MORTGAGE INVESTORS MAY HAVE CLAIMS

By Kent Berk on June 10th, 2010 in BLOG, REAL ESTATE LAW

Investors lost billions of dollars on defective mortgage securities.  Now, they understandably want to recover their losses.   The investment advisers, brokers and others that sold the defective securities may have to pay.   State securities and other laws prohibit misrepresentations in the sale of investments, such as mortgage backed securities.  If the brokers and others knew that the securities were more risky because the underlying mortgages were defective and the brokers did not disclose that knowledge, they may be liable under state securities and other laws.

Such claims have already been investigated by, for example, the Massachusetts attorney general against Morgan Stanley.   In one case involving Morgan Stanley’s reported “partner,” New Century Mortgage, the Massachusetts attorney general alleged that Morgan Stanley provided New Century with financing to provide high risk loans to low income borrowers and then Morgan packaged the loans as securities and sold the securities to investors.  The loans were allegedly not correctly underwritten and violated Massachusetts laws that required the lender to ascertain the borrower’s best interests.  Without admitting any wrongdoing Morgan Stanley agreed to pay a total of $102 million, including $58 million to 1,000 homeowners and $23 million in investment losses to a pension fund.

Although Arizona does not have a “borrower best interest” statute, there are Arizona laws that may provide a basis for civil claims against those that sold defective securities, including consumer fraud and securities fraud statutes, as well as common law claims for fraud and negligent misrepresentation.   Berk Law Group, P.C. handles most types of disputes, including claims for fraud and misrepresentation.  If you or your company bought defective mortgage backed securities or other related investments, contact us.