VOL. 130 | NO. 106 | Tuesday, June 2, 2015
First Tennessee Bank to Pay $212.5 Million for Bad Mortgage Loans
The Associated Press
MEMPHIS, Tenn. (AP) – First Tennessee Bank has agreed to pay the U.S. government $212.5 million after admitting to making bad mortgage loans that left taxpayers footing the bill.
The bank in April announced it had reached an agreement in principle with the U.S. Department of Justice and the U.S. Department of Housing and Urban Development, and that the agreement was subject to execution of a formal written settlement among all the parties.
According to the U.S. Justice Department, between January 2006 and October 2008, the Memphis-based bank repeatedly approved Federal Housing Administration loans for ineligible borrowers through its subsidiary First Horizon Home Loans Corp.
When many of those loans later defaulted, the banks holding the loans were able to submit insurance claims to HUD for their losses.
HUD Inspector General David A. Montoya put it this way, "Our investigation found that First Tennessee caused FHA to pay claims on loans that the bank never should have approved and insured in the first place."
The settlement was announced Monday.
First Horizon National Corp. is the Memphis holding company that controls the bank.
"We are pleased to put this issue related to the mortgage business we sold in 2008 behind us," First Horizon chairman Bryan Jordan said in a statement. "We are excited about the future, and we have the best people in the business focused on building long-term relationships with our customers."
First Horizon, which operated one of the nation's 20 largest residential mortgage businesses, sold the unit in 2008 to MetLife Bank.
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