$235 Million Mortgage-Backed Securities Settlement Approved

On July 31, 2015, U.S. District Court Judge Katherine Polk Failla approved a $235 million class action settlement involving Citigroup Global Markets Inc., Goldman, Sachs & Co., and UBS Securities LLC, over mortgage-backed certificates issued by Residential Accredit Loans, Inc. (“RALI”).

In the litigation, plaintiffs contend that Citigroup, Goldman and UBS, as the underwriters of the mortgage loan collateral, conducted inadequate due diligence in originating the loans at issue and made “material misstatements and omissions of material facts” in offering documents in violation of the Securities Act. Specifically, the plaintiffs allege that the registration statements and prospectuses issued by RALI were misleading as to the quality of the mortgage loans backing the securities, which Citigroup, Goldman and UBS helped underwrite. As a result, the plaintiffs claim to have suffered significant damages when their investments were downgraded.

This $235 million settlement trails a 2013 resolution for $100 million among the plaintiffs, and Residential Capital, LLC, Residential Funding Company, LLC, RALI, and certain individual defendants. In the prior settlement, as well as this agreement, the defendants admit no wrongdoing.

In an article published by Cohen Milstein Sellers & Toll, which represents the lead plaintiff, the firm states, “This settlement brings closure and substantial monetary relief to investors who suffered losses in connection with these RALI mortgage-backed securities.”

The case is: New Jersey Carpenters Health Fund v. RALI, Docket No. 1:08-cv-8781 (S.D.N.Y.)

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