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RBS settles with New York over misleading RMBS investors, to pay $500 million

Royal Bank of Scotland agreed to pay $500 million to settle charges of misleading investors in the marketing and selling of residential mortgage-backed securities that led up to the global financial crisis.

The settlement includes $100 million in cash to New York state and $400 million worth of consumer relief for New York homeowners and communities.

"While the financial crisis may be behind us, New Yorkers are still feeling the effects of the housing crash," said New York Attorney General Eric T. Schneiderman in a news release from his office announcing the settlement. "Today's settlement is another important step in our comprehensive effort to help New Yorkers rebuild their lives and communities."

As part of the settlement, RBS admitted that, in leading up to the global financial crisis, it sold RMBS to investors that were backed by mortgage loans that did not comply with underwriting guidelines or applicable laws and regulations, contrary to its representations.

As a result, the loan pools backing the securitizations suffered billions of dollars of collateral losses, and investors experienced shortfalls in principal and interest payments, as well as declines in the market value of their certificates. RBS admits that this conduct harmed several New York homeowners and investors by contributing to the crash in home values during the financial crisis.

This settlement brings the total cash and consumer relief secured by Mr. Schneiderman in the aftermath of the financial crisis to $3.7 billion, and $5.83 billion when combined with the national mortgage settlement.

RBS CEO Ross McEwan said in an emailed statement: "We have been very clear that putting our remaining legacy issues behind us is a key part of our strategy. I am pleased that we have reached this settlement with the New York state attorney general in relation to RMBS issues, which date back to 2004-2008."

Mr. McEwan added: "Settling these issues is a stark reminder of the heavy price we continue to pay for the global ambitions pursued by the bank in the run up to the crisis."

The settlement agreement and accompanying statement of facts is on the New York attorney general's website.