June 3, 2010 - An investor in Mortgage Loan Trust 2007-4F Mortgage-Backed Certificates offered by GS Mortgage Securities Corporation filed a lawsuit n the U.S. District Court for the Southern District of New York against GS Mortgage Securities Corporation over alleged violations of Federal Securities Laws pursuant and/or traceable to the false and misleading Registration Statement and Prospectus Supplements issued during 2007 and 2008.
According to the complaint the plaintiff's alleges that GS Mortgage Securities Corporation violated Sections 11 and 15 of the Securities Act. The action is filed on behalf of a class consisting of all persons who purchased or acquired the Certificates (the Class ) pursuant and/or traceable to the Offering Documents issued in connection with the Offering from the effective date of January 31, 2007 through June 3, 2010. Included in the Class are (a) all those who have sold their certificates or who sell their Certificates prior to the final judgment in this action; and (b) all those who retain their Certificates.

More specifically, the plaintiff claims the defendants made the following false and misleading statements in the Offering Documents:
• The loans supporting the Certificates were originated using underwriting standards that evaluated a prospective borrower's ability to repay the loan;

• Property appraisers' compensation was not affected by whether or not a loan was approved; appraisals of the properties underlying the loans were
based on recent sales of comparable properties; and the appraisals confoimed to the Uniform Standards of Professional Appraisal Practice ( USPAP ), Fannie Mae or Freddie Mac standards;

• Documents submitted in connection with the loan underwriting process were not falsified, did not contain untrue statements and were free of fraud;

• The loans underlying the Certificates had certain, specific, loan-to-value ( LTV ) ratios;

and

• The Certificates had investment grade credit ratings.

The true, material facts, which the plaintiff's claim the defendants omitted from the Offering Documents, were that:
• Borrowers were not evaluated on their ability to repay the loans; instead, loans were made regardless of a borrower's ability to repay; loan originators made as many loans as possible regardless of repayment ability since they were selling the loans to defendants at a profit; in addition, borrowers and loan originators were routinely inflating borrowers' incomes to falsely high levels to qualify borrowers for loans they could not afford to repay;

• Property appraisers' future compensation was contingent upon providing loan originators with predetermined, inflated property appraisals that allowed borrowers to qualify for loans; in addition, appraisals were not based on recent sales of comparable properties; and appraisals did not conform to USPAP, Fannie Mae or Freddie Mac standards;

• Documents submitted for loan underwriting contained untrue and false statements because potential borrowers and loan originators inflated borrowers' incomes and appraisers submitted falsely inflated property appraisals;

• Because the specified LTV ratios contained in the Offering Documents were based on inaccurate and inflated property appraisals, the LTV ratios specified in the Offering Documents were false, inaccurate and understated;

• The credit ratings of the Certificates were inaccurate and understated the investment risk associated with the Certificates because the rating agencies used outdated assumptions, overly-relaxed rating criteria and inaccurate data in formulating the ratings;

and

• At the same time defendants were selling the Certificates to plaintiff and the Class, and representing that the Certificates were investment grade , defendants were in essence betting against the success of the certificates by engaging in credit default swaps and other investments that were based on the expectation that loans like those underlying the Certificates would not be repaid.

As a result of these omissions and false and misleading statements, the Certificates sold to plaintiff and the Class had a much greater risk profile than represented in the Offering Documents. Instead of being conservative investment grade products as defendants represented in the Offering Documents, the Certificates were extremely risky investments that should have actually been rated as junk.

By mid-2008, the truth about the performance of the mortgage loans that secured the Certificates began to be revealed to the public. Information was released indicating that the Certificates were much riskier than originally represented and that holders would likely receive less absolute cash flow in the future and receive it, if at all, on a untimely basis. The credit rating agencies however, did not act upon these reports until mid-2009 at which point they put negative watch labels on the Certificates and downgraded previously-assigned ratings. At present, the Certificates plaintiff bought have been downgraded from AAA investment grade at the time of purchase to CCC junk grade investments.

As an additional result, the Certificates are no longer marketable in the secondary market at prices anywhere near the prices paid by plaintiff and the Class, and the holders of the Certificates are exposed to much more risk than the Offering Documents represented with respect to both the timing and absolute cash flow to be received.