Bond insurer MBIA is marching forward in yet another lawsuit against an investment bank that it claims deceptively induced it to insure a bunch of bad mortgage-backed securities. Last week, Acting Supreme Court Justice Gerald Loehr in White Plains denied Morgan Stanley’s motion to dismiss MBIA’s claims of fraudulent inducement and breach of contract in MBIA Insurance Corp. v. Morgan Stanley, 29951-10. MBIA is represented by Robin Henry of Boies, Schiller & Flexner.
MBIA accused Morgan Stanley and its mortgage servicing subsidiary of falsely representing the quality of the underwriting on about 5,000 second-lien residential mortgages that were packaged into $223 million worth of securities. After conducting a forensic review of nearly 3,000 loans, MBIA found that 97 percent were in breach of the requirements that Morgan Stanley laid out for inclusion in the mortgage pool. James Rouhandeh of Davis Polk & Wardwell represents Morgan Stanley.
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