A Morgan Stanley subsidiary on Tuesday argued that a New York judge should dismiss a breach of contract suit brought by a trust over $110.8 million in losses suffered by investors in mortgage-backed securities. Morgan Stanley argued that a grant of the remedies sought by the investors would rewrite the underlying contracts .
An attorney for the financial services juggernaut also argued that the claims should be time barred since more than six years have passed since the purchase of these assets .
In its complaint, the plaintiffs claim that despite promising that the loans it securitized and sold to the plaintiff met strict underwriting rules and were not in danger of foreclosure, Morgan Stanley Mortgage Capital Holdings LLC allegedly included at least 371 loans in the deal that they knew violated one or more of the agreed-upon eligibility terms and later did not repurchase the loans even after the plaintiff had made Morgan Stanley aware of the violations .
What is worse is that Morgan Stanley said there is no remedy available to the plaintiff’s even though they sold them securities that clearly violated the underwriting terms.
Plaintiff’s council argued that they were no longer bound to a single remedy as was outlined in the original agreement between the two parties because of the gross negligence displayed in the underwriting of these assets .
“The gross negligence was the failure to provide proper underwriting procedures to these mortgage loans when they were first underwritten. They made representations and warranties to us that in fact they were compliant … that there was no problem, there was no mistake,” Council for plaintiffs said. “If this is not gross negligence, I don’t know what would be considered gross negligence.”
If you or someone you know has lost money as a result of an investment, please contact Richard Frankowski at 888-741-7503 to discuss your potential legal remedies.