Deutsche Bank to Settle Mortgage Inquiry for $7.2 Billion

Deutsche Bank announced late on Thursday that it had reached a tentative $7.2 billion deal to resolve a federal investigation into its sale of toxic mortgage securities, capping months of negotiations that weighed heavily on the bank’s stock price and reputation.

The civil settlement requires the bank, Germany’s largest, to pay a $3.1 billion penalty and provide relief to American consumers valued at $4.1 billion, the bank said in a statement that came ahead of a formal announcement in the case. The consumer portion of the settlement, the bank said, is expected to be “primarily in the form of loan modifications and other assistance to homeowners.”

Still, the bank cautioned that the deal was not final, saying that “there can be no assurance that the U.S. Department of Justice and the bank will agree on the final documentation.” The payout would settle claims that the bank, like many other institutions during the financial crisis of 2008, sold investors mortgage securities that contributed to the crisis. Collectively, big banks have paid tens of billions of dollars over their sale of these securities.