A federal judge on July 22 rejected a motion by two former Washington Mutual Bank (WaMu) units to escape a class action lawsuit.
The suit alleges Securities Act violations that were filed by plaintiffs who purchased MBS from WaMu before the bank failed in 2008.
This decision now paves the way for a Sept. 17 trial date, according to plaintiffs’ co-lead counsel Steven Toll from Cohen Milstein Sellers & Toll.
The case involves substantial claims against MBS issued and underwritten by WaMu and its related entities. The value of the residential loans supporting the MBS collapsed soon after issuance of the securities.
The named plaintiffs, representing a court-certified class of buyers, allege that loans that were backing the MBS were “fundamentally impaired” and that they were misled in terms of the loans' underwriting quality.
The defendant sought to dismiss the plaintiffs’ claims before trial. In denying the motion for summary judgment, Judge Marsha Pechman from the U.S. District Court for the Western District of Washington, in Seattle, wrote: "Plaintiffs have successfully raised a dispute of fact as to whether WaMu systematically deviated from its underwriting guidelines so as to render the statements in the offering documents false or misleading.”
She added that the plaintiffs have also shown a dispute of fact in terms of whether the disclosures on the exceptions were accurately reported to the buyers of the securities.
Pechman also rejected the defendant’s argument that losses claimed were caused by something aside from the disregard of WaMu’s loan underwriting guidelines.