Government sues Deutsche Bank over bad home loans
By Zachary Roth
Tue May 3, 3:29 pm ET
THE LOOKOUT
According to the complaint, MortgageIT, a unit of Deutsche Bank, issued more than 39,000 such loans between 1999 and 2009, worth more than $5 billion. Because the loans had won government backing, the bank was then able to turn around and sell them to investors--in the same fashion that other Wall Street forms were repackaging home loans as investment securities.
But in order to win the crucial cachet of an FHA-guaranteed mortgage, MortgageIT and Deutsche Bank had to file yearly certifications, affirming that the loans met HUD's standards. And federal prosecutors now allege that when the bank filed those documents, it "repeatedly lied to H.U.D. to obtain and maintain MortgageIT's Direct Endorsement Lender status." In part, the federal indictment alleges, the bank did not actually monitor the default rate of the securitized loans, even though it claimed to be doing so.
As far back as 2003, a HUD audit found that MortgageIT hadn't met basic standards of quality control. In response, the company assured the government that it had changed its practices. But, according to the complaint, that wasn't true.
Wednesday, May 04, 2011
ANOTHER CIVIL SUIT AGAINST THE BANKSTERS
This time it's Deutsche Bank which in 2007 had the bad idea to acquire a really crooked mortgage firm, MortgageIT.
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2 comments:
"Of course fraud is more than just a civil issue. If intent can be proved then it can be a criminal issue as well, and if two or more people conspired together to commit it, this is commonly known as "Racketeering."
Notice, however, that the government both isn't filing criminal charges nor is it chasing the treble-damage Racketeering charge. As such we're still in the world where it's simply a "cost of doing business" when you get caught ripping people off - do it all you want, but just pay a fine.
Until this pattern changes the business computation is simple: Commit all the crimes you want if you're a bank, since at worst you'll just have to give back the loot when you get caught."
Denninger at Market Ticker yesterday.
Commit all the crimes you want if you're a bank, since at worst you'll just have to give back the loot when you get caught."
Yup, this is another case of the Free Market Fairy failing us.
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