A unit of the Royal Bank of Scotland has agreed to settle allegations that it misrepresented the quality of residential mortgage-backed securities to investors prior to the financial crisis.
RBS Financial Products Inc. allegedly sold the securities in 2006 and 2007 even though due diligence vendors warned it that many of the loans did not meet its own guidelines.
In addition, a number of the securitized mortgages had loan-to-value ratios in excess of 100 percent, while many of the loans had no due diligence performed on them.
That is according to an announcement Tuesday from New
York Attorney General Eric T. Schneiderman.
“Further, RBS’s review of securitized mortgage loans, which shortly after issuance, showed serious problems in the origination of the loans,” the statement said. “Nevertheless, after identifying these problems, RBS continued to purchase and securitize risky loans from the same originators, which it packaged and sold to unwitting investors.”
RBS, which was formerly known as Greenwich Financial Products Inc., has agreed to settle the allegations for $500 million. The state will receive $100 million, while the other $400 million will go towards consumer relief.
RBS reached a number of similar RMBS settlements since the financial crisis. Most recently, it agreed in December 2017 to pay $125 million to state pension funds in California.
