Fifth Third bank is set to pay more than $84.9 million to settle US civil fraud lawsuits after failing to report defects in more than 1,400 mortgage loans.
According to stltoday.com, Fifth Third Bank was not able to report on time to the U.S. Department of Housing and Urban Development about the defects that made the loans ineligible for insurance provided by the Federal Housing Administration. The defects were later discovered after the post- closing reviews of mortgages from 2003 to 2013.
The bank has to pay $84.9 million to cover for the losses of Housing and Urban Development for paying insurance claims if 519 mortgage loans.
Fifth Third will also have to compensate Housing and Urban Development for more than 900 other loan losses and another $2.04 million under another compensation settlement.
The bank's settlement had resolved claims following the federal False Claims Act and Financial Institutions Reform, Recovery, and Enforcement Act.
U.S. Attorney Preet Bharara said "When banks discover that some of (their) 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 housingwire.com, the attorney's office also said that "Fifth Third admitted and accepted responsibility for failing to self-report mortgage loans it knew to be defective, contrary to HUD requirements. Fifth Third has also reformed its business practices and terminated the employment of responsible employees."
In addition to this, Christy Goldsmith Romero, Special Inspector General for the Troubled Asset Relief Program, said "Before and during the time Fifth Third was bailed out in TARP, its Quality Control employees made false representations to HUD that residential mortgages the bank originated were of the quality required to be insured by HUD. The bank's false representations cost HUD millions of dollars to pay insurance claims on 519 of the materially defective loans that later defaulted."
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