On Tuesday, May 3, the Deutsche Bank was sued by the federal government, represented by US Attorney Preet Bharara. The bank has been accused of committing fraud and getting undeserved income by repeatedly lying so that it could benefit from insured mortgages provided by a government program.
The lawsuit, which is taking place in US District Court in Manhattan, seeks to get back insurance claims that the government had to pay to homeowners that defaulted on their mortgages. These claims are worth hundreds of millions of dollars, and according to the government, between 2007 and 2009, Deutsche Bank was able to reap large profits from the reselling of mortgages that were risky, which left the Federal Housing Administration to pay for all of the loans that defaulted. In total, the US is seeking for more than $1 billion in the suit, including fines and punitive damages.
According to the lawsuit, the fraud was carried out by Deutsche Bank through MortgageIT, its subsidiary, which was acquired by the bank in 2007. MortgageIT had branches in all 50 states and had more than 2,000 people working for it.
Bharara said in a news conference that the bank and company it acquired “…indulged in the worst of the industry’s reckless lending practices.” He went on to say, “They often seemed to treat red flags as though they were green lights.”
Deutsche Bank is determined to fight the lawsuit, according to a statement by Renee Calabro, spokeswoman for the bank. She went on to say that about 90 percent of what was described in the lawsuit happened before MortgageIT was acquired by Deutsche Bank.
According to Calabro, “We believe the claims against MortgageIT and Deutsche Bank are unreasonable and unfair, and we intend to defend against the action vigorously.”