Citigroup Inc., Goldman Sachs Group Inc. and UBS Group AG agreed to pay $235 million to settle a lawsuit over mortgage-backed securities issued by defunct Residential Capital LLC, Bloomberg News reported on Sunday. The three banks reached the agreement with investors led by the New Jersey Carpenters Health Fund, the union fund said in court papers Friday. The investors sued in 2008, alleging the banks failed to disclose that they’d disregarded guidelines in underwriting the securities. The damage claims were based on losses when the investments were downgraded, causing the value of the securities to collapse. The settlement must be approved by U.S. District Judge Katherine Failla in Manhattan before it can take effect. The parties told Judge Failla in November they had reached a settlement in principle, without disclosing the terms publicly. The agreement follows a $100 million settlement reached in 2013 with ResCap and a group of individual defendants. ResCap, formerly the mortgage-servicing unit of Ally Financial Inc., filed for chapter 11 bankruptcy protection in May 2012. Its reorganization plan was approved in December 2013.
