(Adds further comment from Santander)
By Nate Raymond
BOSTON, March 29 (Reuters) - Santander Consumer USA Holdings Inc has agreed to pay $25.9 million to resolve investigations by the attorneys general in Massachusetts and Delaware into its financing and securitization of sub-prime auto loans.
The settlements were announced on Wednesday and resolved allegations Santander facilitated unfair, high-rate auto loans for thousands of car buyers. The loans were then packaged into securities sold to investors.
The accords mark the first settlements in connection with U.S. investigations into subprime auto loan securitization, Massachusetts Attorney General Maura Healey said. The U.S. Justice Department has also been investigating the matter.
Santander, which is the largest packager of subprime auto loan securities in the United States and an arm of Spanish bank Banco Santander SA that went public in 2014, in a statement said it was pleased to resolve the matter.
"In the last 18 months, our new management team has taken significant steps to strengthen our business practices and controls," Santander said.
It stressed that the settlements, which focused on how auto loans were originated, were not about securitizations, but said any such claims were released under the accords.
According to Healey, the investigation revealed that Santander funded auto loans without a reasonable basis to believe borrowers could afford them, predicting many would default.
The probe also revealed that Santander knew certain dealerships had high default rates due of inaccurate data on loan applications but kept buying the loans from them anyway, authorities said.
Santander even identified a group of dealers it called the "fraud dealers" whose loans it nonetheless continued to fund, Healey's office said.
She said the conduct repeated the pattern seen with banks in the run-up to the subprime mortgage meltdown that contributed to the 2008 financial crisis.
"These predatory practices are almost identical to what we saw in the mortgage industry," she said.
Healey's office said the settlement was part of an ongoing industry-wide investigation into securitization practices in the subprime auto market.
The settlement follows an earlier 2015 accord for $5.5 million between Healey's office and Santander relating to its funding of loans that included expensive insurance coverage.
Under Wednesday's settlements, Santander will pay $22 million to resolve the Massachusetts case, which includes $16 million in relief to 2,000 consumers.
The company will pay also $3.9 million to resolve the Delaware case, including $2.88 million into a trust for the benefit of Delaware consumers, Delaware Attorney General Matt Denn said. (Editing by David Gregorio, Bernard Orr)