U.S. Bank Reaches $200 Million Settlement With Government for FHA Violations – NMP Skip to main content

U.S. Bank Reaches $200 Million Settlement With Government for FHA Violations

Jul 01, 2014

U.S. Bank has agreed to pay the United States $200 million to resolve allegations that it violated the False Claims Act by knowingly originating and underwriting mortgage loans insured by the Federal Housing Administration (FHA) that did not meet applicable requirements, the Justice Department announced. “By misusing government programs designed to maintain and expand homeownership, U.S. Bank not only wasted taxpayer funds, but inflicted harm on homeowners and the housing market that lasts to this day,” said Assistant Attorney General for the Justice Department’s Civil Division Stuart F. Delery.  “As this settlement shows, we will continue to hold accountable financial institutions that violate the law by pursuing their own financial interests at the expense of hardworking Americans.” “U.S. Bank ignored certain lending requirements causing substantial losses to taxpayers,” said United States Attorney for the Northern District of Ohio Steven M. Dettelbach. “This settlement demonstrates that the Department of Justice will not permit lenders to play fast and loose with the rules and stick the American people with their significant tab.” “U.S. Bank’s lax mortgage underwriting practices contributed to home foreclosures across the country,” said United States Attorney for the Eastern District of Michigan Barbara L. McQuade. “This settlement recovers funds for taxpayers and demonstrates that lenders will be held accountable for engaging in irresponsible lending practices.” During the time period covered by the settlement, U.S. Bank participated as a direct endorsement lender (DEL) in the FHA insurance program. A DEL has the authority to originate, underwrite, and certify mortgages for FHA insurance. If a loan certified for FHA insurance later defaults, the holder of the loan may submit an insurance claim to the U.S. Department of Housing and Urban Development (HUD), FHA’s parent agency, for the losses resulting from the defaulted loan. Because FHA does not review a loan before it is endorsed for FHA insurance, FHA requires a DEL to follow program rules designed to ensure that the DEL is properly underwriting and submitting mortgages for FHA insurance. As part of the settlement, U.S. Bank admitted that, from 2006 through 2011, it repeatedly certified for FHA insurance mortgage loans that did not meet HUD underwriting requirements. U.S. Bank also admitted that its quality control program did not meet FHA requirements, and as a result, it failed to identify deficiencies in many of the loans it had certified for FHA insurance, failed to self-report many deficient loans to HUD, and failed to take the corrective action required under the program. U.S. Bank further acknowledged that its conduct caused FHA to insure thousands of loans that were not eligible for insurance and that the FHA suffered substantial losses when it later paid insurance claims on those loans. “This substantial recovery on behalf of the Federal Housing Administration should serve as a vivid reminder of the potential consequences of not following HUD program rules, and the diligence with which we will pursue those that violate them, particularly where lenders such as U.S. Bank take actions to compromise the insurance fund,” said David A. Montoya, Inspector General of the Department of Housing and Urban Development. “We are gratified that U.S. Bank has agreed to put this matter behind it, and we want to thank the Department of Justice and HUD’s Office of Inspector General for all of their efforts in helping us make this settlement a reality,” said Damon Smith, Acting General Counsel for the U.S. Department of Housing and Urban Development. “This settlement underscores our consistent message that following Federal Housing Administration rules for underwriting FHA-insured loans is a requirement, not an option.” The agreement resolves potential violations of federal law based on U.S. Bank’s deficient origination of FHA insured mortgages. The agreement does not prevent state and federal authorities from pursuing enforcement actions for other origination conduct by U.S. Bank, or for any servicing or foreclosure conduct, including civil enforcement actions against U.S. Bank for violations of the CFPB’s new mortgage servicing rules that took effect on Jan. 10, 2014. U.S. Bank is a banking services company headquartered in Cincinnati, Ohio, and a wholly owned subsidiary of U.S. Bancorp, a bank holding company headquartered in Minneapolis, Minnesota. The settlement was the result of a joint investigation conducted by HUD, its Office of Inspector General, the Civil Division of the Department of Justice, and the United States Attorney’s Offices for the Northern District of Ohio and the Eastern District of Michigan.
Jul 01, 2014
Markets Anxious As Fed Opens 2-Day Meeting

Investors, mortgage brokers & bankers await latest policy statement on fighting inflation

Regulation and Compliance
Jan 25, 2022
Ginnie Mae Streamlines FHA Advanced Loan Modification program

Documentation changes eliminate requirements for recordation and title insurance.

Regulation and Compliance
Jan 24, 2022
'A Long Road To Normal'

Nominated again to lead The Fed, Powell tells Senate committee to expect three rate hikes, but 'if we have to raise interest rates more over time, we will.'

Regulation and Compliance
Jan 11, 2022
CFPB: Complaint Response Worsens At Big 3 Credit Bureaus

Report claims Equifax, Experian, and TransUnion routinely failed to fully respond to consumers with errors.

Regulation and Compliance
Jan 10, 2022
The Fed Names Chairs, Deputy Chairs For 12 Reserve Banks

In recent years, the Federal Reserve System has worked to increase the overall diversity of the Reserve Bank and branch boards of directors and continues to build on those efforts.

Regulation and Compliance
Jan 06, 2022
The Fed: Rate Hike Likely Coming in June

Federal Open Market Committee's December minutes reveal discussion of first hike in federal funds rate in 2Q of 2022, as well as of ending asset purchases by March.

Regulation and Compliance
Jan 05, 2022