By Chris Bruce
May 13 — M&T Bank will pay $64 million to settle U.S. claims that it violated the False Claims Act by originating and underwriting mortgages that failed to meet federal requirements, the Justice Department said May 13.
According to the Justice Department, loans originated and underwritten by the Buffalo, N.Y.-based bank and insured by the Federal Housing Administration (FHA) failed to meet relevant FHA standards. The accord is the latest in a series of settlements involving banks alleged to have run afoul of the False Claims Act.
“Mortgage lenders that fail to follow FHA program rules put taxpayer funds at risk and increase the chances of borrowers losing their homes,” Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division, said in a statement. “We will continue to hold lenders accountable for knowingly submitting ineligible loans for FHA insurance.”
The allegations at issue in the settlement arose from a whistle-blower lawsuit filed in the U.S. District Court for the Western District of New York under the False Claims Act by a former M&T Bank employee, Keisha Kelschenbach.
Although the statute allows private citizens who sue on the government's behalf to share in recoveries, the share to be awarded in this case “has not yet been determined,” the Justice Department said.
According to the Justice Department, the allegations focused on a period between Jan. 1, 2006, and Dec. 31, 2011, during which time M&T Bank participated as a direct endorsement lender (DEL) in the FHA insurance program, which allows the FHA to insure loans without first checking them for compliance with FHA requirements.
M&T Bank is the 16th mortgage lender to settle such claims, spokesman C. Michael Zabel said in a May 13 e-mail to Bloomberg BNA. M&T previously disclosed the government's review of the bank's participation in the DEL program, Zabel said.
Matters in the case stretch back as many as 10 years, he said. “We made a business decision to settle this matter, without admitting liability, in order to avoid the expense of potential litigation,” Zabel said. “As we have also previously disclosed, this settlement will not have a material impact on our financial condition or results of operations.”
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