(Bloomberg News) Royal Bank of Scotland Group Plc's RBS Financial Products unit will pay $52 million to settle claims it financed, purchased and bundled unfair residential loans, Massachusetts Attorney General Martha Coakley said.

More than $40.2 million will be used for principal reduction and relief for more than 700 borrowers and more than $8.9 million will be paid to the state, Coakley said today in an e-mailed statement.

"The securitization of subprime loans by investment banks is a major cause of the economic crisis," Coakley said. "Investment banks profited handsomely from those securitizations at the expense of homeowners."

The RBS deal, together with previous settlements with Goldman Sachs Group Inc. and Morgan Stanley, brings Massachusetts settlements with investment banks over securitization practices to more than $200 million, according to the statement.

"We are pleased to have resolved this matter with the Massachusetts attorney general," Mike Geller, an RBS spokesman, said in an e-mailed statement.

The RBS unit was formerly known as Greenwich Capital Financial Products.

Coakley said the loans were unfair and violated state consumer law because they had an introductory "teaser" period of less than three years, an introductory "teaser" rate at least 2 percent below the fully indexed rate, a debt-to-income ratio of more than 50 percent and substantial prepayment penalties.