MBS Fraud Cases: Wells Fargo, Deutsche Bank AG, and Royal Bank of Scotland Reach $165M Class Action Settlement, Bank of NY Mellon Ordered to Face $1B Lawsuit Brought by Commerzbank, and Judge Says Royal Park Must Better Define “Class” in Securities Case
$165M Class Action Settlement Reached in MBS Fraud Case Involving NovaStar Securities
Royal Bank of Scotland Group Plc (RBS), Wells Fargo & Co. (WFC), and Deutsche Bank AG (DB) have reached a $165M with investors in their class action mortgage-backed securities case involving underwriting for NovaStar Mortgage Inc., a former subprime lender. The lead plaintiff in the case is the New Jersey Carpenters Health Fund.
NovaStar, which filed for bankruptcy last year, had specialized in low quality residential mortgages. Many of these were bundled into risky securities that were issued prior to the 2008 financial crisis. The class action settlement resolves claims contending that the offering documents put together by the banks misled investors into thinking that the loans underlying about $7.55B of NovaStar MBSs were safe and had been underwritten properly.
A district court judge must still approve the settlement. Meantime, despite the resolution, the banks continue to deny wrongdoing.
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