UPDATE 1-Morgan Stanley, NY attorney general in $500-mln talks to settle …

20 Apr 2015 | Author: | No comments yet »

Morgan Stanley, New York Talk $500 Million Mortgage-Bond Pact.

Morgan Stanley is in talks to pay about $500 million to settle a probe by New York’s attorney general into whether the Wall Street firm misled investors in mortgage bonds that cratered during the financial crisis, people familiar with the matter said.

The pact would clear up another headache for the New York firm and add to the $130 billion legal tab rung up by the largest U.S. banks for their actions during the crisis. Morgan Stanley ranks down the list among the big banks that have paid mortgage-related fines, in part because it never held a sprawling home-lending business like Bank of America Corp. and J.P. Earlier this year, Morgan Stanley struck a preliminary deal to resolve the federal government’s inquiry into those same mortgage-bond practices, agreeing to pay $2.6 billion to the Justice Department. Negotiations on that settlement are also continuing, and while a draft “statement of facts” has gone back and forth between the parties, any final deal is still weeks, if not months, away, the people said. The reserve, announced after the firm disclosed fourth-quarter results but before it had filed its annual report, wiped out much of the firm’s previously reported 2014 profit.

In past settlements that state and federal authorities have reached with other banks to resolve mortgage-securities claims, both California and New York received similar pots of money. Last year, the office of California’s attorney general, Kamala Harris, also told the bank it believed Morgan Stanley had violated California law by making misrepresentations on a structured investment vehicle known as the Cheyne SIV. Schneiderman’s office alleged Morgan Stanley misrepresented and omitted key details on the health of the loans that underpinned the securities it sold. The consumer relief included in any deal with New York is expected to differ from previous similar bank settlements, which largely revolved around reducing mortgage debt or otherwise lowering payments for struggling borrowers.

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