MOTION TO DISMISS DENIED: FRAUD ALLEGED V MORGAN STANLEY

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It is interesting how the same allegations made by an institution are taken more seriously. In fact, the Court leaves in the prayer for punitive, consequential and future damages. Here MBIA is suing Morgan Stanley for lying about the risks and the nature of what they were buying. It’s all about the mortgages. Below I’ve selected some of the more interesting passages from the order denying Morgan Stanley’s Motion to Dismiss. While Judges routinely dismiss or otherwise are dismissive of homeowner complaints about the exact same thing by the exact same parties, they tend to take it more seriously when another institution says the same thing.

I remind the readers that we have repeatedly predicted the ankle-biting complaints amongst the giants that participated in the Ponzi scheme, whether knowingly or not. The obvious move by MBIA raises the question of why the same move has not been vigorously prosecuted by AIG, which played such a central role in funding the ill-gotten escape hatch for bankers.

“a vast number of of mortgage loans were made to borrowers who could not reasonably be expected to be able to repay their mortgage debt.”

As to MBIA Third PArty Guarantee and Payment: “This guarantee of repayment of principal and interest for the RMBS notes increased their marketability.”

“MBIA contends that these misrepresentations and failures ‘fundamentally distorted the risk profile represented to MBIA and raised the likelihood of losses’. Had MBIA known the truth it would not have issued the certificate insurance policy.” [Editor’s Note: Had ANYONE known the truth there would have been no mortgage bonds to  sell, no loans to make, no borrowers signing on the dotted line. Even here, the Judge assumes the Morgan acquired the loans when all indications are that it never did so. The Judge’s assumption is most likely the result of a bad assumption by the writer’s of the complaint for MBIA. The truth is that the loans never made it into the pools, there was nothing to insure, and the entire proposition is “all or nothing” with the emphasis on the NOTHING.]

“Morgan Stanley argues in essence that MBIA’s fraud claim must be dismissed because it is duplicative of the breach of contract claim. It is not. A fraudulent inducement claim may be sustained when it is alleged that misrepresentations contained in documents collateral to the contract were made to induce the Plaintiff to enter into the contract in the first place…” [Editor’s comment: Applying exactly this logic to the borrower, the “contract” was fraudulently induced by misrepresenting the appraised value of the property, misrepresenting the underwriting of the loan including parties and terms and viability, and misrepresenting the risk that the “lender” was taking (none). Thus our assertion on these pages that the primary claim is fraud in the inducement, as to damages, and quiet title, as to the lien, is corroborated by these simple statement of obvious black letter law by this Judge.]

Tags: borrower, creditor, disclosure, foreclosure, foreclosure offense, foreclosures, fraud, Lender Liability, MBIA, Morgan Stanley, mortgage meltdown, MOTION TO DISMISS, rescission, securitization, TILA audit, trustee
Posted in bubble, Corruption, Eviction, securities fraud |