"Morgan Stanley Knew They Were Making Loans Designed To Fail!" Declares Massachusetts AG After Scoring $102M Settlement In Subprime Mortgage Case

In Boston, Massachusetts, The Boston Globe reports:

• Attorney General Martha Coakley has won a $102 million settlement from Wall Street’s Morgan Stanley & Co., money that will help more than 1,000 Massachusetts homeowners who are in foreclosure or saddled with unwieldy subprime mortgages.

• The deal, the first of its kind in the country with Morgan Stanley, followed an investigation by Coakley’s office into the firm for fueling subprime mortgages written by New Century Financial Corp., a large California lender that went bankrupt in 2007. She said Morgan Stanley knew that New Century was making predatory loans, but continued to provide the lender billions of mortgage dollars by buying the loans to turn them into securities.

• Morgan Stanley “uncovered signals pretty early on that the lending practices of New Century were not sound,’’ Coakley said at a press conference yesterday. “Morgan Stanley knew they were making loans designed to fail.’’

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• Under the agreement, $58 million would go to cut the principal due on New Century loans for about 600 borrowers, as well as to assist 400 other New Century borrowers who have already lost their homes in foreclosure. Another $23 million would go to the state pension fund, which invested in the securities packaged by Morgan Stanley; those securities went bad when the mortgage market collapsed. The Commonwealth will get another $19.5 million in the settlement.(1)

For more, see Mass. wins $102m in subprime loan case.

For the Massachusetts AG press release, see Morgan Stanley to Pay $102 Million for Role in Massachusetts Subprime Mortgage Meltdown Under Settlement with AG Coakley’s Office.

(1) For the terms of the settlement agreement, see In re: Morgan Stanley & Co. Incorporated: Assurance of Discontinuance.