According to its latest quarterly filing, Goldman Sachs Group Inc. faces a class action lawsuit over two collateralized debt obligations (CDOs) it packaged and sold in 2006 and 2007, writes the Wall Street Journal.
The CDO deals, called Hudson Mezzanine Funding 1 and 2, are $1.2 billion of subprime and other residential mortgage-backed securities, which were sponsored by subprime mortgage lenders including Long Beach, New Century, Fremont, Countrywide, Lehman Brothers and Bear Stearns.
Similar to an existing lawsuit involving Goldman's Abacus CDOs, the Hudson CDO lawsuit states that Goldman failed to disclose that the securities were structured so that Goldman would profit from its own short positions in subprime mortgages. The Hudson CDOs lost value shortly after they were offered.
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