Wells Fargo, RBS, Deutsche Bank in $165 million NovaStar settlement
By Jonathan Stempel
NEW YORK (Reuters) - Wells Fargo & Co, Royal Bank of Scotland Group Plc and Deutsche Bank AG have reached a $165 million class-action settlement over their underwriting for the now-bankrupt subprime lender NovaStar Mortgage Inc.
It resolves claims that offering materials prepared by the banks misled investors into believing that loans underlying roughly $7.55 billion of NovaStar mortgage-backed securities they bought were properly underwritten, and were safe.
The accord was made public on Wednesday, and requires approval by U.S. District Judge Deborah Batts in Manhattan.
The defendants denied wrongdoing in agreeing to settle.
NovaStar had specialized in lower-quality residential mortgages, including many packaged into what proved to be risky securities issued in 2006 and 2007.
The company filed for Chapter 11 protection last July, and is not contributing to the payout.
Steven Toll, a lawyer for investors led by the New Jersey Carpenters Health Fund, said participants in the settlement are expected to receive about 3.1 cents per dollar of face value.
He said that exceeded recoveries in similar settlements involving Bank of America Corp, IndyMac Bancorp Inc, JPMorgan Chase & Co, Morgan Stanley and others. Continued...