Morgan Stanley agrees to pay $1.25 billion to resolve mortgage lawsuit

Morgan Stanley agrees to pay $1.25 billion to resolve mortgage lawsuitUS-based banking giant Morgan Stanley confirmed on Tuesday that it would pay $1.25 billion to the U. S. regulator to settle the charges that it misled investors on the sale of mortgage-backed securities prior to the housing bust.

In September 2011, the U. S. Federal Housing Finance Agency (FHFA), the conservator of Freddie Mac and Fannie Mae, accused Morgan Stanley of making untrue statements and material omissions in the sale of nearly $11-billion worth of mortgage securities.

The settlement deal is however at the moment is an 'agreement in principle' as it is still subject to final approval by the parties.

The US housing authority had slapped lawsuits on a total of eighteen financial institutions in 2011. Morgan Stanley's settlement marks the latest big settlement between a bank and the government in the aftermath of the housing bust.

In November last year, JPMorgan Chase & Co had hit an agreement to settle charges related to sale of mortgage-backed securities by agreeing to pay $13 billion. In December, Deutsche Bank announced that it had agreed to pay $1.9 billion to settle charges, while Citigroup said it would pay $250 million to settle similar charges.

The list of other US banking giants that have already reached a settlement in the mortgage-backed securities case includes Bank of America and Goldman Sachs.