U.S. judge certifies class action against NovaStar banks
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NEW YORK (Reuters) - A federal judge on Friday said investors seeking to hold banks liable for helping underwrite more than $7.7 billion of mortgage-backed securities from the now-bankrupt subprime lender NovaStar Mortgage Inc may pursue their claims as a group.
In a 33-page decision, U.S. District Judge Deborah Batts in Manhattan granted class certification to investors led by the New Jersey Carpenters Health Fund against units of Royal Bank of Scotland Group Plc (NYSE: RBS), Deutsche Bank AG
Several former NovaStar executives are also defendants.
NovaStar specialized in lower-quality residential mortgages, including many packaged into securities issued in 2006 and 2007.
Investors accused the banks of misleading them through their offering materials into believing that the underlying loans were underwritten as advertised, and that the securities they bought were safer than they proved to be.
The lawsuit was filed in June 2008. Hundreds of similar lawsuits have been filed nationwide against banks over mortgage securities sold prior to the 2008 financial crisis.
NovaStar filed for bankruptcy protection in July.
The case is New Jersey Carpenters Health Fund v Royal Bank of Scotland Group Plc et al, U.S. District Court, Southern District of New York, No. 08-05310.
(Reporting by Jonathan Stempel in New York; Editing by Leslie Adler)
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