Detroit: even harder times
The American Civil Liberties Union claims the multi-national bank steered ethnic minorities towards risky mortgages bundled by the now-bankrupt New Century Financial Corporation.
This action follows a number of lawsuits filed by federal and state officials against some of the nation’s largest investment banks. A $175 million deal was struck with Wells Fargo last July, settling claims that the bank sold sub-prime mortgages to 34,000 minority customers who would have qualified for lower-risk mortgages, The New York Times reported yesterday.
The ACLU is filing a class-action suit on behalf of five Detroit residents, alleging that Morgan Stanley violated the Fair Housing Act and the Equal Credit Opportunity Act. Ethnic minorities – and especially black residents -- in the Detroit area were 70 per cent more likely than comparable white borrowers to be sold a New Century sub-prime mortgage loan, according to an analysis contained in the lawsuit.
While other banks were also involved in selling New Century’s sub-prime loans, the lawsuit alleges that Morgan Stanley ‘purchased a greater proportion of New Century’s loans than any other institution.’ This suit follows a $102 million settlement with Morgan Stanley back in 2010 following a similar investigation led by the Massachusetts attorney general.