Allstate Files Mortgage-Backed Securities Fraud Lawsuit Against Morgan Stanley

Allstate Insurance Co., which bought over $104M in residential mortgage-backed securities in 6 offerings from Morgan Stanley between ‘05 and ’07 is suing the broker-dealer for securities fraud. The insurer claims that the financial firm sold it RMBS under the assurances that they were in alignment with “conservative” underwriting standards and that the properties had received accurate appraisals when, actually, Morgan Stanley RMBS did not meet these standards and had come from originators that Allstate categorizes as among “worst” in the subprime lending:

• New Century Financial Corp.
• Decision One Mortgage Co.
• WMC Mortgage Corp.
• First NLC Financial Services
• Wilmington Finance Inc.
• AIG Federal Savings Bank

Allstate says that leading up to the financial collapse, it had acquired $2.78 billion in mortgage-backed securities. It bought RMBS from Morgan Stanley because of the “central role” the financial firm made in creating and selling the securities, the latter’s assurances that it had done its due diligence on the mortgages backing the securities, and because of the prospectuses, registration statements, and other documents. Now, the insurance company believes that the brokerage firm either knew that the lenders were putting forth risky loans that did not conform to standards or recklessly disregarded the facts.

Allstate is seeking unspecified compensatory and/or “recessionary” damages and is asking for a jury trial. This is not the first RMBS that the insurance company has filed. Allstate has already sued several other brokerage firms for MBS fraud including:

• Merrill Lynch (a Bank of America unit)
• Countrywide (also a Bank of America units)
• Citigroup Inc.
• JP Morgan Chase & Co.
• Deutsche Bank AG
• Credit Suisse Group AG

Related Web Resources:

Morgan Stanley Sued by Allstate Over Mortgage Securities Fraud Claims, Bloomberg, July 6, 2011

Allstate adds Morgan Stanley to RMBS litigation pool, Housing Wires, July 6, 2011

More Blog Posts:

Bank of America Cop. (BAC)’s Merrill Lynch a Defendant of Class-Action Mortgage-Backed Securities Lawsuit Against at Least 1,800 Investors, Institutional Investors Securities Blog, June 25, 2011

National Credit Union Administration Board Files $800M Mortgage-Backed Securities Fraud Lawsuits Against JP Morgan Securities, RBS Securities, and Other Financial Institutions, Institutional Investors Securities Blog, June 23, 2011

Morgan Keegan Settles Subprime Mortgage-Backed Securities Charges for $200M, Stockbroker Fraud Blog, June 29, 2011

Contact our securities fraud attorneys about your institutional investment fraud cause.