Wells, Morgan Stanley face investor claims on mortgage bonds

(Reuters) - A law firm that reached a major settlement with Bank of America over allegedly defective mortgage bonds said on Wednesday that Wells Fargo and Morgan Stanley failed to perform their duties servicing $73 billion in securities.

The move likely means bond INVESTOR (INVEB.ES) represented by the Gibbs & Bruns law firm could be seeking to negotiate settlements with the two U.S. banks over securities backed by now-soured mortgages made during the housing boom, said Isaac Gradman, an attorney who specializes in mortgage-backed securities.

The holders of voting rights in $45 billion of Wells Fargo-issued securities and $28 billion in Morgan Stanley-issued securities sent "notices of non-performance" to the banks, the law firm said.

The investors have at least 25 percent voting rights on $15 billion of Wells Fargo bonds and $5 billion of Morgan Stanley bonds, a key hurdle in these types of cases.

Wells Fargo will "review any communications we receive and respond appropriately," bank spokeswoman Mary Eshet said. Morgan Stanley spokeswoman Mary Claire Delaney declined to comment.

Gibbs & Bruns attorney Kathy Patrick could not be reached for comment.

In the wake of the financial crisis, banks have faced billions of dollars of claims related to allegedly faulty home loans that were packaged into securities and sold to investors. Some of these claims have been made by government-controlled mortgage finance companies Fannie Mae and Freddie Mac , while others have been brought by private investors.

Banks have said the private claims are more difficult to bring because a sufficient number of investors must come forward. But Gibbs & Bruns has proven successful at this task.

Last year, major bondholders including BlackRock Inc and Pacific Investment Management Co reached an $8.5 billion settlement with Bank of America over $424 billion in securities issued by Countrywide Financial, which the bank bought in 2008. That pact is awaiting court approval.

Some of the same investors, including BlackRock and PIMCO, are joining the latest effort against Wells Fargo and Morgan Stanley, according to the Wall Street Journal.

Gradman said he expects Gibbs & Bruns will seek to reach a global settlement with Wells Fargo and Morgan Stanley on the behalf of all investors, not just those it represents.

The firm took a similar approach with Bank of America, although some of the investors who were not involved in the negotiations later objected to the agreement.

(Reporting By Rick Rothacker in Charlotte, North Carolina; editing by John Wallace and M.D. Golan)

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