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Regions Bank Settles with DOJ Over Underwriting Violations

Regions Bank has become the latest financial institution to settle with the U.S. Department of Justice, this time regarding the bank’s residential mortgage loan origination, underwriting, and quality control practices.

As part of the settlement, the Alabama-based bank agreed to pay more than $52 million to settle claims that it failed to follow federal underwriting guidelines between a six-year period from January 1, 2011, to December 31, 2016. As a result of the bank’s failure to follow the guidelines, Regions approved hundreds of mortgage loans for the Federal Housing Administration’s mortgage insurance program that were not eligible for FHA insurance, the DOJ reported.

Because Regions had approved these loans for the FHA’s insurance program, HUD incurred substantial losses when many of the loans defaulted, according to the DOJ.

“Mortgage lenders that participate in the FHA insurance program must follow the requirements intended to safeguard its integrity and to protect homeowners,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department's Civil Division. “We will continue to hold responsible lenders that knowingly violate these important requirements.”

Regions issued the following statement regarding the settlement: “The company fully cooperated with the inquiry and has agreed to a $52.4 million settlement, without admitting liability, in order to avoid the expense of potential litigation. Regions established and previously disclosed reserves sufficient to cover this matter; therefore, this settlement will not have a material impact on Regions' financial condition or results of operations. Regions is pleased to resolve this inquiry and is committed to maintaining fair, consistent and accurate loan origination practices.”

Wells Fargo agreed to a settlement with the DOJ in February 2016 over similar claims of wrongly approving mortgage loans for FHA insurance, which caused the government to incur substantial losses when the loans later defaulted. Wells Fargo agreed to pay $1.2 billion to resolve the claims regarding its FHA lending activities; the alleged violations occurred within a nine-year period from 2001 to 2010.

About Author: Seth Welborn

Seth Welborn is a Harding University graduate with a degree in English and a minor in writing. He is a contributing writer for MReport. An East Texas Native, he has studied abroad in Athens, Greece and works part-time as a photographer.
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