By Ben Lane, Housing Wire, August 10, 2016
Earlier this year, Morgan Stanley agreed to a $3.2 billion settlement over its “deceptive” mortgage bond practices in the run-up to the financial crisis.
Part of that settlement included a commitment to provide $400 million in consumer relief for New York residents affected by Morgan Stanley’s alleged actions, set to be distributed by the end of September 2019.
Now, Morgan Stanley is taking its first steps to fulfill that commitment, by providing principal forgiveness to a handful of borrowers as a “test drive” of its relief plan, according to a new report from Eric Green, the independent monitor of the consumer-relief portion of the settlement.
The settlement stems from Morgan Stanley’s alleged misrepresentations about the security and safety of residential mortgage-backed securities it sold before the financial crisis.
According to the office of New York Attorney General Eric Schneiderman, Morgan Stanley made multiple representations to RMBS investors about the quality of the mortgage loans it securitized and sold to investors, and its process for screening out questionable loans.
Per Green’s report, Morgan Stanley recently began engaging in its consumer relief efforts by forgiving $10,468,806 in principal on 19 first-lien mortgage loans.
“This initial batch of forgiveness, representing less than 3% of Morgan Stanley’s overall consumer-relief obligations under the settlement, provided a ‘test drive’ allowing the monitor and his team of legal, finance and accounting professionals to assess Morgan Stanley’s plan for delivering relief and its methodology for calculating how the assistance qualifies for credit under the terms of the settlement agreement,” Green’s office said in a release. “Based on their initial review, Professor Green said he believes that Morgan Stanley is ‘employing a logical and appropriate approach to seeking credit for its consumer-relief efforts.’”
Read full article here.