Deutsche Bank agrees to pay $7.2 bn for toxic mortgages

Deutsche Bank has signed a $7.2 billion settlement with the U.S. Department of Justice (DOJ) over its sale of toxic mortgage securities in the run-up to the 2008 financial crisis, the government agency said on Tuesday. 
The settlement requires Deutsche Bank to pay a $3.1 billion civil penalty under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA).  Under the settlement, Deutsche Bank will also provide $4.1 billion in relief to underwater homeowners, distressed borrowers and affected communities.

Deutsche's agreement represents the largest resolution for the conduct of a single entity in misleading investors in residential mortgage-backed securities, the department said in a statement. "Deutsche Bank did not merely mislead investors: it contributed directly to an international financial crisis," Attorney General Loretta Lynch said in the statement.

The bank also agreed to a statement of facts that describes how it made false and misleading representations to investors about the loans underlying billions of dollars worth of mortgage securities issued by the bank in 2006 and 2007.

"Our conduct in this matter, which occurred from 2005 to 2007, falls short of our standards and is unacceptable. We apologize unreservedly for it," John Cryan, who took over as CEO in July 2015, wrote in an emailed statement.

"We have subsequently exited many of the underlying activities and comprehensively improved our standards. As we enter 2017, we are pleased to have resolved this matter", CEO added in the note, as Reuters reported.

Deutsche Bank's settlement is significantly lower than the $14 billion originally demanded by the Justice Department last year.