Big bank to pay $11.5m in mortgage probe settlement

A unit of Deutsche Bank AG has agreed to pay $11.5 million to settle a Nevada probe if its role in funding subprime mortgages

A unit of Deutsche Bank AG has agreed to pay $11.5 million to settle a Nevada probe if its role in funding subprime mortgages, according to a Reuters report.

The mortgages in question were provided by other lenders, but funded, bought and securitized by Deutsche Bank unit DB Structured Products Inc. from 2004 to 2007, according to Reuters.

Nevada Attorney General Catherine Masto alleged that the other lenders misled borrowers about the loans’ interest rates or added high-risk features regardless of the borrower’s ability to repay – and that Deutsche Bank knew about the misleading practices when it funded the loans.

Deutsche Bank would neither admit nor deny the allegations, Reuters reported. However, the bank did agree to review any future loans it helps finance in the state of Nevada for similar issues.

Masto said the money from the settlement will be used to cover the costs of the investigation and repay some of the affected borrowers.

“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,” she said in a statement.

Nevada – which was one of the hardest hit states during the housing crisis – has also been among the most aggressive in going after financial institutions that engaged in risky lending practices, Reuters reported. In the last two years, the state has sued units of Royal Bank of Scotland and Morgan Stanley, which settled for $42 million and $40 million, respectively.