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.

The settlement is part of a string of actions against financial firms involved in the mortgage mess. On Wednesday, the U.S. Attorney’s office in Manhattan sued Bank of America (BAC), charging that Countrywide Financial, which Bank of America acquired in 2008, generated thousands of fraudulent residential mortgage loans sold to Fannie Mae and Freddie Mac.

Earlier this month, New York Attorney General Eric Schneiderman sued JPMorgan Chase (JPM), alleging that the Bear Stearns brokerage it bought committed fraud in the sale of hundreds of billions of dollars in mortgage-backed securities.  The U.S. Attorney’s office in Manhattan later filed a lawsuit against Wells Fargo (WFC) that charges the company with fraudulently certifying loans backed by the Federal Housing Administration. The National Credit Union Administration also recently charged Credit Suisse Group (CS) with misleading three corporate credit unions about the riskiness of mortgage securities the company bundled and sold to them. 

Schneiderman, who co-chairs a federal-state working group probing possible wrongdoing in connection with the mortgage meltdown, told reporters recently that investigators are prepared to bring more actions.

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