BB&T Corp. has agreed to an $83 million settlement with the U.S. Department of Justice over mortgages with quality control problems that were insured by the Federal Housing Administration.
The settlement will not have a negative effect on BB&T's financials as the bank had previously set aside $85 million because of
"BB&T fully cooperated with all agencies involved in this matter. The inquiry was settled for $83 million without any admission of liability to avoid the cost and uncertainty of potential litigation," the bank's press release said.
However, BB&T admitted that between Jan. 1, 2006 and Sept. 30, 2014, it certified mortgages for FHA insurance that did not meet underwriting guidelines, the DOJ press release said.
"While profiting from the FHA program, BB&T exposed the taxpayers to losses by failing to comply with Department of Housing and Urban Development guidelines, and then took the additional step of falsely certifying that it had complied with such guidelines. This settlement recovers substantial losses caused by BB&T's decision to place its own profits above its commitment to adhere to HUD underwriting and quality control requirements," said U.S. Attorney John Horn of the Northern District of Georgia in a DOJ press release.
Between 2007 and 2011, the percentage of loans originated by BB&T that ended up getting FHA insurance which were not eligible because of serious quality control defects always exceeded 30%, and exceeded as much as 50% in 2010 and 2011, according to DOJ. BB&T failed to self-report these material underwriting defects to HUD until 2013.
