Detroit residents sue Morgan Stanley
Michigan Citizen Staff Report
Five current and former residents filed a federal lawsuit Oct. 15 that alleges Morgan Stanley financed predatory home loans that targeted Black communities and borrowers in Detroit.
The American Civil Liberties Union (ACLU) filed the lawsuit on behalf of the residents in U.S. District Court in New York. The suit claims the financial institution violated state and federal laws as a “principal financier” of now-bankrupt New Century, which supplied Morgan Stanley with a steady stream of irresponsible, high-risk loans issued in communities of color that were particularly vulnerable to economic ruin.
The suit also alleges Morgan Stanley systematically disregarded basic guidelines for safe lending and signaled its willingness to purchase loans that placed borrowers at elevated risk of foreclosure. In fact, Morgan Stanley often purchased loans containing multiple high-risk factors, and the bank’s appetite for extremely risky loans incentivized New Century to favor predatory loans — high-cost loans, sometimes made fraudulently, with risky features and unreasonably high chances of foreclosure.
Charmaine Williams lives in Westland. Her home on Detroit’s east side was taken through foreclosure. “My dream of home ownership became an American nightmare,” Williams said.
Williams became ill and had to leave her job at Chrysler. She struggled to keep her home through a series of refinancings that led to higher monthly payments. Finally it was taken for unpaid taxes in 2011.
ACLU’s Web site has statistics showing Detroit has 67,000 foreclosures, the highest rate among the nation’s 100 large metro areas.
The class-action suit could include up to 6,000 people, the ACLU said.
A message seeking comment was left with Morgan Stanley.