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Financial Services Law Insights and Observations

International bank agrees to pay $2 billion in civil penalties to settle allegations of RMBS misconduct

Securities DOJ RMBS Settlement FIRREA

Securities

On March 29, the DOJ announced a $2 billion settlement with an international bank and several of its affiliates to resolve allegations of misrepresentation in the sale of residential mortgage-backed securities, in violation of the Financial Institutions Reform, Recovery, and Enforcement Act. The bank agreed to pay the civil monetary penalty in exchange for dismissal of a civil action filed in 2016. According to the settlement agreement, the investigation focused on 36 securitizations by the bank between 2005 and 2007. In addition to the alleged misrepresentations in the offering documents, the bank allegedly misled investors about the quality of the mortgage loans backing the deals. Separately, two former bank executives agreed to pay a combined $2 million to resolve claims brought against them individually. The bank did not admit to any liability or wrongdoing.

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