Deutsche Bank Mortgage Fraud Whistleblower Case Is First of Many Coming Against Big Banks and Securities Firms

A civil fraud lawsuit by the Justice Department against Deutsche Bank and MortgageIT for repeatedly lying about the quality of mortgages they selected for inclusion in a government insurance program, is now seen as the first of several similar suits against other large banks and securities firms. As a participating lender in the government insurance program, MortgageIT (later bought by Deutsche Bank) was able to get suitable loans backed by the Federal Housing Administration. The firm certified annually that its mortgages were worthy of insurance. The charges say that the quality control process of nearly non-existent. Of the 39,000 endorsed by MortgageIT and Deutsche more than 12,500 had defaulted and one quarter of those within six months of signing. The FHA has paid $386 million in related insurance claims. The exposure to Deutshe could be around $1 billion. The Securities and Exchange Commission is apparently close to bringing several other large banks and securities firms for similar potential cases. Jeffrey A. Newman represents whistleblowers in financial fraud allegations against banks and securities firms.