“Federal insurers rely on banks when they promise that the mortgage loans they originate are eligible for that insurance,” U.S. Attorney Preet Bharara said in a prepared statement, according to USA Today
. “When banks discover that some of the loans are lemons and that their promises of quality were false, as Fifth Third Bank did, they must come forward and report it promptly, so that taxpayers don’t get stuck with the bill."
According to USA Today
, the FHA
lost millions on bad loans made over a decade leading up to, during, and following the financial crisis.
The bank discovered 1,439 of its FHA
-backed originated loans were defective but did not disclose that information to the government until 2012. The U.S. Department of Housing and Urban Development went on to pay claims on 519 of those loans after they defaulted.
Fifth Third also accepted $3.4 billion in federal funds under the Troubled Asset Relief Program, according to the settlement.
“The bank’s false representations cost HUD millions of dollars to pay insurance claims," said Christy Goldsmith Romero, Troubled Asset Relief Program special inspector general, according to USA Today
. "Fifth Third’s actions to fire those employees, voluntarily disclose its violations... to law enforcement, and make corporate changes should stand as an example for others who violated the law. It is always better to disclose those violations rather than wait (for authorities to find them)."
Firth Third, a Cincinnati-based bank, will pay $85 million after admitting it had certified over 1,400 defective loans for