NEW YORK (AP) — Fifth Third Bancorp has agreed to pay an $85 million settlement for not reporting flawed mortgages insured by the Federal Housing Administration to regulators.
Between 2003 and 2013 the bank originated roughly 1,400 mortgage loans that it certified as eligible for FHA insurance, but later determined they were “materially defective” and therefore not eligible for FHA insurance, Preet Bharara, the U.S. Attorney for the Southern District of New York, said Tuesday.
However, the bank failed to report this to the Department of Housing and Urban Development, resulting in millions of dollars in HUD losses.
The Cincinnati-based regional bank admitted the violations, has fixed its business practices and fired the responsible workers, Bharara said.
Fifth Third Bancorp’s $85 million payment will cover federal losses on about 500 of the loans that defaulted and for which HUD paid insurance claims, and indemnify HUD for all losses the agency may incur on approximately 900 defective loans that have not yet defaulted.
U.S. District Judge Deborah A. Batts approved the settlement Monday.
Fifth Third Bancorp shares closed Tuesday down 18 cents at $18.95.