As a plugged-in reader notes, the United States has filed a civil mortgage fraud lawsuit against Deutsche Bank and its wholly owned subsidiary MortgageIT for falsely certifying loans were eligible for FHA guarantees without conducting the required due diligence.
Between 1999 and 2009, MORTGAGEIT was an approved direct endorsement lender, and endorsed more than 39,000 mortgages for FHA insurance, totaling more than $5 billion in underlying principal obligations. These mortgages were highly marketable for resale to investors because they were insured by the full faith and credit of the United States. MORTGAGEIT and DEUTSCHE BANK, which acquired MORTGAGEIT in January 2007, made substantial profits through the resale of these endorsed FHA-insured mortgages.
According to the Complaint, MORTGAGEIT repeatedly made false certifications to HUD to obtain approval of mortgages that MORTGAGEIT underwriters wrongfully endorsed for FHA insurance. These mortgages were not eligible for FHA insurance under HUD rules. Notwithstanding the mortgages’ ineligibility, underwriters at MORTGAGEIT endorsed the mortgages by falsely certifying that they had conducted the due diligence required by
HUD rules when, in fact, they had not. By endorsing ineligible mortgages and falsely certifying compliance with HUD rules, MORTGAGEIT wrongfully obtained approval of these ineligible
mortgages for FHA insurance, thereby putting millions of FHA dollars at risk.
To date, FHA has paid insurance claims on more than 3,100 mortgages, totaling $386 million, for mortgages endorsed by MortgageIT.
As plugged-in people know, at the begining of 2008 FHA insured mortgages accounted for less than 0.5 percent of all Bay Area home sales, jumping to 20 percent by the end of that year. This March, the percentage was 22.4.
∙ DOJ Sues Deutsche Bank for Reckless Lending Practices [justice.gov]
∙ FHA To Tighten Its Belt, But With Its Fly Wide Open? [SocketSite]
∙ San Francisco Recorded Sales Activity Down 1.0% In March [SocketSite]