Royal Bank of Scotland (RBS) will pay $42 million to settle a probe by Nevada’s attorney general into its mortgage-purchase practices before the housing crisis.

The investigation examined whether the $2.2 billion-asset bank knew that lenders such as Countrywide Financial and Option One Mortgage allegedly misled borrowers who took out subprime loans and adjustable-rate mortgages that RBS later bought and sold, Attorney General Catherine Cortez Masto said Wednesday. The loans in question were made over a three-year period beginning in 2004.

Proceeds from the settlement will be used to compensate roughly 2,000 homeowners, enforce mortgage laws and prevent foreclosures, according to the attorney general’s office.

“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,” Masto said in a news release. “The payment from RBS will alleviate some of the injury to the Silver State and its residents.”

“We are pleased to have resolved this matter with the Nevada attorney general,” RBS said in an email.  The company has not admitted or denied any unlawful conduct in the case.

The inquiry examined whether the lenders deceived consumers about the actual interest rate and payments on their loans, the appraised value of their property and the potential shock to borrowers when the teaser rate expired, according to the attorney general’s office.

As part of the settlement, RBS has agreed to refrain from financing, purchasing or securitizing subprime mortgage loans unless it has reviewed the loans to determine whether the lender has sufficiently disclosed to the borrower the existence of such terms and whether the borrower’s income is reasonable in relation to the amount of the loan.

“The changes to its securitization process should help make sure that we do not go down this road again,” Masto said.

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