Massachusetts Mutual Life Insurance Company (MassMutual) and RBS Securities Inc. (RBS) have reached a confidential agreement to settle MassMutual’s claims that RBS misrepresented the quality of $235 million in residential mortgage-backed securities (RMBS) sold to MassMutual between 2005 and 2007. MassMutual’s complaint alleges that RBS Financial Products Inc. (then operating as Greenwich Capital Financial Products Inc.) made knowingly false representations as to the quality of the loans serving as collateral for the 10 securities RBS sold to MassMutual.
Because MassMutual had no access to the loan-level data underlying the deals, it relied on RBS’s allegedly false representations that the loans were underwritten in accordance with market standards. MassMutual claims that RBS knew that the loans were issued based on overstated income, false verification of employment, and inflated appraisals, among other defects. Additionally, the insurer claims that RBS routinely allowed exceptions to underwriting guidelines to approve loans for no reason other than its bottom line.
The parties filed a joint request to dismiss the case with prejudice, noting that they had reached a confidential settlement that would resolve all of MassMutual’s claims against RBS and related entities. The case was filed in U.S. District Court for the District of Massachusetts.
MassMutual has recently settled numerous other RMBS suits against big banks. In March, it reached a settlement with Barclays Capital Inc. concerning the purchase of $175 million of RMBS. And in October 2015, MassMutual settled with JPMorgan Chase & Co. regarding more than $2.3 billion worth of RMBS. Additionally, the insurer has settled claims against HSBC Bank PLC, Bank of America Corp., UBS, and Deutsche Bank AG. However, its claims against Credit Suisse Group Inc. and Goldman Sachs Group Inc. are still active.