Opinion ID: 216493
Heading Depth: 2
Heading Rank: 1

Heading: The Securities Offerings

Text: In the period from 2005 to 2007, plaintiffs and similarly situated persons purchased approximately $155 billion worth of mortgage pass-through certificates registered with the Securities and Exchange Commission (SEC) entitling them to distributions from underlying pools of mortgages. To create such certificates, a sponsor originates or acquires mortgages. Next, the loans are sold to a depositor that securitizes the loansmeaning, in effect, that the depositor secures the rights to cash flows from the loans so that those rights can be sold to investors. The loans are then placed in issuing trusts, which collect the principal and interest payments made by the individual mortgage borrowers and, in turn, pay out distributions to the purchasers of the mortgage pass-through certificates. Finally, different risk levels, or tranches of risk, are created by using various types of credit enhancement, such as subordinating lower tranches to absorb losses first, overcollateralizing the loan pools in excess of the bond amount, or creating an excess spread fund to cover the difference between the interest collected from borrowers and amounts owed to investors. [1] Each tranche is denominated by a credit ratingin these cases issued by one or more Rating Agenciesdetermined by the seniority level and the expected loss of the loan pool. Finally, the depositor sells the certificates to underwriters, who then offer them to investors. Many of the certificates here at issue received AAA ratings, the safest tranche supposedly least likely to default. Investment-grade ratings were crucial to the certificates' sale because many institutional investors must purchase investment-grade securities. Moreover, some senior certificates' sales were conditioned on the receipt of AAA ratings.
The Union Plaintiffs and other similarly situated persons bought certificates in ninety-four offerings between September 29, 2005, and July 28, 2007, that were sponsored by Lehman Brothers Holdings, Inc. (LBHI) and underwritten by Lehman Brothers, Inc., with Structured Asset Securities Corporation (SASCo), a wholly-owned LBHI entity, acting as depositor (collectively, Lehman). The certificates were issued pursuant to one of two registration statements, initially filed with the SEC on September 16, 2005, and August 8, 2006, respectively. S & P and Moody's rated the securities.
Wyoming and similarly situated persons purchased certificates sponsored by Indymac Bank, with Indymac MBS, Inc. acting as depositor. Many large investment banks underwrote the offerings, which were issued pursuant to three registration statements first filed on August 15, 2005, February 24, 2006, and February 14, 2007, respectively. S & P, Moody's, and Fitch rated Wyoming's certificates.
Vaszurele and similarly situated plaintiffs acquired senior mortgage pass-through certificates, issued on June 28, 2006, by the Residential Asset Securitization Trust 2006-A8 (RAST). Indymac Bank sponsored Vaszurele's certificates, with Indymac MBS, Inc. acting as depositor and Credit Suisse Securities (USA) Inc. as lead underwriter. S & P and Moody's rated the certificates acquired by Vaszurele, which are traceable to a registration statement initially filed on February 24, 2006.