The Royal Bank of Scotland (RBS) has reached a settlement with New York to pay $500m for using deceptive practices to market and sell mortgage-backed securities that led to the financial crisis of 2008.
Announcing the settlement,New York attorney general Eric Schneidermans aid that the lender used fraudulent practices and misrepresentations for marketing risky residential mortgage-backed securities (RMBS).
Under the terms of the settlement, RBS will pay $100m in cash to New York State and $400m in consumer relief for New York homeowners and communities.
The lender also admitted that it sold residential mortgage-backed securities which did not comply with underwriting guidelines. The bank’s actions contributed in crashing the home values and as a result many New York homeowners and investors sustained losses.
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.
“Today’s settlement is another important step in our comprehensive effort to help New Yorkers rebuild their lives and communities. I am proud of the extraordinary housing programs these settlements have funded across New York, from Brookhaven to Buffalo – and today’s settlement will fund even more community revitalization initiatives for years to come.”
Pursuant to the settlement, RBS will carry out community-level relief to New Yorkers, including funding construction of more affordable housing. Additionally, the bank will assist communities in transforming code enforcement systems and purchasing distressed properties to protect them from being acquired by predatory investors.
RBS is the sixth bank to settle similar claims with New York. So far the settlements have reached $3.7bn with several financial services firms, including JPMorgan Chase & Co, Bank of America, Citigroup, Morgan Stanley, and Goldman Sachs Group.