Home / Daily Dose / Morgan Stanley Begins to Fulfill RMBS Settlement Debt
Print This Post Print This Post

Morgan Stanley Begins to Fulfill RMBS Settlement Debt

Seal On Money BHMorgan Stanley has begun to fulfill its consumer relief obligations under a settlement with federal and state regulators in connection with mortgage-backed securities practices, according to a report from independent monitor Professor Eric D. Green.

On February 11, 2016, Morgan Stanley entered into a $3.2 billion settlement with the Department of Justice and New York State in connection with the creation, packaging, marketing, underwriting, sale, structuring, arrangement, and issuance of mortgage-based securities in the run-up to the financial crisis.

The penalty from the DOJ amounted to $2.6 billion, while Morgan Stanley agreed to provide New York State with $550 million—including $400 million in consumer relief by the end of September 2019.

Green said in his first report on the settlement that Morgan Stanley has submitted credit under the settlement of debt that is owed on 19 first-lien mortgage loans totaling approximately $10.4 million in reportable credit. While that total represents less than 3 percent of the overall consumer credit Morgan Stanley agreed to provide, it provided a “test drive” for the monitor and his team to assess Morgan Stanley’s plan for delivering the consumer relief and methodology for calculating how the assistance qualifies for credit under the settlement.

Morgan StanleyBased on the initial review, Green said that Morgan Stanley is “employing a logical and appropriate approach to seeking credit for its consumer-relief efforts” and that “In the coming months, we should get a clearer picture of how quickly Morgan Stanley is delivering on its consumer-relief obligations and how much of what kind of relief is being delivered.”

According to the monitor, 11 of the 19 loans were located in Hardest Hit Areas, which are areas identified by the U.S. Census Bureau has having a high concentration of foreclosure and distressed properties. All but one of the 19 homes were underwater on their mortgages. The average principal forgiven on these loans was more than $430,000, according to Green, and after the forgiveness, all 19 of the homes had an LTV ratio of 100 percent or lower—meaning either they were in positive equity or the owners did not owe more than the homes were worth.

The February 2016 settlement was not the first for Morgan Stanley over mortgage-backed securities practices. In February 2014, Morgan Stanley entered into a settlement with the Justice Department for $2.6 billion to resolve claims that the investment firm packaged and sold toxic MBS in the run-up to the crisis.

Click here to view the monitor’s complete report.

About Author: Brian Honea

Brian Honea's writing and editing career spans nearly two decades across many forms of media. He served as sports editor for two suburban newspaper chains in the DFW area and has freelanced for such publications as the Yahoo! Contributor Network, Dallas Home Improvement magazine, and the Dallas Morning News. He has written four non-fiction sports books, the latest of which, The Life of Coach Chuck Curtis, was published by the TCU Press in December 2014. A lifelong Texan, Brian received his master's degree from Amberton University in Garland.
x

Check Also

flooding

Study Shows Americans Ill-Prepared for Flooding

During a time of increased mortgage delinquencies, storm surges can have an even more devastating effect on those who are underinsured, experts say.

GET YOUR DAILY DOSE OF DS NEWS

Featuring daily updates on foreclosure, REO, and the secondary market, DS News has the timely and relevant content you need to stay at the top of your game. Get each day’s most important default servicing news and market information delivered directly to your inbox, complimentary, when you subscribe.