Prudential Financial Inc. has sued Morgan Stanley over a $1 billion residential mortgage-backed securities (RMBS) purchase.
According to a Bloomberg News report, Prudential bought RMBS certificates issued with 41 mortgage-loan securitizations between July 2004 to August 2007. However, the insurer alleges that Morgan Stanley falsely claimed the mortgages backing the securities were properly appraised and met underwriting guidelines, and that Morgan Stanley properly transferred the titles to the home loans.
‘A high percentage of the mortgage loans backing the certificates have defaulted, been foreclosed upon, or are delinquent,’ said Prudential in its lawsuit, adding that the loans ultimately ’caused a massive decline in the value of the certificates and Prudential investment losses in excess of $350 million.’