The lawsuit is brought on behalf of purchasers of Mortgage Pass-Through Certificates issued by Structured Asset Mortgage Investments II, Inc. (“SAMI”) and/or Bear Stearns Asset-Backed Securities I LLC (“BSABSI”) (the “Certificates”) pursuant and/or traceable to false and misleading Registration Statements and Prospectus Supplements issued between March 2006 and September 2007 (collectively, the “Registration Statements”).   The lawsuit is pending before the Honorable Laura Taylor Swain in the United States District Court in the Southern District of New York.

The lawsuit alleges that the Registration Statements and Prospectuses incorporated therein contained material misstatements and omissions in violation of Sections 11, 12 and 15 of the Securities Act of 1933.  The Certificates were supported by large pools of mortgage loans generally secured by first liens on residential properties, including conventional, adjustable rate and negative amortization mortgage loans.  According to the pleadings, the Registration Statements 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 the Nationally Recognized Statistical Ratings Organizations (the “NRSRO” or “Ratings Agencies”) assigned superior credit ratings to 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 down-grading 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 have declined precipitously in value.

The defendants named in the lawsuit include SAMI, BSABSI, certain of their officers and directors, Bear Stearns Cos., Inc. (“BSC”), J.P. Morgan Chase, Inc. (“JPM”) as successor in interest to BSC, the Underwriter of the Certificates Bear Stearns & Co., Inc., the Issuers of the Certificates and the Ratings Agencies who rated the Certificates. 
 
The putative class includes purchasers of Certificates issued by the following trusts (the “Issuers”):

  • Bear Stearns Asset Backed Securities, Series 2006-HE5
  • Bear Stearns Asset Backed Securities, Series 2007-AC2    
  • Bear Stearns Mortgage Funding, Series 2006-AR2
  • Bear Stearns Asset Backed Securities, Series 2006-AC4
  • Bear Stearns Asset Backed Securities, Series 2007-AQ2
  • Structured Asset Mortgage Investments II, Series 2006-AR8
  • Bear Stearns Mortgage Funding, Series 2006-AC1
  • Bear Stearns Asset Backed Securities, Series 2007-FS1
  • Bear Stearns Mortgage Funding, Series 2006-AR3
  • Bear Stearns Mortgage Funding, Series 2006-SL1
  • Bear Stearns Asset Backed Securities, Series 2007-HE2
  • Bear Stearns Mortgage Funding, Series 2006-AR4
  • Bear Stearns Mortgage Funding, Series 2006-SL2
  • Bear Stearns Mortgage Funding, Series 2007-SL2
  • Bear Stearns Mortgage Funding, Series 2006-AR5
  • Bear Stearns Mortgage Funding, Series 2006-SL3
  • Bear Stearns Asset Backed Securities, Series 2007-AC3
  • Bear Stearns Mortgage Funding, Series 2007-AR1
  • Bear Stearns Mortgage Funding, Series 2006-SL4
  • Bear Stearns Asset Backed Securities, Series 2007-HE3
  • Structured Asset Mortgage Investments II, Series 2007-AR1
  • Bear Stearns Asset Backed Securities, Series 2006-AC5
  • Bear Stearns Asset Backed Securities, Series 2007-HE4
  • Structured Asset Mortgage Investments II, Series 2007-AR2
  • Bear Stearns Asset Backed Securities, Series 2006-AQ1
  • Bear Stearns Asset Backed Securities, Series 2007-AC4
  • Bear Stearns Mortgage Funding, Series 2007-AR3
  • Bear Stearns Asset Backed Securities, Series 2006-HE9
  • Bear Stearns Asset Backed Securities, Series 2007-HE5
  • Bear Stearns Alt-A Trust, Series 2006-5
  • Bear Stearns Mortgage Funding, Series 2006-SL5
  • Bear Stearns Asset Backed Securities, Series 2007-AC5
  • Bear Stearns Alt-A Trust, Series 2006-6
  • Bear Stearns Asset Backed Securities, Series 2006-HE10
  • Bear Stearns Asset Backed Securities, Series 2007-HE6
  • Bear Stearns Alt-A Trust, Series 2006-7
  • Bear Stearns Mortgage Funding, Series 2006-SL6
  • Bear Stearns Asset Backed Securities, Series 2007-AC6
  • Bear Stearns Alt-A Trust, Series 2006-8
  • Bear Stearns Mortgage Funding, Series 2007-SL1
  • Structured Asset Mortgage Investments II, Series 2006-AR5
  • Bear Stearns Alt-A Trust, Series 2007-1
  • Bear Stearns Asset Backed Securities, Series 2007-AQ1
  • Structured Asset Mortgage Investments II, Series 2006-AR4
  • Bear Stearns ARM Trust, Series 2006-4
  • Bear Stearns Asset Backed Securities, Series 2007-AC1
  • Bear Stearns Mortgage Funding, Series 2006-AR1
  • Bear Stearns ARM Trust, Series 2007-1
  • Bear Stearns Asset Backed Securities, Series 2007-HE1
  • Structured Asset Mortgage Investments II, Series 2006-AR6
  • Bear Stearns ARM Trust, Series 2007-3

 

 

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