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A lot of people have been wondering when the government would finally start prosecuting the companies responsible for the home loan and mortgage crisis of the last few years.
In one of the Department of Justice's first actions, it filed a suit against mega-lender Deutsche Bank on Tuesday, accusing the company of lying and recklessly approving mortgages for federal insurance.
In other words, mortgage fraud.
Between the years of 1999 and 2009, the Los Angeles Times reports that MortgageIT, a Deutsche Bank subsidiary, took part in the Federal Housing Administration's mortgage insurance program.
As part of the program, MortgageIT was permitted to approve borrowers for the insurance if they implemented a host of quality control procedures, and properly ensured that borrowers could make payments.
The complaint alleges that, year after year, MortgageIT, and then Deutsche Bank, falsely certified that it was complying with program auditing and selection rules.
It also alleges that the lender didn't properly vet borrowers and disregarded their financial situations, and then turned around and sold the mortgages for a profit.
The government is seeking over $1 billion in damages, with knowledge that it has paid out $386 million on related insurance claims to this date.
In a semi-related suit across the country, the City of Los Angeles is also suing Deutsche Bank, accusing it of buying 2,200 properties in foreclosure sales and then allowing them to fall into disrepair.
The city, which is calling Deutsche Bank a "major slumlord," is also alleging that the bank is illegally evicting low-income tenants from those buildings.
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