City Tech’s Zissu Played Key Role in Record-Breaking $500 Million Mortgage Backed Securities Lawsuit Settlement

May 8, 2013 | New York City College of Technology

Brooklyn, NY — Dr. Anne Zissu, chair of the business department at New York City College of Technology (City Tech), was the lead expert witness in the recent landmark $500 million settlement of a class action suit against Countrywide Financial Corporationzissu2_lowres

The case, “No. 2:10-CV-00302 MPR (Man) Maine State Retirement System, Individually and on Behalf of All Others Similarly Situated (plaintiff) v. Countrywide,” which was litigated for five years, resulted in the nation’s largest mortgage-backed securities (MBS) class action settlement. Dr. Zissu was the lead expert witness on behalf of the plaintiffs, which were multiple retirement funds in Maine, Iowa, California and Oregon.

From 2005 to 2007, Countrywide was the biggest U.S. residential home lender, originating or purchasing about $1.4 trillion in mortgages. By late 2008, virtually all of the MBS certificates purchased by the plaintiffs had been downgraded to junk bond status, causing significant economic losses. The Oregon state pension fund, for example, lost $29 million of its $200 million investment.

In 2010, the plaintiffs charged that they were sold billions of dollars worth of MBS certificates backed primarily with defective Countrywide-originated loans, because the company violated its own guidelines for originating home loans.

Dr. Zissu’s deposition validated claims that Countrywide’s prospectus of 429 offerings misled investors about the quality of mortgage loans in the pool of collateral, packaging poorer quality loans into the MBS. Besides analyzing the structure of the MBS, she assisted the plaintiffs’ attorney at the class certification stage of the litigation.

She established that a class action suit was appropriate, since the investors all were in the same circumstances, having relied on the misrepresented quality of the mortgage loans and invested in the same MBS. She also opined that the court could evaluate the plaintiffs’ economic losses from the misrepresentations in the Countrywide prospectus supplements.

“I am very happy about the settlement,” says Dr. Zissu, who in addition to her responsibilities at City Tech is a research fellow at The Polytechnic Institute of New York University (NYU-Poly), the Department of Financial and Risk Engineering. “This means that my testimony was strong, and I am happy that I could help investors recover some of their investments. I wish, though, that the settlement was for more than the $500 million.”

This was not the first time that Dr. Zissu has been called as a witness in a subprime mortgage securitization case. Her 20 years of experience with asset-backed securities and senior life settlements, plus her track record as a respected author of books and numerous articles, position her as one of the country’s sought-after experts in the field.

A California court must make the final decision of approval for the Countrywide settlement. Says Dr. Zissu, “I am hoping that this decision, contingent on the judge’s approval, will restore investors’ confidence in mortgage-backed securities.”

New York City College of Technology (City Tech) of The City University of New York (CUNY) is the largest public college of technology in New York State. Located at 300 Jay Street in Downtown Brooklyn, the College enrolls more than 16,000 students in 65 baccalaureate, associate and specialized certificate programs.