Schneiderman Announces $3.2 Billion Payout from Morgan Stanley

By KARI FORD

Morgan Stanley has agreed to pay $3.2 billion to settle claims relating to the residential mortgage-backed securities that they sold leading up to the financial crisis, State Attorney General Eric Schneiderman announced on Thursday.

Banks like Morgan Stanley and J.P. Morgan Chase had sold bad mortgage-backed securities that they knew, or should have known, were going to fail, according to Schneiderman, which had drained $7.4 trillion from homeowners in 2008, nearly destroying the American middle class.

Many of these homeowners didn’t have the chance to speak to a lawyer or housing counselor to help them face these foreclosures. Schneiderman has created a network of legal service providers and housing counselors, the Home Owner Protection Program (HOP), which created ninety different legal services and counseling agencies across the state.

“As long as I’m Attorney General, nobody in New York will be foreclosed on if they can’t get to a lawyer,” Schneiderman declared.

Families and communities in New York will receive $550 million from this settlement in cash and consumer relief. This money will create principle reductions for families still facing foreclosure, writing down their loans, and helping them to avoid losing their homes. These funds will also go towards resources to build and support multi-family affordable rental housing, which is critical for those families who already lost their homes during the market crash.

Ten non-profit land banks in New York are expected to receive $33 million to address the “zombie properties” across the state. A “zombie property” is one where, “foreclosure has begun, but not concluded, and the homes are abandoned, not being maintained, falling into disrepair, and hurting the values of neighboring properties that weren’t abandoned,” says Schneiderman. The land banks take control of and redevelop these vacant or abandoned properties to where they can better service the public interest. The land bank in Syracuse has already acquired more than 900 properties to be rehabilitated.

Madeline Fletcher, executive director of Newburgh community land bank, said that in her small town upstate, they have already restored multiple properties for productive use. “In just a five block area in our downtown, we’ve laid down the ground work for the rehabilitation of abandoned historic buildings to turn them into almost a hundred units of affordable, high quality apartments,” she said.

“The focus of our working group continues to be investigating and pursuing financial institutions [i.e. Morgan Stanley, J.P. Morgan Chase, Bank of America] who contributed to the crash and working as smartly as we can to try and see that resources are directed from those institutions to help the communities that are still suffering,” Schneiderman concluded. “I’m proud of the fact that New York has lead the way on this, but our work is far from done.”