This is a securities class action against Lehman Brothers, various affiliates of Lehman Brothers and three rating agencies alleging violations of securities laws in connection with the issuance of Mortgage Pas-Through Certificates to investors.
During 2005 and 2006 Lehman caused loans originated primarily by Countrywide and IndyMac Bank to be placed into certain trusts. Lehman then issued certain offering documents for said trusts and sold investors Mortgage Pass-Through Certificates representing investments in said trusts. The mortgages and liens on the mortgaged properties constituting the Certificates collateral were, as set forth in the Prospectuses, to be the principal source by which Certificate purchasers were to obtain repayment of their investment plus interest.
As also set forth in the Registration Statements, the Certificate collateral was purportedly originated by pursuant to specific underwriting procedures and guidelines. The Underwriter for the Offerings was Defendant Lehman Brothers, Inc. ("Underwriter"). The Underwriter was obligated to conduct meaningful due diligence to ensure that the Registration Statement contained no material misstatements and omissions including as related to the stated manner in which the mortgages had been originated. The Underwriter received massive fees for its work in connection with the Offerings. At the time of the Offerings, the Certificates were issued at approximately par or $1000.00 per Certificate..
Following the issuance of the Certificates, disclosures began to emerge revealing that IndyMac and Countrywide routinely disregarded the underwriting guidelines in originating mortgage collateral. These disclosures were confirmed by substantially higher rates of delinquencies and foreclosures on collateral for such highly-rated debt issues. The revelations set forth below regarding the true underwriting practices used to originate the collateral and the true value and quality of the Certificate collateral caused the value of the Certificates to substantially collapse.
Plaintiff purchased Certificates at par for $125,781.25 at the time of the October 2005 Offerings, but now, at the commencement of the action herein, they are valued at $48,629.56 - a 61% percent decline in value.
Name (Stock Symbol)
McGraw-Hill Companies, Inc., The (MHP)
The McGraw-Hill Companies, Inc. provides information services and products to the financial services, education, and business information markets. It operates under the Standard & Poors brand, which provides investment research, market indices, credit ratings, financial data, and fixed income research and analysis to investors, corporations, governments, financial institutions, investment managers, and advisors.
Moodys Investor Services
Moodys Investor Services, a subsidiary of Moodys Corporation, publishes credit ratings on a range of debt obligations, including various corporate and governmental obligations, structured finance securities, and commercial paper programs, as well as the entities that issue such obligations.
Moodys Corporation (MCO)
Moodys Corporation, through its subsidiaries, provides credit ratings and related research, data, and analytical tools.
Lehman Brothers Holdings Inc. (LEHMQ.PK)
Lehman Brothers Holdings, Inc., through its subsidiaries, provided financial services to corporations, governments and municipalities, institutions, and high-net-worth individuals worldwide. It is in bankruptcy.
DBRS, Inc. is a rating agency, which rates the credit quality of financial instruments.
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