Rubbie McCoy, one of the homeowners suing Morgan Stanley
Today the American Civil Liberties Union filed a lawsuit against Morgan Stanley for purposely goading a subprime lender into selling risky mortgages to black homeowners.
New Century Mortgage Corp – the sub-prime lender – started selling the bulk of its risk loans to Morgan Stanley when the investment bank remodeled its purchases of mortgage-backed securities in 2004. 6,000 African-Americans in Detroit have since been targeted by Morgan Stanley’s collusion with New Century.
The ACLU contends that the lawsuit is in strict violation of the Fair Housing Act and the Equal Credit Opportunity Act. The lawsuit is the first of its kind to relate racial discrimination directly to the securitization of mortgage-backed securities. The lawsuit is also the first case in which homeowners are directly suing the investment bank, rather than sub-prime lenders.
ACLU Executive Director Anthony Romero boiled it down:
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…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.
