Sept 9 (Reuters) - Barclays Plc agreed on Monday topay $36.1 million to settle charges by Massachusetts that ithurt homeowners there by packaging subprime mortgages that theborrowers could not afford, and which violated state law, intosecurities.
The British bank is the fourth big bank to settle probes byMassachusetts into securitization practices, according to stateAttorney General Martha Coakley, who announced the settlement.
Earlier settlements included $60 million by Goldman SachsGroup Inc in May 2009, $102 million by Morgan Stanley in June 2010 and $52 million by Royal Bank of ScotlandGroup Plc in November 2011, Coakley said.
The securitization of home loans that quickly soured amidthe U.S. housing downturn was a factor that contributed to the2008 global financial crisis. While much of the subsequentregulatory scrutiny has occurred at the national level, manyU.S. states have pursued their own probes as well.
Massachusetts said that from late 2005 through 2007,Barclays financed and packaged adjustable-rate mortgages made bysubprime lenders such as Fremont, New Century, Option One andWMC Mortgage that were "presumptively unfair" under state law.
The state said these loans were unfair because the lendersdid not reasonably believe that borrowers could afford them. Itsaid the loans saddled borrowers with too much debt, teased themwith low initial rates that would quickly rise, and imposedsubstantial penalties for necessary refinancings.
"The troubling practices of these Wall Street securitizationfirms greatly contributed to the economic crisis that harmedMassachusetts residents," Coakley said in a statement.
Barclays did not admit or deny the charges, and a spokesmansaid the bank is pleased to resolve the matter.
Roughly $26.2 million of the settlement funds will helpborrowers reduce principal and obtain other relief, while therest will go to the state, municipalities, and non-profitorganizations that assist with foreclosure relief.
The case is Massachusetts v. Barclays Bank Plc, SuperiorCourt of Massachusetts, Suffolk County, No. 13-3202.