Post by Minou on Jul 16, 2011 4:33:07 GMT 4
July 12 (Bloomberg) -- Deutsche Bank AG, Germany’s biggest bank, and its MortgageIT unit are seeking dismissal of a $1 billion suit by the U.S. government claiming they lied to qualify thousands of risky mortgages for a government insurance program.
The U.S. claims Deutsche Bank and MortgageIT falsely certified that they properly assessed the default risk of borrowers, qualifying loans for insurance by the Housing and Urban Development Department’s Federal Housing Administration, according to a complaint filed May 3 in Manhattan federal court.
“The complaint is long on unsupported and conclusory rhetoric but short on facts and legal underpinnings,” Deutsche Bank argued in a court filing yesterday. “It utterly fails to state any basis on which to hold Deutsche Bank liable for alleged conduct that occurred before it acquired MortgageIT and in which it had no involvement.”
The U.S. sued under the False Claims Act, which permits it to seek triple damages and penalties of more than $1 billion.
The government claims Deutsche Bank and MortgageIT masked problem loans through “egregious” violations of HUD rules for analyzing the income and creditworthiness of borrowers. MortgageIT endorsed more than 39,000 loans for FHA insurance after 1999, making them “highly marketable for resale,” the U.S. claimed. Of those, 12,500 defaulted.
Ellen Davis, a spokeswoman for U.S. Attorney Preet Bharara in Manhattan, declined to comment on the filing.
Case Targets Statements
The government’s case targets statements made by Deutsche Bank and MortgageIT made as participants in the FHA’s Direct Endorsement Lender Program.
Frankfurt-based Deutsche Bank, which acquired MortgageIT in 2007, argued that it’s not legally responsible for any liability tied to MortgageIT’s operations. MortgageIT stopped lending to homebuyers shortly after the acquisition, according to the court filing.
Both defendants argued that the False Claims Act doesn’t authorize the government to impose liability based on allegedly false certifications made by a MortgageIT official about compliance with the requirements of the Direct Endorsement Lender Program.
The case is U.S. v. Deutsche Bank AG, 11-cv-2976, U.S. District Court, Southern District of New York (Manhattan).
The U.S. claims Deutsche Bank and MortgageIT falsely certified that they properly assessed the default risk of borrowers, qualifying loans for insurance by the Housing and Urban Development Department’s Federal Housing Administration, according to a complaint filed May 3 in Manhattan federal court.
“The complaint is long on unsupported and conclusory rhetoric but short on facts and legal underpinnings,” Deutsche Bank argued in a court filing yesterday. “It utterly fails to state any basis on which to hold Deutsche Bank liable for alleged conduct that occurred before it acquired MortgageIT and in which it had no involvement.”
The U.S. sued under the False Claims Act, which permits it to seek triple damages and penalties of more than $1 billion.
The government claims Deutsche Bank and MortgageIT masked problem loans through “egregious” violations of HUD rules for analyzing the income and creditworthiness of borrowers. MortgageIT endorsed more than 39,000 loans for FHA insurance after 1999, making them “highly marketable for resale,” the U.S. claimed. Of those, 12,500 defaulted.
Ellen Davis, a spokeswoman for U.S. Attorney Preet Bharara in Manhattan, declined to comment on the filing.
Case Targets Statements
The government’s case targets statements made by Deutsche Bank and MortgageIT made as participants in the FHA’s Direct Endorsement Lender Program.
Frankfurt-based Deutsche Bank, which acquired MortgageIT in 2007, argued that it’s not legally responsible for any liability tied to MortgageIT’s operations. MortgageIT stopped lending to homebuyers shortly after the acquisition, according to the court filing.
Both defendants argued that the False Claims Act doesn’t authorize the government to impose liability based on allegedly false certifications made by a MortgageIT official about compliance with the requirements of the Direct Endorsement Lender Program.
The case is U.S. v. Deutsche Bank AG, 11-cv-2976, U.S. District Court, Southern District of New York (Manhattan).