Economy

RBS To Pay $500M For Deception On Mortgage-Backed Securities

RBS To Pay $500M For Deception On Mortgage-Backed Securities

Royal Bank of Scotland's (RBS) settlement with the state of NY over mis-selling of financial products prior to the financial crisis could mean the total bill faced by the bank will be higher than previously expected.

RBS is the sixth large financial institution to settle with the attorney general's office since Schneiderman was appointed co-chair of the RMBS Working Group by then-president Barack Obama in 2012. When the bank settled with the FHFA a year ago, McEwan called it a "legacy matter" it was committed to resolving. The settlement brings the total cash and consumer relief secured by NY to $3.7 billion - more than any other state.

A message left with RBS's press office after regular business hours in the United Kingdom wasn't immediately returned. Federal prosecutors in Boston have investigated the bank and explored the possibility of bringing charges against individual employees.

The size of the settlement with the Justice Department was not immediately determined.

Under the NY deal, RBS admitted to selling investors mortgage bonds that were backed by loans that didn't "materially comply with underwriting guidelines", the attorney general said. Numerous loans backing the securities also didn't apply with applicable laws and regulations.

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RBS issued and underwrote $32 billion of mortgage bonds in the USA before the financial crisis.

"Yet, RBS packaged and sold them anyway", the attorney general said. "Home values plummeted. Vacant homes consumed neighborhoods".

"Today's settlement is another important step in our comprehensive effort to help New Yorkers rebuild their lives and communities", Schneiderman said.

Since the National Mortgage Settlement was announced by former President Barack Obama's administration in early 2012, the USA has received $5.8 billion from six of the largest mortgage servicers, with the NY attorney general securing $3.7 billion of the total, Schneiderman said.

RBS's deal with Schneiderman hinges on "significant community-level relief", according to the statement. This will include putting funds into construction projects to allow for more affordable housing to be built.