By Vicki Needham - 06/30/14 05:16 PM EDT
U.S. Bank has agreed to pay $200 million to resolve allegations about its shoddy mortgage practices insured by the Federal Housing Administration (FHA).
The Justice Department on Monday said the bank acknowledged knowingly originating and underwriting mortgages insured by the FHA that did not meet legal requirements.
As part of the settlement, U.S. Bank admitted that from 2006 through 2011 it repeatedly certified FHA insurance mortgage loans that did not meet Department of Housing and Urban Development underwriting requirements.
“U.S. Bank ignored certain lending requirements causing substantial losses to taxpayers,” said Steven M. Dettelbach, U.S. attorney for the Northern District of Ohio.
The bank also acknowledged that its quality control program did not meet FHA requirements so it failed to identify or report deficiencies in many of the loans or fix the issues.
“U.S. Bank’s lax mortgage underwriting practices contributed to home foreclosures across the country,” said Barbara McQuade, U.S. attorney for the Eastern District of Michigan.
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 settlement underscores our consistent message that following Federal Housing Administration rules for underwriting FHA-insured loans is a requirement, not an option," said Damon Smith, acting general counsel for the Department of Housing and Urban Development.