Private mortgage bond investors are targeting $73 billion in securities issued by Wells Fargo (WFC) and Morgan Stanley (MS) in hopes of forcing the banks to buyback some of the underlying loans.

Lawfirm Gibbs & Bruns sent a notice to the two banks Wednesday identifying the bonds investors allege the two banks violated pooling and servicing agreements. Such notices often come after a settlement offer was rejected and could signal escalation ahead.

The firm alleged in a statement that “each of these failures has materially affected the rights of the certificateholders and constitutes an ongoing event of default in the mortgage servicer’s performance under the relevant PSAs.”

The notice covers $45 billion in bonds issued by Wells and $28 billion from Morgan Stanley.

Analysts at research firm Compass Point said more investors in private-label mortgage bonds would likely increase their claims as the six-year statute of limitations on 2006 deals draws near.

“Further, it seems logical that G&B, or others, are likely preparing additional actions such as these in preparation for lawsuits,” Compass Point analysts said.

They estimate — using figures from a separate settlement between investors and Bank of America (BAC) — that Wells may be on the hook for $1.2 billion in claims and Morgan Stanley could face $800 million.

“We will review any communication we receive and respond appropriately,” a Wells Fargo spokesperson said in a statement.

Morgan Stanley declined to comment.

jprior@housingwire.com

Most Popular Articles

Are mortgage rates about to hit an all-time low?

The lowest mortgage rates have ever been was around Thanksgiving 2012 when the interest rate for a 30-year fixed-rate mortgage fell to 3.31% (according to Freddie Mac data), but rising panic over the coronavirus could drive rates to lows never seen before. HW+ Premium Content

Feb 25, 2020 By

Latest Articles

The looming concerns servicers might be ignoring

Breaking down the biggest trends and concerns servicers should be thinking about, TMS Chief Compliance Officer Shanya Arrington sat down with HousingWire to offer some exclusive insights on what’s happening in the servicing space. HW+ Premium Content

Feb 27, 2020 By
3d rendering of a row of luxury townhouses along a street

Log In

Forgot Password?

Don't have an account? Please