Barclays to pay $2bn to resolve fraud claims over USA mortgage misselling

Randall Padilla
March 30, 2018

Barclays Capital and some of its affiliates have agreed to pay a hefty $2 billion fine for improperly selling securities backed by home mortgages, according to a report.

The British lender was the only bank to push back against the size of the settlement demanded by the Justice Department, prompting the prosecutor to file a lawsuit in the waning days of the Obama administration in 2016.

The Justice Department said Barclays misled investors about the quality of the mortgage loans and committed mail fraud, wire fraud, and other allegations.

It relates to Barclays' underwriting and issuance of residential mortgage-backed securities (RMBS) between 2005 and 2007.

"This settlement reflects the ongoing commitment of the Department of Justice, and this Office, to hold banks and other entities and individuals accountable for their fraudulent conduct", said Richard Donoghue, the United States Attorney for the eastern district of NY.

Before the Barclays deal, the US regulators had already fined several major banks more than $50 billion over their dealings in mortgage-backed securities.

Barclays has agreed a $2bn (£1.4bn) settlement with the US Department of Justice over claims that it mis-sold mortgage-backed securities in the run-up to the financial crisis. Deutsche Bank paid $7 billion earlier this year.

Accusing Barclays of fraud in an unprecedented 2016 complaint, the Justice Department described the bank's losses as "catastrophic". In addition, the mortgaged properties were worth much less than what Barclays had presented to investors.

Announcing the agreement on Thursday, the U.S. Department of Justice said it would dismiss its December 2016 lawsuit that accused Barclays of causing investors billions of dollars of losses for problems with more than $31 billion worth of subprime and Alt-A mortgages the bank securitized.

The settlement comes almost a month after Barclays confirmed a loss of almost £2bn previous year, after a string of hefty charges, including a £900m from Donald Trump's corporate tax changes and £127m from the collapse of the outsourcing and construction firm Carillion.

But many borrowers attached to the loans ended up not being able to pay, or there were problems with the mortgage structure.

Barclays CEO Jes Staley said in a statement that the settlement was "fair and proportionate".

Noting that the bank completed restructuring in 2017, Staley said Barclays has put "significant legacy matters like this one behind us". Barclays shares edged down after the announcement.

Other reports by AllAboutTopnews

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