The Office of the Comptroller of the Currency issued a $6 million civil penalty against Southfield, Mich.-based Sterling Bancorp for failing to stop former employees from issuing fraudulent mortgages that borrowers used to evade taxes and launder money from 2011-19.
The penalty, announced in a Sept. 27 press release, ends the OCC’s investigation into the now-defunct Advantage Loan Program. The Department of Justice and Securities and Exchange Commission continue investigating Sterling Bancorp and its subsidiary Sterling Bank in connection with the program.
Sterling Bancorp CEO Thomas O’Brien said the bank remains engaged with the DOJ on the investigation. “We have no visibility into the potential terms or timing of any settlement,” he said. “We will continue to provide full cooperation and hope resolution with Sterling will be forthcoming.”
Sterling Bancorp has taken a number of steps since 2019 to resolve the situation. The company’s former managing director of residential lending, YiHou Han, and two former officers, Hao Liang “Frank” Hu and Amy Lu, pleaded guilty last year to participating in the years-long scheme to originate fraudulent residential-mortgage loans through the program.
In February, the bank agreed to sell a pool of its commercial real estate loans to a third-party purchaser. The pool included 21 loans with an aggregate outstanding principal balance of nearly $57 million as of the end of last year. The sale came less than one month after Sterling Bancorp agreed to settle shareholder claims that directors failed to stop former employees from issuing the fraudulent mortgages.
In June 2020, the bank hired O’Brien as its CEO. O’Brien closed some branches and played a key role in settling the lawsuit. “The level of cooperation that we have provided and the comprehensive internal investigation have been critical to our building a reputation with our regulators that had been absent previously,” he said.