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Deutsche Bank unit to pay $11 million to end Nevada mortgage probe

The logo of Germany's largest business bank, Deutsche Bank, is illuminated at the bank's original headquarters in Frankfurt January 31, 2012. REUTERS/Kai Pfaffenbach

By Aruna Viswanatha

(Reuters) - A unit of Deutsche Bank AG will pay $11.5 million to resolve a probe of its role in funding subprime mortgage loans in Nevada, the state's attorney general said on Thursday.

The investigation focused on mortgage loans provided by other lenders but funded, bought and securitized by DB Structured Products Inc between 2004 and 2007, Attorney General Catherine Masto said.

At issue was whether the other lenders misled borrowers about the actual interest rates on their loans or piled on risky features without considering a borrower's ability to repay, and whether Deutsche Bank knew about such practices when it helped to finance the loans.

The bank neither admitted nor denied the state's allegations but agreed to review any future Nevada loans it helps to finance for similar problems.

"I remain committed to enforcing Nevada's laws against the players - including those on Wall Street - that contributed to and profited from mortgage lending and sales practices that misled Nevada consumers into loans that they did not understand and could not repay," Masto said in a statement.

Deutsche Bank spokeswoman Renee Calabro said the bank was pleased to resolve the matter.

The money from the settlement will be used to pay some affected borrowers and cover the costs of the investigation, Masto said.

Nevada, one of the states hardest hit by the recent housing crisis, has also since been one of the most aggressive in pursuing cases against financial institutions that funded risky loans that fueled the crisis.

In the past two years, units of Royal Bank of Scotland Group plc and Morgan Stanley entered into similar settlements with the state, paying $42 million and $40 million, respectively.

(Reporting by Aruna Viswanatha; Editing by Karey Van Hall, John Wallace and Andrew Hay)