Barclays Bank PLC will pay $36.1 million for its alleged role in the state’s subprime mortgage crisis, Attorney General Martha Coakley said Monday, in a settlement that will help 450 Massachusetts homeowners.
The bulk of the settlement, $25 million, will come in the form of reduced loan principal for eligible homeowners. Barclays will also pay $7 million to the state, $2 million to cities and towns hard hit by foreclosures, and $1 million to nonprofits assisting families affected by foreclosure.
Barclays is the fourth investment firm to settle with Coakley since 2009 for “presumptively unfair” practices in financing, purchasing, and bundling mortgages. Many of these loans were doomed to fail, because they contained high-risk interest rates and were approved for borrowers unlikely to pay them back, Coakley’s office said.
“The troubling practices of these Wall Street securitization firms greatly contributed to the economic crisis that harmed Massachusetts residents,” Coakley said in a statement.
The loans Barclays financed had low introductory “teaser” interest rates that later ballooned, Coakley alleged. They typically required taking on debt of more than half the borrower’s income and penalized people for paying loans early, discouraging refinancing at lower rates.
Barclays neither admitted nor denied the allegations, but was “pleased to have resolved this matter,” said Brandon Ashcraft, a spokesman.
Coakley previously reached settlements with Goldman Sachs Group, Morgan Stanley, and a subsidiary of Royal Bank of Scotland. Coakley has recovered more than $250 million.