIT unit "recklessly" selected mortgages that violated the rules of the Federal Housing Administration's mortgage-insurance program "in blatant disregard of whether borrowers could make mortgage payments." Those government-insured mortgages were then resold, according to the lawsuit.

The FHA program has paid more than $386 million in insurance claims and costs as of February as a result of Deutsche Bank and MortgageIT allegedly approving mortgages that didn't qualify for the program, the lawsuit said. The U.S. government expects the program will be required to pay "hundreds of millions of dollars in additional claims" in the months and years ahead, according to the lawsuit.

Read Full Article from Wall Street Journal

- Posted: 2011-05-03 11:34:00

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