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Goldman Wins Dismissal of $450 Million Mortgage-Bond Suit

bloomberg.com | June 15, 2014

By Chris Dolmetsch

Goldman Sachs Group Inc. (GS) won dismissal of a suit over $450 million in residential mortgage-backed securities, with a New York judge saying that the firms that bought the bonds should have done more research beforehand.

State Supreme Court Justice Charles Ramos dismissed the claims against Goldman Sachs today, saying the investors only reviewed data presented in offering documents for the securities and never asked to review files for the underlying loans.

“The true nature of the risk being assumed could, admittedly, have been ascertained from reviewing these loan files and plaintiffs never asked for them,” Ramos wrote.

Goldman Sachs was among financial firms including Bank of America Corp. and JPMorgan Chase & Co. sued over more than $1.8 billion in mortgage-backed securities in 2012 by Phoenix Light SF Ltd., a company based in Dublin that inherited claims from six legal entities “that collapsed or nearly collapsed,” according to court filings.

The entities include WestLB, the 180-year-old German state-owned lender, based in Dusseldorf, that ceased operations in 2012 as part of European Union conditions tied to a 17 billion-euro ($23 billion) bailout after the 2008 financial crisis, according to a complaint.

Pools of home loans securitized into bonds were a central part of the housing bubble that helped send the U.S. into the worst recession since the 1930s. The housing market collapsed, and the market for the securities evaporated.

No Request

The plaintiffs said Goldman Sachs didn’t share the files for the loans underlying the securities. Ramos said there were no allegations that that they asked for them and Goldman Sachs denied access.

“It does not matter if the failure to seek this information was because of blind faith in the process of origination and/or securitization, or if it was attributable to the desire to quickly get on board of what the investors thought was a profitable bandwagon,” the judge wrote. “The obligation of a sophisticated investor to inquire cannot be merely excused.”

Nathan Lindell, an attorney with Robbins Geller Rudman & Dowd LLP representing the plaintiffs in the case, didn’t immediately respond to a phone message seeking comment on the ruling.

Michael DuVally, a spokesman for Goldman Sachs, didn’t immediately respond to an e-mail seeking comment on the ruling.

The case is Phoenix Light SF Ltd. v. Goldman Sachs Group Inc., 652356/2013, New York State Supreme Court, New York County (Manhattan).


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CFLA was founded by the Nation's Leading Foreclosure Defense Attorneys back in 2007 to serve the Foreclosure Defense Industry and fight pervasive Bank Fraud. Since opening our virtual doors, CFLA has rapidly expanded to become the premier online legal destination for small businesses and consumers. But as the company continues to grow, we're careful to hold true to our original vision. For us, putting the law within reach of millions of people is more than just a novel idea—it's the founding principle, just ask Andrew P. Lehman, J.D.. With convenient locations in Houston and Los Angeles, you can contact Our National Account Specialist and General Manager / Member Damion W. Emholtz at 888-758-2352 for a free Mortgage Fraud Analysis or to obtain samples of work product, including cutting edge Bloomberg Securitization Audits, Litigation Support, Quiet Title Packages, and for more information about our Nationally Accredited and U.S. Department of Education Approved "Mortgage Securitization Analyst Training Certification" Classes (3 days) 24 hours for approved CLE & MCLE Credit (Now Available Online).

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