Photo: Jenix89
Morgan Stanley has agreed to pay $62.95 million to settle charges related to the sale of residential mortgage-backed securities to three banks that later failed, the Federal Deposit Insurance Corporation said Tuesday.
The settlement resolves federal and state charges based on misrepresentations in the offering documents for 14 mortgage-backed securities purchased by the three failed banks.
The settlement funds will be distributed among the receiverships for the three failed banks – Colonial Bank of Montgomery, Ala.; Security Savings Bank of Henderson, Nev.; and United Western Bank of Denver, Colo. Three of the banks failed in 2009 and one in 2011.
The FDIC, as receiver for the three failed banks, filed four lawsuits from February 2012 to January 2014 against Morgan Stanley and other defendants for violations of federal and state securities laws in connection with the sale of mortgage-backed securities to the three failed banks.
Along with $24 million from a settlement with Morgan Stanley last year of mortgage-backed securities claims related to Franklin Bank, S.S.B., of Houston, Texas, which failed in 2008, this settlement brings total mortgage-backed securities claim settlements by the FDIC with Morgan Stanley to $86.95 million.
As of Dec. 31, the FDIC has filed 19 mortgage-backed securities lawsuits on behalf of eight failed institutions, including the four lawsuits against Morgan Stanley, seeking damages for violations of federal and state securities laws.
This settlement, which resolves all of the FDIC's mortgage-backed securities claims against Morgan Stanley that were brought in those lawsuits, came with in coordination with the U.S. Department of Justice.
