Wash Fed v Countrywide

7/31/2019 Wash Fed v Countrywide

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COMPLAINT 1

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Nold Muchinsky PLLCBellevue Place, Suite 930

10500 NE 8th StreetBellevue, WA 98004

425.289.5555 FAX425.289.6666

David A. Nold, WSBA #19009Thomas W. Stone, WSBA #37559NOLD MUCHINSKY PLLC10500 NE 8th St., Ste. 930Bellevue, Washington 98004

Phone: (425) 289-5555Attorneys for Plaintiff Washington Federal

UNITED STATES DISTRICT COURTWESTERN DISTRICT OF WASHINGTON AT SEATTLE

WASHINGTON FEDERAL, a federally

chartered savings association,

Plaintiff,

vs.

COUNTRYWIDE HOME LOANS, INC.(d/b/a BANK OF AMERICA HOMELOANS), BANK OF AMERICACORPORATION, BANK OF AMERICA,N.A.,

Defendants.

NO.

COMPLAINT FORBREACH OF CONTRACT ANDJURY DEMAND

Washington Federal (Washington Federal) brings this action against Countrywide

Home Loans, Inc. (Countrywide), d/b/a Bank of America Home Loans, and against Bank of

America, N.A. (Bank of America), and Bank of America Corporation (BAC) and alleges as

follows:

I. NATURE OF ACTION1.1 This is an action for declaratory relief and breach of contract stemming from

numerous breaches of the Mortgage Loan Purchase and Servicing Agreement (MLPSA) and

related transactional documents associated with Washington Federals purchase from

Countrywide of 10 pools of mortgage loans (collectively the Transaction Documents). This is

Case 2:12-cv-01820 Document 1 Filed 10/16/12 Page 1 of 118


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COMPLAINT 2

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also an action for breach of the Defendants servicing obligations contained in the MLPSA. A

copy of the MLPSA is attached hereto as Exhibit A. A copy of the Transaction Documents

associated with the first pool of loans purchased is attached hereto as Exhibit B. The Transaction

Documents related to subsequent loan pool transactions are substantially similar to those in

Exhibit B.

1.2 Over a period of approximately three years, Washington Federal purchased 1,046

loans (individually, a Loan and collectively, the Loans) with an initial aggregate balance of

approximately $400 million from Countrywide. The MLPSA and Transaction Documents

include specific representations and warranties by Countrywide regarding the Loans, including,

inter alia, that the Loans complied with specific underwriting guidelines, that its origination

practices were legal, prudent and customary in the industry, that the notes and mortgages or

deeds of trust (collectively Mortgages) were not subject to any defenses or set offs and were

enforceable in accordance with their terms, that Countrywide was the sole owner and holder of

the Loans, and that the Loans conformed to the parameters specified in the MLPSA and

Transaction Documents. Countrywides representations and warranties are described in more

detail below.

1.3 The MLPSA provides that Countrywides representations and warranties survive

the sale of the Loans to Washington Federal, and inure to the benefit of Washington Federal

notwithstanding any restrictive or qualified endorsement on any mortgage note or assignment or

Washington Federals examination or failure to examine any collateral documents or credit files.

1.4 In addition, the MLPSA obligates Countrywide to notify Washington Federal if it

discovers any breach of a representation or warranty and to cure such breach within 90 days of

notice. If Countrywide cannot cure the breach, it must repurchase the Loan(s) to which the

breach relates at a price provided in the MLPSA.

1.5 The MLPSA further provides that Countrywide is to service and administer



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COMPLAINT 3

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Mortgage Loans sold . . . in accordance with the terms of [the MLPSA]. In exchange for that

servicing, Countrywide receives a servicing fee equal to 0.25% of the unpaid principal balance of

the Loans. In the MLPSA, Countrywide agreed to employ procedures in accordance with the

customary and usual standards of practice of prudent mortgage servicers. The MLPSA

obligated Countrywide to, inter alia:

1.5.1 [M]ake reasonable efforts, in accordance with customary and usual

standards of practice of prudent mortgage servicers, to collect all payments due under each

Mortgage Loan . . . (Section 4.02);

1.5.2 [U]se reasonable efforts to foreclose upon or otherwise comparably

convert the ownership of properties securing such of the Mortgage Loans as come into and

continue in default and as to which no satisfactory arrangements can be made for collection of

delinquent payments; (Section 4.03(a)).

1.5.3 [U]se reasonable efforts to realize upon defaulted Mortgage Loans, in

such manner as will maximize the receipt of principal and interest by [Washington Federal],

taking into account, among other things, the timing of foreclosure proceedings. (Section

4.03(a));

1.5.4 [M]anage, conserve, protect and operate each REO Property in the same

manner that it manages, conserves, protects and operates other foreclosed property for its own

account; (Section 4.13(b)); and to

1.5.5 [U]se reasonable efforts to dispose of each REO Property as soon as

possible and . . . sell each REO Property no later than one (1) year after title to such REO

Property has been obtained, unless Countrywide determines, and gives an appropriate notice to

[Washington Federal], that a longer period is necessary for the orderly disposition of any REO

Property. (Section 4.13(c)).

1.6 In 2008 the Bank of America Defendants acquired Countrywide and assumed



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COMPLAINT 4

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Countrywides obligations under the MLPSA. The Bank of America Defendants are successors

and assigns under the MLPSA.

1.7 Countrywide breached at least one representation or warranty contained in the

MLPSA and/or the Transaction Documents materially and adversely affecting the value of the

Mortgage Loan with respect to a very high percentage of the Loans.

1.8 The pervasiveness and severity of the breaches of the various representations

and warranties contained in the Transaction Documents amount to a material and substantial

breach, which go TO the heart of the MLPSA governing all loan pool purchases.

1.9 Defendants have also breached their promises to service the Loans in accordance

with the requirements of the MLPSA. For example:

1.9.1 Defendants have not used reasonable care to notify Washington Federal of

defaults on a timely basis or of defects in the Loan documentation and underwriting;

1.9.2 Defendants have unreasonably delayed foreclosure proceedings by

requiring or counseling borrowers to seek to modify the terms of their Loans under programs in

which Washington Federal does not participate;

1.9.3 Defendants have failed to seek on a timely basis direction from

Washington Federal as required by the MLPSA and/or have failed to follow Washington

Federals directions as required by the MLPSA;

1.9.4 Defendants have not used reasonable diligence in seeking relief from

automatic stays in bankruptcy;

1.9.5 Defendants have not taken reasonable measures to protect the value of

Washington Federals collateral by taking control of abandoned properties or evicting persons in

unlawful possession;

1.9.6 Defendants have incurred excess servicing and collection costs, including

tax penalties, forced place insurance and other unreasonable insurance charges, and unnecessary

and unreasonably high legal fees and related expenses. As a result of these breaches,



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COMPLAINT 5

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Washington Federal has been damaged in the amounts of unearned servicing fees paid to date

and in the loss of market value of its collateral and the value of its Loans.

II. PARTIES2.1 Washington Federal is a federally chartered savings association with

its principal place of business and home office in Seattle, Washington. In July 2011, Washington

Federal shortened its name from Washington Federal Savings & Loan Association, which is the

name appearing on the MLPSA and Transaction Documents.

2.2 Countrywide is a New York corporation with its principal place of business in

Calabasas, California. Countrywide was the seller of the various loan pools and a party to the

MLPSA and Transaction Documents.

2.3 BAC is a Delaware corporation with its principal place of business in Charlotte,

North Carolina and offices throughout the State of Washington, including in Seattle,

Washington.

2.4 Bank of America, NA is a national banking association with its designated main

office in Charlotte, North Carolina. It is a wholly-owned subsidiary of BAC.

III. JURISDICTION AND VENUE

3.1 This Court has subject matter jurisdiction over this proceeding pursuant to 28

U.S.C. 1332(a), as the Plaintiff is a citizen of the State of Washington, the Defendants are all

citizens of states other than Washington, and the amount in controversy exceeds $75,000.

3.2 Venue is proper in this Court because the Defendants transact business in this

state, have offices in this state and this is the state where the relevant agreements were entered

into.

IV. ADDITIONAL ALLEGATIONS

4.1 On or about December 30, 2004, Washington Federal contracted to purchase 30-

year fixed rate jumbo mortgage Loans from Countrywide. Groups of mortgage Loans (pools)



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COMPLAINT 6

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were purchased in a series of ten transactions between December 30, 2004 and September 29,

2006.

4.2 A single master Mortgage Loan Purchase and Servicing Agreement

(MLPSA), dated December 30, 2004 governed all of the Loan pool purchase transactions. In

addition, various Transaction Documents applied to each specific Loan pool purchase and sale

transaction. These Transaction Documents included for each pool: (a) a Trade Confirmation,

which confirmed the proposed terms of a prospective purchase of a specific mortgage pool; (b) a

Purchase Confirmation, which set forth the terms of a purchase of a specific mortgage pool;

and (c) a Mortgage Loan Schedule, which described the attributes of the purchased Loans.

Collectively, these documents are referred to as the Transaction Documents.

A. Representations and Warranties Regarding Origination and Underwriting.

4.3 In the MLPSA Countrywide set out numerous specific representations and

warranties concerning the origination and underwriting of the Loans it was selling to Washington

Federal. These included, inter alia, representations and warranties that as of the date of the Loan

sale:

4.3.1 The information contained in the Mortgage Loan Schedule was complete, true

and correct in all material respects. MLPSA 3.02(a).

4.3.2 There were no outstanding charges affecting the mortgaged property.

MLPSA 3.02(c).

4.3.3 The Mortgage Note and the Mortgage were not subject to any right of

rescission, set-off, counterclaim or defense. MLPSA 3.02(e).

4.3.4 All buildings on the mortgaged property were insured against loss by fire and

hazards as are customary in the area where the mortgaged property was located. MLPSA

3.02(f).

4.3.5 Each Loan at the time of origination complied in all material respects



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COMPLAINT 7

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with applicable state law and federal laws including truth in lending, real estate settlement

procedures, consumer credit protection, equal credit opportunity and disclosure laws applicable

to the Loan. MLPSA 3.02(g).

4.3.6 The Mortgage Note and the related Mortgage were genuine and each was the

legal, valid and binding obligation of the maker thereof, enforceable in accordance with its

terms. MLPSA 3.02(i).

4.3.7 The Mortgage was a valid, existing and enforceable first or second lien (as

specified in the related Mortgage Loan Schedule) on the Mortgaged Property. MLPSA 3.02(j).

4.3.8 Countrywide was the sole owner and holder of the Loan. Countrywide has

good and marketable title thereto, and has full right to transfer and sell the Loan to Washington

Federal free and clear of any encumbrance, equity, lien, pledge, charge, claim or security interest

not specifically set forth in the related Mortgage Loan Schedule and has full right and authority

subject to no interest or participation of, or agreement with, any other party, to sell and assign

each Mortgage Loan pursuant to the terms of the MLPSA. MLPSA 3.02(l).

4.3.9 The origination and collection practices used by Countrywide with respect to

each Mortgage Note and Mortgage has been in all respects legal, proper, prudent and customary

in the mortgage origination and servicing business. MLPSA 3.02(p).

4.3.10 Unless the Loan was underwritten pursuant to one of Countrywides

streamline documentation programs, the Credit File contained an appraisal of the related

Mortgaged Property signed prior to the approval of the Loan application by an appraiser who (a)

possessed the minimum requisite qualifications of Fannie Mae or Freddie Mac, (b) was duly

appointed by the originator that had no interest, direct or indirect in the Mortgaged Property, and

(c) whose compensation was not affected by the approval or disapproval of the Loan. MLPSA

3.02(f).

4.4 Additional representations and warranties were included in the Transaction



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COMPLAINT 8

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Documents. These included representations and warranties that, inter alia, only 30-year fixed

rate Jumbo mortgages were included in the pools and representations concerning the parameters

of the specific Loans that were included in the respective pools, including loan-to-value ratio,

cumulative loan-to-value ratio, FICO credit scores of borrowers, and whether Loans were full

documentation or reduced documentation Loans.

4.5 These representations and warranties were material to Washington Federal

when it purchased the mortgage Loans. 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 accordance with legal requirements and industry

standards. Without these representations and warranties, the Loans would have represented a

much higher default risk and Washington Federal would not have purchased the Loans.

B. Countrywides Breaches of the Representations and Warranties Regarding

Origination.

4.6 Bank of America provided Washington Federal with what it represented were the

complete Loan files relating to a selected sample of Loans sold to Washington Federal. A

review of the sample of mortgage loan files has revealed breaches of numerous representations

and warranties including, inter alia:

4.6.1 Loans that were listed as Full Doc, on the Mortgage Loan Schedule but

which lacked standard income verification documentation.

4.6.2 Loans that were made at an interest rate differing from that listed on the

Mortgage Loan Schedule.

4.6.3 Loans that were not jumbo loans, as represented in the Transaction

Documents.

4.6.4 Mortgage notes with facial deficiencies such as lack of proper

endorsement, making Countrywides status as a holder questionable and giving rise to defenses.

4.6.5 Loans underwritten outside prudent and customary origination standards



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COMPLAINT 9

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in the industry, e.g., Loans approved with cash out without any tax returns or other income

verification documentation where the borrower was self-employed and had a history of

delinquencies and judgments.

4.6.6 Incomplete loan files lacking deeds, notes or evidence of property hazard

insurance.

4.6.7 Loan-to-value and cumulative loan-to-value ratios in excess of those

represented on the Mortgage Loan Schedules.

4.6.8 Loans originated outside the parameters of the applicable underwriting

guidelines, e.g., loans with excessive debt-to-income ratio, insufficient credit scores, and

insufficient employment, income or asset verification.

4.7 Specifically, the following breaches of specific representations and warranties

were found:

4.7.1 With respect to loan #100674715 in pool 3:

4.7.1.1 There was no evidence of a Certificate of Insurance

covering the unit, borrower or lender. This was a breach of the representation and warranty

contained in section 3.02(f) (All buildings upon the Mortgaged Property were insured by an

insurer acceptable to an Agency against loss by fire, hazards of extended coverage and insurer

was licensed to do business in the state where the Mortgaged Property is located. All such

insurance policies contain a standard mortgagee clause naming Countrywide, its successors and

assigns as mortgagee, and all premiums thereon have been paid.).

4.7.1.2 The loan balance was $200,000, which was below Fannie

Mae and Freddie Mac loan limits. This was a breach of the representation and warranty

contained in the Purchase Confirmation dated August 31, 2005, which stated that, [e]ach

Mortgage Loan was a jumbo Mortgage Loan . . . .



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COMPLAINT 10

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4.7.2.1 The loan balance is $116,700, which was below Fannie

Mae and Freddie Mac loan limits. This was a breach of the representations and warranties

contained in the Purchase Confirmation dated August 31, 2005, which stated that, [e]ach

Mortgage Loan is a jumbo Mortgage Loan . . . .

4.7.2.2 The CLTV for this loan was 100%. Applicable

underwriting guidelines provided that for this type of loan the maximum CLTV was 95%. This

was a breach of the representation and warranty contained in the Purchase Confirmation dated

August 31, 2005, which stated that, [e]ach Mortgage Loan conforms to the jumbo underwriting

guidelines of the prior owner of the Mortgage Loan or Countrywide's jumbo credit underwriting

guidelines, as applicable, in effect at the time of origination.


4.7.3.1 The loan balance was $78,400, which was below Freddie

Mac and Fannie Mae limits. This was a breach of the representation and warranty contained in

the Purchase Confirmation dated August 31, 2005, which states that, [e]ach Mortgage Loan is a

jumbo Mortgage Loan . . . .

4.7.3.2 The CLTV for this loan was 100%. Applicable

underwriting guidelines provided that for this type of loan the maximum CLTV was 95%. This


August 31, 2005, which stated that, [e]ach Mortgage Loan conforms to the jumbo underwriting

guidelines of the prior owner of the Mortgage Loan or Countrywide's jumbo credit underwriting




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COMPLAINT 11

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4.7.4 With respect to loan # 102522464 in pool 3:

4.7.4.1 There was no title policy in the loan file. This was a breach

of the representations and warranties contained in section 3.02(m) (Each Mortgage Loan

secured by (i) a first priority Mortgage, is covered by a lender's title insurance policy acceptable

to an Agency, issued by a title insurer acceptable to an Agency and qualified to do business in

the jurisdiction where the related Mortgaged Property is located, insuring (subject to the

exceptions contained in Section 3.02(j)(i), (ii) and (iii) above) Countrywide, its successors and

assigns as to the first or second priority lien of the Mortgage, as applicable.).


Mae and Freddie Mac limits. This was a breach of the representation and warranty contained in

the Purchase Confirmation dated August 31, 2005, which stated that, [e]ach Mortgage Loan is a


4.7.4.3 The loan officer did not sign the final loan application.

Proper, prudent and customary origination practices require the loan officer to sign the final loan

application. This was a breach of the representation and warranty contained in section 3.02(p)

(The origination and collection practices used by Countrywide with respect to each Mortgage

Note and Mortgage have been in all respects legal, proper, prudent and customary in the

mortgage origination and servicing business. . . .).

4.7.4.4 Applicable underwriting guidelines provide that the

maximum LTV/CLTV was 80/100% for a reduced doc loan with a 700 credit score. This

borrower had a 662 credit score and the CLTV was 99.989%. This was a breach of the

representation and warranty contained in the Purchase Confirmation dated August 31, 2005,



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COMPLAINT 12

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which stated that, [e]ach Mortgage Loan conforms to the jumbo underwriting guidelines of the

prior owner of the Mortgage Loans or Countrywide's jumbo credit underwriting guidelines, as

applicable, in effect at the time of origination.

4.7.4.5 The applicable underwriting guidelines provided that the

maximum debt-to-income ratio for a reduced doc loan was 45%. The debt-to-income ratio was

49.484%. This was a breach of the representation and warranty contained in the Purchase

Confirmation dated August 31, 2005, which stated that, [e]ach Mortgage Loan conforms to the

jumbo underwriting guidelines of the prior owner of the Mortgage Loans or Countrywide's

jumbo credit underwriting guidelines, as applicable, in effect at the time of origination.


4.7.5.1 The mortgagee clause in the title insurance policy indicated

the broker's rather than Countrywides name and does not state, "its successors and or assigns."

This was a breach of the representation and warranty contained in section 3.02(f) (All buildings

upon the Mortgaged Property are insured by an insurer acceptable to an Agency against loss by

fire, hazards of extended coverage and insurer is licensed to do business in the state where the

Mortgaged Property is located. All such policies contain a standard mortgagee clause naming

Countrywide, its successors and or assigns as mortgagee . . . .).

4.7.5.2 The signature affidavit was missing the notary's seal and

date and the deed was missing the notary's seal. Proper, prudent and customary origination

practices require the Signature Affidavit and Deed to be properly notarized. This was a breach

of the representation and warranty contained in section 3.02(p) (The origination and collection

practices used by Countrywide with respect to each Mortgage Note and Mortgage have been in



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COMPLAINT 13

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all respects legal, proper, prudent and customary in the mortgage origination and servicing

business . . . .).


4.7.6.1 The application signature page was not in the file, and the

name affidavit was not notarized. Proper, prudent and customary origination practices require

the final loan application to be signed and dated by the borrower and loan officer; and the name

affidavit notarized. This was a breach of the representation and warranty contained in section

3.02(p) (The origination and collection practices used by Countrywide with respect to each

Mortgage Note and Mortgage have been in all respects legal, proper, prudent and customary in

the mortgage origination and servicing business . . . .).

4.7.6.2 The borrowers debt-to-income ratio was 48.171%.

Countrywide guidelines provide that the maximum debt-to-income ratio for an 80% LTV

Full/Alt loan was 40%. This was a breach of the representation and warranty contained in the

Purchase Confirmation dated August 31, 2005, which stated that, [e]ach Mortgage Loan

conforms to the jumbo underwriting guidelines of the prior owner of the Mortgage Loans or

Countrywide's jumbo credit underwriting guidelines, as applicable, in effect at the time of

origination.


4.7.7.1 At the time of closing the subordination agreement for the

borrower's second Deed of Trust had not been recorded. There was no subordination agreement

in the file. This was a breach of the representation and warranty contained in section 3.02(j)



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COMPLAINT 14

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(The Mortgage is a valid, existing and enforceable first or second lien (as specified in the

related Mortgage Loan Schedule) on the Mortgaged Property . . . .).

4.7.7.2 The mortgagee clause in the insurance policy indicated

Countrywide's name, but did not state, "its successors and or assigns", and the loan number was

missing. This was a breach of the representation and warranty contained in section 3.02(f) (All

buildings upon the Mortgaged Property are insured by an insurer acceptable to an Agency

against loss by fire, hazards of extended coverage and insurer is licensed to do business in the

state where the Mortgaged Property is located. All such policies contain a standard mortgagee

clause naming Countrywide, its successors and or assigns as mortgagee . . . .).


4.7.8.1 There was no assignment of mortgage in the file. This was

a breach of the representation and warranty contained in section 3.02(x) (Except for the absence

of recording information, the Assignment of Mortgage is in recordable form and is acceptable for

recording under the laws of the jurisdiction in which the Mortgaged Property is located.).


4.7.9.1 The Note was not endorsed in blank or to Countrywide.

This was a breach of the representations and warranties contained in section 3.02(e) (The

Mortgage Note and the Mortgage are not subject to any right of rescission, set-off, counterclaim

or defense . . . .) and section 3.02(l) (Countrywide is the sole owner and holder of the

Mortgage Loan. The Mortgage Loan is not assigned or pledged, and Countrywide has good and

marketable title thereto, and has full right to transfer and sell the Mortgage Loan to the Purchaser

free and clear . . . .)



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COMPLAINT 15

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recording under the laws of the jurisdiction in which the Mortgaged Property is located.)

4.7.9.3 The loan officer did not sign the final loan application. The

address on the loan documents and insurance binder does not match the address on the appraisal

and title report. Proper, prudent and customary origination practices required the final loan

application to be signed and dated by the loan officer, the note should be initialed correctly, and

the property address verified. This was a breach of the representation and warranty contained in

section 3.02(p) (The origination and collection practices used by Countrywide with respect to

each Mortgage Note and Mortgage have been in all respects legal, proper, prudent and customary

in the mortgage origination and servicing business . . . .).


4.7.10.1 The borrowers debt-to-income ratio was 49.578%. The

underwriters (Universal American Mortgage Company), underwriting guidelines provide that

the maximum debt-to-income ratio for a Full Doc loan where the CLTV is 95% is 38% (or 45%

for an 80/20 loan). This was a breach of the representation and warranty contained in the

Purchase Confirmation dated April 28, 2006, which stated that, [e]ach Mortgage Loan conforms

to the jumbo underwriting guidelines of the prior owner of the Mortgage Loans or Countrywide's





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COMPLAINT 16

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4.7.11.1 The Notice of Right to Cancel was not in the file. Proper,

prudent and customary origination practices required the Notice of Right to Cancel to be signed

and dated. This was a breach of the representation and warranty contained in section 3.02(p)

(The origination and collection practices used by Countrywide with respect to each Mortgage

Note and Mortgage have been in all respects legal, proper, prudent and customary in the

mortgage origination and servicing business . . . .).



Proper, prudent and customary origination practices require the final loan application to be

signed and dated by the loan officer. This was a breach of the representation and warranty

contained in section 3.02(p) (The origination and collection practices used by Countrywide with

respect to each Mortgage Note and Mortgage have been in all respects legal, proper, prudent and

customary in the mortgage origination and servicing business . . . .).

4.7.12.2 The borrowers debt-to-income ratio was 52.40%.

Countrywides guidelines provide that the maximum debt-to-income ratio for an 80% LTV

Full/Alt loan is 40%. This was a breach of the representation and warranty contained in the

Purchase Confirmation dated March 31, 2006, which stated that, [e]ach Mortgage Loan



origination.




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signed and dated by the loan officer. This is a breach of the representation and warranty



customary in the mortgage origination and servicing business . . . .)

4.7.13.2 No business license, tax return or asset verification was in

the file. Countrywide's Reduced Doc documentation requirements required that the borrower's

employment and assets be verified. This is a breach of the representation and warranty contained

in the Purchase Confirmation dated September 30, 2005, which stated, [e]ach Mortgage Loan



origination.


4.7.14.1 There was no flood certificate in the file and the hazard

insurance coverage may be inadequate. Proper, prudent and customary loan origination practices

require a flood certificate to be in the file, and adequate hazard insurance coverage. This was a

breach of the representation and warranty contained in section 3.02(f) (All buildings upon the

Mortgaged property are insured by an insurer acceptable to an Agency against loss by fire . . . .)

and section 3.02(p) (The origination and collection practices used by Countrywide with respect

to each Mortgage Note and Mortgage have been in all respects legal, proper, prudent and

customary in the mortgage origination and servicing business . . . .).



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COMPLAINT 18

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4.7.14.2 No business license was in the file (business license

information pulled from the Washington State Dept. of Revenue website). Countrywide's

Reduced Documentation requirements require that the borrower's employment be verified. This


October 28, 2005, which stated, [e]ach Mortgage Loan conforms to the jumbo underwriting

guidelines of the prior owner of the Mortgage Loans or Countrywide's jumbo credit underwriting


4.7.14.3 There was no Assignment of Mortgage in the file. This

was a breach of the representation and warranty contained in section 3.02(x) (Except for the

absence of recording information, the Assignment of Mortgage is in recordable form and is

acceptable for recording under the laws of the jurisdiction in which the Mortgaged Property is

located.).

4.7.14.4 Countrywide's Clues Report imposed an underwriting

condition that the borrower provide an explanation letter for four recent credit inquiries, and the

letter was not in the file. Proper, prudent and customary loan origination practices require

compliance with all underwriter conditions. This was a breach of representation and warranty



customary in the mortgage origination and servicing business . . . .) and the representation and

warranty in the Purchase Confirmation dated October 28, 2005, which stated, [e]ach Mortgage

Loan conforms to the jumbo underwriting guidelines of the prior owner of the Mortgage Loans



19/118


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COMPLAINT 20

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4.7.16.3 The title policy did not identify the trust identified on the

mortgage. Proper, prudent and customary origination practices require the name on the

mortgage to match the name on the title insurance policy. This was a breach of the

representation and warranty contained in section 3.02(p) (The origination and collection



business . . . .).


4.7.17.1 The final inspection and photos were not in the file.

Proper, prudent and customary origination practices for new construction require the subject

property be completed per plans and specifications and evidence of completion to be in the file.

This was a breach of the representation and warranty contained in section 3.02(p) (The

origination and collection practices used by Countrywide with respect to each Mortgage Note

and Mortgage have been in all respects legal, proper, prudent and customary in the mortgage

origination and servicing business . . . . ).

4.7.17.2 The Certificate of Occupancy from the appropriate

authorities was not in the file. This was a breach of the representation and warranty contained in

section 3.02(w) (To the best of Countrywide's knowledge, all inspections, licenses and

certificates required to be made or issued with respect to all occupied portions of the Mortgaged

property, and with respect to the use and occupancy of the same including certificates of

occupancy, have been made or obtained from the appropriate authorities.)



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COMPLAINT 21

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4.7.17.3 The loan documents (mortgage and note etc.) indicate the

city is North Las Vegas; and the Appraisal, Title and Flood Cert. indicate the city is Las Vegas.

Proper, prudent and customary origination practices are to verify the property address. This was

a breach of representation and warranty contained in section 3.02(p) (The origination and

collection practices used by Countrywide with respect to each Mortgage Note and Mortgage

have been in all respects legal, proper, prudent and customary in the mortgage origination and

servicing business . . . .).




signed and dated by the loan officer. This was a breach of the representation and warranty



customary in the mortgage origination and servicing business . . . . ).


4.7.19.1 The borrowers most recent monthly asset or bank

statement was not in the file (this loan is a cash-out refinance). The applicable underwriting

guidelines require the borrower's employment and assets to be verified. There is no business

license or CPA letter in the file. Proper, prudent and customary origination practices require the

borrowers employment and assets to be verified. This was a breach in the representation and

warranty contained in section 3.02(p) (The origination and collection practices used by

Countrywide with respect to each Mortgage Note and Mortgage have been in all respects legal,



22/118

COMPLAINT 22

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proper, prudent and customary in the mortgage origination and servicing business . . . .); and the

representations and warranties contained in the Purchase Confirmation dated August 31, 2005,

which states, [e]ach Mortgage Loan conforms to the jumbo underwriting guidelines of the prior

owner of the Mortgage Loans or Countrywide's jumbo credit underwriting guidelines, as

applicable, in effect at the time of origination..

4.7.19.2 The loan amount was $150,000, which is below Fannie


the Purchase confirmation dated August 31, 2005, which states, [e]ach Mortgage Loan is a


4.7.19.3 The property address was not indicated on the insurance

binder. The insurance agent has used the legal description for the property address. This was a


Mortgaged property are insured by an insurer acceptable to an Agency against loss by fire,

hazards of extended coverage . . . .).



Mae and Freddie Mac loan limits. This was a breach of the representations and warranties

contained in the Purchase Confirmation dated August 31, 2005, which states that, [e]ach



4.7.21.1 The Loan amount was $183,920, which was below Fannie

Mae and Freddie Mac limits. This was a breach in the representation and warranty contained in



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COMPLAINT 23

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jumbo mortgage and a fixed rate mortgage loan . . . .


4.7.22.1 The Loan amount was $249,600, which was below Fannie



jumbo mortgage Loan . . . .




or defense. . . .) and section 3.02(l) (Countrywide is the sole owner and holder of the Mortgage

Loan. The Mortgage Loan is not assigned or pledged, and Countrywide has good and


free and clear . . . ).


4.7.23.1 No assets are indicated on the application and the loan is a

cash-out refinance. The applicable underwriting guidelines require that the borrower's

employment and assets be verified. The underwriter's Loan Approval indicates this is a limited

doc loan and that Partner Loan Services performed a verbal verification of employment

(VOE). The borrower is self-employed and there is no tax return or CPA letter in the file. The

Underwriter's Decision indicates there is no business data available on-line. This was a breach

of the representation and warranty contained in the Purchase Confirmation dated August 31,



24/118

COMPLAINT 24

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2005, which states, [e]ach Mortgage Loan conforms to the jumbo underwriting guidelines of the



4.7.23.2 The Loan amount was $170,300, which is below Fannie


the Purchase Confirmation dated August 31, 2005, which states, [e]ach Mortgage Loan is a


4.7.23.3 The insurance binder uses only the legal description for the

property address. The property address is not indicated on the insurance binder. This was a



hazards of extended coverage . . . .).


4.7.24.1 The insurance binder was not in the file. Proper, prudent

and customary loan origination and collection practices require an insurance binder. This was a



hazards of extended coverage . . . .) and section 3.02(p) (The origination and collection



business . . . .).




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COMPLAINT 25

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4.7.25.1 The final loan application was not signed by the loan

officer, and a copy of the deed is not in the file. Proper, prudent and customary loan origination

and collection practices require the final application to be signed by the loan officer, and a copy

of the seller's deed to be in the file. This was a breach of the representation and warranty



customary in the mortgage origination and servicing business. . . .).


4.7.26.1 The title report was not in the file, and the new house

payment is $3,882. The Underwriter's Commitment Letter conditions the loan on receipt of a

copy of the title report to verify the seller is vested in title, and that the borrower's new house

payment is not to exceed $3,647. Proper, prudent and customary origination practices require

that all of the underwriter's conditions be satisfied. This was a breach of the representation and



proper, prudent and customary in the mortgage origination and servicing business. . . .).


officer, and a copy of the deed is not in the file. Proper, prudent and customary loan origination

and collection practices require the final application be signed by the loan officer and a copy of

the seller's deed to be in the file. This was a breach of the representation and warranty contained

in section 3.02(p) (The origination and collection practices used by Countrywide with respect to



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COMPLAINT 26

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in the mortgage origination and servicing business . . . .).


4.7.27.1 The Loan amount was $158,000, which is below applicable

Fannie Mae and Freddie Mac limits. This was a breach of the representation and warranty

contained in the Purchase Confirmation dated September 30, 2005, which states, [e]ach

Mortgage Loan is a jumbo mortgage and a fixed rate mortgage loan. . . .).

4.7.27.2 No assets were verified. The applicable underwriting

guidelines and proper, prudent and customary loan origination practices require that the

borrower's assets be verified with the most recent monthly bank or asset statement. This was a

breach of the representation and warranty contained in section 3.02(p) (The origination and



servicing business. . . .) and the representation and warranty contained in the Purchase

Confirmation dated September 30, 2005, which states, [e]ach Mortgage Loan conforms to the

jumbo underwriting guidelines of the prior owner of the Mortgage Loans or Countrywide's


4.7.27.3 The borrowers DTI was 52.2817%. The underwriter

guidelines provide that the maximum DTI for this loan program was 50%. This was a breach of

the representation and warranty contained in the Purchase Confirmation dated September 30,




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COMPLAINT 27

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officer. Proper, prudent and customary loan origination and collection practices require the final

application to be signed by the loan officer. This was a breach of the representation and



proper, prudent and customary in the mortgage origination and servicing business. . . . ).





or defense . . . .) and section 3.02(l) (Countrywide is the sole owner and holder of the

Mortgage Loan. The Mortgage Loan is not assigned or pledged, and Countrywide has good and


free and clear . . . .).

4.7.28.2 The Loan amount was $123,950, which was below

applicable Fannie Mae and Freddie Mac limits. This was a breach of the representation and

warranty contained in the Purchase Confirmation dated September 30, 2005, which states,

[e]ach Mortgage Loan is a jumbo Mortgage Loan . . . .

4.7.28.3 No assets were verified. The underwriters final report

indicates that no business data is available on-line for the borrower's current employer. The



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COMPLAINT 28

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applicable underwriting guidelines require that the borrower's assets be verified with the most

recent monthly statement. This was a breach of the representation and warranty contained in



in the mortgage origination and servicing business. . . .); and the representation and warranty


Mortgage Loan conforms to the jumbo underwriting guidelines of the prior owner of the

Mortgage Loans or Countrywide's jumbo credit underwriting guidelines, as applicable, in effect

at the time of origination.


officer. Proper, prudent and customary loan origination and collection practices require the final

application to be signed by the loan officer. This was a breach of the representation and







recording under the laws of the jurisdiction in which the Mortgaged Property is located.).


4.7.29.1 The Loan amount was $171,200, which was below

applicable Fannie Mae and Freddie Mac limits. This was a breach of the representation and



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COMPLAINT 29

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warranty contained in the Purchase Confirmation dated September 30, 2005, which states,

[e]ach Mortgage Loan is a jumbo mortgage and a fixed rate mortgage loan. . . .

4.7.29.2 No assets were indicated on the application and no assets

were verified. Borrower received $1,786.20 cash back on the HUD. The applicable

underwriting guidelines and proper, prudent and customary origination practices require the

borrower's assets to be verified with the most recent monthly bank statement. This was a breach




business. . . . ); and the representation and warranty contained in the Purchase Confirmation

dated September 30, 2005, which states, [e]ach Mortgage Loan conforms to the jumbo

underwriting guidelines of the prior owner of the Mortgage Loans or Countrywide's jumbo credit

underwriting guidelines, as applicable, in effect at the time of origination.

4.7.29.3 The property address was not indicated on the insurance

binder; only the legal description is indicated. The underwriters guidelines and proper, prudent

and customary origination practices require that the homeowner's policy show that the mailing

address and property address are the same. This was a breach of the representation and warranty

contained in section 3.02(f) (All buildings upon the Mortgaged property are insured by an

insurer acceptable to an Agency against loss by fire, hazards of extended coverage. . . .; section



the mortgage origination and servicing business. . . .); and the representation and warranty



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COMPLAINT 30

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Mortgage Loans or Countrywides jumbo credit underwriting guidelines, as applicable, in effect



4.7.30.1 After funding, during a post-closing audit, Ohio Savings

Bank determined that the APR and Finance Charge on the final Truth in Lending Disclosure

(TIL) was understated. Per Ohio Savings Bank's letter in the file, they made the necessary

adjustments, and informed the borrower. A corrected TIL was sent to the borrower along with a

refund check in the amount of $491. The corrected TIL in the file isn't signed by the borrower.

This was a breach of the representation and warranty contained in section 3.02(g) (Each

Mortgage Loan at the time of origination complied in all material respects with applicable state

law and federal laws including Truth-In-Lending. . . .).

4.7.30.2 The final application was not signed by the loan officer.

Proper, prudent and customary loan origination and collection practices require the final

application be signed by the loan officer. This was a breach in the representation and warranty



customary in the mortgage origination and servicing business. . . .).

4.7.30.3 A copy of the deed was not in the file. Proper, prudent and

customary loan origination and collection practices require a copy of the deed be in the file. This

was a breach of the representation and warranty contained in section 3.02(p) (The origination



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COMPLAINT 31

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and collection practices used by Countrywide with respect to each Mortgage Note and Mortgage


servicing business. . . . ).

4.7.30.4 The HUD in the file wasnt signed by the seller. Proper,

prudent and customary loan origination and collection practices require a copy of the seller's

signed HUD be in the file. This was a breach in the representation and warranty contained in



in the mortgage origination and servicing business. . . .).

4.7.30.5 The borrower's HUD indicates the seller credited the

borrower $12,000, and the borrower's costs were only $9,985.07. The borrower paid $8,003

above the appraisal value for the property (sales price $516,003 and appraisal value $508,000).

Proper, prudent and customary loan origination and collection practices require that the seller

paid closing costs cannot exceed the borrower's actual costs. If this was a sales concession, a

reduced sales price should have been reflected. This was a breach of the representation and




4.7.30.6 The borrower is married, but the spouse did not sign the

TIL. Proper, prudent and customary origination practices require that the borrowers spouse sign

the TIL. This was a breach of the representation and warranty contained in section 3.02(p) (The

origination and collection practices used by Countrywide with respect to each Mortgage Note



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COMPLAINT 32

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and Mortgage have been in all respects legal, proper, prudent and customary in the mortgage

origination and servicing business. . . .).

4.7.30.7 There was no tax return or business license in the file.

Instead, business information was pulled from the State of Arizonas public access system, and

was last updated July 29, 2003. The applicable underwriting guidelines require that the

borrower's employment be verified with a business license or tax return. This was a breach of

the representation and warranty contained in the Purchase Confirmation dated September 30,





4.7.31.1 The note was not endorsed in blank or to Countrywide.



or defense . . .) and section 3.02(l) (Countrywide is the sole owner and holder of the Mortgage



free and clear . . .).

4.7.31.2 The loan officer failed to sign and date the final loan

application. Proper, prudent and customary origination practices require the final loan

application to be signed and dated by the loan officer. This was a breach of the representation

and warranty contained in section 3.02(p) (The origination and collection practices used by



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COMPLAINT 33

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proper, prudent and customary in the mortgage origination and servicing business . . .).

4.7.31.3 There was no signed 4506T in the file. The applicable

underwriting guidelines required a signed 4506T and the underwriter conditioned approval upon

receipt of a signed 4506T. Proper, prudent and customary loan origination practices require a

signed 4506T and require that an underwriters conditions be satisfied. This was a breach of the

representations and warranties contained in section 3.02(p) (The origination and collection



business. . .) and in the Purchase Confirmation dated May 31, 2005, which stated that, [e]ach




4.7.31.4 There was no final title report or policy in the file. Proper,

prudent and customary practices require a copy of the title report and policy. This was a breach




business . . . .).

4.7.31.5 There was no Deed in the file. Proper, prudent and

customary practices require a copy of the Deed. This was a breach of the representation and




34/118

COMPLAINT 34

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4.7.31.6 The underwriter conditioned approval upon determination

that the borrowers income to be deemed reasonable and consistent with the borrowers

occupation, which was not present in the file. Proper, prudent and customary origination

practices require verification of income for the borrower. This was a breach of the representation





4.7.32.1 The loan officer and borrower failed to date the final loan

application. Proper, prudent and customary origination practices require the final loan

application to be dated by the loan officer and borrower. This was a breach of the representation




4.7.32.2 There was no appraisal in the file. Proper, prudent and

customary origination practices require a copy of the appraisal in the file. This was a breach of

the representations and warranties contained in section 3.02(p) (The origination and collection



business . . .) and section 3.02(t) (The Credit File contains an appraisal of the related



35/118

COMPLAINT 35

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Mortgaged Property signed prior to the approval of the Mortgage loan application by an

appraiser who meets the minimum requisite qualifications by an Agency for appraisers . . .).

4.7.32.3 There was no verification of assets in the file. The

applicable underwriting guidelines required verification of assets. Proper, prudent and

customary loan origination practices require verification of assets. This was a breach of the








4.7.32.4 There was no verification of income in the file. The

applicable underwriting guidelines required verification of income. Proper, prudent and

customary loan origination practices require verification of income. This was a breach of the










36/118

COMPLAINT 36

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4.7.32.5 There was no Deed or Purchase and Sale Agreement in the

file. Proper, prudent and customary practices require a copy of the Deed and the Purchase and

Sale Agreement. This was a breach of the representation and warranty contained in section



the mortgage origination and servicing business . . .).

4.7.32.6 The borrower was married and was to hold title as an

individual; the Loan Closing Instructions required the borrowers spouse to execute a disclaimer

deed. No such deed was in the file. Proper, prudent and customary loan origination practices

require adherence to the Loan Closing Instructions. This was a breach of the representations and

warranties contained in section 3.02(p) (The origination and collection practices used by


proper, prudent and customary in the mortgage origination and servicing business. . .).

4.7.32.7 The Certificate of Occupancy was not in the file. Without

an appraisal in the file, it is impossible to determine the age of the building. Proper, prudent and

customary loan origination practices require a copy of the Certificate of Occupancy be in the file

for new construction. This was a breach of the representation and warranty contained in section

3.02(w) (To the best of Countrywide's knowledge, the mortgaged property is lawfully occupied

under applicable law . . . .).

4.7.32.8 An account listed on the credit report was omitted from the

application and the underwriting analysis. The underwriter conditioned approval upon receipt of

documentation supporting the omission of the liability. No such verification was in the file.



37/118


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COMPLAINT 38

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at the time of origination; section 3.02(p) (The origination and collection practices used by




4.7.34.1 The second note and copies of the third party bill payoffs

are not in the file. Aegis' Underwriting Decision requires a copy of the second note, and copies

of third party bills appearing on the HUD. Proper, prudent and customary origination practices

require that all of the underwriter's conditions be satisfied. This was a breach of the

representations and warranties contained in the Purchase Confirmation dated March 31, 2005,

which states, [e]ach Mortgage Loan conforms to the jumbo underwriting guidelines of the prior

owner of the Mortgage Loans or Countrywide's jumbo credit underwriting guidelines, as

applicable, in effect at the time of origination, and section 3.02(p) (The origination and



servicing business. . . .).

4.7.34.2 The borrowers spouse did not sign the Notice of

Right to Cancel. The spouse is on title. Proper, prudent and customary loan origination

practices require the non-borrowing spouse to sign the Notice of Right to Cancel if on title. This

was a breach of the representation and warranty contained in section 3.02(p) (The origination

and collection practices used by Countrywide with respect to each Mortgage Note and Mortgage



39/118

COMPLAINT 39

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servicing business. . . .).





or defense. . . .) and section 3.02(l) (Countrywide is the sole owner and holder of the Mortgage



free and clear. . . .).

4.7.35.2 The Loan amount was $260,950, which is below applicable

Fannie Mae and Freddie Mac limits. This was a breach of the representation and warranty

contained in the Purchase Confirmation dated April 28, 2006, which states that, [e]ach


4.7.35.3 The spouse did not sign the TIL. Proper, prudent and

customary loan origination practices require the non-borrowing spouse to sign the TIL. This was

a breach of the representation and warranty contained in section 3.02(p) (The origination and



servicing business . . . .).

4.7.35.4 The title report required an affidavit from the borrower that

was not in the file, and the ALTA was not showing clear title. Proper, prudent and customary



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COMPLAINT 40

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425.289.5555 FAX425.289.6666

collection practices require the title report conditions be cleared prior to closing. This was a

breach of the representation and warranty contained in section 3.02(j) (The Mortgage is a valid,

existing and enforceable first or second lien (as specified in the related Mortgage Loan Schedule)

on the Mortgaged Property, including all improvements on the Mortgaged Property, subject only

to (i) the lien of current real property taxes and assessments not yet due and payable; (ii)

covenants, conditions and restrictions, rights of way, easements and other matters of public

record as of the date of recording that are acceptable to mortgage lending institutions generally

and specifically referred to in lender's title insurance policy delivered to the originator of the

Mortgage Loan and that do not adversely affect the Appraised Value (as evidenced by an

appraisal referred to in such definition) of the Mortgaged Property; (iii) if a second lien,