Borrowers set to receive money under RBS settlement will be notified

RBS Financial Products Inc., a subsidiary of the Royal Bank of Scotland formerly known as Greenwich Capital Financial Products Inc., will pay $52 million to settle allegations that it securitized "presumptively unfair" residential mortgages, state Attorney General Martha Coakley said today.

The settlement is part of an ongoing investigation into the financing, purchase and securitization of what Coakley calls "unfair" home loans.

Of the $52 million due from RBS, $40.2 million will be used for principal reduction for more than 700 Massachusetts subprime borrowers, Coakley's office said. The loans, primarily ARMs, were securitized by RBS in 2006 and 2007 and feature high debt-to-income and loan-to-value ratios.

Nearly $9 million will be paid to the commonwealth and more than $2.6 million will be used to compensate entities, including municipalities, that are "acutely affected by foreclosures of the RBS securitized loans," Coakley's office said.

Last year, Coakley won a $102 million settlement from Morgan Stanley. In 2009, Goldman Sachs paid $60 million in a similar case.

Borrowers set to receive money under the RBS settlement will be notified by Coakley's office.

By Matt Brown