InvestmentsPolitics & Money

RBS to pay $20 million to Illinois pension funds over crisis-era mortgage bonds

New settlement is bank’s eighth such settlement in recent years

For the third time this year, the Royal Bank of Scotland is about to pay up over the bank’s mortgage practices in the run-up to the housing crisis.

RBS has already reached a nearly $5 billion settlement with the Department of Justice that would cover the bank’s issuance and underwriting of residential mortgage-backed securities between 2005 and 2007, and a $500 million settlement with the state of New York over the bank’s pre-crisis mortgage bond activities, in first six months of the year alone.

Now, the bank has agreed to a new settlement with the state of Illinois, which will see RBS pay $20 million to some of the state’s pension funds.

The settlement covers the bank’s “misconduct in its marketing and sale of risky residential mortgage-backed securities leading up to the 2008 economic collapse,” according to the office of Illinois Attorney General Lisa Madigan.

Per an announcement from Madigan’s office, the settlement resolves an investigation into RBS’ “failure to disclose the true risk of RMBS investments.”

Under the terms of the settlement, RBS will pay $20 million to the state of Illinois, which will then distribute the funds to the Teachers Retirement System of the State of Illinois, the State Universities Retirement System of Illinois, and the Illinois State Board of Investment, which oversees the State Employees’ Retirement System.

For RBS, the settlement is at least the bank’s eighth mortgage-related settlement in recent memory.

Over the last few years, RBS reached a $5.5 billion settlement with the Federal Housing Finance Agency; a $129.6 million settlement and a $1.1 billion settlement with the National Credit Union Administration; a $120 million settlement with the state of Connecticut, a separate $44 million settlement with the DOJ and the Special Inspector General for the Troubled Asset Relief Program; and a $125 million settlement with the state of California, in addition to the settlements with the DOJ and the state of New York.

And now, Illinois will be added to that list as well.

According to Madigan’s office, the RBS settlement is the state’s eighth recovery for its pension funds over crisis-era mortgage bond activities.

Previously, Madigan’s office secured settlements with JPMorgan Chase, Citigroup, Bank of America, Goldman Sachs, and others.

“With this settlement, I have recovered over $475 million for Illinois pension systems and residents as a result of fraudulent conduct in the mortgage-backed securities market,” Madigan said in a statement. “Nearly a decade after the economic crisis, I continue to recover critical funds for the state due to Wall Street’s misconduct.”

HousingWire contacted RBS for a statement and this article will be updated should the bank respond.

3d rendering of a row of luxury townhouses along a street

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