Tuesday, May 3, 2011

BREAKING: Deutsche Bank Accused of Mortgage Fraud

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Shahien Nasiripour at the Huff Post reports that Deutsche Bank has been accused of mortgage fraud by the Justice Department. They are suing the bank for $1 billion. 

Here's another interesting piece of information about Deutsche Bank. They are in the business of investing in student loan debt.

Today, the WSJ noted:

 An $859.17 million student loan-backed bond from Educational Funding of the South priced on Tuesday, according to a person familiar with the matter. The $372.3 million triple-A rated 2.8-year tranche priced at 55 basis points over three month London Interbank Offered rate, while the $450 million 9.6-year portion priced at 65 basis points over three-month Libor.
Price guidance is also out on AH Mortgage Servicer Advance Revolving Trust's $850 million bond.
Price guidance on the $325 million triple-A rated one-year tranche suggests it could yield between 3% and 3.25%. The $325 million triple-A-rated two-year portion could yield about 3.5%, according to a term sheet.
Joint leads on the deal are Deutsche Bank, Royal Bank of Scotland and Bank of America Merrill Lynch. The security is expected to price later this week. 
Source: Credit Markets, WSJ (May 3, 2011) 

So is it all right for Deutsche Bank to be involved in investing in student loan-backed bonds, while at the same time being sued by the U.S. government for mortgage fraud?

Related Links

"Education Funding of the South, Inc. Announces Acceptance of Tenders in Tender Offers," PRNews Wire, May 3, 2011

"Steve Eisman Blasts For-Profits, Arguing 'Subprime Goes To College,''' AEM, May 28, 2010

"Those who seek knowledge suffer from the sin of despair and frustration,"  AEM, February 28, 2010

"Nelnet Keeps Taking Taxpayer Money Despite Accusations On Student Loans," Lawrence Delevingne, Business Insider, October 25, 2009


Anonymous said...

Deutsche Bank has long served as one of the top five eligible-lender trustees in FFELP. Many of the well-known (and not-so-well-known) lenders are (were) not actually eligible lenders under the regs, so they use an ELT in order to participate in the program. It is assumed that the non-lender "lender" pays the ELT a fee for this service.

Cryn Johannsen said...

Thanks for the remark. But what exactly are you saying?