Downey Financial Faces Suit Over Subprime Mess

Law360, New York (May 19, 2008, 12:00 AM EDT) -- A pension fund has launched a putative class action against Downey Financial Corp. in the wake of the subprime mortgage collapse, alleging the bank's investment in mortgage-backed securities shrank its assets and devastated its credit.

The lawsuit, filed in the U.S. District Court for the Central District of California, accuses the savings and loan association of pushing risky subprime loans and adjustable-rate mortgages onto borrowers with solid credit to generate high fees, to the ultimate detriment of the company and its investors.

Filed by class action...
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