Swiss-based bank Credit Suisse and New Jersey-based insurance company Prudential agreed on a $460 million settlement over a lawsuit filed by Prudential alleging that the bank had sold fraudulent residential mortgage-backed securities (RMBS).
The settlement was approved on August 25 by U.S. District Judge Katharine Hayden.
Prudential first brought the lawsuit in the New Jersey federal court against Credit Suisse (and several affiliates) in August 2012. The suit accused Credit Suisse and its affiliates of selling more than 18,000 U.S. mortgage loans from 2004 to 2008 that did not comply with the bank's underwriting guidelines to Prudential. The insurance company then accused the bank of switching to an "originate and distribute" model, a scheme in which a lender collects huge profits by immediately selling off mortgage loans, from an "originate and hold" model in which the lender keeps the loans and earns money off interest.
Credit Suisse tried to have the suit dismissed in January 2013, claiming that Prudential's allegations were not specific enough, but the judge ruled at that time there was enough information for the case to continue, citing the large amount of recent litigation regarding fraudulent RMBS.
Counsel for both Credit Suisse and Prudential did not immediately return requests for comment on the case.