By Donna Goodison And Jerry Kronenberg
Royal Bank of Scotland subsidiary has agreed to pay $52 million to settle charges that it traded more than 700 “presumptively unfair” sub-prime mortgages given to Massachusetts homeowners during the housing boom.
The payment will settle allegations that RBS Financial Products Inc., formerly known as Greenwich Capital Financial Products Inc., financed, purchased and scrutinized residential loans that were unfair under Massachusetts law.
More than 700 Massachusetts homeowners will benefit from the settlement, according to state Attorney General Martha Coakley.
The RBS case is the third securitization-related action brought by Coakley against investment firms following an investigation of their practices in the wake of the recent economic collapse. Her office previously targeted Goldman Sachs and Morgan Stanley to recover a total of $200 million-plus in settlements.
“The securitization of sub-prime loans by investment banks is a major cause of the economic crisis,” said Coakley. “Investment banks profited handsomely from those securitizations at the expense of homeowners. The only way we are going to return to a healthy economy is to hold these banks accountable in order to achieve real relief for homeowners.”
Under the terms of the settlement filed in Suffolk Superior Court today, upward of $40.2 million of the settlement will go toward principal loan reduction and other relief for more than 700 Massachusetts sub-prime borrowers. Those borrowers’ loans were scrutinized by RBS in 2006 and 2007 and primarily were so-called “ARM” loans with low introductory interest rates and high debt-to-income and loan-to-value ratios, according to Coakley’s office.
The settlement also includes a $8.9 million-plus payment to the state and approximately $2.6 million that will be used to compensate municipalities most affected by foreclosures of the RBS-securitized loans.
Coakley’s office plans to notify consumers covered by the settlement in the next few months.
Comment From the Law Office of Brian R Lewis:
It is good to see the lenders held accountable for deceptive lending practices but for many home owner this is too late. If you are behind on your mortgage or being threaten with foreclosure, there are options, give us a call or visit www.erasedebts.com we can help.