RBS Financial Products will pay Nevada $42 million to resolve an investigation into the firm’s role in the buying and securitizing of subprime and payment- option adjustable-rate mortgages, a state official said.
The money will be used for payments to affected borrowers, mortgage fraud enforcement, foreclosure prevention and attorneys’ fees and costs, state Attorney General Catherine Cortez Masto said today in a statement.
The Royal Bank of Scotland Group Plc unit also agreed to only buy, finance or securitize subprime loans in the state after conducting a “reasonable review” to ensure the loans comply with Nevada’s Deceptive Trade Practices Act, Masto said.
“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. “The changes to its securitization process should help make sure that we do not go down this road again.”
The firm neither admitted nor denied wrongdoing.
“We are pleased to have resolved this matter with the Nevada attorney general,” Ed Canaday, a spokesman for RBS Financial, said in an e-mailed statement.
The Nevada probe centered on potential misrepresentations made by lenders, including Countrywide and Option One, to state consumers who took out subprime loans and payment option adjustable-rate mortgages that were bought and securitized by RBS from 2004 to 2007, Masto said in the statement.
Her investigation examined whether the lenders misled borrowers about actual interest rates, appraised property values, and what happened when introductory interest rates on loans expired, according to Masto’s statement.
Royal Bank of Scotland Group is based in Edinburgh.