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Deutsche Bank Renegs On Pledge To Help Distressed Homeowners

This ought to win Deutsche Bank some badly needed good will with global prosecutors investigating the bank for its involvement in various financial frauds – not to mention Financial Services Committee Chairwoman Maxine Waters.

According to a Bloomberg report on Friday, DB has decided – apparently with the blessing of a federally appointed monitor – that it won’t pay out the $4 billion balance on its commitment to help distressed homeowners impacted by the housing collapse. The bank had agreed to spend billions of dollars on consumer relief during the waning days of the Obama administration as part of a massive settlement with the DOJ over its role in selling mortgages.

DB

Instead, the bank will use the money on providing new loans.

The bank’s monitor said the decision might disappoint some homeowners who had reached out to the bank for relief over the past two years…but, to be fair, DB has already paid out $1.5 billion as part of the program.

The decision reverses pronouncements by the bank and the U.S. Justice Department that some of the funds – part of an overall $7.2 billion settlement over bad mortgage bonds sold before the 2008 crisis – would go to aiding people who were in imminent risk of defaulting on their mortgage payments, have especially high interest rates or owe more on their mortgage than in the value of their home.

The change in plans “may disappoint distressed homeowners and others, including the many individuals who have reached out to the monitor over the past two years, hoping to receive different types of consumer relief from the bank,” Bresnick wrote in the report, which was posted online.

Bresnick, a partner at the law firm Venable LLC and a former U.S. prosecutor, declined to comment for this article. The Justice Department didn’t have an immediate comment.

The bank rationalized its decision by saying the “most effective” form of consumer relief would be to provide loans to consumers so they can purchase homes (though, presumably, those distressed consumers wouldn’t qualify under the more stringent lending standards of the modern era).

The decision reverses pronouncements by the bank and the U.S. Justice Department that some of the funds – part of an overall $7.2 billion settlement over bad mortgage bonds sold before the 2008 crisis – would go to aiding people who were in imminent risk of defaulting on their mortgage payments, have especially high interest rates or owe more on their mortgage than in the value of their home.

The change in plans “may disappoint distressed homeowners and others, including the many individuals who have reached out to the monitor over the past two years, hoping to receive different types of consumer relief from the bank,” Bresnick wrote in the report, which was posted online.

Bresnick, a partner at the law firm Venable LLC and a former U.S. prosecutor, declined to comment for this article. The Justice Department didn’t have an immediate comment.

Unlike other bank settlements from the Obama era, DB’s settlement didn’t require the bank to spend the money on consumer relief; instead, DOJ and DB had what amounted to a handshake agreement. The money earmarked for consumer relief wasn’t specifically earmarked for loan modifications, which means the bank is free to use it for loans at its discretion. By comparison, similar settlements reached during the Trump era haven’t required money be set aside to help consumers.

Earlier monitor reports said the bank was planning to offer loan relief and had entered into financing arrangements with two companies specializing in modifications.

“The bank now has declined to pursue these options for relief,” the latest monitor report said. “It will not, after all, help any underwater homeowner by forgiving a portion of the principal owed on a mortgage, offer forbearance to any homeowner finding it difficult to make a monthly mortgage payment, or provide any of the other relief addressed in the monitor’s prior report.”

The settlement – which initial reports suggested could be as high as $14 billion – instead required the bank to pay a roughly $3 billion fine and offer the $4 billion for consumer relief. But rest assured, the bank’s new Democratic overlords on the House Financial Services Committee likely won’t forget this.

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Source: zerohedge.com

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