DB STRUCTURED PRODUCTS TO PAY $11.5 MLN TO RESOLVE PROBE

     (The following statement from the Nevada Attorney General's Office was 
received by e-mail and was reformatted. The sender verified the statement.) 
ATTORNEY GENERAL MASTO Secures Agreement with Securitizer Regarding Lending 
Issues 
Carson City, NV - Nevada Attorney General Catherine Cortez Masto announced that 
DB Structured Products, Inc. (DB) will pay the State $11.5 million as part of 
an agreement, called an assurance of discontinuance, to resolve an 
investigation into the firm's role in purchasing and securitizing subprime and 
Alt-A mortgage loans in Nevada. 
The agreement filed in the District Court in Clark County also requires DB to 
commit to changes in its practice to securitize Nevada mortgages.  The $11.5 
million will be used for payments to affected borrowers, mortgage fraud 
enforcement, and pay the costs of the State's investigation. 
"I remain committed to enforcing Nevada's laws against the players - including 
those on Wall Street - that contributed to and profited from mortgage lending 
and sales practices that misled Nevada consumers into loans that they did not 
understand and could not repay," said Masto.  "The payment from DB will help 
alleviate some of the injury to Nevada consumers and the changes to its 
securitization process should help make sure that we do not go down this road 
again."
The nearly two year investigation centered upon potential misrepresentations by 
lenders, including New Century, American Home Mortgage and MortgageIT, to 
Nevada consumers who took out subprime loans and Alt-A loans that were funded, 
bought and securitized by DB between 2004 and 2007.  These include whether 
lenders deceived consumers about the actual interest rate and payments on their 
loans, and the potential payment shock when the initial "teaser" or 
"interest-only" rates on their mortgages expired. 
In addition, the investigation examined whether lenders originated loans with 
multiple risk features that allowed them to approve loans without proper 
consideration of the borrowers' ability to repay.  These layered risks included 
loans that: featured adjustable interest rates, extended amortization periods 
and pre-payment penalties; were predicated on stated income applications and 
100% financing;  and were qualified on the basis of initial teaser rates and 
not the adjusted rates that would be in effect for most of the loan term. 
The Nevada Attorney General also examined the extent to which DB was aware of 
the lenders' allegedly deceptive practices through its due diligence process 
when it bought the loans and whether DB substantially assisted these lenders by 
financing and purchasing their loans. 
The agreement includes the following conduct provisions going forward: 
·DB only will finance, purchase, or securitize Nevada subprime mortgage loans 
if it has engaged in a review of such loans and determined that the loans 
comply with the Nevada Deceptive Trade Practices Act. 
·DB will not securitize loans where upon review it has reason to believe that 
the lender has not adequately disclosed to the borrowers the existence of an 
initial teaser rate, the potential negative amortization on the loan, the 
maximum adjusted interest rate or payments, and the potential for payment shock 
if payments increase after a loan reset or recast.
Borrowers eligible for relief will be notified by the Nevada Attorney General's 
Office in the future.  No application or qualification process will be required 
and borrowers will not be required to release any claims that they may have 
against their lenders or against DB.  Only borrowers whose loans were financed 
or acquired by DB are covered by this Assurance. 
The agreement, which follows the Attorney General's settlements in the last two 
years with Morgan Stanley and RBS Financial Products, continues her work to 
hold financial institutions and other entities accountable for their roles in 
the housing crisis that has imposed an enormous toll on Nevada homeowners and 
communities and the State's economy. 
In all, the Attorney General has recovered roughly $80 million from banks that 
funded and purchased deceptively originated mortgage loans.  In 2009, Masto 
settled claims against Wells Fargo for claims that Wachovia Bank misled 
borrowers about the interest rate and payment due on their mortgages.  Doing so 
misled borrowers about the interest rate and payment due on their mortgages and 
caused borrowers' loan payments or principal balances to increase dramatically. 
Masto was one of only two attorneys general in the country to file suit against 
Bank of America in 2010 for consumer fraud in its handling of mortgage 
modifications and foreclosures.  Nevada's settlement with Bank of America 
secured $30 million in additional relief for Nevada consumers and the bank's 
commitment to at least $750 million of mortgage modifications and short sales 
in Nevada.  The Attorney General's Office also sued and is currently litigating 
against Lender Processing Service, which handles half of all foreclosures in 
the country, for engaging in widespread fraud in executing foreclosure-related 
documents and improperly controlling the foreclosure process. 
(rml) NY
 
 
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