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RBS settles NY mortgage-backed securities case for $500M

The Royal Bank of Scotland Group Plc has reached a $500 million settlement with New York Attorney General Eric Schneiderman over claims of "deceptive practices and misrepresentations to investors" in the issuance of residential mortgage-backed securities leading up to the financial crisis.

The settlement consists of a $100 million cash payment by RBS to the state of New York and another $400 million in consumer relief for homeowners and communities in New York, according to a press release by the New York State Office of the Attorney General.

In the settlement, RBS "admits that it sold investors RMBS backed by mortgage loans that, contrary to its representations, did not materially comply with underwriting guidelines," the statement said. "Further, many of the mortgage loans did not comply with applicable laws and regulations, among other defects."

RBS in its Feb. 23 earnings release said it is also in contact with the U.S. Department of Justice over the RMBS matter, but that the duration, timing for resolution and outcome of the probe "remain uncertain, including in respect of whether settlements for all or any of such matters may be reached."