Several purported shareholder class action lawsuits have been filed against Doral Financial Corporation and certain of its present and former executive officers. Specifically, the complaint alleges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. Statements issued by the defendants were materially false and misleading when made because they failed to disclose that the Company used actual 90-day London interbank offer rates ("LIBOR") rates instead of the forward LIBOR curve, which is customary, to value its floating rate interest only ("IO") Strips. As a result of such unusual methodologies, during the Class Period: (1) the Company's IO Strip portfolio was materially overvalued; (2) the Company's net income and net gain on mortgage loan sales were materially overstated; (3) the Company's return on equity and return on capital were materially overstated; and (4) the Company's reported net capital was materially overstated. Defendants also failed to disclose to investors that the Company's risk management, hedging strategies, and internal controls were deficient and would not protect the value of Doral's IO Strip portfolio in a rising-rate environment, despite repeated reassurances to the contrary.

The complaint further alleges that on or around April 19, 2005, Doral announced that it was restating its financial results for 2000 through 2004. The restatements were made to correct the accounting treatment for the value of its IO Strip portfolio. The company said the restatement will result in a decrease in the fair value of the securities by $400 to $600 million. It said it estimates it will eventually have to take a $290 million to $435 million charge for the required adjustments. In a press release, the Company stated that "management concluded that the previously filed interim and audited financial statements for the periods from January 1, 2000, through December 31, 2004, could be materially affected and, therefore, should no longer be relied on and that the financial statements for some or all of the periods included therein should be restated." Since January 3, 2005, the price of Doral's common stock has dropped from $48.50 a share to below $16 a share.

A similar class action is also pending in the United States District Court for the District of Puerto Rico.

If you bought Doral Financial Corporation securities between January 17, 2001 and April 18, 2005, inclusive, and would like to obtain information about the lawsuit, then you are invited to call (866) 467-1400 to speak with an attorney.