Credit Suisse's plan to fulfill the consumer relief portion of its multibillion-dollar residential mortgage-backed securities settlement with the Department of Justice could cost it less than the face settlement amount.

The $5.2 billion settlement includes $2.8 billion in consumer relief credit that does not necessarily require a dollar match in spending, and it could allow Credit Suisse to spend less, "potentially far less," than that amount, settlement monitor Neal Barofsky of Jenner & Block LLP noted in the report.

If Credit Suisse does not fulfill its consumer relief obligation by Dec. 31, 2021 the obligation will increase 5% per year until fulfilled, but its current plans calls for it to try to do this a year earlier, he said.

Credit Suisse RMBS settlement

The largest category of relief in the settlement that has flexible costs is at least $1.75 billion in credit it must provide toward loan modifications to distressed or near-distressed borrowers with underwater mortgages, regardless of whether their loans were in the 625 RMBS that are specified in the settlement.

"If Credit Suisse provides loan modification relief by a certain date or if Credit Suisse provides a large enough amount of assistance so that borrowers who were previously underwater now owe less on their mortgages than their homes are worth, Credit Suisse can earn extra credit," the monitor noted.

Also at least $240 million in affordable housing development credit "will be earned based on the losses that Credit Suisse suffers from certain loans it will make to finance the construction and rehabilitation of affordable housing developments for low‐income residents."

"To earn credit, Credit Suisse will structure the loans in a manner such that it expects not to be repaid. By funding affordable housing in this manner, under the terms of the settlement agreement Credit Suisse will receive at least $3.25 in credit for every dollar that Credit Suisse expects not to be repaid on the loans," the settlement report noted.

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