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U.S. Bank Pays $200 Million in Settlement of Banking Fraud Case

Date Published
Jul 03, 2014

On Monday, June 30, 2014, the Department of Justice (DOJ) announced that U.S. Bank has agreed to pay the United States $200 million to settle allegations that it violated the False Claims Act by knowingly underwriting thousands of unqualified mortgage loans insured by the Federal Housing Administration (FHA).  The FHA alleged that U.S. Bank misused government programs designed to expand home ownership, which resulted in homes being foreclosed on across the country, causing undue harm on homeowners, and crippling the housing market for years to come.

According to the lawsuit, U.S. Bank falsely claimed that mortgage loans it had created and insured were qualified for FHA coverage.  As a consequence of U.S. Bank’s falsifications, the FHA incurred huge monetary losses when the unqualified loans failed, due to the fact that the FHA had to cover the associated losses of the loans.

The FHA’s program allows lower income borrowers to purchase homes by insuring qualified loans, made by participating lenders such as U.S. Bank, against losses if the loans later default.  However, a participating lender may only submit creditworthy loans to the FHA if they meet certain requirements.

Since 1934, the FHA has insured over 34 million loans through U.S. Department of Housing and Urban Development (HUD), allowing lenders to insure loans for borrowers that have less than perfect credit.  Loan guidelines, including debt-to-income ratios, specific credit requirements, and maximum loan amounts, were created by the FHA in order to protect the borrower and the lender.  However, according to the government’s allegations, U.S. Bank repeatedly neglected to adhere to these guidelines. Additionally, according to the FHA, U.S. Bank admitted that between 2006 and 2011, “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.”

These types of banking fraud cases are not new for the banking industry, and in an effort to reduce and ultimately eliminate banking fraud practices, President Barack Obama’s Financial Fraud Enforcement Task Force was designed to investigate and eventually prosecute financial crimes.  Last month, SunTrust agreed to a $968 million settlement of charges brought by federal and state regulators for unqualified mortgage loans — $500 million of which will go towards consumer relief to homeowners who were affected by these abusive mortgage practices.  Additionally, in February 2014, JPMorgan agreed to a settlement of $614 million for similar loan violations.

If you have information concerning a potential case involving banking fraud, do not hesitate to take action. It is possible that you might be able to bring your own qui tam lawsuit under the False Claims Act, acting as a whistleblower on behalf of the US government. Before filing your lawsuit, be sure to consult with an attorney familiar with the intricacies of the False Claims Act and qui tam lawsuits, as these attorneys are best equipped to help protect your rights and help you gain your share of any monetary reward from a potential settlement.

If you would like to consult with one of our False Claims Act attorneys concerning banking fraud, please fill out our Confidential Case Evaluation form, or call (202) 973-0900 to speak with a lawyer at the law office of Tycko & Zavareei LLP.

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Our experienced qui tam attorneys are available for a confidential, no-cost, no-commitment, initial evaluation of your case. Call us now at (202) 973-0900, or begin the process by completing our Confidential Case Evaluation Form.
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