Warren asks DOJ to explain 'timid' FHA settlement

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The federal government and 49 state attorneys general  struck a $25 billion settlement against some of the nation's largest banks in March, following widespread abuses in the housing market and foreclosure process. A portion of that settlement was set aside to address potentially false insurance claims filed with the FHA. But in Warren's eyes, that $225 million payment does not seem to be sufficient, noting that banks submitted over 92,000 claims to the FHA over the covered period, totaling over $12 billion. The maximum liability banks would face under laws pertaining to false claims, if all those claims were fraudulent, would total $37 billion. The settlement amount is 0.6 percent of that figure, Warren said.

She asked the Justice Department to explain how it reached the $225 million figure.

Warren went on to argue that if a more aggressive settlement was reached, the FHA might be in a healthier fiscal position. The FHA announced at the end of 2012 that it was facing a potentially billions of dollars in a shortfall, as its portfolio took heavy losses due to delinquent and defaulting mortgages.

The Senate Banking Committee, of which Warren is a member, has already passed legislation to shore up the FHA's finances, and Warren added that more information on the settlement could help guide the process as lawmakers continue to work on legislation when Congress returns in September.