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Morgan Stanley to Pay $1.25 Billion to Settle Mortgage Bond Dispute

NEW YORK ( TheStreet) -- Morgan Stanley (MS - Get Report) will pay $1.25 billion to settle mortgage-backed securities litigation with Fannie Mae (FNMA) and Freddie Mac (FMCC), the giant securities dealer disclosed in a filing after the market closed on Tuesday.

In connection with the agreement, which still must get final approvals, Morgan Stanley set aside an additional $150 million to its legal reserves. The reserve increase will reduce fourth quarter and full-year 2013 earnings by an additional $97 million, or $0.05 per share versus the figures reported last month.

Morgan Stanley shares, which gained 0.24% to close at $29.02 on Tuesday, were down by 0.24% to $28.95 in after hours trading.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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