Morgan Stanley Unit Hit With $110M Suit Over RMBS

By Kaitlin Ugolik (October 2, 2012, 2:42 PM EDT) -- A unit of Morgan Stanley Mortgage Capital Inc. was hit Friday with a breach of contract suit in New York state court by a trustee for investors in mortgage-backed securities over at least $110.8 million in losses allegedly caused by the bank unit's mishandling of the underlying loans.

Despite promising that the loans it securitized and sold to the plaintiff met strict underwriting rules and were not in danger of foreclosure, Morgan Stanley Mortgage Capital Holdings LLC allegedly included at least 371 loans in the deal that violated one or more of the agreed-upon eligibility terms.

When the plaintiff, a trust...

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