Yesterday I mentioned a lawsuit against Goldman Sachs (article by HouseingWire) alleging that Goldman misled investors in its mortgage securitizations. Here’s the complaint. It’s a fun read.
The allegations are pretty simple. As part of each securitization, Goldman had to produce a registration statement and prospectus. In theory, as any investor knows, you are supposed to read the prospectus before buying a security. The claim is that these statements and prospectuses (someone help me with that plural) contained false statements regarding the underwriting standards used when making the underlying mortgages. The bulk of the complaint (pages 12-28) goes originator by originator and compares the statements made about that originator’s lending practices in the prospectus to information that has since emerged about how these lenders actually made loans.
One thing that struck me was how open these prospectuses were about what was going on. For example, here’s a passage on Countrywide’s “no income/no asset” loans:
The Baseline Scenario 