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An affiliate of IndyMac Bank may have misled investors about the risk profile of the underlying mortgages which collaterialized the Rast Senior Mortgage Pass-Through Certificates, Series 2006-H.
Investigation Source (Case #08-cv-10637)
- Nationwide
Investigation Scope
Category Information
Investigation Topics
- Investments
- Registration Statement
- Mortgage-Backed Securities
- Rating Agency
- Underwriting Action
Product or Service
- Mortgage Pass-Through Certificates
Injury Type
- Monetary Loss
Investigation Details
This is a securities action against a subsidiary of IndyMac Bank, called Residential Asset Securitization Trust 2006-A8 (RAST). The class action lawsuit also names the rating agencies, Moody's Investors Services and The McGraw-Hill Companies, Inc. (S&P), that gave the ratings to the certificates sold to investors in RAST and Credit Swiss, the bank tha underwrote the offering.
The only assets of RAST were home loans originated by IndyMac Bank. Once the ownership of these home loans were transferred to RAST, it issued certificates entitling the purchased of the certificate to an indivisible interest in the assets of RAST. The certificates at issue in this action are the Senior Mortgage Pass-Through Certificates, Series 2006-H.
Following the issuance of the Senior Certificates, disclosures began to emerge revealing that during the time period in which the Mortgage Loans were originated, IndyMac routinely disregarded its underwriting guidelines in an effort to boost its loan production. These disclosures were confirmed by substantially higher rates of delinquencies and foreclosures on mortgage loans underwritten by IndyMac, including the Mortgage Loans securitized in the Offering. As of October 27, 2008, the Mortgage Loans had a 19.4% rate of delinquency, default or foreclosure. These disclosures, and the poor performance of the Mortgage Loans, caused the Rating Agencies to recognize that they had not rated the Senior Certificates consistent with the true risks of these instruments at the time of the Offering. Therefore, the Rating Agencies re-evaluated the Senior Certificates applying ''new'' and 'updated' 'methodologies' that properly accounted for IndyMac's actual lax underwriting.
As a result, both Moody's and S&P downgraded the Senior Certificates. The above revelations shed light on the true quality and risk of the Mortgage Loans and caused the value of the Senior Certificates to substantially collapse. Plaintiff purchased his Senior Certificates at par for $1,000 per Certificate at the time of the Offering. but now, at the commencement of the action herein, they are valued at $60.84 per $100 of par value - a 39% decline in value on a once 'triple-A' rated bond.
The only assets of RAST were home loans originated by IndyMac Bank. Once the ownership of these home loans were transferred to RAST, it issued certificates entitling the purchased of the certificate to an indivisible interest in the assets of RAST. The certificates at issue in this action are the Senior Mortgage Pass-Through Certificates, Series 2006-H.
Following the issuance of the Senior Certificates, disclosures began to emerge revealing that during the time period in which the Mortgage Loans were originated, IndyMac routinely disregarded its underwriting guidelines in an effort to boost its loan production. These disclosures were confirmed by substantially higher rates of delinquencies and foreclosures on mortgage loans underwritten by IndyMac, including the Mortgage Loans securitized in the Offering. As of October 27, 2008, the Mortgage Loans had a 19.4% rate of delinquency, default or foreclosure. These disclosures, and the poor performance of the Mortgage Loans, caused the Rating Agencies to recognize that they had not rated the Senior Certificates consistent with the true risks of these instruments at the time of the Offering. Therefore, the Rating Agencies re-evaluated the Senior Certificates applying ''new'' and 'updated' 'methodologies' that properly accounted for IndyMac's actual lax underwriting.
As a result, both Moody's and S&P downgraded the Senior Certificates. The above revelations shed light on the true quality and risk of the Mortgage Loans and caused the value of the Senior Certificates to substantially collapse. Plaintiff purchased his Senior Certificates at par for $1,000 per Certificate at the time of the Offering. but now, at the commencement of the action herein, they are valued at $60.84 per $100 of par value - a 39% decline in value on a once 'triple-A' rated bond.
Defendant Details
| Name (Stock Symbol) | Brief Description |
|---|---|
| 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. |
| IndyMac Bancorp Inc. | IndyMac Bancorp Inc. was a bank, primarily known for originating and underwriting nonconforming mortgage loans. The FDIC took over the bank in 2008. It is now known as OneWestBank. |
| Credit Suisse Group AG (CS) | Credit Suisse Group operates as a financial services company worldwide. It operates through three segments: Private Banking, Investment Banking, and Asset Management. |