BayernLB, Morgan Stanley Agree to End Mortgage Bond Suit

Morgan Stanley and Bayerische Landesbank agreed to end litigation over almost $486 million worth of residential mortgage-backed securities, according to a court filing.

Bayerische Landesbank, based in Munich, sued Morgan Stanley in New York State Supreme Court in Manhattan in January 2012 over securities purchased in 22 offerings in 2006 and 2007, saying the lender knew the loans underlying the bonds were riskier than promised and didn’t conform with underwriting standards.

The parties said in the filing dated yesterday that they have agreed to end the suit. The filing didn’t state whether the firms had settled the matter, or any terms of such an accord. Mark Lake, a spokesman for Morgan Stanley, declined to comment on the filing. Gerald H. Silk, an attorney representing BayernLB, didn’t return a voice-mail message seeking comment.

BayernLB, Germany’s second-biggest state-owned lender, has filed similar suits against other banks over mortgage securities in the same court over the past two years, including Bank of America Corp., Deutsche Bank AG and JPMorgan Chase & Co.

Pools of home loans securitized into bonds were a central part of the housing bubble that helped send the U.S. into the biggest recession since the 1930s. The housing market collapsed, and the crisis swept up lenders and investment banks as the market for the securities evaporated.

The case is Bayerische Landesbank, New York branch v. Morgan Stanley, 650230/2012 New York State Supreme Court, New York County (Manhattan).

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