The Royal Bank of Canada has agreed to pay the United States government more than $10.71 million to resolve allegations that it’s mortgage unit submitted false documentation on 219 federally insured mortgages to the Federal Housing Administration (FHA) – mortgages which eventually wound up in foreclosure.
The U.S. government alleged that, between 2001 and 2005, RBC Mortgage Company (RBC), a subsidiary of the Royal Bank of Canada, falsified documentation in support of loan applications, violated due diligence underwriting requirements, and improperly submitted loans for endorsement by the U.S. Department of Housing and Urban Development, (HUD) that were not eligible for FHA insurance. According to a %{=FONT-STYLE: italic} Reuters% report, RBC Mortgage Co agreed to the payment to avoid litigation but denied wrongdoing, Patrick Fitzgerald, the U.S. attorney in Chicago, said.

RBC, a publicly traded Canadian corporation, maintained offices located throughout the United States including Rockford, Illinois. Investigators accused RBC of knowing that 219 loans made in the Rockford and Freeport, Illinois areas were based on false or fraudulent statements about the borrowers’ credit, employment, or sources of equity, %{=FONT-STYLE: italic}
Reuters% said.
RBC was a pre-approved lender with “Direct Endorsement Authority” to originate and process FHA loans without waiting for prior review of the application by HUD. The FHA program and the direct endorsement process are designed to help low and moderate income families purchase homes by lowering some of the costs associated with mortgage loans.
As a pre-approved lender, RBC was responsible for conducting due diligence in underwriting the loans by verifying each borrower’s qualifications, the Justice Department said. The mortgage firm also was obligated to meet other requirements established by regulations or HUD program guidance.
The settlement reached between RBC and the United States resolves the false claim allegations against the company. In addition to its agreement to pay more than $10.71 million, RBC has also agreed to pay $264,000 to resolve administrative claims with respect to 39 federally insured loans.
The settlement was reached through the collaborative efforts of the U.S. Attorney’s office for the Northern District of Illinois, HUD’s Office of Inspector General, and the Justice Department’s Civil Division.
RBC was sold off by the Canadian Bank in 2005, and according to the Department of Justice, has not originated a mortgage loan since September 2005.