New Jersey Carpenters Health Fund v. NovaStar Mortgage, Inc.

You or someone in your family may have purchased or otherwise acquired an interest in any Certificates issued in any of the following six (6) NovaStar Mortgage Funding Trust Offerings before May 21, 2008: Series 2006-3, Series 2006-4, Series 2006-5, Series 2006-6, Series 2007-1, and Series 2007-2. The Court has directed us to send you the Notice because, as a potential Class Member, you have a right to know about your options before the Court rules on the proposed Settlement of this case. Additionally, you have the right to understand how a class action lawsuit may generally affect your legal rights. If the Court approves the Settlement, and after any objections or appeals are resolved, the Claims Administrator appointed by the Court will make the payments allowed by the settlement to those persons who submit valid claims by September 6, 2017.

If you did not receive a Notice but believe you may be a part of the Settlement, you may view the Notice here.

Plaintiff brought this lawsuit on behalf of itself and other similarly situated purchasers of the following six (6) NMFT Offerings: Series 2006-3, Series 2006-4, Series 2006-5, Series 2006-6, Series 2007-1, and Series 2007-2. This lawsuit alleges that the Defendants violated Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 by making material misstatements and omitting material information from the Offering Documents regarding the systematic disregard of the stated mortgage underwriting guidelines used to originate the mortgage loans supporting the six NMFT Certificates.

A more in-depth background of the lawsuit can be found in the Notice.

Plaintiffs and Lead Counsel have agreed to the Settlement in order to avoid the costs and risks of further litigation and trial.

In light of the risks of continued litigation, Plaintiffs and Lead Counsel believe that the proposed Settlement is fair, reasonable and adequate, and in the best interests of the Class. Lead Plaintiff and Lead Counsel also believe that the Settlement provides a substantial benefit now, namely Defendants’ payment of $165 million in U.S. dollars (less the various deductions described in the Notice) to be distributed to the Settlement Class, as compared to the risk that the claims would produce a similar, smaller, or no recovery after summary judgment, trial and appeals, possibly years in the future.

Defendants have denied and continue to deny each and all of the claims and contentions alleged by Plaintiffs in the Action, as well as all charges of wrongdoing or liability against them arising out of any of the conduct, statements, acts, or omissions alleged, or that could have been alleged, in the Action. Defendants believe the Action has no merit. Defendants deny that they made any false or misleading statements during the Class Period, that they had the state of mind required to render any of the alleged misrepresentations and omissions actionable, and that any alleged loss was caused by any alleged misrepresentations. Nonetheless, taking into account the uncertainty, risks, and costs inherent in any litigation, especially in complex cases such as this Action, Defendants have concluded that further conduct of the Action could be protracted and distracting. Defendants have, therefore, determined that it is desirable and beneficial to them that the Action be settled in the manner and upon the terms and conditions set forth in the Settlement.

If there was no Settlement and Plaintiffs failed to establish any essential legal or factual element of their claims against the Defendants, neither Plaintiffs nor members of the Settlement Class would recover anything from the Defendants. Also, if the Defendants were successful in proving any of their defenses, the Settlement Class likely would recover substantially less than the amount provided in the Settlement, or nothing at all.

If you are a member of the Settlement Class, you are subject to the Settlement unless you timely request to be excluded. The Settlement Class consists of: all Persons who, before May 21, 2008, purchased or otherwise acquired publicly offered Certificates representing interests in any of the following six (6) NovaStar Mortgage Funding Trust Offerings before May 21, 2008: Series 2006-3, Series 2006-4, Series 2006-5, Series 2006-6, Series 2007-1, and Series 2007-2 pursuant or traceable to the Registration Statement, and who were damaged thereby, except those Persons that timely and validly request exclusion from the class pursuant to and in accordance with the terms of the Preliminary Approval Order. Also excluded from the Settlement Class are all Defendants, their officers and directors at all relevant times, members of their immediate families and their legal representatives, heirs, successors or assigns, and any entity in which any Defendant has or had a controlling interest, except for any Investment Vehicle.

The $165 million Settlement Amount, and the interest earned thereon while it is held in escrow before distribution, shall be the Settlement Fund. If you are entitled to a payment, your share of the Settlement Fund will depend on the number of members of the Settlement Class who submit valid Proofs of Claim (the “Authorized Claimants”). Payments will be calculated on a pro rata basis, meaning that the Settlement Fund (less all administrative costs, including the costs of notice, attorneys’ fees, and expenses) will be divided among the Authorized Claimants and distributed accordingly after the deadline for submission of Proof of Claim and Release forms has passed. At this time, it is not possible to make any determination as to how much individual Class Members may receive from the Settlement.

Claims that result in payment of less than $10 will be deemed de minimis, and payment will not be issued.

Essentially, by agreeing to the Settlement, you will be giving up your right to sue the Defendants for the wrongdoing alleged in this Action.

More specifically, the Judgment will dismiss with prejudice the claims in the Action and will provide that Plaintiffs shall have, and all other Settlement Class Members shall be deemed to have and by operation of the Judgment shall have, whether or not such Person submits a Proof of Claim form—fully, finally and forever waived, released, discharged and dismissed each and every Released Claim against each and every Released Party, with prejudice and on the merits, and without costs to any party.

Lead Counsel has not received any payment for its services in pursuing claims against Defendants on behalf of the Settlement Class, nor has Lead Counsel been reimbursed for its out-of-pocket expenses. Before final approval of the Settlement, Lead Counsel intends to apply to the Court for an award of attorneys’ fees from the Settlement Fund in an amount not to exceed 28% of the Settlement Fund (or $46,200,000.00), net of Court-approved Litigation Expenses, plus interest at the same rate and for the same time period as earned by the Settlement Fund. At the same time, Lead Counsel also intends to apply for the reimbursement of certain Litigation Expenses in an amount not to exceed $3,500,000.00, plus interest at the same rate and for the same time period as earned by the Settlement Fund. The sums approved by the Court will be paid from the Settlement Fund. Members of the Settlement Class are not personally liable for the payment of these sums.

If you purchased any of the six NMFT Certificates specified in the Notice before May 21, 2008, and you are not excluded by the definition of the Settlement Class and you do not timely exclude yourself from the Settlement Class in the manner provided in the Notice, then you are a member of the Settlement Class and you will be bound by the Settlement. If you are a member of the Settlement Class, you must submit a Proof of Claim Form and supporting documentation to establish your entitlement to share in the Settlement. The Proof of Claim Form is available here. Those who exclude themselves from the Settlement Class, and those who do not submit timely and valid Proof of Claim Forms with adequate supporting documentation will not be eligible to share in the Settlement. Please retain all records of your ownership of, or transactions in the Certificates, as they may be needed to document your claim.

As a Settlement Class Member, you are represented by Plaintiffs and Lead Counsel unless you enter an appearance through counsel of your own choice at your own expense. You are not required to retain your own counsel, but if you choose to do so, such counsel must file a notice of appearance on your behalf and must serve copies of his or her notice of appearance on the attorneys listed in FAQ 11.

If you do not wish to remain a Class Member, you may exclude yourself from the Class by following the instructions in FAQ 10.

If you wish to object to the Settlement or any of its terms, the proposed Plan of Allocation, or Lead Counsel’s application for attorneys’ fees and reimbursement of Litigation Expenses, and if you do not exclude yourself from the Class, you may present your objections by following the instructions in FAQ 11.

Settlement Class Members will be bound by all determinations and judgments in this lawsuit, including those concerning the Settlement. To request exclusion from the Settlement Class, please send a written request addressed to NovaStar MBS Settlement Administrator, P.O. Box 4098, Portland, OR 97208-4098. The exclusion request must be received no later than August 16, 2017. Each Request for Exclusion must clearly indicate the name, address and telephone number of the person seeking exclusion, that the sender requests to be excluded from the Settlement Class in the case styled New Jersey Carpenters Health Fund v. NovaStar Mortgage, Inc., et al., Case No. 08-cv-5310 (S.D.N.Y.) (DAB), and must be signed by such person. Such persons must also provide the following information:

1. The identity and original face value of Certificates purchased (or otherwise acquired) or sold;
2. The prices or other consideration paid or received for such Certificates;
3. The date of each purchase or sale transaction; and
4. Proper evidence of the transactions.

Requests for exclusion will not be valid if they do not include the information set forth above and are not received within the time stated above, unless the Court otherwise determines.

If you ask to be excluded, you will not get any payment from the Settlement, you cannot object to the Settlement, and you will not be legally bound by anything that happens in this lawsuit. You might be able to sue Defendants in the future.

Objections or oppositions must be in writing. You must file any written objection or opposition, together with copies of all other supporting papers and briefs, with the Clerk’s Office at the United States District Court for the Southern District of New York on or before August 30, 2017. You must also serve the papers on Lead Counsel for the Settlement Class and counsel for the Defendants so that the papers are received on or before August 30, 2017. Please refer to paragraph 75 in the Notice for the specific requirements that any objection must include.

The Final Approval Hearing will be held on September 20, 2017, at 2:30 P.M, before the Honorable Deborah A. Batts at the United States District Court for the Southern District of New York, 500 Pearl Street, Courtroom 24B, New York, NY 10007. At this hearing, the Court will consider whether the Settlement is fair, reasonable, and adequate, and will consider Lead Counsel’s application for attorneys’ fees. If there are objections, the Court will consider them. At or after the hearing, the Court will decide whether to approve the Settlement.

The Settlement Hearing may be adjourned by the Court without further written notice to the Settlement Class. If you intend to attend the Final Approval Hearing, you should confirm the date and time with Lead Counsel.

If you wish to be heard orally at the Final Approval Hearing in opposition to the approval of the Settlement, the Plan of Allocation, or Lead Counsel’s request for an award of attorneys’ fees and reimbursement of Litigation Expenses, you also must notify Lead Counsel on or before August 30, 2017. Persons who intend to object and desire to present evidence at the Final Approval Hearing must include in their written objections the identity of any witnesses they may call to testify and exhibits they intend to introduce into evidence at the hearing.

You cannot speak at the hearing if you excluded yourself from the Settlement Class or if you have not provided written notice of your intention to speak at the Final Approval Hearing by the deadline identified.

You are not required to come to the hearing if you do not object to the Settlement.

If you purchased or otherwise acquired the Certificates for the beneficial interest of a person or organization other than yourself, you must either:

1. Send a copy of the Notice to the beneficial owner of such Certificates, postmarked no later than fourteen (14) days after you receive the Notice, or
2. Provide to NovaStar MBS Settlement Administrator, P.O. Box 4098, Portland, OR 97208-4098, the names and addresses of such persons no later than fourteen (14) days after you receive the Notice.

If you choose the second option, the Claims Administrator will send a copy of the Notice to the beneficial owner. Upon full compliance with these directions, such nominees may seek reimbursement of their reasonable expenses actually incurred, by providing the Claims Administrator with proper documentation supporting the expenses for which reimbursement is sought.

Copies of the Notice may also be obtained by downloading a copy here, calling Lead Counsel at (212) 838-7797 or from Lead Counsel’s website, www.cohenmilstein.com.

The Notice and this website contains only a summary of the terms of the proposed Settlement. The Settlement itself is available here. All further inquiries should be directed to:

DO NOT CALL OR WRITE THE COURT OR THE OFFICE OF THE CLERK OF COURT REGARDING THIS NOTICE.