Reuters: Regulatory News: UPDATE 1-RBS paying $42 mln to settle Nevada mortgage case

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UPDATE 1-RBS paying $42 mln to settle Nevada mortgage case Oct 24th 2012, 16:30 Wed Oct 24, 2012 12:30pm EDT Oct 24 (Reuters) - Royal Bank of Scotland Group PLC agreed to pay $42 million to the state of Nevada to settle an investigation into deceptive sales practices involving subprime mortgages. Nevada's attorney general, Catherine Masto, said in a statement on Wednesday that a U.S. unit of the Scottish bank purchased loans made by the former Countrywide Financial Corp and Option One Mortgage Corp that many borrowers could not afford. RBS securitized the loans and sold them to investors. Masto said her probe looked into the extent that RBS helped the mortgage banks finance the loans and how aware it was of the allegedly deceptive sales practices they used. In the settlement, RBS neither admitted nor denied any wrongdoing, Masto said. The case is the second in two weeks in which a bank was charged with wrongdoing for securitizing mortgages that it did not originate. The American Civil Liberties Union on Oct. 15 sued Morgan Stanley for racial discrimination in helping finance loans to a disproportionately high number of black borrowers in Detroit. Morgan Stanley said it will contest the charges. "I remain committed to enforcing Nevada's laws against the players - including those on Wall Street - that contributed to and profited from reckless and deceptive mortgage lending in Nevada," Masto said in a statement. As part of its settlement, RBS said it will not finance, purchase or securitize Nevada subprime loans unless it has conducted a reasonable review of the loans and the way they were marketed. The settlement does not release RBS or the lenders from pending claims being made by borrowers. "We are pleased to have resolved this matter with the Nevada attorney general," an RBS spokesman said. The investigation found that RBS formed joint ventures with Countrywide, which was subsequently bought by Bank of America Corp., and Option One, then a unit of H&R Block, during the housing boom. RBS funded more than $100 billion of risky loans from 2004 to 2007 and was the third-largest securitizer of subprime mortgages and adjustable rate loans in Nevada, according to The New York Times, which first reported on the settlement. Borrowers, who are expected to receive about $36 million of the settlement, can find information about obtaining benefits atOnly borrowers whose loans were financed or acquired by RBS are covered. Earlier this year, the Nevada attorney general reached a settlement with Bank of America over charges of consumer fraud. Bank of America agreed to pay $30 million and make a commitment of at least $750 million toward mortgage modifications and short sales in the state. Nevada also has sued Lender Processing Service, claiming it engaged in widespread fraud in executing foreclosure-related documents and improperly controlling the foreclosure process. Link this Share this Digg this Email Reprints

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