Loan securitizer DB Structured Products, an arm of Deutsche Bank, agreed to pay $11.5 million to settle the Nevada Attorney General's investigation into DB's packaging and sales of subprime and Alt-A loans.
Nevada Attorney General Catherine Cortez Masto first launched the investigation to determine if the original lenders used tricks to disguise underwriting and loan-quality issues. In its settlement, DB agreed not to securitize loans in the future if it finds that the mortgages violate any part of the Nevada Deceptive Trade Practices Act; it also will not securitize them if the lender is found to have failed to disclose risky terms, such as teaser rates, to borrowers.
Masto launched the investigation two years ago, regarding loans that date back as far as 2004-2007. The money paid in the settlement will go to harmed borrowers and to mortgage-fraud enforcement activities. This case is one of many that involve companies heavily invested in the mass securitization of mortgages before the housing meltdown, and it is not likely to be the last. "The legacy mortgage origination and servicing litigation cases could go on for at least a few years more before further clarity has been reached," said Ron D’Vari, CEO and co-founder of NewOak Capital.