Boston, MA 02/19/2014 (wallstreetpr) – Royal Bank of Scotland Plc. (ADR) (NYSE:RBS) has come to a consensual agreement and agreed to pay $275 million as settlement fee to resolve an ongoing lawsuit in which it is accused of misleading investors in Mortgage backed securities. The accord now awaits approval by a federal Judge in the US and will go down as the third largest settlement in the US class action against bank backed mortgages that formed part of the economic meltdown of 2008.
A lawyer of the plaintiffs at Cohen Milstein &Toll maintains justice has been served and should set precedence against future incidence of the sort. Royal Bank of Scotland Plc. (ADR) (NYSE:RBS) looks to have prepared in advance for any eventuality concerning the matter as it had set aside $2.5 billion to cater for legal claims and 1.9 billion pounds for settling any related mortgage backed securities.
This is a major blow to the U.K. government which is a major shareholder in the company owning 80% of the company after a 45 billion pound takeover at the heart of economic crisis in 2008. The suit had been brought forward by New Jersey Carpenters Health fund and Boilermaker Blacksmith Pension trust which was seeking damages for the soared mortgage securities that were issued in 2006 and 2007.
Royal Bank of Scotland Plc. (ADR) (NYSE:RBS) under the lawsuit with other defendants was being accused of selling fraudulent back mortgage securities that violated US securities laws. The accusers were accused of packing and selling a total of $25.39 billion of securities in 14 offerings of mortgage backed securities that were linked to Harborview Mortgage Loan Trusts.
Royal Bank of Scotland Plc. (ADR) (NYSE:RBS) is accused of concealing to potential investors that the mortgage loans did not meet underwriting guidelines as required by law. This security later sank to junk status affecting and impairing investor’s investments. The case previously started with a US District Judge Harold Baer in New York in December, who gave a go ahead to the investors to file for settlement aimed at covering 12 offerings.
Other class actions under the settlement over the mortgage backed securities will involve a $500 million deal between the Bank of America Corp (NYSE:BAC) and investors who claim the banks subsidiary Countrywide Unit also dealt in fraudulent mortgage backed securities. This is not the first time that Bank of America is intertwined in such settlements as a result of fraudulent activities of its subsidiary Countrywide Unit.
