Several organizations are suing Morgan Stanley (MS) over alleged discrimination against black homeowners and violations of federal civil rights laws affecting up to 6,000 individuals in the Detroit area.
The suit, filed Monday, names five homeowners and claims that Morgan Stanley provided “strong incentives to a subprime lender to originate mortgages that were likely to be foreclosed on.”
While the case concerns lending abuses in Detroit, these practices were “common throughout the financial services industry and victimized black and Latino neighborhoods nationwide,” said Anthony D. Romero, American Civil Liberties Union (ACLU) executive director, in a statement.
“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,” Romero said.
Morgan Stanley, though, denies the charges raised in the lawsuit. “We believe these allegations are completely without merit and plan to defend ourselves vigorously,” the company said in a statement on Monday.
According to the ACLU, the lawsuit, filed in the U.S. District Court of New York, is the first to link racial discrimination to the securitization of mortgage-backed securities, which were sold to institutional investors and pension funds.