Fifth Third bank has admitted to committing fraud which will cost taxpayers millions of dollars. The bank admitted to improperly certifying over 1,400 loans to mortgages although they knew they were defective. These mortgage loans were not eligible for Federal Administration Housing insurance and this will end up costing the taxpayers millions of dollars.
Bank Will Pay $85 Million in Fraud Claims
According to USA Today, the Cincinnati based bank will now have to pay $85 million in civil fraud claims. In fact, between the years of 2003 and 2013, the FHA lost millions of dollars because of the bank allowing these bad loans to go through. This happened while the real estate collapse was starting and the foreclosure crisis was continuing.
The whole thing about this is that Fifth Third bank found out the loans were defective and did not report their findings to the government until 2012. They knew the loans would not be eligible for FHA insurance but did not say a word about it until it was too late. In fact, the U.S Department of Housing and Urban Development ended up paying out on the insurance claims for 519 of those defective loans.
Made False Representations About the Loans
As well as all of this, the bank made false representations about these loans before and during the time that it accepted $3.4 billion in federal money from the Troubled Asset Relief Program. Admitting to this in the settlement, Fifth Third participated in this program from 2008 to 2011.
According to federal authorities, the bank should have reported this because ultimately the taxpayers end up having to pay the bill when the FHA covers bad loans like this.
In a prepared statement, U.S Attorney PreetBharara said, “Federal insurers rely on banks when they promise that the mortgage loans they originate are eligible for that insurance. When banks discover that some of the 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.”
Fired the Employees Responsible
Although Fifth Third Bank fired the employees that were responsible for not reporting these bad loans to the government, it has not yet been determined whether or not they faced any other consequences for their actions. Fifth Third has taken full responsibility for their actions and has agreed to cover federal losses on the bad loans.
According to wcpo 9 Cincinnati, this is the second major fraud claim for the bank within 7 days. The bank may also have to pay millions more. They settled out of court with two whistleblowers, John Ferguson and George Mann, and will have to pay them each $6.37 million.
Fifth Third Bank actually had 60 days to report the bad loans they ended up approving but they did not report them until between 2012 and 2014.
Last week, the bank settled out of court to pay $18 million to settle the allegations that it discriminated against blacks and Hispanic consumers since they charged some of them higher interest rates on auto loans.