Then Morgan Stanley Took Him to the U.S. Open 🎾

In late summer ‘25, a top-producing LO at a big depository bank was trying to close a $4M mortgage on a $7M Hamptons home for a repeat client.

The borrower had a $10M home in 🏙 Manhattan & another $20M in private-company stock, but the file still required some massaging. The LO ultimately added the client’s mother-in-law as a co-signer to get the loan approved. The client was happy. He liked the wealth manager the LO introduced him to & moved $4.5M in assets to the bank.

Then Morgan Stanley took him to the U.S. Open 🎾 .

Morgan Stanley was courting the client’s tech company, & the Hamptons purchase came up. Morgan Stanley offered to do the mortgage three-eighths of a point cheaper.

“My bank would not match the rate of Morgan Stanley,” the LO told me. “Their stance was, ‘If we do that, we’ll take a small loss on the loan, & we don’t want to do that out of the gate for the customer.’”

That is the exact opposite of how Morgan Stanley approaches the business, he said.

Morgan Stanley, he explained, “will take a loss on the mortgage and retain the client solely for the purpose of the balance sheet.”

That strategy can be brilliant (they did win the client). It can also create enormous internal pressure over who gets to say no. On Tuesday, the WSJ published an article [gift link] detailing tensions between Morgan Stanley’s financial advisers & its mortgage staff.

According to the report, private-bank mortgage employees who slowed down or pushed back on loans for wealthy clients allegedly got steamrolled by advisers, their own bosses or both. Morgan Stanley clients repeatedly applied for owner-occupied mortgages even when evidence suggested the properties were being purchased as investments, a whistleblower’s lawyer & other sources told the WSJ.

Morgan Stanley denies essentially all of it. The bank says its underwriting is robust, no loan was improperly extended, defaults run well below industry averages & it is unaware of any regulatory inquiry into its mortgage business.

In today’s edition, exclusively for paid subscribers: why alleged occupancy misrepresentations are usually a tactical error in this corner of the market, the comp structure that can make a $350M producer the least powerful person in the room, & a former Chase originator on why mortgage loses nearly every one of these fights.

After the story broke, I spent a few hours calling people who know the private-wealth jumbo world. Their collective reaction was basically: “Yeah, man. This sort of pressure happens all the time w/ private wealth clients. Duh.” 

But what makes it weird is that — assuming the reporting is accurate — it isn’t necessary in most cases. Nobody has to lie about occupancy; there is almost nothing to gain from it.