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May 16, 2008 – Coughlin Stoia Geller Rudman & Robbins LLP (“Coughlin Stoia”) (http://www.csgrr.com/cases/downey/) today announced that a class action has been commenced on behalf of an institutional investor in the United States District Court for the Central District of California on behalf of purchasers of Downey Financial Corp. (“Downey”) (NYSE:DSL) common stock during the period between October 16, 2006 and March 14, 2008 (the “Class Period”).

If you wish to serve as lead plaintiff, you must move the Court no later than 60 days from today. If you wish to discuss this action or have any questions concerning this notice or your rights or interests, please contact plaintiff’s counsel, Darren Robbins of Coughlin Stoia at 800/449-4900 or 619/231-1058, or via e-mail at djr@csgrr.com. If you are a member of this class, you can view a copy of the complaint as filed or join this class action online at http://www.csgrr.com/cases/downey/. Any member of the purported class may move the Court to serve as lead plaintiff through counsel of their choice, or may choose to do nothing and remain an absent class member.

The complaint charges Downey and certain of its officers and directors with violations of the Securities Exchange Act of 1934. Downey is a savings and loan holding company.

The complaint alleges that during the Class Period, defendants issued materially false and misleading statements regarding the Company’s business and financial results. As a result of defendants’ false statements, Downey’s stock traded at artificially inflated prices during the Class Period, reaching a high of $74.85 per share in June 2007.

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, before the market opened 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, a decline from $19.14 per share on March 14, 2008, and a decline of 68% from $59 per share on October 9, 2007.

According to the complaint, the true facts, which were known by the defendants but concealed from the investing public during the Class Period, were as follows: (a) defendants’ portfolio of Option ARMs contained millions of dollars worth of impaired and risky securities, many of which were backed by subprime mortgage loans; (b) 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; (c) defendants failed to properly account for highly leveraged loans such as mortgage securities; (d) Downey had very little real underwriting, which led to large numbers of bad loans that would cause huge numbers of defaults; and (e) Downey had not adequately reserved for Option ARM loans, the terms of 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.

Plaintiff seeks to recover damages on behalf of all purchasers of Downey common stock during the Class Period (the “Class”). The plaintiff is represented by Coughlin Stoia, which has expertise in prosecuting investor class actions and extensive experience in actions involving financial fraud.

Coughlin Stoia, a 190-lawyer firm with offices in San Diego, San Francisco, Los Angeles, New York, Boca Raton, Washington, D.C., Philadelphia and Atlanta, is active in major litigations pending in federal and state courts throughout the United States and has taken a leading role in many important actions on behalf of defrauded investors, consumers, and companies, as well as victims of human rights violations. The Coughlin Stoia Web site (http://www.csgrr.com) has more information about the firm.