Financial services giant Morgan Stanley has agreed to a payment of $3.2 billion to settle a federal and state of New York probe into its lending practices of Residential Mortgage Backed Securities that contributed to the 2008 financial crisis. As part of the settlement, the bank admitted to selling securities with defective loans and acknowledged that it relaxed its standards for the mortgage loans it pooled and sold to investors, without informing buyers that it had done so. The state of New York will receive $550 million of the settlement, with $400 million earmarked for mortgage reductions and other forms of relief for customers, with the remaining $150 million paid to the state in cash. The bank, which made $908 million in profit in the fourth quarter of 2015, has already set the funds aside to pay the fine.
“Today’s settlement will bring money to the families and communities that need resources the most, while helping New Yorkers avoid foreclosure and spurring the construction of more affordable housing statewide,” said State Attorney General Eric Schneiderman, who co-chaired the legal task force that negotiated the settlement.
