Global financial services giant Morgan Stanley agreed to pay $3.2 billion to settle a federal and state probe into Residential Mortgage Backed Securities-related practices that contributed to the 2008 financial crisis.
As part of the settlement, the bank acknowledged that it relaxed its standards for mortgage loans it pooled and sold to the investors, without informing buyers that it had done so. The bank also admitted that loans with material defects were packed into securities and sold.
New York state will receive a sizable chunk of the funds, with $400 million going to mortgage reductions and other forms of relief for customers, and another $150 million paid to the state in cash. State Attorney General Eric Schneiderman co-chaired the legal task force that negotiated the settlement, the Associated Press reported.
“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,” Schneiderman said.
Morgan Stanley – which made $908 million in profit in the fourth quarter of 2015 – had already set funds aside to pay the fine.