GERMAN lender Deutsche Bank is to be sued by the United States for more than $1bn (£605m) over alleged mortgage fraud.
The Frankfurt-based bank is accused of “years of reckless lending practices” by the US Justice Department. It is also accused of defrauding the federal government by repeatedly lying to obtain insurance guarantees on mortgage debt.
According to the lawsuit, filed in New York, Deutsche Bank and its MortgageIT unit misled the Federal Housing Administration into believing their mortgages qualified for federal insurance, knowing they could make “substantial profits” when the loans were later sold.
In fact, the government said, the loan quality was so poor that nearly one in three mortgages defaulted, a percentage elevated by Deutsche Bank’s “dysfunctional” quality control.
Deutsche Bank said the claims were “unreasonable and unfair”, and said it would defend against the action vigorously.