Wells Fargo, Morgan Stanley Under Scrutiny for Mortgage Handling

Houston law firm Gibbs & Bruns LLP has accused Wells Fargo (NYSE: WFC  ) and Morgan Stanley (NYSE: MS  ) of failing to service more $73 billion in residential mortgage-backed securities (RMBS), triggering a default.

"Servicing" refers to billing and collecting loan payments, as well as overseeing foreclosures.

The law firm is representing bondholders that have 25% or 50% or more of the voting rights in $20 billion of debt and less than the applicable 25% or 50% in $53 billion more, according to a press release from the law firm. A total of $28 billion was issued by Morgan Stanley and $45 billion was issued by Wells Fargo.

A partner at Gibbs & Bruns, Kathy Patrick, represented a bondholder group that reached a settlement with Bank of America in 2011 over a $424 billion portfolio, Bloomberg reported.

Fool contributor John Divine owns shares in none of the companies mentioned above. You can follow him on Twitter @divinebizkid and on Motley Fool CAPS @TMFDivine.

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