SAN FRANCISCO (Legal Newsline) – Morgan Stanley has agreed to pay $2.6 billion to resolve allegations related to its marketing, sale and issuance of residential mortgage backed securities, the Justice Department announced.
In the settlement, Morgan Stanley admitted in writing to the allegations that it failed to disclose critical information to prospective investors about the quality of mortgage loans underlying its RMBS and about its due diligence process.
“Today’s settlement holds Morgan Stanley appropriately accountable for misleading investors about the subprime mortgage loans underlying the securities it sold,” Acting Associate Attorney General Stuart F. Delery said. “The Department of Justice will not tolerate those who seek financial gain through deceptive or unfair means, and we will take appropriately aggressive action against financial institutions that knowingly engage in improper investment practices.”
An RMBS is a security that is comprised of a pool of mortgage loans and its performance is based on numerous factors. These include the characteristics of borrowers and the value of the properties underlying the RMBS.
“Those who contributed to the financial crisis of 2008 cannot evade responsibility for their misconduct,” Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division, said. “This resolution demonstrates once again that the Financial Institutions Reform, Recovery and Enforcement Act is a powerful weapon for combatting financial fraud and that the department will not hesitate to use it to hold accountable those who violate the law.”
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