SUPREME COURT OF THE STATE OF NEW YORKCOUNTY OF NEW YORK

U.S. BANK NATIONAL ASSOCIATION, asTrustee for HarborView Mortgage Loan Trust,Series 2005-10,

Plaintiff,

v.

COUNTRYWIDE HOME LOANS, INC. (d/b/aBANK OF AMERICA HOME LOANS), BANK OFAMERICA CORPORATION, COUNTRYWIDEFINANCIAL CORPORATION, BANK OFAMERICA, N.A., and NB HOLDINGSCORPORATION,

Defendants.

Index No. 652388/2011

SECOND AMENDED COMPLAINT

JURY TRIAL DEMANDED

FILED: NEW YORK COUNTY CLERK 06/18/2013 INDEX NO. 652388/2011

NYSCEF DOC. NO. 40 RECEIVED NYSCEF: 06/18/2013

U.S. Bank National Association (“U.S. Bank” or the “Trustee”), in its capacity as trustee,

brings this action on behalf of HarborView Mortgage Loan Trust 2005-10, by its attorneys,

Kasowitz, Benson, Torres & Friedman LLP, for its Complaint herein against Countrywide Home

Loans, Inc., doing business as Bank of America Home Loans (“Countrywide Home Loans”),

Countrywide Financial Corporation (“Countrywide Financial” and, together with Countrywide

Home Loans “Countrywide”), Bank of America Corporation, Bank of America, N.A., and NB

Holdings Corporation (collectively “Bank of America” and, together with Countrywide

“Defendants”), alleges as follows:

NATURE OF ACTION

1. This is an action for breach of contract stemming from Defendants’ willful failure

to abide by their unambiguous contractual obligations under the Pooling and Servicing

Agreements (defined below) that govern the sale of more than 4,000 mortgage loans (the

“Loans”) that were originated by Countrywide Home Loans and then securitized in the

HarborView Mortgage Loan Trust 2005-10 (“HVMLT 2005-10” or the “Trust”), for which U.S.

Bank serves as trustee.

2. In connection with its sale of the Loans to Greenwich Capital Financial Products,

Inc. (“GCFP”), the sponsor of HVMLT 2005-10, Countrywide made fifty specific

representations and warranties regarding the Loans (the “Mortgage Representations”). Through

the Mortgage Representations, Countrywide represented, among other things, that the Loans

complied with specified underwriting guidelines, that its origination practices were in all respects

legal, prudent and customary in the mortgage industry, and that it was providing complete and

accurate documentation for each loan. In the event of a breach of any Mortgage Representation

that materially and adversely affected the interests of GCFP in a Loan, Countrywide agreed that

3

it would cure such breach or repurchase the individual Loan within ninety days of receiving

notice of the breach.

3. Upon sale of the Loans to the Trust, GCFP assigned certain of its rights with

respect to the Loans, including its right to enforce the Seller Representation and the Mortgage

Representations, to the Trustee.

4. Soon after being sold to the Trust, Countrywide’s Loans began to become

delinquent and default at a startling rate. As a result, an underwriting consultant was retained to

review the Loans for compliance with the Mortgage Representations. That review revealed a

systemic failure to comply with the Mortgage Representations. Out of an initial sample of 786

Loans, an extraordinary sixty-six percent of the Loans breached one or more Mortgage

Representations. The 520 defective Loans have an aggregate principal balance of over $157

million.

5. Upon learning of the results of the loan review, the Trustee promptly served

notice on Countrywide, through its successor-in-interest Bank of America, and demanded that

Countrywide comply with its obligations and either cure the breaches or repurchase the Loans.

Countrywide has failed, and continues to fail, to do either. To date, Countrywide has failed to

repurchase any Loan put back to it by the Trustee and has offered no basis for its refusal. There

is no alternative mechanism to repair the breaches that exist due to Countrywide’s improper

underwriting and wholesale breach of its contractual obligations.

6. In addition, given that the securitization was a document-intensive transaction,

Countrywide prepared and furnished numerous written statements and documents in connection

with the sale and securitization of the Loans. Because the Trustee was not obligated to verify

that Countrywide’s numerous disclosures were true and correct, the written statements and

4

documents were critical to the benefit of the bargain made by the Trust and the

Certificateholders. Thus, to give rating agencies and potential investors additional comfort that

its disclosures were true and accurate, Countrywide represented that none of its written

statements or documents contained any untrue statements of material fact or omissions that

would make the statements contained therein misleading (the “Seller Representation”). Given

the importance of its numerous written disclosures, Countrywide agreed that in the event of a

breach of the Seller Representation, at GCFP’s option, Countrywide would repurchase all of the

Loans in the mortgage pool within 90 days of receiving notice of the breach.

7. The Seller Representation protected the Trust and the Certificateholders from

misrepresentations and omissions in, among other things:

a. The offering prospectus, including a prospectus supplement, which contained, amongother things, disclosures regarding the characteristics of the Loans, Countrywide’sgeneral origination practices, and the origination practices pertaining to the Loans;

b. The mortgage loan files (the “Mortgage Loan Files” or “Files”), which contained, amongother things, the borrower’s loan application, documents verifying the borrower’sincome, assets and employment, the borrower’s credit reports, an appraisal of theproperty that secured the loan, and a statement of the property’s occupancy status;

c. The certification of a Countrywide officer (the “Officer’s Certificate”) that Countrywidehad performed all of its duties under the Servicing Agreement and that all of itsrepresentations and warranties, including the Seller and Mortgage Representations, weretrue and correct;

d. The mortgage loan data tape (the “Mortgage Loan Schedule”), which provided detailedinformation about the characteristics of each Mortgage Loan, including the loan-to-valueratio and occupancy status; and

e. The diskette or electronic file (the “Information Diskette”) containing the informationnecessary for the Mortgage Loan Schedule and the date the last monthly payment wasactually applied to a Loan’s unpaid principal balance.

The consultant’s findings and ongoing discovery in this action have revealed that many of these

documents are rife with materially untrue statements in violation of the Seller Representation.

5

8. The Trustee is authorized to enforce Countrywide’s Seller and Mortgage

Representations. As a result of Countrywide’s breach of the Seller Representation, the Trustee

now seeks specific performance of Countrywide’s obligation to repurchase all of the Loans in the

mortgage pool within the ninety-day period to which Countrywide expressly agreed.

9. Alternatively, the Trustee seeks to compel Countrywide, and Bank of America as

its successor-in-interest, to specifically perform their obligation to repurchase all of the Loans

that the Trustee has submitted as breaching Loans and all Loans that Defendants know or have

reason to know contain breaches that materially and adversely affect the interests of the Trust.

PARTIES

10. HarborView Mortgage Loan Trust 2005-10 is a securitization trust created

pursuant to the Pooling Agreement dated as of August 1, 2005 between Greenwich Capital

Acceptance, Inc., Greenwich Capital Financial Products, Inc. and U.S. Bank National

Association (“Pooling Agreement”). The Trust originally held 4,484 mortgage loans with an

aggregate principal value of approximately $1.75 billion for the benefit of Certificateholders.

The Pooling Agreement was and is governed by New York law.

11. Plaintiff U.S. Bank National Association is a national banking association

organized and existing under the laws of the United States with its principal place of business in

St. Paul, Minnesota. Pursuant to the Pooling Agreement, U.S. Bank serves as trustee of HVMLT

2005-10. U.S. Bank has offices throughout the United States; its principal office in New York

State is in New York County.

12. Defendant Countrywide Home Loans, Inc. is a New York corporation with its

principal place of business in Calabasas, California. Countrywide Home Loans acted as the

originator for the Loans held by the Trust. Countrywide Home Loans operated as a wholly-

owned subsidiary of Countrywide Financial Corporation, which merged with Bank of America

6

on July 1, 2008. Countrywide Home Loans now operates under the trade name “Bank of

America Home Loans.”

13. Defendant Bank of America Corporation is a Delaware corporation with its

principal place of business in Charlotte, North Carolina and substantial offices at the Bank of

America Tower at One Bryant Park, New York. Bank of America is a global financial institution

serving retail, small business and large corporate consumers with financial products and services.

Countrywide merged with Bank of America on July 1, 2008.

14. Defendant Countrywide Financial Corporation is a corporation organized under

the laws of the State of Delaware with its principal executive offices in Calabasas, California. It

was the corporate parent of Countrywide Home Loans. Pursuant to a transaction completed on

July 1, 2008, Countrywide Financial merged into a subsidiary of Bank of America Corporation.

As of April 27, 2009, Countrywide Financial ceased operating under the brand name

Countrywide. Now combined with Bank of America’s pre-existing mortgage and home loan

business, Countrywide Financial’s main businesses, including Countrywide Home Loans,

operate as Bank of America Home Loans, a division of Bank of America.

15. Defendant Bank of America, National Association is a nationally-chartered

United States bank with substantial business operations and offices at the Bank of America

Tower at One Bryant Park, New York, New York 10036. It is a wholly-owned subsidiary of

Bank of America Corporation.

16. Defendant NB Holdings Corporation is a Delaware corporation with principal

offices in Charlotte, North Carolina, and is a subsidiary of Bank of America Corporation.

17. Defendants Bank of America Corporation, Bank of America, N.A., and NB

Holdings Corporation participated in the acquisition of substantially all of Countrywide through

7

a series of acquisitions that commenced on July 1, 2008. They are the successors-in-interest to

Countrywide.

JURISDICTION AND VENUE

18. This Court has jurisdiction over this proceeding pursuant to CPLR §§ 301 and

302 because Bank of America has offices in New York and Countrywide Home Loans is

organized under the laws of the State of New York. Additionally, the Trust was formed under

New York law pursuant to the Pooling Agreement, which contains a New York choice of law

provision.

19. Venue is proper in this Court pursuant to CPLR § 503(a) and (c) because the

Trustee’s principal New York office is in New York County and, upon information and belief,

Defendants are domestic or foreign corporations authorized to transact business in New York

and their principal New York offices are in New York County.

FACTUAL BACKGROUND

I. THE HVMLT 2005-10 SECURITIZATION.

20. Asset-backed securitization is the process whereby risk is distributed by pooling

cash-producing financial assets, such as mortgage loans, and issuing securities backed by such

pools of assets. The most common form of securitization of mortgage loans involves the

creation of a trust to which a sponsor entity sells a portfolio of mortgage loans. The transfer of

assets to a trust is typically “a two-step process: the financial assets are transferred by the

sponsor first to an intermediate entity, often a limited purpose entity created by the sponsor . . .

and commonly called a depositor, and then the depositor will transfer the assets to the [trust] for

the particular asset-backed transactions.” Asset-Backed Securities, Securities Act Release No.

33-8518, Exchange Act Release No. 34-50905, 84 SEC Docket 1624 (Dec. 22, 2004).

8

21. After receiving the portfolio of mortgage loans, the trust will issue securities,

referred to as “certificates,” using the pool of loans as collateral. Investors (or

“Certificateholders”) acquire an ownership interest in the mortgage loan pool and rights to the

income flowing from the mortgages (the borrowers’ payments of principal and interest on their

mortgages).

22. The HVMLT 2005-10 securitization, which closed on August 31, 2005, was

effected through this basic process. Countrywide Home Loans sold the Loans − 4,484 mortgages

with an aggregate principal balance of approximately $1.75 billion − to GCFP pursuant to the

Master Mortgage Loan Purchase and Servicing Agreement dated as of April 1, 2003, as amended

by the amendment dated as of November 1, 2004, and as reconstituted pursuant to the

Reconstituted Servicing Agreement dated as of August 1, 2005 (the “Servicing Agreement”). A

true and correct copy of the Servicing Agreement is attached as Exhibit A. GCFP then sold the

Loans to Greenwich Capital Acceptance, Inc. (the “Depositor”) through the Mortgage Loan

Purchase Agreement (“MLPA”). A true and correct copy of the MLPA is attached as Exhibit B.

Pursuant to the Pooling Agreement (the “Pooling Agreement”), the Depositor then conveyed the

Loans to the Trust, which issued approximately $1.75 billion in certificates and delivered those

certificates to the Depositor for sale to Certificateholders. A true and correct copy of the Pooling

Agreement is attached as Exhibit C. The Certificates were marketed and sold via, among other

things, a prospectus supplement, dated February 22, 2005 (“the Prospectus Supplement”). A true

and correct copy of the Prospectus Supplement is attached as Exhibit E.

9

II. THE RIGHTS OF THE TRUSTEE TO PROTECT THETRUST AND THE INTERESTS OF CERTIFICATEHOLDERS.

A. The Trustee Has Authority To EnforceThe Seller and Mortgage Representations

23. Pursuant to the Pooling Agreement, the Trustee has the power to exercise all of

GCFP’s rights against Countrywide under the Servicing Agreement. The MLPA assigns

GCFP’s rights to the Depositor. Specifically, Section 2.01 of the MLPA provides:

[GCFP] hereby assigns to [the Depositor] all of its rights andinterest (but none of its obligations) under the ServicingAgreement and the Letter Agreement to the extent relating to theLoans. The [Depositor] hereby accepts such assignment, and shallbe entitled to exercise all such rights of [GCFP] under theServicing Agreement and the Letter Agreement as if [theDepositor] had been a party to the agreement.

24. The Depositor then assigned all of its rights under the MLPA to the Trustee.

Section 2.01(a) of the Pooling Agreement states:

Concurrently with the execution and delivery of this Agreement,the Depositor does hereby assign to the Trustee all of its rights andinterest under the Mortgage Loan Purchase Agreement, includingall rights of [GCFP] under the Servicing Agreement to the extentassigned in the Mortgage Loan Purchase Agreement. The Trusteehereby accepts such assignment, and shall be entitled to exerciseall rights of the Depositor under the Mortgage Loan PurchaseAgreement and all rights of [GCFP] under the ServicingAgreement as if, for such purpose, it were the Depositor or[GCFP], as applicable . . . .

The assigned rights under Section 2.01(a) specifically and expressly include the “right to enforce

remedies for breaches of representations and warranties and delivery of Mortgage Loan

documents. The “Trust Fund,” as defined in the Pooling Agreement, includes the rights to

enforce Countrywide’s obligations under the Servicing Agreement and the MPLA. Under

Section 2.07 of the Pooling Agreement, the Certificateholders own the Trust Fund. Thus, once

the Loans were securitized in the Trust, Countrywide owed its obligations under the Servicing

10

Agreement, including compliance with the Mortgage and Seller Representations, to the Trust,

with the Trustee empowered to enforce such obligations on behalf of the Certificateholders. The

investors at no point prior to the Securitization were afforded the opportunity to perform due

diligence on the Loans.

B. The Seller Representation

25. Section 7.01 of the Servicing Agreement contains the Seller Representations.

Countrywide made, among others, the following representation:

No Untrue Statements or Material Omissions: No writtenstatement, report or other document prepared and furnished or tobe prepared and furnished by the Seller pursuant to this Agreementor in connection with the transactions contemplated herebycontains any untrue statement of material facts or omits to state amaterial fact necessary to make the statements contained thereinnot misleading.

Servicing Agreement § 7.01(ix).

26. This Seller Representation was and is material to the Trust, the Certificateholders

and, on information and belief, GCFP when it purchased the Loans from Countrywide. Through

this Seller Representation, Countrywide promised that the written information it provided in

connection with the sale of the Loans − including the description and documentation of critical

Loan data and the underwriting guidelines used to originate the Loans, as well as the

documentation in the Mortgage Loan Files − was not false or misleading. Upon information and

belief, without this assurance, the Loans would not have been purchased and securitized in the

Trust.

C. The Mortgage Representations

27. Section 7.02 of the Servicing Agreement contains the Mortgage Representations.

Countrywide made fifty specific representations and warranties including, but not limited to, the

following:

11

Compliance with underwriting guidelines [Servicing Agreement § 7.02(xxiii)]:The Mortgage Loans were underwritten generally in accordance with Countrywide’sunderwriting standards in effect at the time the mortgage loan was originated oracquired and the underwriting guidelines described in the related purchase price andterms letter.

Compliance with law [Servicing Agreement § 7.02(vii)]: Any and all requirementsof any federal, state or local law including, without limitation, all applicablepredatory and abusive lending, usury, truth in lending, real estate settlementprocedures, consumer credit protection, equal credit opportunity or disclosure lawsapplicable to the Mortgage Loans were complied with.

Accuracy of mortgage loan schedule [Servicing Agreement § 7.02(i)]: Theinformation set forth in the mortgage loan schedule, which included the mortgagor’sname, the mortgaged property’s address, the type of residence, the appraisal value,the type of documentation program under which the mortgage was originated, amongother information, was complete, true, and correct.

Loan file complete [Servicing Agreement § 7.02(xxxix)]: The mortgage note, themortgage, the assignment of mortgage and any other documents required to bedelivered with respect to each Mortgage Loan pursuant to the custodial agreement,had been delivered to the custodian all in compliance with the specific requirementsof the custodial agreement. With respect to each Mortgage Loan, Countrywide wasin possession of a complete mortgage file in except for such documents as had beendelivered to the custodian.

Legal and customary origination and servicing practices [Servicing Agreement §7.02(xx)]: The origination and collection practices used by Countrywide with respectto each mortgage note and mortgage had been in all respects legal, proper, prudentand customary in the mortgage origination and servicing business.

Qualified appraisal [Servicing Agreement § 7.02(xxv)]: The mortgage filecontained an appraisal of the related mortgage property signed prior to the approvalof the Mortgage Loan application by an appraiser which met the minimum FannieMae or Freddie Mac requisite qualifications for appraisers, appointed by theoriginator, who had no interest, direct or indirect, in the mortgaged property or in anyloan made on the security thereof, and whose compensation was not affected by thedisapproval of the Mortgage Loan.

Maximum loan-to-value ratio [Servicing Agreement § 7.02(xxxi)]: No MortgageLoan had a loan-to-value ratio at origination in excess of 95% or as otherwise setforth in the related purchase price and terms letter.

No knowledge of adverse conditions [Servicing Agreement § 7.02(xxx)]:Countrywide had no knowledge of any circumstances or condition with respect to anymortgage, mortgaged property or mortgagor that could reasonably have been

12

expected to cause the Mortgage Loan to become delinquent, or adversely affect thevalue of the Mortgage Loan.

No fraud in origination or servicing [Servicing Agreement § 7.02(xliii)]: Nofraud was committed by Countrywide in connection with the origination or servicingof each Mortgage Loan and to the best of Countrywide’s knowledge, no fraud wascommitted with respect to each Mortgage Loan on the part of the mortgagor or anyother person involved in the origination of the Mortgage Loan.

28. The Mortgage Representations were and are material to the Trust, the

Certificateholders and, on information and belief, GCFP when it purchased the Loans from

Countrywide. Through the Mortgage Representations, Countrywide promised that its Loans met

certain credit quality thresholds that indicated that borrowers would be able to repay their Loans

on time and in full, that the Loans were originated in compliance with legal requirements, and

that Countrywide had the documentation required to issue the Loans. Upon information and

belief, without these assurances, the Loans would not have been purchased and securitized in the

Trust, or at the very least, would not have been purchased for the price paid.

D. Defendants’ Liability For Breaches ofthe Seller and Mortgage Representations

29. Reflecting the importance of the Seller and Mortgage Representations, and the

inability of the Trust or Certificateholders to review the Loans prior to securitization,

Countrywide accepted the risk that if it failed to abide by its promises, it − not the Trust or

Certificateholders − would bear the consequences.

30. In the event that Countrywide breached a Seller Representation in Section 7.01 of

the Servicing Agreement, GCFP, and thus the Trustee, had the unfettered option to demand that

Countrywide repurchase “all of the Mortgage Loans . . . at the Repurchase Price.” Servicing

Agreement § 7.03. This straightforward remedy reflects (a) the difficulty and burden involved in

repairing the damage caused to the Trust from misrepresentations that go to the core of this

transaction and involve more than defects in Loans that could be efficiently repurchased on a

13

loan-by-loan basis; and (b) the understanding that not only did the Loans have to conform to the

Mortgage Representations, but the documentation provided by Countrywide in connection with

the sale and securitization of the Loans had to be true and accurate.

31. In addition to the remedy provided for a breach of the Seller Representation, in

the event that a Loan breaches one of Countrywide’s Mortgage Representations, and that breach

“materially and adversely affects the value of one or more of the Mortgage Loans” or “materially

and adversely affects the interests of [GCFP] in one or more of the Mortgage Loans,” Section

7.03 of the Servicing Agreement states that Countrywide “shall have a period of ninety (90) days

from the earlier of its discovery of a breach or the receipt by [Countrywide] of notice of such a

breach within which to correct or cure such breach.”

32. Countrywide further “covenant[ed] and agree[d] that if any such breach cannot be

corrected or cured within” the ninety-day cure period, Countrywide “shall . . . repurchase such

Mortgage Loan at the Repurchase Price” (the “Repurchase Obligation”). The “Repurchase

Price” at which Countrywide must repurchase the Loan is defined in the Servicing Agreement as

a price equal to (i) the stated principal balance of the Mortgage Loan, plus (ii) accrued interest on

the stated principal balance at a specified rate, less amounts received or advanced in respect of

such repurchased Mortgage Loan being held in a custodial account for distribution in the month

of repurchase.

33. To the extent any of the Mortgage Representations were made only “to the best of

[Countrywide’s] knowledge, after reasonable inquiry and investigation,” the Servicing

Agreement made clear that Countrywide had to repurchase Loans that breached Mortgage

Representations regardless of its knowledge. Section 7.03 states that, in the event of a “best of

knowledge” qualifier, “if it is discovered by either [Countrywide] or [GCFP] that the substance

14

of such representation and warranty is inaccurate and such inaccuracy materially and adversely

affects the value of the related Mortgage Loan, [GCFP, and hence the Trustee] shall be entitled

to all the remedies to which it would be entitled for a breach of representation or warranty,

including, without limitation, the repurchase requirements contained [in Section 7.03],

notwithstanding [Countrywide’s] lack of knowledge with respect to the inaccuracy at the time

the representation or warranty was made.” Servicing Agreement § 7.03.

34. “In addition to such repurchase . . . obligation,” Countrywide agreed to

“indemnify [GCFP] and hold it harmless against any losses, damages, penalties, fines,

forfeitures, reasonable and necessary legal fees and related costs, judgments, and other costs and

expenses resulting from any claim, demand, defense or assertion based on or grounded upon, or

resulting from, a breach of [Countrywide’s] representations and warranties contained in this

Section 7.” Servicing Agreement § 7.03. Thus, the rights the Trustee was assigned included not

only the right to enforce Countrywide’s Seller and Mortgage Representations, but also the right

to recover the costs of enforcing those Representations.

35. Section 2.03 of the Pooling Agreement provides that the Trustee shall enforce

Countrywide’s Repurchase Obligation for the benefit of Certificateholders:

Upon its discovery or receipt of written notice of any materiallydefective document in, or that a document is missing from, aMortgage File or of the breach by the Originator of anyrepresentation, warranty or covenant under the [ServicingAgreement] in respect of any Mortgage Loan which materiallyadversely affects the value of that Mortgage Loan or the interesttherein of the Certificateholders, the Trustee shall promptly notifythe Originator of such defect, missing document or breach andrequest that the Originator deliver such missing document or curesuch defect or breach within 90 days from the date that the Sellerwas notified of such missing document, defect or breach, and if theOriginator does not deliver such missing document or cure suchdefect or breach in all material respects during such period, theTrustee shall enforce the Originator’s obligation under the

15

[Servicing Agreement] and cause the Originator to repurchase thatMortgage Loan from the Trust Fund at the Repurchase Price (asdefined in the Purchase Agreement) on or prior to theDetermination Date following the expiration of such 90 dayperiod.1

III. COUNTRYWIDE’S BREACHES OF ITS MORTGAGEREPRESENTATIONS AND SELLER REPRESENTATION.

A. Countrywide Ignored Its Mortgage RepresentationsIn Its Pursuit Of Profit And Market Share.

36. During the time period in which Countrywide originated the Loans, it completely

ignored its underwriting guidelines. Numerous investigations − including by the Securities &

Exchange Commission (“SEC”), state attorneys general, the Financial Crisis Inquiry

Commission, and the United States Congress − have exposed Countrywide’s abject failure to

abide by the very representations and warranties it consistently made to induce the purchase of

its Loans for securitizations, including the purchase of the Loans by the Trust. Internal

Countrywide documents recently disclosed as a result of these investigations, as well as

deposition testimony of Countrywide executives, confirm that Countrywide has known for years

that it breached the Mortgage Representations on a massive scale.

37. In June 2009, the SEC initiated a civil action against Countrywide executives

Angelo Mozilo, David Sambol, and Eric Sieracki. On September 16, 2010, the District Court

denied the defendants’ motions for summary judgment. The District Court found that the SEC

raised genuine issues of fact as to, among other things, whether the defendants had

misrepresented the quality of Countrywide’s underwriting processes:

The SEC has presented evidence that these statements regardingthe quality of Countrywide’s underwriting guidelines and loanproduction were misleading in light of Defendants’ failure to

1 The repurchase obligation could also have been satisfied by Countrywide substituting a conforming mortgageloan for a defective mortgage loan, but this substitution option was only available to Countrywide until August 31,2007 − the second anniversary of the August 31, 2005 closing of the Securitization.

16

disclose, inter alia, that: (1) As a consequence of Countrywide’s“matching strategy,” Countrywide’s underwriting “guidelines”would end up as a composite of the most aggressive guidelines inthe market . . . and (2) Countrywide routinely ignored its officialunderwriting guidelines, and in practice, Countrywide’s onlycriterion for approving a loan was whether the loan could be soldinto the secondary market.

For example, Countrywide’s Chief Risk Officer, John McMurray,explained in his deposition that Countrywide mixed and matchedguidelines from various lenders in the industry, which resulted inCountrywide’s guidelines being a composite of the mostaggressive guidelines in the industry . . . .

SEC has also presented evidence that Countrywide routinelyignored its official underwriting guidelines to such an extent thatCountrywide would underwrite any loan it could sell into thesecondary mortgage market. According to the evidence presentedby the SEC, Countrywide typically made four attempts to approvea loan . . . . According to the testimony of the Managing Directorof Countrywide Home Loans’ Secondary Marketing Division, oncethe loan was referred to Countrywide’s Secondary MarketsStructured Lending Desk, the sole criterion used for approving theloan was whether or not the loan could be sold in the secondarymarket. . . . As a result of this process, a significant portion(typically in excess of 20%) of Countrywide’s loans were issued asexceptions to its official underwriting guidelines . . . .

In light of this evidence, a reasonable jury could conclude thatCountrywide all but abandoned managing credit risk through itsunderwriting guidelines[.]

S.E.C. v. Mozilo, No. CV 09-3994, 2010 WL 3656068, at *10 (C.D. Cal. Sept. 16, 2010)

(emphasis in the original). The Court also found that the SEC presented evidence from which a

jury could find Countrywide’s statistics regarding “prime” mortgages to be misleading, based on

Countrywide’s internal definition of that term. Id. at *14-15. Mozilo, Sambol, and Sieracki,

subsequently settled with the SEC on the eve of trial, agreeing to pay substantial fines.

38. The testimony and documents only recently made available by way of the SEC’s

investigation confirm that Countrywide was systematically abusing “exceptions” and low-

documentation processes in order to circumvent its own underwriting standards and in order to

17

grow its volume by implementing a “matching” strategy that let it to lead a race to the bottom,

finding borrowers who, per the underwriting guidelines, would have never (and should have

never) qualified for a loan. A former finance executive at Countrywide explained that: “To the

extent more than 5 percent of the [mortgage] market was originating a particular product, any

new alternative mortgage product, then Countrywide would originate it . . . . [I]t’s the proverbial

race to the bottom.”

39. For instance, the SEC has revealed that, in November 2007, Countrywide

prepared a “lessons learned” analysis. This included key observations from interviews of

Countrywide’s employees and culminated in an internal presentation. In this analysis,

Countrywide repeatedly admitted that it was singularly focused on market share and its

“matching” strategy:

“We were driven by market share, and wouldn’t say ‘no’ (to guideline expansion).”

“Competitiveness and aggressiveness are great, and part of our DNA. However, itcan lead to arrogance and lack of friends. There are times when our strengths canturn into our weaknesses.”

“The strategies that could have avoided the situation were not very appealing at thetime. Do not produce risky loans in the first place: This strategy would have hurt ourproduction franchise and reduced earnings.”

“Market share, size and dominance were driving themes . . . . Created huge upside ingood times, but challenges in today’s environment. Net/net it was probably worth it.”

40. Countrywide also repeatedly admitted that the “matching” strategy led to product

development far outpacing its risk-assessment procedures and misaligned the incentives of its

employees:

“With riskier products, you need to be exquisite in off-loading the risk. This putssignificant pressure on risk management. Our systems never caught up with the risks,or with the pace of change.”

“Risk indicators and internal control systems may not have gotten enough attention inthe institutional risk and Board committees.”

18

“Not enough people had an incentive to manage risk.”

“Decentralized and local decision making were another characteristic of our model . .. The downside was fewer risk controls and less focus on risk, as the local decisionmakers were not directly measured on risk.”

“Our wide guidelines were not supported by the proper infrastructure (credit, riskmanagement).”

“[W]e did not put meaningful boundaries around the [broad product] strategy, evenwhen our instincts might have suggested that we do so, and we allowed the model tooutrun its critical support infrastructure in investment and credit risk management . . .. Our risk management systems were not able to provide enough counterbalance . . . .”

“The focus of production was volume and margin, not credit risk. There was alsomassive emphasis on share.”

“Structure and capabilities of Secondary not in-sync with production.”

41. In a recently revealed March 28, 2006 e-mail to Mr. Sambol and others, Mr.

Mozilo admitted that the problems with loans were caused by “errors of both judgment and

protocol.” And in an April 13, 2006 e-mail, Mr. Mozilo wrote to Mr. Sieracki and others that he

was concerned that certain subprime loans had been originated “with serious disregard for

process [and] compliance with guidelines,” resulting in the delivery of loans “with deficient

documentation”:

I want Sambol to take all steps necessary to assure that ourorigination operation “follows guidelines” for every product thatwe originate. I have personally observed a serious lack ofcompliance within our origination system as it relates todocumentation and generally a deterioration in the quality of loansoriginated versus the pricing of those loan[s]. In my conversationswith Sambol he calls the 100% sub prime seconds as the “milk” ofthe business. Frankly I consider that product line to be the poisonof ours. Obviously as CEO I cannot continue the sanctioning ofthe origination of this product until such time I can get concreteassurances that we are not facing a continuous catastrophe.Therefore I want a plan of action not only from Sambol but equallyfrom McMurray as to how we can manage this risk going forward.

19

42. In a recently-published June 2006 email chain, which included Countrywide’s

Chief Risk Officer, John McMurray, and Mr. Sambol, Countrywide circulated the results of an

internal audit. Among the findings were that “approximately 40% of the Bank’s reduced

documentation loans . . . could potentially have income overstated by more than 10% and a

significant percent of those loans would have income overstated by 50% or more.” Mr.

McMurray admitted that it is “obviously the case” that “perhaps many” of these overstatements

were the result of misrepresentations. Another Countrywide Risk Officer, Clifford Rossi,

agreed, testifying that “the vast majority” of the overstated income amounts were “likely” due to

misrepresentations.

43. According to documents released by the SEC, Countrywide’s Frank Aguilera, a

Managing Director responsible for risk management, reported the “particularly alarming” results

of an internal review on June 12, 2006. He reported to others in Countrywide that 23% of the

subprime loans at the time were generated as exceptions, even taking into account “all

guidelines, published and not published, approved and not yet approved.” Again, this study

occurred during the same period in which the Loans were being generated and included in the

Trust.

44. In April 2005, a Countrywide Managing Director admitted that the “exception”

policy was not an attempt to deal with “compensating factors” that might justify a deviation from

standard underwriting guidelines, but rather was an attempt to “approve all loans submitted . . .

which are later determined to be outside [guidelines],” and an attempt to “keep pace with fast

changing markets.”

45. Countrywide’s Chief Risk Officer, John McMurray, would later testify to the SEC

that Countrywide’s “matching policy” was a very important part of Countrywide’s “culture of

20

obtaining a larger market share”, and that it led to the routine use of “exceptions” in order to

issue as many loans as possible.

46. In a February 2007 internal email, a Regional Vice President noted that borrowers

who did not qualify for a loan would be “flip[ped]” into stated-income products. Loan officers

would then coach borrowers as to what income they would have to claim in order to qualify.

Other former employees have similarly confirmed that Countrywide instructed borrowers

regarding how to falsify their low- or no-documentation loan applications in order to circumvent

the normal underwriting process. One Countrywide employee estimated that approximately 90%

of all reduced-documentation loans sold out of the employee’s Chicago office had inflated

incomes.

47. Throughout the period during which Countrywide originated the Loans, it knew it

was failing to follow the underwriting guidelines with which it promised to comply.

Countrywide therefore had and has actual knowledge that the Mortgage Representation breaches

identified in the re-underwriting review are just the tip of the iceberg. Irrespective of notice from

the Trustee, Countrywide has actual knowledge of additional breaches of Mortgage

Representations throughout the mortgage pool. The governing documents require the repurchase

of any Loan within 90 days of discovery of a breach of a Mortgage Representation that

materially and adversely affects the interests of the Trust in such Loan. Despite the knowledge

of rampant breaches evident from its public statements and disclosures, Countrywide has failed

to repurchase any Loans on its own accord.

21

B. Countrywide’s Failure To Adhere To Its Represented UnderwritingGuidelines Severely Damaged The Trust.

48. As of June 20, 2011, there were 2,084 Loans remaining in the mortgage pool. Of

those remaining Loans, 958 Loans − a staggering 46% of the current mortgage pool − have either

defaulted or become delinquent for at least sixty days as of June 20, 2011.

49. After observing this severe deterioration in the performance of the Trust, certain

Certificateholders requested to inspect the Mortgage Loan Files for a sample of 786 Loans. Each

of the 786 Loans was non-performing − i.e., the borrower was either delinquent in his or her

mortgage payments or had already defaulted on the mortgage. A mortgage underwriting

consultant was retained to examine the Files for compliance with Countrywide’s Mortgage

Representations.

50. The consultant used the same mortgage underwriting guidelines that Countrywide

purportedly used to issue the Loans in the first place. Each Mortgage Loan File was analyzed to

confirm the accuracy of legal documents, credit documentation, appraisal analysis, and the

underwriting decision as a whole. The review examined the File for any red flags that should

have been caught by Countrywide, such as evidence that stated income was unreasonable or that

debts were not fully disclosed. The consultant then determined whether there existed a breach of

the Mortgage Representations.

51. The results of this investigation are striking, but hardly surprising given

Countrywide’s overall misconduct − Countrywide breached its Mortgage Representations on a

massive scale. Of the 786 sampled Loans, 520 Loans − or fully 66% − contained breaches of

one or more Mortgage Representations.

52. The Trustee received notice of the breaches of Mortgage Representations based

on the investigation of the re-underwriting consultant. The Trust then promptly notified

22

Countrywide in writing of specific breaches of Mortgage Representations in 520 individual

Loans. The notices included detailed descriptions of each specific breach, including

misrepresentations of income, employment, and debt obligations; breaches of (and defaults

under) the Loan documents; failure to comply with applicable law; inaccurate and false loan-

level information provided to the Trust, Certificateholders and the credit rating agencies; debt-to-

income ratios that exceeded underwriting program guidelines; loan-to-value ratios and combined

loan-to-value ratios that exceeded underwriting program guidelines; and relevant documents that

are either defective or missing from the Mortgage Loan Files. Exhibit D summarizes the

breaches with respect to each Loan.

53. Misrepresentation of Income: A borrower’s ability to repay a mortgage is quite

obviously driven by his or her income. A key measure of ability to repay is the “debt-to-income

ratio” (the “DTI”), or the borrower’s monthly debt obligations compared to his or her monthly

income. The higher the DTI (i.e., the greater the percentage of monthly income a borrower must

devote to debt payments), the greater the risk of default. Countrywide’s underwriting guidelines

set maximum DTIs for borrowers to qualify for particular loan products. Relatedly, a substantial

and sudden increase in debt obligations, or “payment shock increase,” is a standard red flag that

a borrower will not be able to keep up with mortgage payments. High payment shock increases

require an underwriter to closely scrutinize the suitability of a loan for a particular borrower.

Income misrepresentations conceal these fundamental considerations and make the Loans far

riskier and thus less valuable to the Trust and Certificateholders. The following are a few of

many examples of breaches relating to misrepresentation of income.

Loan Number 94075295: A Loan that closed June 2005 with a principal amount of$737,250 was originated under the Reduced Documentation Program. The borrowerstated earnings of $16,800 per month as a senior program administrator at acommunications company. Despite red flags at origination, there is no evidence in

23

the file that the loan underwriter tested the reasonableness of the borrower’s statedincome, particularly given the payment shock increase of 88.27%. Subsequent re-underwriting revealed that the borrower filed Chapter 7 Bankruptcy in October 2007.The Statement of Financial Affairs, filed with the bankruptcy petition, indicated theborrower was self-employed and reported no income for 2005. The borrower’srecalculated DTI based on all evidence uncovered in the forensic review is infinitebased on the total lack of any income, and is thus egregiously excessive of theguideline maximum of 38%.

Loan Number 94685093: A Loan that closed July 2005 with a principal amount of$642,000 was originated under the Stated Income/Stated Asset Program. Theborrower stated earnings of $15,000 per month as a sales manager at an architecturaldesign company. Despite red flags at origination, there is no evidence in the file thatthe loan underwriter tested the reasonableness of the borrower’s stated income,particularly given the payment shock increase of 191.6% and multiple consumer debtpayment delinquencies. Subsequent re-underwriting verified that the borrower hadannual earnings of $99,250, or $8,270.83 a month, for 2005. The borrower’srecalculated DTI based on all evidence uncovered in the forensic review is 54.57%,exceeding the guideline maximum of 38%.

Loan Number 103250441: A Loan that closed July 2005 with a principal amount of$675,000 was originated under the Reduced Documentation Program. The borrowerstated earnings of $20,000 per month as a fire captain at a municipal fire department.Despite red flags at origination, there is no evidence in the file that the loanunderwriter tested the reasonableness of the borrower’s stated income, particularlygiven the payment shock increase of 246.7%. Subsequent re-underwriting verifiedthat the borrower had annual earnings of $123,758.07, or $10,312.34 a month, for2005. The borrower’s recalculated DTI based on all evidence uncovered in theforensic review is 71.58%, greatly exceeding the guideline maximum of 38%.

Loan Number 93265626: A Loan that closed June 2005 with a principal amount of$513,000 was originated under the Reduced Documentation Program. The borrowerstated earnings of $9,200 per month as a district manager at a cellular telephone retailcompany. Despite red flags at origination, there is no evidence in the file that theloan underwriter tested the reasonableness of the borrower’s stated income. Supportthat the borrower’s income was overstated included that the borrower held only$13,150.44 of cash assets, or just over one month of stated income, in reserve.Additionally, the borrower’s average deposits with Wells Fargo and Bank of Americadid not support the stated monthly income. Subsequent re-underwriting revealed thatthe borrower filed Chapter 7 Bankruptcy in February 2008. Schedule I, filed with thebankruptcy petition, indicated the borrower worked for a hotel company inhousekeeping for 2005. Furthermore, the Statement of Financial Affairs, also filedwith the bankruptcy petition, indicated the borrower’s actual annual income was only$23,859.41 for 2006. The borrower’s 2005 income was not disclosed, but thebankruptcy petition indicated the borrower retained the same employment in 2005and 2006. The borrower’s recalculated DTI based on all evidence uncovered in theforensic review is 166.59%, egregiously exceeding the guideline maximum of 38%.

24

54. Misrepresentation of Debt Obligations: Proper review of a borrower’s existing

debt obligations is similarly a key component of loan underwriting. Like income, a borrower’s

existing debt impacts DTI. Misrepresentations of debt obligations have material and adverse

effects on the value of a loan to the Trust and Certificateholders as well as their interest therein,

exponentially increasing the credit risk inherent in the loan. The following are a few of many

examples of breaches relating to misrepresentation of debt obligations.

Loan Number 91328917: A Loan that closed March 2005 with a principal amount of$650,000 was originated under the Reduced Documentation Program. The loanunderwriter approved the loan with a 37.22% DTI. The borrower failed to discloseall of the properties he owned or was in the process of acquiring at the time oforigination. Despite red flags at origination, there is no evidence in the file that theloan underwriting process addressed the additional properties and debt. Support thatadditional debt existed included a credit report in the Mortgage Loan File containingmultiple recent inquiries. Credit inquiries are generally a sign that the borrower waspursuing other loans. Subsequent re-underwriting revealed that just two months priorto the subject loan’s close, the borrower financed another property with liens totaling$1,115,000. Additionally, a LexisNexis phone lookup report confirmed the borroweroccupied the undisclosed property. The borrower’s recalculated DTI based on allevidence uncovered in the forensic review was 69.81%, greatly exceeding theguideline maximum of 38%.

Loan Number 92016901: A Loan that closed April 2005 with a principal amount of$535,800 was originated under the Full Income Documentation Program. The loanunderwriter approved the loan with a 38.19% DTI (already in excess of the guidelinemaximum of 38%). The borrower failed to disclose all of the properties he owned orwas in the process of acquiring at the time of origination. Despite red flags atorigination, there is no evidence in the file that the loan underwriting processaddressed the additional properties and debt. Support that additional debt existedincluded a credit report in the Mortgage Loan File reflecting another address asrecently as September 2004, multiple recent credit inquiries and the borrower’s 2004tax returns reflecting the other address. All items on the credit report wentunquestioned and the other address was not the same as the borrower’s listeddeparting address. Subsequent re-underwriting revealed that nine months prior to thesubject loan’s close, the borrower purchased another property with a $300,000mortgage. The borrower’s recalculated DTI based on the evidence uncovered in theforensic review was 47.75%, further exceeding the guideline maximum of 38%.

Loan Number 109170216: A Loan that closed July 2005 with a principal amount of$520,000 was originated under the Reduced Documentation Program. The loanunderwriter approved the loan with a 42.52% DTI (already in excess of the guidelinemaximum of 38%). The borrower failed to disclose all of the properties he owned or

25

was in the process of acquiring at the time of origination. Despite red flags atorigination, there is no evidence in the file that the loan underwriting processaddressed the additional properties and debt. Support that additional debt existedincluded a previous address listed on the loan application with no disclosure as towhether this previous address had been owned or rented. Subsequent re-underwritingrevealed that thirteen months prior to the subject loan’s close, the borrower financedanother property with a $2,750,000 mortgage. The borrower’s recalculated DTIbased on all evidence uncovered in the forensic review was 126.83%, furtherexceeding the guideline maximum of 38%.

Loan Number 111581863: A Loan that closed July 2005 with a principal amount of$408,750 was originated under the Reduced Documentation Program. The loanunderwriter approved the loan with a 8.78% DTI. The borrower failed to disclose allof the properties he owned or was in the process of acquiring at the time oforigination. Despite red flags at origination, there is no evidence in the file that theloan underwriting process addressed the additional properties and debt. Support thatadditional debt existed included a credit report in the Mortgage Loan File containingmultiple recent inquiries. These were not questioned. Subsequent re-underwritingrevealed that the borrower refinanced two additional properties just two months priorto the subject loan’s close. In May and June 2005, the borrower refinanced, throughCountrywide, one property with liens totaling $383,950. In May 2005, the borrowerrefinanced another property for $247,500. The borrower’s recalculated DTI based onall evidence uncovered in the forensic review was 113.65%, egregiously exceedingthe guideline maximum of 38%.

55. Misrepresentation of Employment: The following are a few of many examples

of breaches relating to misrepresentation of employment.

Loan Number 109413803: A Loan that closed July 2005 with a principal amount of$288,000 was originated under the Reduced Documentation Program. The borrowerclaimed to be employed as a registered nurse at a municipal hospital and statedmonthly earnings of $8,000. Subsequent re-underwriting verified that the borrowerhad misrepresented her employment title. A records search of the state department ofhealth professionals and LexisNexis indicated the borrower did not become licensedas a registered nurse until July 2010, five years after the loan originated. At the timeof the loan, the borrower was a licensed practical nurse. The borrower filed Chapter7 Bankruptcy in October 2008. The Statement of Financial Affairs, filed with thebankruptcy petition, indicated the borrower had annual earnings of $45,000, or$3,750 a month, for 2006. The borrower’s employment title was misrepresented inviolation of the applicable underwriting guidelines. In addition, the borrower’srecalculated DTI based on all evidence uncovered in the forensic review is 80.03%,greatly exceeding the guideline maximum of 38%.

Loan Number 97270316: A Loan that closed April 2005 with a principal amount of$255,000 was originated under the Reduced Documentation Program. The co-borrowers claimed to have been employed as managers at a manufacturer of

26

construction materials. Subsequent re-underwriting revealed that one of theborrowers was actually the owner, not a wage earner, of the company. The co-borrower was thus employed by a family member. The applicable underwritingguidelines require that self-employment be verified by a valid business license or aneutral third party, such as a professional organization. Employment by a familymember must be verified by the last two years signed federal income tax returns and acompleted verification of employment form. None of these forms of verificationwere obtained. The borrowers’ employment was misrepresented in violation of theapplicable underwriting guidelines.

Loan Number 92008396: A Loan that closed April 2005 with a principal amount of$1,300,000 was originated under the Reduced Documentation Program. Theborrower claimed to be self-employed as the owner of a chiropractic center and statedmonthly earnings of $31,500. The applicable underwriting guidelines require thatself-employment be verified by a valid business license or a neutral third party, suchas a professional organization. Despite red flags at origination, there is no evidencein the file that the loan underwriting process obtained these forms of verification.Support that the borrower was not the owner of the business included a letter from theborrower’s accountant that failed to verify that the borrower owned the business. Inaddition, it was imprudent of the underwriter to accept a stated income of $31,500,which is much greater than the $20,631.25 per month identified as the 90th percentileincome level for a chiropractor in Newport Beach, CA, according to Salary.com.Subsequent re-underwriting revealed that the borrower’s husband and anotherindividual were actually the owners of the business. The borrowers’ employment wasmisrepresented in violation of the applicable underwriting guidelines.

56. LTV or CLTV Ratios Exceed Program Guidelines: LTV reflects the

percentage of a property’s appraised value that a borrower owns. For example, an 80% LTV

means that the mortgage equals 80% of the property’s value, and the borrower owns the

remaining 20%. That 20% equity provides the borrower with an important incentive not to

default (and potentially lose the equity in the property) and also acts as a cushion in the event a

borrower is unable to pay. CLTV reflects similar credit risk concerns, but combines the amount

of any other liens on the subject property. Countrywide’s underwriting guidelines provide for

maximum LTV and CLTV ratios for particular loan products, and Countrywide made specific

Mortgage Representations regarding the LTVs and CLTVs of the Loans. The following are a

few of many examples of breaches relating to excessive loan-to-value (“LTV”) or combined

loan-to-value (“CLTV”) ratios, which violated Countrywide’s underwriting guidelines.

27

Loan Number 94667771: A Loan that closed July 2005 with a principal amount of$636,000 was originated under the Reduced Documentation Program. The loanunderwriter approved the loan with an 80 percent LTV ratio and a 90 percent CLTVratio. Under the applicable underwriting guidelines, the CLTV ratio was to becalculated utilizing the lesser of the appraised value or purchase price plusdocumented home improvements, in the case of a mortgaged property purchasedwithin one year of the origination of the related loan. The subject property waspurchased in September 2004, which was within eleven months preceding the subjectloan. The appraised value of $795,000 was incorrectly used to calculate the CLTVratio. Utilizing the purchase price of $719,000, the actual LTV ratio was 88.46percent and the actual CLTV ratio was 99.51 percent, exceeding the guidelinemaximums of 80 percent and 90 percent, respectively.

Loan Number 100010705: A Loan that closed May 2005 with a principal amount of$1,500,000 was originated under the Reduced Documentation Program. The loanunderwriter approved the loan with an 80 percent LTV ratio and a 90 percent CLTVratio. Under the applicable underwriting guidelines, the CLTV ratio was to becalculated utilizing the lesser of the appraised value or purchase price plusdocumented home improvements, in the case of a mortgaged property purchasedwithin one year of the origination of the related loan. The subject property waspurchased in December 2004, which was within five months preceding the subjectloan. The appraised value of $1,875,000 was incorrectly used to calculate the LTVand CLTV ratios. Utilizing the purchase price of $1,671,000, the actual LTV ratiowas 89.77 percent and the actual CLTV ratio was 100.99 percent, thus violating theapplicable underwriting guidelines.

Loan Number 100027499: A Loan that closed April 2005 with a principal amount of$608,000 was originated under the Reduced Documentation Program. The loanunderwriter approved the loan with an 80 percent LTV ratio and a 90 percent CLTVratio. Under the applicable underwriting guidelines, the CLTV ratio was to becalculated utilizing the lesser of the appraised value or purchase price plusdocumented home improvements, in the case of a mortgaged property purchasedwithin one year of the origination of the related loan. The subject property waspurchased in June 2004, which was within nine months preceding the subject loan.The appraised value of $760,000 was incorrectly used to calculate the LTV andCLTV ratios. Utilizing the purchase price of $639,000, the actual LTV ratio was95.15 percent and the actual CLTV ratio was 107.04 percent, thus violating theapplicable underwriting guidelines.

57. Missing Documents: The following are a few of many breaches relating to

documents omitted from the Mortgage Loan Files.

Loan Number 94667771: A Loan that closed July 2005 with a principal amount of$636,000 was originated under the Reduced Documentation Program. In addition tolending funds to a borrower who misrepresented his income and failing to properlycalculate the subject loan’s LTV under the applicable underwriting guidelines, the

28

lender also failed to include a HUD-1 form, which is required under applicable lawsand regulations.

Loan Number 109465801: A Loan that closed July 2005 with a principal amount of$880,000 was originated under the Full Income Documentation Program. In additionto lending funds to a borrower with multiple undisclosed debts and failing to verifythe borrower’s occupancy status, the lender also failed to include a copy of the fullyexecuted second mortgage note, which is required to determine loan programcompliance for CLTV ratio.

Loan Number 100025330: A Loan that closed April 2005 with a principal amount of$372,000 was originated under the Reduced Documentation Program. In addition tomaking a loan that exceeded the applicable LTV and CLTV ratios without citingproper compensating factors and violating numerous other provisions of theapplicable underwriting guidelines, the lender failed to include a subject propertyappraisal justifying the LTV/CLTV exceptions, a lien note, a HUD-1 settlementstatement, the final title insurance policy, and a final Countrywide Loan UnderwritingExpert System (CLUES) report. The Mortgage Loan File cannot be properly re-underwritten without these documents.

58. The aforementioned breaches of the Mortgage Representations have a material,

adverse effect on the value of the Loans and the interests therein of the Certificateholders. The

breaches identified thus far, only a few of many in the Loans in the mortgage pool, are severe

and widespread. They demonstrate Countrywide’s large scale failure to abide by its

underwriting guidelines.

C. Countrywide Breached The Seller Representation.

59. In addition to re-underwriting the Loans for conformance with the Mortgage

Representation, the mortgage underwriting consultant analyzed whether the documents in the

Mortgage Loan File contained material misrepresentations. The consultant’s analysis,

supplemented by additional documents provided by Countrywide during discovery, has revealed

that numerous written statements and documents prepared and furnished by Countrywide in

connection with the sale and securitization of the Loans – such as the Prospectus Supplement, the

documents in the Mortgage Loan Files, and the Officer’s Certificate – are rife with material

misrepresentations, misstatements and omissions.

29

60. In particular, the Prospectus Supplement contained, among other things,

disclosures regarding the characteristics of the Loans, Countrywide’s general origination

practices, and the origination practices pertaining to the Loans. For example, Countrywide

represented in the Prospectus Supplement that:

All of the mortgage loans originated or acquired by Countrywide have beenoriginated or acquired in accordance with its credit, appraisal and underwritingstandards. (Prospectus Supplement at S-48)

Countrywide’s underwriting standards are applied by or on behalf of Countrywide toevaluate the prospective borrower’s credit standing and repayment ability and thevalue and adequacy of the mortgaged property as collateral. Under those standards, aprospective borrower must generally demonstrate that the ratio of the borrower’smonthly housing expenses (including principal and interest on the proposed mortgageloan and, as applicable, the related monthly portion of property taxes, hazardinsurance and mortgage insurance) to the borrower’s monthly gross income and theratio of total monthly debt to the monthly gross income (the “debt-to-income” ratios)are within acceptable limits. (Id. at S-49)

Exceptions to Countrywide’s underwriting guidelines may be made if compensatingfactors are demonstrated by a prospective borrower. (Id.)

61. The Prospectus Supplement also contained representations regarding the Loans’

occupancy status (see id., S-27; S-46 – S-47) and LTV ratios (see id., S-28). By including these

and other representations in the Prospectus Supplement, which was circulated to investors and

credit ratings agencies, and making the correspondent Seller Representation, Countrywide

provided additional comfort about the truth and accuracy of the information it provided for the

HVMLT 2005-10 securitization.

62. The consultant’s analysis, as well as ongoing discovery in this action, has

revealed that Countrywide’s disclosures in the Prospectus Supplement contained false and

misleading information. Contrary to Countrywide’s representations, the Loans were not

originated in accordance with the stated underwriting guidelines; their true DTI (i.e., debt-to-

income) and LTV ratios were not within acceptable limits; exceptions to underwriting guidelines

30

were made without explanations or compensating factors; and the underlying properties were

frequently used as investment properties instead of being occupied by the borrower.

63. In addition, the consultant discovered that the residential loan applications in the

Mortgage Loan Files contained extensive misrepresentations of borrowers’ income and

employment data, as well as the occupancy status of the underlying property. For example:

Loan No. 102007462: The loan application initially stated the monthly incomes ofthe borrower and co-borrower as $8,620 and $6,250, respectively. However, thesefigures were subsequently crossed out and rewritten by hand as $3,500 for theborrower and $4,000 for the co-borrower. The file included the following internalCountrywide note confirming that the application was false: “Incomes used forborrowers are unrealistic. Lower them to $3500[] for borrower and $4000[] for [co-borrower]”.

Loan No. 102360277: The borrower submitted two loan applications. The firstapplication, dated in April, represented his income as $20,000 per month. The secondapplication, dated in May, less than one month later, stated that his income at thesame position as $47,830 per month. Further, a May letter from the borrower’slawyer stated that the borrower’s monthly income for each of the four monthspreceding his second application was $15,168.65, $16,174.50, $11,443.15, and$11,480.40, respectively. Nevertheless, Countrywide closed the Loan using theunsubstantiated $47,830 figure.

Loan No. 102172625: The application for a refinancing represented the property asowner-occupied, i.e., occupied by the borrower. However, other documents in theMortgage Loan File, such as the borrower’s credit report, copies of bills, and proof ofinsurance indicated that the borrower’s home was located at a different address.

Loan Nos. 110539448 & 110539472: The applications for these two unrelated Loans− which were closed separately, but on the same date, for the same borrowers, by the same underwriter, at the same Countrywide location − represented that the borrowers did not have any other outstanding debt obligations. However, each of theapplication omitted information regarding the existence of the other Loan. Theapplications also failed to disclose another three pre-existing Loans disbursed to thesame borrowers by Countrywide.

64. Countrywide also made misrepresentations in the Officer’s Certificate that it

provided in connection with the Loans’ sale. The Officer’s Certificate, a form of which is

attached as Exhibit 1 to the Servicing Agreement, was “signed by the Chairman of the Board or

the Vice Chairman of the Board or a President or a Vice President and by the Treasurer or the

31

Secretary or one of the Assistant Treasurers or Assistant Secretaries of [Countrywide], and

delivered to the Purchaser.” (Servicing Agreement § 1.01 (Officer’s Certificate); Ex. 1) Among

other things, the Officer’s Certificate stated that “[a]ll of the representations and warranties of

[Countrywide] contained in Subsections 7.01 and 7.02 of the [Servicing] Agreement were true

and correct in all material respects as of the date of the [Servicing] Agreement and are true and

correct in all material respects as of the date hereof.” (Id., Ex. 1) As discussed above, this

representation was false because the Mortgage Representations in Section 7.02 of the Servicing

Agreement were not true and correct in all material respects.

65. The Seller Representation was critical because the HVMLT 2005-10

securitization was based in large part on the veracity of Countrywide’s documents. Indeed,

Countrywide agreed that the Trustee was not obligated to re-underwrite the Mortgage Loans or

verify that the documents furnished by Countrywide were true and correct:

The fact that the Purchaser or its designee has conducted or has failed to conduct anypartial or complete examination of the Mortgage Files shall not affect the Purchaser’s(or any of its successor’s) rights to demand repurchase, substitution or other relief asprovided herein. (Servicing Agreement § 5)

It is understood and agreed that the representations and warranties set forth inSubsections 7.01 and 7.02 shall survive the sale of the Mortgage Loans to thePurchaser and shall inure to the benefit of the Purchaser, notwithstanding . . . theexamination or failure to examine any Mortgage File. (Servicing Agreement § 7.03)

It is herein acknowledged that, in conducting [its] review, the Trustee and theCustodian on its behalf are under no duty or obligation to inspect, review or examineany [Mortgage Loan File] documents, instruments, certificates or other papers todetermine that they are genuine, enforceable, or appropriate for the representedpurpose or that they have actually been recorded or that they are other than what theypurport to be on their face. (Pooling Agreement § 2.02)

66. By making the Seller Representation in Section 7.01, Countrywide provided

additional comfort that each of its statements and documents were true and correct and not

misleading. Rating agencies, investors, and, on information and belief, GCFP relied on the

32

various written statements, reports, and documents prepared and furnished by Countrywide to

assess the risks and value of the Loans and the Certificates. These documents ranged from the

Prospectus Supplement, the Mortgage Loan Schedule, and the Information Diskette which

disclosed material information regarding the Loans, to the Officer’s Certificate which personally

assured investors of the truth and accuracy of Loan information, to the Mortgage Loan Files

which enabled Certificateholders to subsequently verify this information in case a problem

developed.

67. Countrywide’s wholesale failure to comply with its underwriting guidelines and

its Mortgage Representations − as reflected by the results of the forensic review of the Loans and

continued discovery in this action − provides clear evidence of numerous misrepresentations and

material omissions throughout the written statements and documents prepared and furnished by

Countrywide in connection with the sale of the Loans. In turn, the presence of these untrue

statements and omissions of material fact is a breach of Countrywide’s Seller Representation and

entitles the Trustee to demand that Countrywide repurchase all of the Loans in the Trust.

IV. COUNTRYWIDE’S WRONGFUL REFUSAL TOCOMPLY WITH ITS REPURCHASE OBLIGATIONS.

68. The Trustee promptly sought to enforce Countrywide’s Repurchase Obligation as

it received notice of the substantial breaches of Mortgage Representations. By letter dated May

2, 2011 (the “May 2 Breach Notice”), the Trustee gave notice to Countrywide of 58 Loans with

an aggregate principal balance of $42,977,128 that contained breaches of the Mortgage

Representations that had a material adverse effect on the value of the Loans or the interest

therein of Certificateholders. The May 2 Notice attached a report detailing the numerous

breaches of Mortgage Representations with respect to each of the identified Loans. Pursuant to

Section 7.03 of the Servicing Agreement and Section 2.03 of the Pooling Agreement, the Trustee

33

demanded that Countrywide either cure the defects or repurchase the Loans within ninety days of

the Trustee’s notice.

69. The Trustee continued to make repurchase demands on Countrywide as it

discovered Mortgage Representation breaches with respect to additional Loans. In each case, the

Trustee detailed specific breaches with respect to each loan. Repurchase demands were sent on

the following dates:

On May 12, 2011, for 92 Loans with an aggregate principal balance of $37,032,706(the “May 12 Breach Notice”). The ninety-day cure period with respect to theseLoans expired on August 10, 2011.

On May 19, 2011, for 36 Loans with an aggregate principal balance of $11,193,790(the “May 19 Breach Notice”). The ninety-day cure period with respect to theseLoans expired on August 17, 2011.

On May 25, 2011, for 30 Loans with an aggregate principal balance of $8,049,314(the “May 25 Breach Notice”). The ninety-day cure period with respect to theseLoans expired on August 23, 2011.

On June 2, 2011, for 32 Loans with an aggregate principal balance of $7,656,642 (the“June 2 Breach Notice”). The ninety-day cure period with respect to these Loansexpired on August 31, 2011.

On June 16, 2011, for 65 Loans with an aggregate principal balance of $18,306,891(the “June 16 Breach Notice”). The ninety-day cure period with respect to theseLoans expired on September 14, 2011.

On August 4, 2011, for 163 Loans with an aggregate principal balance of$20,445,820 (the “August 4 Breach Notice”). The ninety-day cure period withrespect to these Loans expired on November 2, 2011.

On August 19, 2011, for 44 Loans with an aggregate principal balance of$11,854,697 (the “August 19 Breach Notice”). The ninety-day cure period withrespect to these Loans expired on November 17, 2011.

The notices described in this Paragraph, together with the May 2 Breach Notice, are collectively

referred to as the “Breach Notices.”

34

70. To date, Countrywide has refused to repurchase 495 out of the 520 Loans

identified through the Breach Notices and has failed to provide any explanation for this failure

despite repeated requests from the Trustee.

71. Countrywide’s pattern and practice of refusing to abide by its unambiguous

obligation to repurchase individual defective Loans is clear evidence that it will continue to do so

when the ninety-day cure period expires for further Loans with breaches that may be discovered

in the future.

72. In addition, the written documentation that Countrywide prepared and furnished

in connection with the sale of the Loans to GCFP and ultimately, the Trust are replete with

untrue statements and omissions of material fact that trigger a breach of Countrywide’s Seller

Representation. There is no method by which Countrywide could cure these extensive

misrepresentations.

73. On August 29, 2011, through its complaint, the Trustee provided notice to

Countrywide that it was exercising its right pursuant to Section 7.03 of the Servicing Agreement

and Section 2.03 of the Pooling Agreement to require Countrywide, within ninety days of

receipt, to repurchase all of the Loans in the mortgage pool. To date, well after the expiration of

the ninety-day cure period, Countrywide has failed to repurchase all of the Loans.

V. LIABILITY OF BANK OF AMERICA AS SUCCESSOR TO COUNTRYWIDE.

74. On January 11, 2008, Bank of America announced that it would purchase

Countrywide for approximately $4.1 billion. Based upon the steps taken to consummate this

transaction, Bank of America and Countrywide engaged in a de facto merger and Bank of

America became the successor-in-interest to Countrywide and its affiliated entities because

(a) there was continuity of ownership between Bank of America and Countrywide,

(b) Countrywide ceased ordinary business soon after the transaction was consummated, (c) there

35

was continuity of management, personnel, physical location, assets and general business

operations between Bank of America and Countrywide, (d) Bank of America assumed the

liabilities ordinarily necessary for the uninterrupted continuation of Countrywide’s business, and

(e) Bank of America assumed Countrywide’s tort and mortgage repurchase liability. Bank of

America also became the successor in interest to Countrywide because the transaction, which

was not an arm’s length transaction and which gave inadequate consideration to Countrywide,

was structured in such a way as to leave Countrywide unable to satisfy its massive contingent

liabilities.

A. The Structure of the Transaction

75. Bank of America Corp.’s Form 8-K, dated January 11, 2008, states that under the

terms of the merger “shareholders of Countrywide receive[d] .1822 of a share of Bank of

America Corporation’s stock in exchange for each share of Countrywide.” In other words,

former Countrywide shareholders became Bank of America shareholders.

76. On July 1, 2008, a subsidiary of Bank of America completed the merger with

Countrywide Financial, the parent of all of the Countrywide entities. Bank of America’s Form

10-Q for the period ending September 30, 2009, reported that “On July 1, 2008, the Corporation

[i.e. Bank of America Corp.] acquired Countrywide through its merger with a subsidiary of the

Corporation . . . . The acquisition of Countrywide significantly expanded the Corporation’s

mortgage originating and servicing capabilities, making it a leading mortgage originator and

servicer.” According to the 10-Q, “Countrywide’s results of operations were included in the

Corporation’s results beginning July 1, 2008.” The Form 10-Q also acknowledged pending

litigation against the Countrywide entities.

77. Following this initial transaction and over the course of the next few months,

Bank of America planned to and did enter into several additional transactions with Countrywide

36

and its various subsidiaries, which Bank of America then controlled. These transactions were

designed both to integrate Countrywide’s operations with Bank of America’s and to leave

Countrywide without any source of income and with insufficient assets to cover its massive

contingent liabilities arising from Countrywide’s mortgage origination, securitization, and

servicing practices. Moreover, these transactions were not negotiated at arm’s length since after

July 1, 2008, Bank of America owned Countrywide.

78. In particular, on July 2, 2008, Countrywide Home Loans, a subsidiary of

Countrywide Financial (controlled by Bank of America as of this date), completed the sale of

some or substantially all of its assets to NB Holdings Corporation, another wholly-owned

subsidiary of Bank of America. Specifically, Countrywide Home Loans sold NB Holdings its

membership interests in Countrywide GP, LLC and Countrywide LP, LLC, whose sole assets

were equity interests in Countrywide Home Loans Servicing LP, in exchange for an

approximately $19.7 billion promissory note. Countrywide Home Loans Servicing LP was the

operating entity which serviced the vast majority of residential mortgage loans for Countrywide

Financial and was an operating business. Countrywide Home Loans also sold a pool of

residential mortgages to NB Holdings Corporation for approximately $9.4 billion. NB Holdings

Corporation is Countrywide Home Loan’s successor.

79. On November 7, 2008, after obtaining the necessary consents and approvals, two

additional transactions facilitated the completion of Bank of America’s merger with

Countrywide. First, in exchange for approximately $1.76 billion, Countrywide Home Loans sold

Bank of America substantially all of its remaining assets. Second, in exchange for promissory

notes of approximately $3.6 billion Bank of America acquired 100% of Countrywide’s equity

interest in various subsidiaries, including Countrywide Bank, FSB. In connection with this

37

transaction, Bank of America also assumed approximately $16.6 billion of Countrywide’s public

debt and related guarantees. These two transactions completed Bank of America’s transfer of

substantially all of the operating and income generating assets of Countrywide Financial out of

the Countrywide entities. In February of 2009 Countrywide Bank, FSB filed an application to

become a National Association, and in April of 2009, Countrywide Bank, NA was merged into

Bank of America. As a result of this merger, Bank of America assumed all of the liabilities of

Countrywide Bank, NA.

80. At the time of the November 2008 transactions, Countrywide Bank, FSB was the

largest Countrywide Financial subsidiary. Countrywide Financial’s 2007 10-K revealed that “as

of December 31, 2007, over 90% of [Countrywide Financial’s] monthly mortgage loan

production occurred in Countrywide Bank” and that as of January 1, 2008 Countrywide

Financial’s “production channels ha[d] moved into the Bank, completing the migration of

substantially all of [Countrywide Financial’s] loan production activities from [Countrywide

Home Loans] to the Bank.” By transferring to itself Countrywide Bank, FSB, along with

substantially all of the assets of Countrywide Home Loans, Bank of America left the remaining

Countrywide entities with only illiquid assets, no ongoing business, no ability to generate

revenue, and insufficient assets to satisfy its contingent liabilities. This conclusion is echoed by

Bruce Bingham (who prepared a report on behalf of Bank of New York Mellon (“BoNY”),

trustee for Countrywide-issued RMBS, attempting to value Countrywide Financial) who found

that Countrywide Financial “has negative earnings”, “minimal operating revenues”, “does not

originate, securitize, or service real estate loans” and “has no operations that by themselves are

economically viable on a go-forward basis.” (June 6, 2011 Bingham Opinion, p. 7).2

2 This report was prepared in connection with the proposed settlement of repurchase claims between Countrywide,Bank of America and BoNY, as trustee for over 500 mortgage-backed securitization trusts sponsored by

38

81. The transactions between Countrywide and Bank of America were intentionally

structured so that Countrywide’s massive contingent liabilities relating to its mortgage

origination, securitization, and servicing practices, including Countrywide Home Loans,

remained with Countrywide while all of its assets and businesses that generated revenue were

sold to Bank of America, thus leaving Countrywide unable to satisfy these liabilities. Not only

did Bank of America control the Countrywide entities at the time these transactions were entered

into, but Bank of America also did not provide adequate consideration for the assets it received

from Countrywide Financial. In other words, in a self dealing transaction, and in exchange for

inadequate consideration, Bank of America intentionally rendered Countrywide Financial and its

affiliated entities, including Countrywide Home Loans, insolvent and unable to satisfy its

creditors. Moreover, Bank of America was fully aware of Countrywide Financial’s contingent

liabilities, and acknowledged responsibility for these liabilities, when it transferred these assets

out of Countrywide. For example, in an interview published on February 22, 2008 in the legal

publication Corporate Counsel, a Bank of America spokesperson acknowledged Countrywide’s

liabilities:

Handling all this litigation won’t be cheap, even for Bank ofAmerica, the soon-to-be largest mortgage lender in the country.Nevertheless, the banking giant says that Countrywide’s legalexpenses were not overlooked during negotiations. ‘We boughtthe company and all of its assets and liabilities,’ spokesman ScottSilvestri says. ‘We are aware of the claims and potential claimsagainst the company and have factored these into the purchase.’

82. One significant entity that Bank of America did not acquire was Countrywide

Securities Corp., which acted as Countrywide Financial’s broker-dealer and underwriter.

However, on October 29, 2008, just before the November transactions, this entity withdrew its

Countrywide-affiliated entities. An Article 77 proceeding in which BoNY is seeking court approval of thesettlement is pending in this Court.

39

registration as a broker dealer from FINRA. Without this registration, Countrywide Securities

was unable to continue in the business it had primarily been engaged in (securities dealing and

underwriting) and so as of October 29, 2008, Countrywide Securities effectively ceased doing

business. This is yet more evidence that Countrywide is no longer engaged in revenue producing

activities.

B. The Actual Consolidation of Bank of America and Countrywide

83. On April 27, 2009, Bank of America rebranded Countrywide Home Loans as

“Bank of America Home Loans.” Many former Countrywide locations, employees, assets, and

business operations now continue under the Bank of America Home Loans brand. On the Form

10-K submitted by Bank of America on February 26, 2010, both Countrywide Capital Markets,

LLC and Countrywide Securities Corporation were listed as Bank of America subsidiaries.

84. Countrywide’s former website now redirects to the Bank of America website.

Bank of America has assumed Countrywide’s liabilities, having paid to resolve other litigation

arising from misconduct such as predatory lending allegedly committed by Countrywide.

85. As is customary in large corporate mergers, at least some of the Countrywide

entities retained their pre-merger corporate names following their merger with Bank of America.

However, Countrywide’s operations are fully consolidated into Bank of America’s and the

Countrywide entities have lost any independent identity they have maintained following the

merger. On April 27, 2009, Bank of America announced in a press release that “[t]he

Countrywide brand has been retired.” Bank of America announced that it would operate its home

loan and mortgage business through a new division named Bank of America Home Loans, which

“represents the combined operations of Bank of America’s mortgage and home equity business

and Countrywide Home Loans.” Bank of America Press Release, “Bank of America Responds to

Consumer Desire for Increased Transparency” (April 27, 2009).

40

86. The press release made clear that Bank of America planned to complete its

integration of Countrywide and its affiliated entities into Bank of America “later this year.” The

press release explained that Bank of America was in the process of rebranding former

Countrywide “locations, account statements, marketing materials and advertising” as Bank of

America Home Loans, and stated that “the full systems conversion” to Bank of America Home

Loans would occur later in 2009. “Bank of America Home Loans” is thus a direct continuation

of Countrywide’s operations; Bank of America has represented that Bank of America Home

Loans is a “trade name” rather than a separate legal entity.

87. As of September 21, 2009, former Countrywide’s bank deposit accounts were

reportedly converted to Bank of America accounts. And on November 9, 2009, online account

services for Countrywide mortgages were reportedly transferred to Bank of America’s Online

Banking website. According to press reports, Bank of America Home Loans will operate out of

Countrywide’s offices in Calabasas, California with substantially the same employees as the

former Countrywide entities.

88. The Bank of America website announced that the companies merged and the

now-discontinued Countrywide website previously redirected inquiries about the merger to the

Bank of America webpage regarding the merger. Bank of America noted on its website that it

was “combining the valuable resources and extensive product lines of both companies.”

89. Under the “Merger History” tab of Bank of America’s website, Countrywide was

included among the list of companies Bank of America has acquired. Under the “Time Line”

tab, the website stated that Bank of America “became the largest consumer mortgage lender in

the country” following its acquisition of Countrywide in 2008. Lastly, under the “Our Heritage”

tab, the website stated that the acquisition of Countrywide “resulted in the launch of Bank of

41

America Home Loans in 2009, making the bank the nation’s leading mortgage originator and

servicer.” The Countrywide logo appeared on the page.

90. Mortgage contracts and legal documents state that BAC Home Loans Servicing,

LP is the entity “formerly known as” Countrywide Home Loans Servicing, a Countrywide

Financial subsidiary, which clearly shows that BAC Home Loans Servicing, LP is the direct

successor to Countrywide Home Loans Servicing, since it is a mere continuation of

Countrywide’s servicing business.

91. Bank of America has described the transaction through which it acquired

Countrywide and its subsidiaries as a merger and made clear that it intended to integrate

Countrywide and its subsidiaries into Bank of America fully by the end of 2009.

92. For example, in a July 2008 Bank of America press release, Barbara Desoer,

identified as the head of the “combined mortgage, home equity and insurance businesses” of

Bank of America and Countrywide Financial, said: “Now we begin to combine the two

companies and prepare to introduce our new name and way of operating.” The press release

stated that the bank “anticipates substantial cost savings from combining the two companies.

Cost reductions will come from a range of sources, including the elimination of positions

announced last week, and the reduction of overlapping technology, vendor and marketing

expenses. In addition, [Countrywide] is expected to benefit by leveraging its broad product set

to deepen relationships with existing Countrywide customers.”

93. Desoer was also interviewed for the May 2009 issue of Housing Wire magazine.

The article reported that:

While the move to shutter the Countrywide name is essentiallycomplete, the operational effort to integrate across two completelydistinct lending and service systems is just getting under way. Oneof the assets [Bank of America] acquired with Countrywide was a

42

vast technology platform for originating and servicing loans, andDesoer says that the bank will be migrating some aspects of [Bankof America’s] mortgage operations over to Countrywide’splatforms.

“Q&A with BofA Mortgage Chief Barbara Desoer,” Housing Wire Magazine (May 2009).

94. Desoer was also quoted as saying: “We’re done with defining the target, and

we’re in the middle of doing the development work to prepare us to be able to do the conversion

of the part of the portfolio going to the legacy Countrywide platforms.” Desoer explained that the

conversion would happen in the “late fall” of 2009, and that the integration of the Countrywide

and Bank of America platforms was a critical goal.

95. After the integration had further progressed, Desoer stated in the October 2009

issue of Mortgage Banking that “the first year is a good story in terms of the two companies

[coming] together and meeting all the major [goals and] milestones that we had set for ourselves

for how we would work to integrate the companies.” Robert Stowe England, “A New Look at

BofA,” Mortgage Banking (October 2009). For Desoer, it was “the highlight of the year . . .

when we retired the Countrywide brand and launched the new Bank of America Home Loans

brand.” In the same issue, Mary Kanaga, a Countrywide transition executive who helped oversee

integration, likened the process of integration to the completion of a mosaic: “Everything [i.e.,

each business element] counts. Everything has to get there, whether it is the biggest project or

the smallest project. It’s very much putting a puzzle together. If there is a missing piece, we

have a broken chain and we can’t complete the mosaic.”

96. By way of another example, in its 2008 Annual Report, Bank of America

confirmed that “[o]n July 1, 2008, we acquired Countrywide,” and stated that the merger

“significantly improved our mortgage originating and servicing capabilities, making us a leading

mortgage originator and servicer.” In the Q&A section of the same report, the question was

43

posed: “How do the recent acquisitions of Countrywide and Merrill Lynch fit into your

strategy?” Bank of America responded that by acquiring Countrywide it became the “No. 1

provider of both mortgage originations and servicing” and “as a combined company,” it would

be recognized as a “responsible lender who is committed to helping our customers be successful

homeowners.” (Emphasis added). Similarly, in a July 1, 2008 Countrywide press release,

Mozilo stated that “the combination of Countrywide and Bank of America will create one of the

most powerful mortgage franchises in the world.” (Emphasis added).

97. Thus Countrywide and its subsidiaries, which include Countrywide Home Loans,

have now been merged into Bank of America. Bank of America is liable for the wrongdoing of

Countrywide because it is the successor-in-interest to Countrywide.

98. Bank of America also took steps to expressly and impliedly assume Countrywide

and its affiliates’ liabilities. Substantially all of Countrywide Financial’s and Countrywide

Home Loans’ assets were transferred to Bank of America on November 7, 2008 “in connection

with Countrywide’s integration with Bank of America’s other businesses and operations,” along

with “certain of Countrywide’s debt securities and related guarantees.”

99. Countrywide ceased filing its own financial statements in November 2008, and its

assets and liabilities have been included in Bank of America’s recent financial statements. Bank

of America has paid to restructure certain of Countrywide’s home loans on its behalf, including

permitting Countrywide Financial and Countrywide Home Loans to settle a predatory-lending

lawsuit brought by state attorneys general and agreeing to modify up to 390,000 Countrywide

loans, an agreement valued at up to $8.4 billion.

100. As stated above, in purchasing Countrywide and its subsidiaries for 27% of its

book value, Bank of America was fully aware of the pending claims and potential claims against

44

Countrywide and its affiliates and factored them into the transaction. See article entitled

“Countrywide in Crosshairs as Mortgage Crisis Fuels Litigation,” published on February 22,

2008 in the legal publication Corporate Counsel.

101. Moreover, on October 6, 2008, during an earnings call, Joe Price, Bank of

America’s Chief Financial Officer, stated that “As we transfer those operations [i.e.,

Countrywide and its subsidiaries] our company intends to assume the outstanding Countrywide

[entities’] debt totaling approximately $21 billion.” Asked about the “formal guaranteeing” of

the Countrywide entities’ debt, Kenneth D. Lewis, Bank of America’s former Chairman and

Chief Executive Officer, responded that “The normal process we followed is what are the

operational movements we’ll make to combine the operations. When we do that we’ve said the

debt would fall in line and quite frankly that’s kind of what we’ve said the whole time . . . .

[T]hat’s been very consistent with deals we’ve done in the past from this standpoint.” (Emphasis

added).

102. Similarly, Lewis was quoted in a January 23, 2008 New York Times article

reporting on the acquisition of Countrywide and its subsidiaries, in which he acknowledged that

Bank of America knew of the legal liabilities of Countrywide and its subsidiaries and impliedly

accepted them as part of the cost of the acquisition:

We did extensive due diligence. We had 60 people inside thecompany for almost a month. It was the most extensive duediligence we have ever done. So we feel comfortable with thevaluation. We looked at every aspect of the deal, from their assetsto potential lawsuits and we think we have a price that is a goodprice.

(Emphasis added).

103. Bank of America has made additional statements showing that it has assumed the

liabilities of Countrywide and its affiliates. In a press release announcing the merger, Lewis

45

stated that he was aware of the “issues within the housing and mortgage industries” and said that

“the transaction [with Countrywide] reflects those challenges.” Despite these challenges, Lewis

stated in October 2009 that “The Merrill Lynch and Countrywide integrations are on track and

returning value already.”

104. Likewise, in Bank of America’s Form 10-K for 2009, Bank of America

acknowledged that “[W]e face increased litigation risk and regulatory scrutiny as a result of the

Merrill Lynch and Countrywide acquisitions.”

105. Brian Moynihan, Bank of America’s CEO and President, testified before the

Financial Crisis Inquiry Commission on January 13, 2010, that “our primary window into the

mortgage crisis came through the acquisition of Countrywide . . . . The Countrywide acquisition

has positioned the bank in the mortgage business on a scale it had not previously achieved.

There have been losses, and lawsuits, from the legacy of Countrywide operations, but we are

looking forward.”

106. Addressing investor demands for refunds on faulty loans sold by Countrywide,

Moynihan stated: “There’s a lot of people out there with a lot of thoughts about how we should

solve this, but at the end of the day, we’ll pay for the things that Countrywide did.” And, in a

New York Times article published in December 2010, Moynihan, speaking about Countrywide

and its subsidiaries, again confirmed: “Our company bought it and we’ll stand up; we’ll clean it

up.”

107. Similarly, Jerry Dubrowski, a spokesman for Bank of America, was quoted in an

article published by Bloomberg in December 2010 that the bank will “act responsibly” and

repurchase Countrywide loans in cases where there were valid defects with the loans. Through

the third quarter of 2010, Bank of America has faced $26.7 billion in repurchase requests and has

46

resolved, declined or rescinded $18 billion of those claims. It has established a reserve fund

against the remaining $8.7 billion in repurchase requests, which at the end of the third quarter

stood at $4.4 billion.

108. During an earnings call for the second quarter of 2010, Charles Noski, Bank of

America’s Chief Financial Officer, stated that “we increased our reps and warranties expense by

$722 million to $1.2 billion as a result of our continued evaluation of exposure to repurchases

including our exposure to repurchase demands from certain monoline insurers.” And during the

earnings call for the third quarter of 2010, Noski stated that “[t]hrough September, we’ve

received $4,8 billion of reps and warranty claims related to the monoline-insured deals, of which

$4,2 billion remains outstanding, and approximately $550 million were repurchased.”

109. Bank of America has reached various settlement agreements in which it has

directly taken responsibility for Countrywide Home Loan’s and Countrywide Financial’s

liabilities. As part of a settlement agreement with certain state attorneys general, Bank of

America agreed to forgive up to 30 percent of the outstanding mortgage balances owed by

former Countrywide customers. The loans were made before Bank of America acquired

Countrywide.

110. In October 2010, the New York Times reported that Bank of America is “on the

hook” for $20 million of the disgorgement that Defendant Mozilo agreed to pay in his settlement

agreement with the SEC. The agreement and plan of merger between Bank of America and

Countrywide provided that all indemnification provisions “shall survive the merger and shall

continue in full force and effect . . . for a period of six years.” According to the article, “Because

Countrywide would have had to pay Mr. Mozilo’s disgorgement, Bank of America took on the

same obligation, even though it had nothing to do with the company’s operations at the time.”

47

111. On January 3, 2011 Bank of America announced that it had agreed to pay $2.8

billion to settle claims to repurchase mortgage loans that Fannie Mae and Freddie Mac had

purchased from Countrywide or its subsidiaries. In its press releases and presentation concerning

the settlement, Bank of America admitted that it was paying to resolve claims concerning

“alleged breaches of selling representations and warranties related to loans sold by legacy

Countrywide.”

112. On April 15, 2011, Assured Guaranty Ltd. (“Assured”) reached a comprehensive

$1.1 billion settlement with Bank of America regarding its liabilities with respect to 29

residential mortgage-backed securities transactions insured by Assured. The settlement

agreement covered securitizations sponsored by both Bank of America and Countrywide

affiliates, as well as certain other securitizations containing concentrations of Countrywide-

originated loans, that Assured had insured on a primary basis.

113. On May 26, 2011, Bank of America agreed to pay more than $22 million to settle

charges that it improperly foreclosed on the homes of active-duty members of the U.S. military

between January 2006 and May 2009. In a public statement concerning the settlement, Bank of

America Executive President Terry Laughlin said: “While most cases involve loans originated by

Countrywide and the improper foreclosures were taken or started by Countrywide prior to our

acquisition, it is our responsibility to make things right.”

114. On June 28, 2011, Bank of America announced an $8.5 billion settlement with

BoNY, as Trustee for certain Countrywide RMBS trusts. The settlement applies to claims that

could be brought by BoNY in connection with 530 residential mortgage-backed securities that

were underwritten by Countrywide affiliates and for which BoNY served as Trustee.

48

115. Bank of America’s public statements accepting responsibility for Countrywide’s

contingent liabilities arising from Countrywide’s and its subsidiaries’ mortgage origination,

securitization and servicing practices, along with Bank of America’s actual settlement of such

liabilities demonstrates that Bank of America and Countrywide intentionally structured the

transfer of substantially all Countrywide’s assets in such a way as to leave minimal and

inadequate assets remaining in Countrywide, and Countrywide Home Loans in particular, to

cover these liabilities.

116. Bank of America has also generated substantial earnings from the absorption of

Countrywide’s mortgage business. For example, a Bank of America press release regarding the

company’s 2009 first quarter earnings stated that “[n]et revenue nearly quadrupled to $5.2 billion

primarily due to the acquisition of Countrywide and from higher mortgage banking income as

lower interest rates drove an increase in mortgage activity.” Lewis was quoted as saying, “We

are especially gratified that our new teammates at Countrywide and Merrill Lynch had

outstanding performance that contributed significantly to our success.”

117. A press release regarding Bank of America’s 2009 second quarter earnings

similarly stated that Inlet revenue rose mainly due to the acquisition of Countrywide and higher

mortgage banking income as lower interest rates spurred an increase in refinance activity.” The

press release explained that “higher mortgage banking income, trading account profits and

investment and brokerage services income reflected the addition of Merrill Lynch and

Countrywide.” Bank of America reported that its average retail deposits in the quarter increased

$136.3 billion, or 26 percent, from a year earlier, including $104.3 billion in balances from

Merrill Lynch and Countrywide.

49

118. Bank of America’s 2009 annual report stated that “Revenue, net of interest

expense on a fully taxable-equivalent (FTE) basis, rose to $120.9 billion, representing a 63

percent increase from $74.0 billion in 2008, reflecting in part the addition of Merrill Lynch and

the full-year impact of Countrywide.” Bank of America also reported that “[m]ortgage banking

income increased $4.7 billion driven by higher production and servicing income . . . primarily

due to increased volume as a result of the full-year impact of Countrywide . . . .” Insurance

income also increased $927 million “due to the full-year impact of Countrywide’s property and

casualty businesses.”

C. Bank of America is Countrywide’s Successor-in-Interest

119. Based on the above, Bank of America became the successor-in-interest to

Countrywide and its affiliated entities because Bank of America, in a self dealing transaction for

which it provided inadequate consideration, purchased all of the assets and ongoing businesses of

Countrywide, including Countrywide Home Loans, rendering Countrywide insolvent and unable

to satisfy its massive contingent liabilities. Additionally, Bank of America became the

successor-in-interest to Countrywide and its affiliated entities because (a) there was continuity of

ownership between Bank of America and Countrywide, (b) Countrywide ceased ordinary

business soon after the transaction was consummated, (c) there was continuity of management,

personnel, physical location, assets and general business operations between Bank of America

and Countrywide, (d) Bank of America assumed the liabilities ordinarily necessary for the

uninterrupted continuation of Countrywide’s business, and (e) Bank of America assumed

Countrywide’s tort and mortgage repurchase liability. Thus, Bank of America is the successor-

in-interest to Countrywide, including Countrywide Home Loans, and is jointly and severally

liable for the wrongful conduct alleged herein by Countrywide.

50

120. Based on the same facts, the Supreme Court of the State of New York in MBIA

Ins. Corp. v. Countrywide Home Loans, et al, Index No. 602825/08, held that MBIA sufficiently

alleged a de facto merger “in which Bank of America intended to absorb and continue the

operation of Countrywide.” Id., Order on Motion to Dismiss at 15 (Apr. 29, 2010).

FIRST CAUSE OF ACTION

Breach of Contract(Against All Defendants)

121. Plaintiff repeats all the foregoing allegations as though fully set forth herein.

122. Countrywide represented in Section 7.01 of the Servicing Agreement that no

written statement, report or other document that it prepared and furnished in connection with the

Servicing Agreement or the transactions contemplated thereby contained any untrue statement of

material fact or omitted to state any material fact necessary to make the statements not

misleading. Through the Pooling Agreement, the Trustee was assigned the rights to enforce this

representation.

123. Through Countrywide’s material misrepresentations and omissions in, among

other things, the Prospectus Supplement, the Mortgage Loan Files, and the Officer’s Certificate,

Countrywide breached this Seller Representation and Countrywide is on notice of such breach.

124. Countrywide is obligated under the Servicing Agreement to cure any breach of

the Seller Representation that materially and adversely affects the value of the Loans or the

interests of the Certificateholders therein, or repurchase all of the Loans within ninety days of

receipt of notice of such breach from the Trustee.

125. On August 29, 2011, the Trustee requested that Countrywide repurchase all of the

Loans pursuant to pursuant to Section 7.03 of the Servicing Agreement and Section 2.03 of the

Pooling Agreement. Countrywide has refused to repurchase all of the Loans as required.

51

126. The Trustee has performed all of the conditions, covenants, and promises required

to be performed by it in accordance with the Pooling Agreement and seeks specific performance

of Countrywide’s obligation to repurchase all of the Loans as specified in Section 7.03 of the

Servicing Agreement.

SECOND CAUSE OF ACTION

Breach of Contract(Against All Defendants)

127. Plaintiff repeats all the foregoing allegations as though fully set forth herein.

128. This is a claim against Countrywide and Bank of America for breach of contract

with respect to the Servicing Agreement. Through the Pooling Agreement, the Trustee was

assigned the rights to enforce the Mortgage Representations in the Servicing Agreement.

129. Countrywide expressly agreed in Section 7.03 of the Servicing Agreement to

repurchase a Loan if it was provided with notice or had knowledge of breaches of a Mortgage

Representation that materially and adversely affected the value of such Loan or the interests of

the Certificateholders therein.

130. As the ultimate assignee of the GCFP’s rights in the Servicing Agreement, the

Trustee is entitled to enforce Countrywide’s Repurchase Obligation as if it was a party to the

Servicing Agreement.

131. The Trustee provided Countrywide with notice of breaches of Mortgage

Representations that materially and adversely affect the value of the Loans and the interests of

the Certificateholders therein. The Breach Notices identified the specific Loans that contained

material breaches of Mortgage Representations and described in detail the nature and type of

those breaches.

52

132. The ninety-day period in which Countrywide had to cure the breaches or

repurchase the Loans has expired with respect to the Loans identified in the Breach Notices.

133. Countrywide has not repurchased 495 out of the 520 Loans identified in those

Breach Notices, in direct violation of Section 7.03 of the Servicing Agreement and Section 2.03

of the Pooling Agreement.

134. The Loans identified in the Breach Notices have an aggregate principal balance of

over $100 million. If Defendants are not required to abide by their contractual obligation to

repurchase these Loans, and any other Loans that Defendants know or have reason to know

contain breaches of one or more Mortgage Representations, the Trust and its Certificateholders

will be irreparably harmed.

135. Plaintiff has performed all of the conditions, covenants, and promises required to

be performed by it in accordance with the Pooling Agreement.

PRAYER FOR RELIEF

136. WHEREFORE Plaintiff prays for relief as follows:

137. On the First Cause of Action, specific performance of Defendants’ obligations to

cure or repurchase all of the Loans;

138. On the Second Cause of Action, specific performance of Defendants’ Repurchase

Obligations and enforcement of Section 2.03 of the Pooling Agreement and Section 7.03 of the

Servicing Agreement;

139. On the First and Second Causes of Action, reimbursement of costs and expenses

of maintaining this action on behalf of the Trust, including reasonable attorney and expert fees;

and

140. An award of such other and further relief as may be just and proper.

53

DATED: New York, New YorkJune 18, 2013

Respectfully submitted,

KASOWITZ, BENSON, TORRES& FRIEDMAN LLP

By: /s/ Michael M. FayMarc E. Kasowitz (mkasowitz@kasowitz.com)David M. Friedman (dfriedman@kasowitz.com)Michael M. Fay (mfay@kasowitz.com)Jenny Kim (jkim@kasowitz.com)Uri A. Itkin (uitkin@kasowitz.com)1633 BroadwayNew York, NY 10019(212) 506-1700

Attorneys for Plaintiff