U.S. Bank To Pay $200 Mln To Settle Mortgage Probe

(RTTNews) - U.S. Bank, a unit of U.S. Bancorp (USB), has agreed to pay the United States $200 million to resolve allegations that it violated the False Claims Act by knowingly originating and underwriting mortgage loans insured by the Federal Housing Administration that did not meet applicable requirements, the Justice Department said Monday.

As part of the settlement, U.S. Bank admitted that, from 2006 through 2011, it repeatedly certified for FHA insurance mortgage loans that did not meet HUD underwriting requirements. U.S. Bank also admitted that its quality control program did not meet FHA requirements, and as a result, it failed to identify deficiencies in many of the loans it had certified for FHA insurance, failed to self-report many deficient loans to HUD, and failed to take the corrective action required under the program. U.S. Bank further acknowledged that its conduct caused FHA to insure thousands of loans that were not eligible for insurance and that the FHA suffered substantial losses when it later paid insurance claims on those loans.

U.S. Bancorp previously disclosed the investigation, potential claims and the related reasonably possible losses in prior financial statement disclosures.

The company said it chose to settle the matter for $200 million without an admission of liability to avoid the path of costly and protracted litigation as well as distractions to the business.

In addition, U.S. Bancorp said, during the second quarter and prior to the settlement agreement with the DOJ, it sold 3.0 million shares of the Class B common stock of Visa Inc. (V) resulting in a net pretax gain of $214 million. After the sale, the company continues to own about 9.6 million Visa Class B shares.

The combination of the settlement and the sale of Visa Class B shares is expected to be neutral to earnings-per-share in the second quarter, U.S. Bancorp said.

U.S. Bancorp shares closed Monday's regular trading session at $43.32, down 4 cents.