Latest Bank Mortgage Settlements Aim to Get More Relief to Consumers

Jon Howard
Декабря 24, 2016

The terms of that relief-including loan modifications to help consumers-still must be finalized between the bank and the government.

In 2013, the bank had agreed to pay $1.9 billion to settle all allegations that it defrauded USA government-controlled Fannie Mae and Freddie Mac - America's biggest providers of housing finance - into buying $14.2 billion in mortgage-backed securities before the 2008 financial crisis. The Barclays PLC CEO Jes Staley stated that he felt that the settlement amount was too high and unreasonable, perhaps explaining why the giant did not choose to settle.

European stocks ended the last session before Christmas little changed in what would have been boring session had Deutsche Bank not surprised the market by managing to settle a long-running investigation in the U.S. into alleged mis-selling of mortgage securities.

The bank's stock price increased 0.7 percent on the US stock market following news of the settlement.

The sum is far lower than the $14 bn the U.S. had asked Deutsche Bank to pay in September to settle the claims.

The lender said earlier it expected to record a pretax charge of about $1.17 billion in its fourth quarter because of the civil monetary penalty.

The Justice Department is still pursuing mortgage allegations against other lenders in addition to Barclays. It also faces charges of helping investors illegally transfer billions of dollars out of Russian Federation, the report said.

In Switzerland, Credit Suisse shares were trading at 15.19 Swiss francs, down 0.91%.

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The Obama administration is pressing to wrap up investigations of Wall Street firms for creating and selling the sub-prime mortgage bonds that fuelled the 2008 crisis.

Authorities had already extracted more than US$46 billion from six United States financial institutions over their dealings in mortgage-backed securities.

The settlement will probably spare the bank from having to raise capital, said Mr George Boubouras, the chief investment officer of Contango Asset Management. Credit Suisse shares were off by 1% at $14.76. Justice Department officials and many others believe that aggressive and misleading sales tactics contributed to the housing bubble and subsequent crash that precipitated the worst economic downturn since the Great Depression.

Strategists expect the Stoxx 600 to end 2017 at 366, 1.7 percent higher than Thursday's close, according to the average of nine estimates compiled by Bloomberg.

Shares in Deutsche Bank (ETR:DBK) rose over 4 percent on the news, as investors breathed a sign of relief at the scale of the payment.

Banks were the focus across European exchanges after Deutsche Bank and Credit Suisse settled mortgage securities fraud suits in the USA, and Italy's Monte dei Paschi agreed to a bailout.

Credit Suisse has reached a similar deal with the justice department, agreeing to pay $5.28bn to resolve the probe. The lawsuit is rare for big banks, which typically settle with the government rather than risk drawn-out litigation and a possible trial.

The Obama administration has been scrambling to resolve its remaining crisis-era megabank mortgage cases before Donald Trump takes office.

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