US Bank, the Ohio-headquartered banking services firm that also operates in the wealth space, has agreed to pay the US $200 million to resolve allegations that it “knowingly originating and underwriting” mortgage loans insured by the Federal Housing Administration that did not meet applicable requirements.

US Bank, the Ohio-headquartered banking services firm that also operates in the wealth management space, has agreed to pay the US $200 million to resolve allegations that it violated the False Claims Act by “knowingly originating and underwriting” mortgage loans insured by the Federal Housing Administration that did not meet requirements.

“US Bank ignored certain lending requirements causing substantial losses to taxpayers,” said US Attorney for the Northern District of Ohio, Steven Dettelbach.

During the time period covered by the settlement, US Bank allegedly participated as a direct endorsement lender in the FHA insurance program.

The Department of Justice explains: “A DEL has the authority to originate, underwrite, and certify mortgages for FHA insurance.  If a loan certified for FHA insurance later defaults, the holder of the loan may submit an insurance claim to the U.S. Department of Housing and Urban Development (HUD), FHA’s parent agency, for the losses resulting from the defaulted loan.  Because FHA does not review a loan before it is endorsed for FHA insurance, FHA requires a DEL to follow program rules designed to ensure that the DEL is properly underwriting and submitting mortgages for FHA insurance.”

US Bank admitted that from 2006 through 2011 it “repeatedly certified for FHA insurance mortgage loans that did not meet underwriting requirements. The bank also admitted that 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.  

The bank acknowledged that its conduct caused FHA to insure thousands of loans that were not eligible for insurance, resulting in the FHA suffering “substantial losses.”

"US Bancorp previously disclosed the investigation, potential claims and the related reasonably possible losses in prior financial statement disclosures," the firm said in a statement. "The company cooperated fully with the DoJ investigation and chose to settle this matter for $200 million without an admission of liability to avoid the path of costly and protracted litigation as well as distractions to the business. US Bancorp has a legacy of being a respected mortgage lender, including a decades-long, strong working relationship with HUD and its FHA loan programs." 

The agreement resolves potential violations of federal law based on US Bank’s deficient origination of FHA insured mortgages. 

The settlement is part of enforcement efforts by President Barack Obama’s Financial Fraud Enforcement Task Force, established to wage “an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.”

The task force includes representatives from a range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement.