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M&T Bank settles federal fraud case for $64 million

democratandchronicle.com | May 15, 2016

By Khristopher J Brooks

M&T Bank will pay the federal government $64 million to settle a lawsuit that centered on how the company issued housing loans.

In 2013, a former M&T underwriter Keisha Kelschenbach filed a whistleblower lawsuit against her former employer saying that she saw fraud in the bank's Federal Housing Administration underwriting. Her lawsuit prompted a U.S. Department of Justice investigation. From that investigation, the department found M&T had awarded loans that did not meet federal requirements.

"Mortgage lenders that fail to follow FHA program rules put taxpayer funds at risk and increase the chances of borrowers losing their homes," the justice department's Benjamin Mizer said in a statement Friday.

M&T has more than 800 branches and roughly $125 billion in assets. The Buffalo-based bank with about 30 local branches and 450 employees said in a statement that the settlement won't affect bank branches.

"We made a business decision to settle this matter, without admitting liability, in order to avoid the expense of potential litigation," said M&T spokesman Chet Bridger. "This settlement will not have a material impact on our financial condition or results of operations."

M&T now joins a growing list of U.S. banks that have settled mortgage fraud lawsuits.

Wells Fargo agreed to pay $1.2 billion in a mortgage fraud lawsuit filed in 2012. The lawsuit questioned Wells Fargo mortgage underwriting from 2001 to 2005. The lawsuit also claimed that the bank failed to report more than 6,000 loans from 2002 to 2010, loans that didn't meet FHA requirements.

Likewise, Bank of America agreed to pay $16.6 billion in its federal probe focused on mortgages. The bank had to pay a $9.65 billion cash penalty then provide $7 billion to struggling homeowners.

Citigroup and Deutsche Bank are part of the longer list of banks that settled.

Bridger with M&T also noted the laundry list of mortgage fraud settlements.

"We are the 16th mortgage lender to settle such claims, which relate to matters that went back as far as 10 years," he said. "Looking forward, we will continue as a leading and responsible provider of home loans."

M&T made headlines earlier this year when a former vice president Michael Whipple was sentenced to 39 months in prison and ordered to pay about $5.3 million for creating fraudulent loans.

Kelschenbach left M&T in 2012. She filed her lawsuit under the U.S. False Claims Act. Under that act, Kelschenbach will be awarded some of the settlement money. She stands to be awarded anywhere from $9.6 million to $15 million for reporting the fraud to the federal government, but the justice department hasn't decided on a final amount.

Kelschenbach also released a statement through her lawyers at Thomas & Solomon.

“The culture at M&T was that profits always came first,” Kelschenbach said. “M&T wanted to approve as many FHA loans as possible, but at the same time, made almost no effort to comply with the FHA’s rules and quality control requirements.”

 

 

 

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CFLA was founded by the Nation's Leading Foreclosure Defense Attorneys back in 2007 to serve the Foreclosure Defense Industry and fight pervasive Bank Fraud. Since opening our virtual doors, CFLA has rapidly expanded to become the premier online legal destination for small businesses and consumers. But as the company continues to grow, we're careful to hold true to our original vision. For us, putting the law within reach of millions of people is more than just a novel idea—it's the founding principle, just ask Andrew P. Lehman, J.D.. With convenient locations in Houston and Los Angeles, you can contact Our National Account Specialist and General Manager / Member Damion W. Emholtz at 888-758-2352 for a free Mortgage Fraud Analysis or to obtain samples of work product, including cutting edge Bloomberg Securitization Audits, Litigation Support, Quiet Title Packages, and for more information about our Nationally Accredited and U.S. Department of Education Approved "Mortgage Securitization Analyst Training Certification" Classes (3 days) 24 hours for approved CLE & MCLE Credit (Now Available Online).

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