Deutsche Bank Under Fire: Sued by US Attorney, City of Los Angeles

By Stephanie Rabiner, Esq. on May 10, 2011 | Last updated on March 21, 2019

Counsel for Deutsche Bank is about to become incredibly busy.

Both the Department of Justice and the City of Los Angeles have filed suit against the mega-lender this week, the former accusing the company of mortgage fraud, and the latter alleging that is has allowed its local properties to illegally fall into disrepair.

The DOJ suit, filed in Manhattan, stems from the bank's involvement in the FHA mortgage insurance program.

MortgageIT, a Deutsche subsidiary since 2007, maintained Direct Endorsement Lender status from 1999 to 2009, allowing it to approve mortgages for FHA insurance.

The complaint alleges that not only did the company lie to program administrators about its compliance with quality control procedures, it recklessly disregarded whether borrowers could make mortgage payments.

And then Deutsche Bank turned around and sold those mortgages to investors, earning it a substantial profit and costing the government $386 million in insurance claims.

Instead of focusing on the bank's actions as a home lender, Los Angeles is focusing on its actions as a home owner.

Deutsche Bank apparently bought 2200 local properties via foreclosure, which the city alleges it has allowed to fall into disrepair in contradiction with local habitability and blight ordinances.

Deutsche is being called one of city's "major slum lords", as reported by Bloomberg. The company has also reportedly been illegally evicting low-income tenants.

Counsel disputes both lawsuits, notes Bloomberg. The company is calling the government's claims "unreasonable and unfair" and arguing that the city needs to look to loan servicers, not Deutsche Bank.

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