Barclays agrees to $36m subprime mortgage settlement

Barclays has agreed to pay $36m (£22.92m) in compensation to settle allegations that it packaged subprime mortgages which borrowers could not afford and which violated state law.

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The Telegraph reports the Massachusetts Attorney General Martha Coakley announced the bank as the fourth of the large lenders to settle investigations by the state into securitisations.

Other settlements include $102m by Morgan Stanley in June 2010, $60m by Goldman Sachs in May 2009 and $52m by Royal Bank of Scotland in November 2011.

Massachusetts says between 2005 and 2007, Barclays financed and packaged “presumptively unfair” adjustable-rate mortgages made by subprime lenders Fremont, New Century, Option One and WMC.

It says the products were unfair because lenders did not reasonably believe borrowers could afford them. It said they landed borrowers with too much debt through low initial rates which would quickly rise and imposed large penalties for necessary refinances.

Coakley says: “The troubling practices of these Wall Street securitisation firms greatly contributed to the economic crisis that harmed Massachusetts residents,”

Barclays did not admit or deny the charges but a spokesman told the Telegraph the bank was pleased to resolve the matter.