US Law Firm Schatz Nobel Izard PC Announces Class Action Lawsuit Against Downey Financial Corp.

(Lawfuel) – The law firm of Schatz Nobel Izard P.C., which has significant
experience representing investors in prosecuting claims of securities
fraud, announces that a lawsuit seeking class action status has been
filed in the United States District Court for the Central District of
California on behalf of all persons who purchased the common stock of
Downey Financial Corp. (“Downey” or the “Company”) (NYSE:DSL) between
October 16, 2006 and March 14, 2008, inclusive (the “Class Period”).

The Complaint charges that Downey and certain of its officers and
directors violated federal securities laws by issuing materially false
statements regarding the Company’s financial results. Specifically, the
Complaint alleges that defendants concealed the following: (i) Downey’s
portfolio of Option ARMs contained millions of dollars worth of
impaired and risky securities, many of which were backed by subprime
mortgage loans; (ii) prior to the Class Period, Downey had seen
Countrywide’s growth and had started to get more aggressive in
acquiring loans from brokers such that the loans were extremely risky;
(iii) defendants failed to properly account for highly leveraged loans;
(iv) Downey had very little real underwriting, which led to large
numbers of bad loans; and (v) Downey had not adequately reserved for
Option ARM loans, which provided that during the initial term of the
loan borrowers could pay only as much as they desired with any
underpayment being added to the loan balance.

On October 10, 2007, Downey announced that it expected to incur an
operating loss for the 2007 third quarter due to the continued
weakening in the housing market. Then, on March 17, 2008, Downey
released its monthly selected financial results for the 13 months ended
February 29, 2008, which showed a significant increase in
non-performing assets to almost 11% of total assets, up from 1.2% in
May 2007. Downey had to restructure debt for many borrowers to avoid
having their loans fail. On this news, Downey’s stock dropped to close
at $18.82 per share on March 17, 2008.

If you are a member of the class, you may, no later than July 15, 2008,
request that the Court appoint you as lead plaintiff of the class. A
lead plaintiff is a class member that acts on behalf of other class
members in directing the litigation. Although your ability to share in
any recovery is not affected by the decision whether or not to seek
appointment as a lead plaintiff, lead plaintiffs make important
decisions which could affect the overall recovery for class members.

While Schatz Nobel Izard P.C. has not filed a lawsuit against the
defendants, to view a copy of the Complaint initiating the class action
or for more information about the case, class action cases in general,
and your rights, please contact Schatz Nobel Izard P.C. toll-free at
(800) 797-5499, or by e-mail at [email protected], or visit our website:
www.snilaw.com.

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