Photographer: Krisztian Bocsi/Bloomberg

Deutsche Bank Meets With Funds to Finance Subprime Relief

  • Deals can get the lender credit for its subprime settlement
  • Bank staff met with funds at Vegas securitization conference

A decade ago, Deutsche Bank AG pitched hedge funds at a securitization industry conference in Las Vegas on a big short. Now at the same annual gathering, it’s offering to help clean up what remains of the subprime mortgage mess. 

The bank met this week with hedge funds that specialize in handling delinquent home loans and that may want financing, according to people with knowledge of the meetings. The deals could help Deutsche Bank meet some of its requirements under its $7.2 billion mortgage-bond settlement with the U.S. government, finalized on Jan. 17.

Deutsche Bank would finance the hedge funds’ purchase of defaulted loans, and investors would then ease the terms of the mortgages. The funding could count toward Deutsche Bank’s requirement under the settlement to provide $4.1 billion of relief for mortgage borrowers, according to the people. 

Some of these loans may end up coming from taxpayer-backed Fannie Mae and Freddie Mac, said the people, who asked not to be named because they were not authorized to speak publicly on the matter. Troy Gravitt, a spokesman for the German lender, declined to comment.

Before the housing bubble burst, Deutsche Bank traders at the conference pitched investors on shorting mortgage bonds, as chronicled in the book and movie “The Big Short.”

Make NPLs Great Again hat.

Photographer: Matt Scully/Bloomberg

Business has been booming again for delinquent and soured mortgage loans that remain from the 2008 financial crisis, in part because of lenders like Deutsche Bank that are required by legal settlements to provide relief to consumers. Firms are bundling last decade’s subprime home loans into bonds, and some of the securities are performing well thanks in part to recovering home prices.

On one panel during the conference, a participant distributed red, Trump-style hats that he’d brought along. They read, "Make NPLs Great Again," referring to non-performing mortgage loans.

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