DOCSLIB.ORG

In Re: Thornburg Mortgage, Inc. Securities Litigation 07-CV-00815

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
In Re: Thornburg Mortgage, Inc. Securities Litigation 07-CV-00815 Case 1:07-cv-00815-JB -WDS Document 361 Filed 06/14/11 Page 1 of 179 UNITED STATES DISTRICT COURT DISTRICT OF NEW MEXICO IN RE THORNBURG MORTGAGE, INC Case No. 07-815 JB/WDS SECURITIES LITIGATION CONSOLIDATED AMENDED CLASS ACTION COMPLAINT Case 1:07-cv-00815-JB -WDS Document 361 Filed 06/14/11 Page 2 of 179 TABLE OF CONTENTS Page NATURE OF THE ACTION 1 I. The Exchange Act Action 2 II. The Securities Act Action 13 JURISDICTION AND VENUE 16 PARTIES 17 I. Plaintiffs 17 II. Defendants 19 III. Control Person/Group Published Information Allegations 20 SUBSTANTIVE ALLEGATIONS 37 I. Background 37 II. The Company Generates Revenue Based Upon the Small Spread Between its Investments and the Cost of Borrowing 38 III. The Company Relied Extensively on and Touted the Benefits of Leveraging its Assets to Grow its Business 41 IV. TMI and the Mortgage Market Meltdown 43 A. The Implosion of Heavily Leveraged Subprime Backed Hedge Funds Due to Lender Margin Calls 45 B. High Risk Alt-A Loans Contribute to Mortgage Market Failures 46 C. Agency Ratings Begin To Lose Market Credibility In Early 2007 48 D. TMI and the Individual Defendants Repeatedly Tout the Invincibility of the Company’s MBS Asset Portfolio While at the Same Time Concealing That It Held Billions in Assets Backed by Risky Alt-A Loans 49 E. TMI’s Significant Involvement With Originated and Purchased Alt-A Loans 52 F. Unbeknownst to Shareholders, the ABCP Market Dries Up, Leaving TMI Forced Asset Sales as Only Viable Liquidity Option 55 i Case 1:07-cv-00815-JB -WDS Document 361 Filed 06/14/11 Page 3 of 179 G. TMI Commences an Undisclosed Discount Sale of Its Highest-Rated Assets While Informing the Market It Was Only “Exploring” Such Sales. 57 H. TMI Fails to Disclose That It Still Holds Billions in Illiquid MBS Backed by Risky Alt-A Collateral 58 I. Asset Sales Do Not Fully Absolve the Company of Liquidity Issues 59 J. Adjustments to Loss Estimates Trigger SEC Inquiry 59 K. Effects of the Liquidity Crisis Continued to Plague TMI throughout the Fall of 2007 and Into 2008 61 L. Company Touts 4Q07 Return to Profitability 62 M. February 2008 Announcement of Alt-A Portfolio and Margin Calls Stuns the Market 64 N. Company Faces Additional Margin Calls 66 O. KPMG Demands that TMI Restate its FY 2006 and 2007 Financial Statements 67 P. TMI Delays Disclosure of the NYSE Investigation 69 Q. Company Finally Announces That It Must Restate 69 R. Lender Bailout Comes at Heavy Price 71 SUMMARY OF SCIENTER ALLEGATIONS 73 I. TMI and the Individual Defendants Knew and/or Recklessly Disregarded the Falsity of Their Class Period Statements and Omissions 74 II. Defendants Were Motivated to Commit Fraud 75 A. TMI’s “Manager” Is Paid To Grow the Company’s Balance Sheet Without Regard For Market Conditions 75 B. The Individual Defendants were Motivated to Conceal the Entire Truth From Investors Due to the Imminent Threat of Bankruptcy 77 C. TMI and the Individual Defendants Were Motivated to Conceal the Truth to Raise Cash Through Public Offerings 78 D. TMI and the Individual Defendants were Motivated to Conceal the Truth to Complete Securitization Transactions to Fund Loan Originations When Borrowings Were Increasingly Difficult to Obtain 79 ii Case 1:07-cv-00815-JB -WDS Document 361 Filed 06/14/11 Page 4 of 179 III. Additional Indicia Of Scienter 80 A. The Magnitude of the Funds Required to Meet Margin Calls Also Raises an Inference of Scienter 80 B. The Timing and Magnitude of the Company’s Restatement Raises a Strong Inference of Scienter 80 DEFENDANTS’ GAAP VIOLATIONS 80 I. Subsequent Events 84 II. TMI and the Individual Defendants Failed to Disclose Adverse Facts and Events During the Class Period in Violation of GAAP and SEC Regulation S-K 86 III. Violations of SEC Regulation S-K and S-X 89 IV. The 2008 Restatement 90 MATERIALLY FALSE AND MISLEADING STATEMENTS DURING THE CLASS PERIOD 93 I. April 2007 Misrepresentations and Omissions 93 A. TMI and the Individual Defendants Tout TMI’s Credit Quality and Asset Liquidity Due to TMI’s Purported Focus on “Prime” Mortgages, While Concealing Billions of Dollars in Alt-A Mortgage Backed Assets 93 II. May 2007 Misrepresentations and Omissions 95 A. TMI and the Individual Defendants Disseminate Materially False and Misleading Offering Documents to Raise $121.7 Million in Capital and Fuel Liquidity 95 B. TMI’s First Quarter 2007 Form 10-Q 97 III. June 2007 Misrepresentations and Omissions 99 A. TMI and Defendant Goldstone Tout “Prime” Originations But Continue To Conceal Alt-A Origination Activity And Exposure 99 B. TMI and the Individual Defendants Disseminate Materially False and Misleading Offering Documents in Order to Raise $68.8 Million in Capital to Fuel Liquidity 100 IV. July 2007 Misrepresentations and Omissions 103 iii Case 1:07-cv-00815-JB -WDS Document 361 Filed 06/14/11 Page 5 of 179 A. TMI and the Individual Defendants Report 2Q EPS and that Dividend Will be Maintained, But Continue to Conceal Alt-A Holdings and Problems in the ABCP Market 103 V. August 2007 Misstatements and Omissions – TMI and the Individual Defendants Begin A Campaign of Selective Disclosure 104 A. TMI Files 2Q07 10-Q Concealing Asset Illiquidity and Billions in Alt-A Exposure 104 B. TMI and the Individual Defendants Disseminate Materially False and Misleading Offering Documents in Order to Raise $500 Million in Necessary Capital to Keep Company Afloat Following Liquidity Crisis 108 VI. Misrepresentations and Omissions in TMI’s 3Q07 Form 10-Q 111 VII. January 2008 Misrepresentations and Omissions 112 A. January 2008 Offering 112 VIII. February 2008 Misrepresentations and Omissions 114 A. The Undisclosed JP Morgan Default, Cross-Defaults, and First Disclosure of ARM Assets Backed by Alt-A Loans 114 IX. March 2008 Misstatements and Omissions 117 A. TMI and the Individual Defendants Reveal Company’s Inability to Meet $270 Million in Margin Calls Would Have a “Material” Impact on its Borrowing Position 117 B. TMI and the Individual Defendants Admit that the JP Morgan Default Triggered Cross-Default Provisions with All Other RPA Lenders 120 C. TMI and the Individual Defendants Finally Reveal Existence of KPMG Letter and Requirement to Restate 121 D. Company Issues Restated Financial Results and Reports Greater Loss than Estimated Just Two Days Prior 123 E. Company Continues to Default on Repurchase Agreements 125 F. Company Announces Lender Bailout 126 POST CLASS-PERIOD DISCLOSURES/EVENTS 128 LOSS CAUSATION/ECONOMIC LOSS 131 FRAUD-ON-THE-MARKET PRESUMPTION OF RELIANCE 136 iv Case 1:07-cv-00815-JB -WDS Document 361 Filed 06/14/11 Page 6 of 179 NO SAFE HARBOR 137 CLASS ACTION ALLEGATIONS 138 FIRST CLAIM FOR RELIEF 141 For Violation of Section 10(b) of the Exchange Act and Rule 1 0b-5 Against TMI and the Individual Defendants 141 SECOND CLAIM FOR RELIEF 144 For Violation of Section 20(a) of the Exchange Act Against the Individual Defendants 144 ALLEGATIONS SPECIFIC TO THE SECURITIES ACT ACTION 146 I. Additional Securities Act Parties 147 A. The Underwriter Defendants 147 B. The Director Defendants 150 C. Duty to Conduct a Reasonable and Diligent Investigation 151 II. The Offerings 151 A. The May 2007 Offering 151 B. The June 2007 Offering 152 C. The September 2007 Offering 152 D. The January 2008 Offerings 153 III. The Revelation of Alt-A Exposure in the Company’s Portfolio and of Misstated FY2006 Financial Results 154 IV. Materially False Statements in And Omissions From the Offering Documents 156 A. The Shelf Registration Statement 156 B. The May 2007 Offering Documents Were Materially False or Misleading 157 C. The June 2007 Offering Documents Were Materially False or Misleading 159 D. The September 2007 Offering Documents Were Materially False or Misleading 162 v Case 1:07-cv-00815-JB -WDS Document 361 Filed 06/14/11 Page 7 of 179 E. The January 2008 Offering Documents Were Materially False or Misleading 164 THIRD CLAIM FOR RELIEF 167 For Violation of Section 11 of the Securities Act Against TMI, the Individual Defendants, the Director Defendants, and the Underwriter Defendants 167 FOURTH CLAIM FOR RELIEF 170 For Violation of Section 15 of the Securities Act Against the Individual Defendants... 170 PRAYER FOR RELIEF 170 JURY DEMAND 172 vi Case 1:07-cv-00815-JB -WDS Document 361 Filed 06/14/11 Page 8 of 179 Lead Plaintiffs, W. Allen Gage, individually and on behalf of J. David Wrather, Harry Rhodes, FFF Investments, LLC, Robert Ippolito, individually and as Trustee for the Family Limited Partnership Trust, and Nicholas F. Aldrich, Sr., individually and behalf of the Aldrich Family, Plaintiff Betty L. Manning, Plaintiff John Learch and Plaintiff Boilermakers Lodge 154 Retirement Plan (collectively, “Plaintiffs”), individually, and on behalf of all others similarly situated, allege the following based upon Lead Plaintiffs’ individual and personal knowledge and Lead Plaintiffs’ own acts, and upon the investigation of Lead Plaintiffs’ counsel as to all other matters, which includes, inter alia, a review of public documents published or disseminated by or on behalf of, or concerning Thornburg Mortgage, Inc. (“TMI” or the “Company”) and/or any of its competitors or peers, and any of the individual defendants named herein, including, inter alia, United States Securities and Exchange Commission (“SEC”) filings, wire and press releases and other announcements, transcripts or wire broadcasts of conference calls, securities analysts’ reports and advisories, and information readily available on the Internet. Lead Plaintiffs believe that substantial additional evidentiary support will exist for the allegations set forth herein after a reasonable opportunity for discovery.
Load more

Recommended publications
  • The Causes of Fraud in Financial Crises: Evidence from the Mortgage-Backed Securities Industry
    IRLE IRLE WORKING PAPER #122-15 October 2015 The Causes of Fraud in Financial Crises: Evidence from the Mortgage-Backed Securities Industry Neil Fligstein and Alexander Roehrkasse Cite as: Neil Fligstein and Alexander Roehrkasse (2015). “The Causes of Fraud in Financial Crises: Evidence from the Mortgage-Backed Securities Industry”. IRLE Working Paper No. 122-15. http://irle.berkeley.edu/workingpapers/122-15.pdf irle.berkeley.edu/workingpapers FRAUD IN FINANCIAL CRISES The Causes of Fraud in Financial Crises: Evidence from the Mortgage-Backed Securities Industry* Neil Fligstein Alexander Roehrkasse University of California–Berkeley Key words: white-collar crime; finance; organizations; markets. * Corresponding author: Neil Fligstein, Department of Sociology, 410 Barrows Hall, University of California– Berkeley, Berkeley, CA, 94720-1980. Email: [email protected]. We thank Ogi Radic for excellent research assistance, and Diane Vaughan, Cornelia Woll, and participants of conferences and workshops at Yale Law School, Sciences Po, the German Historical Society, and the University of California–Berkeley for helpful comments. Roehrkasse acknowledges support by the National Science Foundation Graduate Research Fellowship under Grant No. DGE 1106400. All remaining errors are our own. FRAUD IN FINANCIAL CRISES ABSTRACT The financial crisis of 2007-2009 was marked by widespread fraud in the mortgage securitization industry. Most of the largest mortgage originators and mortgage-backed securities issuers and underwriters have been implicated in regulatory settlements, and many have paid multibillion-dollar penalties. This paper seeks to explain why this behavior became so pervasive. We evaluate predominant theories of white-collar crime, finding that those emphasizing deregulation or technical opacity identify only necessary, not sufficient conditions.
    [Show full text]
  • April 1, 2008 Dear Shareholder, on March 31, 2008, Thornburg
    April 1, 2008 Dear Shareholder, On March 31, 2008, Thornburg Mortgage, Inc. announced the completion of an offering to raise $1.35 billion from the sale of senior subordinated secured notes, warrants to purchase common stock and a participation in certain mortgage-related assets. We have received $1.15 billion of the proceeds from the offering. We will receive the remaining escrowed $200 million of the offering proceeds upon the successful completion of a tender offer for our preferred stock, as described below. We intend to use the proceeds to meet all currently outstanding margin calls from our reverse repurchase agreement and auction swap counterparties, to create a liquidity fund in order to provide a cushion to protect against further deterioration of mortgage securities prices, to pay off deficiency claims and for general working capital enabling us to refocus on our loan origination and securitization activities. These senior subordinated secured notes have an initial annual interest rate of 18%, which will be lowered to 12% upon shareholder approval of an increase in the number of authorized shares of capital stock that we may issue to 4 billion shares and the successful completion of a tender offer for our preferred stock, as described below. These notes are scheduled to mature on March 31, 2015. Each purchaser of these notes also received initial detachable warrants to purchase shares of common stock, which are exercisable at a price of $0.01 per share. These warrants, in the aggregate, will be equal to approximately 39.6% of the currently outstanding fully diluted shares of the company upon issuance.
    [Show full text]
  • Annual Report
    ANNUAL REPORT Catalyst Insider Income Fund (IIXAX, IIXCX, IIXIX) Catalyst Enhanced Income Strategy Fund (EIXAX, EIXCX, EIXIX) Catalyst/MAP Global Balanced Fund (TRXAX, TRXCX, TRXIX) Catalyst/CIFC Floating Rate Income Fund (CFRAX, CFRCX, CFRIX) Catalyst/SMH High Income Fund (HIIFX, HIICX, HIIIX) Catalyst/SMH Total Return Income Fund (TRIFX, TRICX, TRIIX) Catalyst/Stone Beach Income Opportunity Fund (IOXAX, IOXCX, IOXIX) Annual June 30, 2021 Mutual Fund Series Trust CATALYST FUNDS ANNUAL REPORT TABLE OF CONTENTS Investment Review ........................................................................................... Page 1 Schedules of Investments ................................................................................. Page 35 Statements of Assets and Liabilities ................................................................. Page 78 Statements of Operations ................................................................................ Page 79 Statements of Changes in Net Assets ............................................................... Page 80 Financial Highlights .......................................................................................... Page 83 Notes to Financial Statements .......................................................................... Page 97 Auditors Opinion…………………………………………………………………………………………….. Page 113 Supplemental Information ............................................................................... Page 115 Trustees Table…………………………………………………………………………………………… ..... Page 128 Expense
    [Show full text]
  • Lincoln Variable Insurance Products Trust President's Letter
    Lincoln Variable Insurance Products Trust President’s Letter Dear Fellow Investors, 2020 was a year of surprises and uncertainty as the spread of the global pandemic led to the sharpest – but shortest – US recession in modern history. In response, the size and speed of the comprehensive government stimulus was unprecedented as the Federal Reserve Board lowered interest rates to zero, expanded their bond buying, and for the first time ever, purchased corporate debt to calm markets. This monetary stimulus was matched by a historic amount of fiscal stimulus, which provided relief to individuals and small businesses negatively impacted by the pandemic. In turn, after experiencing the single most volatile period in history, equity markets rebounded with the strongest rally out of a bear market since 1932. As we reflect more deeply on the underlying market drivers throughout the year, 2020 can be characterized by three distinct periods. January 1st through February 19th was a constructive period, as 2020 economic growth was expected to continue at the same solid pace as 2019. However, as markets began to anticipate the economic impact of the rapid onset of the COVID-19 pandemic and the ensuing recession, the S&P 500 declined 35% from February 19th through March 23rd, with the VIX rising from 15 to a high of nearly 83 as evidence of the volatility incurred during this period. From March 23rd through the end of the year, investors began to anticipate a post-pandemic economic rebound, which led to a domestic equity market recovery that eradicated the losses of the short-lived bear market and allowed the S&P 500 to finish the year at a record high.
    [Show full text]
  • Genesee Co V Thornburg Mortg\CV09-300 Docs 125-128-130
    Case 1:09-cv-00300-JB-KBM Document 184 Filed 11/12/11 Page 1 of 273 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW MEXICO GENESEE COUNTY EMPLOYEES’ RETIREMENT SYSTEM; MARYLAND-NATIONAL CAPITAL PARK & PLANNING COMMISSION EMPLOYEES’ RETIREMENT SYSTEM; MIDWEST OPERATING ENGINEERS PENSION TRUST FUND, Individually and On Behalf of All Others Similarly Situated, Plaintiffs, vs. No. CIV 09-0300 JB/KBM THORNBURG MORTGAGE SECURITIES TRUST 2006-3; THORNBURG MORTGAGE SECURITIES TRUST 2006-5; THORNBURG MORTGAGE SECURITIES TRUST 2007-4; GREENWICH CAPITAL ACCEPTANCE, INC.; STRUCTURED ASSET MORTGAGE INVESTMENTS II, INC.; CREDIT SUISSE SECURITIES LLC d/b/a CREDIT SUISSE SECURITIES (USA) LLC; RBS SECURITIES INC.; BANC OF AMERICA SECURITIES LLC; ROBERT J. MCGINNIS; CAROL P. MATHIS; JOSEPH N. WALSH, III; JOHN C. ANDERSON; JAMES M. ESPOSITO; JEFFREY L. VERSCHLEISER; MICHAEL B. NIERENBERG; JEFFREY MAYER; THOMAS F. MARANO; MOODY’S CORP.; MOODY’S INVESTORS SERVICES, INC.; MCGRAW-HILL COMPANIES, INC.; STANDARD & POOR’S RATING SERVICES; FITCH, INC.; and FITCH RATINGS, Defendants. MEMORANDUM OPINION AND AMENDED ORDER THIS MATTER comes before the Court on: (i) the Opposed Motion to Dismiss of Defendants Greenwich Capital Acceptance, Inc. (n/k/a RBS Acceptance Inc.), Structured Asset Mortgage Investments II, Inc., Credit Suisse Securities (USA) LLC, RBS Securities Inc. (f/k/a Greenwich Capital Markets, Inc.), Robert J. McGinnis, Carol P. Mathis, Joseph N. Walsh III, John C. Anderson, James M. Esposito, Jeffrey L. Verschleiser, Michael B. Nierenberg, Jeffrey Mayer, Case 1:09-cv-00300-JB-KBM Document 184 Filed 11/12/11 Page 2 of 273 Thomas F. Marano, filed July 11, 2011 (Doc.
    [Show full text]
  • Thornburg Mortgage, Inc. Securities Litigation 07-CV-00815-Amended
    IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW MEXICO IN RE THORNBURG MORTGAGE, INC. No. CIV 07-0815 JB/WDS SECURITIES LITIGATION AMENDED MEMORANDUM OPINION AND ORDER 1 THIS MATTER comes before the Court on the Motion to Dismiss Consolidated Amended Complaint by Defendants Thornburg Mortgage, Inc., Garrett Thornburg, Larry A. Goldstone, Joseph H. Badal, Paul G. Decoff, Clarence D. Simmons, Ann-Drue M. Anderson, David A. Ater, Eliot R. Cutler, Ike Kalangis, Owen M. Lopez, Francis I. Mullin, Jr., and Stuart C. Sherman, filed September 22, 2008 (Doc. 126). The Court held a hearing on April 22, 2009. The primary issues are: (i) whether the Plaintiffs sufficiently allege facts giving rise to the strong inference of scienter necessary to support liability under the Securities Exchange Act of 1934 (“Exchange Act”), 15 U. S.C. §§ 78a-78oo; (ii) whether the Plaintiffs adequately allege any false or misleading statements of fact to support liability under the Exchange Act; (iii) whether any of the Defendants are subject to control-person liability under Section 20(a) of the Exchange Act, 15 U. S.C. § 78t(a); (iv) whether, under the facts alleged, Paul G. Decoff, Defendant Thornburg Mortgage, Inc.’s (“TMI’s”) Senior Executive Vice President and Chief Lending Officer, and/or Defendant Clarence D. Simmons, TMI’s Senior Executive Vice President and Chief Financial Officer, are proper parties defendant to the Plaintiffs’ claim under Section 11 of the Securities Act of 1933 (“Securities Act”), 15 U. S.C. 1 In its Memorandum Opinion and Order, entered January 27, 2010 (Doc.
    [Show full text]
  • In Re: Thornburg Mortgage, Inc. Securities Litigation 07-CV-00815
    Case 1:07-cv-00815-JB -WDS Document 360 Filed 06/02/11 Page 1 of 120 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW MEXICO IN RE THORNBURG MORTGAGE, INC. NO. CIV 07-0815 JB/WDS SECURITIES LITIGATION MEMORANDUM OPINION 1 THIS MATTER comes before the Court on the Plaintiff’s Omnibus Motion of (i) Leave to Amend the Consolidated Class Action Complaint and (ii) For Reconsideration of the Court’s January 27, 2010 Memorandum Opinion and Orders Granting in Part and Denying in Part Defendant’s Motions to Dismiss the Consolidated Amended Complaint, filed July 9, 2010 (Doc. 309)(“Motion”). The Court held a hearing on November 3, 2010. The primary issues are: (i) whether the Court should reconsider the Defendants’ disclosure obligations under the abstain-or- disclose doctrine and Item 303 of Regulation S-K, 17 C.F.R. § 229.303; (ii) whether the Court should reconsider its decision that Defendant Thornburg Mortgage, Inc.’s (“TMI’s”) 2007 Form 10- K Report was not actionable; (iii) whether the Court should reconsider its decision that certain of the Defendants’ statement were inactionable puffery; (iv) whether the Court should reconsider dismissing the Plaintiffs’ claims under Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), against Defendants Garrett Thornburg and Joseph H. Badal; (v) whether the Court should reconsider reserving ruling on the dismissal of the Plaintiffs’ claims under Sections 20(a) of the Exchange Act, 15 U.S.C. § 78t(a), against Defendants Larry A. Goldstone, Clarence D. Simmons, and Paul G.
    [Show full text]
  • Mortgages Loan Payments
    HARVARD JOHN M. OLIN CENTER FOR LAW, ECONOMICS, AND BUSINESS LEGAL AND ECONOMIC ISSUES IN LITIGATION ARISING FROM THE 2007-2008 CREDIT CRISIS Jennifer E. Bethel Allen Ferrell Gang Hu October 23, 2008 Discussion Paper 02/2008 Revised 10/2008 Harvard Law School Cambridge, MA 02138 This paper can be downloaded without charge from: The Harvard John M. Olin Discussion Paper Series: http://www.law.harvard.edu/programs/olin_center/ The Social Science Research Network Electronic Paper Collection: http://papers.ssrn.com/ This paper is also a discussion paper of the John M. Olin Center’s Program on Corporate Governance. LEGAL AND ECONOMIC ISSUES IN LITIGATION ARISING FROM THE 2007-2008 CREDIT CRISIS Jennifer E. Bethel* Allen Ferrell** Gang Hu*** ABSTRACT This paper explores the economic and legal causes and consequences of the 2007-2008 credit crisis. We provide basic descriptive statistics and institutional details on the mortgage origination process, mortgage-backed securities (MBS), and collateralized debt obligations (CDOs). We examine a number of aspects of these markets, including the identity of MBS and CDO sponsors, CDO trustees, CDO liquidations, MBS insured and registered amounts, the evolution of MBS tranche structure over time, mortgage originations, underwriting quality of mortgage originations, and writedowns of the commercial and investment banks. In light of this discussion, the paper then addresses questions as to whether these difficulties might have been foreseen, and some of the main legal issues that will play an important role in the extensive litigation (summarized in the paper) that is underway, including the Rule 10b-5 class actions that have already been filed against the banks, pending ERISA litigation, the causes-of-action available to MBS and CDO purchasers, and litigation against the rating agencies.
    [Show full text]
  • In Re: Thornburg Mortgage, Inc. Securities Litigation 07-CV-00815-Consolidated Class Action Complaint
    Case 1:07-cv-00815-JB-WDS Document 68 Filed 05/27/2008 Page 1 of 196 UNITED STATES DISTRICT COURT DISTRICT OF NEW MEXICO IN RE THORNBURG MORTGAGE, INC Case No. 07-815 JB/WDS SECURITIES LITIGATION CONSOLIDATED CLASS ACTION COMPLAINT Case 1:07-cv-00815-JB-WDS Document 68 Filed 05/27/2008 Page 2 of 196 TABLE OF CONTENTS NATURE OF THE ACTION 1 I. The Exchange Act Action 2 II. The Securities Act Action 12 JURISDICTION AND VENUE 15 PARTIES 15 I. Plaintiffs 15 II. Defendants 16 A. The Company 16 B. The Individual Defendants 17 III. Control Person/Group Published Information Allegations 18 SUBSTANTIVE ALLEGATIONS 20 I. Background 20 II. The Company Generates Revenue Based Upon the Small Spread Between its Investments and the Cost of Borrowing 21 III. The Company Relied Extensively on and Touted the Benefits of Leveraging its Assets to Grow its Business 24 IV. TMI and the Mortgage Market Meltdown 26 A. The Implosion of Heavily Leveraged Subprime Backed Hedge Funds Due to Lender Margin Calls 28 B. High Risk Alt-A Loans Contribute to Mortgage Market Failures 28 C. Agency Ratings Begin To Lose Market Credibility In Early 2007 31 D. The Thornburg Defendants Repeatedly Tout the Invincibility of the Company’s MBS Asset Portfolio While at the Same Time Concealing That It Held Billions in Assets Backed by Risky Alt-A Loans 32 i Case 1:07-cv-00815-JB-WDS Document 68 Filed 05/27/2008 Page 3 of 196 E. TMI’s Significant Involvement With Originated and Purchased Alt-A Loans 34 F.
    [Show full text]
  • 2005 West Virginia Division of Banking Annual Report
    STATE OF WEST VIRGINIA 104nd ANNUAL REPORT OF FINANCIAL INSTITUTIONS Pursuant to WV §31A-2-12 Under the Supervision of the COMMISSIONER OF BANKING Year ending December 31, 2005 LARRY A. STARK COMMISSIONER TABLE OF CONTENTS Division of Banking History 2 Division of Banking Activities 3 Fiscal Year Receipts and Disbursements 4 West Virginia Division of Banking Staff 5 West Virginia Lending & Credit Rate Board Members 6-7 West Virginia Floating Usury Ceiling Rates 8 DEPOSITORY INSTITUTIONS: State Chartered Banks Headquartered in West Virginia 9-11 National Chartered Banks Headquartered in West Virginia 12 West Virginia Board of Banking & Financial Institutions 13 Bank Applications Received and/or Acted Upon 14 State and National Bank Mergers 15 Super Parity Activity 16 Trust Departments 17 Report of Condition and Income for State and National Banks in WV 18-19 Bank Holding Companies Operating in West Virginia 20-23 Bank Holding Companies Formations and Dissolutions 24 State Chartered Credit Unions Headquartered in West Virginia 25 State Credit Union’s Balance Sheet Report 26 State Credit Union’s Income Statement Report 27 WV Corporate Credit Union Year End Totals 28 NON DEPOSITORY INSTITUTIONS: West Virginia Mortgage Loan Act Licensees 29-41 West Virginia Money Transmission Licensees 42 West Virginia Regulated Consumer Lender Licensees 43 1 DIVISION HISTORY During the period between 1863 and 1891, state banks were entirely free from regulation and supervision by the State. The Legislature in 1891 passed a law providing for a State Banking Department and authorized the Governor to appoint a State Bank Examiner, to be under the jurisdiction and control of the Board of Public Works.
    [Show full text]
  • Liquidity Crises in the Mortgage Market
    BPEA Conference Drafts, March 8–9, 2018 Liquidity crises in the mortgage market You Suk Kim, Federal Reserve Board Steven M. Laufer, Federal Reserve Board Karen Pence, Federal Reserve Board Richard Stanton, University of California, Berkeley Nancy Wallace, University of California, Berkeley Conflict of Interest Disclosure: The authors did not receive financial support from any firm or person for this paper or from any firm or person with a financial or political interest in this paper. They are currently not officers, directors, or board members of any organization with an interest in this paper. In order to ensure the confidentiality of individual banks, the Federal Reserve Board’s Division of Supervision and Regulation reviewed the relevant portions of this paper before circulation. With the exception of the aforementioned, no outside party had the right to review this paper before circulation. The analysis and conclusions set forth are those of the authors and do not indicate concurrence by the Federal Reserve Board or other members of its staff. Liquidity Crises in the Mortgage Market∗ You Suk Kimy Steven M. Lauferz Karen Pence§ Richard Stanton{ Nancy Wallacek February 27, 2018 Abstract Nonbanks originated about half of all mortgages in 2016, and 75% of mortgages insured by the FHA or VA. Both shares are much higher than those observed at any point in the 2000s. We describe in this paper how nonbank mortgage companies are vulnerable to liquidity pressures in both their loan origination and servicing activities, and we document that this sector in aggregate appears to have minimal resources to bring to bear in a stress scenario.
    [Show full text]
  • 2006 West Virginia Division of Banking Annual Report
    STATE OF WEST VIRGINIA 105th ANNUAL REPORT OF FINANCIAL INSTITUTIONS Pursuant to WV §31A-2-12 Under the Supervision of the COMMISSIONER OF BANKING Year ending December 31, 2006 LARRY A. STARK COMMISSIONER TABLE OF CONTENTS Cover Page 1 Table of Contents 2 Letter to the Governor 3 Division History 4 Division Activities 5 Fiscal Year Receipts and Disbursements 6 West Virginia Division of Banking Employees 7 West Virginia Board of Banking & Financial Institutions Members 8 West Virginia Lending & Credit Rate Board Members 9-10 West Virginia Floating Usury Ceiling Rates 11 DEPOSITORY INSTITUTIONS: State Chartered Banks Headquartered in West Virginia 12-15 National Chartered Banks Headquartered in West Virginia 16 Bank Applications Received and/or acted upon 17 State and National Bank Mergers 18 Super Parity Activity 19 Trust Departments 20 Report of Condition and Income for State and National Banks in WV 21 Bank Holding Companies Operating in West Virginia 22-24 Bank Holding Companies Formations and Dissolutions 25 State Chartered Credit Unions Headquartered in West Virginia 26 State Credit Union’s Balance Sheet Report 27 State Credit Union’s Income Statement Report 28 WV Corporate Credit Union Year End Totals 29 NON DEPOSITORY INSTITUTIONS: West Virginia Mortgage Loan Act Licensees 30-41 West Virginia Money Transmission Licensees 42 West Virginia Regulated Consumer Lender Licensees 43-45 WEST VIRGINIA DIVISION OF BANKING (304) 558-2294 1900 KANAWHA BLVD., EAST Fax: (304) 558-0442 STATE CAPITOL COMPLEX, BUILDING 3, ROOM 311 Joe Manchin III CHARLESTON, WEST VIRGINIA 25305-0240 Larry A. Stark Governor www.wvdob.org Commissioner ______________________________________________________________________________________________________ April 17, 2007 The Honorable Joe Manchin, Governor Main Building, Capitol Complex 1900 Kanawha Boulevard, East Charleston, WV 25305 Governor Manchin: Attached is the Annual Report of the West Virginia Division of Banking for Fiscal Year 2006, in compliance with W.Va.
    [Show full text]