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Goldman Sachs settles MBS case with pension fund for $26.6 million

Goldman Sachs (GS) agreed to pay $26.6 million to end a mortgage-backed securities investor lawsuit filed by a pension fund earlier this year.

The Public Employees’ Retirement System of Mississippi filed the class action suit on behalf of similarly situated plaintiffs, claiming Goldman sold investors $698 million in high-risk, MBS backed by mortgages originated by New Century Financial.

The Public Employees’ Retirement System contended the loans led to deep losses within its public retirement fund, prompting the filing of the MBS lawsuit.

The parties agreed to settle the case, with Goldman agreeing to pay out $26.6 million and an additional $5.3 million in fees and expenses.

The retirement fund serving as lead plaintiff alleged New Century failed to follow its own underwriting guidelines and overstated the collateral value of the loans backing the mortgage bonds. 

The plaintiffs further alleged that Goldman failed to conduct adequate due diligence when selecting loans for securitization. 

In the official settlement filing, the defendants deny any wrongdoing.

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