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Thornburg Mortgage settles with investors, awaits court approval

Investors in Thornburg Mortgage, once the second largest mortgage lender behind Countrywide, agreed on a settlement with former executives and directors of the company.

A court hearing will be held in Albuquerque, N.M. on Aug. 27 to consider, among other things, whether the proposed settlement with the Santa Fe, N.M.-based jumbo lender be approved as fair and adequate.

Thornburg Mortgage, which filed for bankruptcy in May 2009 and subsequently renamed TMST, could not be reached for comment.

The settlement fund consists of $2 million in cash. If the settlement is approved, former common and preferred stock shareholders will receive about one penny per damaged share — shares bought when a stock price was artificially high due to material omissions or misrepresentations, according to the court filing.

Thornburg Mortgage's stock price fell from $23.84 on Aug. 7, 2007 to $13.50 thirteen days later, after financial analysts and rating agencies downgraded the company’s securities because of liquidity concerns.

The federal court lawsuit, filed in August 2007, accused the company of misleading financial statements. It suspended new originations that month as the non-agency mortgage-backed securities market dried up.

In March, the Securities and Exchange Commission filed fraud charges against three former executives at Thornburg Mortgage. Much like those in charge at former mortgage giant Taylor, Bean and Whitaker, the execs overstated income, in this case by $400 million, to cover a hole.




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