Bank settle multi-million dollar suit

by Justin da Rosa09 Oct 2015
Firth Third, a Cincinnati-based bank, will pay $85 million after admitting it had certified over 1,400 defective loans for FHA insurance.

“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)."

COMMENTS

  • by Griff | 10/9/2015 2:40:48 PM

    WHAT! A bank discovered a problem in 2012 but did not out themselves? LOL

  • by Shocked! | 10/9/2015 3:18:42 PM

    I am shocked too. I had so much faith in the honesty of banks. What am I going to do now?

    On a more serious note:

    If a bank does something illegal that makes it, say $1 billion and
    if they get caught and have to pay, say $104 million

    that means they're still left with $896 million.

    That means they have 896 million incentives to do it again.

  • by | 10/10/2015 2:14:22 PM

    All these settlements with the Government seem to involve money only. Banks ( corporations) do not commit fraud. individuals in the banks do. I don't see any bank officers going to prison. When a bank pays 85 million in fines the cost of this fine is real paid by the banks shareholders. Unless a few bank officers go to prison, this kind of fraud and violations of the law will not stop.

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