Morgan Stanley 2015 Annual Report Download - page 210

MORGAN STANLEY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
alleges, among other things, that the loans in the trust, which had an original principal balance of approximately $609 million,
breached various representations and warranties. The amended complaint seeks, among other relief, declaratory judgment relief,
specific performance and unspecified damages and interest. By order dated September 30, 2014, the court granted in part and
denied in part the Company’s motion to dismiss the amended complaint. On July 13, 2015, the plaintiff perfected its appeal
from the court’s September 30, 2014 decision. Based on currently available information, the Company believes that it could
incur a loss in this action of up to approximately $170 million, the total original unpaid balance of the mortgage loans for which
the Company received repurchase demands that it did not repurchase, plus pre- and post-judgment interest, fees and costs, but
plaintiff is seeking to expand the number of loans at issue and the possible range of loss could increase.
On January 10, 2013, U.S. Bank, in its capacity as trustee, filed a complaint on behalf of Morgan Stanley Mortgage Loan
Trust 2006-10SL and Mortgage Pass-Through Certificates, Series 2006-10SL against the Company styled Morgan Stanley
Mortgage Loan Trust 2006-10SL, et al. v. Morgan Stanley Mortgage Capital Holdings LLC, as successor in interest to
Morgan Stanley Mortgage Capital Inc., pending in the Supreme Court of NY. The complaint asserts claims for breach of
contract and alleges, among other things, that the loans in the trust, which had an original principal balance of approximately
$300 million, breached various representations and warranties. The complaint seeks, among other relief, an order requiring
the Company to comply with the loan breach remedy procedures in the transaction documents, unspecified damages, and
interest. On August 8, 2014, the court granted in part and denied in part the Company’s motion to dismiss the complaint.
Based on currently available information, the Company believes that it could incur a loss in this action of up to
approximately $197 million, the total original unpaid balance of the mortgage loans for which the Company received
repurchase demands that it did not repurchase, plus pre- and post-judgment interest, fees and costs, but plaintiff is seeking to
expand the number of loans at issue and the possible range of loss could increase.
On May 3, 2013, plaintiffs in Deutsche Zentral-Genossenschaftsbank AG et al. v. Morgan Stanley et al. filed a complaint
against the Company, certain affiliates, and other defendants in the Supreme Court of NY. The complaint alleges that
defendants made material misrepresentations and omissions in the sale to plaintiffs of certain mortgage pass-through
certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly
sponsored, underwritten and/or sold by the Company to plaintiff currently at issue in this action was approximately $644
million. The complaint alleges causes of action against the Company for common law fraud, fraudulent concealment, aiding
and abetting fraud, negligent misrepresentation, and rescission and seeks, among other things, compensatory and punitive
damages. On June 10, 2014, the court granted in part and denied in part the Company’s motion to dismiss the complaint. The
Company perfected its appeal from that decision on June 12, 2015. At December 25, 2015, the current unpaid balance of the
mortgage pass-through certificates at issue in this action was approximately $269 million, and the certificates had incurred
actual losses of approximately $83 million. Based on currently available information, the Company believes it could incur a
loss in this action up to the difference between the $269 million unpaid balance of these certificates (plus any losses incurred)
and their fair market value at the time of a judgment against the Company, or upon sale, plus pre- and post-judgment interest,
fees and costs. The Company may be entitled to be indemnified for some of these losses.
On July 8, 2013, U.S. Bank National Association, in its capacity as trustee, filed a complaint against the Company styled U.S.
Bank National Association, solely in its capacity as Trustee of the Morgan Stanley Mortgage Loan Trust 2007-2AX (MSM
2007-2AX) v. Morgan Stanley Mortgage Capital Holdings LLC, as Successor-by-Merger to Morgan Stanley Mortgage
Capital Inc. and Greenpoint Mortgage Funding, Inc., pending in the Supreme Court of NY. The complaint asserts claims for
breach of contract and alleges, among other things, that the loans in the trust, which had an original principal balance of
approximately $650 million, breached various representations and warranties. The complaint seeks, among other relief,
specific performance of the loan breach remedy procedures in the transaction documents, unspecified damages and interest.
On August 22, 2013, the Company filed a motion to dismiss the complaint, which was granted in part and denied in part on
November 24, 2014. Based on currently available information, the Company believes that it could incur a loss in this action
of up to approximately $240 million, the total original unpaid balance of the mortgage loans for which the Company received
repurchase demands that it did not repurchase, plus pre- and post-judgment interest, fees and costs, but plaintiff is seeking to
expand the number of loans at issue and the possible range of loss could increase.
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