24 February 2012 – Bank Admits and Accepts Responsibility for Submitting False Certifications to HUD and Also Agrees to Reform Practices
Preet Bharara, the United States Attorney for the Southern District of New York, Helen Kanovsky, General Counsel of the U.S. Department of Housing and Urban Development (“HUD”), and David A. Montoya, the Inspector General of HUD, announced today that the United States has filed, and simultaneously settled, a civil fraud lawsuit against FLAGSTAR BANK, F.S.B. (“FLAGSTAR”), one of the nation’s largest savings banks and originators of mortgage loans, for improperly approving residential home mortgage loans for government insurance. In the settlement, FLAGSTAR admitted, acknowledged, and accepted responsibility for submitting false certifications to HUD.
The false certifications induced the Federal Housing Administration (“FHA”) to accept loans for government insurance that were not eligible and that resulted in losses to HUD when the loans defaulted. FLAGSTAR agreed to pay $132.8 million to the United States in damages and penalties under the False Claims Act and to reform its business practices. The settlement was approved today by United States District Judge Katherine B. Forrest.