A Deutsche Bank unit has reached an $11.5 million settlement with the state’s attorney general to resolve a nearly two-year investigation into its role in funding subprime mortgage loans in Nevada.
“We are very pleased to have resolved this matter,” Deutsche Bank spokeswoman Renee Calabro said Friday. Calabro declined further comment.
The investigation focused on loans provided to other lenders, including New Century, American Home Mortgage and MortgageIT, bought and securitized by DB Structured Products Inc. between 2004 and 2007, according to the state attorney general’s office.
Attorney General Catherine Cortez Masto said the issue was whether the other lenders misled borrowers about the actual interest rate and loan payment. Investigators also looked at whether they piled on risky features without considering a borrower’s ability to repay and whether Deutsche Bank was aware of the practices when it helped finance the loans.
Deutsche Bank neither admitted nor denied the state’s allegations, according to the nine-page settlement filed Monday with District Court in downtown Las Vegas and released late Thursday.
The bank also agreed to review any future Nevada loans it helps to finance, and it will not “securitize loans” if it believes the lender has not adequately disclosed the existence of an initial teaser rate or the maximum adjusted interest rate or payments.
“I remain committed to enforcing Nevada’s laws against the players, including those on Wall Street, that contributed to and profited from mortgage lending and sales practices that misled Nevada consumers into loans that they did not understand and could not repay,” Cortez Masto said in a statement.
The $11.5 million payment will be used, at the state’s discretion, to pay some affected borrowers and pay for the state’s investigation. Deutsche Bank’s unit also will set aside $75,000 to cover the costs of a settlement administrator, according to court documents.
“Only borrowers whose loans were financed or acquired by Deutsche Bank are covered by this (settlement),” the attorney general’s office said in a statement.
Cortez Masto reached similar settlements with units of the Royal Bank of Scotland Group plc and Morgan Stanley, with the companies paying $42 million and $40 million, respectively.
She said the changes to the securitization process should help make sure that “we do not go down this road again.”
Contact reporter Chris Sieroty at firstname.lastname@example.org or 702-477-3893. Follow @sierotyfeatures on Twitter.