MBIA Insurance Sues Morgan Stanley (MS) for Fraudulent Inducement

Bloomberg reported that MBIA Insurance Corporation has sued Morgan Stanley (MS) for fraudulently inducing them to issue policies covering $223.2 million in mortgage backed securities (MBS). Among the allegations was the claim that Morgan Stanley failed to disclose that most of the 5,000 underlying loans didn’t meet the underwriting guidelines of the firm or the originators. (MBIA Insurance Corporation v. Morgan Stanley; 29951-2010; Supreme Court of the State of New York, County of Westchester)

Attorneys for MBIA said that “a vast number of the mortgage loans were made to buyers who could not reasonably been expected to repay their mortgage debt.” In 2008, the subsidiary of MBIA which is the largest insurer of bonds and mortgage backed debt instruments had claimed the Countrywide Financial unit of Bank of America misrepresented its underwriting standards causing losses of more than $459 million.

If you have suffered losses from investments in mortgage backed securities (MBS), please contact our securities law firm at 1-800-259-9010 for a confidential, no obligation consultation.

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