(More Bank) – Deutsche Bank AG has decided that none of the more than $ 4 billion it promised to spend on helping consumers after the global mortgage crisis hit the hands of distressed homeowners in the US a report from the controller of the 2017 regulations.
Instead, consumer money will be spent on new loans, according to the February 13 report from bank controller Michael Bresnick.
The ruling reverses statements by the bank and the US Department of Justice that part of the funds – part of a $ 7.2 billion global settlement on negative mortgage bonds sold before the 2008 crisis – would be destined to help those who were at imminent risk of default. their mortgage payments, have particularly high interest rates or owe more on their mortgage than on the value of their home.
The change of plans "could disappoint distressed homeowners and others, including the many people who have contacted the monitor over the past two years, hoping to receive different types of help from consumers from the bank, "writes Bresnick in the report. posted online.
Bresnick, a partner at law firm Venable LLC and a former US attorney, declined to comment on the article. The Department of Justice did not comment.
The bank has already received consumer assistance credits for more than $ 1.5 billion spent on initial loans, the report says. Bresnick indicated that he planned to provide a more detailed analysis of the loans offered by Deutsche Bank for consumer credit, such as "where they were made and how loans are similar or similar". different from those of the market in general ".
The bank said in a written statement that its consumer assistance program has provided financing to more than 190,000 homeowners, particularly to low- and moderate-income homeowners or owners in hard-hit areas. financial. "As instructed by the monitor, we have decided to focus our efforts on helping customers for the purchase of homes because it is the most effective way to provide respite." consumption, given the current market situation and our expertise in financing, "said the bank.
The Department of Justice has been criticized for earlier mortgage settlements allowing banks to use settlement funds to fund new loans, rather than helping homeowners affected by the financial crisis. The handful of banking investigations in times of crisis that have been settled by the Trump Department of Justice do not include money for consumer assistance.
Deutsche Bank's turnaround is to "let the big financial institutions that triggered and benefit from the mortgage crisis take over," said Bruce Marks, president and CEO of Neighborhood Assistance Corporation of America, a defense group. housing.
Deutsche Bank's settlement, completed in the final days of the Obama administration, resolved a multi-year US investigation into Deutsche Bank's sale of mortgage-backed securities. The deal forced the bank to pay a $ 3.1 billion civil fine and $ 4.1 billion in consumer assistance.
Negotiations on the US banking survey frightened investors, with initial reports suggesting it could cost $ 14 billion to resolve. Years of low stock prices and layoffs have raised questions about the need to combine Deutsche Bank with another German bank. The bank is also waiting for the results of the US surveys, including whether it helped wealthy Russians to launder billions of dollars of illicit funds, while Democrats began deepening their relationship with President Donald Trump.
Unlike many other agreements between the Ministry of Justice and the banks, the Deutsche Bank agreement did not seem to require that part of what is known as the consumer relief allowance be allocated to loan modifications. In announcing the deal, however, the bank and the Justice Department said the bank would spend some of the money on loan modifications and even loan cancellation.
"Consumer assistance should mainly take the form of loan modifications and other forms of assistance to homeowners and borrowers, as well as other similar initiatives to be determined and put in place. implemented over a period of at least five years, "Deutsche Bank told investors on December 12. 23 2016.
Previous monitoring reports indicated that the bank was considering offering loan relief and had entered into funding agreements with two companies specializing in the amendments.
The story continues
"The bank has now refused to resort to these lightening options," says the latest monitoring report. "After all, it will not help immovable property owners by canceling part of the mortgage principal, by offering forbearance to any homeowner who has difficulty making a monthly mortgage payment, or by providing any other relief. mentioned in the report. previous report. "
Previously: Deutsche Bank was considering new housing loans for settlement
(Adds the Consumer Advocate's comment to the ninth paragraph.)
– With the help of Sonali Basak.
To contact the reporter about this story: Tom Schoenberg in Washington at tschoenberg@More Bank.net
To contact the makers of this story: Jeffrey D Grocott at jgrocott2@More Bank.net, David S. Joachim
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