Deutsche Bank and Credit Suisse Finalize Securities Mortgage Securities Fraud Settlements with the DOJ Are Now Final and JPMorgan Resolves for $55M Case Accusing Bank of Working With Racist Brokers

The mortgage securities fraud deal arrived at between Deutsche Bank (DB) and the Department of Justice is now final. As part of the settlement, the German lender will pay a $3.1B civil penalty and $4.1B in relief to borrowers, homeowners, and others that were impacted because it purportedly misled investors about the mortgage securities it was selling before the housing market failed.

Although the agreement was announced last month, the details of the resolution have just been released to the public. This includes information that as far back as May 2006, a Deutsche Bank supervisor had cautioned one of the firm’s senior traders about one mortgage lender that had become too lax with its underwriting practices.

In a Statement of Facts that was part of the agreement, Deutsche Bank acknowledged that it was aware that it was not fully disclosing the risks involved with the loans that it was bundling and selling. Deutsche Bank CEO John Cryan issued a written statement apologizing “unreservedly” for the bank’s conduct. Cryan said that Deutsche Bank now has better standards in place.

Credit Suisse Settles RMBS Case for $5.3B
Also finalizing its deal with US authorities is Credit Suisse (CS), which will pay $5.3B to resolve contentions that it misled investors over residential mortgage-backed securities that it sold leading up to the 2008 financial crisis.

The Swiss bank admitted that the home loans it put together into securities failed to meet underwriting guidelines. Some employees even described these guidelines as total “crap” or “garbage.” The bank acknowledged that it was aware that the investments it was marketing had stood a very probable chance of failing.

As part of the settlement, Credit Suisse will pay $2.8B in consumer relief and $2.48B as a penalty.

Deutsche Bank and Credit Suisse are just the latest Wall Street banks to settle probes and cases accusing them of concealing the risks involved in the loans they were securitizing or  the securities they were selling, and/or for disregarding poor underwriting practices.

Other banks to have settled similar charges, for a collective total of $46B, include Bank of America Corp. (BAC) and JPMorgan Chase (JPM). Banks that remain under investigation over their actions related to mortgage securities include HSBC (HSBA.L), UBS Group AG (UBS), Wells Fargo & Co. (WFC), and Royal Bank of Scotland (RBS).

 

JPMorgan to Pay $55M Over Racial Discrimination Allegations Involving Minority Borrowers
In other mortgage fraud news, JPMorgan has agreed to pay $55M to settle a federal case accusing the bank of working with mortgage brokers who discriminated against minority borrowers.

A complaint brought by U.S. Attorney Preet Bharara contends that between ’06 and ’09, JPMorgan charged over 50,000 Hispanic and Black borrowers more than they did White borrowers even when their risk and credit profiles were similar. As a result, contends the government, these minority borrowers collectively sustained damages in the tens of millions of dollars.

JPMorgan denies the allegations of wrongdoing. It maintained that its monitoring program is “robust” and claims that it is not to blame for the actions of third party brokers.

JPMorgan worked with mortgage brokers throughout the US for years. These brokers were given allowances when it came to the fees and interests they could charge customers. They were not required to explain why some customers were charged more than others. Brokers that were able to obtain higher interest rates received bonuses.

Deutsche Bank Agrees to Pay $7.2 Billion for Misleading Investors in its Sale of Residential Mortgage-Backed Securities, DOJ, January 17, 2017

Credit Suisse Agrees to Pay $5.28 Billion in Connection with its Sale of Residential Mortgage-Backed Securities, DOJ, January 18, 2017

JPMorgan agrees to $55 million settle of mortgage discrimination complaint: source, Reuters, January 18, 2017