New York, NY: Deutsche Bank has agreed to pay $32.5 million to settle claims in a U.S. lawsuit that it lied about the quality of home loans underlying securities it sold. The investors that sued include the Massachusetts Bricklayers and Masons Trust Funds. They have filed a motion for preliminary approval of the settlement in federal court in Central Islip, New York.
"The proposed settlement will provide a substantial monetary benefit to the settlement class,"court papers state.
According to the lawsuit, and as reported by Bloomberg.com, in 2006, the plaintiffs bought from Deutsche Bank so-called pass-through certificates that gave them the right to the payments on the underlying home loans. The offering documents contained misstatements about loan underwriting standards, property appraisals, loan-to-value ratios and credit ratings on the certificates, according to the complaint. At the same time Deutsche Bank was selling the securities, it was profiting from credit-default swaps by wagering that loans like those underlying the certificates would decline in value, the investors claim.
The lawsuit also states "More than 49 percent of the loans underlying one certificate series were delinquent or foreclosed on, the investors said. The tranche the Massachusetts Bricklayers and Masons Trust Funds, the lead plaintiff, bought "has already realized cumulative principal losses."
The investors also claim that had a sale been don in 2008 when the lawsuit was filed, they would have netted between 70 and 80 cents on the dollar. "The certificates are no longer marketable at prices anywhere near the price paid,"the lawsuit states.