Deutsche Bank has agreed to pay $7.2 billion to settle charged by the U.S. government for misleading investors in the packaging, securitization, marketing, sale and issuance of residential mortgage-backed securities (RMBS) between 2006 and 2007, according to the U.S. Department of Justice (USDOJ).
Deutsche Bank had admitted that it made false and misleading representations to investors about the characteristics of the mortgage loans it securitized in RMBS worth billions of dollars.
The $7.2 billion is the largest settlement ever paid by a financial firm for RMBS violations. As part of the civil penalty, Deutsche Bank has agreed to pay a $3.1 billion under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA). Deutsche Bank is also required to provide $4.1 billion in mortgage assistance to underwater homeowners, distressed borrowers and affected communities.
According to the USDOJ, Deutsche Bank will use the $4.1 billion to offer loan modifications, including loan forgiveness and forbearance, to distressed and underwater homeowners throughout the country. It will also provide financing for affordable rental and for-sale housing throughout the country. Deutsche Bank’s provision of consumer relief will be overseen by an independent monitor who will have authority to approve the selection of any third party used by Deutsche Bank to provide consumer relief.
Attorney General Loretta E. Lynch had issued this statement;
“This resolution holds Deutsche Bank accountable for its illegal conduct and irresponsible lending practices, which caused serious and lasting damage to investors and the American public. Deutsche Bank did not merely mislead investors: it contributed directly to an international financial crisis.
The cost of this misconduct is significant: Deutsche Bank will pay a $3.1 billion civil penalty, and provide an additional $4.1 billion in relief to homeowners, borrowers, and communities harmed by its practices. Our settlement today makes clear that institutions like Deutsche Bank cannot evade responsibility for the great cost exacted by their conduct.”
Read more details about the settlement from the USDOJ at this link.