• Germany's news in English

US prosecutors: Deutsche Bank was aware of mortgage fraud

The Local · 24 Aug 2011, 07:52

Published: 24 Aug 2011 07:52 GMT+02:00

Facebook Twitter Google+ reddit

The US Department of Justice detailed the allegations in an amended lawsuit filed this week with a New York court, hitting back at Deutsche Bank's claim that it was not responsible for the actions of MortgageIT, a home finance business it took over in January 2007.

"Following the merger, MortgageIT continued its wrongful conduct. And, it did so with the knowledge and/or participation of Deutsche Bank," the department said.

The department is seeking more than $1 billion in damages from the German banking giant over alleged fraud committed by Mortgage IT, which was a major mortgage lender before the 2007-08 collapse of the US housing market.

In its lawsuit originally filed in May, the department accused MortgageIT of failing to follow proper quality-control procedures when it insured home loans with the US Federal Housing Administration (FHA).

Of the 39,000 home loans worth more than $5 billion that MortgageIT insured with the FHA prior to 2009, nearly 13,000 are now in default, leaving US taxpayers to pay the bill, the department says.

In Monday's amended filing, the department said about 30 percent of the FHA-insured loans that MortgageIT originated before Deutsche Bank took over ended up in default.

After January 2007, the Justice Department said, the problem only "got worse", with the percentage that went bad rising to 46 percent.

Story continues below…

The rampant issuing of mortgages to unqualified borrowers unable to repay them fuelled a bubble in US home prices that popped in 2007-08, triggering the global financial crisis.


The Local (news@thelocal.de)

Facebook Twitter Google+ reddit

Your comments about this article

08:47 August 24, 2011 by marimay
I remember going to the bank to open an account and couldn't because I didn't have two forms of ID. What counted as "ID"? A gym membership, a costco card, a school ID. LOL easily faked identification which could be easily obtained without being a legal citizen of the US. And, while in the banks, seeing signs saying you could get a mortgage without a credit/ background check was disturbing to me even at 18.

I saw this coming long before it happened. Why was this allowed to happen in the first place? It irritates the hell out of me.

Ah well, no matter. I am house hunting now that the prices are less than half ;)
09:10 August 24, 2011 by storymann
marimay, interesting. They were not concerned as the mortgages were being sold immediately out the back door.

Greed is not restricted by borders.

All one can say to DB is guns,lawyers nor money will not get you out of this.
09:30 August 24, 2011 by twisted
If there is sufficient proof of guilt, I hope they get burned and burned badly. Bankers need to sit up and take notice that banks are NOT there for their private profit but to provide a service to the customers. Swindling them is not one of the services.
12:09 August 24, 2011 by pepsionice
I worked with people who bought houses in the US around 2000, and sold them four years later for a twenty-five percent profit. At the time, I thought this was unsustainable and had to have consequences down the road. Most areas of the US....you bought a house and ten years later....it might have gone up three percent. There were a lot of things which made no sense.
14:17 August 24, 2011 by authun
The governmental bankhunt is basically Goldmann Sachs weakening their competitors as their own reps pull the strings.


Be sure that your scolding will stop these criminals.
06:59 September 1, 2011 by parografik
Remember also, that the US bailed out AIG, and Deutsche Bank got 100 pennies on the dollar, not to mention they just turned a handy profit on the recent public offering of AIG stock.

As an example here, Deutsche Bank didn't have these issues in Germany because financial regulations wouldn't allow this kind of mortgage shell game. Which probably a major reason why the German economy is holding up so well, it wasn't resting on a pile of financial BS the way the US and many European economies were.

Just pay up and shut up DB, or the U.S. justice department should move to freeze your assets in US holdings.
Today's headlines
Five things not to miss at the Frankfurt Book Fair
Photo: DPA

From consulting a book doctor to immersing yourself in an author's world with the help of virtual reality, here are five things not to miss at this week's Frankfurt Book Fair, the world's largest publishing event.

Parents who don't get nursery spot for kid entitled to pay
Photo: DPA

The Federal Court of Justice (BGH) ruled on Thursday that parents whose children don't receive placements in nursery care are entitled to compensation.

Eurowings braces as cabin crew union proclaims strike
Photo: DPA

A union representing cabin crew for Lufthansa's budget airline Eurowings announced that strikes could take place at any time over the next two weeks, starting on Monday.

Mysterious German U-boat wreckage found off Scotland
Photo: ScottishPower

First World War U-boat "attacked by sea monster” thought to be found off Scottish coast.

Supermarket Edeka warns of exploding apple juice bottles
Photo: DPA

"Risk of injury" from "Gut und Günstig" sparkling apple juice bottles has forced Germany's largest supermarket to recall the product.

By wheelchair from Syria to Germany: teen's story of hope
Nujeen Mustafa. Photo: HarperCollins-William Collins Publicity/Private

She tackled the gruelling 2,000-kilometre migrant trail in a wheelchair, translating along the way for other refugees using English she learned from a US soap opera. Now this teen is living in Germany and hoping to inspire others with a newly published memoir.

Berlin Zoo to have a pair of pandas by next summer
A recently born panda pair at Vienna Zoo. Photo: DPA

The giant bamboo-eating bears will move into a brand new 5,000 square-metre enclosure in the capital's Zoologischer Garten.

Two new spider species discovered in Munich
Zoropsis spinimana. Photo: rankingranqueen / Wikimedia Commons

It's news every arachnophobe in Munich is no doubt thrilled to hear: two types of spider new to the region have been discovered in the Bavarian capital - and one of them bites!

After woman's body found in barrel, husband may walk free
Franziska S., who went missing 24 years ago. Photo: Hanover police.

A woman disappeared in Hanover 24 years ago, but no one reported her missing. Although her husband has now confessed to her murder, he still may not step foot in jail.

Two injured after army tank falls 50 metres in Alps
A Bundeswehr Puma tank. File photo: DPA

A Bundeswehr (German army) soldier has been severely injured after the tank he was riding in crashed 50 metres down an embankment after going off course in bad weather.

Sponsored Article
How to vote absentee from abroad in the US elections
10 things you never knew about socialist East Germany
Sponsored Article
Last chance to vote absentee in the US elections
How Germans fell in love with America's favourite squash
How I ditched London for Berlin and became a published author
Sponsored Article
How to vote absentee from abroad in the US elections
12 clever German idioms that'll make you sound like a pro
23 fascinating facts you never knew about Berlin
9 unmissable events to check out in Germany this October
10 things you never knew about German reunification
10 things you're sure to notice after an Oktoberfest visit
Germany's 10 most Instagram-able places
15 pics that prove Germany is absolutely enchanting in autumn
10 German films you have to watch before you die
6 things about Munich that’ll stay with you forever
10 pieces of German slang you'll never learn in class
Ouch! Naked swimmer hospitalized after angler hooks his penis
Six reasons why Berlin is now known as 'the failed city'
15 tell-tale signs you’ll never quite master German
7 American habits that make Germans very, very uncomfortable
Story of a fugitive cow who outwitted police for weeks before capture
Eleven famous Germans with surnames that'll make your sides split
The best ways to get a visa as an American in Germany
jobs available
Toytown Germany
Germany's English-speaking crowd