America's Foreclosure King accused of Fraud

When I read the Huffington Post article on Deutsche Bank, I remembered where I heard the name before.  Deutsche Bank is being accused of fraud by the U.S. government, of repeatedly lying to the Department of Housing and Urban Development (HUD) about the quality of Federal Housing Administration (FHA) mortgages.  HUD guarantees the FHA loans, but they have to meet certain conditions.  Which Deutsche Bank apparently lied about.  The U.S. is suing Deutsche Bank for at least $1 billion.  Yep, that's at least one billion dollars.

This is why self-regulation rarely work.

As part of the FHA program MortgageIT participated in, lenders are required to annually certify that they check basic records like borrowers' incomes, credit history and employment record. The lenders also are required to review loans that quickly default to guard against sloppy lending practices, and act in the government's best interests because taxpayers are bearing the risks for potentially poor loans

Deutsche did none of those things, according to the lawsuit.

As a result, "A third of those mortgages, or about 12,500, have since defaulted, leaving the government on the hook."

This leads to the context that I remembered Deutsche Bank from:

More than 40 members of Common Ground Wisconsin traveled to the Chicago Consulate May 18 with their request to open a dialog with the Germany-based bank. So far, Common Ground has been turned away by bank officials. Wells Fargo and U.S. Bank are meeting with Common Ground leaders to find solutions to Milwaukee’s foreclosure crisis.

Deutsche Bank is one of three banks Common Ground has been negotiating with that hold mortgages or are the trustees for more than 25 percent of foreclosed houses in Milwaukee. Wells Fargo and U.S. Bank are also meeting with Common Ground leaders to find solutions to Milwaukee’s foreclosure crisis.

For an idea of the impact that Deutsche Bank had on Milwaukee, and how it plays at home in Germany, go to this article translated from German.

Deutsche Bank’s tracks lead through the entire American real estate market. In Chicago, the bank foreclosed upon close to 600 large apartment buildings in 2009, more than any other bank in the city. In Cleveland, almost 5,000 houses foreclosed upon by Deutsche Bank were reported to authorities between 2002 and 2006. In many US cities, the complaints are beginning to pile up from homeowners who lost their properties as a result of a foreclosure action filed by Deutsche Bank. The German bank is berated on the Internet as “America’s Foreclosure King.”
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A Victorian house on State Street, painted green with red trim, is now partially burned down. Because it can no longer be sold, Deutsche Bank has “donated” it to the City of Milwaukee, one of the Common Ground activists reports. As a result, the city incurs the costs of demolition, which amount to “at least $25,000.”

To their credit, Common Ground was able to persuade Deutsche Bank to meet with them and to promise to cooperate with efforts in the community, thought it took extraordinary efforts.  Fortunately, Wells Fargo and US Bank are much more involved in the community, and were much more willing to work with community leaders on the foreclosure crisis.