The Resolution Law Group: Deutsche Bank AG Settles Shareholder Lawsuit Over Mortgage Debt

Deutsche Bank AG (DB) has settled a securities lawsuit filed by shareholders accusing the financial institution of misrepresenting the degree of risk it could manage related to mortgage debt before the financial crisis of 2008. The deal, of which the terms have not yet been revealed, were disclosed in a filing made by the firm’s lawyers in the U.S. District Court in Manhattan.

Shareholders, including two mutual funds and the Building Trades United Pension Trust Fund of Elm Grove, claim Deutsche Bank misled them about the management of risk and the underwriting on the mortgage debt that it put together and sold. They also contend that the firm was too slow to take write-downs. They believe that this resulted in an 87% decline in the bank’s share price between May 2007 and January 2009.

They also claim that Deutsche Bank maximized its profit at risk to investors, even as it failed to appraise these customers of the risks they were taking on. When the financial markets failed, it was investors that ended up paying the price.

The securities agreement was reached in the wake of a US district judge refusing to let the shareholder lawsuit become a class action case. Judge Katherine Forrest said that there were problems with the methods and conclusions arrived at by an expert that the plaintiffs had retained.

The settlement comes right after Deutsche Bank agreed to pay $1.9 billion to the Federal Housing Finance Agency over the mortgage-backed securitiesit sold to Fannie Mae and Freddie Mac. FHFA believes that the bank and other financial firms misled the two government-sponsored mortgage companies about borrowers’ creditworthiness and the quality of loans. It also contends that the firms sold Fannie and Freddie flawed securities. (The two entities, which sold these mortgage as securities to investors, suffered huge mortgage losses when the economic crisis struck in 2008.)

Also, Deutsche Bank, along with others banks, has just agreed to settle with the European Union over interbank offered rate manipulation allegations. The banks are accused of manipulating the Yen London interbank offered rate and the Euribor. Of the $2.3B in total that is to be paid, $992 million will come from Deutsche Bank.

At The Resolution Law Group, our securities lawyers are still working with institutional and individual investors to get their money back from this tumultuous time in our economic history.

Contact our securities fraud lawyers to request your free case consultation. You may have grounds for a claim involving mortgage-backed securities, residential mortgage-backed securities, auction-rate securities, real estate investment trusts, municipal bonds, and other financial instruments. You want to work with an experienced law firm that knows how to pursue your claim and is not afraid to go after the big banks.

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The Resolution Law Group: Wells Fargo Reaches $591 Million Mortgage Deal with Fannie Mae

Wells Fargo & Co. (WFC) has arrived at a $591 million mortgage settlement with Fannie Mae (FNMA). The arrangement resolves claims that the banking institution sold faulty mortgages to the government run-home loan financier and covers loans that Wells Fargo originated more than four years ago.

Fannie Mae and Freddie Mac (FMCC) were taken over by the US government five years ago as they stood poised to fail due to faulty loans they bought from Wells Fargo and other banks. The two mortgage companies had bundled the mortgages with securities.

With this deal, Wells Fargo will pay $541 million in cash to Fannie Mae while the rest will be taken care of in credits from previous buy backs.

It was just a couple of months ago that Wells Fargo settled its disputes over faulty loans it sold to Freddie Mac with an $869 million mortgage buyback deal. According to Compass Point Research and Trading LLC, between 2005 and 2008, Wells Fargo sold $345 billion of mortgages to Freddie Mac. Compass says the bank sold another $126 billion to Freddie in 2009.

Also settling with Freddie Mac today is Flagstar Bank (FBC) for $10.8M over loans it sold to the mortgage company between 2000 and 2008. That agreement comes following Flagstar and Fannie Mae settling mortgage claims for $93 million over loans the former sold to the latter between January 2000 and December 31, 2008.

Fannie Mae and Freddie Mac have been trying to get banks to repurchase these trouble loans for some time now. In light of this latest settlement with Wells Fargo, Fannie Mae has reached settlements of about $6.5 billion over loan buy backs, including a $3.6 billion deal with Bank of America Corp. (BAC) and Countrywide Financial Corp. and $968 million with Citigroup (C). Earlier this month, Deutsche Bank (DB) consented to pay $1.9 billion to the Federal Housing Finance Agency over claims that it misled Freddie and Fannie about the mortgage backed securities that the latter two purchased from the bank.

If you feel you are the victim of Securities Fraud, please do not hesitate to email or call the The Resolution Law Group (203) 542-7275 for a confidential, no obligation consultation.

The Resolution Law Group: JPMorgan and the DOJ Finalize Their $13 Billion Settlement

After months of back-and-forth, the US Justice Department and JPMorgan Chase (JPM) have agreed to a $13 billion settlement. The historic deal concludes several of lawsuits and probes over failed mortgage bonds that were issued prior to the economic crisis. It also is the largest combination of damages and fines to be obtained by the federal government in a civil case with just one company. JPMorgan had initially wanted to pay just $3 billion.

The $13 billion deal is the largest crackdown this government had made against Wall Street over questionable mortgage practices. US Attorney General H. Eric Holder and other lead DOJ officials were involved in the settlement talks with JPMorgan CEO Jamie Dimon and other senior officials.

The settlement is over billions of dollars in residential mortgage backed securities involving not just the firm but also its Washington Mutual (WAMUQ) and Bear Stearns (BSC) outfits. The government claims that the RMBS were based on mortgages that were not as solid as what they were advertised to be.

As part of the agreement, JPMorgan acknowledged a statement of facts that delineated its wrongdoing and retracted its demand that prosecutors stop a related criminal probe directed at the bank. Also, the firm for the most part forfeited getting back some of the settlement from the Federal Deposit Insurance Corporation.

Of the $13 billion, $9 billion will pay state and federal civil lawsuit claims over residential mortgage-backed securities including:

• $2 million as a civil penalty to the DOJ
• $1.4 billion to resolve the National Credit Union Administration’s state and federal claims
• $4 billion for Federal Housing Finance Agency claims
• $515 million over Federal Deposit Insurance Corp. claims
• Almost $20 million resolves Delaware claims
• Almost $300 million is for California claims
• Almost $614 million resolves NY state claims
• $100 million is for Illinois claims
• $34 million settles claims made by Massachusetts

The rest of the settlement in the amount of $4 billion will be in the form of programs to help homeowners that suffered harm. JPMorgan says it would pay up to $1.7 billion to write down principal amounts of loans it held in which the borrower owes a sum greater than the value of the property.

Meantime, $300 million to $500 million will go to forbearance, which involves the restructuring of certain mortgages to lower monthly payments. The final $2 billion will go to a number of measures, including absorbing whatever principal is still owed on properties that haven’t foreclosed but were already vacated, as well as to new mortgage originators for certain income borrowers. JPMorgan might even use some of this money to pay for anti-blight work in beleaguered neighborhoods.

The Resolution Law Group represents institutional investors and high net worth individual investors wishing to recoup their RMBS fraud losses. Contact our securities lawyers today.

J.P. Morgan’s $13B Residential Mortgage-Backed Securities Deal with the DOJ Stumbles Into Obstacles

Reuters is reporting that according to a source in the know, J.P. Morgan Chase & Co.’s (JPM) tentative $13 billion residential mortgage-backed securities settlement with the US Justice Department has hit a couple of stumbling blocks. The firm is reportedly trying to include a provision that would close any criminal probes into its packaging and sale of mortgage securities—except for an inquiry by California prosecutors. This counters the bank’s earlier decision to agree to keep criminal investigations out of the deal.

The settlement, preliminarily reached last week, includes $4 billion to resolve claims made by the Federal Housing Finance Agency, which contends that J.P. Morgan misled Freddie Mac (FMCC) and Fannie Mae (FNMA) about the quality of loans the latter two bought from the investment bank before the 2008 economic crisis. Another $4 billion is for consumer relief, while $5 billion is for penalties.

The agreement also would settle a separate mortgage securities lawsuit filed separately by NY AG Eric Schneiderman against the firm over Bear Stearns (BSC)-packaged mortgage bonds. The state’s top prosecutor contended that Bear Stearns misled investors about the faulty loans behind the securities, neglected to complete assess the debt, disregarded defects that were found, and concealed its failure to properly examine the loans or reveal their risks.

The deal isn’t final and certain matters still need to be resolved, such as the disagreement with the Federal Deposit Insurance Corp. over who should be responsible for legal liabilities stemming from the bank’s takeover of Washington Mutual’s (WAMUQ) obligations and assets during the economic collapse. JPMorgan paid $1.9 billion to acquire that bank from FDIC. However, the firm is disputing its degree of responsibility for investor losses on the failed savings holding company’s mortgage securities. The DOJ wants a provision that will stop the bank from attempting to move WaMu liabilities covered under the agreement to the FDIC.

Other Recent JPMorgan Settlements
Also last week, JPMorgan consented to pay $100 million to the Commodity Futures Trading Commission over its “London whale” trades debacle. The CFTC accused the bank’s London traders of employing a reckless derivatives strategy that cost JPMorgan $6.2 billion in losses. While the firm didn’t deny or admit to the agency’s finding that there was a violation, it did agree about “certain facts.” For one, J.P. Morgan admitted that it did not properly supervise the traders who tweaked prices to lower the bank’s losses at cost to investors.

That settlement comes a month after the firm said it would pay $920 million over related charges to the Securities and Exchange Commission, the Federal Reserve, Office of the Comptroller of the Currency in the US and the Financial Conduct Authority in the UK.

Please contact our RMBS fraud lawyers if you think you might have grounds for a mortgage-backed securities case.

The Resolution Law Group: JPMorgan Said to Reach Record $13 Billion U.S. Settlement

JPMorgan Chase & Co.’s record $13 billion deal to end U.S. probes of its mortgage-bond sales would free the nation’s largest bank from mounting civil disputes with the government while leaving a criminal inquiry unresolved.

The tentative pact with the Department of Justice increased from an $11 billion proposal last month and would mark the largest amount paid by a financial firm in a settlement with the U.S. The deal wouldn’t release the bank from potential criminal liability, at the insistence of U.S. Attorney General Eric Holder, according to terms described by a person familiar with the talks, who asked not to be named because they were private.

“To not get the waiver from criminal prosecution is not good,” said Nancy Bush, a bank analyst who founded NAB Research LLC in New Jersey. “What we’re looking for in a settlement of this size is certainty from things like the criminal prosecution of a company. The Street wants certainty.”

JPMorgan Chief Executive Officer Jamie Dimon, 57, personally discussed the deal with Holder after markets closed Oct. 18 as the banker sought to end probes that have beset his firm and resulted in its first quarterly loss under his watch. The agreement, which isn’t yet final, includes $4 billion in relief for unspecified consumers and $9 billion in payments and fines, according to another person briefed on the terms.

The payouts would cover a $4 billion accord with the Federal Housing Finance Agency over the bank’s sale of mortgage-backed securities, that person said. The deal, which may be announced in the coming week, also resolves pending inquiries by New York Attorney General Eric Schneiderman, the people said.

Dwarfing Pay

The settlement would amount to more than half of JPMorgan’s record $21.3 billion profit last year, or 1.5 times what the firm’s corporate and investment bank set aside to pay employees during this year’s first nine months. Only seven companies in the Dow Jones Industrial Average earned more than $13 billion in 2012, according to data compiled by Bloomberg. Some portions of the deal, such as relief to homeowners, would probably be tax deductible for JPMorgan.

The outline of the tentative accord was reached during a telephone call between Holder, Dimon, JPMorgan General Counsel Stephen Cutler and Associate U.S. Attorney General Tony West, said the person. The settlement’s statement of facts is still being negotiated.

Bondholder Concerns

Holder told Dimon that a release from the criminal inquiry wouldn’t be forthcoming as part of any deal, said the person familiar with their talks. The accord will probably require JPMorgan to cooperate in criminal investigations of individuals tied to wrongdoing associated with the bank’s mortgage practices, said the person.

Brian Fallon, a spokesman for the Justice Department, and Matt Mittenthal, a spokesman for Schneiderman, declined to comment.

The possible inclusion of homeowner relief has revived concerns among mortgage-bond investors that efforts to ease the financial burdens of millions of Americans may lower the value of instruments held by Wall Street money managers.

The Association of Mortgage Investors, representing mutual funds and pensions, urged Holder in an Oct. 7 letter not to let banks saddle them with costs associated with relief for mortgage borrowers. Banks settling claims of underwriting lapses often service debts in bonds held by others, who can wind up bearing the burden of breaks granted to homeowners.

Talks Intensify

JPMorgan’s push to settle the mortgage probes and other cases required a $7.2 billion charge in the third quarter, causing the bank to report a $380 million loss on Oct. 11. The firm has tapped $8 billion of $28 billion in reserves set aside since 2010 to cover its legal expenses.

Those costs follow three years of record profits that have driven the stock higher. JPMorgan’s shares have climbed 72 percent since the end of 2008, compared with a 48 percent gain in the KBW Bank Index of 24 U.S. firms. On the day the firm reported its quarterly loss, the stock closed little changed. It has since climbed 3.4 percent.

“It looks like they are gradually becoming able to put the past and the crisis behind them,” said Craig Pirrong, professor of finance at the University of Houston’s Bauer College of Business whose research includes risk management. “It’s an expensive history lesson, and they are not out of the woods yet.”

JPMorgan’s push to end the mortgage probes intensified last month after the U.S. Attorney’s office in Sacramento, California, told the bank it was preparing to bring a case. Authorities there already had concluded there were civil violations and opened a criminal probe, JPMorgan said in an August regulatory filing.

Government’s Stance

Dimon spent two hours at the Justice Department in Washington on Sept. 26 to discuss a possible settlement of state and federal probes with Holder, a person familiar with the matter said at the time. During the bank’s talks with senior Justice Department officials, proposals swung by billions of dollars, people with knowledge of the situation said. At one point, officials rejected the company’s offer to pay $3 billion to $4 billion, one person said at the time.

“It almost sounds like a negotiation where the government just kept saying, ‘No. No. No,’ until JPMorgan met their number,” said Peter Henning, a former federal prosecutor and Securities and Exchange Commission attorney who teaches law at Wayne State University in Detroit.

Others involved in the talks of a global deal included the Department of Housing and Urban Development and Schneiderman, who is co-chairman of a federal and state working group on residential mortgage-backed securities, which negotiated the civil-mortgage settlement with JPMorgan.

False Statements

The FHFA sued JPMorgan and 17 other banks over faulty mortgage bonds two years ago to recoup some of the losses taxpayers were forced to cover when the government took control of failing mortgage finance companies in 2008.

The FHFA accused JPMorgan and its affiliates of making false statements and omitting material facts in selling $33 billion in mortgage bonds to Fannie Mae and Freddie Mac from Sept. 7, 2005, through Sept. 19, 2007. Those two firms, regulated by FHFA, have taken $187.5 billion in federal aid since then.

The regulator said executives at JPMorgan, Washington Mutual and Bear Stearns Cos., which were acquired by JPMorgan in 2008, knowingly misrepresented the quality of the loans underlying the bonds, according to the lawsuit filed in federal court in Manhattan.

Dimon said in a speech last year that he did the U.S. a favor by buying Bear Stearns and that he might not go through with it again because of how much the deal ultimately cost.

Settlement ‘Chagrin’

“The settlement probably comes with a sense of chagrin at JPMorgan,” said Joseph Grundfest, a former SEC commissioner who’s now a professor of business and law at Stanford University Law School. “Many of the problematic transactions were done by banks that JPMorgan acquired during the financial crisis at the behest of the U.S. government — not by JPMorgan itself.”

UBS AG, Switzerland’s largest bank, agreed to pay $885 million last month to settle claims it misrepresented the quality of the loans backing $4.5 billion in residential mortgage bonds it sponsored and $1.8 billion of third-party mortgage bonds sold to Fannie Mae and Freddie Mac. UBS was the third bank to reach an agreement with FHFA.

Citigroup Inc. and General Electric Co. both paid undisclosed amounts to settle the regulator’s claims.

Probes Pending

JPMorgan has paid more than $1 billion to five different regulators in the past month to settle probes into botched derivatives trades that lost more than $6.2 billion in 2012. It also settled unrelated claims it unfairly charged customers for credit-monitoring products.

The bank faces an investigation into its hiring practices in Asia. It’s also the subject of a probe by Manhattan U.S. Attorney Preet Bharara into claims it abetted Bernard Madoff’s Ponzi scheme, a person familiar with that matter said.

The six biggest U.S. banks, led by JPMorgan and Charlotte, North Carolina-based Bank of America Corp., have piled up more than $100 billion in legal costs since the financial crisis, a figure that exceeds all of the dividends paid to shareholders in the past five years, Bloomberg data show.

The Obama administration set up the residential mortgage-backed securities working group in 2012 to coordinate a crackdown on deceptive underwriting practices that contributed to the financial crisis.

Schneiderman’s Claims

Schneiderman’s office sued JPMorgan last October over mortgage-bonds packaged by Bear Stearns.

Schneiderman alleged Bear Stearns misled mortgage-bond investors about defective loans backing the securities. The firm failed to fully evaluate the debt, ignored defects uncovered by a limited review and hid that it failed to adequately scrutinize the loans or disclose their risks, according to the complaint.

At the time it was filed, the cumulative realized losses on more than 100 subprime and Alt-A securities that the bank and its affiliates sponsored and underwrote in 2006 and 2007 totaled about $22.5 billion, or about 26 percent of the original balance of about $87 billion, according to the complaint. Alt-A is a term for mortgages that typically didn’t require documentation such as proof of income.

Schneiderman’s office asserted claims under New York’s Martin Act, an almost century-old law that gives the state’s attorney general broad powers to target financial fraud. The bank denied the claims in the case, which is pending in state Supreme Court in Manhattan.

‘Self-Inflicted’

The FHFA alleged in its 2011 lawsuit that the bank misled Fannie Mae and Freddie Mac about the soundness of loans in billions of dollars of residential mortgage-backed securities. The bank didn’t disclose that a significant portion of the loans failed to adhere to underwriting standards and had poor credit quality, according to the complaint.

The number of loans for owner-occupied properties was lower than investors were told, and the bank’s disclosures misrepresented the properties’ value, according to the complaint.

JPMorgan’s rising legal and regulatory penalties don’t mean the company’s bankers are “immoral,” Dimon told an audience Oct. 12 at a meeting hosted by Institute of International Finance, where he acknowledged the bank was working through a series of problems.

“Some are self-inflicted, which we’ve completely confessed to the whole world. Some are obviously industrywide,” he said. “And yes, we’ve had some mistakes. But honestly, you can never expect to have no mistakes. So, we’ve had more than our share.”

The case is Federal Housing Finance Agency v. JPMorgan Chase & Co., 11-06188, U.S. District Court Southern District of New York (Manhattan).

 

If you feel you are the victim of Mortgage Fraud, please do not hesitate to email or call the The Resolution Law Group (203) 542-7275 for a confidential, no obligation consultation.

The Resolution Law Group: JPMorgan Considers $11B Mortgage-Backed Securities Settlement

Now that US Attorney General Eric Holder has turned down JPMorgan Chase’s (JPM) offer to settle criminal and civil charges related a mortgage-backed securities probe, the financial firm is looking at a settlement of possibly $11 billion. The financial figure has gone up as talks have expanded to include additional cases with more regulators.

The MBS investigations are over residential mortgage-backed securities (RMBS) that JPMorgan, Washington Mutual (WAMUQ), and Bear Stearns (BSC) issued between 2005 and 2007. Authorities have been looking into whether JPMorgan, which the other two firms acquired during the financial crisis, misled investors of the quality of the mortgages that were backing the securities. A lot of these RMBS failed as housing prices dropped. JPMorgan says that Washington Mutual and Bear Stearns issued about 70% of these RMBS.

One possible settlement could include $4 billion in relief to consumers and a $7 billion penalty. However, according to sources familiar with the settlement talks, the two sides have not come close to agreeing on the figure and the amount could change.

JPMorgan wants any settlement to confirm that the investigations are done and there will be no additional liability related to the MBS. Aside from the expected fine, the US Justice Department may try to get JPMorgan to admit wrongdoing, which the latter might consent to so as to avoid criminal charges. However, sources say that even if a deal is reached, the issue of whether anyone should be criminally charged over the RMBS losses may not be resolved.

Also part of the settlement talks is the Federal Housing Finance Agency. FHFA wants JPMorgan to pay over $6 billion to settle claims accusing the investment bank of misleading Freddie Mac and Fannie Mae about the mortgages that they bought from the bank during the housing bubble. Meantime, NY Attorney General Eric Schneiderman, wants recovery from JPMorgan over securities that the latter bought, which were issued by Bear Stearns as that firm was failing. Schneiderman contends that investors lost $22 billion.

It was just last year that JPMorgan settled the US Securities and Exchange Commission’s MBS case for $296.6 million. However, the bank settled without denying or admitting wrongdoing.

Last week, JPMorgan settled for $920 million with regulators over the London “whale” trading investigations. That debacle cost the financial firm over $6 billion last year. JPMorgan also consented to pay $80 million for credit card practice-related claims to its sale of identity fraud protection to customers who never received these products.

The Resolution Law Group represents high net worth individuals and institutional investors in securities arbitration, mediation, and litigation. We are here to help our clients recoup their RMBS fraud losses.

The Resolution Law Group: UBS to Pay Fannie Mae and Freddie Mac $885M to Settle RMBS Lawsuit

UBS (UBS) will pay $885 million to settle Federal Housing Finance Agency to settle allegations that it misrepresented mortgage-backed bonds during the housing bubble. $415 million of the mortgage settlement will go to Fannie Mae, while $470 million will be paid to Freddie Mac, both government-sponsored enterprises, over the $200 million in mortgage-backed securities that were sold to them.

According to FHFA, UBS misrepresented the quality of loans that were underlying residential mortgage-backed securities worth billions of dollars that Freddie Mac and Fannie Mae ended up buying. Both firms were seized in 2008 when losses from subprime mortgages brought them close to insolvency. They still are under US conservatorship.

UBS is the third to settle with FHFA over RMBS allegations. Citigroup (C) and General Electric Co. (GE) were the first.

The federal regulator is suing 18 banks, and already, Deutsche Bank (DB) and Credit Suisse (CS) have put money aside for their potential settlements. Analysts are estimating that European banks may end up paying $11 billion for mortgage-related litigation in the US, with Royal Bank of Scotland (RBS) perhaps having to pay $1.6 billion, HSBC $900 million, and Barclays (BCS) $1.1 billion.

Other banks that FHFA is suing on behalf of Freddie and Fannie:

Bank of America Corp. (BAC)
Countrywide Financial Corp.
• Ally Financial
• First Horizon National Corporation
Goldman Sachs & Co. (GS)
JPMorgan Chase 7 Co. (JPM)
• HSBC North America Holdings, Inc.
Morgan Stanley (MS)
Merrill Lynch & Co. (MER)
• Nomura Holding America Inc.
• Société Générale

The securities complaints were filed in state and federal courts and invoke government is seeking, in addition to compensatory damages  GE was the first to settle FHFA’s mortgage bond case against it. The company was one of the underwriters to the RMBS that were sold to Fannie and Freddie. The terms of the settlement, however, remain confidential. However, FHFA did accuse GE of misleading Freddie Mac into purchasing $549 million of securities.  Citibank’s RMBS settlement with FHFA was also resolved with the terms left confidential. That mortgage-backed securities lawsuit was over allegations that it misled Freddie Mac and Fannie Mae into purchasing $3.5B of the securities.
Residential Mortgage-Backed Securities
RMBS are a type of MBS with a cash flow that comes from, residential debt, including home-equity loans, residential mortgages, and subprime mortgages, rather than commercial debt. At The Resolution Law Group, our securities lawyers help investors that suffered losses from mortgage-backed securities in getting their investments back from negligent brokerage firms, brokers, and investment advisers. We represent corporations, high net worth individuals, banks, partnerships, financial firms, private foundations, large trusts, charitable organizations, school districts, retirement plans, and municipalities.

If you feel you are the victim of Mortgage Fraud, please do not hesitate to email or call the The Resolution Law Group (203) 542-7275 for a confidential, no obligation consultation.

Lender Litigation, Unlawful Foreclosure, Tarp Money, Mortgage Backed Securities, Derivitives Lawsuits, Insider Trading Lawsuit, SEC Settlements, Ponzi Scheme Lawsuits, Intentional Misrepresentation, Securitized Mortgage, Class Action Securities Lawsuit, Robo-Signing Lawsuit, Lost Equity Litigation, Mortgage Lender Fraud, FINRA Fraud Lawsuit, Suing Banks, Fraudulent Misrepresentation, Short Sale Fraud, Fraudulent Business Practices, Mortgage Litigation, Complex Tort Litigation, Injunctive Relief, MERS Fraud