Deutsche Bank agrees to pay $7.2 billion in settlement over misconduct in mortgage securities

Deutsche Bank to pay $7.2B in mortgage settlement

Deutsche Bank agreed on Tuesday to pay $7.2 billion for misleading investors in its sale of residential mortgage-backed securities, among the largest resolutions of its kind.

The U.S. Justice Department said the settlement requires Germany's biggest lender to pay a $3.1 billion civil penalty under the Financial Institutions Reform, Recovery and Enforcement Act.

It will also provide $4.1 billion in relief to underwater homeowners, distressed borrowers and affected communities.

The DOJ said it is "one of the largest FIRREA penalties ever paid."

"This resolution holds Deutsche Bank accountable for its illegal conduct and irresponsible lending practices, which caused serious and lasting damage to investors and the American public," Attorney General Loretta Lynch said in a release.

"Deutsche Bank did not merely mislead investors: it contributed directly to an international financial crisis," Lynch added.

To compare, in 2014, Bank of America agreed to pay $10 billion to regulators in a settlement tied to residential mortgage-backed securities. That included fines from Merrill Lynch and countrywide that BofA acquired during the financial crisis.

In 2013, JPMorgan agreed to pay $9 billion, according to regulators.

As a part of the settlement, Deutsche Bank will admit to making "false representations and omitting material information from disclosures to investors about the loans included in RMBS securities sold by the Bank."

The agreement follows months of negotiations with the DOJ. The bank's stock was hit hard in September after it acknowledged the Justice Department had been seeking nearly twice as much.

In December, Reuters reported that Deutsche Bank had reached an agreement but it had not yet been finalized.

The Justice Department sued Barclays in December on charges of fraud in the sale of mortgage-backed securities in the run-up to the 2008-09 financial crisis. Barclays said that the claims in the lawsuit are "disconnected from the facts" and that it has an obligation to defend against "unreasonable allegations and demands," according to a Reuters report.

— Reuters contributed to this report.