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Morgan Stanley to pay $2.6 bn to settle mortgage bond probe

Morgan Stanley said Wednesday it had reached a preliminary agreement with the Justice Department to pay $2.6 billion to settle a probe into its marketing of mortgage-backed securities (AFP Photo/Emmanuel Dunand)

New York (AFP) - Morgan Stanley said Wednesday it had reached a preliminary agreement with the Justice Department to pay $2.6 billion to settle a probe into its marketing of mortgage-backed securities.

The settlement resolves claims the civil division of the Justice Department "indicated it intended to bring against the company," Morgan Stanley said in a securities filing.

The investment bank previously described regulatory probes as focusing on the bank's packaging of securities linked to subprime and non-subprime residential mortgages ahead of the housing bust and financial crisis.

The probes focused on issues including "the Company's due diligence on loans that it purchased for securitization, the Company's communications with ratings agencies, the Company's disclosures to investors, and the Company's handling of servicing and foreclosure related issues," the bank said in a November 2014 filing.

On Wednesday, Morgan Stanley trimmed its 2014 earnings from continuing operations by $1.35 per share from the $2.96 per share previously reported in light of the settlement.