Hovnanian Enterprises and Deutsche Bank AG Settle Lawsuit Over Toxic Mortgage Bonds
New York Stock Exchange-Listed Homebuilder and German Bank Reach Agreement
Settlement Ends Legal Dispute Sparked by Subprime Mortgage Crisis
Hovnanian Enterprises, a homebuilder listed on the New York Stock Exchange, and Deutsche Bank AG have reached a settlement agreement to end a lawsuit over toxic mortgage bonds that contributed to the 2008 financial crisis. The terms of the settlement remain confidential, but it marks a significant step forward in resolving legal disputes stemming from the subprime mortgage debacle.
The lawsuit, filed in 2011, alleged that Hovnanian and Deutsche Bank misled investors about the quality of mortgage-backed securities they sold in the lead-up to the crisis. The plaintiffs, who included pension funds and other institutional investors, claimed they suffered billions of dollars in losses when the underlying mortgages defaulted.
Hovnanian and Deutsche Bank have denied any wrongdoing, but the settlement agreement suggests both parties were eager to avoid a lengthy and costly trial. The settlement is also a sign that the financial industry is continuing to grapple with the fallout from the subprime mortgage crisis, which led to the collapse of several major financial institutions and the Great Recession.
The settlement is the latest in a series of legal actions brought against banks and other financial institutions over toxic mortgage bonds. In 2014, Bank of America reached a $16.6 billion settlement with the U.S. Department of Justice over similar allegations. JPMorgan Chase settled with the Justice Department for $13 billion in 2013.
The settlements have provided some relief to investors who lost money in the subprime mortgage debacle, but they have also raised questions about the adequacy of financial regulation. Critics argue that the settlements have allowed banks to avoid criminal prosecution and have done little to prevent a similar crisis from happening again.
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