Several pension funds are claiming victory in a lawsuit originally filed nearly a decade ago over alleged losses suffered from mortgage-backed securities investments.
A number of worker pension funds, including lead plaintiff the New Jersey Carpenters Health Fund, filed a complaint in 2008
against NovaStar Mortgage Inc.
The plaintiffs
claim they were misled into believing that the MBS they bought, which were filled with subprime home loans, were safer than they actually were.
An announcement Wednesday from
Cohen Milstein Sellers & Toll PLLC, the lead law firm representing the plaintiffs, said the pension funds “took a painful financial hit” when the MBS were downgraded to junk bond status.
“The suit argued the company hid how it systematically disregarded its own underwriting guidelines to increase the number of mortgages it could originate and incentivized its employees to make non-compliant loans to extremely risky borrowers,” statement said.
Also named as defendants in the case were
the Royal Bank of Scotland, Wells Fargo and Deutsche Bank.
The lawsuit included a dismissal, an appeal, and even the bankruptcy of some defendants, according to the announcement.
A settlement was reached with the defendants for $165 million.
The all-cash settlement is still subject to court approval.
