News and Resources

FCA, FHA Lending, and US v. Deutsche Bank

Andrew L. Sandler, David S. Krakoff & Michelle L. Rogers

May 11, 2011

The United States recently slapped Deutsche Bank and its subsidiary, MortgageIT, with a $1 billion lawsuit that has rocked the financial services industry. Although the suit cites some scandalous moments — including allegations that MortgageIT “stuffed [audit] letters, unopened and unread, in a closet” — the case’s core facts shine a bright light on a newly emerging challenge for financial institutions.

Primarily, the case is built on repeated mistakes in loan underwriting which, individually, seem to be mere missteps but, together, can suggest to an enforcement official a pattern of egregious conduct. Deutsche Bank makes it clear that even small problems come with great risk and, in this case, potentially enormous penalties.

Originally published in Law360; reposted with permission.