Morgan Stanley Thursday afternoon agreed to pay $102 million to Massachusetts homeowners and the state, settling allegations that it aided and abetted subprime lender New Century Financial Corp. in taking advantage of consumers.
State attorney general Martha Coakley, announcing the settlement at a press conference, said Morgan provided billions of dollars in credit lines to New Century "which used Morgan funds to target lower-income borrowers and lure them into loans that consumers predictably could not afford to repay."
She added that some Morgan executives referred to New Century as Morgan's "partner" in subprime lending.
The Irvine, Calif.-based NCFC filed for bankruptcy in early 2008. For much of the decade it was one of the largest subprime lenders in the nation, according to figures compiled by National Mortgage News.
As part of the settlement, Morgan agreed to "change its business practices" and to provide the AG's office with "information and materials" as part of its ongoing probe of subprime lenders and the securitization process.
In a court filing, Coakley noted that other Wall Street firms are under investigation regarding their securitization practices. Morgan agreed to the deal without admitting or denying any wrongdoing.