"On May 3, the United States government has filed a civil mortgage fraud lawsuit against Deutsche Bank AG and its wholly owned subsidiary, MortgageIT Inc. The complaint seeks damages and civil penalties under the False Claims Act for what it alleges were repeated false certifications made to the Department of Housing and Urban Development (HUD) in connection with the residential 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.
" '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. 'While the homes the defendants issued loans for may have been built on solid ground, the defendants’ lending practices were built on quicksand. Ultimately, prudence was trumped by profit, and good faith took a back seat to good fees.'
"Court documents state that 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 U.S. government. MortgageIT and Deutsche Bank, which acquired MortgageIT in January 2007, made substantial profits through the resale of these endorsed FHA-insured mortgages."