Wednesday, January 4, 2006
For the second time in less than a month, Dutch bank giant ABN AMRO entered into a civil settlement with the federal government over internal failures at the bank. Earlier, the bank settled charges related to its internal controls for money laundering with suspect Russian companies and individuals and agreed to pay an $80 million civil penalty (earlier post here). This time, misconduct in failing to properly review loan documentation at its mortgage unit will cost the company approximately $41 million in penalties and foregone FHA loss claims. According to a HUD press release (here):
In 2003, HUD discovered underwriting deficiencies and improper conduct by an ABN employee. After the matter was brought to the company's attention, ABN launched an internal investigation and discovered that, in direct violation of FHA rules, a number of its employees falsely certified that two ABN underwriters had reviewed more than 28,000 loans prior to FHA endorsement when, in fact, they had not.
As a result, ABN has agreed to pay the U.S. Government $16.85 million and will not submit hundreds of defaulted loans to HUD, saving the FHA insurance fund an estimated $24.35 million in losses. The total value of the settlement agreement announced today is estimated to be more than $41 million.