WASHINGTON, May 13 (UPI) -- M&T Bank Corp. agreed to pay $64 million to settle claims it deliberately misled the government into backing hundreds of risky mortgages, the Department of Justice said Friday.
The bank, headquartered in Buffalo, N.Y., allegedly violated the False Claims Act by knowingly underwriting mortgage loans between 2006 and 2011 which were insured by the U.S. Department of Housing and Urban Development's Federal Housing Administration but did not meet applicable requirements.
A Justice Department statement said M&T Bank admitted it did not follow HUD underwriting requirements, failed to review certain delinquent loans and created a quality control process which inadequately uncovered major error rates in its loans. The bank also did not follow HUD's self-reporting requirements.
The review by the Justice Department was prompted by a lawsuit filed by former bank employee, Keisha Kelschenbach. Under the False Claims Act, a private citizen can sue on behalf of the government and share in the recovery, an amount yet undetermined in this case.
"Mortgage lenders that fail to follow FHA program rules put taxpayer funds at risk and increase the chances of borrowers losing their homes," said Principal Deputy Assistant Attorney General Benjamin C. Mizer of the Justice Department's Civil Division. "We will continue to hold lenders accountable for knowingly submitting ineligible loans for FHA insurance."