UK regulator hits Deutsche Bank lender with huge fine for subprime mortgages
U.K. regulator, the Financial Services Authority, announced Tuesday that it fined Deutsche Bank subsidiary, DB Mortgages, £840,000 ($1.35 million) for its subprime mortgage lending business practices. It is the first time the regulator charged a mortgage lender in the U.K. for irresponsible lending specifically in the subprime sector. Further, the FSA is securing £1.5 million ($2.4 million) in redress for borrowers who fell victim to irresponsible lending practices and unfair treatment at the hands of DB Mortgages, according to a statement released today. DB Mortgages was not big into stringent underwriting, the FSA said. The company failed to show that customers could afford mortgages sold, especially after retirement. DB Mortgage never looked for cheaper mortgages available for customers seeking self-documented mortgages. Once borrowers fell behind on payments, the FSA said that DB Mortgages did not offer a range of available options in an attempt to bring the accounts current. Further, DB Mortgages unfairly fined these borrowers. The FSA said that they were sometimes charged repeatedly. In some cases the charges did not accurately reflect the cost of administering delinquent accounts. ''This is the first time that we have taken enforcement action against a firm for irresponsible mortgage lending," said Margaret Cole, the FSA managing director of enforcement and financial crime. ''Firms which fail in their obligations to customers should expect not only a substantial fine but also that they will have to pay back customers who have been disadvantaged by their failings.'' In levying the penalty, the FSA took into account that DB Mortgages worked in an open and co-operative way with the FSA "and has made significant improvements to its arrears handling procedures," the statement reads. "As a result of early settlement, the firm also qualified for a 30% discount under the FSA’s settlement discount scheme," the regulator said. Write to Jacob Gaffney. Follow him on Twitter @JacobGaffney.