Another U.S. financial firm has agreed to settle allegations from the federal government related to inadequate mortgage underwriting practices.
The U.S. Justice Department announced today that Cincinnati-based U.S. Bank has agreed to pay US$200 million to resolve allegations that it violated federal law by knowingly originating and underwriting mortgage loans insured by the Federal Housing Administration (FHA) that did not meet FHA requirements.
As part of the settlement, the bank admitted that from 2006 through 2011, it repeatedly certified FHA insurance mortgage loans that did not meet underwriting requirements. It also admitted that its quality control program did not meet FHA requirements, and as a result, it failed to identify deficiencies in many of the loans it had certified for FHA insurance, failed to self-report many deficient loans, and failed to take the corrective action required under the program.
As a result, the bank acknowledged that its conduct caused FHA to insure thousands of loans that were not eligible for insurance and that the FHA suffered substantial losses when it later paid insurance claims on those loans.
“By misusing government programs designed to maintain and expand homeownership, U.S. Bank not only wasted taxpayer funds, but inflicted harm on homeowners and the housing market that lasts to this day,” said Stuart Delery, assistant U.S. attorney general for the Justice Department’s civil division. “As this settlement shows, we will continue to hold accountable financial institutions that violate the law by pursuing their own financial interests at the expense of hardworking Americans.”
”U.S. Bank’s lax mortgage underwriting practices contributed to home foreclosures across the country,” added U.S. attorney for the Eastern District of Michigan, Barbara McQuade. “This settlement recovers funds for taxpayers and demonstrates that lenders will be held accountable for engaging in irresponsible lending practices.”