Morgan Stanley To Pay $1.25 Billion in Mortgage-Backed Fraud Case to FHFA for violations of Federal and State Securities Laws and Common Law Fraud

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The Federal Housing Finance Agency (FHFA), as conservator of Fannie Mae and Freddie Mac, today announced it has reached a settlement with Morgan Stanley, related companies and specifically named individuals for $1.25 billion. The settlement resolves claims in the lawsuit FHFA v. Morgan Stanley, et al. in the U.S. District Court of the Southern District of New York. The settlement addresses claims alleging violations of federal and state securities laws and common law fraud in connection with private-label mortgage-backed securities (PLS) purchased by Fannie Mae and Freddie Mac between 2005 and 2007.

Under the terms of the agreement, Morgan Stanley will pay $625 million each to Fannie Mae and Freddie Mac. As part of the agreement, FHFA, Fannie Mae and Freddie Mac will release certain claims against Morgan Stanley related to the securities involved. This is the seventh settlement related to the 18 PLS lawsuits FHFA filed in 2011. FHFA remains committed to satisfactory resolution of the remaining actions.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Barry Fagan, Law Offices of Barry S Fagan | Attorney Advertising

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