Alison Frankel: Are MBS class actions a bust? And is that good for banks?

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Alison Frankel: Are MBS class actions a bust? And is that good for banks?

Alison Frankel: Are MBS class actions a bust? And is that good for banks?

Reuters-

Tuesday brought a pair of interesting developments in class actions over mortgage-backed securities. In federal court in Manhattan, Goldman Sachs agreed to pay $26.6 million to settle claims in a hotly contested case involving a $698 million MBS offering backed by New Century mortgages. Meanwhile, across the Hudson River in New Jersey, U.S. District Judge Claire Cecchi dismissed with prejudice an MBS class action against UBS, holding that the class hadn’t brought claims before the statute of limitations ran out.

The Goldman settlement, in a case led by Bernstein Litowitz Berger & Grossmann, is nothing to sneeze at (especially since Bernstein Litowitz is asking U.S. District Judge Harold Baer to approve $5.3 million in legal fees and expenses). The lone Goldman offering that remained in the case after rulings on standing knocked out claims on two other MBS trusts had an initial principal amount of $698 million, but the 2007 trust had paid almost $400 million in principal and interest so damages were limited. Under the crude analysis we’ve seen in MBS settlements, the Goldman deal represents 32 cents per $1,000 of original face value, which wo ul d make it the best MBS class deal on the books. In two other big MBS cases, class members received 12.8 cents per $1,000 of original face value in the $32.5 million class settlement against Deutsche Bank and 19 cents in Bernstein Litowitz’s $315 million settlement with Merrill Lynch.

[REUTERS ON THE CASE]

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