4 May 2011

$US1 billion suit against Deutsche Bank by US govt

8:48 am on 4 May 2011

The US Justice Department is suing Deutsche Bank for more than $US1 billion, for what it describes as years of reckless lending practices.

Deutsche and MortgageIT, one of its subsidiaries, are accused of repeatedly lying in order to benefit from a US mortgage insurance programme.

Deutsche Bank describes the claims as unreasonable and unfair and says it intends to defend them vigorously.

The lawsuit is one of the first targeting mortgage lenders under the federal False Claims Act.

The US government says MortgageIT endorsed more than 39,000 mortgages for FHA insurance that between 1999 - 2009.

It says that the lender had powerful incentives to generate as many FHA-insured loans as it could so that it could then sell them to investors.

The BBC reports Deutsche Bank bought MortgageIT for $US430 million in 2007.

The government said it has paid more than $US386 million in FHA insurance claims and related costs.