US banking giant Morgan Stanley has said that it has agreed to pay $1.25 billion to settle the charges that it misled investors on the sale of mortgage-backed securities ahead of the housing bust.
Morgan Stanley will boost its legal reserves by $150 million to pay out the settlement to the US Federal Housing Finance Agency, the banking giant had said yesterday in a securities filing.
The settlement marks the latest big government agreement with a US banking giant in the aftermath of the housing bust.
In November, JPMorgan Chase had agreed to a $13-billion settlement on mortgage-backed securities. Bank of America and Goldman Sachs have also announced big settlements.
The settlement resolves a September 2011 suit in which the FHFA, the conservator of Freddie Mac and Fannie Mae, alleged that Morgan Stanley made “untrue statements and material omissions” in the sale of about $11-billion worth of mortgage securities, Morgan Stanley had said in a 2013 securities filing.
Yesterday’s securities filing described the deal as “an agreement in principle” and said it is still subject to “final approval” by the parties.