The state of Maryland has reached a $95 million settlement with Deutsche
Bank over claims of deception with their sale of residential mortgage-backed
securities. Maryland Attorney General Brian Frosh announced the agreement
earlier this month that includes a requirement that Deutsche Bank provides
$80 million in relief to the state’s consumers. Municipal and local
governments also stand to benefit from the deal as the agreement stipulates
$15 million of the $95 million restitution going towards public investments.
Deutsche Bank is accused of providing misleading information to investors
regarding securitization and collateralized debt offerings. All of the
alleged turmoil ensued before the nation's financial crisis that occurred
nearly a decade ago. The Department of Justice accused Deutsche Bank of
knowingly making false or misleading representations when soliciting to
investors. Such fraud centered around the nature of mortgage loans that
were issued between 2006 and 2007. The advances totaled in the billions
and included private buyers as well as corporations, along with public
entities such as city and county governments.
Deutsche Bank acknowledged its failure to provide investors with complete
and accurate information, and thus agreed to a settlement that included
relief to homeowners currently underwater because of the financial institution’s
carelessness. The Department of Justice has mandated around $4.1 billion
in aid going to such borrowers, with an $80 million portion of the most
recent agreement set aside for consumers, accounting for some of the funding.
Mortgage forgiveness and forbearance are two of many ways that Deutsche
Bank plans to make good with the public on the $95 million settlement.
The financial institution also plans to implement low to moderate income
lending along with affordable housing practices. Investing in the community
as a whole will be another way that Deutsche Bank makes amends for its
wrongdoing. The corporation has plans to contribute to housing stabilization
for various cities and, as a result, help shore up the state of Maryland's economy.
It seems that Deutsche Bank has had to answer up in recent months for some
deceptive practices. The financial institution settled a federal mortgage
probe in December 2016 in which it was ordered to pay a civil penalty
totaling $3.1 billion. The final price tag for the investigation was $7.2
billion, which was a reduction from the initial $14 billion that the government
initially proposed. The $4.1 billion relief expense imposed by the Department
of Justice resulted from this probe and may have contributed to Deutsche
Bank’s legal costs, which accounted for $2 billion in losses on
the financial institution’s fourth quarter report.
Deutsche Bank was also found liable in a silver manipulation lawsuit in
October 2016, and ordered to pay $38 million in damages. The financial
institution is accused of employing manipulative device claims along with
a myriad of other offenses that it was unable to refute effectively. The
original class action lawsuit for this matter was filed in July 2014 and
included other banks, which subsequently cleared their names and avoided
substantial penalties over the alleged deceptive practices.
The most recent settlement between Deutsche Bank and the state of Maryland
adds to the company’s total in legal bills and overall liabilities.
Only time will tell if more cases concerning Deutsche Bank result in losses,
placing, even more pressure on the Frankfurt-based financial services
company to revamp their policies.