According to the complaint, it has become apparent in recent months that one of the prime drivers of the current credit crisis in the United States is that over the last several years, financial institutions, in an effort to amass massive underwriting fees, have issued billions of mortgage-backed securities ("MBS") collateralized with what has now been recognized to be impaired and defective mortgage loans.
The Underwriter of the Certificates, BSC, had no incentive to do the due diligence as required under the Securities Act of 1933 because it was obtaining millions of dollars in fees upon the completion of these massive MBS offerings. The Registration Statements issued in connection with these Offerings were issued and sold by the same or related entities and contained substantially similar material misstatements and omissions in violations of Sections 11, 12 and 15 of the Securities Act.
An investigation has shown that the loan underwriting standards described in the Registration Statements in connection with the Bonds was rampantly disregarded in favor of simply generating sufficient loans to sell to investors in MBS offerings.
On January 26, 2009, Judge Laura Taylor Swain signed the Pretrial Order No. 1 appointing New Jersey Carpenters Health Fund as lead plaintiff and the law firm of Schoengold Sporn Laitman & Lornetti, P.C., as lead counsel. On May 5, 2009, Cohen Milstein Sellers & Toll PLLC replaced Schoengold Sporn Laitman & Lometti, P.C. as lead counsel. On May 15, 2009, the lead plaintiff filed a First Consolidated Amended Securities Class Action Complaint.
On July 9, 2009, a complaint was filed in the U.S. District Court for the Southern District of New York titled, Pension Fund For Operating Engineers, et al. v. Structured Asset Mortgage Investments II, Inc., et al., case number 09-CV-06172. Specifically, the complaint alleges that on March 6, 2006, Structured Asset and the Issuers caused a Registration Statement to be filed with the Securities and Exchange Commission (“SEC”) in connection with the issuance of the Certificates. The Certificates were issued pursuant to Prospectus Supplements, each of which was incorporated into the Registration Statement. The Certificates were supported by large pools of mortgage loans. The Registration Statement represented that the mortgage pools would primarily consist of loan groups generally secured by first liens on residential properties, including conventional, adjustable rate and negative amortization mortgage loans. According to the complaint, the Registration Statement included false statements and/or omissions about: (i) the underwriting standards purportedly used in connection with the origination of the underlying mortgage loans; (ii) the maximum loan-to-value ratios used to qualify borrowers; (iii) the appraisals of properties underlying the mortgage loans; and (iv) the debt-to-income ratios permitted on the loans. As a result of these misstatements and omissions, the Certificates were secured by assets that had a much greater risk profile than represented in the Registration Statement, and defendants offered superior credit ratings on the Certificates as a result of defendants’ failure to disclose the underwriting defects and appraisal manipulations. However, by late 2008, the amount of uncollectible mortgage loans securing the Certificates began to be revealed to the public and the rating agencies began to put negative watch labels on many Certificate classes, ultimately downgrading many. The delinquency and foreclosure rates of the mortgage loans securing the Certificates has grown both faster and in greater quantity than what would be expected for mortgage loans of the types described in the Prospectus Supplements. As a result, the Certificates are no longer marketable at prices anywhere near the price paid by plaintiff and the Class.
On December 23, 2009, Judge Laura Taylor Swain signed the Memorandum Opinion and Order Consolidating Bear Stearns Mortgage Pass-Through Certificates Actions, Appointing Co-Lead Plaintiffs And Approving Co-Lead Counsel. According to the Order, the above-captioned actions are consolidated into Civil Action No. 08 Civ. 8093 (LTS) for all purposes including, but not limited to, discovery, pretrial proceedings and trial. The consolidated action shall be referred to collectively as In re Bear Stearns Mortgage Pass-Through Certificates Litigation, Master File No. 08 Civ. 8093 (LTS)(KNF). The NJ Carpenters Health Fund and Mississippi PERS are appointed Co-Lead Plaintiff and their choice of lead counsel is approved. Accordingly, the law firms of Bernstein Litowitz Berger & Grossmann LLP and Cohen Milstein Sellers & Toll PLLC are appointed Plaintiffs Co-Lead Counsel.
On February 18, 2010, a consolidated class action complaint was filed by the lead plaintiffs against the defendants in this action.
On October 29, 2010, a Third Amended Class Action Complaint was filed by the Co-Lead Plaintiffs in this action against the Defendants.
On March 30, 2012, the Court issued an order granting, without prejudice, Defendants' Motion to Dismiss the Third Amended Complaint. Plaintiffs were granted leave to file a Fourth Amended Complaint.
On May 16, 2012, the Court issued an order staying this action pending the outcome of the appeal of the In re IndyMac Mortgage-Backed Securities Litigation case.
On February 2, 2015, the parties filed a Settlement Agreement. On May 27, this Settlement was given final approval by the Court, and attorneys' fees and expenses were approved.