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Home - Top News
May 03, 2011 10:50 AM

Deutsche Bank Faces U.S. Fraud Lawsuit Over Mortgage Lending

May 3 (Bloomberg) -- Deutsche Bank AG, Germany's biggest bank, was sued for more than $1 billion by the U.S. government for allegedly selecting mortgages 'recklessly' for inclusion in a government insurance program.

The Frankfurt-based bank and its MortgageIT unit violated the U.S. False Claims Act by presenting fraudulent data to obtain mortgage insurance from the Federal Housing Administration of the U.S. Housing and Urban Development Department, according to a complaint filed today by the Justice Deppartment in Manhattan federal court.

'While Deutsche Bank and MortgageIT profited from the resale of these government-insured mortgages, thousands of American homeowners have faced default and eviction, and the government has paid hundreds of millions of dollars in insurance claims, with hundreds of millions of dollars more expected to be paid in the future,' according to the complaint.

Deutsche Bank paid $429 million in January 2007 to buy MortgageIT and shuttered it the next year.

'We just received the complaint and are reviewing it,' Renee Calabro, a bank spokeswoman, said in an e-mail. 'We believe the claims against MortgageIT and Deutsche Bank are unreasonable and unfair.' The bank said it would fight the suit.

Insurance Claims

As of February, HUD had paid more than $386 million in FHA insurance claims and related costs arising from Deutsche Bank- approved mortgages, according to the complaint. Under the False Claims Act, the U.S. can seek triple damages and penalties, meaning it could demand more than $1 billion.

Deutsche Bank fell as much as 3.7 percent in Frankfurt trading. The shares declined 3.2 percent, or 1.43 euros, to 42.77 euros at 4:43 p.m. local time.

U.S. Attorney Preet Bharara will hold a news conference at 1 p.m. in New York. Those speaking will include Dane Narode, associate general counsel for program enforcement for HUD, and Rene Febles, special agent in charge of HUD's office of inspector general.

The case is U.S. v. Deutsche Bank AG, 11-cv-2976, U.S. District Court, Southern District of New York (Manhattan).

To contact the editor responsible for this story: Michael Hytha at

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