Royal Bank of Scotland (RBS)-owned RBS Financial agreed to pay a $42 million settlement to resolve an investigation into the firm’s role in purchasing and securitizing subprime and payment option adjustable rate mortgages, according to the office of Nevada Attorney General Catherine Cortez Masto.
Additionally, RBS will change practices associated with securitization operations in regards to mortgages originated and serviced within the state.
Masto publicly announced that her office would pursue such cases. The February 2012 issue of HousingWire magazine featured the attorney general on the cover.
"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,” said Masto in a statement. "The payment from RBS will alleviate some of the injury to the Silver State and its residents. The changes to its securitization process should help make sure that we do not go down this road again."
The investigation focused on the activities of the subprime activities of Countrywide and Option One, which originated mortgages securitized by RBS between 2004 and 2007.
Masto said many borrowers who took these loans did not understand the likelihood that they would not be able to repay their loans or that they would have to refinance the loan before the payment increased.
The Nevada AG contends that RBS may not have performed adequate due diligence on the loans, which would have likely reveal these shortcomings.