Just a month after revealing that it was under investigation, U.S. Bancorp has disclosed that it reached a large settlement over the handling of government-insured lending.
In May, the Minneapolis-based company said in a filing with the Securities and Exchange Commission that it was being investigated and examined by government agencies and bank regulators about its mortgage-related practices.
The Department of Housing and Urban Development Office of Inspector General and the Department of Justice were investigating its compliance with Federal Housing Administration insurance program requirements.
On Monday, U.S. Bancorp announced a $200 million settlement with the Justice Department to resolve the investigation into its endorsement of FHA loans.
A statement from the Department of Justice accused U.S. Bank of violating the False Claims Act by failing to comply with FHA requirements.
According to the government, the lender misused government programs, wasted taxpayer funds and inflicted long-lasting harm on borrowers and the housing market. The lax underwriting practices contributed to national foreclosures.
U.S. Bank admitted that it repeatedly certified FHA loans from 2006 through 2011 even though they didn’t meet HUD underwriting requirements, the Justice Department said. It also admitted that its quality control program didn’t meet FHA requirements — resulting in a failure to identify deficiencies in many of the loans it had certified.
When it did identify deficient loans, the government claims that U.S. Bank failed to self-report many of them to HUD. It also failed to take the corrective action required.
As a result, U.S. Bank caused FHA to insure thousands of loans that weren’t eligible for insurance — leading to substantial losses from paid claims.
U.S. Bancorp said it decided to settle in order to “avoid the path of costly and protracted litigation as well as distractions to the business,” and no admission of liability was made.
US. Bancorp said it fully cooperated with the investigation and touted its “legacy of being a respected mortgage lender, including a decades-long, strong working relationship with HUD and its FHA loan programs.”
The Justice Department noted that the agreement doesn’t prevent state and federal authorities from pursuing enforcement actions for its origination, servicing or foreclosure conduct — including civil enforcement actions for violations of the Consumer Financial Protection Bureau’s new mortgage servicing rules.
