Deutsche Bank will pay $202 million to U.S. over bad loans

By Alejandro Lazo

May 10, 2012 12 AM PT

Deutsche Bank will shell out $202 million to settle claims it deceived the U.S. government about the strength of home loans it was approving under a taxpayer-backed mortgage program.

The government endured $368 million in losses after a subsidiary of Deutsche Bank approved more than 39,000 borrowers for the Federal Housing Administration’s Direct Endorsement Lender program.

The FHA, which helps fuel the mortgage market by providing loans that are insured by the federal government, had to pay claims on more than 3,200 mortgages that the subsidiary, MortgageIT, approved for that program.

“MortgageIT and Deutsche Bank treated FHA insurance as free government money to backstop lending practices that did not follow the rules,” Manhattan U.S. Atty. Preet Bharara, who brought the suit on behalf of the government, said in a statement Thursday.

The government sued in New York federal court last year seeking damages under the False Claims Act and alleging that the company repeatedly filed false certifications to the government. In the settlement, the company “admitted, acknowledged and accepted responsibility for certain conduct alleged,” the government said.

Deutsche Bank could not be immediately reached for comment.

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