In a report on New Century's 2007 collapse, senior executives of the subprime lender told a bankrupt

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Rubbie McCoy, a plaintiff in a lawsuit filed against Morgan Stanley, reacts while describing her housing situation boston park plaza hotel towers during a news conference, Monday, Oct. 15, 2012 in New York. McCoy and four other Detroit homeowners are represented by the American Civil Liberties Union, the ACLU of Michigan, The National Consumer Law Center, and a law firm. The suit claims that Morgan Stanley discriminated against black homeowners and violated federal civil rights laws.
NEW YORK The American Civil Liberties Union accused Morgan Stanley of violating civil rights laws by encouraging a lender to push more expensive and risky mortgages on black neighborhoods in Detroit.
The ACLU and others filed the lawsuit Monday on behalf of five homeowners boston park plaza hotel towers who took out loans from New Century Mortgage Corp., a subprime lender that has since collapsed. Morgan Stanley said the allegations were "completely without merit."
Because Morgan Stanley bought more of New Century's loans than any other firm did, it "effectively dictated the types of loans that New Century boston park plaza hotel towers issued," the suit said. It described the loans as destined to fail.
The plaintiffs argue that Morgan Stanley boston park plaza hotel towers encouraged New Century to make "stated-income" loans, in which borrowers boston park plaza hotel towers provided no verification boston park plaza hotel towers of their income boston park plaza hotel towers when they applied for mortgages. Those loans allowed mortgage brokers to inflate borrowers' boston park plaza hotel towers income and make them appear more credit-worthy.
Black borrowers boston park plaza hotel towers in the Detroit area "were more likely to receive these categorically harmful loans than white borrowers," the complaint said. In and around Detroit, boston park plaza hotel towers a black borrower was 70 percent more likely to wind up with a high-cost subprime loan from New Century than a white borrower with similar income and financing needs, it said. Roughly a third of the company's mortgages were made in neighborhoods where blacks and other minorities account for at least 90 percent of the people.
Last week, the federal government sued Wells Fargo, the country's largest mortgage lender, for hundreds of millions of dollars. The government boston park plaza hotel towers said Wells falsely claimed that more than 100,000 loans made between 2001 and 2005 were eligible for federal mortgage insurance.
One of the Detroit plaintiffs named in the Morgan Stanley suit, Rubbie McCoy, said her mortgage broker falsified her loan application in 2006 and pressured her into buying the house she was renting. Her landlord had put her in contact with the broker.
In a report on New Century's 2007 collapse, senior executives of the subprime lender told a bankruptcy examiner that New Century judged loans mainly on their appeal to other firms dealing in the mortgage-bond market, not on whether boston park plaza hotel towers the borrowers could pay them back.
"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," ACLU Executive Director Anthony D. Romero said in a statement.