On February 11, 2016, the State of New York and Morgan Stanley reached an agreement to settle claims that Morgan Stanley violated New York state law in connection with the packaging, marketing, underwriting, sale, structuring, arrangement, and issuance of residential mortgage-backed securities.
Under the Settlement Agreement, Morgan Stanley is required to (i) pay $150 million to the State of New York; and (ii) provide $400 million in consumer relief to remediate harms.
Consumer relief may include first lien principal forgiveness, principal forgiveness of forbearance, first lien forbearance (payment forgiveness), second lien principal forgiveness (including extinguishments), first lien balance forgiveness, second lien balance forgiveness (including extinguishments), assistance for borrowers to refinance outside Morgan Stanley, financing to units of local government or other eligible entities for the acquisition and remediation of non-performing loans, rate reductions, cross-servicer HARP, grants to municipalities or counties to capitalize or support certified Land Banks subject to state or local regulation, grants to municipalities or their housing or finance agencies to support housing quality improvement and enforcement programs, and financing and/or grants to municipalities or counties (including housing or finance agencies) to fund Critical Need Housing Developments and/or Support Services or programs for such Developments.
Under the Settlement Agreement, the Monitor was appointed to publicly: (i) report quarterly on Morgan Stanley’s progress towards completion of the consumer relief portion of the Settlement Agreement; (ii) report on credits earned by Morgan Stanley; and (iii) determine and certify Morgan Stanley’s compliance with the terms of the Settlement Agreement. The Monitor must file his first quarterly report by August 9, 2016.
Morgan Stanley must complete all consumer relief obligations under the Settlement Agreement by September 30, 2019. Morgan Stanley is entitled to a 115% early incentive credit for all forms of consumer relief offered or completed by February 11, 2017.
The Monitor has retained Young Conaway Stargatt & Taylor, LLP and BDO USA, LLP to assist him in conducting his work under the Settlement Agreement.
To read more about the Monitor, please click here.
To read the Settlement Agreement, please click here.