1st Tennessee Bank Pays Penalty for Bad Debt
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.
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 the U.S. Department of Housing and Urban Development 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.
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