Royal Bank of Scotland Reaches $500 Million Settlement with New York Over Mortgage Securities

March 6, 2018  |  CNBC         Royal Bank of Scotland Group has reached a $500 million settlement with New York state to resolve claims over its sale of risky residential mortgage-backed securities that contributed to the 2008 global financial crisis.

New York Attorney General Eric Schneiderman on Tuesday said the accord includes a $100 million cash payment to the state, plus $400 million of consumer relief for homeowners and communities.

Schneiderman said RBS admitted to having sold investors residential mortgage-backed securities that did not meet underwriting guidelines, contrary to its representations, and did not comply with applicable laws and regulations.  Link to article here.

Goldman's Buying of Default Mortgages Not Without Risk

The Hill|  March 20, 2017        Goldman Sachs has launched an ambitious program to buy severely delinquent or nonperforming home mortgages as one element of a $5.1-billion settlement it has entered into with the federal government for its role in creating and selling mortgage-backed securities (MBS) in the years leading up to the financial crisis.

According to a Wall Street Journal article, Goldman has spent $4.5 billion to acquire 26,000 delinquent mortgages from Fannie Mae. Goldman did not originate any of these mortgages. It also has purchased similar troubled mortgages from Freddie Mac and private sellers.

Goldman intends to restructure the mortgages it has purchased with the expectation that the homeowners will then become current in making payments on them.  In accordance with its settlement agreement, Goldman will provide $1.8 billion of relief to homeowners, presumably by a combination of writing down principal balances, lowering interest rates on the mortgages and extending the repayment period.  Read more here.

Credit Suisse Finalizes $5.3 Billion Mortgage Deal with US

CNBC | January 18, 2017         Credit Suisse formally agreed to pay $5.3 billion to settle with U.S. authorities over claims it misled investors in residential mortgage-backed securities it sold in the run-up to the 2008 financial crisis, the U.S. Department of Justice said on Wednesday.

Zurich-based Credit Suisse will pay a $2.48 billion cash penalty and provide $2.8 billion in consumer relief, including loan forgiveness and financing for affordable housing, the Justice Department said in a statement.

"The bank concedes that it knew it was peddling investments that were likely to fail," Principal Associate Attorney General Bill Baer said in the statement.

Credit Suisse, which had announced the agreement in principle on Dec. 23, said in a statement it was "pleased to have reached an amicable settlement that allows the bank to put this legacy matter behind it."

Shares of Credit Suisse on the Swiss stock exchange closed down 2.5 percent at 15.28 Swiss francs, a steeper drop than the broader European banking sector.

In a statement of facts, Credit Suisse acknowledged it knew the loans it pooled into securities did not meet underwriting guidelines.  Read more here.

 

Deutsche Bank to Fight $14 Billion Demand From U.S. Authorities

Deutsche Bank shares tumble on U.S. fine

Reuters | September 16, 2016         Deutsche Bank (DBKGn.DE) said it would fight a $14 billion demand from the U.S. Department of Justice to settle claims it missold mortgage-backed securities, a shock bill that raises questions about the future of Germany's largest lender.

The claim against Deutsche, which is likely to trigger several months of talks, far exceeds the bank's expectations that the DoJ would be looking for a figure of only up to 3 billion euros ($3.4 billion).

The demand adds to the problems facing Deutsche Bank's Chief Executive John Cryan, a Briton who has been in the job for a year.

The bank only scraped through European stress tests in July and has warned it may need deeper cost cuts to turn itself around after revenue fell sharply in the second quarter due to challenging markets and low interest rates.

Deutsche Bank shares, which have lost around half their value this year, tumbled 7.6 percent to 12.10 euros in Frankfurt on Friday, with analysts saying the bank may need to raise fresh funds from investors or sell assets to shore up its capital ratios.

The cost of insuring Deutsche Bank debt against default rose by around eight percent.

The bank, which employs around 100,000 people, said it regarded the DoJ demand as an opening shot.

"Deutsche Bank has no intent to settle these potential civil claims anywhere near the number cited," it said in a statement.

"The negotiations are only just beginning. The bank expects that they will lead to an outcome similar to those of peer banks which have settled at materially lower amounts."  Read more here.

JPMorgan Getting Back in the RMBS Game

New securities would be bank's first “house transaction” since the financial crisis

The Real Deal |  March 16, 2016     JPMorgan Chase is dipping back into the mortgage-backed securities market in the banking giant’s first “house transaction” since the financial crisis.

JPMorgan is expected to price a new residential mortgage-backed securities deal, which would pass along most of the credit risk on $1.9 billion in mortgages owned by the bank, over the next two weeks. JPMorgan would hold 90 percent of the deal, keeping the most senior tranches, while selling off riskier pieces to investors.

The deal would be JPMorgan’s first “house transaction,” entirely backed by mortgages it owns, since the financial crisis, according to the Wall Street Journal. The pool backing the securities includes a mix of more than 6,000 mortgages, around 75 percent of which conform with Fannie Mae and Freddie Mac underwriting standards.  Read more here.