Feds Sue Deutsche Bank Over Bad Mortgages

Posted on May 3, 2011

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The U.S. government is looking to recoup as much as $1 billion in anticipated losses it says were caused by Deutsche Bank’s reckless lending practices. Prosecutors in New York are making the case that the bank and subsidiary MortgageIT knowingly provided thousands of government-backed loans to unqualified borrowers, then lied about it when confronted by officials. The government has been slow to file claims against banks involved in the mortgage crisis but may now be gaining momentum.  —KDG

The New York Times:

The bank had “powerful financial incentives to invest resources into generating as many F.H.A.-insured mortgages as quickly as possible for resale to investors,” the complaint says. “By contrast, Deutsche Bank and MortgageIT had few financial incentives to invest resources into ensuring the quality of its F.H.A.-insured mortgages.”

At a news conference, the United States attorney for the Southern District of New York, Preet Bharara, said that Deutsche and MortgageIT had “indulged in the worst of the industry’s lending practices.”

The defendants ignored every red flag, he said, and “repeatedly abused the public’s trust.”

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