Morgan Stanley Faces ‘Redlining’ Claims

The National Community Reinvestment Coalition said today that it has filed a civil rights complaint with both the U.S. Department of Housing & Urban Development and the Securities and Exchange Commission alleging “redlining” against Morgan Stanley and its operating subsidiaries. Click here to read the full press statement from the NCRC. For a brief look at the claims being made, Inman News reports:

Morgan Stanley is accused of redlining by establishing high minimum loan amounts in programs offered by its subsidiary, Saxon Mortgage Inc., and not offering those programs for properties on American Indian reservations. Morgan Stanley has allegedly restricted Saxon Mortgage from making some types of loans in rural Alaska and Puerto Rico, Guam and the U.S. Virgin Islands … The complaint alleges that Morgan Stanley, which acquired Saxon Mortgage’s parent company, Saxon Capital, in December, has restricted lending to African Americans and Latino neighborhoods by implementing high minimum loan amounts. Saxon Mortgage’s ScorePLUS loan program is not available for loans under $75,000, and the ScorePLUS2 loan program is limited to loans of $100,000 or greater, the complaint alleges.

Inman subscribers can read the full article. For its part, Morgan Stanley was quick to note its opposition to the case, per Reuters:

Morgan Stanley said it was reviewing the complaint. “The mortgage lending policies of Morgan Stanley and its affiliates do not discriminate on the basis of race or national origin,” bank spokeswoman Jennifer Sala said. “We are confident the allegations will prove meritless.”

Regardless of merit — keep in mind redlining suits aren’t really anything new in this industry — what’s interesting here are the tactics: the SEC doesn’t regulate mortgages, but does regulate the securities backed by them. I don’t believe the SEC has ever been asked to investigate claims of redlining, as a result.

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