On August 4, 2008, New Orleans Employees’ Retirement System and MARTA/ATU Local 732 Employees Retirement Plan filed a complaint in Washington State Superior Court in King County on behalf of purchasers of Washington Mutual Mortgage Pass-Through Trust Certificates between January 26, 2006 and November 1, 2007 (the “Class Period”). Many of the loans Washington Mutual originated in 2006 were pooled together and securitized into mortgage backed securities (“MBS”) that were sold to qualifying special-purpose entities, in this case referred to as the “Issuing Trusts”. The Issuing Trusts, in turn, sold “Certificates” to members of the Class during the Class Period, providing monthly distributions of interest and principal on future cash flows from the mortgages underlying the Issuing Trusts. Claims are brought under Sections 11, 12, and 15 of the Securities Act of 1933.

The complaint alleges that Washington Mutual, one of the nation’s largest savings and loan institutions, used registration statements to tout its supposedly strong underwriting standards when in fact, it had systematically inflated the appraised values of the properties that secured the mortgages by improperly pressuring supposedly independent appraisers to artificially inflate real estate appraisals in order to close home loans that would otherwise not have closed because, absent the inflated values, the loan-to-value ratio would be too high for the borrowers to qualify. By inflating the appraised values, Washington Mutual was able to close more loans and earn more fees by issuing mortgages to unqualified borrowers. Then by pooling and selling those mortgages to the Issuing Trusts, Washington Mutual shifted the undisclosed and increased risk of loss from mortgage defaults to unwitting Class members. Labaton Sucharow is negotiating a scheduling order with Defendants.