Goldman Sachs Group Inc. has agreed to pay around $270 million to settle a lawsuit by investors who claimed the bank misled them about the safety of billions of dollars worth of residential mortgage-backed securities, two people familiar with the case said.
The agreement hasn’t been signed yet and is expected to be disclosed as soon as Monday, the people said, asking not to be identified because the discussions are private.
Pension funds led by NECA-IBEW Health & Welfare Fund of Illinois said the bank gave investors misleading information about the appraisals and credit quality of home loans underlying the securities. The prices soon collapsed amid the 2008 financial crisis, the investors said.
Andrew Williams, a spokesman for Goldman Sachs, declined to comment. Goldman Sachs said this month that it’s put aside $1.45 billion in the second quarter for mortgage-related litigation and regulatory matters.
The suit is among the last of a string of investor class actions against banks stemming from the credit crisis of those years, precipitated by the failure of investment bank Lehman Brothers Holdings Inc. They have unfolded alongside multibillion-dollar penalties extracted from the banks by U.S. authorities as well. Goldman Sachs agreed to buy back almost $3.2 billion in mortgage bonds from Fannie Mae and Freddie Mac last year to settle a suit by the Federal Housing Finance Agency.
JPMorgan Chase & Co. this month agreed to pay $388 million to settle a similar MBS class action. Robbins Geller Rudman & Dowd LLP represented investors in both that matter and the Goldman Sachs case.
The pension fund case is NECA-IBEW Health & Welfare Fund v. Goldman Sachs & Co., 08-cv-10783, U.S. District Court, Southern District of New York (Manhattan).