Martin Luther was well aware that 1st century Judaism had aspects of grace and forgiveness in their theology.
Even the righteousness of God which is by faith of Jesus Christ (Romans 3:22). This is a most important addition, and is directed against the rebellious mind of arrogant objectors who say: "Very well, then, we know of ourselves that we are unrighteous; we also know that we are inclined to evil and that inwardly we are enemies of God. We believe therefore that we must be justified before God, but this we desire to achieve by our prayers, repentance and confession. We do not want Christ, for God can give us His righteousness even without Christ." To this the Apostle replies: Such a wicked demand God neither will nor can fulfill, for Christ is God; righteousness for justification is given us only through faith in Jesus Christ. So God has willed it, and so God is pleased to do, and this He will never change. And who is there to resist His will? Now, however, if that is true then there is no greater arrogance than not to desire to be justified by faith in Christ. (Martin Luther. Commentary on Romans. Zondervan 1954. p77)
So perhaps Luther was the father of the New Perspective on Paul? But then again, he didn't take the Jews side in their dispute with Paul, but rather he realized they were still legalistic.