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FDIC Suit: Morgan Stanley to Pay $63M Over RMBS Claims

Morgan StanleyMS will shell out $62.95 million in settlement to resolve claims over its misrepresentation in the sale of residential mortgage-backed securities ("RMBS") before the 2008 financial crisis, as revealed by the Federal Deposit Insurance Corporation ("FDIC") yesterday.

The FDIC had charged Morgan Stanley with misrepresented claims in the offering documents for 14 RMBS sold to Colonial Bank of Montgomery, Security Savings Bank of Henderson and United Western Bank of Denver.

Morgan Stanley was sued by the FDIC on behalf of these three banks, which failed either during or after the crisis. Four lawsuits from February 2012 to January 2014 were filed against Morgan Stanley and other defendants for violations of federal and state securities laws related to the sale of RMBS to the three failed banks.

Though Morgan Stanley did not admit liability for its alleged actions, the settlement, which was coordinated with the Department of Justice, resolves all of the FDIC's RMBS claims against the company.

According to the FDIC, the funds from the latest settlement deal would be distributed among the receiverships for the three failed banks.

The latest settlement totals the amount collected from Morgan Stanley by the FDIC for mortgage-backed securities claims to $86.95 million. In 2015, Morgan Stanley agreed to pay $24 million to resolve similar claims involving RMBS sales to Franklin Bank of Houston.

Moreover, in December 2015, Morgan Stanley settled a lawsuit pertaining to the sale of mortgage-backed securities. The company agreed to pay $225 million to the credit union regulator, the National Credit Union Administration ("NCUA"), for resolving allegations related to the sale of faulty securities to five corporate credit unions.

Also, in February 2015, Morgan Stanley said it had reached an agreement in principle to pay $2.6 billion as part of a settlement with the U.S. Justice Department over mortgage bonds.

As of Dec 31, 2015, the FDIC has filed 19 RMBS lawsuits on behalf of eight failed institutions, including four lawsuits against Morgan Stanley, seeking damages for violations of federal and state securities laws.

Last year, the FDIC had also filed cases against U.S. Bancorp USB and The Bank of New York Mellon Corporation BK related to RMBS that soured afterwards.

Currently, Morgan Stanley carries a Zacks Rank #3 (Hold). A better-ranked company in the same space is Evercore Partners Inc. EVR , which holds a Zacks Rank #2 (Buy).

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US BANCORP (USB): Free Stock Analysis Report

BANK OF NY MELL (BK): Free Stock Analysis Report

MORGAN STANLEY (MS): Free Stock Analysis Report

EVERCORE PARTNR (EVR): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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