Goldman Sachs has agreed to pay $272 million to end a lawsuit that claimed the Wall Street bank defrauded investors about the risks of about $6 billion of residential mortgage-backed securities they bought in 2007 and 2008.
The settlement with investors led by the NECA-IBEW Health & Welfare Fund, an electrical workers’ pension fund was disclosed in court filings. NECA-IBEW accused Goldman of misleading investors about the underwriting of home loans backing the securities, including the quality of appraisals and whether borrowers were capable of repaying their loans. The fund said the securities’ prices collapsed during and after the financial crisis, while their credit ratings fell to low, “triple-C” junk grades from “triple-A.”
The settlement requires approval by U.S. District Judge Miriam Goldman Cedarbaum in Manhattan.
JP Morgan Chase agreed to pay $388 million to settle a similar case last month. The bank is among those targeted by a federal-state working group probing misconduct in the sale of mortgage-backed securities prior to the financial crisis.
Jeffrey Newman represents whistleblowers.