According to the complaint filed March 27, 2009, the Offering Documents pursuant to which Defendants issued the Certificates contained material false and misleading statements with respect to: (a) compliance with stated underwriting guidelines; (b) the quantity of mortgage loans originated pursuant to various documentation programs, including fully documented loans and stated income loans; (c) the borrowers' debt-to-income ratio; (d) the level of credit enhancement calculated to afford a certain pre-determined level of protections to investors; (e) the ratings issued by the Rating Agency Defendants to each class of Certificates; and (f) the conflict of interest between the Rating Agency Defendants and the issuers of the Certificates.
On February 26, 2010, District Judge James O. Browning granted the motion to appoint the Maryland-National Capital Park & Planning Commission Employees’ Retirement System and the Midwest Operating Engineers Pension Trust Fund as lead plaintiff and approved their selection of Coughlin Stoia Geller Rudman & Robbins LLP as lead counsel. The lead plaintiff filed an Amended Complaint on December 10, 2010. The defendants responded by filing a motion to dismiss the Amended Complaint on February 11, 2011.
On March 22, 2011, the plaintiffs filed a Notice of Voluntary Dismissal as to Thornburg Mortgage Securities Trust 2007-4, Thornburg Mortgage Securities Trust 2006-3 and Thornburg Mortgage Securities Trust 2006-5.
According to a news article dated October 3, 2011, on Friday, Albuquerque Federal Court Judge James Browning denied the rating agencies' motion to dismiss claims that they made false statements in connection with the sale of securities backed by Thornburg-issued mortgages. The order doesn't include any explanation, merely citing Sept. 19 oral arguments. But the key difference between the Thornburg MBS class action and all of its unsuccessful predecessors is that the Thornburg plaintiffs were able to assert New Mexico's since-repealed state securities law.
According to a news article dated November 25, 2011, a federal judge has said credit ratings are not always protected opinion under the First Amendment, a defeat for credit rating agencies in a lawsuit brought by investors who lost money on mortgage-backed securities. The Nov. 12 decision was a little-noticed setback for McGraw-Hill Cos' Standard & Poor's, Moody's Corp's Moody's Investors Service and Fimalac SA's Fitch Ratings, which have long invoked First Amendment free speech protection to defend against lawsuits over their ratings. These agencies had argued that the Constitution protected them from claims they issued inflated ratings on more than $5 billion of securities issued in 2006 and 2007, and backed by loans from former Thornburg Mortgage Inc and other lenders. But the judge said the ratings were shared with too small a group of investors to deserve the broad protection sought. 'The court rejects the rating agency defendants' arguments that the First Amendment provides any protection to them under the facts of this case,' U.S. District Judge James Browning in Albuquerque, New Mexico, wrote in a 273-page opinion. Browning nonetheless dismissed claims accusing Moody's and Fitch, but not S&P, of misrepresentations, saying the investors did not adequately allege that the two agencies did not believe their ratings, or knowingly concealed their inaccuracy. He also said federal law preempts some arguments that the investors used to recover under New Mexico securities law. The judge said the investors may file an amended complaint, which had sought class-action status. If the state law claims went forward, it could provide an avenue for investors to go after the agencies in other states.
On December 19, 2011, a Second Amended Complaint was filed.
On December 3, 2012, the parties entered into a Stipulation of Settlement. On December 10, the Court issued an Order preliminarily approving the settlement.
On February 25, 2013, the Court issued a Final Order and Judgment. On the same day, the Court also issued an Order awarding attorneys' fees and expenses. Finally, the Court issued a Final Judgment closing this case.