Morgan Stanley’s $275M fund to pay harmed subprime bond investors 

Resolutions of foreclosure era investments gone wrong are finally catching up with some lucky investors. The Securities & Exchange Commission (SEC) announced the establishment of Morgan Stanley Fair Fund Distribution Plan designed to reimburse harmed, subprime residential mortgage backed security investors.

To claim lost monies investors must complete and sign a proof of claim form and submit it to the fund plan administrator by December 12, 2020.

The SEC issued a cease-and-desist order against Morgan Stanley and Co. LLC and its affiliates in 2014, for “misleading public disclosures regarding the number of delinquent loans in two subprime residential mortgage-backed securities transactions offered in 2007,” collectively referred to as theNC4 and HE7 trusts, according to a SEC statement. 

The order stated that Morgan Stanley “failed to remove or accurately disclose loans with either current and/or historical delinquencies made in each transaction offering documents.” 

Following the order, Morgan Stanley ABS Capital I Inc. and Morgan Stanley Mortgage Capital Holdings LLC paid a total of $275 million for distribution to harmed investors. 

The SEC approved the creation of a fair fund plan that would distribute the funds, “approved in its entirety” on June 30, 2020. 

In addition the regulator appointed Epiq Class Action and Claims Solutions (previously known as Garden City Group, LLC), as the fair fund plan administrator to assist the SEC in developing a distribution plan.

To qualify for a payment from the fair fund investors must have purchased eligible bond certificates “before the date of the issuance of the first monthly remittance report” sent to investors by the securities administrator for the Trust; and did not sell the certificates before June 29, 2007 for the NC4 Trust and October 24, 2007 for the HE7 Trust.

Details about the plan are available on the fair fund website. Investors also can inquire by phone, or email

Fannie: Consumer sentiments regain momentum 

After wavering downwards in July, the share of consumers who think now is a good time to buy a home increased to 59% in August 2020, according to Fannie Mae, up from 53% the previous month.

Fannie’s Home Purchase Sentiment Index(HPSI), which offers insights based on various data analysis and responses to six home sales related questions from 1,000 participants in the Fannie Mae National Housing Survey (NHS) reported a monthly improvement in consumer sentiments. 

HPSI was 77.5 in August, down 16.3 points year over year, but up 3.3 points from July, continued the rebound from May and June, the report found. 

Month over month increases reported across five of the six HPSI components show consumers had a more optimistic view of both home buying and home selling conditions, even though expected home price growth patterns cause some concern. 

On the positive side, the net share of Americans who say it is a good time to buy increased 9 percentage points, slightly less than a seven, percentage points increase in the share of respondents who said, it is a good time to sell a home. Sellers’ sentiment improved, increasing three percentage points from 45% in July, to 48% in August.

“The HPSI rose modestly in August, recovering the ground it lost in July,” said Doug Duncan, senior vice president and chief economist. “The HPSI’s recovery was driven by near-record low mortgage rates that helped restore much of consumers’ positivity on whether it is a good time to buy a home, while also improving the good-time-to-sell sentiment.”

The August survey reflects uncertainty regarding fall issues such as reopening plans for schools and businesses after “the CARES Act $600-per-week income supplement expired,” Duncan said.

Despite the pandemic, the net share of Americans who say they are not concerned about losing their job increased 3 percentage points, bringing the total to 78%.

LendingTree: 64% may stretch budget for “dream home”

Spending much more than one can afford is never a good idea. Nonetheless, the temptation to go over budget for their perfect house was strong enough for 64% of more than 1,000 homebuyers participating in a recent Lending Tree survey. 

Most are willing to splurge motivated by low mortgage rates and the shrinking inventory for sale driving competitionamong potential buyers, pressuring them to consider stretching their budget, LendingTree analysts wrote. 

It is a bad idea, said Tendayi Kapfidze, LendingTree’s chief economist, who urges homebuyers to avoid going over budget. “Many people underestimate the maintenance costs of owning a home. If you are stretched financially and under-invest in maintenance it can diminish the value of your home.”

If low interest rates make homebuyers feel they should try to take advantage of this unique opportunity, buyers also want to keep their priorities straight. According to the survey, the top three are location, for 30% of the respondents; affordability or a home within budget is a priority for 27%; and enough space for 24%.

The level of such stressors differs by demographic, age group and gender. 

Affordability is the most stressful part of the process for 37% of all potential buyers. The mortgage loan application process itself is yet another stressor. Nearly 12% of buyers said that they did not feel their mortgage lender was effective at explaining their available loan options.

At 18% for Hispanics and 16% for black homebuyers, compared to 9% of whites, minority buyers were nearly twice as likely to find applying for a mortgage, “the most stressful part of the home buying process.” 

By age and gender, the drive is higher among younger buyers and men. Up to 76% of millennial respondents (ages 24 to 39) are more willing to stretch their budget to buy their dream home, and 74% of the men surveyed.

At 48%, nearly half of first-time homebuyers stress most about finding a home within budget, compared with 31% of repeat buyers, the report notes.

“Overpaying is one of the downsides of very low interest rates,” explained Kapfidze. “As many homebuyers budget a monthly payment, lower rates translate into a higher mortgage amount. Coupled with tight inventory in some areas, it increases the risk of bidding wars over asking price.”

NEXT Mortgage News logo

Stay in the know

Get the daily intel that impacts your customers, employees and market. 

Up NEXT eNewsletter — Industry news

Thank you!

Share This