The American Civil Liberties Union (ACLU) of Michigan has filed a case against the investment banker Morgan Stanley, accusing its engagement in racial discrimination by funding unsafe subprime mortgage loans and breaching Fair Housing Act.
The case was filed in the US District Court in New York on behalf of five Detroit residents and Michigan Legal Services, in which the National Consumer Law Center, and Lieff Cabraser Heimann & Bernstein, are also plaintiffs.
The complaints accused the bank that it provided funds to New Century, the subprime lender whose loans were bought, and dictated the terms of the loans according to its will and ultimately purchased for its securitized pools.
Seeking the court to certify the case as a class action, ACLU alleged that the act could have affected 6,000 black homeowners in the Detroit area.
Lieff Cabraser Heimann & Bernstein partner and co-counsel for the plaintiffs Elizabeth Cabraser said, "The targeting of communities of color for loans that unfairly raises the risk of default and foreclosure is the quintessential ‘reverse-redlining’ outlawed by the Federal Fair Housing Act."
The case also alleges violations of the Equal Credit Opportunity Act, which prohibits discrimination for credit transactions, including consumer loans such as mortgages.
Morgan Stanley rejected the aforesaid allegations and said that the accusations leveled against it was completely without merit and plans to defend the same.