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 securities it 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 SSEK Partners 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.

Deutsche Bank, U.S. shareholders settle lawsuit over mortgages, Reuters, January 2, 2014

More Blog Posts:
Deutsche Bank to Pay $1.9B to FHFA Over Mortgage-Backed Securities Sold to Freddie Mac and Fannie Mae, Institutional Investor Securities Blog, December 26, 2013

Former Merrill Lynch, Oppenheimer, Deutsche Bank Broker is Ordered by FINRA To Pay Investor $11M Over Alleged Securities Fraud, Stockbroker Fraud Blog, April 19, 2013