Welcome login | signup
Language en es fr
OccupyForum

Forum Post: ACLU - Morgan Stanley Sued for Racial Discrimination in Pushing Predatory Loans to Black Homeowners

Posted 11 years ago on Dec. 13, 2012, 3:34 a.m. EST by TrevorMnemonic (5827)
This content is user submitted and not an official statement

Morgan Stanley Sued for Racial Discrimination in Pushing Predatory Loans to Black Homeowners

Landmark Lawsuit First to Link Bundling of Mortgage-Backed Securities and Racial Discrimination; Suit Charges Violation of Fair Housing Act FOR IMMEDIATE RELEASE October 15, 2012

NEW YORK – Morgan Stanley discriminated against black homeowners and violated federal civil rights laws by providing strong incentives to a subprime lender to originate mortgages that were likely to be foreclosed on, according to a groundbreaking lawsuit filed today.

The lawsuit, filed in U.S. District Court in New York, is the first that connects racial discrimination to the securitization of mortgage-backed securities, which were sold to institutional investors and pension funds. It is also the first case where a prospective class of victimized homeowners is suing an investment bank directly rather than the subprime lender whose loans the bank bought.

The lawsuit was filed by the American Civil Liberties Union, the ACLU of Michigan, the National Consumer Law Center, and Lieff Cabraser Heimann & Bernstein, a San Francisco-based law firm, on behalf of five Detroit residents and Michigan Legal Services. The complaint asks the court to certify the case as a class action. As many as 6,000 black homeowners in the Detroit area may have suffered similar discrimination.

While the case concerns lending abuses in Detroit, these practices were common throughout the financial services industry and victimized black and Latino neighborhoods nationwide, according to Anthony D. Romero, ACLU executive director.

"With this lawsuit, real victims of the subprime lending scandal are stepping forward to hold investment banks like Morgan Stanley accountable for the devastation the banks wrought in their lives and in our economy,” Romero said. “Illegal practices surrounding mortgage-backed securities robbed people of their homes, violated our civil rights laws and left all Americans holding the bag as our economy teetered on the brink of another Great Depression.”

The five homeowners in the suit received their loans from now-defunct New Century Mortgage Corp., a one-time major player in subprime lending. As Morgan Stanley ramped up its mortgage-backed securities business starting in 2004, it became New Century’s largest buyer of subprime loans.

Morgan Stanley provided funds to New Century to originate the loans, and dictated the terms of the loans it wanted and ultimately purchased for its securitized pools. It pushed New Century to issue certain types of loans with no concern about risk, because it made its profit at the outset, when the securities were created and sold.

Because minority residents of the Detroit region have been subjected to decades of housing and lending discrimination, and had fewer alternative sources of credit, they were natural targets for these predatory loans.

“Morgan Stanley actively encouraged the proliferation of irresponsible subprime mortgage loans in order to feed its hunger for purchasing, pooling, and securitizing mortgage debt for sale to investors,” said Elizabeth J. Cabraser, a partner at Lieff Cabraser Heimann & Bernstein, and co-counsel for the plaintiffs. “The targeting of communities of color for loans that unfairly raises the risk of default and foreclosure is the quintessential ‘reverse-redlining’ outlawed by the Federal Fair Housing Act.”

First enacted in 1968, the Fair Housing Act prohibits discrimination in housing transactions, including unfair lending practices. The lawsuit also alleges violations of the Equal Credit Opportunity Act, which bans discrimination for credit transactions, including consumer loans such as mortgages.

“Congress enacted these civil rights statutes to require that banks like Morgan Stanley are responsible for ensuring that their policies and practices do not perpetuate historical patterns of discrimination and banks have the duty to provide a level playing field for all consumers,” noted Stuart Rossman, director of litigation at the National Consumer Law Center. “Ultimately, economic justice is a civil right in our country. This landmark case brought on behalf of African-American homeowners asserts their rights under those laws and seeks to protect the greater Detroit community from continuing to be burdened because of past acts and patterns of discrimination.”

Among those affected is Rubbie McCoy, who said her mortgage broker falsified information on her loan application even though she objected. The broker also omitted critical details, including the fact that after two years, New Century would no longer pay the taxes or insurance on her loan. Those added costs have prevented her from making a payment since 2011.

“I’ve seen firsthand the devastation banks like Morgan Stanley have caused in communities like mine. When I first moved into my home, I knew every neighbor and most of the homes were occupied. Today, the majority of homes stand abandoned and stripped,” McCoy said. “I don’t like to say that I am losing my home, instead I tell my family that I’m fighting for my home. The truth is I’m afraid that today will be the day a sheriff kicks us out. No one should live with this fear.”

13 Comments

13 Comments


Read the Rules
[-] 1 points by conservatroll (187) 11 years ago

And on the flip side, back in the 90';s a young lawyer named Barack helped his law firm win $950k from banks that wouldn't make loans to bad credit risks....

Housing Crisis: Previously unpublished court documents reveal that as a young lawyer from Chicago, President Obama's lawsuit against big banks started inflating the housing bubble that created the mess he says he inherited.

We have often written that the true roots of our current economic crisis lay in the excesses of the 1977 Community Reinvestment Act as redefined under the Clinton administration. We have explained how community outreach by banks, under pressure from groups such as Acorn, was transformed into the mandatory credit issuance based not of creditworthiness, but on the basis of "fairness."

"Redlining," the activists argued, was the antithesis of the American dream of owning a home. Moreover, they insisted, everyone had the "right" to own a home. So the banks were forced to issue loans to people who couldn't afford to pay them back. The banking system was forced to inflate a housing bubble that set us up for a near-catastrophic economic collapse.

Read More At IBD: http://news.investors.com/ibd-editorials/090412-624522-obama-launched-subprime-crisis-with-lawsuit.htm#ixzz2F20VmNed

[Removed]

[-] -1 points by Theeighthpieceuv8 (-32) from Seven Sisters, Wales 11 years ago

You're joking right?

Jay Mantz, former vice chairman of Morgan Stanley's real estate division is now president of Rialto Investments.

http://sfpublicpress.org/news/2010-06/homebuilder-lennar-uses-federal-taxpayer-funds-to-balance-its-books

[-] -1 points by TrevorMnemonic (5827) 11 years ago

i am not joking. They're really that corrupt.

[-] 0 points by Theeighthpieceuv8 (-32) from Seven Sisters, Wales 11 years ago

You must also realize that the Democrats are at the center of this, right? That it's not just the Republicans accepting dollars from lobbyists...? Why give the Dems a buy as many do here in this forum?

[-] 0 points by TrevorMnemonic (5827) 11 years ago

Wow you party hacks never give up do you?

I'd like to go one day on this forum without being accused of being too hard or soft on democrats and republicans.

[-] 0 points by Theeighthpieceuv8 (-32) from Seven Sisters, Wales 11 years ago

What this forum needs is a ban on use of the words Democrat and Republican. Because what our present administration has proven is that simply replacing Republicans will not cure the corruption.

[-] 1 points by GirlFriday (17435) 11 years ago

Didja go so far left that you hit right?

[-] -1 points by Theeighthpieceuv8 (-32) from Seven Sisters, Wales 11 years ago

Something like that yea. In the sense of being liberal, open minded, unbiased, untainted by influence, and un-egotistical, I have certainly looked Left. I looked left in search of "right" and it took me to another place.

My political concerns are only in defense of the people.

[-] 2 points by GirlFriday (17435) 11 years ago

Don't confuse Left with Democrat.

Aren't they all concerned with the people?

[-] 0 points by Theeighthpieceuv8 (-32) from Seven Sisters, Wales 11 years ago

You are using it as a verb, a reflexive; I use it as a noun. I would prefer to reject the power entities of "Left," "Right," and certainly all political parties. Because I think these others whom I label as "the people" are essentially the same everywhere; interests may vary because circumstance varies but we are all driven by the very same evolutionary desires. Part of this eventually relates to organizational structure and how we create power entities, and I think it would be a beautiful thing if the Burgermeister was always benevolent and always loved and the people always happy but it is impossible; there will always be tension; the power entity is born of tension, it is seated in tension. And it's a struggle for life itself. Left and Right serve to challenge but in doing so they also deny to create; both fear their power diluted... and we can go on and on, draw analogies, cite examples, that hit very close to home both in micro and on the macro level.

Suffice it to say I exist to challenge all... because I would really prefer that at some point, we insert some intelligence. Which is sadly lacking in all of our endeavors.

One of the ways to address our economic concerns might be... to break up and outlaw all corporate divisions. If a corporation exists with varied interests then it must be one entity. The very people who promoted subprime, and suffered devastating losses, are now the very same people who are profiting from those loses through the generous finance of tax payer dollars because of subdivisons. It was subdivisions that allowed them to dismantle companied America; it was the subdivision that best promoted shareholder profit; it was the subdivision that cost Americans their livelihoods. And it all began in earnest on or about the mid 1980s.

[-] -2 points by TrevorMnemonic (5827) 11 years ago

What this forum needs is users that can talk issues without immediately creating a distraction and turning it into a polarized political staunch.

[-] 0 points by Theeighthpieceuv8 (-32) from Seven Sisters, Wales 11 years ago

Yea... but you have a handful here that are directing the conversation as political.

[-] -2 points by VQkag2 (16478) 11 years ago

More crimes by the 1% against the 99%. More evidence banksters created the housing bubble.

I'm sure this lawsuit will result in inadequate fine/punishment, and no jailtime for the criminal 1% banksters. Small victory, slow progress.

We must fight for stronger fin regulations that include jail time for guilty executives.

We must fight to replace the 80% reduction in money allocated for fin prosecutions.

We must pressure all pols to pursue fin crimes prosecutions.