According to a press release dated December 11, 2008, class action has been commenced on behalf of an institutional investor on behalf of purchasers of GS Mortgage Securities Corp. Mortgage Pass-Through Certificates or Asset-Backed Certificates pursuant and/or traceable to the false and misleading Registration Statement and Prospectus Supplements issued during 2007 and 2008.
The complaint charges GS Mortgage, certain of its officers and directors and the issuers and underwriters of the Certificates with violations of the Securities Act of 1933. GS Mortgage engages in securitizing mortgage assets and related activities. Specifically, the complaint alleges that on January 31, 2007, defendants caused a Registration Statement to be filed with the SEC in connection with and for the purpose of issuing billions of dollars of Certificates. The Certificates were issued pursuant to Prospectus Supplements, each of which was incorporated into the Registration Statement. The Certificates were supported by pools of mortgage loans.
According to the complaint, the Registration Statement included false statements and/or omissions about: (i) the underwriting standards purportedly used in connection with the origination of the underlying mortgage loans; (ii) the maximum loan-to-value ratios used to qualify borrowers; (iii) the appraisals of properties underlying the mortgage loans; and (iv) the debt-to-income ratios permitted on the loans. As a result, the Certificates sold to plaintiff and the Class were secured by assets that had a much greater risk profile than represented in the Registration Statement. In this way, defendants were able to obtain superior ratings on the tranches or classes of Certificates, when in fact these tranches or classes were not equivalent to other investments with the same credit ratings.
By early 2008, the truth about the performance of the mortgage loans that secured the Certificates began to be revealed to the public, increasing the risk of the Certificates receiving less absolute cash flow in the future and the likelihood that investors would not receive it on a timely basis. The credit rating agencies also began to put negative watch labels on the Certificate tranches or classes, ultimately downgrading many. As an additional result, the Certificates are no longer marketable at prices anywhere near the price paid by plaintiff and the Class and the holders of the Certificates are exposed to much more risk with respect to both the timing and absolute cash flow to be received than the Registration Statement/Prospectus Supplements represented.
On February 6, 2009, a similar class action lawsuit in the United States District Court for the Southern District of New York on behalf of its client Mississippi
Public Employees Retirement System and similarly situated purchasers of GS Mortgage Securities Corp. Mortgage Pass-Through Certificates or Asset-Backed Certificates pursuant and/or traceable to the false and misleading Registration Statement and Prospectus Supplements issued during 2006. The class includes purchasers of the following Certificates: GSAMP Trust 2006-S2, Series 2006-S2; GSAA Home Equity Trust 2006-3, Series 2006-3; and GSAA Home Equity Trust 2006-2, Series 2006-2.
On May 15, 2009, an Amended Complaint was filed by the plaintiff in this matter. On November 11, 2009, a Second Amended Complaint was filed with the court in this action. On March 31, 2010, a Third Amended Complaint amending the previous amended complaint was filed by the lead plaintiffs in this matter against the defendants.
On October 14, 2010, the Court issued an Opinion granting the Defendants’ motion to dismiss the claim for violation of Section 11 of the Federal Securities Laws. The plaintiffs filed a motion for reconsideration of the opinion. The motion was denied on November 17, 2010.
On December 9, 2010, the plaintiff filed a motion for entry of judgment. The motion was denied on March 3, 2011. On June 10, 2011, Judge Miriam Goldman Cedarbaum granted the unopposed motion to enter judgment pursuant to F.R.C.P. Rule 58(d). On July 6, 2011, the plaintiffs filed a Notice of Appeal. The appeal is currently pending in the Second Circuit Court of Appeals.
On September 28, 2012, the Court of Appeals issued a Mandate affirming in part and vacating in part the judgment of the District Court. This case was remanded back to the District Court.
On November 5, 2012, the Plaintiffs filed their fourth amended complaint.
On July 15, 2014, the court issued a Memo Endorsement granting in part and denying in part the motion to dismiss parts of the fourth amended complaint.
On August 13, 2015, the parties filed a Stipulation of Settlement. The Settlement was preliminarily approved by the Court on December 30. On May 2, 2016, the Court granted final approval of the Settlement and dismissed this case with prejudice.