06 Mar 2018
The Royal Bank of Scotland (RBS) has agreed to pay a half a billion dollars fine to settle charges for mis-selling residential mortgage-backed securities (RMBS) leading up to the financial crisis.
The British tax payer owned-bank admitted that it sold RMBS backed by mortgage loans that it knew did not comply with underwriting rules, and many of the mortgage loans did not comply with regulations.
As a result, many of the ill-fated loans backing the securitisation suffered billions of dollars of collateral losses, New York State said.
It explained that the settlement had been reached over the bank’s “deceptive practices and misrepresentations to investors.”
This conduct harmed homeowners and investors by contributing to the crash in home values during the financial crisis.
Attorney General Eric T. Schneiderman said: “While the financial crisis may be behind us, New Yorkers are still feeling the effects of the housing crash.”
“Home values plummeted. Vacant homes consumed neighbourhoods. And for many New Yorkers, affordable housing fell out of reach.”
As part of the agreement, $100 million in cash will go to New York State and $400 million worth of consumer relief will go towards New York homeowners and communities.
In addition, although an RBS review of securitised mortgage loans showed ‘serious problems’ in the orientation of the loans, it continued to buy and securitise risky loans.
The RBS settlement marks the sixth large financial institution to settle with Attorney General Schneiderman’s office since 2012, and brings the total cash and consumer relief secured in the aftermath of the financial crisis to $3.7 billion.
When combined with the National Mortgage Settlement, the total number is $5.83 billion, New York State said.
Christie Peale CEO of the Center for NYC Neighborhoods, said the resources AG Schneiderman has delivered to NYS over the past six years “have been critical to helping families keep their homes while also making our communities vibrant for the next generations of New Yorkers.”
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