A CV I L-58876Pi)Ilt T7 ADMINISTRATION BOARD, As Liquidating Agent of Western Corporate Case No

I MARC M. SELTZEF.('4'34)

a J 1901 Avenue of the Stars, Suite 950 0. 4 Los Anseles. California 90067 -6029 Teleoho"ne ß10) 789-3 100 o 5 Fax:' (310) ZBq-lt SO U g 6 GEORGE A.ZELCS 7 205 North Michisan Avenue. Suite 1950 8 Chicaso. Illinoisî060 I Telepñoíre: (3 12) 641-97 60 9 Fax:' (312) 641-9751

10 Attornevs for Plaintiff National Credit Union Admini'stration Board 11 lSee Sisnature Pase for Names and Addresses I2 òf a¿¿ïíional Couisel for Plaintiffs) I3 UNITED STATES DISTRICT COURT 14 CENTRAL DISTRICT OF CALIFORNIA 15 \ryESTERN DIVISION t6 NATIONAL CREDIT TINION A CV I L-58876pi)ilt t7 ADMINISTRATION BOARD, as Liquidating Agent of Western Corporate Case No. 18 Federal C rëdit"tJnion, t9 Plaintiff, VS. 20 RBS SECURITIES, INC., flIWA RBS COMPLAINT FOR DAMAGES 2T GREENWICH CAPITAL MARKETS, INC.; GREENWICH CAPITAL FOR VIOLATION OF THE 22 ACCEPTANCE, INC.; AMEzuCAN SECURITIES ACT OF 1933 AND HOME MORTGAGE ASSETS LLC; TIIE CALIFORNIA CORPORATE 23 INDYMAC MBS, INC.; LARES ASSET SECURITIES LAW OF 1968 SECURITIZATION, INC. ; NOMURA 24 ASSET ACCEPTANCE CORP.; NOMURA HOME EQUITY LOAN, JURY TRIAL DEMANDED 25 INC.; and WACHOVIA MORTGAGE LOAN TRUST, LLC, 26 Defendants 27

l616146vll01266l 1 TABLE OF CONTENTS

2 Page NATURE OF TFIE 3 I. ACTION ...... 1

4 II. PARTIES AND RELEVANT NON-PARTIES...... ,..6

5 III. JURISDICTION AND VENUE...... 9 6 IV. MORTGAGE ORIGINATION AND TFIE SECURITIZATION 7 pRocESS...... 9 I V. RMBS CREDIT RATINGS AND CRE,DIT ENI{ANCEMENT ...... 12 9 u. wESCORp',S PURCHASES ...... 15 10 TF{E 11 VII. ORIGINATORS SYSTEMATICALLY DISREGARDED TFIE UNDERWRITING GUIDELINES STATED IN THE OFFERING 12 DOCUMENTS...... t7

13 A. The Surge in Mortgage_Deli_nquency and Defaults Shortly After the OffeÌinss and the-Hieh OTD Práctices of the Orisinalors T4 Demonstraté SystematicÐisregard of Underwriting Standards ...... I 8

15 B. The Surge in Actual Versus Expected Cumulative Losses Is Evidencé. gf th_e Originators' Systematic Disregard of T6 Underwriting Standãrds ...... :...... 29 t7 C. The Collapse of the Certificates' Credit Ratines Is Evidence of Systematiõ Disregard of Underwriting Guidelines...... 42 18 D. Revelations Subsequent to the Offerinss Show That the I9 Originators Systemätical ly Disregardeð Underwriting Standards ...... 42 20 1. The Systematic Disreeard of [Jnderwritins Standárds Was Pervasìve as Revealed Aft"er the 2t Collapse ...... 42 22 2. American Home's Systematic Disregard of Underwriting Standárds...... 49 z) J. \.ounrrywtqeCguntrywide Homerlome Loans,Loans. Inc.'s Systematiòvs lc 24 Disregárd of Underwriting' Standards 53 25 4. First National Bank of Nevada's Svstematic Disregard of Underwriting Standaíds .....62 26 5. IndyMac. ÞanL" Systematic Disregard of 27 Unclerwriting Stanciards...... 63

1616l46vll01266l 1 6. Option One Mortgage Corporation's Svstematic Disregard of Undõr'ñriting Standards ...... 68 2 7. Silver State Mortsase Companv's Svstematic J Disregard of Undéniriting StarídardÉ ....69 4 8. WaMu's Systematic Disregard of Underwriting Standards .:...... :...... 71 5 VIII. TFIE OFFERING DOCUMENTS CONTAINED IINTRUE 6 STATEMENTS OF MATERIAL FACT ...... 83

7 A. Untrue Statements Concerning Evaluation of the Borrower's Capacity and 8 Likelihood To Repay the Mortgage Loan...... 86 Untrue 9 B. Statements Conceming Reduced Documentation Programs ...... 111 10 C. Untrue Statements Concerning Loan-to-Value Ratios ...... I17 11 D. Untrue Statements Conceming Credit Enhancement ...... 120 t2 IX. TFIE CLAIMS ARE TIMELY ...... 123 t3 x. CLAIMS FOR RELIEF...... t27 t4

15 I6 I7

18 t9

1616146vll012661 I Plaintiff, National Credit Union Administration Board ("NCUA Board")

2 brings this action in its capacity as Liquidating Agent of Western Corporate Federal

3 Credit Union ("WesCorp") against RBS Securities, Inc. ("RBS") (f/k/a RBS

4 Greenwich Capital Markets, Inc.) as underwriter and seller, and against Greenwich

5 Capital Acceptance, Inc.; American Home Mortgage Assets LLC; IndyMac MBS,

6 Inc.; Lares Asset Securitization, Inc.; Nomura Asset Acceptance Corp.; Nomura

7 Home Equity Loan, Inc.; and, Wachovia Mortgage Loan Trust, LLC (collectively,

8 the "Issuer Defendants") as issuers, of certain residential mortgage-backed

9 securities ("RMBS") purchased by WesCorp, and alleges as follows: l0 I. NATURE OF THE ACTION

11 1. This action arises out of the sale of RMBS to WesCorp where RBS

t2 acted as underwriter and/or seller of the RMBS.

13 2. Virtually all of the RMBS sold to WesCorp were rated as triple-A (the

t4 same rating as United States Treasury Bonds) at the time of issuance.

15 3. The Issuer Defendants issued and RBS underwrote and sold the RMBS

T6 pursuant to registration statements, prospectuses, and/or prospectus supplements

l7 (collectively, the "Offering Documents"). These Offering Documents contained

18 untrue statements of material fact or omitted to state material facts in violation of

t9 Sections 11 and l2(a)(2) of the Securities Act of 1933 ("securities Act"), 15 U.S.C. 20 $$ 77k, 771(a)(2) ("Section 11" and "section 1,2(a)(2)," respectively), and the 2I California Corporate Securities Law of 1968, Cal. Corp. Code $$ 25000, et seq. 22 ("California Corporate Securities Law"). z) 4. The NCUA Board expressly disclaims and disavows any allegation in

24 this complaint that could be construed as alleging fraud.

25 5. The Offering Documents described, among other things, the mortgage 26 underwriting standards of the originators (the "Originators") that made the

27 mortgages that were pooled and served as the collateral for the RMBS purchased by

28 WesCorp.

l6l6l46vll0l266l 1 I 6. The Offering Documents represented that the Originators adhered to

2 the underwriting guidelines set out in the Offering Documents for the mortgages in

J the pools collateralizing the RMBS. In fact, the Originators had systematically

4 abandoned the stated underwriting guidelines described in the Offering Documents.

5 Because the mortgages in the pools collateralizing the RMBS were largely

6 underwritten without adherence to the underwriting standards stated in the Offering

7 Documents, the RMBS were significantly riskier than represented in the Offering I Documents. Indeed, a material percentage of the borrowers whose mortgages

9 comprised the RMBS were all but certain to become delinquent or default shortly

10 after origination. As a result, the RMBS were destined from inception to perform

11 poorly. t2 7. These untrue statements and omissions of fact were material because l3 the value of RMBS is largely a function of the cash flow from the principal and t4 interest payments on the mortgage loans collateralizing the RMBS. Thus, the

15 performance of the RMBS is tied to the borrower's ability to repay the loan. t6 8. \MesCorp purchased the RMBS listed in Table 1 (infra) through initial t7 offerings directly from RBS by means of prospectuses or oral communications.

18 Thus, RBS is liable for material untrue statements and omissions of fact under t9 Section 11, Section l2(a)(2), and/or the California Corporate Securities Law for the

20 RMBS listed in Table 1. 2t

1616146vl101266l 1 Table I

2 TRADE custpl ISSUING ENTITY DEPOSITOR BUYER PRICE PAID DATE J

Nomura Asset 4 Alternative Loan Trust 65538DABl Acceptance WesCorp 2006-AR4 tt/t7t06 $12,778,000 5 Corporation

6 American Home American Home 026935AD8 Mortgage Assets Trust Mortgage Assets WesCorp 6/U07 s30,339,000 7 2007-3 LLC

I First Franklin Financial Asset 32027NX86 Mortgage Loan Trust WesCorp n/30/05 $10,000,000 Securities Corp. 9 2005-FFH4

10 Greenwich Capital 4tt62CAD3 HarborView 2006-10 WesCorp 10t18/06 $90,000,000 ll Acceptance, Inc. t2 Greenwich Capital 4t 162GAB8 HarborView 2006-11 WesCorp 10t27/06 $ 18,934,000 13 Acceptance, Inc. I4 Greenwich Capital 4lt62DAG4 HarborView 2006-12 WesCorp t0n9/06 $80,000,000 Acceptance, Inc. 15 t6 Greenwich Capital 4tl62DAH2 HarborView 2006-12 WesCorp 11t29/06 $120,000,000 t7 Acceptance, Inc.

18 Greenwich Capital 41l62NAD9 HarborView 2006-14 WesCorp 12t5t06 s60,000,000 t9 Acceptance, Inc.

20 Greenwich Capitat 4l I62NAH0 HarborView 2006-14 WesCorp 12/5/06 $99,827,000 Acceptance, Inc. 21

22 Greenwich Capital 4l l6IGAE3 HarborView 2006-8 WesCorp 811t06 s105,693,000 Acceptance, Inc. 23

24 Greenwich Capital 4116lXAM8 HarborView 2006-9 WesCorp 8/18/06 100,000,000 Acceptance, Inc. $ 25

26 t ..CUSIP" stands for "Committee on uniform Securities Identif,rcation 27 Procedures." A CUSIP number is used to identifu most securities. includins certihcates of RMBS. See CUSIP Nu mber, http ://www. sec. gov/answers/ôus ip. htm." 28

l616l46vl/012661 1 TRADE CUSIPI ISSUING ENTITY DEPOSITOR BUYER PRICE PAID 2 DATE

Ja Greenwich Capital 4tt64l/4.AF4 HarborView 2007-l rüesCorp 2n4/07 $48,602,000 4 Acceptance, Inc.

6 Greenwich Capital 41I64MAP2 HarborView 2007-l WesCorp 2ll6107 $56,000,000 Acceptance, Inc. 7

I Greenwich Capital 4tt64LAC3 HarborView 2007-2 WesCorp 3/t/07 s55,000,000 Acceptance, Inc. 9

10 Greenwich Capital 4l l64YAD3 HarborView 2007-4 WesCorp 5130/07 $98,667,000 11 Acceptance, Inc. l2 Greenwich Capital 4l l65AAC6 HarborView 2007-5 WesCorp 6126t07 $55,000,000 13 Acceptance, Inc. t4 Greenwich Capital 4l l65AAD4 HarborView 2007-5 WesCorp 6126/07 s71,000,000 15 Acceptance, Inc.

T6 IndyMac INDX IndyMac MBS, 45667SAN7 Mortgage Loan Trust WesCorp 11128/06 180,000,000 t7 Inc. $ 2006-AR3s 18

IndyMac INDX 19 IndyMac MBS, 456675AP2 Mortgage Loan Trust WesCorp lt/28106 $20,000,000 Inc. 20 2006-AR35 2l Luminent Mortgage Lares Asset 55028CAA3 WesCorp l/23/07 $35,000,000 22 Trust 2007-l Securitization, Inc.

23 Luminent Mortgage Lares Asset 55028C481 WesCorp t/23/07 $20,400,000 24 Trust 2007-1 Securitization, Inc.

25 MortgagelT Mortgage Greenwich Capital 6l9l5RCL8 WesCorp 2/17/06 $35,710,500 26 Loan Trust 2006-l Acceptance, Inc.

1616146vll01266l 1 TRADE CUSIPl ISSUING ENTITY DEPOSITOR BUYER PRICE PAID 2 DATE

J Nomura Home Equity Loan, Inc., Home Nomura Home 4 65537KA86 WesCorp I/23/07 $40,000,000 Equity Loan Trust, Equity Loan, Inc. Series 2007-1 5

6 Nomura Home Equity Loan, Inc., Home Nomura Home 65537KAC4 WesCorp I/23/07 $30,000,000 7 Equity Loan Trust, Equity Loan, Inc. Series 2007-l 8

Soundview Home 9 Financial Asset 83611MJM1 Loan Trust 2005- WesCorp t1/22/0s Securities Corp. $18,037,000 OPT4 10

11 t2 9. WesCorp purchased each RMBS listed in Table 2 (infra) pursuant to

13 and traceable to a registration statement containing an untrue statement of a l4 material fact or that omitted to state a material fact required to be stated therein or

15 necessary to make the statements therein not misleading. RBS was an underwriter I6 for each of the securities listed in Table 2 andis therefore liable under Section 11. I7 Table 2

18 t9 TRADE CUSIP TSSUING ENTITY DEPOSITOR BUYER PRICE PAID DATE 20 2t Greenwich 4116lXAN6 HarborView 2006-9 Capital WesCorp 3/8/07 s22,810.706 Acceptance, Inc. 22 Greenwich 23 4II64MAP2 HarborView 2007-l Capital WesCorp 3/12/07 $6,921,395 Acceptance, Inc. 24 Lares Asset Luminent Mortgage 25 55028CAE5 Securitization, WesCorp 3/t/07 Trust 2007-l 925,074,560 Inc. 26 Wachovia Mortgage Vy'achovia 27 92978GAC3 Loan Trust, Series Mortgage Loan WesCorp tt/30/06 s44,376,000 2006-ALTr Trust, LLC 28

1616146vll0l266t 1 10. The RMBS WesCorp purchased suffered a significant drop in market 2 value. WesCorp has suffered significant losses from those RMBS purchased

Ja despite the NCUA Board's mitigation efforts.

4 II. PARTIES AND RELEVANT NON.PARTIES

5 1 1. The National Credit Union Administration ("NCUA") is an 6 independent agency of the Executive Branch of the United States Government that,

7 among other things, charters and regulates federal credit unions, and operates and

8 manages the National Credit Union Share Insurance Fund ("NCUSIF") and the 9 Temporary Corporate Credit Union Stabilization Fund ("TCCUSF"). The NCUSIF

10 insures the deposits of account holders in all federal credit unions and the majority

11 of state-chartered credit unions. The TCCUSF was created in 2009 to allow the t2 NCUA to borrow funds from the United States Department of the Treasury 13 ("Treasury Department") for the purposes of stabilizing corporate credit unions

T4 under conservatorship or liquidation, or colporate credit unions threatened with

15 conservatorship or liquidation. The NCUA must repay all monies borrowed from t6 the Treasury Department for the purposes of the TCCUSF by 2021. The NCUA t7 has regulatory authority over state-chartered credit unions that have their deposits

18 insured by the NCUSIF. The NCUA is under the management of the NCUA I9 Board. See Federal Credit Union Act, 12 U.S.C. gg 175l,l752a(a) ("FCU Act"). 20 12. WesCorp was a federally chartered corporate credit union with its 2I offices and principal place of business in San Dimas, California. As a corporate 22 credit union, WesCorp provided investment and financial services to other credit

23 unions.

24 13. The NCUA Board placed WesCorp into conservatorship on March 20,

25 2009, pursuant to its authority under the FCU Act, 12 U.S.C. g 1786(h). On 26 October l, 2010, the NCUA Board placed WesCorp into involuntary liquidation 27 pursuant to 12 U.S.C. $$ 1766(a), 1787(a)(1)(A), and appointed itself Liquidating 28 Agent. Pursuant fo 12 U.S.C. $ 1787(b)(2XA), the NCUA Board as Liquidating

l616146vll012661 1 Agent has succeeded to all rights, titles, powers, and privileges of WesCorp and of 2 any member, account holder, officer, or director of WesCorp, with respect to

a J WesCorp and its assets, including the right to bring the claims asserted by them in 4 this action. As Liquidating Agent, the NCUA Board has all the powers of the

5 members, directors, officers, and committees of WesCorp, see 12 U.S.C. $ 6 1786(hX8), and succeeds to all rights, titles, powers, and privileges of WesCorp, 'WesCorp's 7 see 12 U.S.C. $ 1787(b)(2XA). The NCUA Board may also sue on I behalf. See 12 U.S.C. $$ 1766(bX3XA), t787(b)(2),1789(a)(2). 9 14. Prior to being placed into conservatorship and involuntary liquidation,

10 WesCorp was the second largest corporate credit union in the United States.

1t 15. Any recoveries from this legal action will reduce the total losses t2 resulting from the failure of WesCorp. Losses from WesCorp's failure must be

13 paid from the NCIISIF or the TCCUSF. Expenditures from these funds must be t4 repaid through assessments against all federally insured credit unions. Because of l5 the expenditures resulting from WesCorp's failure, federally insured credit unions t6 will experience larger assessments, thereby reducing federally insured credit l7 unions' net worth. Reductions in net worth can adversely affect the dividends that

18 individual members of credit unions receive for the savings on deposit at their

19 credit union. Reductions in net worth can also make loans for home mortgages and 20 automobile purchases more expensive and difficult to obtain. Any recoveries from 2l this action will help to reduce the amount of any future assessments on federally

22 insured credit unions throughout the system, reducing the negative impact on z) federally insured credit unions' net worth. Recoveries from this action will benefit 24 credit unions and their individual members by increasing net worth resulting in

25 more efficient and lower-cost lending practices.

26 16. Defendant RBS Securities Inc. is a United States Securities and

27 Exchange Commission ("SEC") registered broker-dealer. RBS Securities, Inc. is a 28 wholly-owned subsidiary of The Royal Bank of Scotland Group. Prior to 2009,

l616146vl/012661 1 RBS Securities, Inc. was known as "RBS Greenwich Capital Markets, Inc." In

2 2000, The Royal Bank of Scotland acquired Greenwich Capital Markets, Inc.,

J renaming it "RBS Greenwich Capital Markets, Inc."

4 17. RBS acted as an underwriter of all the RMBS that are the subject of

5 this Complaint and that are listed in Tables 1 and 2 (supra). RBS is a Delaware

6 corporation with its principal place of business in Connecticut.

7 18. Greenwich Capital Acceptance, Inc. is the depositor and issuer of the

8 HarborView 2007-5, HarborView 2007-4, HarborView 2007-2, HarborView 2007-

9 1 , HarborView 2006 -14, HarborView 2006-12, HarborView 2006- I 1, HarborView

10 2006-10, HarborView 2006-9, and HarborView 2006-8 offerings. Greenwich l1 Capital Acceptance, Inc. is a Delaware corporation with its principal place of t2 business in Maryland.

13 19. American Home Mortgage Assets LLC is the depositor and issuer of t4 the American Home Mortgage Assets Trust 2007-3 offering. American Home

15 Mortgage Assets LLC is a Delaware corporation with its principal place of business t6 in New York. t7 20. IndyMac MBS, Inc. is the depositor and issuer of the IndyMac INDX

18 Mortgage Loan Trust 2006-4R35 offering. IndyMac MBS, Inc. is a Delaware t9 corporation with its principal place of business in Califomia.

20 2\. Lares Asset Securitization, Inc. is the depositor and issuer of the

2t Luminent Mortgage Trust 2007-1 offering. Lares Asset Securitization, Inc. is a 22 Delaware corporation with its principal place of business in California.

23 22. Nomura Asset Acceptance Corp. is the depositor and issuer of the

24 Altemative Loan Trust 2006-AR4 offering. Nomura Asset Acceptance Corp. is a

25 Delaware corporation with its principal place of business in New York.

26 23. Nomura Home Equity Loan, Inc. is the depositor and issuer of the 27 Nomura Home Equity Loan, Inc., Home Equity Loan Trust, Series 2007-l

1616146vllO1266l I ("Nomura FIELT 2007-1") offering. Nomura Home Equity Loan, Inc. is a 2 Delaware corporation with its principal place of business in New York.

Ja 24. Wachovia Mortgage Loan Trust, LLC is the depositor and issuer of the

4 Wachovia Mortgage Loan Trust, Series 2006-ALT1 offering. Wachovia Mortgage

5 Loan Trust, LLC is a Delaware corporation with its principal place of business in

6 North Carolina.

7 ilI. JURISDICTION AND VENUE

8 25. This Court has subject matter jurisdiction pursuant to: (a) 12 U.S.C. g

9 1789(a)(2), which provides that "[a]11 suits of a civil nature at common law or in 10 equity to which the INCUA Board] shall be a party shall be deemed to arise under

11 the laws of the United States, and the United States district courts shall have

12 original jurisdiction thereof, without regard to the amount in controversy"; and (b) 13 28 U.S.C. $ 1345, which provides that "the district courts shall have original t4 jurisdiction of all civil actions, suits or proceedings commenced by the United

15 States, or by any agency or officer thereof expressly authorized to sue by Act of

T6 Congress."

I7 26. Venue is proper in this District under Section 22 of the Securities Act, 18 15 U.S.C. $ 77v(a), because the transactions at issue occurred in San Dimas, T9 California, the headquarters of WesCorp. This Court has personal jurisdiction over 20 each Defendant because they offered/sold the RMBS at issue in this Complaint to 2l WesCorp in this District; prepared/disseminated the Offering Documents 22 containing untrue statements or omissions of material fact as alleged herein to

23 WesCorp in this District; andlor are residents of/conduct business in this District. 24 IV. MORTGAGE ORIGINATION AND THE SECURITIZATION

25 PROCESS

26 27. RMBS are asset-backed securities. A pool or pools of residential 27 mortgages are the assets that back or collateralize the RMBS certificates purchased

28 by investors.

l6l6t46vll01266l 1 28. Because residential mortgages are the assets collateralizing RMBS, the 2 origination of mortgages commences the process that leads to the creation of

Ja RMBS. Originators decide whether to loan potential borrowers money to purchase

4 residential real estate through a process called mortgage underwriting. The

5 originator applies its underwriting standards or guidelines to determine whether a

6 particular borrower is qualified to receive a mortgage for a particular property. The

7 underwriting guidelines consist of a variety of metrics including: the borrower's

I debt, income, savings, credit history, and credit score; whether the property will be

9 owner-occupied; and the amount of the loan compared to the value of the property

10 at issue (the "loan-to-value" or "LTV" ratio), among other things. Underwriting

11 guidelines are designed to ensure that: (1) the borrower has the means to repay the l2 loan, (2) the borrower will likely repay the loan, and (3) the loan is secured by

13 sufficient collateral in the event of default. I4 29. Historically, originators made mortgage loans to borrowers and held

15 the loans. Originators profited as they collected monthly principal and interest

16 payments directly from the borrower. Originators also retained the risk that the I7 borrower would default on the loan.

18 30. This changed in the 1970s when the Government National Mortgage

T9 Association ("Ginnie Mae"), the Federal National Mortgage Association ("Fannie

20 Mae"), and the Federal Home Loan Mortgage Corporation ("Freddie Mac") began 2l purchasing "conforming loans" (loans underwritten in accordance with Fannie Mae 22 and Freddie Mac underwriting guidelines) from originators and "securitizing" them

23 for resale to investors as RMBS.

24 31. More recently, originators, usually working with investment banks,

25 began securitizing "non-conforming" loans. Non-conforming loans (loans not 26 written in compliance with Fannie Mae or Freddie Mac guidelines) are also known

27 as "nonprime" or "private label" loans and include "Alt-A" and "subprime" loans. 28 Despite the non-conforming nature of the underlying mortgages, the securitizers of

1616146vll01266l 10 I such RMBS were able to obtain triple-A credit ratings by using "credit 2 enhancement" (explained infra) when they securitizedthe non-conforming loans.

J 32. On information and belief, all of the loans collateralizingthe RMBS at 4 issue in this Complaint are non-conforming mortgage loans.

5 33. The issuance of RMBS collateralized by non-conforming loans peaked

6 in2006. The securit\zation process shifted the originators' focus from ensuring the

7 ability of borrowers to repay their mortgages to ensuring that the originator could

I process (and obtain fees from) an ever-larger loan volume for distribution as

9 RMBS. This practice is known as "originate-to-distribute" ("OTD").

10 34. Securitization begins with a "sponsor" that purchases loans in bulk

11 from one or more originators. The sponsor transfers title of the loans to an entity t2 called the "depositor."

13 35. The depositor transfers the loans to a trust called the "issuing entity."

I4 36. The issuing entity issues "notes" and/or "certificates" representing an

15 ownership interest in the cash flow from the mortgage pool underlying the I6 securities (i.e., the principal and interest generated as borrowers make monthly

T7 payrnents on the mortgages in the pool).

18 37. The depositor files required documents (such as registration statements

t9 and prospectuses) with the SEC so that the certificates can be offered to the public. 20 38. One or more "underwriters"-like RBS-then sell the certificates to 2l investors.

22 39. A loan "servicer" collects payments from borrowers on individual

23 mortgages as part of a pool of mortgages, and the issuing entity allocates and

24 distributes the income stream generated from the mortgage loan payments to the

25 RMBS investors.

26 40. Figure I (ínfra) depicts a typical securitization process.

l616146v1/012661 ll I Figure 1

Originator (e.g., American Home, 4 Countrywide, WaMu)

5 Loan Servicer (collects monthly 6 payments from Borrowers) '' :i Sponsorpurchases loansfrom 7 1 otiginator Sponsor .r-' Borrowers malce 8 monthly mortgage p6yments Sponsor transfers loans to Depositor 9 Depositor 10 Mortgage payments floy) to Depositor creates Issuing Entity Issuing Entity and transfers mortgages to Issuing Entity. Depositor fi les 11 re gi s tration s tdte me nt an d Issuing Entity (e.g., HarborView prospectus with SEC 12 Issuing Entity paysfunds to 2006-12, HarborView 20074, investors in order of Soundview Home Loan Trust seniorilt class of 13 2005-oPT4) Issuing Trust issues mortgage certûcates p as slhrough ce r tifr c ate s t4 ,' i Underwriter (t.e., RBS Securities) i f'l 15 sells certificates to investors I I ______--___l t6 Investors Owners ofsenior tranches paid first l7 Owners ofjunior tranches paid after more senior tranches are paid l8

19 Because securitization, as a practical matter, 20 41. shifts the risk of default 2l on the mortgage loans from the originator of the loan to the RMBS investor, the originator's adherence mortgage guidelines 22 to underwriting as represented in the respect ¿) offering documents with to the underlying mortgage loans is critical to the investors' ability to evaluate the expected performance of the 24 RMBS. RMBS CREDIT RATII{GS 25 V. AI{D CREDIT ENHAÌ\CEMENT RMBS offerings are generally each 26 42. divided into slices or "tranches," which represents 27 of a different level of risk. RMBS certificates denote the particular tranches of the security purchased investor. 28 by the

l616146vll01266l t2 1 43. The credit rating for an RMBS reflects an assessment of the 2 creditworthiness of that RMBS and indicates the level of risk associated with that

J RMBS. Standard &. Poor's ("S&P") and Moody's Investors Service, Inc. 4 ("Moody's") are the credit rating agencies that assigned credit ratings to the RMBS

5 in this case.

6 44. The credit rating agencies use letter-grade rating systems as shown in

7 Table 3 (infra). Table 3 8 Credit Rat 9 Moody's S&P DeÍïnitions Grade Type 10 AAA Ãaa (Maximum 11 Prime Safety) t2 Aal AA+ Aa2 AA High Grade, High Quality Aa3 AA- 13 INVESTMENT A1 A+ GRADE t4 A2 A Upper Medium Grade A3 A- Baal BBB+ 15 Baa2 BBB Medium Grade r6 Baa3 BBB- Ba2 BB Non-Investment Grade, or t7 Ba3 BB- Sneculative BI B+ Highly Speculative, or B2 B 18 Substantial Risk B3 B- SPECULATIVE Caa2 CCC+ In Poor Standing GRADE 19 Caa3 Ca CCC Extremely Speculative 20 CCC- C Mav be in Default 2I D Default 22

23 45. Moody's purportedly awards the coveted "Aaa" rating to structured 24 finance products that are "of the highest quality, with minimal credit risk." 25 Moody's Investors Service, Moody's Rating Symbols & Definìtions at 6 (August

26 2003), av ailabl e at http ://www.rbcpa.com/Moodyrs_ratings_and_definitions.pdf. 27 Likewise, S&P rates a product "AAA" when the "obligor's capacity to meet its

l6l6l46vl111266l 13 1 financial commitment on the obligation is extremely strong." Standard & Poor's, 2 Ratings Definitions, available at http://www.standardandpoors.com/ratings/

J articles/en/us/ ?assetlD:12453037 I 1 3 5 0.

4 46. In fact, RMBS could not be sold unless they received one of the

5 highest "investment grade" ratings on most tranches from one or more credit rating

6 agencies, because the primary market for RMBS is institutional investors, such as

7 WesCorp , that are generally limited to buying only securities with the highest credit 8 ratings. See, e.g., NCUA Credit Risk Management Rule, 12 C.F.R. $ 704.6(dX2) 9 (2010) (prohibiting colporate credit unions from investing in securities rated below 10 AA-); but see, €.8., Removing References to Credit Ratings in Regulations;

11 Proposing Alternatives to the Use of Credit Ratings, T6 Fed. Reg. 1I,164 (proposed t2 Mar. l, 2011) (to be codified at 12 C.F.R. pts. 703, 704,709, and 742) (NCUA's t3 proposed rule eliminating the use of credit ratings for guidance in investment t4 decisions by credit unions).

15 47. While the pool of mortgages underlying the RMBS may not have been t6 sufficient to warrant a triple-A credit rating, various forms of "credit enhancement"

t7 were used to obtain a triple-A rating on the higher tranches of RMBS.

18 48. One form of credit enhancement is "structural subordination." The t9 tranches, and their risk characteristics relative to each other, are often analogized to

20 a waterfall. Investors in the higher or "senior" tranches are the first to be paid as 2I income is generated when borrowers make their monthly payments. After investors 22 in the most senior tranche are paid, investors in the next subordinate or 'Junior"

23 tranche are paid, and so on down to the most subordinate or lowest tranche.

24 49. In the event mortgages in the pool default, the resulting loss is 25 absorbed by the subordinate tranches first.

26 50. Accordingly, senior tranches are deemed less risky than subordinate

27 tranches and therefore receive higher credit ratings.

l6l6t46vll01266l t4 1 51. Another form of credit enhancement is overcollateralization. 2 Overcollateralization is the inclusion of a higher dollar amount of mortgages in the

J pool than the par value of the security. The spread between the value of the pool 4 and the par value of the security acts as a cushion in the event of a shortfall in

5 expected cash flow.

6 52. Other forms of credit enhancement include "excess spread," monoline

7 insurance, obtaining a letter of credit, and "cross-collateralization." "Excess

8 spread" involves increasing the interest rate paid to the purchasers of the RMBS

9 relative to the interest rate received on the cash flow from the underlying

10 mortgages. Monoline insurance, also known as "wrapping" the deal, involves

11 purchasing insurance to cover losses from any defaults. Letters of credit can also t2 be purchased to cover defaults. Finally, some RMBS are "cross-collateralized,"

13 i.e., when a tranche in an RMBS experiences rapid prepayments or l4 disproportionately high realized losses, principal and interest collected from another l5 tranche is applied to pay principal or interest, or both, to the senior certificates in t6 the loan group experiencing rapid prepayment or disproportionate losses. l7 VI. WESCORP'S PURCHASES

18 53. WesCorp purchased only the highest-rated tranches of RMBS. All but

19 two were rated triple-A at the time of issuance. These securities have since been 20 downgraded below investment grade just a few years after they were sold (see infra

21 Table 4).

22 Table 4 z) CNSOTT RATTNGS OF RMBS PURCHASES ONICTX.IT,/RECENT ORIGINAL ORIGINAL RECENT RECENT 24 CUSIP ISSUERNAME BUYER RATING RATING RATING RATING S&P MOODY'S s&P MOODY'S 25 Alternative Loan AAA Aaa D C 65538D481 WesCorp 26 Trust 2006-AR4 t21412006 tU30/2006 8/19t2009 91212010

1616146v ll01266l t5 1 Cnnurr Rrrrxcs or RMBS PURCHASES OnrcrxAl,/Rrcrxr

2 ORIGINAL ORIGINAL RECENT RECENT CUSIP ISSUERNAME BUYER RATING RATING RATING RATING J s&P MOODY'S s&P MOODY'S

4 American Home AAA Aaa D C 0269354D8 Mortgage Assets Trust WesCorp 5 6/14/2007 611412007 2124/2010 2/212009 2007-3

6 First Franklin AA Aa2 B. C 32027NXF,6 Mortgage Loan Trust WesCorp 12/28/200s t2/221200s 8/4/2009 416/2010 7 2005-FFH4 AAA Aaa CC C 41162C4D3 HarborView 2006-10 WesCorp 8 tl122/2006 tU2112006 5/tt/2011 12/512010 AAA Aaa CC C 4l l62GAB8 HarborView 2006-11 WesCorp 9 t2/22/2006 1212012006 2/16/20t0 tllt9l20t0 AAA Aaa CCC C 41162DAG4 HarborView 2006-12 WesCorp 10 12/19/2006 121t312006 7124/2009 t2/5/2010 AAA Aaa AA+ Aa3 41162D^H2 HarborView 2006-12 WesCorp 11 t2/19/2006 12113/2006 lr/8/2010 n123t2008 AAA Aaa CCC C 41162N4D9 HarborView 2006-14 WesCorp t2 t2/2712006 t212212006 8ll4/2009 tt/19/2010 AAA Aaa D C 13 4l l62NAH0 HarborView 2006-14 WesCorp 12/27t2006 12/2212006 612312010 tt/19/2010 AAA Aaa D C t4 4l161GAE3 HarborView 2006-8 WesCorp 9/s/2006 8/412006 912412010 t2l5l20t0 AAA Ãaa CCC C 15 4l l61XAM8 HarborView 2006-9 WesCorp 10118t2006 10/412006 4/15/2009 12/512010 AAA Aaa CCC C r6 4l 16lxAN6 HarborView 2006-9 WesCorp I0lt8/2006 t014t2006 8/14/2009 t2/5120t0 Aaa NR C t7 4l l64MAF4 HarborView 2007-1 WesCorp NR 212612007 2/20/2009 AAA Aaa CCC C 18 4tL64MAP2 HarborView 2007-l WesCorp 3/2212007 319/2007 8/14/2009 r2l5/2010 AAA Aaa CCC C l9 4tL64LAC3 HarborView 2007-2 WesCorp 4/312007 3/30/2007 8lt4/2009 t2l5l20t0 Aaa C 20 4tL64YA.D3 HarborView 2007-4 WesCorp NR NR 6/14/2007 L2/512010 AAA Aaa CCC C 2l 4l l65AAC6 HarborView 2007-5 WesCorp 7126/2007 7/1212007 712412009 12/512010 AAA Aaa D C 22 4l l65AAD4 HarborView 2007-5 WesCorp 7126/2007 7/12t2007 5l2s/2010 12/5/2010 IndyMac INDX 23 AAA Aaa D Caa3 45667S4N7 Mortgage Loan Trust WesCorp 121U2006 1U29t2006 3n8/2011 I/29t2009 24 2006-AR35 IndyMac INDX AAA Aaa D c 456675¡^P2 Mortgage Loan Trust WesCorp 25 t2lt/2006 1v2912006 t2124/2009 l0/1212010 2006-AR3s Luminent Mortgage AAA Aaa CCC Caa3 26 55028C443 WesCorp Trust 2007-l 2/U2007 l/2s12007 7124t2009 t2/1412010 Luminent Mortgage AAA Aaa CC C 27 55028CABl WesCorp Trust 2007-l 2/t/2007 t/2st2007 2116120r0 t2/t4/2010 28

l6l6l46vll01266l I6 1 Cnøort RATTNGS oF RMBS PURCTIASES Onrcrx¡,/Rncnnr

2 ORIGINAL ORIGINAL RECENT RECENT a CUSIP TSSUERNAME BUYER RATING RATING RATING RATING J S&P MOODY'S s&P MOODY'S

4 Luminent Mortgage AAA Aaa D 55028CAE5 WesCorp c Trust 2007-l 2/U2007 U2512007 6/2312010 12/s12010 5 MortgagelT Mortgage AAA Aaa D C 6l9l5RCL8 WesCorp Loan Trust 2006-l 3/2/2006 212212006 2/24/2010 I2l9/2010 6 Nomura Home Equity Loan, Inc., Home AAA Aaa D Ca 65537K486 WesCorp 7 Equity Loan Trust, 212/2007 t/3U2007 It/25/2009 9Dl2A10 Series 2007-l 8 Nomura Home Equity Loan, Inc,, Home AAA Aaa D C 65537KAC4 WesCorp 9 Equity Loan Trust, 21212007 t/31/2007 6/2s12009 912/2010 Series 2007-l 10 Soundview Home AA CCC 836l1MJMl Loan Trust 2005- WesCorp NR NR 12/v200s 8/4/2009 11 OPT4 Wachovia Mortgage AAA Aaa B- Caa2 12 92978GAC3 Loan Trust, Series WesCorp t/3/2007 12127/2006 2/212010 t/14/2010 2006-ALTI 13 t4

15 54. At the time of purchase, WesCorp was not aware of the untrue l6 statements or omissions of material facts in the Offering Documents of the RMBS. t7 If WesCorp had known about the Originators' pervasive disregard of underwriting

18 standards-contrary to the representations in the Offering Documents-WesCorp

19 would not have purchased the certificates.

20 55. The securities' substantial loss of market value has injured WesCorp 2I and the NCUA Board.

22 VII. THE ORIGINATORS SYSTEMATICALLY DISREGARDED THE 23 UNDERWRITING GUIDELINES STATED IN THE OFFERING 24 DOCUMENTS

25 56. The perfoffnance and value of RMBS are largely contingent upon

26 borrowers repaying their mortgages. The loan underwriting guidelines ensure that

27 the borrower has the means to repay the mortgage and that the RMBS is secured by

l616146vll01266l I7 1 sufficient collateral in the event of reasonably anticipated defaults on underlying

2 mortgage loans.

JI 57. With respect to RMBS collateralized by loans written by originators

4 that systematically disregarded their stated underwriting standards, the following

5 pattern is present:

6 (a) a surge in borrower delinquencies and defaults on the mortgages

7 in the pools (see infra Section VII.A and Table 5);

8 (b) actual losses to the underlying mortgage pools within the first 12

9 months after the offerings vastly exceeded expected losses (see

10 infra Section VII.B and Figure 2); and,

l1 (t) a high percentage of the underlying mortgage loans were

12 originated for distribution, as explained below (see infra Table 6

13 and accompanying allegations).

T4 58. These factors support a finding that the Originators failed to originate

15 the mortgages in accordance with the underwriting standards stated in the Offering I6 Documents.

l7 59. This conclusion is further corroborated by reports that the Originators

18 that contributed mortgage loans to the RMBS at issue in this Complaint abandoned

t9 the underwriting standards described in the RMBS Offering Documents. See infra 20 Section VII.D. 2l A. The Surge in Mortsase Delinquencv and Defaults Shortlv After 22 the Offerines and the Hieh OTD Practices of the Orieinators 23 I)emonstrate Svstematic Disregard of Underwriting Standards 24 60. Residential mortgages are generally considered delinquent if no 25 payment has been received for more than 30 days after payment is due. Residential

26 mortgages where no payment has been received for more than 90 days (or three 27 payment cycles) are generally considered to be in default.

l616l46vll01266l 18 1 61. The surge in delinquencies and defaults following the offerings

2 evidences the systematic flaws in the Originators' underwriting process (see infra

JI Table 5).

4 62. The Offering Documents reported zero or near zero delinquencies and

5 defaults at the time of the offerings (see infra Table 5).

6 63. The pools of mortgages collateralizing the RMBS experienced

7 delinquency and default rates as high as 9.63Yo after only three months, up to

8 23.04% at six months, and reaching43.78% at one year (see infra Table 5).

9 64. As of May 2011, nearly half (45.09%) of the mortgage collateral

10 across all of the RMBS that WesCorp purchased was in delinquency, bankruptcy, " 1l foreclosure, or was real estate owned ("REO"), which means that a bank or lending t2 institution owns the property after a failed sale at a foreclosure auction (see ínfra

13 Table 5).

T4 65. Table 5 (infra) reflects the delinquency, foreclosure, bankruptcy, and

l5 REO rates on the RMBS as to which claims are asserted in this Complaint. The

T6 data presented in the last five columns are from the trustee reports (dates and page l7 references as indicated in the parentheticals). The shadowed rows reflect the group

18 of mortgages in the pool underlying the specific tranches purchased by WesCorp; t9 however, some trustee reports include only the aggregate data. For the RMBS with

20 multiple groups, aggregate information on all the groups is included because the 2t tranches are cross-collateral ized.

22 Table 5

23 RATE AT CUT-OFF 24 CUSIP OFFBRING I MO. 3 MOS. 6 MOS. 12 MOS. RECENT DATE FOR 25 OFFERING

26 Altemative Loan Trust 2006-AR4 42.39% .27%;o (Dec., 2.69Yo 7.32% 17.63% 65538DABl Aggregate (P.S. Zero. (S-34) (May 201I, p.e) (Feb., p.9) (May, p.9) (Nov., p.9) 27 dated November p.e) 30,2006) 28

16l6t46v1/012661 t9 1 RATE AT CUT-OFF CUSIP OFFERING l Mo. 3 MOS. 6 MOS. 12 MOS. RECENT 2 DATE FOR OFFERING J American Home Mortgage Assets 4.99% 46.49o/o 4 0o/o 13.90% 27.470/o Trust 2007-3 Zero. (S-40) (Aug., (May 2011, (June, p.10) (lt{ov., p.10) (May, p.10) Aggregate (June p.l 0) p.l1) 5 5,2007)

6 American Home 2.62% 52.s2% Mortgage Assets 0% 8.63% (Nov 2358% Zero. (S-40) (Aug., (May 201I, Trust 2007-3: (June, p.12) p.t2) (May, p.l2) 7 p t2) Group I-1 p.t2) 8

American Home 9 Mortgage Assets 9.630/o 62.39Yo Trust 2007-3: 0% 23.04o/o 43.78% 026935AD8 Zero. (S-40) (Aug., (May 2011, Group I-2 *Class (June, p.l2) (Nov., p.12) (May, p.12) p.t2) p.r2) l0 I-24-2 in Group r-2. (s-12) 11

American Home I2 2.04% 4232% Mortgage Assets 0% 5.74% (Nov., 15.73o/o Zero. (S-40) (Aug., (May 201l, Trust 2007-3: (June, p.13) p.l3) (May, p.l3) p.1 3) p 13 Group II-l 13) t4

American Home 15 3.72% 42.85o/o Mortgage Assets 0o/o 12.44o/o 25.55o/o Zero. (S-40) (Aug, (May 201I, Trust 2007-3: (June, p. l3) (Nov., p.13) (May, p.l3) p 13) p t6 Group II-2 13) t7 American Home 5.160/o 13.85% 18 Mortgage Assets 0o/o t6.3s% 18.05% Zero. (S-40) (Aug., (May 2011, Trust 2007-3: (June, p. 14) (Nov., p.l4) (May, p.l4) p.14) p 14) I9 Group III

20 First Franklin Mortgage Loan 49.43Vo Trust 2005-FFH4 .80% 2.t6% 3.83% (May, 9.64% (Nov., 2l (May 2011, Aggregate (P.S. (Dec., p.12) (Feb., p.12) p.12) p. l2) dated November p.l3) 22 30,200s)

23 First Franklin Mortgage Loan 46.37% Trust 2005-FFH4 .73o/o r.38% 2.58%(May, 8.66% (Nov., 32027NXE6 (May 201I, 24 Group I *Class (Dec., p.13) (Feb., p. l3) p.13) p.13) p.14) M-2 in Groups I 25 nd2. (S-72)

26 First Franklin Mortgage Loan 54.40% Trust 2005-FFH4 .88% 3.O9o/¡ s.39% ß.92% 32027NXE6 (May 201I, 27 Group 2 *Class (Dec., p.l4) (Feb., p.14) (May, p.14) (Nov., p.14) M-2 in Groups I p.ls) and 2. (S-72) 28

16l6l46vI/012661 20 1 RATE AT CUT-OFF CTJSIP OFFERING I MO. 3 MOS. 6 MOS. 12 MOS. RECENT 2 DATE FOR OFFERING Ja HarborView . I 5%o of the 4 2006- 1 0 28.99% mortgage loans .t4% .67% L.t2% 5.47% (Apr., Aggregate (P.S. (May 2011, were 30-59 days (Nov., p.l0) (Jan., p.l0) (Apr., p.l0) p l0) dated November p 10) delinquent. (S-27) 5 r 0, 2006)

, l5% ofthe 32.57% 7 HarborView mortgage loans .07% .55% .s6% 538% (May 201I, 2006-10 Group I were 30-59 days (Nov., p.1 l) (Jan.,p.1l) (Apr., p.l l) (Apr., p.1l) p delinquent. (S-27) ll) 8

9 HarborView . I 5% ofthe 10 2006-10 Group 2 26.97Vo moftgage Ioans .l9o/o .74Yo 1.44o/o 5.52o/o 4l I62CAD3 *Class 2A-lB and (May 201 I, were 30-59 days (Nov., p.I l) (Jan., p.l 1) (Apr., p.l l) (Apr., p.l l) 2A-lC in Group 2 p.l (S-27) l) l1 (s-6) delinquent.

12 HarborView s0.38% 13 2006-lr (P.s. .38% l.46Yo 2.44% 9.07% 4l I62GAB8 Zero. (S-20) (May 201l, dated November (Nov., p.9) (Jan., p.9) (Apr., p.9) (Apr., p.9) p.9) t4 10,2006)

15 HarborView 2006-t2 61.77% 0% .57% t.4t% 7.37% (Nov., Aggregate (P.S. Zero. (S-28) (May 201I, I6 (Dec., p.I 1) (Feb.,p.ll) (May, p.l0) p.l 0) dated December p.l1) 1 l, 2006) I1 63.08% HarborView 0% .46Yo t.0t% 6.88% (Nov., l8 Zero. (S-28) (May 201I, 2006-12 Group I (Dec., p.l2) (Feb., p.l3) (May, p.ll) p.l l) p t2) t9 HarborView 2006-12 Group 2 6t.27% 4tt62DAG4 0% .6t% 1.53o/o 7.55% (Nov., 20 *Class 2A-lB, Zero. (S-28) (May 201I, 4II62DAÍ12 (Dec., p.l2) (Feb., p.l3) (May, p.l l) p.l l) 2Ã-28 and2{-2C p. l2) 2l in Group 2. (S-7)

22 HarborView 2006-t4 36.66% .t7% .7\Yo 197% 8.6r% Aggregate Zero. (5-26) (May 2011, (Jan., p.l l) (Mar., p.10) (June, p. l0) (Dec., p.l0) ¿J (December 20, p.ll) 2006) 24 37.01% HarborView .20% .39% .74% 6.4s% Zero. (5-26) (May 201l, 2006-14 Group I (Jan., p.l3) (Mar., p.l2) (June, p,12) (Dec., p.l2) 25 p.t2)

26 Ha¡borView 2006-14 Group 2 36.54yo 4l I62NAD9 .l6a/o .90% 2.36% 9.29% *Class 2A-lB and Zero. (3-26\ (May 201I, 4l I62NAH0 (Jan., p.13) (Mu., p.12) (June, p.l2) (Dec., p.l2) 27 2A-2C in Group p.t2) 2. (S-7) 28

1616l46vl /012661 2I 1 RÀTE AT CUT-OFF CUSIP OFFERING I MO. 3 MOS. 6 MOS. 12 MOS. RECENT 2 DATE FOR OFFERING J1

2.78%o of the 4 mortgage loans were HarborView 30-59 days 5 5.680/o 46.43o/o 2006-8 Aggregate delinquent in 5.59o/o 5.48o/" 9.160/o (Aug., (Nov., (May 2011, (P.S. dated payment, and (Sept., p. I 1) (Feb., p. l0) p.l0) p.l l) p.l0) 6 August 28,2006) 0.48% were 60-89 days delinquent in payment. 7 (s-24)

8 2.78%o of the 9 mortgage loans were 30-59 days 4.12% 45.29% 10 HarborView delinquent in 3.78% 3.40% 8.11% (Aug., O.lov., (May 2011, 2006-8 Group I payment, and (Sept., p. l3) (Feb., p. l2) p.t2) p.1 3) p.l 0.48% were 60-89 l) 1l days delinquent in payment. T2 (s-24)

13 2.78o/o of the mortgage loans l4 wefe HarborView 30-59 days 6.50o/o 47.13o/o 2006-8 Group 2 delinquent in 6.51Yõ 6.54o/o (Aug., 15 4l l61GAE3 (Nov., 9.75o/o (May20ll, *Clæs 2A-lC in paymont, and (Sept., p.13) (Feb., p.12) p.t2) p.l3) p.l Group 2. (S-7) 0.48% were 60-89 l) I6 days delinquent in payment. t7 (s-24)

18 HarborView 6t.34% 2006-9 Aggregate 0o/. .31% .99% 532% Zero. (3-26) (May 201l, (P.S. dated (Oct., p.10) (Dec., p.10) (Mar., p.10) (Sept., p.l0) T9 p October 3, 2006) 10)

20 58.93o/o HarborView 0% .3t% .67% 4.96% Zero. (3-26) (May 201l, 2006-9 Group I (Oct., p.1l) (Dec., p.l l) (Mar., p.l l) (Sept., p. I 1) 2I p.l5)

22 Ha¡borView 2006-9 Group 2 62.52% 4l16lxAM8 0% .3t% t.t4% 5.50o/o *Class 2A-lCl Zero. (5-26) (May 201I, 4ll6lxAN6 (Oct., p.12) (Dec., p.12) (Mar., p.12) (Sept., p.12) and 2A-lB2 in p.19) Group 2. (S-7) 24

1616l46vll01266l 22 I RATE AT CUT-OFF CUSIP OFFERING I MO. 3 MOS. 6 MOS. 12 MOS. RECENT 2 DATE FOR OFFERING J

0.04% ofthe 4 mortgage loans were at least 30 days but less than 5 HarborView 60 days detinquent 62.01o/o 2007-1 Aggregate 32% 1.08% 2.88%;o (Aug., t2.86% in payment, and (May 201l, (P.S. dated March (Mar., p.l0) (May, p.l0) p.l0) (Feb., p.l0) 6 '1,2007) 0.03% were 60 p.l0) days or more delinquent in 7 payment. (s-24) 8

9 0.04% of the mortgage loans were at leæt 30 10 HarborView days but less than 2007-l Group I 60 days delinquenl 57.52o/o .25% 1.05o/o 2.32o/o (Aug., t0.83% 4l l64MAF4 tClass B-l in in payment, and (May 201I, 11 (Mar., p.l l) (May, p.l l) p.l l) (Feb., p.l l) both loan groups. 0.03% were 60 p.l l) (s-6) days or more t2 delinquent in payment. (s-24) 13

t4 0.04% ofthe mortgage loans were at least 30 15 Ha¡borView days but less 2007-l Group2 than *Class 60 days delinquent 65.t7% 4l I64MAP2 2A-lC2 in .37% l.lïVo 3.29o/o (Aug., 14.29% I6 in payment, and (May 201I, 4l I64MAF4 Group 2 and Class (Mar., p.l l) (May, p.l l) p.l 1) (Feb., p. I l) 0.03% were 60 p.l B-l in both l) days or more g¡oups. (5-6) I7 delinquent in payment. 18 (s-24) I9

.64%o of the HarborView mortgage loans 3927% 20 2007-2 AggregaÍe 1.40% 2.84% 6.45% 16.00% were 30 days or (May 201l, (P.S. dated March (Apr., p.l0) (June, p. l0) (Sept., p.l0) (Mar., p.l0) more delinquent. p.l0) 29,2007) 2t (s-2s)

¿) .64Yo of the mortgage loans 37.72Yo HarborView .84o/o 1'l8o/o 3.15% 10.64% were 30 days or (May 2011, 2007-2 Group I (Apr., p.ll) (June, p. I l) (Sept., p.ll) (Mar., p.l l) 24 more delinquent. p ll) (s-2s) 25

l6l6l46vl/012661 ¿i 1 RATE AT CUT.OFF CUSIP OFFERING 1 MO. 3 MOS. 6 MOS. t2 MOS. RECENT 2 DATE FOR OFFERING JI

.64Yoof the 4 HarborView mortgage loans 39.94o/o 2007-2GroupZ r.63% 3.45% 7.660/o 17.93% 4tl64LAC3 were 30 days or (May 201I, *Class 2A-lB in (Apr., p.1l) (June, p.ll) (Sept., p.l l) (Ma¡., p.1l) 5 more delinquent. p.l Group 2. (S-7) l) (s-2s) 6

7 .26Yo of the HarborView mortgage loans 2.620/o 29.24% 2007-4 Ãggregate .69% 5.90% ('lrlov., t4.04% were 30 days or (Aug, (May 2011, 8 (P.S. dated June (June, p.1 1) p.l0) (May, p.l0) more delinquent. p.l0) p.l0) 13,2007) (s-26) 9

10 .26Y:o of ¡he mortgage loans .77% 24.24o/o 11 HarborView .44% 1.73% Q.,lov., 4.88o/o were 30 days or (Aug., (May 2011, 2007-4 Group I (June, p. l2) p.l l) (May, p.ll) more delinquent. p.ll) p.1l) t2 (s-26)

.26%oof the t4 Ha¡borView mortgage loans 3.31o/o 31.52o/o 20074Grotp2 .78% 7.45% (Nov., r7.40% 4l I64YAD3 *Class were 30 days or (Aug., (May 2011, 2A-3 in (June, p. 12) p.l l) (May, p.ll) 15 more delinquent. p.l l) p.1l) Group 2 (S-7) (s-26) 16

HarborView t7 2007-5 Aggregate 35.230/o 4lI65AAC6 +Classes A-lB 0% .55% r.88% 7.42Yo Zero. (S-23) (May 201I, 4lI65AAD1 and A-lC (P.S. (July, p.l0) (sepr., p.l0) (Dec., p.9) (Junq p.9) 18 p.e) dated July I l, 2007) l9 30.32% HarborView 0% 0.00% .32% 3.31o/n Zero. (S-23) (May 2011, 20 2007-5 Group I (July, p. I l) (Sept., p.1 1) (Dec., p.l0) (June, p.l0) p l0)

3s.7r% 2l HarborView 0% .60% 2.0r% 7.75% Zero. (S-23) (May 201l, 2007-5 Group 2 (July, p. I l) (Sept., p. I l) (Dec., p.10) (June, p. l0) p l0) 22 lndyMac INDX Mortgage Loan 43 06% z3 Trust 2006-4R35 2.42% 3.76% 6.42% 16.r6% Zero. (S-36) (May 201I, Aggregate (P.S. (Dec., p.l0) (Feb., p.l0) (May, p.l0) (Nov., p.l0) p.l0) 24 dated November 29,2006) 25 IndyMac INDX 44.60% Mortgage Loan t.6't% 2.99o/o 6.t6% ts.s8% 26 Zero. (S-36) (May 201l, Trust 2006-4R35 (Dec., p.ll) (Feb., p. I l) (May, p.l l) (Nov., p.l l) p.l5) Group I 27

l6l6l46vll0l.266l 24 I RATE AT CUT.OFF CUSIP OFFERING I MO. 3 MOS. 6 MOS. 12 MOS. RECENT 2 DATE FOR OFFERING J

IndyMac INDX 4 Mortgage Loan Trust 2006-4R35 4t.99% 45667S4N7 2.89o/" 4.25% 6s8% 16.54% Group 2 rClæses Zero. (5-36) (May 201l, 5 45667SAP2 (Dec., p.12) (Feb., p.12) (May, p.12) (Nov., p.12) 2-A-lA,2-A-3A p.20) and 2-A-38 in 6 Group 2. (S-l l)

Luminent 8 Mortgage Trust 45.39Yo t.24% 2.56% 4.82% 1r.32% 2007-l Aggregale Zero. (S-24) (May 20t l, (Feb., p.1 l) (Apr., p.l l) (July, p. I l) (Jan., p.l l) 9 (P.S. dated p.1 1) January 24,2007) t0

Luminent 1l Mortgage Trust 43.t9% 55028CAA3 2007-l Group I Ll4o/o 2.54% 4.32Yo 9.95o/o Zero. (S-24) (May 2011, 55028CABl tClasses I-A-l (Feb., p.l3) p.l3) (July, p. p. t2 (Apr., l3) (Jan., 13) p.l2\ and I-A-2 in Group l. (S-7) 13

T4 Luminent Mortgage Trust 49.ll%o t.40% 2.59% 5.55o/o 13.40% 15 55028CAEs 2007-l Group 2 Zerc. (S-24) (May 201I, (Feb., p.l3) (Apr., p.l3) (July, p.l3) (Jan., p.l3) iClæs II-A-3 in p.l2) r6 Group 2. (S-7)

t7 MortgagelT 18 Mortgage Loan 24.42yo Trust 2006-l .l7o/" 1.89% 3.03% (Aug., 5.75% (May 201l, Aggregate (P.S. (Mar., p.l3) (May, p.13) p l3) (Feb., p. l3) p.13) t9 dated February t7,2006) 20 2l .2'lVo of the MortgagelT mortgage loans 18.t2% Mortgage Loan 0% 1.37o/o 1.33%o(Aug., 2.18o/o 22 were 30 days or (May 2011, Trust 2006-l (Mar., p.l4) (May, p.l4) p.l4) (Feb., p. l4) more delinquent. p.l5) Group l-Al 23 (s-3 l)

.26%ó of ¡he MortgagelT 25 mortgage loans 23.14% Mortgage Loan .27o/" 2.74yo 4.35%:o (Aug., 8.05% were 30 days or (May 201I, Trust 2006-1 (Mar., p.t4) (May, p.l4) p.l4) (Feb., p.14) more delinquent. 26 Group 1-42 p.1 s) (s-47)

16L6l46vtl0t2661 25 1 RATE AT CUT-OFF CUSIP OFFERING I MO. 3 MOS. 6 MOS. 12 MOS. RECENT 2 DATE FOR OFFERING Ja

MortgagelT 4 .34Vo of the Mortgage Loan mortgage loans 3t.62% Trust 2006-l .18% r.30% 2.80% (Aug., 5.9t% 6l9l5RCL8 *Class were 30 days or (May 201I, 5 Group 2 2- (Mar., p.l5) (May, p.l5) p.ls) (Feb., p. l5) more delinquent. p.l4) A-lC in Group 2. (s-s4) (s-8) 6

7 Nomura Home Equity Loan, Inc., Home Equity 4639% I .l60/0 5.05o/o tl.90% 24.01% Loan Trust, Series Zero. (S-57) (May 201l, (Feb., p. l3) (Apr., p.l3) (July, p. l3) (Jan., p.13) 2007-l Aggregate p 13) 9 (P.S. dated January 29,2007) 10 Nomura Home Equity Loan, Inc., 11 Home Equþ 47.53% 65537K.AB6 Loan Trust, Series .19% 7.00% 14.26% 27.54o/o Zero. (S-57) (May 201 t, 65537KAC4 2007-l Group 2 (Feb., p. l4) (Apr., p.l5) (July, p.ls) (Jan., p. I 5) 12 *Clæses 2-A-lA p.l4) and2-A-lB in 13 Group 2. (S-i)

14 Soundview Home Loan Trust 2005- 15 36.08o/o OPT4 Aggregate .t2% I 87o/o .04% 8.51% (Nov., Zerc. (37) (May 2011, (P.S. dated (Dec., p.l2) (Feb., p. 12) (May, p.l l) p ll) p. l2) t6 November 22, 2005) l7

18 Soundview Home Loan Trust 2005- 34.35o/o OPT4 Group I .05% 2.l3Yo 3.34% 9.3o/o 8361 IMJMI Zero. (37) (May 201I, l9 *CIæses M-l and p.l3) (Feb., p. 13) (May, p.12) (Nov., p.l2) @ec., p.13) M-2 in Groups I 20 and 2. (5-68) 2l Soundview Home Loan Trust 2005- 22 37.660/o OPT4 Group 2 .2o/o |.6Yo 2.720/o 7.71% (Nov., 836lIMJMl Zero. (37) (May 2011, *Classes M-l and (Dec., p.14) (Feb., p.14) (May, p.13) p. l3) p.l4) ¿J M-2 in Groups I and 2. (5-68) 24

25 Wachovia Mortgage Loan 31.95% 26 Trust, Series .94% 2.13% 4.14o/o 14.840/0 92978GAC3 Zero. (S-32) (May 201I, 2006-ALTI (P.S. (Jan., p.14) (Mar., p.l4) (June, p.l4) (Dec., p.14) p.l2) 27 dated December 19,2006) 28

l6l6l46vll01266l 26 I 66. This early spike in delinquencies and defaults, which occurred almost

2 immediately after these RMBS were purchased by WesColp, was later discovered

Ja to be indicative of the Originators' systematic disregard of their stated underwriting

4 guidelines.

5 67. The phenomenon of borrower default shortly after origination of the

6 loans is known as "Early Payment Default." Early Payment Default evidences

7 borrower misrepresentations and other misinformation in the origination process I resulting from the systematic failure of the Originators to apply the underwriting

9 guidelines described in the Offering Documents.

10 68. A November 2008 Federal Reserve Board study attributed the rise in

11 defaults, in part, to "fd]eteriorating lending standards," and posited that "the surge t2 in early payment defaults suggests that underwriting . . . deteriorated on dimensions

13 that were less readily apparent to investors." Christopher J. Mayer et al., The Rise

t4 in Mortgage Defaults 15-16 (Fed. Reserve Bd. Fin. & Econ. Discussion Series,

15 Paper No. 2008-59). l6 69. In January 2011, the Financial Stability Oversight Council ("FSOC"), t7 chaired by United States Treasury Secretary Timotþ Geithner, issued a report

18 analyzing the effects of risk retention requirements in mortgage lending on the t9 broader economy. See FIN. STABILITY OVERSIGHT COUNCIL, 20 MACROECONOMIC EFFECTS OF RISK RETENTION REQUIREMENTS 2l (2011) ("F SOC Risk Retention Report"). The FSOC Risk Retention Report 22 focused on stabilizing the mortgage lending industry through larger risk retention ôô ZJ requirements in the industry that can "incent better lending decisions" and "help to 24 mitigate some of the pro-cyclical effects securitization may have on the economy."

25 Id. at2.

26 70. The FSOC Risk Retention Reporl observed that the securitization 27 process often incentivizes poor underwriting by shifting the risk of default from the

16l6t46vll01266l I originators to the investors, while obscuring critical information concerning the

2 actual nature of the risk. The FSOC Risk Retention Report stated:

J The securitization process involves multiple parties with varying 4 incentives and information, thereby breaking down the traditional

5 direct relationship between borrower and lender. The party setting

6 underwriting standards and making lending decisions (the originator)

7 and the party making structuring decisions (the securitizer) are often

I exposed to minimal or no credit risk. By contrast, the party that is

9 most exposed to credit risk (the investor) often has less influence over

10 underwriting standards and may have less information about the 1l borrower. As a result, originators and securitizers that do not retain l2 risk can, at least in the short run, maximize their own returns by

13 lowering loan underwriting standards in ways that investors may have t4 difficulty detecting. The originate-to-distribute model, as it was 15 conducted, exacerbated this weakness by compensating originators and t6 securitizers based on volume, rather than on quality. l7 Id. at3.

18 71. Indeed, originators that wrote a high percentage of their loans for T9 distribution were more likely to disregard underwriting standards, resulting in 20 poorly performing mortgages, in contrast to originators that originated and then 2l held most of their loans.

22 72. High OTD originators profited from mortgage origination fees without

23 bearing the risks of borrower default or insufficient collateral in the event of a 24 default. Divorced from these risks, high OTD originators were incentivized to push

25 loan quantity over quality. 26 73. Table 6 (infra) sho.ws the percentage of loans originated for 27 distribution relative to all the loans made by the Originator for the years 2005, 28 2006, and 2007, for those Originators in this Complaint with high OTD t6l6t46vtl0t266t 28 I percentages. The data was obtained from the Home Mortgage Disclosure Act

2 database.

a J Table 6

4 Originator OTD % OTD % OTD% 5 200s 2006 2007 American Home Mortgage Corp. 91.9 62.4 6 American Home Mortgage Investment Corp. 100 100 100 7 Countrywide Home Loans, Inc. 98.s 96.5 98.4 8 First Federal Bank of California 0 20.6 54.3

9 First National Bank of Nevada 88.0 79.8 89.4 IndyMac Bank, F.S.B. 8l.l 87.7 82.8 10 Kay-Co Investment Inc. dba Pro30 Funding 99.4 11 Metrocities Mortgage, LLC 99.96 100 100

I2 MortgagelT,Inc. 55.5 98.8 r00 Option One Mortgage 13 Corporation 92.2 72.7 58.2 Paul Financial,LLC 85.2 83.4 99.1 t4 Residential Mortgage Capital 99.9 100 100 15 I6 B. The Surge in Actual Versus Expected Cumulative Losses Is I7 Evidence of the Originators' Svstematic Disregard of l8 flnderwriting Standards l9 74. The actual losses to the mortgage pools underlying the RMBS 20 WesCorp purchased have exceeded expected losses so quickly and by so wide a 2l margin (see infra Figure 2) lhat a signiflrcant portion of the mortgages could not 22 have been underwritten as represented in the Offering Documents. 23 75. "Loss" is different than and should be distinguished from default and 24 delinquency rates. Loss either attempts to predict ("expected loss") or reflects 25 ("actual loss") losses to the collateral pool by reason of borrower default, less any 26 amounts recovered by the mortgage holder on a defaulted loan by sale of the 27 subject property after foreclosure (which amounts may be less than I00% of the 28

l616146vl/012661 29 I balance of the outstanding mortgage if the property is sold for less than the

2 balance).

Ja 76. While the short term price of a security may be influenced by broader

4 market or liquidity forces, actual versus expected loss is a gauge of the health or the

5 performance of an RMBS based on factors particular to that security.

6 77. Expected loss is a statistical estimate of the total cumulative shortfall

7 in principal payments on a mortgage pool over its 3O-year life, expressed as a

I percentage of the original principal balance of the pool. Expected loss is based on

9 historical data for similar mortgage pools.

10 78. The amount of expected loss is used to determine the amount of credit

11 enhancement needed to achieve a desired credit rating. Each credit rating has a t2 "rating factor," which can be expressed in multiples of the amount of credit t3 enhancement over expected loss (in equation form: CEIEL: RF). Thus, the rating t4 factor expresses how many times the expected loss is covered by credit 15 enhancement. A triple-A rated security would have a rating factor of "5," so it r6 would require credit enhancement of five times the amount of the expected loss. A I7 "double-A rating" would have a rating factor of "4," and thus would require credit

18 enhancement equaling four times the expected loss. A "single-A" rating would t9 have a rating factor of "3" and would require credit enhancement of three times the 20 expected loss. A "Baa" rating would require credit enhancement of 2-1.5 times ccBa') 2l expected loss, and a rating or lower requires some amount of credit 22 enhancement less than 1.5 times expected loss.

23 79. Again, credit enhancement over expected loss equals the rating factor.

24 So, by way of example, if cumulative expected losses on an asset pool are

25 calculated to be $1 million and the desired rating is triple-A (rating factor 5), the

26 amount of credit enhancement provided will have to equal $5 million, or 51 million 27 multiplied by five.

1616146vt/012661 30 1 80. Accordingly, if the analysis of expected loss is flawed, so too is the

2 calculation of the amount of credit enhancement. For instance, on a triple-A rated

J security, if actual cumulative losses exceed five times expected losses, the credit

4 enhancement will be insufficient, and the principal of the senior tranche will be

5 impaired. This is because, again, the amount of credit enhancement was

6 determined based on the assumed amount of expected loss.

7 81. The following hypothetical illustrates how, working backwards,

8 expected loss can be inferred in an already-issued offering. Assume there is a 5100

9 million offering backed by $100 million of assets, with a triple-A rated senior

10 tranche with a principal balance of $75 million. This means the non-senior

11 (subordinate) tranches, in aggregate, have a principal balance of $25 million. The t2 $25 million amount of the non-senior or subordinated tranches in this hypothetical

13 offering serves as the credit enhancement for the senior tranche. Therefore, on our t4 hypothetical $100 million offering, the expected loss would be 55 million, or the

15 amount of the credit enhancement on the triple-A rated senior tranche-$25 t6 million-divided by the rating factor for triple-A rated securities-5. The t7 following equation illustrates: $25,000,000/5 : $5,000,000.

18 82. "Actual losses" are the economic losses that were, in fact, suffered by t9 the mortgage pools due to defaults and resulting foreclosures and any related

20 inability of the mortgage holder or servicer to recoup the full principal amount of

2T the mortgages. The actual loss data in Figure 2 (ínfra) is from ABSNET, a provider

22 of asset-backed securities related data.

23 83. The path of cumulative losses can be plotted on a line graph 24 representing loss (either expected or actual) from origination to maturity, as shown

25 in Figure 2 (infra).

26 84. For the RMBS WesCorp purchased, Figure 2 (infra) depicts a series of 27 graphs illustrating the losses the RMBS actually experienced in the first 12 months

28 after issuance in comparison to the losses the RMBS were expected to experience

l616146vll01266l 31 I during the same time period. As the graphs show, the actual losses (the "Series 1"

2 or solid line) far exceeded the expected losses (the "Seri es 2" or dotted line) for the

J period analyzed.

4 Figure 2

Deal Name {BSNet Deal ld Month Actual Gross Losses Exoected Gross Losses 6 Alternative Loan Trust 200GAR4 39724 S S ssr,o¡z Alternative Loan Trust 200GAR4 39724 s S goz.gæ 7 Alternative Loan Trust 200GAR4 39722 S r.9orJ72 S r,0s1,631 Alternative Loan Trust 200GAR4 39723 4 5 t,464,6o5 S r. r+B,2ss 8 Alternative Loan Trust 200GAR4 39723 5 5 t,310,855 S r.zs3.s15 Alternative Loan Trust 200GAR4 3972= 6 5 t.31o.8ss s r,368,137 9 Alternative Loan Trust 200GAR4 39723 s rL29O,67r S r.492,899 Alternative Loan Trust 200GAR4 39722 I S 24,187,875 S r.628.633 10 Alternative Loan Trust 200GAR4 39723 9 S 28,38s,840 s r,776,228 Alternative Loan Trust 200GAR4 39723 1C 5 ¿5,560,714 S r,936,629 11 Alternative Loan Trust 200GAR4 39723 t1 S ¿7,163,r!3 S z.Lro.B4.z Alternative Loan Trust 200GAR4 39723 12 S s0,i.i.5.861 5 2,299,928 t2 s60,ooo,o00

13 sso,ooo,o00 I4 s40,ooo,ooo s30,ooo,ooo 15 Actual Cum. Gross Losses / -'- - Expected Gross Losses s20,ooo,ooo - I6 s 10.ooo.ooo t7 s- -L ,246A701274--.--.--. 18 s(1O,OOO,OOO)

T9 Deal Nãme ABSNet Deal ld Month Actual Gross Losses Expected Gross Losses American Home Mortgage Assets Trust 2OO7-3 47708 t S 2,232,609 20 American Home Mortgage Assets Trust 2007-3 47708 2 s 20.399.980 S 2,438,s67 American Home Mortsase Assets Trust 2OO7-3 41708 3 S +9,464.s49 S 2,663,093 2T American Home Mortsaee Assets Trust 2007-3 41-708 S t6,378,883 5 2,907,778 American Home Mortsase Assets Trust 2007-3 4]-708 5 S 103,617,642 S 3. 174.333 22 Amer¡can Home Mortsase Assets Trust 2007-3 4r708 S 130,873,934 S s,464.s9s American Home Mortsase Assets Trust 2007-3 4]-708 7 S rrc,742,932 S s.780.s36 23 American Home Mortgase Assets Trus 2007-3 41702 8 S r63,B47,rot S +.L24.262 American Home Mortgage Assets Trus 2007-3 4\708 9 s 187.001.069 5 +,49a,o24 24 American Home Mortgage Assets Trus 2007-3 4!708 1C S 185.965.334 S ¿,9o4,2ts American Home Mortsase Assets Trust 2007-3 44708 Tt S 206,785.530 S s,34s.381 25 Amer¡can Home Mortsase Assets Trust 2007-3 4L7o,8 12 S 226,6os.691 S 5.824.213

26 2l

l616146vIl01266l 32 1

Actual Cum. Gross Losses 4 -'- -- Expected Gross Losses - 5

7 Deal Name \BSNet Deal ld Vonth Actual Gross Losses Exoected Gross Losses 8 First Franklin Mortsaee Loan Trust 2005-FFH4 36028 1 s 4.157.138 S s.o8e,27l First Frankl n Mortsase Loan Trust 2005-FFH4 36028 2 S o,oL7,o78 S s.sss.7il 9 First Frankl n Mortgage Loan Trust 2005-FFH4 36028 3 s 9.3s7.1s0 s 6,070,576 First Frankl n Mortsase Loan Trust 2005-FFH4 36028 4 s 10,723,986 S 0,628,33e 10 First Frankl n Mortsase Loan Trust 2005-FFH4 36028 5 S rJ.,7os,o3r S 2,23s.9s6 First Frankl n Mortsase Loan Trust 20O5-FFH4 36028 Ê, s 17.425.209 5 t,897,6r6 First Frankl n Mortease Loan Trust 2005-FFH4 7 11 36028 5 2o,7s6,7r4 S e,6fl,8æ Fi rst Frankl n Mortsase Loan Trust 2005-FFH4 36028 8 S 27,24s,0s5 s 9.4f.L.3Q t2 First Frankl n Mortsase Loan Trust 2005-FFH4 36028 9 s 37.707.7L2 s 10,253,337 First Frankl n Mortsase Loan Trust 2005-FFH4 36028 1C s Es,498,901 S 11,!79,259 Fi rst Frankl n Mortsaee Loan Trust 2005-FFH4 36028 TI 13 S 98,2ss,7o7 s 12.184.906 First Frankl n Mortsase Loan Trust 2005-FFH4 36028 !2 s q4.937.6r2 S 14,276,473 t4 sooooooo 45000000 15 40000000 35000000 l6 30000000 25000000 Actual Cum- Gross Losses t7 20000000 '- ci - Expected Gross Losses lsoooooo - 18 10000000 soooooo 19

20 Deal Name ABSNet Deal ld Vtonth Actual Gross Losses Expected Gross Losses 2t HarborView 2006-8 34747 1. 5 2,969,076 HarborView 2006-8 38787 2 s 844.510 5 3,242,974 HarborView 2006-8 22 34747 3 s 2,24A,223 S 3.s4r.5æ HarborView 2006-8 34747 4 s 3,795,493 s 3.866.962 Herborview 2006-8 34747 5 S s,so3,14s s 4,22r.44s 23 HarborView 2006-8 34747 Ê S 2.929.r4r S 4.æ7.4s6 Harborview 2006-8 34747 7 s 6.810.649 S s.o27.6rs 24 Harborview 2006-8 3a787 8 s 8.830.028 S s.4a4]26 HarborView 20O6-8 38787 9 S 9.472.044 S s,9aL78o 25 HarborView 20O6-8 34747 1C s 10.903.39s s 6,s21,962 HarborView 2006-8 34747 LL S 12.osa.27:- s 7,108,6s4 Harborview 2006-8 34747 L2 S 1s.az4.r2r t,74s.437 26 s

t6l6t46vll0t2661 JJ I 18000000 16000000 2 14000000 J 12000000 10000000 4 Actualcum. Gross Losses 8000000 - .- * Expected Gross Losses 5 6000000 - 4000000 6 2000000 o 7 o 246810 1,2 14

8 Deal Name ABSNet Deal ld Month Actual Gross Losses Expected Gross Losses HarborView 200G9 39173 7 s s 6.428.s29 9 HarborView 2OO69 39773 s S t.o2L.s6t Harborview 2006-9 391_73 5 S 2.668,057 10 HarborView 20O6-9 39173 4 S z,s7o,s74 5 e,372.s97 HarborView 2006-9 391_73 5 S 6,3s3,042 S 9.140,109 11 larborView 2006-9 39]-73 6 s 6.758.658 s 9,975,885 HarborView 2006-9 39173 s r.7.65s.s74 S ro,88s,se8 t2 HarborView 20O6-9 39173 I S r3.82s.14s S rr,B7s,3l6 HarborView 2006-9 3917i 9 S r7,s38,934 S rz.gst.sr7 13 HarborView 20O6-9 39174 10 S 29,668,7Ls S r+.P1.098 Harborview 2006-9 3917i t" S E9,et6,o2s S rs.39i..381 I4 HarborView 2006-9 39174 L2 S 54.44t.a64 S re,77o.r2o 60000000 15 50000000 l6 40000000 t7 30000000 ,- Actual Cum. Gross Losses 20000000 _/_ '..- Expected Gross Losses 18 - - Á t9 10000000

20 o t246aIo1214 -10000000 2t Deal Name \BSNet Deal ld Month Actual Gross Losses Expected Gross Losses 22 HarborView 2006-10 3946Ê I s S q.r46.64r HarborView 2006-10 3946É 2 s S 4.s29.1.69 HarborView 2006-10 3946e 3 23 S ¿.946.ra2 HarborView 2006-10 3946( 4 5 S 5. 4f,o.637 HarborView 2006-10 3946Ê 5 S s,ags,7Lr 24 HarborView 2006-10 3946É 6 s S o.434.ara HarborView 2006-L0 3946e 7 s 8.680.070 S z,02r,6r,6 25 HarborView 2OO&10 3946Ê 8 S 1L,r41,,BaI 5 t.66o.ozt HarborView 20OGL0 3946e 9 s 14.725.771 S 8.3s4.2]-r 26 HarborView 200G10 3946Ê 10 S 2o.454.13s s 9, 108,634 HarborView 2006-10 3946e LI 5 24,2A0,427 S 9.928.01s 27 HarborView 2006-10 3946Ê T2 s 32.90A.rrs S ro,ar7,3s2

l616146vl/012661 34 1 35000000

2 30000000

a 25000000 -L J 20000000 4 cum. Gross Losses 15000000 / ^ *. ,- Expected Gross Losses 5 10000000 -Actual

6 5000000 ræ ^_.,--"-*l-+ o 7 t246a70t274 -5000000

8 )eal Name ABSNet Deal ld Month Actual Gross Losses Exoected Gross Losses HarborView 2æ6-1I 39604 s s 620.128 9 HarborView 2m6-7I 39604 2 s s 677.335 HarborView 2æ6-11 39604 3 s t,541,,596 s 739.7æ 10 larborView 2006-11- 39604 ¿ $ z,sg6,32s S 807,663 HarborView 2006-1L 39604 5 S 1.614.729 $ asr,zor 11 HarborView 2006-LL 39604 S 2.697.387 5 gøz,zzq HarborView 2æ6-tI 39604 7 S s.s48.9s6 S r,oso,o8o 12 HarborView 2W6-LI 396@ S ssgs.z2r S i..i-4s.ss3 HarborView 2æ6-It 39604 9 S ro,o29,321 s L.249.369 13 HarborView 2ú6-II 39604 LC 5 ro,s46,s2r s 1.362.193 HarborView 2ffi6-77 39604 1-L 5 r2,os9,ss7 S r.494,73r t4 HarborView 2æ6-11) 39604 t2 S i.1.489.433 S r,6r7,73i, 14000000

15 12000000

T6 10000000 8000000 I7 ActualCum. Gross Losses 6000000 'â { -r Expected Gross Losses 18 4000000 -

T9 2000000

o 20 ,24681O7214 -2000000 2l

22 Deal Name \BSNet Deal ld Vlónth Actual Gross Losses Expected Gross Losses ZJ HarborView 2006-72 39654 s S 6.998.409 HarborView 2006-]-2 39654 s S t.æ4.or3 HarborView 24 2006-12 39654 S 8.347.a2o HarborView 2OO6-t2 39654 S 4.084.060 S 9,1i.4,816 HarborView 2006-1-2 396s4 S rr,094,460 s 9.9s0.367 25 HarborView 2006-1..2 39654 s 19.896.280 S 1o.a6o.224 HarborView 2006-12 39654 S st,o22,s67 s 11.850,591 26 HarborView 2006-12 396s4 s 40.963.688 S r2.92a.o47 HarborView 2006-12 396y. S 60.!92.493 s 14,æ9,652 27 HarborView 2o06-12 396s4 LC $ sg,sz6,4as S 1s.372.9r4 HarborView 2OO6-t2 39654 11 s 96.0ss.s71 s 16,7ss,ao7 28 HarborView 2006-12 396s4 \2 S g6,r3r,!sr s 18,2s6,769

l616t46vll01266l 35 1 120000000

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8 Deal Name \BSNet Deal ld Month Actual Gross Losses Exoected Gross Losses HarborView 2006-1.4 3966t S 9,s74,6s4 9 HarborView 2006-14 3966t s S ¡.9M,4!6 HarborView 2006-14 3966€ 5 368,396 s 4263,907 10 HarborView 2006-\4 3966t A 5 0,858,¿to8 5 ¿,6s5,674 HarborView 2006-14 3966t 5 S 13,473,277 s 5.082.4s8 11 HarborView 2006-i4 3966€ 6 S r6,77r,sa2 S s,s47,2æ HarborView 2006-14 3966t 5 zr,sa7,46 5 6,053,0s6 t2 HarborView 2006-!4 3966€ I S 28.030.r.17 S 0.603.399 HarborView 2006-i4 3966€ I S ¡9.7s0.06s 5 t,201,833 q4,347,3r6 13 HarborView 2006-14 3966r 1C 5 S z,85z,r9r HarborView 2006-14 3966€ v. S s9,77o,494 S s.558.546 t4 HarborView 2006-14 3966t 72 S 24,94s.9M s s,32s,2æ 80000000 15 70000000 / 16 60000000 50000000 t7 40000000 Actual Cum. Gross Losses 18 30000000 '- -. 'ì Expected Gross Losses - 20000000 t9 10000000 " "--.-."-,---",-- -""", 20 o --;-" : -10000000 68107214 2l

22 Deal Name ABSNet Deal ld Month Actual Gross Losses Exoected Gross Losses Harborview 2OO7-1 4o9o,Ê S 470.016 S 4.4a6.a67 23 Harborview 2OO7-1 4o,9o,Ê s S 4.9oo.78i. HarborView 2OO7-1 zlo90€ s 740.974 5 s.3s2.oi.o 24 Harborview 2OO7-1- 4090( 4 s 3.422.669 S s.s3,7s2 Harborview 2OO7-1 z¡o90€ S 1r.s22.4a7 S 0,379,446 Harborview 2OO7-l- 25 4090€ 6 S r7.64s.2s7 s 6.962.7A6 Harborview 2OO7-l- 4090€ 5 27,455,2as S 7.s97.73r Harborview 2OO7-1 4090€ I 5 33,429,oa9 S 8.2aa,sr7 26 Harborview 2OO7-1 4090€ I s 37.706.A44 S 9.039.6æ Harborview 2OO7-1 4,O90€ 1-C S 37.339.ss7 S 9.gss.987 27 Harborview 2OO7-1 4090€ 11 5 48.4a3.9a4 S 1o.742.s96 Harborview 2OO7-1 4090,( 1 5 ¿7,750,974 S rr.7o4.9o3 28

l616l46vll01266l 36 I 60000000

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8 Deal Name ABSNet Deal ld Month Actual Gross Losses Expected Gross Losses HarborView 2007-2 40901 1. s 647.55L S r,78s,903 9 HarborView 2007-2 4090i 2 S i..793.44o 5 r,9s0,652 HarborView 2007-2 4D901 3 s L,699.532 5 z,r3o,zss 10 Harborview 2007-2 40901 4 S rLt4o,763 5 2.32s.9A2 HarborView 2OO7-2 40901 5 S rz,49ç,s2L s 2.539.204 11 Harborv¡ew 2007-2 4Ð901 6 S s3,584,483 S 2.771.390 HarborView 2007-2 Æ901 s 46.1-88.9L3 S :,o24.rL6 I2 Harborview 2007-2 40901 S ss,s36,048 S ¡.299,069 HarborView 2007-2 4090i S 61,3r-8.518 S E,se&M7 13 Harborview 2007-2 4090i 1( S 09,284,01:6 S ¡,922,967 HarborView 2007-2 4090') 11 S o9,2rs,M9 S +,27s,863 t4 Harborview 2007-2 4c901 12 S e3,s1s,196 s 4.658.889 90000000 15 80000000 70000000 l6 60000000 l7 50000000 Actual Cum. Gross Losses 40000000 '- * Expected Gross Losses 18 30000000 - - r9 20000000 10000000 20

Deal Name ABSNet Deal ld Month Actual Gross Losses Expected Gross Losses 23 HarborView 2OO7-4 47472 L s S 1.4g4.ars Harborview 2OO7-4 41472 S r,47s,896 S 1.62r.79c, 24 HarborView 2OO7-4 41471 3 s 4.503.163 S r.77r.ar3 HarborView 2OO7-4 41472 4 S 12.670.740 S 1.933.842 25 HarborView 2OO7-4 4L472 S 18.897.3i.1 5 2,]Lr,117 HarborView 2OO7-4 4L47i E S 26.42o.69a S 2.3o4.1sa HarborView 20O7-4 4a47i 7 S 33,546,63L S 2.sL4.277 26 HarborView 20O7-4 4147i I S 4o.7r9.sL4 S 2.742.87s HarborView 2OO7-4 4747i c S s2.66o.9t4 s 2.997.449 27 HarborView 2OO7-4 4L47i 1-C S sa.oa4.7s7 S :,26r,s9o HarborV¡ew 2OO7-4 47472 LL s 63.3ss.O76 s 3.554.991 28 HarborView 2m7-4 4747i 12 s 73.274.790 S 3.9v3.442

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6 10000000

o 7 2468101214

8 )eal Name ABSNet Deal ld Month Actual Gross Losses Exoected Gross Losses larborView 20O7-5 4177( 7 s s L.359.786 9 JarborView 2007-5 4177e 2 s s 1.Æ5,226 larborView 2007-5 4177(. 3 s 7s1,s00 S r,621,97s 10 larborview 2007-5 4177(. 4 S 2.920.614 S r,77r,oo2 HarborView 20O7-5 4177( 5 5 7.632.190 s 1,933,349 11 Harborview 2007-5 4177( 6 s 1-2.511-.060 5 2,110,13s HarborView 20O7-5 4177e S 15.835.9214 s 2.302.s61 t2 Harborview 2007-5 4177( I S 21,,t43.s92 s 2.511.91_0 HarborView 20O7-5 4177e I S 24,7so,664 S 2.739.ss2 1aIJ Harborview 2007-5 4177( 1-C S 20,932,966 S 2.986.94s HarborView 2007-5 4t77e I S 29.63s.1s2 5 s,zss,64 t4 HarborView 2m7-5 4177e L2 s 34.s63.869 S E, s47,276 40000000

15 35000000 r6 30000000 25000000 t7 20000000 Actual Cum. Gross Losses 15000000 - --'- Expected Gross Losses 18 - 10000000 t9 5000000

20 0 -5000000 246810]-214 2t

22 Deal Name ABSNet Deal ld Month Actual Gross Losses Expected Gross Losses ndvMac NDX MortPase Loan Trust 20O6-4R35 4¡,677 1 s S r,734,368 lndvMac INDX Mortsase Loan Trust 2006-4R35 Æ67-) 2 S s 1-ß94.3æ 23 ndvMac NDX Mortsase Loan Trust 2OO6-4R35 4¡,677 3 s S 2.068.783 ndyMac NDX Mortsaee Loan ïrust 2006-4R35 4c677 4 S 2.2sa.a63 24 lndvMac INDX Mortsase Loan Trust 2006-4R35 40,677 5 s 1.848.000 S 2.465.932 ndyMac NDX Mortgage Loan Trust 2006-4R35 4¡,677 6 S 3.866.023 5 2,697,4t8 25 lndvMac INDX Mortsase Loan Trust 2006-4R35 40677 s 13,740.659 s 2.936.851 ndvMac NDX Mortsase Loan Trust 2OO6-4R35 Æ677 8 S 21.838.oi.2 S ¡,2o3,a7o 26 IndvMac INDX Mortsase Loan Trust 2006-4R35 4¡671 I 5 27,603,649 S ¡.494.221 ndvMac NDX Mortsaee Loan Trust 2O06-4R35 M67'j L0 s 37.42a.r13 S 3.8o9.76s 27 ndyMac NDX Morteage Loan Trust 2006-4R35 4¡671 L7 S 34.423.s9s 5 4,152,477 ndyMac NDX Mortsase Loan Trust 2006-4R35 Æ677 72 s 43,899,52r s 4.524.450 28

1616l46vl/012661 38 I 50000000 45000000 2 40000000

I 35000000 J 30000000

4 25000000 Actual cum. Gross Losses 20000000 'ó "- Expected Gross Losses -- 5 15000000 10000000 6 5000000 o 7 -5000000

8 Deal Name ABSNet Deal ld Month Actual Gross Losses Exoected Gross Losses Lum nent Mortqase Trust 20O7-1 40299 s s 837.607 9 Lum nent Mortgage Trust 2007-1 40299 S 914.876 Lum nent Mortgage Trust 2007-1 40295 s S gss,tz 10 Lum nent Mortsase Trust 2007-1 40299 S r,9a2,522 S r.o9o.91o Lum nent Mortsase Trust 2007-1 40.299 s 3.098.8s1 S r,ß0,9i-3 11 Lum nent Mortsase Trust 2007-1 4.D299 S t.s3s.538 S r,299,Br]. Luminent Mortsase Trust 2007-1 40299 S e,s77.7o6 S i..4ras4z t2 Luminent Mortsase Trust 20O7-1 4Ð299 S t,269.6s9 s 1.547.298 Luminent Mortsase Trust 2007-1 40299 5 t,Bo9,2s7 S r.687.s22 13 Luminent Mortease Trust 2007-1 40299 LC S o, r3s,97s S r.B39,9rz Lum¡nent Mortgage Trust 2007-1 4¡.299 TT S l-1-.639.a77 5 z,æs,424 l4 Luminent Mortsase Trust 2007-1 40.299 12 S r.3.374.4oo S 2,i.8s.068 16000000

15 14000000 I6 12000000 10000000 I7 8000000 Actual Cum. Gross Losses

'- Expected Losses 18 6000000 - - Gross I9 4000000 2000000

20 o 24681072]-4 2T -2000000

22 Deal Name ABSNet Deal ld Month Actual Gross Losses Exoected Gross Losses ZJ MorteaselT Mortsaee Loan Trust 2006-1 36A37 7 s S 676.o6s.76 MortsaselT Morteaqe Loan Trust 2006-1 36437 2 s S 738.432.90 MortsaeelT Mortsase Loan Trust 2OO6-1 24 36837 3 s ao6,422.5a MortsaselT Mortsase Loan Trust 2OO5-1 36837 4 S s6o.ooo.oo s 880,sr6.s7 MortsaeelT Mortsape Loen Trust 2006-1 36837 5 S 1.2s4.2s7.r7 5 961,233.77 25 MortgaeelT Mortgage Loan Trust 2006-1 36837 6 S 2.47o.2s7.a9 S r.o¿s.!28.74 MortgaeelT Mortsase Loan Trust 2006-1 3683; 7 5 2,628,4s7.17 s 1.t44.800.o5 26 MortgagelT Mortsase Loan Trust 2006-1 3683; 8 5 4,055,807.77 s 7.24A.88s.24 MortsaeelT Mortsase Loan Trust 20O6.1 3683; 9 s 3,738,676.18 S r.362.06s.s3 27 MortsaselT Mortsase Loan Trust 2006-1 3683; 10 5 4.116.310.48 S 1.48s.o66.24 MortsaselT Mortsase Loan Trust 2006-1 36837 \7 s s.153.808.11 S 1.618.6s7.so MorteaselT Mortsase Loan Trust 20O6.1 3683/ 72 5 t.ro3.777.!7 S r.763.6s4.s8 28

16l6146vll012661 39 I 8000000

7000000 2 6000000 a J 5000000

4 4000000 ActualCum. Gross Losses 3000000 5 - 2000000 6 1000000 o 7 -1000000

8 Deal Name \BSNet Deal ld Month Actual Gross Losses Exoected Gross Losses Nomura Home Equ¡W Loan TrustSeries2OOT-I n29L 1 s 159,200 S r.737.9s4 9 Nomura Home EquiW Loan TrustSeries 2OO7-L N291. 2 S org,zoo $ r.898.280 Nomura Home EquiW Loan TrustSeries 2OO7-L Æ29'J, 3 5 23,s42,962 S z,073.060 10 Nomura Home Equ¡W Loan TrustSer¡es 2OO7-L 40297 ¿ s 42.794.130 5 2.263.s33 Nomura Home EquitV Loan TrustSeries 2OO7-L 40291" 5 s 36.287.!62 S 2,471,,o3o 11 Nomura Home EouiW Loan TrustSer¡es 2OO7-L 40.297 e. S s7.7r7,s22 S 2,696,9s2 Nomura Home EquiW Loan Trust Series 2OO7-l 4029L 7 S e9,224,81,t s 2.942.923 t2 Nomura Home EquiW Loan Trust Ser¡es 2OO7-L 4029L 8 S s6,609,78s s 3.270.493 Nomura Home EquiW Loan Trust Series 2OO7-I 4029L c S 90,6ss,311 S 3.so1-.444 Nomura Home EquiW Loan Trust Series 2OO7-L 4A291, tc r!2,784,673 ¡.9r7,64L 13 S S Nomura Home EquiW Loan Trust Series 2OO7-L 4029t TL S 96.63s.919 S +,i.6:-,062 l4 Nomura Home Eouiw Loan Trust Series 2OO7-I 4029r 12 S ros.724.469 S ¿,s33.804 120000000

15 100000000

T6 80000000 ^¿ 60000000 t7 ActualCum. Gross Losses ... * 40000000 '" Expected Gross Losses 18 - 20000000 I9 - o ;7 "--- 20 )2468707214 -20000000 2I

22 Deal Name ABSNet Deal ld Month Actual Gross Losses Expected Gross Losses Soundview Home Equ¡W Loan Trus 2005-oPT4 3602s s 1.2]-2.442 S 0,716,668 23 Soundv¡ew Home Equ¡W Loan Trus 2005-oPT4 36025 5 r,sr2,469 5 7.336.287 Soundview Home Equ¡W Loan Trus 2005-oPT4 3602s 5 3.073.67A S 8.orr.7s4 Soundv¡ew Home Equity Loan Trus 2005-oPT4 36025 4 S 5.331.109 8.747,873 24 s Soundv¡ew Home Equ¡W Loan Trus 2005-oPT4 3602s s 5,676,196 S 9.549.7a6 Soundvlew Home Eouitv Loan Trus 2005-oPT4 36025 6 S 12.ooa.r62 S 10,423,024 25 Soundview Home Equitv Loan Trus 2005-oPT4 36025 S 19,248,s43 S 11.373.s12 Soundview Home Equ¡W Loan Trust 20O5-OPT4 3602s I s 23.426.005 5 tz,Æ7,sgr 26 Soundview Home Equ¡ty Loan Trus 2005-oPT4 36025 9 S 3o.776.3'J"I s 13.532.030 Soundview Home EquiW Loan Trus 2005-oPT4 36025 10 s 3s,034.668 S 14.7s4.o33 27 Soundview Home Eouitv Loan Trus 2005-oPT4 36025 11 S 44.624.4a2 S ro,o8r,2s4 Soundview Home Equ¡W Loan Trus 2005-oPT4 36025 12 S s2,s7o,99a 5 L7,521.790 28

1616146v1/012661 40 1 60000000

2 50000000

J 40000000

4 30000000 Cum. Gross Losses - "- *- Expected Gross Losses 5 20000000 -Actua¡

6 10000000

8 Deal Name ABSNet Deal ld Vlonth Actual Gross Losses Expected Gross Losses 9 Wachovia Mortsase Loan Trust Series 20O6-ALT1 40065 1 s 5 stt,zzs Wachovia Mortsase Loan Trust Series 2OO6-ALTL 40065 2 S soz,ooo S azg,gzo Wachovia Mortsase Loan Trust 2OO6-ALT1 10 Ser¡es 40065 S 9,477,77a s 681.366 Wachovia Mortgage Loan Trust Series 2OO6-ALT1 40065 4 5 s,86s.9s8 s 743.970 Wachovia Mortgage Loan TrustSeries 2OO6-ALT1 40065 5 q,77s,29o srz.rog 11 S S Wachovia Mortgage Loan Trust Series 2OO6-ALT1 40065 6 s 8.398.870 s 886,435 gøt,zto l2 Wachovia Mortsase Loan Trust Series 2O06-ALT1 40065 s LO47.724 5 Wachovia Mortsape Loan Trust Series 2006-ALT1 40065 I s 8.64s.036 s 1.,055,214 Wachov¡a Mortqase Loan TrustSeries 2006-ALT1 ¿¡o065 I S rL.762.7or S r,150,843 13 Wachovia Mortease Loan Trust Series 2006-ALTL 40065 1C S r7,o7'J-.o99 S i..2s4.769 Wachovia Mortgage Loan TrustSeries 2006-ALTL ¿10O65 11 S 21.,346,rM s 1.367.643 t4 Wachov¡a Mortgage Loan Trust Ser¡es 2006-ALT1 /t0o65 L2 s 23,6a4,214 s 1-.490,L55 25000000 15 t6 20000000 t7 15000000 Actual Cum. Gross Losses 18 10000000 "- Expected Gross Losses - -''.

I9 5000000

22 85. As clearly shown in Figure 2 (supra), actual losses spiked almost 23 immediately after issuance of the RMBS. Borrowers defaulted on the underlying 24 mortgages soon after loan origination, rapidly eliminating the RMBS's credit 25 enhancement. For example, in the American Home Mortgage Assets Trust 2007-3 26 offering (shown in Figure 2), actual losses at month 12 exceeded 5226 million,

27 nearly 39 times the expected losses of $5.8 million.

l616146vl/0t2661 4l I 86. This immediate increase in actual losses-at a rate far greater than 2 expected losses-is strong evidence that the Originators systematically disregarded

a J the underwriting standards in the Offering Documents. 4 87. Because credit enhancement is designed to ensure triple-A

5 performance of triple-A-rated RMBS, the evidence that credit enhancement failed

6 (i.e., actual losses swiftly surged past expected losses shortly after the offering)

7 substantiates that a critical number of mortgages in the pool were not written in

8 accordance with the underwriting guidelines stated in the Offering Documents. 9 C. The Collapse of the Certificates' Credit Ratinss Is Evidence of

10 Svstematic Disresard of Underwriting Guidelines

11 88. Virtually all of the RMBS WesCorp purchased were rated triple-A at t2 issuance.

13 89. Moody's and S&P have since downgraded the RMBS \MesCorp

T4 purchased to well below investment grade (see supraTable 4).

15 90. A rating downgrade is material. The total collapse in the credit ratings t6 of the RMBS WesCorp purchased, typically from triple-A to non-investment l7 speculative grade, is evidence of the Originators' systematic disregard of

18 underwriting guidelines, amplifring that these securities were impaired from the t9 outset.

20 D. Revelations Subsequent to the Offerings Show That the 2l Orisinators Svstematicallv Disresarded Undenvritins Standards 22 9I. Public disclosures subsequent to the issuance of the RMBS reinforce 23 the allegation that the Originators systematically abandoned their stated 24 underwriting guidelines.

25 l. The Svstematic Disresard of Underwritins Standards Was 26 Pervasive as Revealed After the Collapse

27 92. Mortgage originators experienced unprecedented success during the

28 mortgage boom. Yet their success was illusory. As the loans they originated began

l616l46vll01266l 42 I to significantly underperform, the demand for their products subsided. It became

2 evident that originators had systematically disregarded their underwriting standards.

Ja 93. The Office of the Comptroller of the Currency (the "OCC"), an ofhce

4 within the United States Department of the Treasury, published a report in

5 November 2008 listing the "Worst Ten" metropolitan areas with the highest rates of

6 foreclosures and the 'oWorst Ten" originators with the largest numbers of

7 foreclosures in those areas ("2008 'Worst Ten in the Worst Ten' Report"). In this

8 report, the OCC emphasized the importance of adherence to underwriting standards

9 in mortgage loan origination

10 The quality of the underwriting process-that is, determining through

l1 analysis of the borrower and market conditions that a borrower is t2 highly likely to be able to repay the loan as promised-is a major

13 determinant of subsequent loan performance. The quality of t4 underwriting varies across lenders, a factor that is evident through l5 comparisons of rates of delinquency, foreclosure, or other loan t6 performance measures across loan originators. t7 94. Recently, government reports and investigations and newspaper

18 reports have uncovered the extent of the pervasive abandonment of underwriting

I9 standards. The Permanent Subcommittee on Investigations in the United States

20 Senate ("PSI") recently released its report detailing the causes of the financial 2t crisis. Using Washington Mutual Bank ("WaMu") as a case study, the PSI

22 concluded through its investigation:

23 Washington Mutual was far from the only lender that sold poor quality

24 mortgages and mortgage backed securities that undermined U.S.

25 financial markets. The Subcommittee investigation indicates that

26 Washington Mutual was emblematic of a host of financial institutions

27 that knowingly originated, sold, and securitized billions of dollars in

28 high risk, poor quality home loans. These lenders were not the victims

1616146vllO1266l 43 1 of the financial crisis; the high risk loans they issued became the fuel

2 that ignited the financial crisis.

Ja srarr o¡ s. PSRTUaNBNT suBCoMM. oN INvssrrcATroNS, ll2ru coNc., 4 wall srRssr aNo rnp FrNraNcrAL czusrs: AwRrovv op a FrNRNcnl

5 Cou-apsp 50 (Subcomm. Print2011) ("PSI Wall Street Report").

6 95. Indeed, the Financial Crisis Inquiry Commission ("FCIC") issued its 7 final report in January 20Il that detailed, among other things, the collapse of 8 mortgage underwriting standards and subsequent collapse of the mortgage market

9 and wider economy. See FIN CRISIS INQUIRY COMM'N, FINAL REPORT OF 10 TFIE NATIONAL COMMISSION ON THE CAUSES OF THE FINANCIAL AND

11 ECONOMIC CRISIS IN TI{E UNITED STATES (2011) ("FCIC Report"). l2 96. The FCIC Report concluded that there was a "systemic breakdown in t3 accountability and ethics" during the housing and financial crisis. t4 ..Unfortunate1y-ashasbeenthecaseinpastspeculativeboomsandbusts

15 witnessed an erosion of standards of responsibility and ethics that exacerbated the t6 financial crisis." Id. al xxä. The FCIC found that the current economic crisis had t7 its genesis in the housing boom: 18 [I]t was the collapse of the housing bubble-fueled by low interest I9 rates, easy and available credit, scant regulation, and toxic 20 mortgages-that was the spark that ignited a string of events, which 2I led to a full-blown crises in the fall of 2008. Trillions of dollars in 22 risky mortgages had become embedded throughout the financial

ZJ system, as mortgage-related securities were packaged, repackaged, and 24 sold to investors around the world.

25 Id. atxvi.

26 97. During the housing boom, mortgage lenders focused on quantity rather 27 than quality, originating loans for borrowers who had no realistic capacity to repay 28 the loan. The FCIC Report found "that the percentage of borrowers who defaulted

l616l46vtl01266l 1 on their mortgages within just a matter of months after taking a loan nearly doubled

2 from the summer of 2006 to late 2007." Id. at xxä. Early Payment Default is a î J significant indicator of pervasive disregard for underwriting standards. The FCIC 4 Report noted that mortgage fraud "flourished in an environment of collapsing

5 lending standards. . . .''' Id.

6 98. In this lax lending environment, mortgage lenders went unchecked,

7 originating mortgages for borrowers in spite of underwriting standards:

8 Lenders made loans that they knew borrowers could not afford and

9 that could cause massive losses to investors in mortgage securities. As

10 early as September 2004, Countrywide executives recognized that

11 many of the loans they were originating could result in "catastrophic t2 consequences." Less than ayear later, they noted that certain high-risk

13 loans they were making could result not only in foreclosures but also t4 in "financial and reputational catastrophe" for the f,rrm. But they did

15 not stop. t6 rd. t7 99. Lenders and borrowers took advantage of this climate, with borrowers

18 willing to take on loans and lenders anxious to get those borrowers into the loans, t9 ignoring even loosened underwriting standards. The FCIC Report observed: 20 "Many mortgage lenders set the bar so low that lenders simply took eager 2l borrowers' qualifications on faith, often with a willful disregard for a borrower's 22 ability to pay." Id. at xxiii.

ZJ 100. In an interview with the FCIC, Alphonso Jackson, the Secretary of the 24 Department of Housing and Urban Affairs ("H[ID") from 2004 to 2008, related that

25 HUD had heard about mortgage lenders "running wild, taking applications over the

26 Internet, not verifuing people's income or their ability to have a job." Id. at 12-13 27 (internal quotation marks omitted).

1616146vl/012661 45 1 101. Chairman of the Federal Reserve Board, Benjamin Bernanke, spoke to

2 the decline of underwriting standards in his speech before the World Affairs

Ja Council of Greater Richmond on April 10, 2008:

4 First, at the point of origination, underwriting standards became

5 increasingly compromised. The best-known and most serious case is

6 that of subprime mortgages, mortgages extended to borrowers with

7 weaker credit histories. To a degree that increased over time, these

8 mortgages were often poorly documented and extended with

9 insufficient attention to the borrower's ability to repay. In retrospect,

10 the breakdown in underwriting can be linked to the incentives that the

11 originate-to-distribute model, as implemented in this case, created for t2 the originators. Notably, the incentive structures sometimes often tied

13 originator revenue to loan volume, rather than to the quality of the l4 loans being passed up the chain. Investors normally have the right to

15 put loans that default quickly back to the originator, which should tend I6 to apply some discipline to the underwriting process. However, in the t7 recent episode, some originators had little capital at stake, reducing

18 their exposure to the risk that the loans would perform poorly. t9 Benjamin Bernanke, Chairman, Federal Reserve Board, Speech to the World 20 Affairs Council of Greater Richmond, Addressing Weaknesses in the Global 2t Financial Markets: The Report of the President's Working Group on Financiql

22 Markets, Apr. 10,2008.

23 102. Investment banks securitized loans that were not originated in 24 accordance with underwriting guidelines and failed to disclose this fact in RMBS

25 offering documents. As the FCIC Report noted:

26 The Commission concludes that f,rrms securitizing mortgages failed to

27 perform adequate due diligence on the mortgages they purchased and

28 at times knowingly waived compliance with underwriting standards.

r616146v11012661 46 1 Potential investors were not fully informed or were misled about the

2 poor quality of the mortgages contained in some mortgage-related

Ja securities. These problems appear to have been significant.

4 FCIC Report at 187.

5 103. The lack of disclosure regarding the true underwriting practices of the

6 Originators in the Offering Documents at issue in this Complaint put WesCorp at a

7 severe disadvantage. The FSOC explained that the origination and securitizalion

I process contains inherent "information asymmetries" that put investors at a

9 disadvantage regarding critical information concerning the quality and perfoffnance

10 of RMBS. The FSOC Risk Retention Report described the information

11 disadvantage for investors of RMBS:

I2 One important informational friction highlighted during the recent

13 financial crisis has aspects of a "lemons" problem that exists between

I4 the issuer and investor. An originator has more information about the

15 ability of a borrower to repay than an investor, because the originator

t6 is the party making the loan. Because the investor is several steps I7 removed from the borrower, the investor may receive less robust loan

18 performance information. Additionally, the large number of assets and t9 the disclosures provided to investors may not include sufficient 20 information on the quality of the underlying financial assets for

2I investors to undertake full due diligence on each asset that backs the

22 security.

23 FSOC Risk Retention Report at 9 (footnote omitted).

24 I04. Because investors had limited or no access to information concerning 25 the actual quality of loans underlying the RMBS, the "originate-to-distribute" 26 model created a situation where the origination of low quality mortgages through 27 poor underwriting thrived. The FSOC found:

r6t6l46vl/012661 47 1 In the originate-to-distribute model, originators receive significant

2 compensation upfront without retaining a material ongoing economic

J interest in the performance of the loan. This reduces the economic

4 incentive of originators and securitizers to evaluate the credit quality

5 of the underlying loans carefully. Some research indicates that

6 securitization was associated with lower quality loans in the financial

7 crisis. For instance, one study found that subprime borrowers with

8 credit scores just above a threshold commonly used by securitizers to

9 determine which loans to purchase defaulted at significantly higher

10 rates than those with credit scores below the threshold. By lower

11 underwriting standards, securitization may have increased the amount

12 of credit extended, resulting in riskier and unsustainable loans that

13 otherwise may not have been originated. t4 Id. at 11 (footnote omitted).

15 105. The FSOC reported that, as the "originate-to-distribute" model became r6 more pervasive in the mortgage industry, underwriting practices weakened across t7 the industry. The FSOC Risk Retention Report found "[t]his deterioration was

18 particularly prevalent with respect to the verification of the bonower's income, t9 assets, and employment for residential real estate loans. . . ." Id.

20 106. In sum, the disregard of underwriting standards was pervasive across 2l originators. The failure to adhere to underwriting standards directly contributed to 22 the sharp decline in the quality of mortgages that became part of mortgage pools 23 collateralizing RMBS. The lack of adherence to underwriting standards for the 24 loans underlying RMBS was not disclosed to investors in the offering materials. 25 The nature of the securitization process, with the investor several steps removed 26 from the origination of the mortgages underlying the RMBS, made it difficult for 27 investors to ascertain how the RMBS would perform.

l616146vl/012661 48 1 107. As discussed below, facts have recently come to light that show many

2 of the Originators that contributed to the loan pools underlying the RMBS at issue

Ja in this Complaint engaged in these underwriting practices.

4 2. American Homeos Svstematic Disregard of Underwriting 5 * 6 108. American Home Mortgage Investment Corp. was a real estate 7 investment trust that invested in RMBS consisting of loans originated and serviced

8 by its subsidiaries. It was the parent of American Home Mortgage Holdings, Inc.,

9 which in turn was the parent of American Home Mortgage Corp., a retail lender of

10 mortgage loans. Collectively, these entities are referred to herein as "American

11 Home." American Home originated or contributed a critical number of loans to the t2 mortgage pools underlying the American Home Mortgage Assets Trust 2007-3, t3 HarborView 2007-5, HarborView 2007-2, and HarborView 2006-14 offerings. t4 109. Edmund Andrews, an economics reporter for the New York Times,

15 recounted his own experience using American Home as a lender. According to

t6 Andrews, he was looking to purchase a home in 2004, and his real estate agent l7 referred him to a loan officer at American Home. The American Home loan officer

18 began the ordeal by asking Andrews how large of a loan he needed. Andrews, who

19 had a monthly take home pay of 52,777, advised the loan officer that he had hefty

20 child support and alimony payments to an ex-wife. Andrews would be relying on 2t his then-unemployed fiancée to earn enough money to meet his monthly 22 obligations-including the mortgage. Andrews reported: 23 As I quickly found out, American Home Mortgage had become one of 24 the fastest-growing mortgage lenders in the country. One of its 25 specialties was serving people just like me: borrowers with good 26 credit scores who wanted to stretch their finances far beyond what our

27 incomes could justifu. In industry jargon, we were "Alt-A" customers,

l616l46vll012661 49 I and we usually paid slightly higher rates for the privilege of concealing

2 our financial weaknesses.

4 I thought I knew a lot about go-go mortgages. I had already written

5 several articles about the explosive growth of liar's loans, no-money-

6 down loans, interest-only loans and other even more exotic mortgages.

7 I had interviewed people with very modest incomes who had taken out I big loans. Yet for all that, I was stunned at how much money people

9 were willing to throw at me.

11 [The American Home loan officer] called back the next morning.

12 "Your credit scores are almost perfect," he said happily. "Based on

13 your income, you can qualif,r for a mortgage of about $500,000." l4

15 What about my alimony and child-support obligations? No need to I6 mention them. What would happen when they saw the automatic I7 withholdings in my paycheck? No need to show them. If I wanted to

18 buy a house, [the American Home loan officer] figured, it was my job l9 to decide whether I could afford it. His job was to make it happen.

2l "I am here to enable dreams," he explained to me long afterward. [The 22 American Home loan officer]'s view was that if I'd been unemployed

23 for seven years and didn't have a dime to my name but I wanted a 24 house, he wouldn't question my prudence. "'Who am I to tell you that

25 you shouldn't do what you want to do? I am here to sell money and to

26 help you do what you want to do. At the end of the day, it's your

27 signature on the mortgage-not mine."

l616l46vll01266l 50 1 Edmund L. Andrews, My Personal Credit Crisis, N.Y. TIMES, May 17,2009, at

2 MM46.

J 110. The American Home loan officer steered Andrews to a stated-income 4 loan so that he would not have to produce paychecks or tax returns that would

5 reveal his alimony and child support obligations. The loan officer wanted to limit 6 disclosure of Andrews's alimony and child support payments when an existing

7 mortgage showed up under Andrews's name. Although his ex-wife was solely

8 responsible for that mortgage under the terms of the couple's separation agreement,

9 the only way Andrews could explain that fact would be to produce the agreement,

10 which would also reveal his alimony and child support obligations. According to l1 Andrews: t2 [The American Home loan officer] didn't get flustered. If Plan A 13 didn't work, he would simply,move down another step on the ladder of I4 credibility. Instead of "stating" my income without documenting it, I 15 would take out a "no ratio" mortgage and not state my income at all. t6 For the price of a slightly higher interest rate, American Home would t7 veriff my assets, but that was it. Because I wasn't stating my income, l8 I couldn't have a debt-to-income ratio, and therefore, I couldn't have t9 too much debt. I could have had four other mortgages, and it wouldn't 20 have mattered. American Home was practically begging me to take 2I the money.

22 rd.

ZJ 111. American Home ultimately approved Andrews's application. Not 24 surprisingly, Andrews was unable to afford his monthly mortgage payments.

25 ll2. American Home's lack of adherence to underwriting guidelines was

26 set forth in detail in a 165-page amended class action complaint fîled June 4, 2008, 27 in In re American Home Mortgage sec Litig, No. 07-md-1s98 (TCp) (E.D.N.Y.). 28 Investors in American Home common/preferred stock alleged that the company

r6l6l46vll0l266t 51 I misrepresented itself as a conservative lender, when, based on statements from

2 more than 33 confidential witnesses and internal company documents, American

J Home in reality was a high risk lender, promoting quantity of loans over quality by 4 targeting borrowers with poor credit, violating company underwriting guidelines,

5 and providing incentives for employees to sell risky loans, regardless of the 6 borrowers' creditworthiness. See Am. Class Action Compl., In re American Home

7 Mortgage sec. Litig., No.07-md-1898 (E.D.N.Y. filed June 4,2008) ("American I Home ACC").

9 113. According to the American Home ACC, former American Home

10 employees recounted that underwriters were consistently bullied by sales staff when

11 underwriters challenged questionable loans, while exceptions to American Home's t2 underwriting guidelines were routinely applied. See íd. at 43.

13 lI4. The American Home ACC cited to witnesses who were former t4 American Home employees. These witnesses reported that American Home

15 management told underwriters not to decline a loan, regardless of whether the loan

T6 application included fraud. See id. t7 115. Another former American Home employee stated that American Home l8 routinely made exceptions to its underwriting guidelines to be able to close loans. t9 When American Home mortgage underwriters raised concerns to the sales 20 department about the pervasive use of exceptions to American Home's mortgage 2l underwriting practices, the sales department contacted American Home 22 headquarters to get approval for the use of exceptions. Indeed, it was commonplace

23 to ovemrle mortgage underwriters' objections to approving a loan to facilitate loan

24 approval. See id. aI" 44. 25 116. A former American Home auditor confirmed this account that 26 American Home mortgage underwriters were regularly overruled when they

27 objected to loan originations. See id.

l6l6r46vl101266l 52 I lI7. The parties settled the litigation on January 14, 2010, for 537.25

2 million.

J 118. American Home's lax lending practices landed it in the 2008 "Worst 4 Ten in the Worst Ten" Report. American Home came in 8th in Las Vegas, Nevada,

5 and 9th in both Detroit, Michigan, and Miami, Florida. See 2008 "Worst Ten in the 6 Worst Ten" Report. When the OCC issued the 2009 "'Worst Ten in the Worst Ten" 7 Report, American Home again featured prominently, appearing in the top ten in six

8 of the ten worst metropolitan areas (4th in both Fort Pierce-Port St. Lucie, Florida,

9 and Fort Myers-Cape Coral, Florida; 7th in Vallejo-Fairfield-Napa, California; 8th 10 in Las Vegas, Nevada; 9th in Stockton-Lodi, Califomia; and 1Oth in Bakersfield,

11 California). See 2009 "Worst Ten in the Worst Ten" Report. I2 3. Countrywide Home Loans. Inc.os Svstematic Disregard of

13 Underwritins Standards

I4 119. Countrywide Home Loans, Inc. ("Countrywide") was among the l5 largest originators of residential mortgages in the United States during the period at t6 issue in this Complaint. Countrywide originated or contributed a critical portion of l7 the loans in the mortgage pools underlying the HarborView 2007-1, HarborView

18 2006-12, HarborView 2006-11, and HarborView 2006-9 offerings. l9 I20. In October 2009, the House Committee on Oversight and Government 20 Reform launched an investigation into the entire subprime mortgage industry, 2l including Countrywide, focusing on "whether mortgage companies employed 22 deceptive and predatory lending practices, or improper tactics to thwart regulation,

ZJ and the impact of those activities on the current crisis." Press Release, Comm. on 24 Oversight & Government Reform, Statement of Chairman Towns on Committee 25 Investigation Into Mortgage Crisis at 1 (Oct.23,2009) (internal quotation marks 26 omitted). 27 r2l. on May g,2008, the New York Times noted that minimal

28 documentation and stated income loans-Countrywide's No IncomeAtro Assets

t6t6t46vtl0t266t 53 I Program and Stated Income/Stated Assets Program-have "becfo]me known 2 fwithin the mortgage industry] as 'liars' loans' because many fof the] borrowers a J falsified their income." Floyd Norris, A Little Pity, Please, for Lenders, N.Y. 4 TIMns, May 9, 2008, at Cl.

5 122. In a television special titled, "If You Had a Pulse, We Gave You a

6 Loan," Dateline NBC reported on March 27,2009:

7 To highlight just how simple it could be to borrow money,

8 Countrywide marketed one of its stated-income products as the "Fast

9 and Easy loan."

11 As manager of Countrywide's offrce in Alaska, Kourosh Partow t2 pushed Fast and Easy loans and became one of the company's top

13 producers. I4

15 He said the loans were 'oan invitation to lie" because there was so little

t6 scrutiny of lenders. "We told them the income that you are giving us

t7 will not be verif,red. The asset that you are stating will not be

18 verified." I9

20 He said they joked about it: "If you had a pulse, we gave you a loan. 2t If you fog the mirror, give you a loan."

23 But it turned out to be no laughing matter for Partow. Countrywide 24 fired him for processing so-called'oliar loans" and federal prosecutors

25 charged him with crimes. On April 20,2007, he pleaded guilty to two

26 counts of wire fraud involving loans to a real estate speculator; he

27 spent 18 months in prison.

16t6t46vr/012661 54 1 In an interview shortly after he completed his sentence, Partow said

2 that the practice of pushing through loans with false information was

a J common and was known by top company officials. "It's impossible

4 they didn't know."

7 During the criminal proceedings in federal court, Countrywide

8 executives portrayed Partow as a rogue who violated company

9 standards.

11 But former senior account executive Bob Feinberg, who was with the t2 company for 12 years, said the problem was not isolated. "I don't buy

13 the rogue. I think it was infested." I4

15 He lamented the decline of what he saw as a great place to work, I6 suggesting a push to be number one in the business led Countrywide

T7 astray. He blamed Angelo Mozilo, a man he long admired, for taking

18 the company down the wrong path. It was not just the matter of stated t9 income loans, said Feinberg. Countrywide also became a purveyor of 20 loans that many consumer experts contend were a bad deal for 2I borrowers, with low introductory interest rates that later could

22 skyrocket.

24 In many instances, Feinberg said, that meant borrowers were getting

25 loans that were "guaranteed to fail."

26 I23. On June 4,2009, the SEC sued Angelo Mozilo and other Countrywide

27 executives, alleging securities fraud. Specifically, the SEC alleged that Mozilo and

28 the others misled investors about the credit risks that Countrywide created with its

l6l6t46vt/012661 55 1 mortgage origination business, telling investors that Countrywide was primarily

2 involved in prime mortgage lending, when it was actually heavily involved in risky

Ja sub-prime loans with expanded underwriting guidelines. See Compl. for Violations 4 of the Federal Securities Laws, SEC v. Mozilo, No. CV 09-3994-IFW (C.D. Cal.

5 filed June 4,2009). Mozilo and the other executives settled the charges with the 6 SEC for $73 million on October 15,2010. See Walter Hamilton & E. Scott

7 Reckard, Angelo Mozilo, Other tormer Countrywide Execs Settle Fraud Charges,

8 L.A. TtvtsS, Oct. 16,2010, at A1.

9 124. Internal Countrywide e-mails the SEC released in connection with its

10 lawsuit show the extent to which Countrywide systematically deviated from its

11 underwriting guidelines. For instance, in an April 13,2006 e-mail from Mozilo to t2 other top Countrywide executives, Mozilo stated that Countrywide was originating l3 home mortgage loans with "serious disregard for process, compliance with t4 guidelines and irresponsible behavior relative to meeting timelines." E-mail from

15 Angelo Mozilo to Eric Sieracki and other Countrywide Executives (Apr. 13,2006 t6 7:42P}l4 PDT). Mozilo also wrote that he had "personally observed a serious lack t7 of compliance within our origination system as it relates to documentation and

18 generally a deterioration in the quality of loans originated versus the pricing of

19 those loan[s]." Id. (internal quotation marks omitted).

20 I25. Indeed, in September 2004, Mozilo had voiced his concern over the 2t "clear deterioration in the credit quality of loans being originated," observing that

22 "the trend is getting worse" because of competition in the non-conforming loans

ZJ market. With this in mind, Mozilo argued that Countrywide should 'oseriously 24 consider securitizing and selling ([Net Interest Margin Securities]) a substantial 25 portion of fCountrywide's] current and future sub prime [sic] residuals." E-mail 26 from Angelo Mozilo to Stan Kurland & Keith Mclaughlin, Managing Directors,

27 Countrywide (Sept. I, 2004 8: I 7 PM PDT).

1616l46vll01266l 1 126. To protect themselves against poorly underwritten loans, parties that

2 purchase loans from an originator frequently require the originator to repurchase

Ja any loans that suffer F,arly Payment Default.

4 127. In the first quarter of 2006, HSBC Holdings plc ("HSBC"), a

5 purchaser of Countrywide's 80120 subprime loans, began to force Countrywide to

6 repurchase certain loans that HSBC contended were defective under the parties'

7 contract. In an e-mail sent on April 17, 2006, Mozilo asked, "[w]here were the

8 breakdowns in our system that caused the HSBC debacle including the creation of

9 the contracl all the way through the massive disregard for guidelines set forth by

10 both the contract and corpoÍate." E-mail from Angelo Mozilo to Dave Sambol,

11 former Executive Managing Director and Chief of Mortgage Banking and Capital

t2 Markets, Countrywide Financial (Apr. 17 ,2006 5:55 PM PST). Mozilo continued:

13 In all my years in the business I have never seen a more toxic prduct. t4 [sic] It's not only subordinated to the first, but the first is subprime. In 15 addition, the IFICOs] are below 600, below 500 and some below 400. t6 With real estate values coming down . . . the product will become T7 increasingly worse. There has [sic] to be major changes in this 18 program, including substantial increases in the minimum [FICO]. I9 rd.

20 128. Countrywide sold a product called the "Pay Option ARM." This loan 2l was a 3O-year adjustable rate mortgage that allowed the borrower to choose 22 between various monthly payment options, including a set minimum payment. In a 23 June 1 , 2006 e-mail, Mozilo noted that most of Countrywide's Pay Option ARMs 24 were based on stated income and admitted that "[t]here is also some evidence that 25 the information that the borrower is providing us relative to their income does not 26 match up with IRS records." E-mail from Angelo Mozilo to Carlos Garcia, former 27

l616l46vl/012661 57 1 CFO of Countrywide Financial, and Jim Furash, former President of Countrywide

2 Bank (June 1,2006 10:38 PM PST).

Ja 129. An internal quality control report e-mailed on June 2, 2006, showed 4 that, for stated income loans, 50.3% of loans indicated a variance of l0o/o or more

5 from the stated income in the loan application. See E-mail from Clifford Rossi,

6 Chief Risk Officer, Countrywide, to Jim Furash, Executive, CEO, Countrywide

7 Bank, N.4., among others (June 2,2006 12:28 PM PDT).

8 130. Countrywide, apparently, was "flying blind" on how one of its popular

9 loan products, the Pay Option ARM loan, would perform, and, admittedly, had "no

r0 wây, with any reasonable certainty, to assess the real risk of holding these loans on l1 [its] balance sheet." E-mail from Angelo Mozilo to Dave Sambol, Managing 12 Director Countrywide (Sept.26,2006 10:15 AM PDT). Yet such loans were

13 securitized and passed on to unsuspecting investors such as WesCorp.

T4 131. With growing concern over the performance of Pay Option ARM l5 loans in the waning months of 2007, Mozilo advised that he "dfid]n't want any r6 more Pay Options originated for the Bank." E-mail from Angelo Mozilo to Carlos t7 Garcia, former Managing Director, Countrywide (Nov. 3,2007 5:33 PM PST). In l8 other words, if Countrywide was to continue to originate Pay Option ARM loans, it t9 was not to hold onto the loans. Mozilo's concerns about Pay Option ARM loans

20 were rooted in "[Countrywide's] inability to underwrite lPay Option ARM loans] 2l combined with the fact that these loans [we]re inherently unsound unless they are 22 full doc, no more thanT5Yo LTV and no piggys." Id.

¿J 132. In a March27,2006 e-mail, Mozilo reaffirmed the need to "oversee all

24 of the corrective processes that will be put into effect to permanently avoid the 25 effors of both judgement [sic] and protocol that have led to the issues that we face 26 today" and that "the people responsible for the origination process understand the

27 necessity for adhering to the guidelines for 100% LTV sub-prime product. This is

28 the most dangerous product in existence and there can be nothing more toxic and

16l6l46vl/012661 58 I therefore requires that no deviation from guidelines be permitted irrespective of the

2 circumstances." E-mail from Angelo Mozilo to the former Countrywide Managing

Ja Directors (Mar. 27,2006 8:53 PM PST). 4 133. Yet Countrywide routinely found exceptions to its underwriting

5 guidelines without sufficient compensating factors. In an April 14,2005 e-mail, 6 Frank Aguilera, a Countrywide managing director, explained that the "spirit" of 7 Countrywide's exception policy was not being followed. He noted a "significant I concentration of similar exceptions" that "denotefd] a divisional or branch 9 exception policy that is out side [sic] the spirit of the policy." E-mail from Frank 10 Aguilera, Managing Director, Countrywide to John McMurray, Managing Director,

11 Countrywide (Apr. 14,2005 12:14 PM PDT). Aguilera continued: "The continued t2 concentration in these same categories indicates either a) inadequate controls in 13 place to mange [sic] rogue production units or b) general disregard for corporate t4 program policies and guidelines." Id. Aguilera observed that pervasive use of the

15 exceptions policy was an industry-wide practice: t6 It appears that fcountrywide Home Loans]' loan exception policy is l7 more loosely interpreted at fSpecialty Lending Group] than at the other 18 divisions. I understand that fCorrespondent Lending Division] has t9 decided to proceed with a similar strategy to appease their complaint

20 customers. . . . fSpecialty Lending Group] has clearly made a market 2l in this unauthorized product by employing a strategy that Blackwell

22 has suggested is prevalent in the industry. . . .

23 rd.

24 134. Internal reports months after an initial push to rein in the excessive use 25 of exceptions with a"zero tolerance" policy showed the use of exceptions remained 26 excessive. E-mail from Frank Aguilera, Managing Director, Countrywide, to Brian 27 Kuelbs, Managing Director, Countrywide, among others (June 12,2006 10:13 AM

28 PDT).

1616146vt/012661 59 1 135. In February 2007, nearly a year after pressing for a reduction in the 2 overuse of exceptions and as Countrywide claimed to be tightening lending

I J standards, Countrywide executives found that exceptions continued to be used at an 4 unacceptably high rate. Frank Aguilera stated that any "fg]uideline tightening

5 should be considered purely optics with little change in overall execution unless

6 these exceptions can be contained." E-mail from Frank Aguilera, Managing 7 Director, Countrywide, to Mark Elbuam, Managing Director, Countrywide, among

8 others (Feb. 21,2007 4:58 PM PST).

9 136. John McMurray, a former Countrywide managing director, expressed 10 his opinion in a September 2007 e-mail that "the exception process has never

11 worked properly." E-mail from John McMurray, Managing Director, Countrywide, t2 to Jess Lederman, Managing Director, Countrywide (Sept. 7,2007 10:12 AM

13 PDT). t4 137 . Countrywide conceded that the poor performance of loans it originated 15 was, in many cases, due to poor underwriting. In April 2007, Countrywide noticed t6 that its high combined loan-to-value ratio ("CLTV") stated income loans were t7 performing worse than those of its competitors. After reviewing many of the loans

18 that went bad, a Countrywide executive stated that "in most cases fpoor l9 performance was] due to poor underwriting related to reserves and verification of 20 assets to support reasonable income." E-mail from Russ Smith, Countrywide, to 2I Andrew Gissinger, Managing Director, Countrywide (Apr. ll, 2007 7:58 AM 22 PDT).

23 138. On October 6,2008, 39 states announced that Countrywide agreed to

24 pay up to $8 billion in relief to homeowners nationwide to settle lawsuits and 25 investigations regarding Countrywide' s deceptive lending practices. 26 139. on July 1, 2008, NBC Nightly News aired the story of a former 27 Countrywide regional Vice President, Mark Zachary, who sued Countrywide after

l616146vtl01266l 60 1 he was fired for questioning his supervisors about Countrywide's poor underwriting

2 practices.

J 140. According lo Zachary, Countrywide pressured employees to approve 4 unqualified borrowers. Countrywide's mentality, he said, was "what do we do to 5 get one more deal done. It doesn't matter how you get there [i.e., how the 6 employee closes the deal]. . . ." NBC Nightly News, Countrywide Whistleblower 7 Reports "Liar Loans" (July 1, 2008) ("July 1, 2008 NBC Nightly News"). Zachary 8 also stated that the practices were not the work of a few bad apples, but rather: "It 9 comes down, I think from the very top that you get a loan done at any cost." Id.

10 l4I. Zachary also told of a pattern of: (1) inflating home appraisals so

11 buyers could borrow enough to cover closing costs, but leaving the borrower owing t2 more than the house was truly worth; (2) employees steering borrowers who did not

13 qualifu for a conventional loan into riskier mortgages requiring little or no t4 documentation, knowing they could not afford it; and (3) employees coaching

15 borrowers to overstate their income in order to qualitr for loans. l6 142. NBC News interviewed six other former Countrywide employees from I7 different parts of the country, who confirmed Zachary's description of 18 Countrywide's comrpt culture and practices. Some said that Countrywide t9 employees falsified documents intended to verifl' borrowers' debt and income to

20 clear loans. NBC News quoted a former loan officer: "'I've seen supervisors stand 2t over employees' shoulders and watch them . . . change incomes and things like that 22 to make the loan work."' July 1, 2008 NBC Nightly News.

ZJ 143. Not surprisingly, Countrywide's default rates reflected its approach to 24 underwriting. See 2008 "'Worst Ten in the Worst Ten" Report. Countrywide 25 appeared on the top ten list in six of the ten markets: 4th in Las Vegas, Nevada; 8th 26 in Sacramento, California; 9th in Stockton, California, and Riverside, California;

27 and lOth in Bakersheld, Califomia, and Miami, Florida. When the OCC issued its

28 updated 2009 "Worst Ten in the Worst Ten" Report, Countrywide appeared on the

l616l46vll01266l 61 I top ten list in every market, holding 1st place in Las Vegas, Nevada; 2nd in Reno, 2 Nevada; 3rd in Merced, California; 6th in Fort Myers-Cape Coral, Florida, Ja Modesto, California, and Stockton-Lodi, California; 7th in Riverside-San 4 Bernardino, Califomia, and Fort Pierce-Port St. Lucie, Florida; 8th in Vallejo-

5 Fairfield-Napa, Califomia; and gth in Bakersfîeld, Califomia. See 2009 "Worst

6 Ten in the \iVorst Ten" Report.

7 4. First National Bank of Nevada's Svstematic Disregard of 8 t-

9 I44. First National Bank of Nevada ("FNBN") originated or contributed a

10 critical portion of loans in the mortgage pool underlying the Nomura FIELT 2007-l

11 offering. The Federal Deposit Insurance Corporation ("FDIC") wound down t2 FNBN's operations in July 2008-among the largest bank failures of that year.

13 145. FNBN faces a class action lawsuit that alleges FNBN systematically t4 disregarded its underwriting guidelines when originating mortgages that were

15 subsequently securitized into RMBS. ^See Consolidated Amended Class Action t6 Compl., Plumber's Union Local No. I2 Pension Fund v. Nomura Asset Acceptance t7 Corp., No. 08-cv-10446 (D. Mass. filed Jan. 20,2009) ("Plumber's Union ACC").

18 146. According to the Plumber's (Jnion ACC, one of FNBN's underwriters t9 approached her lJnderwriting Supervisor about a loan application where the 20 borrower-a hotel housekeeper-stated a monthly income of $5,000. 2I I47. The mortgage underwriter informed her supervisor of her intention to

22 deny the loan on the grounds that the unverified income of the borrower appeared

¿J to be inflated. The Underwriting Supervisor pushed back on the underwriter's 24 decision, assuring her that the loan could be worked out. The underwriter told the 25 IJnderwriting Supervisor that it was "absolutely impossible" for the application 26 information to be true, but the Underwriting Supervisor refused to "back-down." 27 The underwriter refused to close the loan, but the Underwriting Supervisor

28 eventually signed the necessary forms and the loan was close d. See id. n 92. l616146vl/012661 62 1 148. The complaint described FNBN's use of "loan scrubbing" when

2 originating loans. See id. T 87. J 149. According to the complaint, the Warm Springs office in Las Vegas, 4 Nevada, employed eight or nine Loan Coordinators whose primary job was to

5 "scrub" the loan applications received from a broker. This consisted of removing 6 any and all information for the loan application that would disqualifu the borrower

7 from FNBN's loan programs. FNBN Loan Coordinators were often fired for failing

8 to alter the loan package information to eliminate disqualiffing information. See id.

9 1T 87.

10 150. FNBN originated a large number of Alt-A loans, many of which were

11 made to borrowers who were "obviously unqualified to be able to repay them," l2 although FNBN would make the loans pass by "creating the numbers to make

13 things work." See id. '1T 88. l4 5. IndvMac Bankos Svstematic Disregard of Underwriting

15 Standards

I6 151. IndyMac Bank ("IndyMac") was a principal originator of the loans t7 underlying the IndyMac INDX Mortgage Loan Trust 2006-4R35 and HarborView

18 2006-14 offerings. t9 152. On July 11,2008, just four months after IndyMac filed its 2007

20 Annual Report, federal regulators seized IndyMac in what was among one of the

2t largest bank failures in U.S. history. IndyMac filed for bankruptcy on July 31,

22 2008.

23 153. On March 4,2009, the Office of the Inspector General of the United 24 States Department of the Treasury ("Treasury OIG") issued Audit Report No. OIG- 25 09-032, titled "Safety and Soundness: Material Loss Review of IndyMac Bank, 26 FSB" (the "IndyMac OIG Repotr"), reporting the results of the Treasury OIG's

27 review of the failure of IndyMac. The IndyMac OIG Report portrays IndyMac as a

28 company determined to originate as many loans as possible, as quickly as possible,

1616l46vl/012661 I without regard for the quality of the loans, the creditworthiness of the borrowers, or

2 the value of the underlying collateral.

JI 154. According to the IndyMac OIG Report, "[t]he primary causes of 4 IndyMac's failure were . . . associated with its" "aggressive growth strategy" of

5 "originating and securitizing Alt-A loans on a large scale." IndyMac OIG Report at

6 2. The report found, "IndyMac often made loans without verification of the

7 borrower's income or assets, and to borrowers with poor credit histories. I Appraisals obtained by IndyMac on underlying collateral were often questionable

9 as weII." Id.

10 155. IndyMac "encouraged the use of nontraditional loans," engaged in

11 "unsound underwriting practices," and "did not perform adequate underwriting," in t2 an effort to "produce as many loans as possible and sell them in the secondary

13 market." Id. at ll,2l. The IndyMac OIG Report reviewed a sampling of loans in I4 default and found "little, if any, review of borrower qualifications, including

15 income, assets, and employment." Id. atll. t6 156. IndyMac was not concemed by the poor quality of the loans or the fact

I7 that borrowers simply "could not afford to make their payments" because, 'oas long

18 as it was able to sell those loans in the secondary mortgage market," IndyMac could t9 remain profitable. Id. at2-3.

20 157. IndyMac's "risk from its loan products . . . was not sufficiently offset 2I by other underwriting parameters, primarily higher FICO scores and lower LTV

22 ratios." Id. at 3I.

23 158. Unprepared for the downturn in the mortgage market and the sharp

24 decrease in demand for poorly underwritten loans, IndyMac found itself "holdfing]

25 $10.7 billion of loans it could not sell in the secondary market." Id. at3. This

26 proved to be a weight it could not bear, and IndyMac ultimately failed. See id.

27 159. In June 2008, the Center for Responsible Lending ("CRL") published a

28 report titled IndyMac: What Went \ï/rong? How an 'Alt-A' Leader Fueled its

l616146vtl0t266l 1 Growth with Unsound and Abusive Mortgage Lending (June 30, 2008) ("CRL 2 Report"), available at htç ://www.responsiblelending.org/mort gage- J lending/research-analysis/indymac_what_went_ wrong.pdf. The CRL Report 4 detailed the results of the CRL's investigation into IndyMac's lending practices.

5 CRL based its report on interviews with former IndyMac employees and reviewed

6 numerous lawsuits filed against IndyMac. The CRL Report summarized the results

7 of its investigation as follows: I IndyMac's story offers a body of evidence that discredits the notion

9 that the mortgage crisis was caused by rogue brokers or by borrowers

10 who lied to bankroll the purchase of bigger homes or investment 1l properties. CRL's investigation indicates many of the problems at l2 IndyMac were spawned by top-down pressures that valued short-term t3 growth over protecting borrowers and shareholders' interests over the l4 long haul.

15 CRL Report at l.

r6 160. CRL reported that its investigation "uncovered substantial evidence l7 that [IndyMac] engaged in unsound and abusive lending during the mortgage boom,

18 routinely making loans without regard to borrowers' ability to repay fthe mortgage t9 loans]." Id. at2.

20 161. The CRL Report stated that "IndyMac pushed through loans with 2t fudged or falsified information or simply lowered standards so dramatically that

22 shaky loans were easy to approve." Id.

23 162. The CRL Report noted that, "[a]s IndyMac lowered standards and 24 pushed for more volume," "the quality of flndyMac's] loans became a running joke 25 among its employees." Id. at3.

26 163. Former IndyMac mortgage underwriters explained that "loans that 27 required no documentation of the borrowers' wages" were "[a] big problem" 28 because "these loans allowed outside mortgage brokers and in-house sales staffers

t6t6t46vtl0t266t 65 1 to inflate applicants' ffinancial information] ... and make them look like better 2 credit risks." Id. at 8. These "shoddily documented loans were known inside the

J company as 'Disneyland loans'-in honor of a mortgage issued to a Disneyland

4 cashier whose loan application claimed an income of S90,000 a year." Id. at.3.

5 164. The CRL also found evidence that: (1) managers pressured

6 underwriters to approve shaky loans in disregard of IndyMac's underwriting

7 guidelines; and (2) manasers ovenuled underwriters' decisions to deny loans that I were based upon falsified paperwork and inflated appraisals. For instance, Wesley

9 E. Miller, who worked as a mortgage underwriter for IndyMac in California from

10 2005 to 2007, told the CRL:

11 fW]hen he rejected a loan, sales managers screamed at him and then T2 went up the line to a senior vice president and got it okayed. "There's

13 a lot of pressure when you're doing a deal and you know it's wrong I4 from the get-go-that the guy can't afford it," Miller told CRL. 'oAnd

15 then they pressure you to approve it." t6 The refrain from managers, Miller recalls, was simple: "Find a way to l7 make this work." 18 Id. at 9 (footnote omitted). t9 165. Likewise, Audrey Streater, a former IndyMac mortgage underwriting 20 team leader, stated: "I would reject a loan and the insanity would begin. It would 2l go to upper management and the next thing you know it's going to closing." Id. at 22 I,3. Streater also said the "prevailing attitude" at IndyMac was that underwriting 23 was "window dressing-a procedural annoyance that was tolerated because loans 24 needed an underwriter's stamp of approval if they were going to be sold to 25 investors." Id. at 8. 26 166. Scott Montilla, who was an IndyMac mortgage loan underwriter in 27 Arizona during the same time period, told the CRL that IndyMac management 28

l616l46vll01266l 66 I would override his decision to reject loans about 50Yo of the time. See id. at9.

2 According to Montilla:

J "I would tell them: 'If you want to approve this, let another 4 underwriter do it, I won't touch it-I'm not putting my name on it,"'

5 Montilla says. "There were some loans that were just blatantly

6 overstated. . . . Some of these loans are very questionable. They're

7 not going to perform."

8 Id. at 10.

9 167. Montilla and another IndyMac mortgage underwriter told the CRL that

10 borrowers did not know their stated incomes were being inflated as part of the

11 application process. See id. at 74. t2 168. On July 2,2010, the FDIC sued certain former officers of IndyMac's

13 Homebuilder Division ("FIBD"), alleging that IndyMac disregarded its I4 underwriting practices, among other things, and approved loans to borrowers who

15 were not creditworthy or for projects with insufficient collateral. See Compl. 1T6, t6 FDIC v. Van Dellen, No. 2:10-cv-04915-DSF (C.D.Cal. filed JuIy 2,2010). That I7 case is set for trial in September 2012.

18 169. IndyMac currently faces a class action lawsuit alleging disregard of I9 underwriting standards that adversely affected the value of the purchased RMBS.

20 ,See Class Action Compl., In re IndyMac Mortgage-Backed Sec. Lìtîg., No. 09-4583

2l (S.D.N.Y. filed li1ray 14,2009). On June 21,2010, the class action suit survived a

22 motion to dismiss.

23 I70. Like loan purchasers, insurers of RMBS also typically require the 24 insured parÍy to repurchase loans suffering Early Payment Default in order to

25 protect themselves against fraud and poor underwriting. 26 l7f. MBIA Insurance Corporation, an RMBS insurer, filed a breach of

27 contract claim against IndyMac (with the FDIC representing IndyMac as 28 conservator and receiver) in May 2009, claiming that IndyMac made contractual

l616l46vll01266l 67 1 misrepresentations concerning its adherence to its underwriting standards in 2 processing mortgage loan applications. See Compl., MBIA Ins. Corp. v. IndyMac J Bank, FSB, No. 1:09-cv-0101I-CKK (D.D.C. filed May 29,2009). A motion to

4 dismiss is pending.

5 I72. IndyMac's failure to abide by its underwriting standards left investors

6 holding severely downgraded junk securities. As a result of IndyMac's systematic

7 disregard of its underwriting standards, the OCC included IndyMac in the OCC's

8 2008 "Worst Ten in the Worst Ten" Report. IndyMac ranked 10th in Las Vegas,

9 Nevada, in both 2008 and 2009, while coming in at 10th in Merced, California,

10 Riverside-San Bernardino, California, and Modesto, California, in 2009. See 2008

11 "Worst Ten in the Worst Ten" Report; 2009 "'Worst Ten in the Worst Ten" Report. l2 6. Option One Mortgaqe Corporation's Svstematic Disregard

13 of flnderwriting Standards

T4 I73. Option One Mortgage Corporation ("Option One") was a California

15 corporation headquartered in Irvine, California. Option One originated, serviced, l6 acquired, and sold non-prime residential mortgages. The company was founded in t7 1992 and, from June 1997 until April 2008, was a subsidiary of Block Financial

18 Corporation. In April 2008, Option One's assets were sold to American Home t9 Mortgage Servicing, Inc. Option One originated or contributed loans in the 20 mortgage pool underlying the Soundview Home Loan Trust 2005-OPT4 offering. 2I 174. The Massachusetts Attorney General sued Option One, alleging, 22 among other things, that Option One failed to follow its own underwriting

¿J standards in processing mortgage loan applications. See Massachusetts v. H&R 24 Block,1nc., No. 08-2474-BLS (Mass. Super. Ct. filed June 3,2008); see alsoTim

25 Mclaughlin, Caturano Being Acquired by RSM McGladrey, BosroN Bus. J., June

26 24,2010. Trial is set for June 201I.

27 I7 5. Option One faces a lawsuit that alleges it systematically disregarded its 28 underwriting guidelines when originating mortgages that were subsequently

l616146vll01266l 68 I securitized into RMBS. ,See Complaint, Federal Home Loan Bank of Chicago v.

2 Banc of Am., No. 10-ch-45003 (Ill. Cir. Ct.) ("FHLB Chicago Complaint").

a J 176. Statements from confidential witnesses in the FHLB Chicago

4 Complaint represented that Option One originated mor[gage loans in violation of its

5 stated underwriting standards.

6 I77. According to one confidential witness in the complaint, Option One

7 "watered down" the appraisal process, allowing loans with inflated appraisals to be

8 approved . See id. 1l298. 9 178. The same confidential witness explained how Option One told its

10 employees to "be more aggressive"; it was made clear that the main objective of the

11 company was to generate loans-66[a]s long as they could sell it, that's what

12 mattered." See íd. 11 296.

13 179. Another confidential witness stated that one particular broker who I4 worked with Option One "was given preferential treatment and his loans were

15 always pushed through" because he provided the company with "lots and lots of I6 loans"; loans that this confidential witness said were often absent the necessary t7 documentation. See id. n297. 18 7. Silver State Mortgage Companv's Systematic Disregard of l9 *ffilrrunuu.o, 20 180. Silver State Mortgage Company ("Silver State") was a national 2t wholesale and residential mortgage lender headquartered in Las Vegas, Nevada.

22 Silver State ceased operations in February 2007 amid the turmoil of the subprime

23 mortgage crisis. The details of Silver State's mortgage lending practices slowly

24 emerged after it ceased operations. Silver State originated or contributed a critical

25 portion of loans in the mortgage pool underlying the Alternative Loan Trust 2006-

26 AR4 and Nomura HELT 2007-1 offerings.

27 181. A former Silver State employee recounted his experiences as a loan

28 officer with Silver State in a May 9, 2008 This American Life story on NPR

1616l46vl/01266t 69 I entitled "The Giant Pool of Money." Mike Garner, the former Silver State 2 employee, related how Silver State did not adequately assess whether the income of

J borrowers under Silver State's "stated income" product was reasonable compared

4 to the borrowers' line of work:

5 Garner: The next guideline lower is just stated income, stated assets.

6 Then you state what you make and state what's in your bank account.

7 They call and make sure you work where you say you work. Then an

8 accountant has to say for your flreld it is possible to make what you 9 said you make. But they don't say what you make, they just say it's

10 possible that they could make that.

11 Alex Blumberg & Adam Davidson, The Giant Pool of Money (National Public t2 Radio broadcast May 9, 2008), transcript available at

13 htç://www.thisamericanlife.org/sites/default/fi1es 1355_transcript.pdf.

I4 I82. Alex Blumberg, one of the NPR interviewers, commented on how easy

15 it could have been to simply provide a W-2. Garner responded by describing the

t6 means by which loan officers would determine whether the income was reasonable l7 for the occupation:

18 Blumberg: It's just so funtty that instead ofjust asking people to prove

r9 what they make, there's this theater in place of you have to find an

20 accountant sitting right in front of me who could very easily provide a

2T W2, but we're not asking for a W2 form, but we do want this 22 accountant to say yeah, what they're saying is plausible in some

23 unlverse.

25 Garner: Yeah, and loan off,rcers would have an accountant they could

26 call up and say "Can you write a statement saying a truck driver can 27 make this much money?" Then the next one, came along, and it was no 28 income, verified assets. So you don't have to tell the people what you

1616l46vll01266l 70 I do for a living. You don't have to tell the people what you do for

2 work. All you have to do is state you have a certain amount of money

Ja in your bank account. And then, the next one, is just no income, no

4 asset. You don't have to state anything. Just have to have a credit

5 score and apulse.

6 rd.

7 183. Garner recounted how his boss at Silver State despised these types of I loan products that permitted such wanton disregard of underwriting standards.

9 Garner concluded:

10 Garner: Yeah. And my boss was in the business for 25 years. He

1l hated those loans. He hated them and used to rant and say, "It makes

12 me sick to my stomach the kind of loans that we do." He fought the

13 owners and sales force tooth and neck about these guidelines. He got

I4 [the] same answer. Nope, other people are offering it. We're going to

15 offer them too. We're going to get more market share this way. t6 House prices are booming, everything's gonna [sic] be good. And . . . I7 the company was just rolling in the cash. The owners and the

18 production staff were just raking it in. t9 Id,

20 184. Instead, Silver State, like many other originators, focused on keeping

21 up with the competition, sacrificing adherence to underwriting guidelines. This

22 quixotic quest for higher profits and more market share ultimately failed as Silver ¿) State ceased operations in 2007, no longer maintaining any share of the mortgage

24 market.

25 8. WaMu's Systematic Disresard of Underwritins Standards 26 185. WaMu contributed a substantial portion of loans to the Luminent

27 Mortgage Trust 2007-1, offering.

1616146v11012661 7l 1 186. WaMu was a Seattle-based thrift that rapidly grew from a regional to a

2 national mortgage lender from 1991 to 2006. At over $300 billion in total assets,

J WaMu was at one time the largest institution regulated by the Office of Thrift 4 Supervision ("OTS"). On September 25,2008, however, federal regulators closed

5 WaMu when loan losses, borrowing capacity limitations, a plummeting stock price,

6 and rumors of WaMu's problems led to a nrn on the thrift by depositors. Federal

7 regulators facilitated the sale of WaMu to J.P. Morgan Chase & Co., in September

8 2008.

9 I87. In April 2010, the Treasury OIG, issued a report entitled, "Evaluation

10 of Federal Regulatory Oversight of V/ashington Mutual Bank," Report No. EVAL-

11 10-002 (the "WaMu OIG Report"), discussing the reasons for WaMu's meteoric t2 rise and consequent collapse. The WaMu OIG Report found, "WaMu failed

13 primarily because of management's pursuit of a high-risk lending strategy that t4 included liberal underwriting standards and inadequate risk controls." WaMu OIG

15 Report at 2. The report elaborated on how WaMu adopted this new strategy to l6 compete with Countrywide and maximize profits:

l7 In 2005, WaMu management made a decision to shift its business

18 strategy away from originating traditional fixed-rate and conforming

T9 single family residential loans, towards riskier nontraditional loan 20 products and subprime loans. WaMu pursued the new strategy in

2l anticipation of increased earnings and to compete with Countrywide. .

ZJ . WaMu estimated in 2006 that its internal profit margin from

24 subprime loans could be more than 10 times the amount for a 25 government-backed loan product and more thanT times the amount for

26 a fixed-rate loan product.

27 Id. at 8 (footnote omitted).

I616l46vtl0t266l 72 I 188. As previously noted in this Complaint, the PSI issued its report on the

2 causes of the economic crisis. The PSI Wall Street Report used WaMu as its case

J study into lending practices of the mortgage industry during the housing bubble. 4 Citing intemal e-mails and coffespondence the PSI obtained as part of its

5 investigation, the PSI made the following factual findings:

6 (1) High Risk Lending Strategy. [WaMu] executives embarked upon a 7 High Risk Lending Strategy and increased sales of high risk home

I loans to Wall Street, because they projected that high risk home loans,

9 which generally charged higher rates of interest, would be more

10 profitable for the bank than low risk home loans.

11 (2) Shoddy Lending Practices. WaMu and its affiliate, fl-ong Beach], 12 used shoddy lending practices riddled with credit, compliance, and 13 operational deficiencies to make tens of thousands of high risk home 14 loans that too often contained excessive risk, fraudulent information, 15 or effors. 16

17 (3) Steering Borrowers to High Risk Loans. WaMu and Long Beach l8 too of[en steered borrowers into home loans they could not afford, t9 allowing and encouraging them to make low initial payments that 20 would be followed by much higher payments, and presumed that rising 2T home prices would enable those borrowers to refinance their loans or 22 sell their homes before the payments shot up.

¿5 (4) Polluting Financial Beach 24 the System. WaMu and Long securitized over $77 billion in subprime home loans and more 25 billions in other high risk home loans, used Street f,rrms 26 Wall to sell the securities to investors worldwide, and polluted 27 the financial system

t616146vll01266l 73 1 with mortgage backed securities which later incuned high rates of

2 delinquency and loss.

J (5) Securitizing Delinquency-Prone and Fraudulent Loans. At times, 4 WaMu selected and securitized loans that it had identified as likely to 5 go delinquent, without disclosing its analysis to investors who bought 6 the securities, and also securitized loans tainted by fraudulent 7 information, without notiffing purchasers of the fraud that was 8 discovered. 9

10 (6) Destructive Compensation. W'aMu's compensation system 11 rewarded loan officers and loan processors for originating large l2 volumes of high risk loans, paid extra to loan officers who 13 overcharged borrowers or added stiff prepayment penalties, and gave t4 executives millions of dollars even when their High Risk Lending 15 Strategy placed the bank in financial jeopardy.

r6 PSI Wall Street Report at 50-51.

t7 189. In particular, the PSI Wall Street Report noted that \MaMu had r8 engaged in internal reviews of its lending practices and the lending practices of its T9 subsidiary, Long Beach. WaMu's Chief Risk Officer, Ron Cathcart commissioned 20 a study to look into the quality of loans originated by Long Beach. The review

2l found that the "top five priority issues" were as follows: 22 "Appraisal deficiencies thal could impact value and were not 23 addressed[;]

24 Material misrepresentations relating to credit evaluation were 25 confirmed[;]

26 Legal documents were missing or contained errors or discrepanciesf;] 27 Credit evaluation or loan decision errorsf; and] 28

1616146v11012661 t4 I Required credit documentation was insufficient or missing from the

2 file."

J Id. at 82 (quoting e-mail from Ron Cathcart, Chief Risk Officer, WaMu, to Cory

4 Gunderson (Dec. 11,2006 9:21 ANIPST)). 'WaMu's 5 190. Pushing "Option ARMs" was a major part of new "high risk" 6 lending strategy. In a bipartisan memorandum from Senators Carl Levin and Tom 7 Coburn to the Members of the PSI, dated April 13, 2070, option ARMS were

8 labeled WaMu's "flagship" product. Wall Street qnd the Financial Crisis: The

9 Role of High Risk Home Loans, Hearing Beþre S. Permanent Subcomm. on

10 Investigations,ll2th Cong. (2010) ("PSI High Risk Home Loans Hearing"), Senate

11 Ex. 1 .a, at 3. The WaMu OIG Report describes the inherently dangerous nature of t2 W'aMu's Option ARMs:

13 WaMu's Option ARMs provided borrowers with the choice to pay t4 their monthly mortgages in amounts equal to monthly principal and

15 interest, interest-only, or a minimum monthly payment. Borrowers r6 selected the minimum monthly payment option for 56 percent of the l7 Option ARM portfolio in 2005.

18 The minimum monthly payment was based on an introductory rate, t9 also known as a teaser rate, which was significantly below the market 20 interest rate and was usually in place for only I month. After the 2I introductory rate expired, the minimum monthly payment feature 22 introduced two significant risks to WaMu's portfolio: payment shock 23 and negative amorttzation. WaMu projected that, on average, payment 24 shock increased monthly mortgage amounts by 60 percent. At the end 25 of 2007, 84 percent of the total value of Option ARMs on WaMu's 26 financial statements was negatively amortizing. 27 WaMu OIG Report at 9. 28

l6l6l46vl101266l 75 I 191. The WaMu OIG Report notes that "Option ARMs represented as much

2 as half of all loan originations from 2003 to 2007 and approximately $59 billion, or

J 47 percenl". of the home loans on WaMu's balance sheet at the end of 2007." Id.

4 192. The OIG also notes that WaMu's "new strategy included underwriting

5 subprime loans, home equity loans, and home equity lines of credit to high-risk

6 borrowers. In line with that strategy, WaMu purchased and originated subprime

7 loans, which represented approximately $16 billion, or 13 percent, of WaMu's 2007

8 home loan portfolio." Id. at 10.

9 I93. WaMu's careless underwriting practices rendered these already high

10 risk loan products even more risky. See id. The WaMu OIG Report stated that the

11 OTS and the FDIC repeatedly "identif,red concems with WaMu's high-risk lending t2 strategy" and loan underwriting, weaknesses in management, and "inadequate

13 internal controls." Id. at 3-4. Those concerns included "questions about the t4 reasonableness of stated incomes contained in loan documents, numerous

15 underwriting exceptions, miscalculations of loan-to-value ratios, and missing or t6 inadequate documentation." Hearing on Wall Street & the Fin. Crisis: The Role of l7 Bank Regulators Beþre the United States S. Homeland SecuriQ and Governmental

18 Affairs Comm., Permanent Subcomm. on Investigatíons, 11lth Cong. 9 (Apr. 16, l9 2010) (statement of the Hon. Eric M. Thorson, Inspector General, Dep't of the

20 Treasury) ("Thorson Statement"). 2l I94. WaMu management began to notice the pattern of "first payment 22 default" ("FPD") for loans its Long Beach subsidiary originated. In June 2007,

23 WaMu closed Long Beach as a separate entity and placed its subprime lending

24 operations in a new division called "Wholesale Specialty Lending."

25 195. In late 2007, WaMu performed an internal review to determine 26 whether its plans to address its poor underwriting practices were effective. The

27 review focused on 187 loans that experienced FPD, originated from November

28 2006 to March 2007. As an initial matter, the review found:

l616146vl/012661 76 1 The overall system of credit risk management activities and process 2 has major weaknesses resulting in unacceptable level of credit risk.

J Exposure is considerable and immediate corrective action is essential 4 in order to limit or avoid considerable losses, reputation damage, or

5 financial statement effors.

6 PSI High Risk Home Loans Hearing, Senate Ex. 2I, "WaMu Corporate Credit 7 Review: Wholesale Specialty Lending-FPD" at 2 (Sept .28,2007).

8 196. Specifically, the WaMu internal review reported the following f,rndings 9 regarding the 187 FPD loans: 10 o (High) Ineffectiveness of fraud detection tools - 132 of the 187 (71%) 1l files were reviewed by Risk Mitigation for fraud. Risk Mitigation t2 confirmed fraud on 115 files and could not confirm on 17 of the files,

13 but listed them as "highly suspect." This issue is a repeat finding l4 with CCR.

15 o (High) Weak credit risk infrastructure impacting credit quality. Credit 16 weakness and underwriting deficiencies is a repeat finding with CCR. l7 It was also identified as a repeat finding and Criticism in the OTS 18 Asset Quality memo 3 issued May 17,2007. Internal Audit in their I9 August 20,2007 Loan Origination & Underwriting report identified it 20 as a repeat issue. Findings from the CCR FPD review in relation to 2l credit quality:

22 o 132 of the 187 loans sampled were identified with red flags that ¿J were not addressed by the business unit

24 o 80 of the 112 (71%) stated income loans were identif,red for lack 25 of reasonableness of income

26 o 87 files (47%) exceeded program parameters in place at the time 27 ofapproval

28 o 133 (71%) had credit evaluation or loan decision effors present l6l6I46vll01266l 1 o 25 (13%)had the title report issues that were not addressed 2 o 28 (14%) had income calculation errors and 35 (19%)had

J income documentation enors

4 o 58 (31%)had appraisal discrepancies that raised concems that

5 the value was not supported

6 Id. at3.

7 197. An OTS memorandum on Loan Fraud Investigation, dated June 19,

8 2008, noted the systematic nature of the problem: "[T]he review defines an

9 origination culture focused more heavily on production volume rather than quality.

10 An example of this was a finding that production personnel were allowed to

11 participate in aspects of the income, employment, or asset verification process, a t2 clear conflict of interest. . . . Prior OTS examinations have raised similar issues

13 including the need to implement incentive compensation programs to place greater

T4 emphasis on loan quality." PSI High Risk Home Loans Hearing, Senate 8x.25, 15 Memorandum from D. Schneider, President Home Loans, to A. Hedger, oTS t6 Examiner and B. Franklin, OTS EIC at 1 (June 19, 2008). t7 198. A WaMu Significant Incident Notification, Date Incident Reported - 18 0410112008, Loss Type - Mortgage Loan, stated: t9 One Sales Associate admitted that during that crunch time some of the 20 Associates would "manufacture" assets statements from previous loan

2l docs and submit them to the Loan Fulfillment Center ("LFC"). She

22 said the pressure was tremendous from the LFC to get them the docs

¿J since the loan had already been funded and there was pressure from

24 the Loan Consultants to get the loans funded.

25 PSI High Risk Home Loans Hearing, Senate Ex. 30, "significant Incident

26 Notification (SIN)" at 1 (Apr. 1, 2008).

27 199. A New York Times article described WaMu's underwriting practices

28 as follows: "On a financial landscape littered with wreckage, WaMu, a Seattle-

t6t6t46vtt0t266t 78 I based bank that opened branches at a clip worthy of a fast-food chain, stands out as 2 a singularly brazen case of lax lending." Peter S. Goodman &, Gretchen

3 Morgenson, Saying Yes, [haMu Built Empire on Shalqt Loans, N.Y. TIMes, Dec.27,

4 2008, at 41.

5 200. Sheni Zaback, a former underwriter at a WaMu branch in San Diego,

6 California, stated that "[m]ost of the loans she . handled merely required 7 borrowers to provide an address and Social Security number, and to state their I income and assets." Id. On one occasion, Zaback asked a loan officer for

9 verification of a potential borrower's assets. The officer sent her a letter from a

10 bank showing a balance of approximately S150,000 in the borrower's account.

11 Zaback called the bank to confirm and was told the balance was only $5,000. The I2 loan officer yelled at her, }r4s. Zaback recalled. "She said, 'We don't call the bank

13 to verifu."' Id. l4 201. Zaback also recalled that the sheer volume of loans precluded WaMu

15 employees from adhering to underwriting standards. According to Zaback, she t6 would typically spend a maximum of 35 minutes per file: "'Just spit it out and get l7 it done. That's what they wanted us to do. Garbage in, and garbage out."' Id.

18 Another WaMu agent in Irvine, California told the New York Times that she 19 "coached brokers to leave parts of applications blank to avoid prompting 20 verification if the borrower's job or income was sketchy)' Id.

2t 202. WaMu's underwriting critically failed with respect to appraisals as 22 well. An accurate appraisal of a property's market value is as crucial to the 23 underwriting process as the property provides collateral for the loan in case of 24 default.

25 WaMu's review of appraisals establishing the value of single family 26 homes did not always follow standard residential appraisal methods

27 because WaMu allowed a homeowner's estimate of the value of the

l616l46vl/0t2661 79 1 home to be included on the form sent from WaMu to third-party

2 appraisers, thereby biasing the appraiser's evaluation.

a J WaMu OIG Report at 1 l.

4 203. The New York Times reported, 'oWaMu pressured appraisers to

5 provide inflated property values that made loans appear less risky, enabling Wall

6 Street to bundle them more easily for sale to investors." Goodman & Morgenson,

7 Saying Yes, WaMu Built Empire on Shalqt Loans at 41. The article quoted the

I founder of one appraisal company that did business with V/aMu until 2007 as

9 saying, "'It was the Wild West.' . . . 'If you were alive, they would give you a

10 loan. Actually, I think if you were dead, they would still give you a loan."' Id.

11 (quoting Steven Knoble, founder Mitchell, Maxwell & Jackson). t2 204. Nor did WaMu adequately monitor non-employee third-party brokers

13 who originated most of WaMu's loans. As Eric Thorson explained before the PSI: t4 In addition to originating retail loans with its own employees, WaMu

15 began originating and purchasing wholesale loans through a network r6 of brokers and coffespondents. From 2003 to 2007, wholesale loan t7 channels represented 48 to 70 percent of WaMu's total single family

18 residential loan production. WaMu saw the f,rnancial incentive to use t9 wholesale loan channels for production as significant. According to an 20 April 2006 internal presentation to the WaMu Board, it cost WaMu 2t about 66 percent less to close a wholesale loan (S1,809 per loan) than

22 it did to close a retail loan (S5,273). So while WaMu profitability

23 increased through the use of third-party originators, it had far less 24 oversight and control over the quality of the originations.

25 Thorson Statemental5. According to the WaMu OIG Report, WaMu had only 14

26 employees monitoring the actions of 34,000 third-party brokers. See WaMu OIG

27 Report at 1 l. This lack of oversight led to WaMu "identif[ying] fraud losses 28 attributable to third-party brokers of $51 million for subprime loans andÐ27 million

l6L6l46vll01266l I for prime loans" in2007. Id.

2 205. Federal regulators also noted that "WaMu acquired 11 institutions and J merged with 2 affiliates" from I99l to 2006, yet failed to "fully integrate 4 . . . information technology systems, risk controls, and policies and procedures"

5 from its acquisitions and institute "a single enterprise-wide risk management

6 system." Thorson Statement at 5. An integrated risk management system was

7 critically important in light of WaMu's high-risk lending strategy. See id.

I 206. Based on interviews with two dozen former employees, mortgage

9 brokers, real estate agents and appraisers, Goodman and Morgenson of the New 10 York Times noted the "relentless pressure to chum out loans" while "disregarding

11 borrowers' incomes and assets" came from WaMu's top executives. Goodman & t2 Morgenson, Saying Yes, WaMu Built Empire on Shalry Loans at 41. According to

13 Dana Zweibel, a former financial representative at a WaMu branch in Tampa, t4 Florida, even if she doubted whether a borrower could repay the loan, she was told 15 by WaMu management that it was not her concern: her concern was "'just to write t6 the loan."' Id. Said Zweibel, "'It was a disgrace 'We were giving loans to t7 people that never should have had loans."' Id.

18 207. In November 2008 the New York Times, quoting Keysha Cooper, a l9 Senior Mortgage Underwriter at WaMu from 2003 to 2007 , recounted "'[a]t WaMu 20 it wasn't about the quality of the loans; it was about the numbers'. . . . 'They didn't 2I care if we were giving loans to people that didn't qualifr. Instead, it was how many 22 loans did you guys close and fund?"' Gretchen Morgenson, Was There a Loan It 23 Didn't Like?, N.Y. Times, Nov. 1,2008. According to the article, "[i]n February 24 2007 . . . the pressure became intense. WaMu executives told employees they were 25 not making enough loans and had to get their numbers up. . . ." Cooper concluded, 26 "'I swear 60 percent of the loans I approved I was made to' ... 'If I could get 27 everyone's name, I would write them apology letters."' Id.

1616146v11012661 81 I 208. WaMu blatantly inflated salaries of baby sitters and mariachi singers 2 to the six-figure range. Indeed, the only verification of the mariachi singer's

a J income was a photograph of the mariachi singer in his outfit included in the loan 4 application file. The New York Times reported:

5 As a supervisor at a Washington Mutual mortgage processing center, 6 John D. Parsons was accustomed to seeing baby sitters claiming

7 salaries worthy of college presidents, and schoolteachers with incomes

8 rivaling stockbrokers'. He rarely questioned them. A real estate 9 frenzy was under way and waMu, as his bank was known, was all

10 about saying yes.

11 Yet even by waMu's relaxed standards, one mortgage four years ago 12 raised eyebrows. The borrower was claiming a six-fîgure income and 13 an unusual profession: mariachi singer. t4

15 Mr. Parsons could not veriff the singer's income, so he had him t6 photographed in front of his home dressed in his mariachi outfit. The t7 photo went into a WaMu file. Approved. 18 I9 "I'd lie if I said every piece of documentation was properly signed and 20 dated," said Mr. Parsons. 2t

23 At \MaMu, getting the job done meant lending money to nearly anyone 24 who asked for it the force behind the bank's meteoric rise and its 25 - precipitous collapse this year in the biggest bank failure in American 26 history. 2l

l616146vl/012661 82 1 Interviews with two dozen former employees, mortgage brokers, real

2 estate agents and appraisers reveal the relentless pressure to churn out

J loans that produced such results.

4 Goodman & Morgenson, Saying Yes, WaMu Built Empire on Shalry Loans at 41.

5 V[I. THE OFFERII{G DOCUMENTS CONTAINED UNTRUE

6 STATEMEI\TS OF MATERIAL FACT

7 209. The Offering Documents included material untrue statements or I omitted facts necessary to make the statements made, in light of the circumstances

9 under which they were made, not misleading.

10 210. For purposes of Section 11 liability, the prospectus supplements are

11 part of and included in the registration statements of the offerings pursuant to 17 t2 C.F.R. $$ 230.158,230.430B (2008); see a/so Securities Offering Reform, 70 Fed.

13 Reg. 44,722-01,44,768-69 (Aug. 3, 2005). t4 2ll. Statements in the Offering Documents concerning the following

15 subjects were material and untrue at the time they were made: (l) the Originators' t6 evaluation of the borrower's likelihood and capacity to repay the loan through

I7 application of the stated underwriting standards, including the calculation and use

18 of an accurate "debt-to-income" ratio and the frequency and use of exceptions to t9 those standards; (2) adherence to stated underwriting standards for reduced 20 documentation programs; (3) the accurate calculation of the "loan-to-value" ratio 2t for the mortgaged property and the accuracy of appraisals; and (a) the existence of 22 credit enhancement to minimize the risk of loss.

23 212. FNBN and Silver State were the primary originators in the Alternative

24 Loan Trust 2006-AR4 and Nomura FIELT 2007-I offerings. ,See Nomura FIELT

25 2007 - 1 Prospectus Supplement, Jan. 29, 2007 , at S-3; Alternative Loan Trust 2006- 26 AR4 Prospectus Supplement, Nov. 29, 2006, at S-2. FNBN's and Silver State's 27 systematic disregard of their underwriting standards is detailed in Sections VII.D.4

28 and VII.D.7 (supra).

l616L46vrl0l266t 83 1 2I3. American Home was the sole originator of loans in the American

2 Home Mortgage Assets Trust 2007-3 offering. ,See American Home Mortgage

Ja Assets Trust 2007-3 Prospectus Supplement, June 5,2007, at S-5. American Home

4 also originated all of the loans in the HarborView 2007-5 offering. See

5 HarborView 2007-5 Prospectus Supplement, July 11,2007, at S-22. American 6 Home's systematic disregard of its underwriting standards is detailed in Section

7 VII.D.2 (supra).

8 2I4. First Franklin Mortgage was the primary originator of mortgages

9 collateralizing the First Franklin Mortgage Loan Trust 2005-FFH4 offering. See

10 First Franklin Mortgage Loan Trust 2005-FFH4 Prospectus Supplement, Nov. 30,

11 2005, at S-5. t2 215. Paul Financial, Plaza Home Mortgage, and First Federal Bank of

13 California originated a large portion of the loans in the mortgage pool underlying I4 the HarborView 2007-4 offering. No other originators contributed more than l\Yo

15 of the loans to the offering. See HarborView 2007 -4 Prospectus Supplement, June t6 13,2007, at S-25.

t7 216. American Home, Paul Financial, Kay-Co Investment dlbla Pro 30

18 Funding, and Residential Funding Co., originated a large portion of loans for the t9 HarborView 2007-2 offering. No other originators contributed more than 1\Yo of

20 the loans to the offering. ,See HarborView 2007-2 Prospectus Supplement,Mar.2g,

2I 2007, at S-24. American Home's systematic disregard of its underwriting standards

22 is detailed in Section VII.D.2 (supra).

23 217. Countrywide originated all of the loans in the HarborView 2007-I, 24 HarborView 2006-12, HarborView 2006-11, and HarborView 2006-9 offerings. 25 See HarborView 2007-I Prospectus Supplement, Mar. 7, 2007, at S-23;

26 HarborView 2006-12 Prospectus Supplement, Dec. 1 1,2006, at S-25; HarborView 27 2006-11 Prospectus Supplement, Nov. I0, 2006, at S-33; and HarborView 2006-9

l616146vtl012661 I Prospectus Supplement, Oct.3,2006,atS-23. Countrywide's systematic disregard 2 of its underwriting standards is detailed in Section VII.D.3 (supra).

J 2I8. IndyMac, BankUnited FSB, and American Home originated a 4 substantial majority of the loans in the HarborView 2006-14 offering. No other

5 originators contributed more than l0% of the loans to the offering. See 6 HarborView 2006-14 Prospectus Supplement, Dec. 20, 2006, at S-25. American

7 Home's and IndyMac's systematic disregard of their underwriting standards is

8 detailed in Sections VII.D.2 and VII.D.5 (supra).

9 219. BankUnited, Paul Financial, and Residential Mortgage Capital 10 originated a substantial portion of the loans in the HarborView 2006-10 offering.

11 ,See HarborView 2006-10 Prospectus Supplement, Nov. I0,2006, atS-24. l2 220. BankUnited, First Federal Bank of Califomia, and Paul Financial 13 originated a substantial portion of the loans underlying the HarborView 2006-8

T4 offering. SeeHarborView 2006-8 Prospectus Supplement, Aug. 28,2006, at S-21. l5 221. IndyMac originated all of the loans in the IndyMac INDX Mortgage t6 Loan Trust 2006-4R35 offering. See IndyMac INDX Mortgage Loan Trust 2006- t7 AR35 Prospectus Supplement, Nov. 29, 2006, at 5-66. IndyMac's systematic 18 disregard of its underwriting standards is recounted in Section VII.D.5 (supra). t9 222. WaMu purchased all of the loans that made up the Group 1 pool of 20 loans backing the certificate in the CUSIP 55028C4B1 purchased by WesCorp in 2l the Luminent Mortgage Trust 2007-l offering. See Luminent Mortgage Trust 22 2007-l Prospectus Supplement, Jan. 24, 2007, at S-31. IndyMac Bank FSB 23 originated all of the loans in Group 2 backing the certificate that WesCorp 24 purchased in the CUSIP 55028C4E5 of the Luminent Mortgage Trust 2007-l

25 offering. See id. WaMu's systematic disregard of its underwriting standards is 26 detailed in Section VII.D.8 (supra). IndyMac's systematic disregard of its 27 underwriting standards is detailed in Section VII.D.5 (supra).

l616l46vll01266l 85 1 223. MortgagelT, Inc. was the sole originator of loans in the MortgagelT 2 Mortgage Loan Trust 2006-l offering. ,See MortgagelT Mortgage Loan Trust

J 2006-1 Prospectus Supplement, Feb. 17 ,2006, at 5-64. 4 224. Option One originated or acquired all of the loans underlying the

5 Soundview Home Loan Trust 2005-OPT4 offering. See Soundview Home Loan 6 Trust 2005-oPT4 Prospectus Supplement, Nov. 22, 2005, at S-5. option one's 7 systematic disregard of its underwriting standards is detailed in Section VII.D.6

8 (supra).

9 225. National City Mortgage, Accredited Home Lenders, Inc., and

10 Wachovia Mortgage Cotp., were the primary originators of the loans underlying the

11 Wachovia Mortgage Loan Trust, Series 2006-ALT1 offering. See Wachovia

t2 Mortgage Loan Trust, Series 2006-ALTI Prospectus Supplement, Dec. 19, 2006, at

13 s-3.

I4 226. Examples of material untrue statements and/or omissions of fact from

15 the RMBS listed above follow. t6 A. LJntrue Statements Concerning Evaluation of the Borrower's t7 Capacitv and Likelihood To Repav the Mortgage Loan

18 227. The Nomura FIELT 2007-I Prospectus Supplement represented: t9 FNBN's underwriting guidelines are applied in a standard procedure

20 that is intended to comply with applicable federal and state laws and 2l regulations. However, the application of FNBN's underwriting 22 guidelines does not imply that each specific criterion was satisfied

23 individually. FNBN will have considered a mortgage loan to be 24 originated in accordance with a given set of underwriting guidelines if,

25 based on an overall qualitative evaluation, in FNBN's discretion such 26 mortgage loan is in substantial compliance with such underwriting 27 guidelines or if the borrower can document compensating factors. A 28 mortgage loan may be considered to comply with a set of underwriting

l616146vll012661 86 I guidelines, even if one or more specific criteria included in such 2 underwriting guidelines were not satisfied, if other factors Ja compensated for the criteria that were not satisfîed or the mortgage 4 loan is considered to be in substantial compliance with the

5 underwriting guidelines.

6 Nomura HELT 2007-l Prospectus Supplement at 5-105-106; Alternative Loan 7 Trust 2006-AR4 Prospectus Supplement at 5-49-5 0; see Alternative Loan Trust

I 2006-AR4 Free Writing Prospectus, Nov. 17,2006, at the "IJnderwriting Standards

9 of FNBN" section.

10 228. The Nomura HELT 2007-l Prospectus Supplement represented:

11 All of the Mortgage Loans have been purchased by the sponsor from t2 various banks, savings and loan associations, mortgage bankers and

13 other mortgage loan originators and purchasers of mortgage loans in t4 the secondary market, and were originated generally in accordance

15 with the underwriting criteria described in this section. t6 Nomura F{ELT 2007-1 Prospectus Supplement at 5-108; Altemative Loan Trust

T7 2006-AR4 Free Writing Prospectus, Nov. 17,2006, at the "IJnderwriting Standards

18 of the Sponsor" section. t9 229. The Nomura FIELT 2007-l Prospectus Supplement represented: 20 In addition, FNBN may make certain exceptions to the underwriting 2t guidelines described herein if, in FNBN's discretion, compensating

22 factors are demonstrated by a prospective borrower.

23 Nomura FIELT 2007-1 Prospectus Supplement at 5-104; Alternative Loan Trust 24 2006-AR4 Prospectus Supplement at S-48.

25 230. The Nomura FIELT 2007-l Prospectus Supplement represented the

26 sponsor, Nomura Credit & Capital, Inc.'s underwriting standards as follows:

l616l46vll01266l 87 1 In addition, certain exceptions to the underwriting standards described

2 in this prospectus supplement are made in the event that compensating

J factors are demonstrated by a prospective borrower.

4 Nomura F{ELT 2007-l Prospectus Supplement at 5-109.

5 231. The Nomura FIELT 2007-l Prospectus Supplement represented:

6 FNBN's underwriting guidelines are primarily intended to evaluate the

7 prospective borrower's credit standing and ability to repay the loan, as

I well as the value and adequacy of the proposed Mortgaged Property as 9 collateral. A prospective borrower applying for a mortgage loan is

10 required to complete an application, which elicits pertinent information

11 about the prospective borrower including, depending upon the loan t2 program, the prospective borrower's financial condition (assets,

13 liabilities, income and expenses), the property being financed and the I4 type of loan desired.

15 Nomura FIELT 2007-1 Prospectus Supplement at 5-105; Alternative Loan Trust

r6 2006-AR4 Prospectus Supplement at S-49; Alternative Loan Trust 2006-AR4 Free I7 Writing Prospectus, Nov. 17, 2006, at the "fJnderwriting Standards of FNBN"

18 section.

t9 232. The Nomura FIELT 2007-l Prospectus Supplement represented: 20 Based on the data provided in the application and certain verifications 2t (if required), a determination will have been made that the borrower's

22 monthly income (if required to be stated or verified) should be 23 sufficient to enable the borrower to meet its monthly obligations on the 24 mortgage loan and other expenses related to the Mortgaged Property 25 (such as property taxes, standard hazard insurance and other fixed 26 obligations other than housing expenses). Generally, scheduled 27 payments on a mortgage loan during the first year of its term plus taxes

28 and insurance and other fixed obligations equal no more than a

l6l6t46vll01266l 88 I specif,red percentage of the prospective borrower's gross income. The

2 percentage applied varies on a case-by-case basis depending on a

J number of underwriting criteria including, but not limited to, the loan-

4 to-value ratio of the mortgage loan or the amount of liquid assets

5 available to the borrower after origination.

6 Nomura I{ELT 2007-1 Prospectus Supplement at 5-105; Altemative Loan Trust

7 2006-AR4 Prospectus Supplement at S-49.

I 233. The Nomura FIELT 2007-l Prospectus Supplement stated:

9 Silver State Mortgage's underwriting guidelines are primarily intended

10 to evaluate the prospective borrower's credit standing and ability to

11 repay the loan, as well as the value and adequacy of the proposed I2 Mortgaged Property as collateral. A prospective borrower applying

13 for a mortgage loan is required to complete an application which elicits

T4 pertinent information about the prospective borrower including,

15 depending upon the loan program, the prospective borrower's financial

16 condition (assets, liabilities, income and expenses), the property being l7 financed and the type of loan desired.

18 Nomura FIELT 2007-l Prospectus Supplement at 5-107.

I9 234. The Nomura FIELT 2007-I Prospectus Supplement represented: 20 Based on the data provided in the application and certain verifications 2l (if required), a determination will have been made that the borrower's

22 monthly income (if required to be stated or verified) should be

23 sufficient to enable the borrower to meet its monthly obligations on the 24 mortgage loan and other expenses related to the Mortgaged Property 25 (such as property taxes, standard hazard insurance and other fixed 26 obligations other than housing expenses).

27 Nomura HELT 2007-l Prospectus Supplement at 5-108.

28 235. The Nomura FIELT 2007-l Prospectus Supplement represented:

l6l6l46vl/012661 89 1 Generally, each borrower will have been required to complete an 2 application designed to provide to the original lender pertinent credit

Ja information conceming the borrower. As part of the description of the 4 borrower's financial condition, the borrower generally will have

5 furnished certain information with respect to its assets, liabilities, 6 income (except as described below), credit history, employment

7 history and personal information, and furnished an authorization to

8 apply for a credit report which summarizes the borrower's credit

9 history with local merchants and lenders and any record of bankruptcy. t0 The borrower may also have been required to authorize verifications of

11 deposits at financial institutions where the borrower had demand or t2 savings accounts.

13 Nomura I{ELT 2007-l Prospectus Supplement at 5-109.

T4 236. The American Home Mortgage Assets Trust 2007-3 Prospectus t5 Supplement represented : t6 The Originator's underwriting philosophy is to weigh all risk factors t7 inherent in the loan file, giving consideration to the individual

18 transaction, borrower profile, the level of documentation provided and t9 the property used to collateralize the debt. Because each loan is

20 different, the Originator expects and encourages underwriters to use 2t professional judgment based on their experience in making a lending

22 decision.

23 American Home Mortgage Assets Trust 2007-3 Prospectus Supplement at 5-51-52.

24 237. The American Home Mortgage Assets Trust 2007-3 Prospectus

25 Supplement represented :

26 The Originator realizes that there may be some acceptable quality

27 loans that fall outside published guidelines and encourages "common

28 sense" underwriting. Because a multitude of factors are involved in a t6t6t46vtl0r266t 90 1 loan transaction, no set of guidelines can contemplate every potential 2 situation. Therefore, each case is weighed individually on its own

J merits and exceptions to the Originator's underwriting guidelines are 4 allowed if sufficient compensating factors exist to offset any additional

5 risk due to the exception.

6 American Home Mortgage Assets Trust 2007-3 Prospectus Supplement at S-53.

7 238. The American Home Mortgage Assets Trust 2007-3 Prospectus

8 Supplement represented :

9 In order to determine if a borrower qualif,res for a non-conforming 10 loan, the loans have been either approved by Fannie Mae's Desktop

11 underwriter or Freddie Mac's Loan Prospector automated t2 underwriting systems or they have been manually underwritten by the

13 Originator underwriters. The Originator's Alt-A loan products have l4 been approved manually by contract underwriters provided by certain 15 mortgage insurance companies. American Home Solutions products t6 must receive an approval from the Assetwise automated underwriting t7 system. For manually underwritten loans, the underwriter must ensure

18 that the borrower's income will support the total housing expense on t9 an ongoing basis. Underwriters may give consideration to borrowers 20 who have demonstrated an ability to carry a similar or greater housing

2I expense for an extended period. In addition to the monthly expense 22 the underwriter must evaluate the borrower's ability to manage all 23 recurring payments on all debts, including the monthly housing

24 expense. V/hen evaluating the ratio of all monthly debt payments to 25 the borrower's monthly income (debrto-income ratio), the underwriter

26 should be aware of the degree and frequency of credit usage and its 27 impact on the borrower's ability to repay the loan. For example, 28 borrowers who lower their total obligations should receive favorable

t6t6l46vl/012661 91 1 consideration and borrowers with a history of heavy usage and a

2 pattern of slow or late payments should receive less flexibility.

J American Home Mortgage Assets Trust 2007-3 Prospectus Supplement at 5-52-53.

4 239. The American Home Mortgage Assets Trust 2007-3 Prospectus

5 Supplement represented :

6 The Originator obtains a credit report that summarizes each borrower's

7 credit history. The credit report contains information from the three

I major credit repositories, Equifax, Experian and TransUnion. These

9 companies have developed scoring models to identifli the comparative

10 risk of delinquency among applicants based on characteristics within

11 the applicant's credit report. A borrower's credit score represents a

12 comprehensive view of the borrower's credit history risk factors and is

13 indicative of whether a borrower is likely to default on a loan. Some t4 of the factors used to calculate credit scores are a borrower's incidents

15 of previous delinquency, the number of credit accounts a borrower has, l6 the amount of available credit that a borrower has utilized, the source t7 of a borrower's existing credit, and recent attempts by a borrower to

18 obtain additional credit. Applicants who have higher credit scores t9 will, as a group, have fewer defaults than those who have lower credit 20 scores. The minimum credit score allowed by the Originator non-

2l conforming loan guidelines for these loans is 620 and the average is

22 typically over 700. For American Home Alt-A products, the minimum

¿J credit score is generally 580. If the borrowers do not have a credit 24 score they must have an alternative credit history showing at least

25 three trade lines with no payments over 60 days past due in the last 12

26 months.

l616l46vl/01266'l 92 1 In addition to reviewing the borrower's credit history and credit score, 2 the Originator underwriters closely review the borrower's housing J payment history. In general, for non-conforming loans the borrower 4 should not have made any mortgage payments over thirty days after 5 the due date for the most recent twelve months. In general, for Alt-A

6 loans the borrower may have no more than one payment that was made 7 over thirty days after the due date for the most recent twelve months.

8 American Home Mortgage Assets Trust 2007-3 Prospectus Supplement at S-52.

9 240. The American Home Mortgage Assets Trust 2007-3 Prospectus

10 Supplement represented :

1l The Originator underwrites a borrower's creditworthiness based solely t2 on information that the Originator believes is indicative of the 13 applicant's willingness and ability to pay the debt they would be t4 incurring.

15 American Home Mortgage Assets Trust 2007-3 Prospectus Supplement at S-52.

l6 241. The First Franklin Mortgage Loan Trust Series 2005-FFH4 Prospectus

I7 Supplement represented :

18 All of the Mortgage Loans were originated or acquired by the 19 originator, generally in accordance with the underwriting criteria 20 described herein. 2l

22 The originator's underwriting standards are primarily intended to

¿J assess the ability and willingness of the borrower to repay the debt and

24 to evaluate the adequacy of the mortgaged property as collateral for the

25 mortgage loan. . . . The Originator considers, among other things, a 26 mortgagor's credit history, repayment ability and debt service-to- 27 income ratio ("Debt Ratio"), as well as the value, type and use of the 28 mortgage property.

l616146vll0t266l 93 I First Franklin Mortgage Loan Trust Series 2005-FFH4 Prospectus Supplement at S-

2 54.

a J 242. The First Franklin Mortgage Loan Trust 2005-FFH4 Prospectus

4 Supplement represented:

5 All of the Mortgage Loans were underwritten by the Originator's 6 underwriters having the appropriate signature authority. Each 7 underwriter is granted a level of authority commensurate with their

I proven judgment, maturity and credit skills. On a case by case basis,

9 the Originator may determine that, based upon compensating factors, a

10 prospective mortgagor not strictly qualifying under the underwriting

11 risk category guidelines described below warrants an underwriting t2 exception. Compensating factors may include, but are not limited to,

13 low loan-to-value ratio, low Debt Ratio, substantial liquid assets, good t4 credit history, stable employment and time in residence at the 15 applicant's current address. It is expected that a substantial portion of t6 the Mortgage Loans may represent such underwriting exceptions.

I7 First Franklin Mortgage Loan Trust 2005-FFH4 Prospectus Supplement at 5-56.

18 243. The HarborView 2007-5 Prospectus Supplement represented: t9 The mortgage loans have been purchased or originated, underwritten

20 and documented in accordance with the guidelines of Fannie Mae, 2l Freddie Mac, the Federal Housing Administration (FHA), the u.S. 22 Department of veterans Affairs (vA), the u.s. Department of )7 Agriculture Guaranteed Rural Housing Program (GRH), Ginnie Mae, 24 the underwriting guidelines of specif,rc private investors, and the non- 25 conforming or Alt-A underwriting guidelines established by American

26 Home.

27 HarborView 2007-5 Prospectus Supplement at S-29; HarborView 2007-2 28 Prospectus Supplement at S-33.

t6t6t46vtl0t266t 94 I 244. The HarborView 2007-5 Prospectus Supplement represented:

2 American Home's underwriting philosophy is to weigh all risk factors

J inherent in the loan file, giving consideration to the individual

4 transaction, borrower profile, the level of documentation provided and

5 the property used to collateralize the debt. These standards are applied

6 in accordance with applicable federal and state laws and regulations.

7 Exceptions to the underwriting standards may be permitted where

8 compensating factors are present. . . . Because each loan is different, 9 American Home expects and encourages underwriters to use

10 professional judgment based on their experience in making a lending

11 decision. l2 HarborView 2007-5 Prospectus Supplement at 5-29-30; HarborView 2007-2

13 Prospectus Supplement at S-33.

t4 245. The HarborView 2007-5 Prospectus Supplement represented:

15 American Home underwrites a borrower's creditworthiness based I6 solely on information that American Home believes is indicative of the

I7 applicant's willingness and ability to pay the debt they would be

18 incurring.

19 HarborView 2007-5 Prospectus Supplement at S-30; HarborView 2007-2 20 Prospectus Supplement at S-33.

2t 246. The HarborView 2007-4 Prospectus Supplement represented the

22 following with respect to originator Paul Financial:

ZJ An applicant's creditworthiness is determined based on the borrower's

24 ability and willingness to repay the loan. The loan decision is based

25 upon the applicant's financial information, employment and income

26 stability, credit history and collateral value. 27 HarborView 2007-4 Prospectus Supplement at S-34; HarborView 2007-2

28 Prospectus Supplement at S-35.

1616146vl/012661 95 1 247. The HarborView 2007-5 Prospectus Supplement represented:

2 American Home realizes that there may be some acceptable quality

J loans that fall outside published guidelines and encourages "common

4 sense" underwriting. Because a multitude of factors are involved in a

5 loan transaction, no set of guidelines can contemplate every potential

6 situation. Therefore, each case is weighed individually on its own

7 merits and exceptions to American Home's underwriting guidelines

8 are allowed if sufficient compensating factors exist to offset any

9 additional risk due to the exception.

10 HarborView 2007-5 Prospectus Supplement at S-31; HarborView 2007-2

11 Prospectus Supplement at S-35.

t2 248. The HarborView 2007-4 Prospectus Supplement stated:

13 Paul Financial's underwriting guidelines are applied to evaluate the

l4 applicant, the property and the applicant's income, employment and

15 credit history in the context of the loan program and documentation I6 requirements. These are guidelines only and each loan is evaluated

l7 based upon its own merits. Exceptions to the guidelines may be

18 acceptable if there are compensating factors. l9 HarborView 2007-4 Prospectus Supplement al S-34; HarborView 2007-2

20 Prospectus Supplement at S-35.

2t 249. The HarborView 2007-4 Prospectus Supplement represented: 22 Paul Financial's underwriting standards are applied by or on behalf of 23 Paul Financial to evaluate the prospective borrower's credit standing 24 and repayment ability and the value and adequacy of the mortgaged

25 property as collateral. Except under the No Income programs, a

26 prospective borrower must generally demonstrate that the ratio of the 27 borrower's monthly housing expenses (including interest on the 28 proposed mortgage loan and, as applicable, the related monthly portion

t616146v11012661 96 I of property taxes, hazard insurance and mortgage insurance) to the

2 borrower's monthly gross income and the ratio of total monthly debt to

J the monthly gross income (the "debt-to-income" ratios) are within

4 acceptable limits.

5 HarborView 2007-4 Prospectus Supplement at S-35; HarborView 2007-2

6 Prospectus Supplemerrt at S-36.

7 250. The HarborView 2007-1 Prospectus Supplement represented:

8 Under its Standard Underwriting Guidelines, Countrywide Home

9 Loans generally permits a debt-to-income ratio based on the

10 borrower's monthly housing expenses of up to 33Yo and a debt-to-

t1 income ratio based on the borrower's total monthly debt of up to 38%o.

T2 HarborView 2007-1 Prospectus Supplement at S-32; HarborView 2006-12

13 Prospectus Supplement at S-70; HarborView 2006-11 Prospectus Supplement at S-

L4 36; HarborView 2006-9 Prospectus Supplement at 5-65.

15 251. The HarborView 2007-l Prospectus Supplement represented: t6 As part of its evaluation of potential borrowers, Countrywide Home t7 Loans generally requires a description of income. If required by its

18 underwriting guidelines, Countrywide Home Loans obtains t9 employment verification providing current and historical income

20 information and/or a telephonic employment confirmation. Such 2t employment verification may be obtained, either through analysis of 22 the prospective borrower's recent pay stub and/or W-2 forms for the

¿J most recent two years, relevant portions of the most recent two years' 24 tax returns, or from the prospective borrower's employer, wherein the

25 employer reports the length of employment and current salary with

26 that organization. Self-employed prospective borrowers generally are

27 required to submit relevant portions of their federal tax returns for the

28 past two years.

l616146vll01266l 97 I HarborView 2007-1 Prospectus Supplement at 5-29-30; HarborView 2006-12

2 Prospectus Supplement at 5-68; HarborView 2006-11 Prospectus Supplement at S-

Ja 34; HarborView 2006-9 Prospectus Supplement at 5-63.

4 252. The HarborView 2006-10 Prospectus Supplement represented:

5 In determining whether a prospective borrower has sufficient monthly

6 income available to meet the monthly housing expenses and other

7 financial obligations on the proposed mortgage loan, BankUnited

8 generally considers, when required by the applicable documentation

9 type, the ratio of such amounts to the proposed borrower's acceptable

10 stable monthly gross income. Such ratio varies depending on a

11 number of underwriting criteria, including loan-to-value ratios, and is t2 determined on a loan-by-loan basis. Under its One Month MTA

13 Guidelines, BankUnited generally permits a debt-to-income ratio t4 based on the borrower's total monthly debt of 42%. Higher debt-to- 15 income ratios may also be acceptable with evidence of specific t6 compensating factors. t7 HarborView 2006-10 Prospectus Supplement at 5-64; HarborView 2006-14

18 Prospectus Supplement at 5-66.

I9 253. The HarborView 2006-10 Prospectus Supplement represented: "Such 20 underwriting standards are applied to evaluate the prospective borrower's credit 2I standing and repayment ability and the value and adequacy of the mortgaged 22 property as collateral. Exceptions to the underwriting standards are permitted

23 where compensating factors are present." HarborView 2006-10 Prospectus 24 Supplement at S-63 (representing BankUnited's underwriting guidelines); 25 HarborView 2006-14 Prospectus Supplement at 5-65. 26 254. The HarborView 2006-8 Prospectus Supplement stated: "BankUnited 27 has represented to the depositor that the mortgage loans were originated generally

l616l46vl/012661 98 I in accordance with such [underwriting] policies." HarborView 2006-8 Prospectus

2 Supplement at 5-60.

a J 255. The Harborview 2006-8 Prospectus supplement represented: 4 Such underwriting standards are applied to evaluate the prospective

5 borrower's credit standing and repayment ability and the value and 6 adequacy of the mortgaged property as collateral. Exceptions to the

7 underwriting standards are permitted where compensating factors are I present.

10 Generally, each borrower will have been required to complete an

11 application designed to provide pertinent credit information t2 concerning the borrower. The borrower will have given information

13 with respect to its assets, liabilities, income (except as described I4 below), credit history, employment history and personal information,

15 and will have furnished the lender with authorization to obtain a credit I6 report that summarizes the borrower's credit history.

I7 HarborView 2006-8 Prospectus Supplement at 5-60.

18 256. The HarborView 2006-8 Prospectus Supplement represented:

19 In determining whether a prospective borrower has sufficient monthly

20 income available (i) to meet the borrower's monthly obligation on 2I their proposed mortgage loan and (ii) to meet the monthly housing 22 expenses and other financial obligations on the proposed mortgage

23 loan, BankUnited generally considers, when required by the applicable 24 documentation type, the ratio of such amounts to the proposed 25 borrower's acceptable stable monthly gross income. Such ratios vary 26 depending on a number underwriting criteria, including loan-to-value

27 ratios, and are determined on a loan-by-loan basis. 28 HarborView 2006-8 Prospectus Supplement at 5-60-61.

t6l6146vll0t266l 99 1 257. The IndyMac INDX Mortgage Loan Trust 2006-4R35 Prospectus

2 Supplement represented:

J Mortgage loans that are acquired by IndyMac Bank are underwritten 4 by IndyMac Bank according to IndyMac Bank's underwriting

5 guidelines, which also accept mortgage loans meeting Fannie Mae or

6 Freddie Mac guidelines regardless of whether such mortgage loans

7 would otherwise meet IndyMac Bank's guidelines, or pursuant to an I exception to those guidelines based on IndyMac Bank's procedures for

9 approving such exceptions. Conventional mortgage loans are loans 10 that are not insured by the FHA or partially guaranteed by the VA.

11 Conforming mortgage loans are loans that qualifr for sale to Fannie

t2 Mae and Freddie Mac, whereas non-conforming mortgage loans are

13 loans that do not so qualiff. Non-conforming mortgage loans t4 originated or purchased by IndyMac Bank pursuant to its underwriting

15 programs typically differ from conforming loans primarily with T6 respect to loan-to-value ratios, borrower income, required

T7 documentation, interest rates, borrower occupancy of the mortgaged

18 property andlor property types. To the extent that these programs t9 reflect underwriting standards different from those of Fannie Mae and 20 Freddie Mac, the performance of loans made pursuant to these 2t different underwriting standards may reflect higher delinquency rates

22 and/or credit losses.

23 IndyMac INDX Mortgage Loan Trust 2006-4R35 Prospectus Supplement at 5-67;

24 see IndyMac INDX Morlgage Loan Trust 2006-4R35 Registration Statement, Feb.

25 24,2006, at S-28.

26 258. The IndyMac INDX Mortgage Loan Trust 2006-4R35 Prospectus 27 Supplement represented:

1616146vl/012661 100 1 IndyMac Bank has two principal underwriting methods designed to be

2 responsive to the needs of its mortgage loan customers: traditional

JI underwriting and e-MITS (Electronic Mortgage Information and

4 Transaction System) underwriting. E-MITS is an automated, internet-

5 based underwriting and risk-based pricing system. IndyMac Bank

6 believes that e-MITS generally enables it to estimate expected credit

7 loss, interest rate risk and prepayment risk more objectively than

8 traditional underwriting and also provides consistent underwriting

9 decisions. IndyMac Bank has procedures to override an e-MITS

10 decision to allow for compensating factors.

11 IndyMac INDX Mortgage Loan Trust 2006-4R35 Prospectus Supplement at 3-67; t2 see IndyMac INDX Mortgage Loan Trust 2006-4R35 Registration Statement, Feb.

13 24,2006, at S-28.

I4 259. The IndyMac INDX Mortgage Loan Trust 2006-4R35 Prospectus

15 Supplement represented: t6 Underwriting procedures vary by channel of origination. Generally, t7 mortgage loans originated through the mortgage professional channel

18 will be submitted to e-MITS for assessment and subjected to a full

T9 credit review and analysis. Mortgage loans that do not meet IndyMac

20 Bank's guidelines may be manually re-underwritten and approved

2t under an exception to those underwriting guidelines. Mortgage loans 22 originated through the consumer direct channel are subjected to

¿) essentially the same procedures, modified as necessary to reflect the

24 fact that no third-party contributes to the preparation of the credit file.

25 IndyMac INDX Mortgage Loan Trust 2006-4R35 Prospectus Supplement at 3-69;

26 see IndyMac INDX Mortgage Loan Trust 2006-4R35 Registration Statement, Feb.

27 24,2006, at S-30.

1616l46vll01266l 101 I 260. The IndyMac INDX Mortgage Loan Trust 2006-4R35 Prospectus

2 Supplement represented :

J Exceptions to underwriting standards are pennitted in situations in

4 which compensating factors exist. Examples of these factors are 5 significant financial reserves, a low loan-to-value ratio, significant 6 decrease in the borrower's monthly payment and long-term

7 employment with the same employer.

I IndyMac INDX Mortgage Loan Trust 2006-4R35 Prospectus Supplement at 5-69; 9 IndyMac INDX Mortgage Loan Trust 2006-4R35 Registration Statement, Feb.24,

10 2006, at S-31.

l1 261. The IndyMac INDX Mortgage Loan Trust 2006-4R35 Prospectus t2 Supplement represented:

13 Additionally, maximum total monthly debt payments-to-income ratios t4 and cash-out limits may be applied. Other factors may be considered

15 in determining loan eligibility such as a borrower's residency and t6 immigration status, whether a non-occupying borrower will be t7 included for qualification putposes, sales or financing concessions l8 included in any purchase contract, the acquisition cost of the property I9 in the case of a refinance transaction, the number of properties owned 20 by the borrower, the type and amount of any subordinate mortgage, the 2l amount of any increase in the borrower's monthly mortgage payment 22 compared to previous mortgage or rent payments and the amount of 23 disposable monthly income after payment of all monthly expenses. 24 IndyMac INDX Mortgage Loan Trust 2006-4R35 Prospectus Supplement at 5-68; 25 IndyMac INDX Mortgage Loan Trust 2006-4R35 Registration Statement,Feb.24, 26 2006, at S-30.

27 262. The IndyMac INDX Mortgage Loan Trust 2006-4R35 Prospectus

28 Supplement stated:

1616146vll01266l t02 1 IndyMac Bank's underwriting criteria for traditionally underwritten 2 mortgage loans includes an analysis of the borrower's credit history, J ability to repay the mortgage loan and the adequacy of the mortgaged

4 property as collateral. Traditional underwriting decisions are made by

5 individuals authorized to consider compensating factors that would 6 allow mortgage loans not otherwise meeting IndyMac Bank's

7 guidelines.

I IndyMac INDX Mortgage Loan Trust 2006-4R35 Prospectus Supplement at 3-67;

9 see IndyMac INDX Mortgage Loan Trust 2006-4R35 Registration Statement, Feb.

10 24,2006, at S-28.

11 263. The Luminent Mortgage Trust 2007-l Prospectus Supplement t2 represented:

13 The mortgage loans have been originated generally in accordance with t4 the following underwriting standards established by WMMSC or

15 underwriting guidelines established by WaMu.

t6 Luminent Mortgage Trust 2007-I Prospectus Supplement at S-32.

t7 264. The Luminent Mortgage Trust 2007-l Prospectus Supplement

18 represented:

l9 Each mortgage loan has been underwritten under one of the following 20 documentation programs. Under a full/alternative documentation 2t program, a borrower's employment and income are verified. The 22 employment and income as stated in the prospective borrower's loan

23 application are verified either directly with the borrower's stated

24 employer(s) or through receipt of altemative documentation such as

25 the borrower's recent pay stub(s) and/or w-2 form(s) reflecting a 26 minimum of 12 months of employment and income or, in the case of 27 self-employed borrowers or borrowers who derive a substantial portion

28 of their income from commissions, receipt of the borrower's personal

l616146vll01266l 103 1 (and, if applicable, business) tax returns. For self-employed 2 borrowers, profit and loss statements may also be required. Generally,

JI under a full/alternative documentation program, the borrower's stated 4 assets are also verified either directly with the stated financial

5 institution holding the stated asset or through receipt of alternative

6 documentation such as the borrower's recent bank and/or brokerage

7 statement(s). In addition, the borrower's employment may be verified

8 with the employer by telephone or by other independent means.

9 Luminent Mortgage Trust 2007-l Prospectus Supplement at 5-33-34.

10 265. The Luminent Mortgage Trust 2007-I Prospectus Supplement

11 represented: "Mortgage loans that are acquired by IndyMac Bank are underwritten I2 by IndyMac Bank according to IndyMac Bank's underwriting guidelines..."

13 Luminent Mortgage Trust 2007-l Prospectus Supplement at 5-36.

t4 266. The Luminent Mortgage Trust 2007-l Prospectus Supplement

15 represented:

I6 Exceptions to underwriting standards described above may be made on I7 a case-by-case basis if compensating factors are present. In those

18 cases, the basis for the exception is documented. Compensating t9 factors may include, but are not limited to, low loan-to-value ratio, low 20 debt-to-income ratio, good credit standing, the availability of other 2l liquid assets, stable employment and time in residence at the

22 prospective borrower' s current address.

23 Luminent Mortgage Trust 2007-l Prospectus Supplement at S-34.

24 267. The Luminent Mortgage Trust 2007-I Prospectus Supplement

25 represented: 26 Exceptions to underwriting standards are perrnitted in situations in

2l which compensating factors exist. Examples of these factors are 28 significant financial reserves, a low loan-to-value ratio, signif,rcant t6t6t46vtt0t2661 104 1 decrease in the borrower's monthly payment and long-term

2 employment with the same employer.

J Luminent Mortgage Trust 2007-l Prospectus Supplement at S-39.

4 268. The Luminent Mortgage Trust 2007-l Prospectus Supplement

5 represented:

6 Under all documentation programs other than the no ratio programs 7 and the no documentation programs, in evaluating a prospective

8 borrower's ability to repay a mortgage loan, the loan underwriter

9 considers the ratio of the borrower's mortgage payments, real property

10 taxes and other monthly housing expenses to the borrower's gross

11 income (referred to as the "housing-to-income ratio" or "front end t2 ratio"), and the ratio of the borrower's total monthly debt (including

13 certain non-housing expenses) to the borrower's gross income L4 (referred to as the "debt-to-income ratio" or "back end ratio"). The

15 maximum acceptable ratios may vary depending on other loan factors, t6 such as loan amount and loan purpose, loan-to-value ratio, credit score t7 and the availability of other liquid assets. Exceptions to the ratio

18 guidelines may be made when compensating factors are present. t9 Luminent Mortgage Trust 2007-l Prospectus Supplement at S-33.

20 269. The Luminent Mortgage Trust 2007-l Prospectus Supplement 2I represented:

22 Additionally, maximum total monthly debt payments-to-income ratios

23 and cash-out limits may be applied. other factors may be considered

24 in determining loan eligibility such as a borrower's residency and

25 immigration status, whether a non-occupying borrower will be 26 included for qualif,rcation purposes, sales or fînancing concessions 27 included in any purchase contract, the acquisition cost of the property 28 in the case of a refinance transaction, the number of properties owned

l616l46vll0l266t t0s 1 by the borrower, the type and amount of any subordinate mortgage the

2 amount of any increase in the borrower's monthly mortgage payment

Ja compared to previous mortgage or rent payments and the amount of

4 disposable monthly income after payment of all monthly expenses.

5 Luminent Mortgage Trust 2007-l Prospectus Supplement at S-3S.

6 270. The Luminent Mortgage Trust 2007-l Prospectus Supplement

7 represented:

I Such underwriting standards or guidelines generally are intended to

9 evaluate the prospective borrower's credit standing and repayment

10 ability and the value and adequacy of the mortgaged property as

11 collateral. Some mortgage loans are manually underwritten, in which

12 case an underwriter reviews a loan application and supporting

13 documentation, if required, and a credit report of the borrower, and I4 based on that review determines whether to originate a loan in the

15 amount and with the terms stated in the loan application. Some I6 mortgage loans may be underwritten through an automated l7 underwriting system, including WaMu's automated underwriting

18 system, described below. t9 Luminent Mortgage Trust 2007-l Prospectus Supplement at S-32.

20 271. The Luminent Mortgage Trust 2007-I Prospectus Supplement 2l represented:

22 IndyMac Bank's underwriting criteria for traditionally underwritten

¿J mortgage loans includes an analysis of the borrower's credit history, 24 ability to repay the mortgage loan and the adequacy of the mortgaged

25 property as collateral. Traditional underwriting decisions are made by 26 individuals authorized to consider compensating factors that would 27 allow mortgage loans not otherwise meeting IndyMac Bank's

28 guidelines.

l616146vll0l266t 106 1 Luminent Mortgage Trust 2007-I Prospectus Supplement at S-36.

2 272. The MortgagelT Mortgage Loan Trust 2006-I Prospectus Supplement

J represented:

4 MortgagelT's underwriting philosophy is to weigh all risk factors

5 inherent in the loan file, giving consideration to the individual

6 transaction, borrower profile, the level of documentation provided and

7 the property used to collateralize the debt. Because each loan is

8 different, MortgagelT expects and encourages underwriters to use 9 professional judgment based on their experience in making a lending

10 decision.

11 MortgagelT Mortgage Loan Trust 2006-I Prospectus Supplement at 5-64.

t2 273. The MortgagelT Mortgage Loan Trust 2006-l Prospectus Supplement

13 represented:

t4 MortgagelT realizes that there may be some acceptable quality loans

15 that fall outside published guidelines and encourages "common sense"

T6 underwriting. Because a multitude of factors are involved in a loan t7 transaction, no set of guidelines can contemplate every potential

18 situation. Therefore, exceptions to these underwriting guidelines are

l9 considered, so long as the borrower has other reasonable compensating

20 factors, on a case-by-case basis.

2t MortgagelT Mortgage Loan Trust 2006-I Prospectus Supplement at 5-66. 22 274. The MortgagelT Mortgage Loan Trust 2006-l Prospectus Supplement

23 represented:

24 In order to determine if a borrower qualifies for a Pay Option ARM or 25 Alt-A loan, MortgagelT underwriting staff or contract underwriters 26 provided by certain mortgage insurance companies have manually 27 underwritten and approved such loans. For manually underwritten 28 loans, the underwriter must ensure that the borrower's income will

t6t6t46vtl0t266r 107 1 support the total housing expense on an ongoing basis. [Jnderwriters

2 may give consideration to borrowers who have demonstrated an ability Ja to carry a similar or greater housing expense for an extended period. 4 In addition to the monthly housing expense the underwriter must 5 evaluate the borrower's ability to manage all recurring payments on all

6 debts, including the monthly housing expense. When evaluating the 7 ratio of all monthly debt payments to the borrower's monthly income

I (debt-to-income ratio), the underwriter should be aware of the degree 9 and frequency of credit usage and its impact on the borrower's ability 10 to repay the loan. For example, borrowers who lower their total

11 obligations should receive favorable consideration and borrowers with t2 a history of heavy usage and a pattern of slow or late payments should

13 receive less flexibility. t4 MortgagelT Mortgage Loan Trust 2006-l Prospectus Supplement at 5-65-66.

15 275. The MortgagelT Mortgage Loan Trust 2006-l Prospectus Supplement I6 represented:

I7 MortgagelT underwrites a borrower's creditworthiness based solely on 18 information that MortgagelT believes is indicative of the applicant's

I9 willingness and ability to pay the debt they would be incurring.

20 MortgagelT Mortgage Loan Trust 2006-l Prospectus Supplement at 5-64.

2t 276. The MortgagelT Mortgage Loan Trust 2006-l Prospectus Supplement 22 represented: z3 In addition to reviewing the borrower's credit history and credit score, 24 MortgagelT underwriters closely review the borrower's housing 25 payment history. In general, for non-conforming loans the borrower

26 should not have made any mortgage payments over 30 days after the 27 due date for the most recent 24 months. In general, for pay option

28 ARM and Alt-A loans the borrower may have no more than one

1616146vI/012661 108 I payment that was made over 30 days after the due date for the most

2 recent 24 months.

a J MortgagelT Mortgage Loan Trust 2006-r Prospectus Supplement at 5-65.

4 277. The Soundview Home Loan Trust 2005-OPT4 Prospectus Supplement 5 represented: The Mortgage Loans will have been originated generally in 6 accordance with Option One's Guidelines (the 'Option One Underwriting

7 Guidelines')." Soundview Home Loan Trust 2005-OPT4 Prospectus Supplement at

8 s-s4.

9 278. The Soundview Home Loan Trust 2005-OPT4 Prospectus Supplement 10 represented: "On a case-by-case basis, exceptions to the Option One Underwriting

11 Guidelines are made where compensating factors exist." Soundview Home Loan t2 Trust 2005-OPT4 Prospectus Supplement at S-54.

13 279. The Soundview Home Loan Trust 2005-OPT4 Prospectus Supplement t4 represented:

15 Option One Underwriting Guidelines require a reasonable t6 determination of an applicant's ability to repay the loan. Such I7 determination is based on a review of the applicant's source of income, 18 calculation of a debt service-to-income ratio based on the amount of 19 income from sources indicated on the loan application or similar 20 documentation, a review of the applicant's credit history and the type 2l and intended use of the property being financed.

22 Soundview Home Loan Trust 2005-oPT4 Prospectus Supplement at S-55.

23 280. The Soundview Home Loan Trust 2005-OPT4 Prospectus Supplement

24 represented:

25 The Option One Underwriting Guidelines are primarily intended to 26 assess the value of the mortgaged property, to evaluate the adequacy of 27 such property as collateral for the mortgage loan and to assess the 28 applicant's ability to repay the mortgage loan.

l6l6l46vll01266l 109 1 Soundview Home Loan Trust 2005-OPT4 Prospectus Supplement at S-54.

2 281. The Wachovia Mortgage Loan Trust, Series 2006-ALTI Prospectus

a J Supplement represented :

4 National City Mortgage's underwriting standards are applied to

5 evaluate the prospective borrower's credit standing and repayment

6 ability and the value and adequacy of the mortgaged property as

7 collateral. These standards are applied in accordance with the I applicable federal and state laws and regulations. Exceptions to the

9 underwriting standards are permitted where compensating factors are

10 present.

11 Wachovia Mortgage Loan Trust, Series 2006-ALT1 Prospectus Supplement at S-

T2 34.

13 282. The Wachovia Mortgage Loan Trust, Series 2006-ALT1 Prospectus

I4 Supplement represented :

15 In determining whether a prospective borrower has sufficient monthly

16 income available (i) to meet the borrower's monthly obligation on

T7 their proposed mortgage loan and (ii) to meet the monthly housing r8 expenses and other financial obligation on the proposed mortgage t9 loan, the originator generally considers, when required by the 20 applicable documentation program, the ratio of such amounts to the

2l proposed borrower's acceptable stable monthly gross income. Such

22 ratios vary depending on a number of underwriting criteria, including

¿) loan-to-value ratios, and are determined on a loan-by-loan basis.

24 Wachovia Mortgage Loan Trust, Series 2006-ALT1 Prospectus Supplement at S-

25 35.

26 283. LINTRUE STATEMENTS AND OMITTED INFORMATION: The 27 preceding statements were material at the time they were made, because the quality 28 of the loans in the mortgage pool directly affects the riskiness of the RMBS

1616146vl101266l 110 1 investment, and the quality of the loans is dependent upon the underwriting process

2 employed. The preceding statements were untrue at the time they were made

J because, as alleged herein, the Originators did not adhere to the stated underwriting 4 guidelines, did not effectively evaluate the borrowers' ability or likelihood to repay

5 the loans, did not properly evaluate whether the borrower's debt-to-income ratio

6 supported a conclusion that the borrower had the means to meet his/her monthly

7 obligations, and did not ensure that adequate compensating factors justified the I granting of exceptions to guidelines. Rather, as alleged herein, the Originators 9 systematically disregarded the stated underwriting guidelines in order to increase 10 the volume of mortgages originated (see supra Section VII.D). Further evidence of

11 this fact is found in, among other things, the surge in delinquencies and defaults t2 shortly after the offerings (see supra Table 5), the rale at which actual losses t3 outpaced expected losses within the first year after the offerings (see supra Figure

I4 2), the collapse of the credit ratings (see supra Table 4), and the fact that the

15 Originators were engaged in high OTD lending (see supra Table 6). t6 B. Untrue Statements Concerning Reduced Documentation Programs l7 284. The Nomura I{ELT 2007-I Prospectus Supplement represented r8 FNBN's reduced documentation underwriting guidelines as the following:

19 [Jnder the stated income documentation and the no ratio programs,

20 more emphasis is placed on a prospective borrower's credit score and

2l on the value and adequacy of the Mortgaged Property as collateral and 22 other assets of the prospective borrower rather than on income 23 underwriting. The stated income documentation program requires

24 prospective borrowers to provide information regarding their assets 25 and income. Information regarding assets is verified through written

26 communications or bank statements. Information regarding income is 27 not verified. The no ratio program requires prospective borrowers to 28 provide information regarding their assets, which is then verified

l6l6l46vllO1266l 111 1 through written communications or bank statements. The no ratio 2 program does not require prospective borrowers to provide

a J information regarding their income. In both the stated income and no

4 ratio programs, the employment history is verified through written or

5 telephonic communication.

6 Nomura I{ELT 2007-1 Prospectus Supplement at 5-106; Alternative Loan Trust

7 2006-AR4 Prospectus Supplement at S-50.

8 285. The American Home Mortgage Assets Trust 2007-3 Prospectus

9 Supplement represented:

10 Certain non-conforming stated income or stated asset products allow

11 for less verification documentation than Fannie Mae or Freddie Mac

l2 require. Certain non-conforming Alt-A products also allow for less

13 verification documentation than Fannie Mae or Freddie Mac require. t4 For these Alt-A products the borrower may not be required to veriff

15 employment income, assets required to close or both. For some other t6 Alt-A products the borrower is not required to provide any information l7 regarding employment income, assets required to close or both. Alt-A

18 products with less verification documentation generally have other I9 compensating factors such as higher credit score or lower loan-to-

20 value requirements.

2T American Home Mortgage Assets Trust 2007-3 Prospectus Supplement at S-52; 22 HarborView 2007-5 Prospectus Supplement aL S-30; HarborView 2007-2

23 Prospectus Supplement at S-33.

24 286. The HarborView 2006-8 Prospectus Supplement represented:

25 Under the Stated Income Verified Asset Documentation type, the 26 mortgage loan application is reviewed to determine that the stated

27 income is reasonable for the borrower's employment and that the

28 assets are consistent with the borrower's income.

l616146vll0t2661 1t2 1 HarborView 2006-8 Prospectus Supplement at 5-61.

2 287. The HarborView 2006-14 Prospectus Supplement represented:

J Under the Stated Income Verified Asset Documentation type, the

4 mortgage loan application is reviewed to determine that the stated 5 income is reasonable for the borrower's employment and that the 6 assets are consistent with the borrower's income. BankUnited obtains 7 from a prospective borrower either a verification of deposit or bank 8 statements for the two-month period immediately before the date of 9 the mortgage loan application or verbal verification of employment. 10 HarborView 2006-14 Prospectus Supplement at 5-66; HarborView 2006-10

11 Prospectus Supplement at 5-64. t2 288. The HarborView 2006-14 Prospectus Supplement represented: l3 lJnder the Stated Income Documentation Program and the No Ratio t4 Program, more emphasis is placed on the prospective borrower's credit

15 score and on the value and adequacy of the mortgaged property as I6 collateral and other assets of the prospective borrower than on income t7 underwriting. The Stated Income Documentation Program requires

18 prospective borrowers to provide information regarding their assets 19 and income. Information regarding assets is verified through written 20 communications. Information regarding income is not verified. The 21 No Ratio Program requires prospective borrowers to provide 22 information regarding their assets, which is then verified through 23 written communications. The No Ratio Program does not require 24 prospective borrowers to provide information regarding their income. 25 Employment is orally verified under both programs.

26 HarborView 2006-14 Prospectus Supplement at S-70.

27 289. The HarborView 2007-l Prospectus Supplement represented:

I6l6146vll0l266t 113 1 Under the Reduced Documentation Program, some underwriting

2 documentation concerning income, employment and asset verification J is waived. Countrywide Home Loans obtains from a prospective 4 borrower either a verification of deposit or bank statements for the

5 two-month period immediately before the date of the mortgage loan

6 application or verbal verification of employment. Since information 7 relating to a prospective borrower's income and employment is not

8 verified, the borrower's debt-to-income ratios are calculated based on 9 the information provided by the borrower in the mortgage loan 10 application. The maximum Loan-to-Value Ratio ranges up to 95%.

11 HarborView 2007-1 Prospectus Supplement at S-32; HarborView 2006-12

I2 Prospectus Supplement at S-70; HarborView 2006-11 Prospectus Supplement at S-

13 37;HarborView 2006-9 Prospectus Supplement at 5-66.

I4 290. The HarborView 2007-4 Prospectus Supplement represented:

15 Under the Reduced Documentation program, the mortgage loan

T6 application is reviewed to determine that the stated income is

t7 reasonable for the borrower's employment. Generally, employment is

18 verified by verbal verification. Paul Financial obtains from a 19 prospective borrower either a verification of deposit or bank 20 statements for a two-month period within 120 days of the date of the

2T mortgage loan application or verbal verification of employment. Since 22 information relating to a prospective borrower's income is not verified,

23 the borrower's debt-to-income ratios are calculated based on the 24 information provided by the borrower in the mortgage loan

25 application.

26 HarborView 2007-4 Prospectus Supplement at 5-36.

27 291. The IndyMac INDX Mortgage Loan Trust 2006-4R35 Prospectus

28 Supplement represented :

l616l46vll01266l n4 I The Stated Income Documentation Program requires prospective

2 borrowers to provide information regarding their assets and income. î J Information regarding a borrower's assets, if applicable, is verified 4 through written communications. Information regarding income is not

5 verified and employment verification may not be written.

6 IndyMac INDX Mortgage Loan Trust 2006-4R35 Prospectus Supplement at 5-68;

7 see IndyMac INDX Mortgage Loan Trust 2006-4R35 Registration Statement, Feb.

8 24, 2006, at S-29.

9 292. The MortgagelT Mortgage Loan Trust 2006-l Prospectus Supplement

10 represented:

11 Generally, under a "stated income/verified assets" program, no t2 verification of a mortgagor's income is undertaken by the origination;

13 however, verification of the mortgagor's assets is obtained. l4 MortgagelT Mortgage Loan Trust Prospectus Supplement at 5-65. 15 293. The MortgagelT Mortgage Loan Jrust 2006-1 Prospectus Supplement t6 represented:

T7 Generally, under both "fulllaltemative" documentation programs, at 18 least one month of income documentation is provided. This t9 documentation is also required to include year-to-date income or prior 20 year income in case the former is not sufficient to establish consistent 2I income.

22 MortgagelT Mortgage Loan Trust 2006-l Prospectus Supplement at 5-65.

23 294. The MortgagelT Mortgage Loan Trust 2006-l Prospectus Supplement 24 represented:

25 The Pay option ARM and Alt-A mortgage loans are generally 26 documented to the requirements of Fannie Mae and Freddie Mac in 27 that the borrower provides the same information on the loan 28 application along with documentation to verift the accuracy of the

1616146v r101266r 115 1 information on the application such as income, assets, other liabilities, 2 etc. Certain non-conforming stated income or stated asset products

J allow for less verification documentation than Fannie Mae or Freddie 4 Mac require. Certain Pay Option ARM and Alt-A products also allow

5 for less verification documentation than Fannie Mae or Freddie Mac

6 requires. For these Pay Option ARM and Alt-A products, the

7 borrower may not be required to verifu employment income, assets

8 required to close or both. For some other Pay option ARM and Alt-A

9 products the borrower is not required to provide any information

10 regarding employment income, assets required to close or both. Pay 1l Option ARM and Alt-A products with less verification documentation

I2 generally have other compensating factors such as higher credit score

13 or lower loan-to-value requirements.

I4 MortgagelT Mortgage Loan Trust 2006-l Prospectus Supplement at 5-65. l5 295. The Wachovia Mortgage Loan Trust, Series 2006-N-Tl Prospectus t6 Supplement represented : I7 Stated Documentation. Under a stated income documentation l8 program, more emphasis is placed on the value and adequacy of the t9 mortgaged property as collateral, credit history and other assets of the 20 borrower than on a verif,red income of the borrower. Although the 2l income is not verified, the originators obtain a telephonic verification 22 of the borrower's employment without reference to income. 23 Employment stability is a critical component in evaluating the

24 borrower's continuing ability to meet obligations. Borrower's assets

25 may or may not be verified.

26 Wachovia Mortgage Loan Trust, Series 2006-ALT1 Prospectus Supplement at S-

27 36.

l6l6l46vll01266l 116 I 296. UNTRUE STATEMENTS AND OMITTED INFORMATIoN: The

2 preceding statements were material at the time they were made, because the quality

Ja of the loans in the mortgage pool directly affects the riskiness of the RMBS 4 investment, and the quality of the loans is dependent upon the underwriting process

5 employed. The preceding statements were untrue at the time they were made,

6 because regardless of the documentation program purportedly employed, the 7 Originators systematically disregarded their underwriting guidelines in order to I increase the volume of mortgages originated, emphasizing quantity of loans rather

9 than the quality of those loans (see supra Section VII.D). Further evidence of this

10 fact is found in, among other things, the surge in delinquencies and defaults shortly

1l after the offerings (see supra Table 5), the huge discrepancy between expected and I2 actual losses (see supra Figure 2),the collapse of the credit ratings (see supra Table

13 4), and the fact that the Originators were engaged in high OTD lending (see supra t4 Table 6).

15 C. Untrue Statements Concerning Loan-to-Value Ratios

I6 297. The American Home Mortgage Assets Trust 2007-3 Prospectus

17 Supplement represented :

18 The Originator sets various maximum loan-to-value ratios based on the l9 loan amount, property type, loan purpose and occupancy of the subject 20 property securing the loan. In general, the Originator requires lower

2l loan-to-value ratios for those loans that are perceived to have a higher

22 risk, such as high loan amounts, loans in which additional cash is

23 being taken out on a refinance transaction or loans on second homes. 24 A lower loan-to-value ratio requires a borrower to have more equity in 25 the property which is a significant additional incentive to the borrower

26 to avoid default on the loan.

27 American Home Mortgage Assets Trust 2007-3 Prospectus Supplement at S-53.

l616146vl/012661 117 1 298. The IndyMac INDX Mortgage Loan Trust 2006-4R35 Prospectus 2 Supplement represented: "Maximum loan-to-value and combined loan-to-value

J ratios and loan amounts are established according to the occupancy type, loan 4 pu{pose, property type, FICO Credit Score, number of previous late mortgage

5 payments and the age of any bankruptcy or foreclosure actions." IndyMac INDX 6 Mortgage Loan Trust 2006-4R35 Prospectus Supplement at 5-68; see IndyMac

7 INDX Mortgage Loan Trust 2006-4R35 Registration Statement, Feb. 24,2006, at

8 s-30.

9 299. The Luminent Mortgage Trust 2007-I Prospectus Supplement 10 represented: "Maximum loan-to-value and combined loan-to-value ratios and loan

11 amounts are established according to the occupancy type, loan purpose, property

t2 type, FICO Credit Score, number of previous late mortgage payments and the age 13 of any bankruptcy or foreclosure actions." Luminent Mortgage Trust 2007-l t4 Prospectus Supplement at S-38.

15 300. The MortgagelT Mortgage Loan Trust 2006-l Prospectus Supplement I6 represented: l7 The appraiser's value conclusion is used to calculate the ratio (loan-to-

18 value) of the loan amount to the value of the property. For loans made

T9 to purchase a property this ratio is based on the lower of the sales price 20 of the property and the appraised value. MortgagelT sets various 2l maximum loan-to-value ratios based on the loan amount, property

22 type, loan purpose and occupancy of the subject property securing the 23 loan. In general, MortgagelT requires lower loan-to-value ratios for

24 those loans that are perceived to have a higher risk, such as high loan

25 amounts, loans in which additional cash is being taken out on a 26 refinance transaction or loans on second homes. A lower loan-to-value

27 ratio requires a borrower to have more equity in the property, which is

28 a significant additional incentive to the borrower to avoid default on

l616l46vll01266l 118 I the loan. In addition, for all conventional loans in which the loan-to- 2 value ratio exceeds 80yo, MortgagelT requires that a private mortgage J insurance company that is approved by Fannie Mae and Freddie Mac 4 insure the loan. Higher loan-to-value ratios require higher coverage

5 levels.

6 MortgagelT Mortgage Loan Trust 2006-I Prospectus Supplement at 5-64-65. 7 301. The Soundview Home Loan Trust 2005-OPT4 Prospectus Supplement

8 represented:

9 Option One recognizes that an appraised value is an opinion and thus, 10 allows for variances to the appraisal based on a review of such 1l appraisal, the loan-to-value ratio ("LTV") and other risk factors. The

t2 maximum variance between the appraisal and a review of the appraisal

13 is limited to (i) l0o/o for LTVs that are less than or equal to 85%, (ii) l4 5Yo for LTVs between 85.01% and 95Yo, and (iii) 3o/o for LTVs over

15 95%.

T6 Soundview Home Loan Trust 2005-oPT4 Prospectus Supplement at S-55.

t7 302, UNTRUE STATEMENTS AND OMITTED INFORMATION: The

18 preceding statements were material at the time they were made because the t9 riskiness of the RMBS investment is directly dependent on the quality of the 20 underwriting process and adequate assessment and limits on loan-to-value ratios (in

2l addition to accurate appraisals) is key to that process. The preceding statements

22 were untrue at the time they were made because the Originators did not adhere to 23 the maximum loan-to-value ratios as represented in the offering document, 24 encouraged inflated appraisals and frequently granted loans with high loan-to-value 25 ratios with no meaningful assessment of the borrower's ability to repay the loan 26 based on the borrower's credit profile (see supra Section VII.D). Further evidence 27 of this fact is found in, among other things, the surge in delinquencies and defaults 28 shortly afler the offerings (see supra Table 5), the huge discrepancy between

16t6146vll01266l 119 1 expected and actual losses þee supra Figure 2), the collapse of the credit ratings 2 (see supra Table 4), and the fact that the Originators were engaged in high OTD

Ja lending (see supra Table 6).

4 D. Untrue Statements Concerning Credit Enhancement

5 303. With regard to credit enhancement, the Nomura [{ELT 2007-l

6 Prospectus Supplement represented:

7 The credit enhancement features described in this prospectus 8 supplement are intended to enhance the likelihood that holders of the 9 Group I Senior Certificates and Group II Senior Certificates will 10 receive regular distributions of interest and principal from amounts

11 received or advanced on the related Mortgage Loans. However, we t2 cannot assure you that the applicable credit enhancement will I3 adequately cover any shortfalls in cash available to distribute to your l4 certificates as a result of delinquencies or defaults on the related

15 Mortgage Loans. If delinquencies or defaults occur on the related l6 Mortgage Loans, neither the servicers nor any other entity will t7 advance scheduled monthly payments of interest and principal on

18 delinquent or defaulted Mortgage Loans if such advances are not likely I9 to be recovered.

20 Nomura I{ELT 2007-I Prospectus Supplement at S-38.

2l 304. The American Home Mortgage Assets Trust 2007-3 Prospectus 22 Supplement represented: "Any decrease in the value of the mortgage properties

23 related to the mortgage loans may result in the allocation of losses which are not 24 covered by credit enhancement to the offered certif,rcates." American Home 25 Mortgage Assets Trust 2007-3 Prospectus Supplement at S-24; see American Home 26 Mortgage Assets Trust 2007-3 Registration Statement, Feb. 6,2007, at 5-16.

27 305. The First Franklin Mortgage Loan Trust 2005-FFH4 Prospectus

28 Supplement represented:

l616l46v1/012661 120 1 The credit enhancement features described in the summary of this 2 prospectus supplement are intended to enhance the likelihood that

Ja holders of the Class A Certificates, and to a limited extent, the holders 4 of the Mezzanine Certificates and the Class B Certificates, will receive

5 regular distributions of interest and principal.

6 First Franklin Mortgage Loan Trust 2005-FFH4 Prospectus Supplement at S-16.

7 306. The HarborView 2006-8 Prospectus Supplement represented:

8 Subordination is designed to provide the holders of certificates with a

9 higher payment priority with protection against losses realized when

10 the remaining unpaid principal balance on a mortgage loan exceeds the

11 amount of proceeds recovered upon the liquidation of that mortgage t2 loan.

13 HarborView 2006-8 Prospectus Supplement at S-10; HarborView 2006-9

l4 Prospectus Supplement at S-10; HarborView 2006-10 Prospectus Supplement at S-

15 10; HarborView 2006-ll Prospectus Supplement at S-8; HarborView 2006-12 t6 Prospectus Supplement at S- 10- 1 1 ; HarborView 2006- 14 Prospectus Supplement at t7 S-11; HarborView 2007-l Prospectus Supplement at S-9; HarborView 2007-2

18 Prospectus Supplement at S-11; HarborView 2007-4 Prospectus Supplement at S- r9 11; HarborView 2007-5 Prospectus Supplement at S-9.

20 307. The IndyMac INDX Mortgage Loan Trust 2006-4R35 Prospectus

2l Supplement represented: "The subordination features of the issuing entity are 22 intended to enhance the likelihood that senior certifìcate holders will receive regular

23 payments of interest and principal, as applicable." IndyMac INDX Mortgage Loan 24 Trust 2006-4R35 Prospectus Supplement at S-25; see IndyMac INDX Mortgage

25 Loan Trust 2006-4R35 Registration Statement, Feb. 24,2006 at S-18.

26 308. The Luminent Mortgage Trust 2007-l Prospectus Supplement

27 represented:

1616146v11012661 121 1 Credit enhancement is intended to reduce the loss caused to holders of

2 the certificates as a result of shortfalls in payments received and losses

Ja realized on the mortgage loans. The credit enhancement for each of the

4 Class I and Class II offered certificates includes subordination, excess

5 interest, overcollateralization and realized loss allocation with respect

6 to the related group of mortgage loans. In addition, substantially all of

7 the mortgage loans with loan-to-value ratios equal to or greater than I 75Yo are covered by one or more primary mortgage insurance policies

9 that, subject to compliance with the terms of the policy, would cover a

10 portion of any losses on a covered loan.

11 Luminent Mortgage Trust 2007-l Prospectus Supplement at 5-6.

T2 309. The Soundview Home Loan Trust 2005-OPT4 Prospectus Supplement

13 represented: t4 The credit enhancement features described in this prospectus

15 supplement are intended to enhance the likelihood that holders of the I6 Class A Certificates and the Mezzanine Certificates, will receive I7 regular distributions of interest and principal. However, we cannot

18 assure you that the applicable credit enhancement will adequately l9 cover any shortfalls in cash available to pay your certificates as a result 20 of delinquencies or defaults on the Mortgage Loans. If delinquencies 2l or defaults occur on the Mortgage Loans, neither the Servicer nor any

22 other entity will advance scheduled monthly payments of interest and 23 principal on delinquent or defaulted Mortgage Loans if such advances 24 are not likely to be recovered.

25 Soundview Home Loan Trust 2005-OPT4 Prospectus Supplement at S-14.

26 310. UNTRUE STATEMENTS AND OMITTED INFORMATION: The

27 preceding statements were material at the time they were made, because WesCorp 28 nearly always purchased the highest rated tranches of the RMBS, and those highly

l616l46vl/0t2661 122 1 rated tranches relied on the credit enhancement, which purportedly afforded 2 protection against financial loss. The preceding statements were untrue at the time J they were made, because, due to the Originators' systematic disregard of 4 underwriting standards, the mortgages in the pools were fatally impaired at the 5 outset and destined to fail (see suprq Section VII.D). This rendered the protection 6 allegedly afforded by the credit enhancement in the highest tranches illusory.

7 Further evidence of the Originators' pervasive disregard of underwriting standards

8 is found in the surge in delinquencies and defaults shortly after the offerings (see 9 supra Table 5); the huge discrepancy between expected and actual losses (see supra 10 Figure 2); the collapse of the credit ratings (see supra Table 4); and the Originators'

11 high OTD lending (see supra Table 6). t2 IX. THE CLAIMS ARE TIMELY

13 311. For actions brought by the NCUA Board as Liquidating Agent, the l4 FCU Act extends the statute of limitations for at least three years from the date of

15 the appointment of the NCUA Board as Conservator or Liquidating Agent. See 12 t6 u.s.c. $ 1787(b)(14XBXi). T7 312. The NCIJA Board placed WesCorp into conservatorship and appointed t8 itself as conservator on March 20, 2009. On October 1,2010, the NCUA Board l9 placed WesCorp in liquidation and appointed itself Liquidating Agent. 20 313. Actions brought under Sections 1l and l2(a)(2) of the Securities Act 2l must be:

22 brought within one year after the discovery of the untrue statement or 23 the omission, or after such discovery should have been made by the 24 exercise of reasonable diligence. . . . In no event shall any such action 25 be brought to enforce a liability created under section 77k or 77t(a)(l) 26 of this title more than three years after the security was bona fìde

27 offered to the public, or under section 771(a)(2) of this title more than 28 three years after the sale.

1616l46vll0t266l 123 1 l5 U.S.C. $ 77m. 2 314. Actions brought under section 25501 of the California Corporate

a J Securities Law must be brought within "five years after the act or transaction 4 constituting the violation or the expiration of two years after the discovery by the

5 plaintiff of the facts constituting the violation, whichever shall first expire." Cal.

6 Corp. Code $ 25506(b). 7 315. As the Federal Reserve Board noted in November 2008, the

8 "deteriorating lending standards" and "the surge in early payment defaults suggests

9 that underwriting . . . deteriorated on dimensions that were less readily apparent to

10 investors." Christopher Mayer et al., The Rise in Mortgage Defautts at 15-1 6; see

11 a/so FSOC Risk Retention Report at 9. t2 316. Accordingly, WesCorp did not discover and could not have discovered 13 the material untrue statements and/or misleading omissions in the Offering t4 Documents more than one year prior to March 20, 2009, the date on which the

15 NCUA Board placed WesCorp into conservatorship. 'WesCorp t6 317. In addition, and/or the NCUA Board, as Liquidating Agent t7 of WesCorp, is or was a member of putative classes in the cases listed below. 18 Therefore, the NCIJA Board's claims are subject to legal tolling of the statute of t9 limitations and statute of repose under the doctrine announced in American Pipe & 20 Construction Co. v. Utah,414 U.S. 538 (1974) ("American Pipe"), and its progeny.

2T Table 7

22 TRADE American CUSIP ISSUING ENTITY BUYER Pipe Tolling American Pipe Tolling DATE Commencement Date Most Recent Update 23 New Jersey Carpenters New Jersey Carpenters 24 Vacation Fund v. The Vacation Fundv. The Royal Royal Bank ofScotland, Bank of Scotland, No. 08- 25 No.08-cv-5093 cv-5093 (S.D.N.Y.) 41t62CAD3 HarborView WesCorp r0/t8/06 (s.D.N.Y.) Consolidated First 26 2006-10 Amended Class Action Opinion & Order Granting Complaint 27 in Part Motion To Filed: May 19,2009 Dismiss Filed: May l9,20ll 28

t616l46vll01266l 124 1 TRADE American Pipe CUSIP ISSUING ENTTTY BUYER Tolling American Pipe Tolling 2 DATE Commencement Date Most Recent Update

J New Jersey Carpenters New Jersey Carpenters 4 VacationFundv. The Vacation Fundv. The Royal Royal Bank ofScotland, Bank of Scotlø¡¿d, No. 08- 5 No. 08-cv-5093 HarborView cv-5093 (S.D.N.Y.) 4l l62GAB8 WesCorp t0/27t06 (s.D.N.Y.) 2006-11 Consolidated First 6 Amended Class Action Opinion & Order Granting Complaint in Part Motion To Dismiss 7 Filed: May 19,2009 Filed: Mav l9.20ll 8 New Jersey Carpenters New Jersey Carpenters Vacation Fundv. The 9 Vacation Fundv. The Royal Royal Bank ofScotland, Bank of Scotlqnd, No. 08- No.08-cv-5093 10 HarborView cv-5093 (S.D.N.Y.) 4tt62DAG4 WesCorp I0lt9t06 (s.D.N.Y.) 2006-12 Consolidated First l1 Amended Class Action Opinion Order Granting Complaint & in Part Motion To Dismiss t2 Filed: May 19,2009 Filed: May l9.20ll 13 New Jersey Carpenters New Jersey Carpenters Vacation Fundv. The Vacation Fundv. The Royal t4 Royal Bank ofScotland, Bank of Scotland, No. 08- No. 08-cv-5093 HarborView cv-5093 (S.D.N.Y.) 15 4tt62DAH2 WesCorp t1/29106 (s.D.N.Y.) 2006-12 Consolidated First Amended Class Action r6 Opinion & Order Granting Complaint in Part Motion To Dismiss Filed: May 19,2009 T7 Filed: May l9,20ll

18 New Jersey Carpenters New Jersey Carpenters Vacation Fundv. The Vacation Fundv. The Royal t9 Royal Bank ofScotland, B ank of S c ot l and, No. 08- HarborView No.08-cv-5093 WesCorp t21506 cv-5093 (S.D.N.Y.) 4l l62NAD9 2006-14 (s.D.N.Y.) 20 Consolidated First Amended Class Action Opinion & Order Granting 2t Complaint in Part Motion To Filed: May 19,2009 Dismiss 22 Filed: May 19.2011

New Jersey Carpenters 23 New Jersey Carpenters Vacqtion Fundv. The Vacation Fundv. The Royal Royal Bank ofScotland, 24 Bank of Scotland, No. 08- HarborView No.08-cv-5093 4l I62NAH0 WesCorp t2/5/06 cv-5093 (S.D.N.Y.) 2006-14 (s.D.N.Y.) 25 Consolidated First Amended Class Action Opinion & Order Granting 26 Complaint in Part Motion To Dismiss Filed: May 19,2009 Filed: May 19. 2011 27

l6l6l46vI/012661 t2s 1 TRADE American Pipe CUSIP ISSUING ENTITY BTIYER Tolling American Pipe Tolling 2 DATE Commencement Date Most Recent Update

J New Jersey Carpenters New Jersey Carpenters 4 Vacation Fundv. Vacetion Fundv. The Harborview Mortgage Royal Bank ofScotland, HarborView Loan, No.08-cv-5093 5 4l l6lXAMS WesCorp 8/18/06 2006-9 No. 08-601451 (N.Y. Sup. (s.D.N.Y.) 6 Ct. Trial Div.) Fifed: May 14,2008 Opinion & Order Granting 7 (Removed to No. 08-5093 in Part Motion To Dismiss (S.D.N.Y.) Filed: May l9,20ll

8 New Jersey Carpenters New Jersey Carpenters Vacation Fund v. The Vacation Fundv. 9 Royal Bank of Scotland, Harborview Mortgage No. 08-cv-5093 HarborView Loan, 10 4l l61XAN6 WesCorp 318/07 (s.D.N.Y.) 2006-9 No. 08-601451 (lt{.Y. Sup. Ct. Trial Div.) 11 Opinion & Order Granting Filed: May 14,2008 in Part Motion To Dismiss (Removed to No. 08-5093 12 (S.D.N.Y.) Filed: May l9,20ll

13 Police and Fire Retirement System of Detroit v. In re Indymac Mortgage- T4 Indymøc, Backed Sec. Litig., No. 09-cv-4583 (S.D.N.Y.) No.09-cv-4583 l5 IndyMac INDX Complaint (s.D.N.Y.) Mortgage Loan Filed: May 14,2009; 45667SAN7 WesCorp rt/28/06 t6 Trust 2006- Wyoming State Treqsurer v. Motion for Class AR35 O linski, No. 09-cv-5933 Certification t7 (s.D.N.Y,) PENDING: December Complaint 10, 2010 18 Filed: June 29,2009 (Consolidated with No. 09- t9 45831S.D.N.Y.))

20 Police and Fire Retirement System of Detroit v. In re Indymac Mortgage- Indymac, 2t Backed Sec. Litig., No. 09-cv-4583 (S.D.N.Y.) No. 09-cv-4583 IndyMac INDX Complaint 22 (s.D.N.Y.) Mortgage Loan Filed: May 14,2009; 456675AP2 WesCorp tt/28/06 Trust 2006- l'[ryoming State Treasurer v. 23 Motion for Class AR35 Olinski, No. 09-cv-593 3 Certification (s.D.N.Y.) 24 PENDING: December Complaint 10, 2010 Filed: June 29,2009 25 (Consolidated with No. 09- 4s83 (S.D.N.Y.)) 26 318. With respect to those RMBS purchases for which the NCUA Board 27 asserts claims under Section 11 of the Securities Act (Claims l-7), the earliest date 28

l616146vll01266l t26 1 they were bona fide offered to the public was August 28, 2006, or not more than 2 three years prior to March 20,2009. Accordingly, the NCUA Board's Section l1

J claims are not time-barred.

4 319. With respect to those RMBS purchases for which the NCUA Board

5 asserts claims under Section l2(a)(2) (Claim 8), the earliest sale was August 1, 6 2006, or not more than three years prior to March 20, 2009. Accordingly, the

7 NCUA Board's Section l2(a)(2) claims are not time-barred.

8 320. With respect to those RMBS purchases for which the NCUA Board

9 asserts claims under state law (Claim 9), the earliest purchase date or offering date 10 with respect to those claims was November 22,2005, or not more than five years

11 prior to March 20,2009. Accordingly, the NCUA Board's state law claims are not t2 time-barred.

13 X. CLAIMS FOR RELIEF I4 FIRST CLAIM FOR RELIEF

15 Section 11 of the Securities Act l6 (Alternative Loan Trust 2006-AR4l T7 321. The NCUA Board realleges paragraphs I through 320 of this l8 Complaint, as though fully set forth here, except those paragraphs specific to the t9 Issuer Defendants other than Nomura Asset Acceptance Corp., or specific to 20 offerings other than the Alternative Loan Trust 2006-AR4 offering. The NCUA

2l Board brings this cause of action pursuant to Section 1 1 of the Securities Act, with 22 respect to WesCorp's purchase of the Alternative Loan Trust 2006-AR4 certificate 23 against Defendant RBS, as underwriter, and against Defendant Nomura Asset 24 Acceptance Corp., as issuer.

25 322. The NCUA Board expressly disclaims and disavows any allegation 26 that could be construed as alleging fraud. 27 323. At the time the registration statement became effective, it (including

28 the prospectus and any prospectus supplements) contained untrue statements and r6t6t46vtt0t266t 127 I omitted facts that were necessary to make the statements made not misleading, as

2 alleged above.

a J 324. The untrue statements and omitted facts were material because a 4 reasonably prudent investor deciding whether to purchase the certificate would 5 have viewed them as important and as substantially altering the total mix of 6 information available, as alleged above.

7 325. WesCorp purchased the certificate pursuant to and traceable to the 8 defective registration statement, as alleged above.

9 326. At the time WesCorp purchased the certificate, it did not know of the 10 untrue statements and omissions contained in the registration statement.

11 327. RBS's and Nomura Asset Acceptance Corp's conduct as alleged above

t2 violated Section 1 l. 13 328. WesCorp and the NCUA Board sustained damages as a result of t4 Defendant RBS's and Defendant Nomura Asset Acceptance Corp.'s violations of

15 Section I 1.

t6 329. WHEREFORE, the NCUA Board requests the Court to enter judgment t7 in its favor against Defendant RBS and Defendant Nomura Asset Acceptance

18 Cotp., jointly and severally, awarding all damages, in an amount to be proven at

t9 trial, costs, and such other relief as the Court deems appropriate and just. 20 SECOND CLAIM FOR RELIEF 21 Section 11 of the Securities Act

22 (American Home Mortsase Assets Trust 2007-31 23 330. The NCUA Board realleges paragraphs I through 320 of this 24 Complaint, as though fully set forth here, except those paragraphs specific to the 25 Issuer Defendants other than American Home Mortgage Assets LLC, or specific to 26 offerings other than the American Home Mortgage Assets Trust 2007-3 offering. 27 33I. The NCUA Board brings this cause of action pursuant to Section 11 of 28 the Securities Act, with respect to WesCorp's purchase of the American Home l6l6146vll0l266t t28 1 Mortgage Assets Trust 2007-3 certificate against Defendant RBS, as underwriter,

2 and against Defendant American Home Mortgage Assets LLC, as the issuer. J 332. The NCUA Board expressly disclaims and disavows any allegation 4 that could be construed as alleging fraud.

5 333. At the time the registration statement became effective, it (including

6 the prospectus and any prospectus supplements) contained untrue statements and

7 omitted facts that were necessary to make the statements made not misleading, âS

8 alleged above.

9 334. The untrue statements and omitted facts were material because a 10 reasonably prudent investor deciding whether to purchase the certificate would 11 have viewed them as important and as substantially altering the total mix of t2 information available, as alleged above.

13 335. WesCorp purchased the certificate pursuant to and traceable to the

14 defective registration statement, as alleged above.

15 336. At the time WesCo.p purchased the certificate, it did not know of the t6 untrue statements and omissions contained in the registration statement.

T7 337. RBS's and American Home Mortgage Assets LLC's conduct as

18 alleged above violated Section 11. I9 338. WesCorp and the NCUA Board sustained damages as a result of 20 Defendant RBS's and Defendant American Home Mortgage Assets LLC's

2t violations of Section 1 1.

22 339. WHEREFORE, the NCUA Board requests the Court to enter judgment 23 in its favor against Defendant RBS and Defendant American Home Mortgage

24 Assets LLc,jointly and severally awarding all damages, in an amount to be proven

25 attrial, costs, and such other relief as the Court deems appropriate and just.

l616146vl/012661 t29 I THIRD CLAIM FOR RELIEF 2 Section 11 of the Securities Act J (HarborView 2007-5. IfarborView 2007-4. HarborView 2007-2" HarborView

4 2007-1 HarborView 2006-1 4" " HarborView 2006-1 2. HarborView 2006-1 1. 5 HarborView 2006-10. HarborView 2006-9, and HarborView 2006-81 6 340. The NCUA Board realleges paragraphs 1 through 320 of this 7 Complaint as though fully set forth here, except those paragraphs specific to the 8 Issuer Defendants other than Greenwich Capital Acceptance, Inc., or specific to 9 offerings other than the HarborView 2007-5, HarborView 2007-4, HarborView 10 2007 -2, HarborView 2007 -1, HarborView 2006-14, HarborView 2006-12,

11 HarborView 2006-11, HarborView 2006-10, HarborView 2006-9, and HarborView

12 2006-8 offerings.

13 341. The NCUA Board brings this cause of action pursuant to Section 1 1 of I4 the Securities Act, with respect to WesCorp's purchases of the HarborVi ew 2007-5, 15 HarborView 2007-4, HarborView 2007-2, HarborView 2007-1, HarborView 2006- l6 14, HarborView 2006-12, HarborView 2006-lI, HarborView 2006-10, t7 HarborView 2006-9, and HarborView 2006-8 certificates against Defendant RBS,

18 as underwriter, and against Defendant Greenwich Capital Acceptance, Inc., as the t9 issuer.

20 342. The NCUA Board expressly disclaims and disavows any allegation 2l that could be construed as alleging fraud. 22 343. At the time the registration statement became effective, it (including

23 the prospectus and any prospectus supplements) contained untrue statements and

24 omitted facts that were necessary to make the statements made not misleading, as

25 alleged above.

26 344. The untrue statements and omitted facts were material because a 27 reasonably prudent investor deciding whether to purchase the certificates would

t6l6146vl/012661 130 I have viewed them as important and as substantially altering the total mix of

2 information available, as alleged above.

J 345. WesCorp purchased the certificates pursuant to and traceable to a 4 defective registration statement, as alleged above.

5 346. At the time WesCorp purchased the certificates, it did not know of the

6 untrue statements and omissions contained in the registration statement.

7 347. RBS's and Greenwich Capital Acceptance, Inc.'s conduct as alleged

8 above violated Section 11.

9 348. WesCorp and the NCUA Board sustained damages as a result of 10 Defendant RBS's and Defendant Greenwich Capital Acceptance, Inc.'s violations ll of Section 1 1. l2 349. WHEREFORE, the NCUA Board requests the Court to enter judgment

13 in its favor against Defendant RBS and Defendant Greenwich Capital Acceptance,

I4 Inc., jointly and severally, awarding all damages, in an amount to be proven at trial, l5 costs, and such other relief as the Court deems appropriate and just. r6 FOURTH CLAIM FOR RELIEF

T7 Section 11 of the Securities Act

18 (IndvMac INDX Morteaee Loan Trust 2006-4R35) t9 350. The NCUA Board realleges paragraphs 1 through 320 of this 20 Complaint, as though fully set forth here, except those paragraphs specific to the 2t Issuer Defendants other than IndyMac MBS, Inc., or specific to offerings other than 22 the IndyMac INDX Mortgage Loan Trust 2006-4R35 offering.

23 351. The NCUA Board brings this cause of action pursuant to Section 1 I of 24 the Securities Act, with respect to WesCo{p's purchase of the IndyMac INDX

25 Mortgage Loan Trust 2006-4R35 certificate against Defendant RBS, as

26 underwriter, and against Defendant IndyMac MBS, Inc., as the issuer. 27 352. The NCLJA Board expressly disclaims and disavows any allegation 28 that could be construed as alleging fraud.

l616146vll01266l l3l 1 353. At the time the registration statement became effective, it (including

2 the prospectus and any prospectus supplements) contained untrue statements and

a J omitted facts that were necessary to make the statements made not misleading, as

4 alleged above.

5 354. The untrue statements and omitted facts were material because a

6 reasonably prudent investor deciding whether to purchase the certificate would 7 have viewed them as important and as substantially altering the total mix of I information available, as alleged above.

9 355. WesCorp purchased the certifìcate pursuant to and traceable to the

10 defective registration statement, as alleged above.

ll 356. At the time WesCorp purchased the certificate, it did not know of the

I2 untrue statements and omissions contained in the registration statement.

13 357. RBS's and IndyMac MBS, Inc.'s conduct as alleged above violated

I4 Section I 1.

15 358. WesCorp and the NCUA Board sustained damages as a result of

l6 Defendant RBS's and Defendant IndyMac MBS, Inc.'s violations of Section 11.

t7 359. WHEREFORE, the NCUA Board requests the Court to enter judgment

r8 in its favor against Defendant RBS and Defendant IndyMac MBS, Inc., jointly and

t9 severally, awarding all damages, in an amount to be proven atlrial, costs, and such

20 other relief as the Court deems appropriate and just. 2l FTFTH CLAIM FOR RELIEF 22 Section 11 of the Securities Act z) (Luminent Mortease Trust 2007-11 24 360. The NCUA Board realleges paragraphs 1 through 320 of this 25 Complaint, as though fully set forth here, except those paragraphs specifìc to the 26 Issuer Defendants other than Lares Asset Securitization, Inc., or specifîc to 27 offerings other than the Luminent Mortgage Trust 2007-l offering.

l616t46vll0l266t t32 1 36I. The NCUA Board brings this cause of action pursuant to Section 1 I of 2 the Securities Act, with respect to V/esCorp's purchase of the Luminent Mortgage a J Trust 2007-l certificate against Defendant RBS, as underwriter, and against

4 Defendant Lares Asset Securitization, Inc., as the issuer.

5 362. The NCUA Board expressly disclaims and disavows any allegation 6 that could be construed as alleging fraud. 7 363. At the time the registration statement became effective, it (including

I the prospectus and any prospectus supplements) contained untrue statements and

9 omitted facts that were necessary to make the statements made not misleading, Íts

10 alleged above.

11 364. The untrue statements and omitted facts were material because a t2 reasonably prudent investor deciding whether to purchase the certifîcate would t3 have viewed them as important and as substantially altering the total mix of T4 information available, as alleged above.

15 365. WesCorp purchased the certificate pursuant to and traceable to the t6 defective registration statement, as alleged above. t7 366. At the time WesCorp purchased the certificate, it did not know of the 18 untrue statements and omissions contained in the registration statement.

19 367. RBS's and Lares Asset Securitization, Inc.'s conduct as alleged above

20 violated Section 1 1.

2T 368. WesCorp and the NCUA Board sustained damages as a result of 22 Defendant RBS's and Defendant Lares Asset Securitization, Inc.'s violations of 23 Section 11.

24 369. WHEREFORE, the NCUA Board requests the Court to enter judgment 25 in its favor against Defendant RBS and Defendant Lares Asset Securitization, Inc., 26 jointly and severally, awarding all damages, in an amount to be proven at triaI,

27 costs, and such other relief as the Court deems appropriate and just.

I616t46v1l01266l t33 1 SIXTH CLAIM FOR RELIEF 2 Section 11 of the Securities Act Ja (Nomura HELT 2007-11 4 370. The NCUA Board realleges paragraphs 1 through 320 of this 5 Complaint, as though fully set forth here, except those paragraphs specific to the 6 Issuer Defendants other than Nomura Home Equity Loan, Inc., or specific to 7 offerings other than the Nomura FIELT 2}}7-Ioffering.

8 37I. The NCUA Board brings this cause of action pursuant to Section 11 of 9 the Securities Act, with respect to WesCorp's purchase of the Nomura F{ELT 2007- 10 1 certificate against Defendant RBS, as underwriter, and against Defendant Nomura

11 Home Equity Loan, Inc., as the issuer.

I2 372. The NCUA Board expressly disclaims and disavows any allegation

13 that could be construed as alleging fraud. t4 373. At the time the registration statement became effective, it (including

15 the prospectus and any prospectus supplements) contained untrue statements and

I6 omitted facts that were necessary to make the statements made not misleading, âs l7 alleged above.

18 374. The untrue statements and omitted facts were material because a T9 reasonably prudent investor deciding whether to purchase the certificate would 20 have viewed them as important and as substantially altering the total mix of 2l information available, as alleged above.

22 375. WesCorp purchased the certificate pursuant to and traceable to the 23 defective registration statement, as alleged above.

24 376. At the time WesCo.p purchased the certificate, it did not know of the 25 untrue statements and omissions contained in the registration statement.

26 377. RBS's and Nomura Home Equity Loan, Inc.'s conduct as alleged 27 above violated Section 11.

l6t6l46vl/012661 134 1 378. WesCorp and the NCUA Board sustained damages as a result of 2 Defendant RBS's and Defendant Nomura Home Equity Loan, Inc.'s violations of

a J Section I 1.

4 379. WHEREFORE, the NCUA Board requests the Court to enter judgment

5 in its favor against Defendant RBS and Defendant Nomura Home Equity Loan,

6 Inc., jointly and severally, awarding all damages, in an amount to be proven at trial,

7 costs, and such other relief as the Court deems appropriate and just. I SEVENTH CLAIM FOR RELIEF

9 Section 11 of the Securities Act

10 (Wachovia Mortsase Loan Trust. Series 2006-ALT1) 1l 380. The NCUA Board realleges paragraphs 1 through 320 of this t2 Complaint, as though fully set forth here, except those paragraphs specific to the

13 Issuer Defendants other than Wachovia Mortgage Loan Trust, LLC, or specific to t4 offerings other than the Wachovia Mortgage Loan Trust, Series 2006-ALTI

15 offering.

l6 3 81 . The NCUA Board brings this cause of action pursuant to Section 1 1 of I7 the Securities Act, with respect to WesCorp's purchase of the Wachovia Mortgage 18 Loan Trust, Series 2006-ALTI certificate against Defendant RBS, as the 19 underwriter, and against Defendant Wachovia Mortgage Loan Trust, LLC, as the 20 issuer.

2l 382. The NCUA Board expressly disclaims and disavows any allegation 22 that could be construed as alleging fraud.

23 383. At the time the registration statement became effective, it (including

24 the prospectus and any prospectus supplements) contained untrue statements and

25 omitted facts that were necessary to make the statements made not misleading, as

26 alleged above.

27 384. The untrue statements and omitted facts were material because a 28 reasonably prudent investor deciding whether to purchase the certificate would

t6t6t46vtt0t266t 135 I have viewed them as important and as substantially altering the total mix of 2 information available, as alleged above.

J 385. WesCorp purchased the certificate pursuant to and traceable to the 4 defective registration statement, as alleged above.

5 386. At the time WesCotp purchased the certificate, it did not know of the 6 untrue statements and omissions contained in the registration statement.

7 387. RBS's and Wachovia Mortgage Loan Trust, LLC's conduct as alleged

8 above violated Section 1 1.

9 388. WesCorp and the NCUA Board sustained damages as a result of 10 Defendant RBS's and Defendant Wachovia Mortgage Loan Trust, LLC's violations

11 of Section 1 1.

I2 389. WHEREFORE, the NCUA Board requests the Court to enter judgment

13 in its favor against Defendant RBS and Defendant Wachovia Mortgage Loan Trust, l4 LLC, jointly and severally, awarding all damages, in an amount to be proven at

15 trial, costs, and such other relief as the Court deems appropriate and just. I6 EIGHTH CLAIM FOR RELIEF l7 Section 12(aX2) of the Securities Act 18 (Alternative Loan Trust 2006-4R4. American Home Mortgage Assets Trust t9 2007-3. HarborView 2007-5, HarborView 2007-4. HarborView 2007-2.

20 Ha rborView 2007-1. HarborView 2006-1 4, Ha rborView 2006- 1 2. HarborView 2l 2006-11. HarborView 2006-L0, HarborView 2006-9. HarborView 2006-8. 22 Loan Trust Luminent 23 2007-1. Nomura HELT 2007-1ì

24 390. The NCUA Board realleges paragraphs 1 through 320 of this 25 Complaint, as though fully set forth here, except those paragraphs specific to the 26 offerings other than Alternative Loan Trust 2006-4R4, American Home Mortgage

27 Assets Trust 2007 -3, HarborVi ew 2007 -5, HarborView 2OO7 -4, HarborVi ew 2007 - 28 2, HarborView 2007-1, HarborView 2006-I4, HarborView 2006-12, HarborView

l616146vl/012661 136 1 2006-ll, HarborView 2006-10, HarborView 2006-9, HarborView 2006-8, 2 IndyMac INDX Mortgage Loan Trust 2006-4R35, Luminent Mortgage Trust 2007- Ja 1, and Nomura FIELT 2}}7-lofferings.

4 39I. The NCUA Board brings this cause of action pursuant to Section 5 l2(a)(2) of the Securities Act, with respect to WesCorp's purchases of the 6 Alternative Loan Trust 2006-4R4, American Home Mortgage Assets Trust 2007-3,

7 HarborVi ew 2007 -5, HarborView 2007 -4, HarborVi ew 2007 -2, HarborView 2007 - 8 l, HarborView 2006 -1 4, HarborView 2006- 12, HarborView 2006- 11, HarborView 9 2006-10, HarborView 2006-9, HarborView 2006-8, IndyMac INDX Mortgage 10 Loan Trust 2006-4R35, Luminent Mortgage Trust 2007-1, Nomura FIELT 2007- 11 lcertifìcates against Defendant RBS, as the underwriter and seller of those t2 certifrcates.

13 392. The NCUA Board expressly disclaims and disavows any allegation I4 that could be construed as alleging fraud.

15 393. Defendant RBS offered to sell and sold the securities to WesCorp

I6 through one or more instrumentalities of interstate commerce (í.e.,telephone, faxes, I7 mails, e-mail, or other means of electronic communication).

18 394. Defendant RBS offered to sell and sold the securities, for its own t9 financial gain, to WesCorp by means of the prospectus andlor prospectus

20 supplements, as alleged above, andlor oral communications related to the 2l prospectuses and/or prospectus supplements.

22 395. The prospectuses andlor prospectus supplements contained untrue

23 statements of material fact and omitted facts that were necessary to make the 24 statements made not misleading, as alleged above.

25 396. The untrue statements of material fact and omitted facts were material 26 because a reasonably prudent investor deciding whether to purchase the certificates 27 would have viewed them as important and as substantially altering the total mix of 28 information available, as alleged above.

t6t6t46vtl0t266t 137 I 397. WesCorp purchased the certificates on the initial offering pursuant to 2 the prospectus and/or prospectus supplements.

a J 398. At the time WesCotp purchased the certificates, it did not know of the 4 untrue statements and omissions contained in the prospectuses and/or prospectus

5 supplements.

6 399. Defendant RBS's conduct as alleged above violated Section l2(a)(2). 7 400. WesCorp and the NCUA Board sustained damages as a result of I Defendant RBS's violations of Section I2(a)(2).

9 401. WHEREFORE, the NCUA Board requests the Court to enter judgment

10 in its favor against Defendant RBS awarding damages in an amount to be proven at

11 trial, costs, and such other relief as the Court deems appropriate and just. I2

t6 I7

18 I9

20 2l

26 2l

1616146vl/012661 138 I NINTH CLAIM FOR RELIEF

2 Violation of the California Corporate Securities Law of 1968

a J Cal. Corp. Code 88 25401 and 25501 4 (Alternative Loan Trust 2006-4R4, American Home Mortgage Assets Trust

5 2007-3, First Franklin Mortgage Loan Trust 2005-FFH4. HarborView 2007-5.

6 HarborView 2007-4. HarborView 2007-2. HarborView 2007-1, HarborView

7 2006- 1 4" HarborView 2006-1 2" HarborView 2006-1 1, Ha rborView 2006- 1 0. I HarborView 2006-9. HarborView 2006-8. IndvMac INDX Mortsage Loan

9 Trust 2006-4R35, Luminent Mortsase Trust 2007-1. MortgagelT Mortsase

10 Loan Trust 2006-1. Nomura HELT 2007-1. Soundview Home Loan Trust

11 200s-oPT4) t2 402. The NCUA Board realleges paragraphs I through 320 of this 13 Complaint, as though fully set forth here, except those paragraphs specific to t4 offerings other than the Alternative Loan Trust 2006-4R4, American Home

15 Mortgage Assets Trust 2007-3, First Franklin Mortgage Loan Trust 2005-FFH4, t6 HarborView 2007-5, HarborView 2007-4, HarborView 2007-2, HarborView 2007-

T7 1, HarborView 2006 -14, HarborView 2006-12, HarborView 2006-1 1, HarborView

18 2006-10, HarborView 2006-9, HarborView 2006-8, IndyMac INDX Mortgage t9 Loan Trust 2006-4R35, Luminent Mortgage Trust 2007-1, MortgagelT Mortgage 20 Loan Trust 2006-1, Nomura FIELT 2007-1, and Soundview Home Loan Trust 2t 2005-OPT4 offerings.

22 403. The NCUA Board brings this cause of action pursuant to Sections 23 2540I and25501 of the California Corporations Code, with respect to'WesCorp's 24 purchases of the Alternative Loan Trust 2006-4R4, American Home Mortgage 25 Assets Trust 2007-3, First Franklin Mortgage Loan Trust 2005-FFH4, HarborView 26 2007-5, HarborView 2007-4, HarborView 2007-2, HarborView 2007-1, 27 HarborView 2006-14, HarborView 2006-12, HarborView 2006-1 l, HarborView 28 2006-10, HarborView 2006-9, HarborView 2006-8, IndyMac INDX Mortgage

1616r46vll01266l r39 I Loan Trust 2006-4R35, Luminent Mortgage Trust 2007-1, MortgagelT Mortgage 2 Loan Trust 2006-1, Nomura FIELT 2007-I, and Soundview Home Loan Trust a J 2005-OPT4 certificales against Defendant RBS, as the seller of those certificates.

4 404. Defendant RBS offered to sell for its own financial gain and sold the 5 certificates to WesCotp by means of written and/or oral communications which 6 included untrue statements of material fact and omissions of material facts that

7 were necessary to make the statements made not misleading, as alleged above.

I 405. The untrue statements and omitted facts were material because a 9 reasonably prudent investor deciding whether to purchase the certificates would 10 have viewed them as important and as substantially altering the total mix of

11 information available, as alleged above. t2 406. Defendant RBS sold the certificates to WesCorp in California.

13 407. Defendant RBS's sales of the certificates violated Cal. Corp. Code

I4 $ 25401. 15 408. WesCorp and the NCUA Board sustained damages as a result of t6 Defendant RBS's violations of Cal. Corp. Code $ 25401, and WesCorp and the

I7 NCUA Board are entitled to the remedies provided by Cal. Corp. Code $ 25501.

T9 WHEREFORE, the NCLJA Board requests the Court to enter judgment in its 20 favor against Defendant RBS awarding damages in an amount to be proven at trial,

2t costs, and such other relief as the Court deems appropriate and just.

23 PRAYER FOR RELIEF

24 WHEREFORE, plaintiff prays for judgment as follows: 25 A. For judgment against the defendants in accordance with the prayers for 26 relief set forth in each of the foregoing Claims for Relief;

27 B. For plaintifls costs of suit; and

28 C. For any other relief the Court deems just and proper.

l616146vll01266l 140 I Dated: July 18, 2011 MARC M. SELTZER 2 BRYAN J.E. CAFORIO a SUSMANI J GODFREY L.L.P. GEORGE A. ZELCS 4 KOREIN TILLERY LLC 5 STEPHEN M. TILLERY DOUGLAS R. SPzuNG 6 PETER H. RACHMANT ROBERT L. KING 7 DIANE MOORE FTEITMAN KOREIN 8 TILLERY LLC !05 North Seventh Street. Suite 3600 St. Louis, Missouri 6310i-16t5 9 Tel: (3 14\ 241-4844 Fax: (314) 10 241-3525 MARK C. HANSEN 11 DAVID C. FREDERICK I2 ffidû[email protected] JOSEPH S. 13 HALL HUEPR. TODD, 4F_r=LQçq, t{4N!EN,' t4 ^EVANS & FIGEL, É.L.L.C.-- Sumner Square 1615 Sti"eet, 15 M N.W." Suite 400 Washinston, D.C. 20036 (202\ t6 Telephon e:' 326-7900 Fax: (202) 326-7999 T7 ROBERT M. F'ENNER General Counsel 18 [email protected] I9 IOHÑ-K.I-AÑÑO Associate General Counsel iohnilÐncua.sov 20 ffiDITT'NION 2l ADMINIISTRATION 1775 Duke Street Alexandria, 22 Virginia 223 I 4-3 428 Tel: (703) s l8-õs40 23

24 By' M. 25 Attorneys for Plaintiff 26 National Credit Union Administration Board 27

l616I46vl/012661 I4l 1 JURY DEMAND

2 Pursuant to Fed. R. Civ. P. 38(b), Plaintiff demands a trial by ju.y of all of

Ja the claims assefted in this Complaint so triable.

4 Dated: July 18,2011 MARC M. SELTZER BRYAN J.E. CAF'ORIO 5 SUSMAN GODFREY L.L.P. 6 GEORGE A. ZELCS KOREIN TILLERY LLC 7 STEPF{EN M. TILLERY I DOUGLAS R. SPRING PETE,R H. RACHMAN 9 ROBERT L. KING DIANE MOORE FIEITMAN 10 KORE,IN TILLERY LLC 505 North Seventh Street. Suite 3600 11 St. Louis, Missouri 6310.1 -1625 Tel: (314\241-4844 t2 Fax: (314) 241-3525 13 MARK C. HANSEN DAVID C. FREDEzuCK t4

15 KELLOGG, HUBER, FIANSEN, TODD, t6 EVANS & FIGEL, P.L.L.C. Sumner Square t7 1615 M Stieet, N.W., Suite 400 Washineton. D.C. 20036 18 Telephoã e:' (202) 326-7 900 Fax: (202) 326-7999 r9 ROBERT M. FENNER 20 General Counsel bobffôncua.sov 2l JMÑK.IÃÑÑO Associate General Counsel 22 ffiDITLINIONiohnifDncua.sov 23 ADMINISTRATION 1775 Duke Street 24 Alexandria. Virsinia 223 l4-3 428 Tel: (703) 518-õ540 25 By: /1. 26 Marc M. Seltzer Attornevs for Plainti ff 27 National Credit Union Administration Board 28

l616l46vll0t266t t42 I Appendix A

2 Table 1

J TRADE 4 CUSIP TSSUING ENTITY DEPOSITOR BUYER PRICE PAII) DATE Nomura Asset 5 Altemative Loan Trust 65538DABr Acceptance WesCorp tU17t06 2006-AR4 $ 12,778,000 Corporation 6 American Home American Home 026935AD8 Mortgage Assets Trust Mortgage Assets WesCorp 6/U07 s30,339,000 7 2007-3 LLC First Franklin Mortgage Financial Asset 32027NXE6 WesCorp lt/30/05 $ r0,000,000 I Loan Trust 2005-FFH4 Securities Com Greenwich Capital 9 4tI62CAD3 HarborView 2006-10 WesCorp I 0/l 8/06 Acceotance. Inc. s90,000,000 Greenwich Capital 10 4l162GAB8 HarborView 2006-l I WesCorp t0/27/06 r8,934,000 Acceptance. Inc. $ Greenwich Capital 11 41t62DAG4 HarborView 2006-12 WesCorp t0/L9t06 Acceotance. Inc. $80,000,000 Greenwich Capital l2 4II62DAIT2 HarborView 2006-12 WesCorp n129/06 l 20,000,000 Acceptance. Inc. $ Greenwich Capital 13 4l162NAD9 HarborView 2006-14 WesCorp t2/5/06 Acceotance. Inc. $60,000,000 t4 Greenwich Capital 4l l62NAH0 HarborView 2006-14 WesCorp t2/5t06 $99,827,000 Acceptance. Inc. 15 Greenwich Capital 4l 16lGAE3 HarborView 2006-8 WesCorp 8/v06 105,693,000 Acceotance- Inc. $ t6 Greenwich Capital 4l 161XAM8 HarborView 2006-9 WesCorp 8/18t06 s100,000,000 Acceptance. Inc. t7 Greenwich Capital 4l I64MAF4 HarborView 2007-l WesCorp 2/t4/07 s48,602,000 Acceptance, Inc. 18 Greenwich Capital 4tt64MAP2 HarborView 2007-1 WesCorp 2/16t07 $56,000,000 Acceptance. Inc. t9 Greenwich Capital 4lt64LAC3 HarborView 2007-2 WesCorp 31U07 s5s,000,000 Acceptance, Inc. 20 Greenwich Capital 41l64YAD3 HarborView 2007-4 WesCorp 5/30t07 Acceotance. Inc. $98,667,000 2l Greenwich Capital 4l l65AAC6 HarborView 2007-5 WesCorp 6t26t07 $55,000,000 Acceþtance. Inc. 22 Greenwich Capital 4l l65AAD4 HarborView 2007-5 WesCorp 6/26t07 1,000,000 Acceotance. Inc. $7 23 IndyMac INDX

45667SAN7 Moftgage Loan Trust IndyMac MBS, Inc. WesCorp tt/28t06 $ r 80,000,000 24 2006-AR35 IndyMac INDX 25 456675APz Mortgago Loan Trust IndyMac MBS, Inc. WesCorp tt/28/06 $20,000,000 2006-AR35 26 Luminent Mortgage Lares Asset 55028CAA3 WesCorp v23/07 Trust 2007-l Securitization, Inc. $35,000,000 27 Luminent Mortgage Lares Asset 55028CA81 WesCorp ll23t07 Trust 2007-l Securitization, Inc. $20,400,000 28

l616146v1lOl266t t43 I MortgagelT Mortgage Greenwich Capital 6l9l5RCL8 WesCorp 2n7t06 $35,710,500 Loan Trust 2006-l Acceptance. Inc. 2 Nomura Home Equity Loan, Inc., Home Nomura Home 65537KA86 WesCorp t/23t07 $40,000,000 J Equity Loan Trust, Equity Loan, Inc. Series 2007-l 4 Nomura Home Equity Loan, Inc., Home Nomura Home 65537KAC4 WesCorp U23t07 $30,000,000 5 Equity Loan Trust, Equity Loan, Inc. Series 2007-l 6 Soundview Home Loan Financial Asset 836l1MJMl WesCorp tU22/05 18,037,000 Trust 2005-OPT4 Securities Coro. $ 7 I

9 Table 2 10

11 ISSUING CUSIP DEPOSITOR BUYER TRADE l2 ENTITY DATE PRICE PAID

13 Greenwich HarborView 4l l61XAN6 Capital 2006-9 WesCorp 318t07 s22,9r0,706 I4 Acceotance. Inc. Greenwich 15 4tt64MAP2 HarborView 2007-I Capital WesCorp 3lr2t07 s6,92r,395 Acceotance- Inc. r6 Lumrnent Lares Asset 55028CAE5 Mortgage Securitization, WesCorp 3^t07 s25,074,560 I7 Trust 2007-1 Inc. Wachovia 18 Mortgage V/achovia 92978GAC3 I9 Loan Trust, Mortgage Loan WesCorp tr/30t06 $44,376,000 Series 2006- Trust, LLC ALTl 20 2l

l616l46vl/O1266l 144 1 Table 3

2 Credit Ratines

J Moodyts S&P Definitions 4 Grade Type Aaa AAA Prime (Maximum 5 Safetv) Aa1 AA+ High Grade, High 6 Aa2 AA Quality Aa3 AA- 7 A1 A+ Upper Medium Grade INVESTMENT GRADE I A2 A A3 A- 9 Baal BBB+ Medium Grade Baa"2 BBB 10 Baa3 BBB- Ba2 BB Non-Investment Grade, 11 Ba3 BB- or Speculative t2 BI B+ Highly Speculative, or B2 B Substantial Risk 13 B3 B- Caa2 CCC+ In Poor Standing t4 SPECULATIVE GRADE Caa3

15 Ca CCC Extremely Speculative CCC- l6 C Mav be in Default D Default I7

18 t9

20 2t

1616l46vll01266l t45 1 Table 4

CNEOTT RATTNGS OF RMBS PURCHASES ONTCTXIT,/RNCNXT J

ORIGINAL ORIGINAL RECENT 4 RECENT CUSIP ISSUERNAME BUYER RATING RATING RATING RATING S&P MOODY'S s&P MOODY'S 5 Alternative Loan AAA Aaa D C 6 65538DABl WesCorp Trust 2006-AR4 t2l4/2006 lt/3012006 8119t2009 9/212010

7 American Home AAA Aaa D C 026935AD8 Mortgage Assets Trust WesCorp 611412007 6/1412007 2/24t20t0 212/2009 8 2001-3 First Franklin AA Aa2 B- C 9 32027NXF,6 Mortgage Loan Trust WesCorp 12/28/2005 t2/22/2005 2005-FFH4 8/4/2009 4/612010 10 AAA Aaa CC C 41t62CAD3 HarborView 2006-10 WesCorp tt/22/2006 l1/2t/2006 l1 sltt/20t1 12/5/20t0 AAA Aaa CC 4l l62GAB8 HarborView 2006-11 WesCorp C t2/22/2006 t2/20t2006 2/16/2010 tt/19/2010 T2 AAA Aaa CCC 4tt62DAG4 HarborView 2006-12 WesCorp C t2/19/2006 t2lt3/2006 7124/2009 12/5/20t0 13 AAA Aaa 41t62DAH2 HarborView 2006-12 WesCorp AA+ Aa3 t4 l2lt9/2006 t2/13/2006 lt/812010 It/23/2008 AAA Aaa 41l62NAD9 HarborView 2006-14 WesCorp CCC C t2/27/2006 t2122/2006 15 8/14/2009 I1/19/20t0 AAA Aaa D 4l l62NAH0 HarborView 2006-14 WesCorp C t6 t2127t2006 t2/2212006 6/2312010 n/19t20t0 AAA Aaa D C 4l l6IGAE3 HarborView 2006-8 WesCorp t7 9/5/2006 8/4/2006 9/24/2010 t2/5/2010 AAA Aaa CCC 4l t6lXAMS HarborView 2006-9 WesCorp C 18 l0/1812006 t0/4/2006 4/1512009 t2/512010 AAA Aaa CCC C 4116IXAN6 HarborView 2006-9 WesCorp t9 10/18/2006 t0/4t2006 8/14/2009 12/5/2010 Aaa NR 4tt64MAF4 HarborView 2007-1 WesCorp NR C 20 2/26/2007 2120/2009 AAA Aaa CCC 4tI64MAP2 HarborView 2007-1 WesCorp C 2I 3/22/2007 3/9/2007 8/t4/2009 12/s/2010 AAA Aaa CCC 4tt64LAC3 HarborView 2007-2 WesCorp C 22 4/3/2007 3/30t2007 8lt4/2009 t2/5/2010 Aaa C 4l l64YAD3 HarborView 2007-4 WesCorp NR NR 23 6/14/2007 12/512010 AAA Aaa 4l l65AAC6 HarborView 2007-5 WesCorp CCC C 24 7/26/2007 7l12/2007 7/24/2009 t2/5/2010 AAA Aaa D 4l l65AAD4 HarborView 2007-5 WesCorp C 25 7126t2007 7/t2/2007 s/25t20t0 t2ls/2010 fndyMac INDX AAA Aaa D 26 45667S4N7 Mortgage Loan Trust WesCorp Caa3 t2/t/2006 tt/29/2006 2006-AR35 3/18t20n r/29t2009 27 IndyMac INDX AAA Aaa D 4566754P2 Mortgage Loan Trusl WesCorp C 12t1t2006 tv29/2006 t2/24/2009 28 2006-AR35 r0/12/2010

l616l46vl/012661 t46 I Cnnorr RAT[{cs oF RMBS Puncn¡sns OnrcnvtilRecenr

2 ORIGINAL ORIGINAL RECENT RECENT CUSIP ISSUERNAME BUYER RATING RATING RATING RATING J S&P MOODY'S s&P MOODY'S

4 Luminent Mortgage AAA Aaa CCC Caa3 55028CAA3 WesCorp Trust 2007-l 2lt/2007 U2s12007 7/24/2009 12/14t2010 5 Luminent Mortgage AAA Aaa CC C 55028C48 I WesCorp Trust 2007-l 2/1/2007 t/2st2007 2/16/2010 12114/2010 6 Luminent Mortgage AAA Aaa D C s5028CAE5 WesCorp Trust 2007-1 2/t/2007 t/2s/2007 612312010 t2ls/20t0 7 MortgagelT Mortgage AAA Aaa D 6l9l5RCL8 WesCorp C Loan Trust 2006-l 31212006 212212006 2/24/2010 t2/9/2010 8 Nomura Home Equity Loan, Inc., Home AAA Aaa D 65537KAB6 WesCorp Ca 9 Equity Loan Trust, 2/2/200'7 t/31/2007 1t/25/2009 9/2t2010 Series 2007-1 10 Nomura Home Equity Loan, Inc., Home AAA Aaa D 65537KAC4 WesCorp C 11 Equity Loan Trust, 21212007 113112007 6/25/2009 9/2/2010 Series 2007-l t2 Soundview Home AA CCC 8361IMJMI Loan Trust 2005- WesCorp NR NR t2/t/2005 8/4/2009 13 OPT4 Wachovia Mortgage AAA Aaa B- Caa2 I4 929',78GAC3 Loan Trust, Series WesCorp 2006-ALTI U3/2007 12127t2006 212120t0 t/14/2010 15

t6 I7

18 t9

l6l6146vll0l266t 147 1

J RATE AT CUT-OFF CUSIP OFFERING I MO. 3 MOS. 6 MOS. 12 DATE FOR MOS. RECENT 4 OFFERING

5 Altemative Loan Trust2006-AR4 42.396/o .27o/o (Dec., 2.69/o 7.32% t7.63% 6 65538DABl Aggregate @.S. Zero. (S-34) (May 2011, p.e) (Feb., p.9) (May, p.9) (Nov., p.9) dated November p.9) 7 30,200ó)

I American Home Mortgage Assets 4.99yo 46.49% 0% t3.900/0 27.47% Trust 2007-3 Zero. (S-40) (Aug., (May 201I, 9 (June, p.l0) (Nov., p.l0) (May, p.l0) Aggregate (June p.10) p.l 1) s,2007) 10

11 American Home 2.62% 52.52% Mortgage Assets 0% 8.63% (Nov., 23.58% Zero. (S-40) (Aug., (May 2011, Trust 2007-3: (June, p. l2) p.t2) p.t2) (May, p.12) l2 Group I-l p.t2)

13 American Home Mortgage Assets t4 9.63% 62.39% Trust 2007-3: 0o/o 23.04% 43.78o/o 026935AD8 Zero. (S-40) (Aug., (May 2011, Group I-2 +Class (June, p.12) (Nov., p.12) (May, p.12) p.12) p.t2) 15 I-24-2 in Group r-2. (s-12) t6 American Home 2.04Yo 4232% Mortgage Assets 0o/o 5.74% (Nov., t7 Zero. (S-40) (Aug., 15.73o/o Trust 2007-3: (June, (May 201l, p. l3) p p 13) (May, p.13) Group II-l 13) p.1 3) 18 t9 American Home 3.72yo Mortgage Assets 0% 42.8s% 20 Zero. (S-40) (Aug., 12.44% 25.5s% Trust 2007-3: (May 201l, (June, p. l3) p.l3) (lrlov., p.l3) (May, p.l3) Group II-2 p.1 3) 2I

22 American Home 5.l6Yo 13.85% Mortgage Assets 0% Zero. (S-40) (Aug., 16.35% I 8.05% 23 Trust 2007-3: (June, (May 201l, p. l4) p.l4) (Nov., p.l4) (May, p.14) Group III p.l4) 24

First Franklin 25 Mortgage Loan 49.430/o Trust 2005-FFH4 .80% 2.16% 3.83% (May, 9.64% (ltlov., (May 201I, 26 Aggregate (P.S. (Dec., p.12) (Feb., p. l2) p.t2) p. l2) dated November p.l3) 30,2005) 27

l616146v1/012661 148 I RATE AT CUT-OFF CUSIP OFFERING I MO. 3 MOS. 6 MOS. 2 DATE FOR 12 MOS. RECENT OFFERING J Fint Franklin Mortgage loan 4 46.370/o Trust 2005-FFH4 .73o/o r38% 2.58o/o 8.66% (Nov., 32027NX86 QtÃay, (May 201I, Group I .Clæs (Dec., p.l3) (Feb., p.13) p.l3) p.l3) p.14) 5 M-2 in Groups I and 2. (S-72) 6 First Franklin Mortgage Loan 54.40% 7 Trust 2005-FFH4 .887o 3.09Yo 5.390/t l0.92Yo 32027N)(E6 iClass (May 201I, Group 2 (Dec., p.14) (Feb., p. 14) (May, p.14) (Nov., p.14) M-2 in Groups I p.l 5) I and 2. (S-72)

9 HarborView . l5% ofthe 2006- I 0 28.99% 10 mortgage loans .t4% .67% I.t2% 5.47% (Apr., Aggregate (P.S. (May 201I, were 30-59 days (N.lov., p.10) (Jan., p.l0) (Apr., p.10) p dated November 10) delinquent. (S-27) p.l 0) 11 10,2006) t2 . I 5% ofthe 32.57% HarborVìew mortgage loans .07% .55% .56% s38% 13 (May 201l, 2006-10 Group I were 30-59 days (Nov., p.l l) (Jan.,p.ll) (Apr., p.l l) (Apr., p.l1) delinquent. (S-27) p 1l) 14

15 Ha¡borView .15% ofthe 2006-10 Group 2 26.97% rClass mortgage loans .t9% .74o/o lA4vo 5.52o/o t6 4l I62CAD3 2A-lB and (May 2011, were 30-59 days (Nov., p.l l) (Jan., p.1 (Apr., p.l (Apr., p.l 2A-lC in Group 2 l) l) l) delinquent. (S-27) p.l l) 17 (s-6)

18 Ha¡borView s0.38% 2006-il (P.S. 38% I -460/" 2.44%o 9.07% 4l Ió2GAB8 Zero. (S-20) (May 201I, 19 dated November (Nov., p.9) (Jan., p.9) (Apr., p.9) (Apr., p.9) 10,2006) p.e) 20

2I HarborView 2006-12 6l.77o/o 0o/o .57% I.4r% 7.37% (lllov., Aggregate (P.S. Zero. (S-28) (May 2011, (Dec., p.l l) (Feb., p. I l) (May, p.l0) p.1 0) 22 dated December p.l l) I l, 2006) 23 63.08% HarborView 0% .46% r.01% 6.88% (Nov., Zero. (S-28) (May 201l, 2006-12 Group I (Dec., p.12) (Feb., p. l3) (May, p.1 l) p.1l) 24 p.t2)

25 Ha¡borView 2006-12 Group 2 61.27o/o 4ll62DAG4 iClass 0o/o .61% r.53% 7.55% (Nov., 2A-lB, Zero. (S-28) (May 201I, 26 4II62DATT2 (Dec., p.12) (Feb., p.13) (May, p.l p.1 2A-2Butd2Ã-2C l) l) p.l2) in Group 2. (S-7) 27

l616l46vll01266l t49 I RÀTE AT CUT-OFF CUSIP OFFERING I MO. 3 MOS. 6 MOS. 12 2 DATE FOR MOS. RECENT OFFERING Ja HarborView 2006-t4 36.66% 4 .t7% .78% I 97% 8.610/o Aggregate Zero. (3-26) (May 201l, (Jan.,p.ll) (Mar., p.l0) (June, p.10) (Dec., p.l0) (December 20, p.1l) 5 2006)

37.01% HarborView .20o/o .39% 6.45% 6 Zero. (3-26) (May 201l, 2006-14 Group I (Jan., p.l3) (Mar., p.l2) (June, p. l2) (Dec., p. t2) p.12) 7 HarborView 2006-14 Group 2 36.54o/" 4l I62NAD9 *Class .16% .90o/o 2.360/" 9.29Vo I 2A-lB and Zero. (5-26) (May 4l I62NAH0 (Jan., p.l3) (Mar., p.l2) (June, p.12) (Dec., p.l2) 201I, 2A-2C in Group p.l2) 9 2. (S-7) 2.78Yo of ihe 10 mortgage loans were HarborView 30-59 days 5.68% 46.43% 11 2006-8 Aggregate delinquent in 5.59% 5.48o/o 9.16% (Alg., (Nov., (May 201I, (P.S. dated payment, and (Sept., p.1 1) (Feb., p.l0) p.l0) p.1 l) p l2 August 28, 2006) 0.48% rvere 60-89 l0) days delinquent in payment. 13 ts-24ì 2.78o/o of Ihe 14 mortgage loans were 30-59 days 4.t2% 45.29% 15 HarborView delinquent in 3.78% 3.40% 8.1l% (Aug., (Nov., (May 201l, 2006-8 Group I payment, and (Sept., p. l3) (Feb., p. l2) p.l2) p 13) 0.48% were 60-89 p.ll) I6 days delinquent in payment. t7 (s-24) 2.78o/o of the mortgage loans 18 were HarborView 30-59 days 6.50o/o 47.r3% 2006-8 Group 2 delinquent in 6.slYo 6.54o/o 9.75o/o (Aug, T9 4l l61GAE3 (Nov., *Class 2A-lC in payment, (Sept., p. (May 201I, and l3) p.l3) (Feb., p. l2) p.l2) Group 2. (S-7) 0.48% rvere 60-89 p.l l) 20 days delinquent in payment. 2l (s-24) HarborView 6t.34% 22 2006-9 Aggregate 0% .3lo/o .99o/o 5.32Yo Zero. (5-26) (May 201l, (P S dated (Oct., p.l0) (Dec., p.l0) (Mar., p.l0) (Sept., p. l0) Ocrober 3, 2006) p.l0) ¿J

58.93% HarborView 0% .31% .67% 4.96o/n 24 Zero. (3-26) (May 2006-9 Group I (Oct., p.l l) (Dec., p.ll) (Mar., p.1l) (Sept.,p.ll) 2011, p.1s) 25 HarborView 200ó-9 Group 2 62.52Vo 26 4l t6lXAMS +Class 0% .3lo/o l.l4a/o 5.50% 2A-lCl Zero. (5-26) (May 201I, 4l l6lxAN6 (Oct., p.12) (Dec., p.l2) (Mar., p.l2) (Sept., p.l2) and 2A-l82 in p.l9) 27 Group 2. (S-7)

1616146vl101266l 150 1 RATE AT CUT-OFF CUSIP OFFERING t Mo. 3 MOS. 6 MOS. 12 MOS. RECf,,NT 2 DATE FOR OFFERING

J 0.04% ofthe mortgage loans 4 were at least 30 days but less than HarborView 60 days delinquent 62.0t% 2007-l Aggregate .32Vr t.08% 2.88% (Aug., 12.86% 5 in payment, and (May 2011, (P.S. dated March (Mar., p.l0) (May, p.10) p.10) (Feb., p.10) 0.03% were 60 7,2007) p.10) 6 days or more delinquent in payment. 7 ls-24)

0.04% of the 8 mortgage loans wefe at least 30 HarborView days but less than 9 2007-l Group I 60 days delinquent 57.52% .25% l.05Yo 2.32e/o(Aug., t0.839r'o 4n64MAF4 B-l in in payment, and (May 2011, 'Class (Mar., p.l l) (May, p.l l) p.l l) (Feb., p. I l) 10 both loan groups. 0.03% were 60 p.l l) (s-6) days or more delinquent in 11 payment. (s-24) 12 0.04% ofthe mortgage loans 13 were at least 30 HarborView days but less than 2007-l Group 2 60 days delinquent 65.t7% t4 4tI64MAP2 tClass 2A-lC2 in .37% Ll0o/o 3.29%o(Aug., 14.29% in payment, and (May 201I, 4ll64MAF4 Group 2 and Class (Mar., p.ll) (May, p.l l) p.l l) (Feb., p.l 0.03% were 60 l) p.l B-l in both l) days or more 15 groups. (5-6) delinquent in payment. l6 (s-24) l7 .640/0 of the HarborView mortgage loans 39.27% 18 2007-2 Aggregate r.400/o 2.84% 6.45o/o 16.00% were 30 days or (May 201l, (P.S. dated March (Apr., p.l0) (June, p. l0) (Sept., p. l0) (Mar., p.l0) more delinquent. 29,2007) p.l0) I9 (s-2s)

.64o/o of The 21 mortgage loans 37.72% HarborView .84Y. t.t8% 3.t5% 10.64% were 30 days or (May 201I, 2007-2 Group I (Apr., p.l l) (June, p. I 1) (Sept., p. I l) (Mar., p.l l) 22 more delinquent. p.1 1) (s-2s) 23

24 .64Yoof lhe HarborView mortgage loans 39.94% 2007-2Grory2 r.63% 3.45o/o 7.660/o 17.93o/o 4tI64LAC3 were 30 days or (May 201I, 25 *Class 2A-lB in (Apr., p.l l) (June,p.ll) (sept., p.l l) (Mar., p.l more delinquent. l) p.l Group 2. (S-7) l) (s-25) 26

t6L6l46vll01266I 151 I RATE AT CUT-OFF CUSIP OFFERING r Mo. 3 MOS. 6 MOS. 2 DATE FOR t2 MOS. RECENT OFFERING Ja

.26Yo of the 4 HarborView mortgage loans 2.62% 29.24% 2007-4 Aggregate .69% 5.90% (Nov., 14.04% were 30 days or (Aug, (May 201I, (P.S. dated June (June, p.1 I p.l0) (May, more ) p.l0) 5 t3,2007) delinquent. p.10) p.10) (s-26) 6

7 .26%o of Íhe mortgage loans .77o/o 24.24% HarborView .44% 1.73% (Nov., 4.88% were 30 days or (Aug., (May 201l, I 2007-4 Group I (June, p. 12) p ll) (May, p.l l) more delinquent p.l l) p.ll) (s-26) 9

10 .26Yo of the Ha¡borView mortgage loans 331% 31.52% 11 2007-4 Group 2 .78% 7.45% (Nov., t7.40% 41 l64YAD3 *Class were 30 days or (Aug., (May 201I, 2A-3 in (June, p.l2) p.ll) (May, p.l1) more delinquent. p.l l) Group 2 (S-7) p.l l) t2 (s-26)

13 HarborView 2007-5 Aggregate 14 *Classes 35.23% 4l l65AAC6 A-lB 0% .55o/o 1.88% 7A2% Zero. (S-23) (May 201I, 4l l65AA_D[ and A-lC (P.S. (July, p. I 0) (Sept., p.l0) (Dec., p.9) (June, p.9) p.e) 15 dated July I l, 2007) t6 3032% HarborView 0% 0.00o/o .32% 3.31% Zero. (S-23) (May 201l, 2007-5 Group I (Iuly, p.1 l) (Sept., p. I l) (Dec., p.l0) (June, p.l0) l7 p l0) 35.71% HarborView 0% .60% 2.01% 7.75% 18 Zero. (S-23) (May 201l, 2007-5 Group 2 (July, p. I l) (Sept., p. I t) (Dec., p.l0) (June, p.l0) p.l0)

t9 IndyMac INDX Mortgage Loan 43.06% Trust 2006-4R35 242% 3.76% 6.42% t6.16% 20 Zero. (S-36) (May 201l, Aggregate (P.S. (Dec., p.l0) (Feb., p. I 0) (May, p.l0) (Nov., p.l0) dated November p.l0) 21 29,2006)

22 IndyMac INDX 44.60% Mortgage Loan 1.67% 2.99% 6.16% ts.s8% Zero. (S-36) (May 201l, 23 Trust 2006-4R35 (Dec., p.l l) (Feb., p.1l) (May, p.l l) (Nov., p.l l) Group I p.l5) 24

25 IndyMac INDX Mortgage Loan Trust 2006-4R35 4l.99Vo 26 45667S4N7 *Classes 2.89% 4.25% 6.58% 16.54% Group 2 Zero. (5-36) (May 201I, 4s667SAP2 (Dec., p.l2) (Feb., p.12) (May, p.12) (Nov., p.l2) 2-A-1A,2-A-3A p.20) 27 and 2-A-38 in Group 2. (S-l 1) 28

l616l46vll0l266l r52 1 RATE AT CUT.OFF CUSIP OFFERING I MO. 3 MOS. 6 MOS. 2 DATE FOR 12 MOS. RECENT OFFERING J

4 Luminent Mortgage Trust 4s.39% 1.24% 2.s6% 4.82% r1.32% 2007-l Aggregate Zero. (S-24) (May 2011, (Feb., p. I l) (Apr., p.l1) (July, p. I 1) (Jan., p. I l) 5 (P.S. dated p.1 1) Ianuary 24,2007) 6

7 Luminent Mortgage Trust 43.t9% 55028CAA3 2007-l Group I t.t4% 254Yo 4.32% 9.95% *Classes Znro. (S-24) (May 2011, 8 55028CABl I-A-l (Feb., p.13) (Apr., p.13) (July, p.13) (Jan., p.l3) and I-A-2 in p.t2) Group l. (S-7) 9

10 Luminent Mortgage Trust 49.t1% 1.40% 2.590/o s.55% 13.400/o 1l 55028CAE5 2007-l Group 2 Zero. (S-24) (May 2011, (Feb., p.13) (Apr., p.l3) (July, p. 13) (Jan., p.l3) rClass II-A-3 in p.t2) t2 Group 2. (S-7)

MortgagelT t4 Mortgage Loan 24.42% Trust 2006-l .17% 1.89o/o 3.03% (Aug., 5.7sYo (May Aggregate (P.S. (Mar., p.l3) p. 2011, 15 (May, p.l3) l3) (Feb., p.13) dated February p.l3) t7,2006) T6

17 .27Yo of The MortgagelT mortgage loans 18.t2% 18 Mortgage Loan ïYo 1.37% 1.33% (Aug., 2.t8% were 30 days or (May 201l, Trust 2006-l (Mar., p.14) (May, p.14) p 14) (Feb., p. more delinquent. l4) Group l-Al p 15) 19 (s-3 l )

.26%o of the 2t MortgagelT mortgage loans 23.14% Mortgage Loan .27% 2.14% 435%(Aug., 8.05Y. were 30 days or (May Trust 2006-l (Mar., p.14) (May, p.14) p 201l, more 14) (Feb., p.14) 22 Group l-42 delinquent. p.l s) (s-47) 23

24 MortgagelT .34%o of the Mortgage Loan mortgage loans 3t.62% 25 Trust 2006-l .l\Yo r.30% 2.80% (Aug., 5.gIVo 619l5RCL8 *Class were 30 days or (May Group 2 2- (Mar., p.l5) (May, p.l5) p.ls) (Feb., 201I, more delinquent. p.l5) A-lC in Group 2. p.l4) (s-54) 26 (s-8)

l616146vl101266l 153 I RATE AT CUT-OFF CUSIP OFFERING I MO. 3 MOS. 6 MOS. 12 MOS. RECENT 2 DATE FOR OFFERING J Nomura Home Equity Loan, Inc., 4 Home Equity 46.39% .t6% 5.05% 1t.90% 24.0r% Loan Trust, Series Zero. (S-57) (May 2011, (Feb., p. l3) (Apr., p.13) (July, p.13) (Jan., p. 2007-l Aggregate l3) 5 p.l 3) (P.S. dated Ianuary 29,2007) 6 Nomura Home 7 Equity Loan, Inc., Home Equity 47.53o/o 65537KA86 Loan Trust Series .t9% 7.40% 14.260/o 27.54o/o Zero. (S-57) (May 201I, I 65537KAC4 2007-l Group 2 (Feb., p. 14) (Apr., p.l5) (July, p. ls) (Jan., p. l5) tClasses 2-A-lA p.14) and 2-A-lB in 9 Group 2. (S-i)

Soundview Home 11 Loan Trust 2005- 36.08% OPT4 Aggregate .t2% t.87% .04% 8.51% (Nov., Zero. (37) (May 201I, (P.S. dated (Dec., p.12) (Feb., p.12) (May, p.l1) p.l 1) 12 November 22, p.12) 2005) 13

t4 Soundview Home Loan Trust 2005- 34.35o/o 15 OPT4 Group I .05% 2.13o/o 3.340/o 9.3% 8361IMJMl Zerc. (May 2011, *Classes M-l and Q7) (Dec., p.l3) (Feb., p.l3) (May, p.12) (Nov., p.l2) p.13) M-2 in Groups I t6 and 2. (5-68) t7

Soundview Home 18 Loan Trust 2005- 37.66Yo OPT4 Group 2 .2% l.60/o 2.72o/o 7.71% (Nov., 8361IMJMr *Classes Zero. (37\ (May 201l, M-l a¡rd @ec., p.la) (Feb., p.14) (May, p.13) p.13) t9 p.14) M-2 in Groups I and 2. (5-68) 20 2t Wachovia Mortgage Loan 22 3t95% Trust, Series .94o/o 2.r3yo 4.r4yo r0.u% 92978G^C3 Zero. (S-32) (May 2011, 2006-ALTI (P.S. (Jan., p.l4) (Mæ., p.14) (June, p.l4) (Dec., p.14) 23 dated December p.t2) 19,2006) 24

1616146vll01266l t54 1

2 OTD% OTD% OTD % J Originator Name 2005 2006 2007 4 American Home Mortgage Corp. 91.9 62.4 American Home Mortgage 5 Investment Corp. 100 100 100 Countrywide Home Loans, Inc. 6 98.5 96.5 98.4 First Federal Bank of California 0 20.6 54.3 7 First National Bank of Nevada 88.0 79.8 89.4 8 IndyMac Bank, F.S.B. 81.1 87.7 82.8 9 Kay-Co Investment Inc. dba Pro30 Funding 99.4

10 Metrocities Mortgage, LLC 99.96 100 100

11 MortgagelT,Inc. 55.5 98.8 100 Option One Mortgage Corporation I2 92.2 72.7 58.2 Paul Financial, LLC 8s.2 83.4 99.1 13 Residential Mortgage Capital 99.9 r00 100 I4

15 I6 t7 l8 t9

20 2l

1616r46vll01266l 155 1

J TRADE American CUSIP ISSUING ENTITY BUYER Pipe Tolling American Pipe Tolling DATE Commencement Date Latest Update 4

5 Nev Jersey Carpenters I/acation New Jersey Carpenters I/ac(rtion Ftmd v. The Royal Bank of 6 Fund v. The Royal Bank of Scotland, Scotland, 4TI62CAD3 No. 08-cv-5093 (S.D.N.Y.) No. 08-cv-5093 (S.D.N.Y.) HarborView 2006-10 WesCorp I 0/1 8/06 Consolidated First Amended Class 7 Action Complaint Opinion & Order Granting in Part Filed: ùIay 19,2009 Motion To Dismiss Filed: ùfav 19.2011 8

New Jersey Carpenters Vacation 9 Netv Jersey Carpenters Yacation Fund v. The Royal Bank of Fund v. The Royal Bank of Scotland, Scotland, No. 08-cv-5093 (S.D.N.Y.) 10 41 162GAB8 HarborView 2006-ll WesCorp t0/27/06 No. 08-cv-5093 (S.D.N.Y.) Consolidated First Amended Class Action Complaint Opinion & Order Granting in Part l1 Filed: rllay 19,2009 Motion To Dismiss Filed: ùlay t9.20ll T2 Nev, Jersey Carpenters Vacation Netv Jersey Carpenters Vacation Fund v. The Royal Bank of 13 Fund v. The Royal Bank oJ Scotland, Scotland, No. 08-cv-5093 (S.D.N.Y.) 4n62D^G4 HarborView 2006-12 WesCorp t0/19t06 No. 08-cv-5093 (S.D.N.Y.) t4 Consolidated First Amended Class Action Complaint Opinion & Order Granting in Part Filed: ùtay 19,2009 Motion To Dismiss 15 Filed: Mav 19.20ll

l6 New Jersey Carpenters Vacation New Jersey Carpenters Vacation Fund v. The Royal Bank of Fund v. The Royal Bank ofScotland, Scotland, No. 08-cv-5093 (S.D.N.Y.) 17 4lt62DAHz HarborVierv 2006-12 WesCorp Il/29/06 No. 08-cv-5093 (S.D.N.Y.) Consolidated First Amended Class Action Complaint Opinion & Order Part 18 Cranting in Filed: rlfay 19,2009 Motion To Dismiss Filed: May f 9. 201I T9 New Jersey Carpenters Vacation 20 New Jersey Carpenters I/qcation Fund v. The Royal Bank of Fund v. The Royal Bank of Scotlønd, Scotland, HarborView 2006-14 WesCorp t2/506 4l 162NAD9 No. 08-cv-5093 (S.D.N.Y.) No. 08-cv-5093 (S.D.N.Y.) 21 Consolidated First Amended Class Action Complaint Opinion & Order Granting in Part Filed: ùIay 19,2009 Motion To Dismiss 22 Filed: ùlay f9.2011

23 Netv Jersey Carpentels Yacdtion Nev Jersey Carpenters I/acation Fund v. The Royal Bank of Fundv. The Royal Bank ofScotland, Scotland, 24 4l l62NAH0 HarborView 2006-14 WesCorp t2/5t06 No. 08-cv-5093 (S.D.N.Y.) No. 08-cv-5093 (S.D.N.Y.) Consolidated First Amended Class 25 Action Complaint Opinion & Order Granting in ParÎ Filed: ùIay 19,2009 Motion To Dismiss Filed: ùIav 19.201f 26

1616146v11012661 156 1 TRADE American cusIP ISSUING ENTITY BUYER Pipe Tolling American Pipe Tolting 2 DATE Commencement Date Latest Update

J New Jersey Carpenters Vacation New Jersey Carpenters Vacation 4 Fundv. Harbomiew Mortgage Loan, Fund v. The Royal Bank of 41l6lXAM8 HarborView 2006-9 WesCorp 8/l 8/06 No.08-601451(N.Y. Sup. Ct. Trial Scotland, Div.) No. 08-cv-5093 (S.D.N.Y.) 5 Filed: May 14,2008 Opinion & Order Granting in Part (Removed to No. 08-5093 Motion To Dismiss (S.D.N,Y.) 6 Filed: ùfav 19.20ff

New Jersey Carpenters New Jersey Carpenters Ydcation Vacation 7 Fund v. The Royal Bank Fundv. Harborvieut Mortgage Loan, of Scotland, No. 08-cv-5093 No. 08-601451 (N.Y. Sup. Cr. Trial 4l 16lxAN6 HarborView 2006-9 WesCorp 3/8/07 (s.D.N.Y.) 8 Div.) Filed: May 14,2008 Opinion & Order Granting in Part (Removed to No. 08-5093 9 (s.D.N.Y.) Motion To Dismiss Filed: May l9,20ll 10 Police and Fire Retirement System of Detroit v. Indymac, 11 No. 09-cv-4583 (S.D.N.Y.) In re Indymac Mortgage-Backed IndyMac INDX Complaint Sec. Litig., No. (S.D.N.Y.) t2 45667SAN7 Mortgage Loan Trusl WesCorp n/28t06 Filed: ùIay 14,2009 09-cv-4583 2006-AR35 Wyoming State Treasurer v. Olinski, No. 09-cv-5933 (S.D.N.Y.) Motion for Class Certification 13 Complaint PENDING: December 10,20f 0 Filed: June 29,2009 (Consolidated with No. 09-4583 l4 (s.D.N.Y.))

15 Police and Fire Retirement System of Detroit v. [ndymac, I6 No. 09-cv-4583 (S.D.N.Y.) In re Indymac lvlortgage-Backed IndyMac INDX Complaint Sec. Litig., 456675AP2 Mortgage Loan Trust WesCorp 11t28t06 Filed: May 14,2009 No. 09-cv-4583 (S.D.N.Y.) t7 2006-AR35 Wyoming State Treayrer v. Olinski, No. 09-cv-5933 (S.D.N.Y.) Motion for Class Certification Complaint PENDING: December 10,2010 18 Filed: June 29,2009 (Consolidated with No. 09-4583 l9 IS,D.N.Y.))

20 2I

l6l6146vll012661 t57 1

2 Fieure I

6 Originator (e.9,, Arnericair Home, Countrywidg WaMu) 7 Loan Servicer (collects monthly I payments from Borrowers)

9 Bonowers tnake Sponsor 10 monthly mortgage p6ymenls Sponsor transfers 1l loans to Depositor Depositor I Mortgage poyuents to t2 flow Depositot cteates Issuíng Entity and I;suingEntþ trqnsfets mortgqges to Isning Enttry. Dep$itor frl es registration t3 stalement and prospecfiß wíth SEC Issuing Entity (a.g., HarborView 2006-12, HarborView 20074, Issuing Enliþ pays to fimds Soundview Home Loan Trust 2005- l4 fwesto¡s ln order of sentority oPT4) class qfcertifieates Issuing Trust issues marlgqge l5 pas s thr oagh c er t if I eate s t6 t7 Investors 18 Owners ofsenior tranches paid first Owners ofjunior tranches paid after more senior tranches are paid t9

l6l6l46vl/012661 158 I Fisure 2

Deal Name ABSNet Deal ld Vlonth Actual Gross Losses Expected Gross Losses J Alternative Loan Trust 200GAR4 39723 T S ssr.osz Alternative Loan Trust 200GAR4 39723 2 S soz,sos 4 Alternative Loan Trust 20064R4 39723 3 S r.9or.772 S r,051.631 Alternative Loan Trust 200GAR4 39723 4 5 t,4il,6os S r. r4g,25s 5 Alternative Loan Trust 200GAR4 39723 5 S 7.31o.8s5 S r,2s3,sts Alternative Loan Trust 20064R4 39723 6 S z.31o,8ss 5 r,368,137 6 Alternative Loan Trust 200GAR4 39723 7 S rLzso,67r S r.492.899 Alternative Loan Trust 200GAR4 39722 I 5 24,!81,,875 $ r,628,633 7 Alternative Loan Trust 200G.4R4 39723 5 28.385.840 S r,776,228 Alternative Loan Trust 200GAR4 39722 t-( S +s,s6o,7r4 S r.936.629 I Alternative Loan Trust 200GAR4 39723 77 S ¿7,763,113 S z,rro,B4z Alternative Loan Trust 200GAR4 39723 12 S s0,115.861 5 2,299,928 9 s60,ooo,ooo

10 sso,ooo,ooo

S4o,ooo,ooo 11 s30,ooo,ooo 12 ActualCum. Gross Losses s20,ooo,ooo '* - * Expected Gross Losses - 13 s10,ooo,ooo t4 s-

15 5(1O,OOO,oOO) Deal Name I6 ABSNet Deal ld Month Actual Gross Losses Expected Gross Losses qmerican Home MortsaseAssets Trust 2007-3 4770t s 5 2,232.6t9 \meri ca n Home Mortgase Assets Trust 2007-3 41708 2 s 20.399.980 5 2.439.s67 17 American Home Mortgage Assets Trust 2007-3 47708 S ¿g.464.s49 5 2,663.093 American Home Mortgage Assets Trust 2007-3 4T7OE 4 S 26.378.883 S 2,907,778 18 American Home Mortgage Assets Trust 2007-3 41708 $ 103.617.642 S s, 174,333 American Home MortgageAssets Trust 2OO7-3 41708 S 130,873,934 S s,464,s9s t9 Amer¡ ca n Home Mortgage Assets Trust 2007-3 4r708 S 140,742,932 S ¡,780,s36 American Home Mortsaee Assets Trust 2007-3 41708 S 163,947,101, s 4.124.262 20 Amer¡can Home Mortgage Assets Trust 2007-3 417c,A S 187,001,,069 S ¿.498.024 Amer¡can Home Mortsase Assets Trust 2007-3 41708 l-c S 185.965.334 S ¿.9o4.21s 2l American Home Mortgage Assets Trust 2OO7-3 47708 11, S 206.785.s30 S s.34s.381 Ameri ca n Home Mortgage Assets Trust 2007-3 41704 t2 S 226.6os.69r S s,824,2:-3 22 250000000

23 200000000

24 150000000

Actual Cum. Gross LÕsses 100000000 25 -- .- -. Expected Gross Losses - 26 50000000

27 10 'L2 a4 28

1616l46vllO1266l r59 1 Deal Name ABSNet Deal ld Month Actual Gross Losses Expected Gross Losses First Franklin Mortgage Loan Trust 2005-FFH4 36028 I s 47s7,r3a S s.o*g.z7* 2 First Franklin Mortsase Loan Trust 2005-FFHr 36028 2 S o,or7,o7g S s,ss*,7æ First Franklin Mortsaee Loan Trust 2005-FFHr 3602E g.3s7.1so o,o7o,s76 I S S J First Franklin Mortgage Loan Trust 2005-FFHI 36028 4 S 10,723,986 S 0.628.33s First Franklin Mortgage Loan Trust 2005-FFHr 36028 5 s 11,705.031 S 2,23s,956 4 First Franklin Mortsase Loan Trust 2005-FFHI 36028 6 S r7.42s.2o9 5 2,897,616 First Franklin Mortease Loan Trust 2005-FFHI 36028 5 20,7s6,7r4 S s.6r7.Bæ 5 First Franklin Mortsase Loan Trust 2005-FFH4 36028 S z7,24s.oss S g,M1ßæ First Franklin Mortsase Loan Trust 2005-FFH4 36028 S :r,7o7.7r2 S ro.2s3.337 6 First Franklin Mortgage Loan Trust 2005-FFH4 36028 1C S ¡s,49&9oi- S u.r79.2s9 First Franklin Mortsase Loan Trust 2005-FFH4 36028 11 S E8,25s,2o7 5 tz,r8r',906 7 First Franklin Mortsase Loan Trust 2005-FFH4 36028 L2 5 q+.937.6t2 S re,276,4t3 50000000 I 4soooooo 40000000 9 35000000 30000000 10 25000000 Actual Cum. Gross Losses 20000000 * -- * 11 Expected Gross Losses lsoooooo - t2 L0000000 5000000

I4 Deal Name ABSNet Deal ld Month Actual Gross Losses Expected Gross Losses HarborView 2006-8 3478'j T 5 2.969.076 15 HarborView 20O6-8 3478i 2 S B44.s1o S 3,242,974 Harborview 2OOG8 38787 3 S 2.248.223 S 3.s41sæ I6 HarborView 2006-8 3478t 4 S 3.19s.493 S 3.866.962 HarborView 2006-8 34747 5 S 5.5o3.14s S ¿.22t.44s HarborView 2OO6-8 l7 387a7 Ê S t.929.L4r S 4.æ7.4s6 Harborview 2006-8 38787 s 6.810.649 S 5.o27.6rs Harborview 2006-8 38787 I s 8,830.O28 S 5.484.726 18 HarborView 20O6-8 387a7 9 S s,472.o44 S s,ggt,7ao HarborView 2OO6-8 38787 10 s 10.903.395 S o, s21,962 r9 larborview 2006-8 38787 t7 s 12.Os8.277 s 7,108,6s4 HarborView 200G8 3A7A7 72 s 1s.a24.72r 5 7,74s.437 20 18000000 16000000 2l 14000000 22 12000000 10000000 23 8000000 Actual Cum. Gross Losses -. -' Expected Gross Losses 6000000 - 24 - 4000000 25 2000000

l6l6l46v1/012661 160 1 Deal Name qBSNet Deal ld Month Actual Gross Losses Expected Gross Losses HarborView 2006-9 391-73 1 s S 0.42s,s29 2 HarborView 2006-9 3917. 2 s 5 t,o2i-,s6t HarborView 2006-9 39L7i 3 s 5 t,668,0s7 J HarborView 2006-9 3917 4 5 z,s7o,s74 S 8,372,s97 HarborView 2006-9 39t7 5 S 0,3s3,o42 s 9.r-40.109 4 Harborview 2006-9 3917 6 S 0,758,6s8 S g.97s.B8s HarborView 2006-9 39173 S rL6sss74 S ro,B8s.s98 HarborView 20O6-9 5 39!7: I S r3.82s.L4s S rr,s7s,3t6 HarborView 2006-9 39173 S r7.s38.934 5 tz,9sL,sL7 HarborView 2006-9 39172 1_C 6 S 29,668.7rs 5 M,121.,O98 HarborView 20O6-9 39172 11 S s9,9r6,o25 5 rs,391,38i. Harborv¡ew 2006-9 39173 !2 s4,44L,8æ 7 S s 16.770.120 60000000

8 50000000

9 40000000

10 30000000 Cum. Gross Losses '- *. Expected Gross Losses 11 20000000 -Actual- t2 10000000

o 13 2468107214 -10000000 t4 Deal Name ABSNet Deal ld Month Actual Gross Losses Expected Gross Losses HarborView 2006-10 3946e 15 1 s S 4.L46.æI HarborView 2006-10 3946É s S ¿,s29,r69 HarborView 2006-10 t6 3946Ê s S ¿.946.182 HarborView 2006-L0 3946e 4 s S s,ao,637 HarborView 2O0G1O 3946Ê s S s,89s.711 t7 HarborView 2006-10 39466 s s 6.434.A1a HarborView 2006-10 39466 S a.68o.o7o S 7.021,6i.6 18 HarborView 2006-10 39466 I S 11.141.881 s 7.660.021 HarborView 2006-L0 39466 c S r4,72s,777 S 8.3s4.2rl t9 HarborView 2006-10 39466 1C S zo.4s4.i.3s S 9.108.634 HarborView 2006-10 39466 11 5 24,280,42r S 9.928.01s HarborView 2006-10 20 3946( L2 S :2.goa.rrs S ro, ar7,3s2 35000000

2I 30000000

22 2soooooo

20000000 23 Actual Cum. Gross Losses L5000000 24 '" {r ''ì Expected Gross Losses 10000000 -

25 5000000

26 o -5000000 27

l6l6t46vl/012661 161 I Deal Name ABSNet Deal ld Month Actual Gross Losses Expected Gross Losses HarborView 2006-11 39604 1 s S øzo,tzs 2 HarborView 2Cf,6-1,L 396M 2 s S an,zzs HarborView 2æ6-1L 39604 S r,s41,,s96 S 739.700 a J HarborView 2æ6-77 39604 4 s 2,s86,32s s 807.663 HarborView 2006-1-1 39604 5 S 1.614.729 S gsr.zor 4 HarborView 2æ6-71 396@ 6 s 2.697.387 5 gaz,zzq HarborView 2û6-71. 39604 S s.5¿ut.956 s 1-,050,080 HarborView 2ú6-7I 5 39604 8 S es9s.221. s 1,1-45,553 HarborView 2006-LL 3960/, S 10,039,321 S r,249,369 HarborView 2æ6-]-,1 6 39604 LC S ro,s46,szt S r s62.r93 HarborView 2æ6-],1 39604 11 S r2,os9,5sz S 1.484.73! HarborView 2006-L1 39604 12 S l-1.489.433 r.617.73:. 7 S 14000000

8 12000000

9 10000000 8000000 10 Actual Cum. Gross Losses 6000000 - s- *¡ Expected Gross Losses 11 4000000 - I2 2000000 o 13 -2000000

t4 Deal Name ABSNet Deal ld Month Actual Gross Losses Expected Gross Losses HarborView 2006-72 39654 s s 6.998.409 15 HarborView 2006-]-2 39654 S z,æ4,or3 HarborView 2006-1'2 3965r s S as47.Bzo I6 HarborView 2006-12 3965r S ¿,084.060 5 g,rt4,Br6 HarborView 200,6-1-2 39651 S 1L.o9446o S 9.9so.367 HarborView 2006-12 3965t T7 S 19.896.280 S ro.a6o.234 HarborView 2006-72 3965¿ 5 3!.022.567 S rr,8so.s91 HarborView 2OO6-t2 3965t S 40.963.688 S rz.928.a47 18 HarborView 20C,6-72 3965r c S 00,192,493 S 14.o99.6s2 HarborView 20c,6-12 39651 TC S sa.s26.4t,s 5 1s.372.9r4 T9 HarborView 2006-1.2 39654 1L S g6,oss,s7r S 16.7ss.ao7 HarborView 2OO6-L2 39654 72 S g6.r31,.tsr S rs,2s6,769 20 1-20000000

2l 100000000

22 80000000

60000000 23 Actual Cum. Gross Losses 40000000 ExPCçteq 24 - 20000000 25 o 26 -20000000 27

l6l6t46vll0l266t t62 I Deal Name ABSNet Deal ld Month Actual Gross Losses Expected Gross Losses HarborView 2006-i4 39668 L s S s.574.6s4 2 HarborView 2006-14 3966t 2 s S s,9o4,4r6 HarborView 2006-14 3966t 3 soa,¡go +,263,907 a $ 5 J HarborView 2006-14 3966t A S 6.8s8.408 s 4.655,674 HarborView 2006-14 3966€ 5 S 13,473,277 S 5.082.4s8 4 HarborView 2006-].4 3966€ e S r6,77r.s82 S s,547,2æ HarborView 2006-L4 3966r 7 $ zt,sg7,N6 S 6.053.0s6 5 HarborView 2006-14 3966€ 8 S 28,030.117 S 0.603.39s HarborView 2006-74 3966t I S :9,7s0.069 s 2,201.,833 6 HarborView 2006-14 3966t 1C $ qa,347,3r6 S z.Bsz.rgt HarborView 2006-74 39668 Ll S s9,770,494 s 8.558.546 7 HarborView 2006-14 39668 12 5 t4,945,944 s 9,325,209 80000000 8 70000000

9 60000000 50000000 10 40000000 Actual Cum. Gross Losses 30000000 - "- * Expected Gross Losses 11 - 20000000 t2 10000000

13 o -10000000 246810]-214 t4 Deal Name qBSNet Deal ld Month Actual Gross Losses Expected Gross Losses HarborView 2OO7-1 4090€ 1 5 470.0L6 s 4,486,a67 15 HarborView 2OO7-L 4090É s S 4.9oo.7a1 HarborView 2OO7-L 4090€ S 740.974 S 5.352.o1o t6 Harborview 2OO7-1- 4090€ S 3.422.669 S s.u3.zs2 Harborview 2OO7-1- rt090€ S rLs72.4B7 s 6,379.446 t7 Harborview 2OO7-1 zto906 S r7,64s,2s7 s 6,962,7a6 Harborview 2OO7-1- zlo90€ S z7,4ss,2as S 7.s97.731' HarborView 2OO7-1- 40906 S 33.429.oae L2BB5L7 18 S HarborV ew 2OO7-7 40906 S 37.7o6.a44 s 9.O39.6æ HarborV ew 2OO7-1 40906 1C S 37.339.ss7 s 9.8ss.987 t9 HarborV ew 2OO7-1 zto906 11 s 48,483,9a4 s 10,742,596 HarborV ew 2OO7-7 40906 72 S ¿7,7so,9r4 S rr.7y.9o3 20 60000000

2t 50000000

22 40000000

30000000 23 ActualCum. Gross Losses "" '- .- Expected Gross Losses 20000000 - 24 10000000 25

o 26 o 2468107274 27

l616l46vllOl2661 r63 I Deal Name ABSNet Deal ld Month Actual Gross Losses Expected Gross Losses HarborView 2007-2 40907 L 5 oqz,sst S r,78s,903 2 HarborView 2007-2 4¡907 2 S r,783,44o s 1.950.6s2 Harborview 2OO7-2 40907 S r.699.s32 S 2,130.255 a J Harborview 2007-2 40907 S rr.!4a.763 S z,32s.9gz HarborView 2007-2 40907 5 S r2,498.s2i" 5 z,s3e,2o4 HarborView 2007-2 4 40907 e, S :3.584.4{13 5 2,771,390 HarborView 2007-2 4A907 S ¿6,i.88.9r.3 S s,o24,r!6 HarborView 2007-2 5 40901 8 S ss,s36,o4s s 3.299.069 HarborView 2007-2 40901 9 S 01,319,518 S 3.s9a.o47 HarborView 2007-2 4090) 6 t-c S 09,294,016 S s.922.967 HarborView 2OO7-2 4n901 11 s 69.2]-s.449 S ¿.27s,863 Harborview 2OO7-2 4D901 72 s 83.51s.1_96 +,6s8.s8s 7 S 90000000

8 80000000 70000000 9 60000000 50000000 10 Actual 40000000 Cum. Gross Losses '-" { "'r Expected Gross Losses 1t 30000000 - 20000000 T2 10000000

t4 Deal Name \BSNet Deal ld Month Actual Gross Losses Expected Gross Losses HarborView 2OO7-4 41472 t r,48rt,8L5 15 5 HarborView 2OO7-4 47472 2 s L,475,496 S 1.62L.79o HarborView 2æ7-4 47472 3 S 4.so3.163 S r.77r.!r3 t6 HarborView 2OO7-4 41-472 S 12.670.74c, S 1.933.a42 HarborView 2OO7-4 47472 S 1a.a97.31r 5 2.r7r,!!7 t7 HarborView 2OO7-4 47472 s 26,42c'69a 5 2,3O41s8 Harborv¡ew 2OO7-4 4L472 s 33,546,63L S 2.sa4.277 HarborView 2OO7-4 47472 S 4o.7r9.sL4 2.742.87s 18 S HarborView 2OO7-4 47472 S 52.66c.9]'4 5 2,99t.M9 HarborView 2OO7-4 41472 1C S 5a.oa4.757 S 3,26L,s9o T9 Harborv¡ew 2OO7-4 47472 11 S 63,3ss.o76 S a, ss4,997 HarborView 2æ7-4 41472 L2 5 t3,274,r9o S 3.873.M2 20 80000000 2l 70000000 60000000

22 50000000

40000000 23 Actual Cum. Gross Losses 30000000 '- "- ^- Expected Gross Losses 24 - 20000000 25 L0000000

l616l46vtl01266l t64 1 Deal Name ABSNet Deal ld Month Actual Gross Losses Exoected Gross Losses HarborView 2007-5 4777( 1 S S r.359.796 2 HarborView 20O7-5 4777( 2 s S r.4as,226 HarborView 2007-5 4177Ê S zsr.soo S r,62L,97s J HarborView 2007-5 4177Ê 4 S 2.920,6L4 S r,77r,oo2 HarborView 2007-5 4177Ê S 2,632,!90 S r,s33,34s 4 HarborView 20O7-5 4t77É S r2,5tl,o6o S z,r-10,135 HarborView 2007-5 4I77Ê s rs,83s.944 S 2,3o2,s6r HarborView 5 2007-5 4177ê 5 z!,743,s92 5 2.511.910 HarborView 2007-5 4777Ê 9 s 24,750,664 5 z.739.ssz HarborView 20O7-5 6 41776 l-c S 2o.9s2.966 S 2.986.94s HarborView 2007-5 41776 77 S 2e.63s.1s2 S E,2ss,6q HarborView 2007-5 41776 L2 s4.s63.869 7 S S a,s47,276 40000000

8 35000000

30000000 9 25000000 10 -.rt: 20000000 Actual Cum. Gross Losses 15000000 ". * Expected Gross Losses 11 -- 10000000 _--- _- t2 5000000 -''";-*- - --;.---*,*'-""-';'-" 13 o : -5000000 2468107274 t4 Deal Name ABSNet Deal ld Month Actual Gross Losses Expected Gross Losses lndvMac INDX Mortsase Loan Trust 20O6-4R35 rc677 L s 15 S r,734,368 ndyMac INDX Mortgage Loan Trust 20O6-4R35 40,67) 2 s S r.a94:æ lndyMa c NDX Mortsase Loan Trust 2O06-4R35 40,67) 3 s S 2.068.793 t6 I ndyMac I NDX Mortgage Loan Trust 2006-4R35 4467i 4 S 5 2.2s8.863 ndyMac NDX Mortgase Loan Trust 20O6-4R35 Æ677 5 s 1,8rt8,000 S 2.46s.932 I7 lndyMac INDX Mortsase Loan Trust 20O6-4R35 4467i 6 s 3.866.023 S z,69t,4tg lndyMac INDX Mortgage Loan Trust 2O06-4R35 4n,677 S 13.74o.6s9 S 2.936.8s1 18 ndyMac lNÐX Mortsase Loan Trust 2O06-4R35 40671 8 5 zr,a38,orz S ¡,2o3,87o ndyMac I NDX Mortgage Loan Trust 2006-4R35 4067 t I 5 27.603.æ9 S :.494.22L t9 ndyMac INDX Morteage Loan Trust 20O6-4R35 ß67'j L0 S ¡t,428,!o3 S 3.8o9.76s lndVMac INDX Mortease Loan Trust 20O6-4R35 Æ677 I1 s 34,423.59s S ¿,!s2,477 lndyMac INDX 20 Morteaee Loan Trust 2006-4R35 40677 7) 5 43.899.s21 5 4.s24.450 50000000 2t 45000000 40000000 22 35000000 30000000 23 25000000 Actual Cum. Gross Losses 20000000 24 '- *, - Expected Gross Losses 15000000 - 25 10000000 5000000 26 o -5000000 27

1616146v11012661 r65 1 Deal Name ABSNet Deal ld Month Actual Gross Losses Expected Gross Losses Luminent Mortgage Trust 2007-1 40299 1 S s:z.ooz 2 Luminent Mortgage Trust 2007-1 40295 2 s 5 gtq.ùa Luminent Mortsase Trust 2007-1 40295 3 s S sgg,nz a J Luminent Mortsase Trust 20O7-L 40.299 4 S r,9s2.s22 s 1,090,9L0 -uminent Mortsase Trust 20O7-1 4¡.299 5 S s.098.8s1 S r,ß0,913 4 Lum¡nent Mortsase Trust 2007-1 40299 6 5 t,53s,s38 S r,299,8r1, Luminent Mortsase Trust 2007-1 40299 7 S e,a77,7o6 S r,4ra34z Luminent Mortgage Trust 2007-L 5 40299 8 S 7.269.6s9 S r.s47.29a Luminent Mortgage Trust 20O7-1 40.299 I S 7.ao9.2s7 S r.6a7.522 Luminent Mortsase Trust 2OO7-1 4o299 10 6 S o.ßs.97s S r.839.912 Luminent Mortsase Trust 2007-1 44299 77 S rL639.877 5 z,æs.424 Luminent Mortsase Trust 2007-1 4D299 12 r3s74.4oo 2.18s,068 7 S S 16000000

8 14000000

12000000 9 10000000 10 8000000 Actual Cum. Gross Losses

6000000 '- '- - Expected Gross Losses 11 - 4000000 t2 2000000

13 0 2468L0L214 l4 -2000000 Deal Name ABSNet Deal ld Month Actual Gross Losses Expected Gross Losses 15 MortgaselT Mortsase Loan Trust 2006-1 36A37 5 676,o6s.76 MortAagelT Mortsase Loan Trust 2m6-1 36A37 s ç 73a,432.90 t6 MortsaselT Mortsase Loan Trust 2006-1 36437 s 5 806,422.s8 MortgagelT Mortgage Loan Trust 2006-1 36a37 4 S s6o.ooo.oo S 880,sr6.s7 MortgagelT Mortgage Loan Trust 2006-1 t7 3683; S 1.2s4.2s7.r7 s 961.233.77 MortgagelT Mortgage Loan Trust 2O06-L 36831 E S 2.47o.2s7.a9 s 1.049.!28.74 V'lortgaeelT Mortgage Loan Trust 2006-1 3643/ S 2.62g,.4s7.r7 S r.rM.8oo.os 18 VlortgagelT Morteaee Loan Trust 2006-1 36437 S q,oss,ao7.t7 S r.24a.B&s.24 VlorteaeelT Mortsase Loan Trust 20O6-1 36837 c S s,738,676.ra S i..362.o6s.s3 l9 VlortgaselT Mortsase Loan Trust 2006-1 36837 1C S q,116.31o.48 S 1.48s.o66.24 MorteaeelT Mortsase Loan Trust 2006-1 36837 11 5 s,1.s3.8o8.11 S r,erg,6s7.so MortsaselT 20 Mortsaee Loan Trust 2006,.1 36A3i L2 5 7.703.777.77 S r,zes,6s4.s8 8000000

2t 7000000 6000000 _L_ 22 5000000

ZJ 4000000 ,:- Actual Cum. Gross Losses 3000000 / 24 - 2000000 25 1000000 26 o -1000000 27

l616146vll01266l t66 I Deal Name qBSNet Deal ld Month Actual Gross Losses Expected Gross Losses Nomura Home Equity Loan Trust Series 2OO7-'J. 4029I ! S rsg,zoo S r,737,9s4 2 Nomura Home Equity Loan Trust Series 2OO7-7 M29T 2 S org,zoo S r,898.280 Nomura Home EquiW Loan Trust Series 2OO7-I 40291 3 S 23,s42,962 5 2,073,060 a J Nomura Home EquiW Loan Trust Series 2OO7-7 40291 4 S +2,794,130 S 2.263.s33 Nomura Home EquiW Loan Trust Series 2OO7-L 4n291. 5 S ¡6,297,].62 S z.47t.o3o 4 Nomura Home Equ¡W Loan TrustSeries 2OO7-7 40297 e S 37.7r7.s22 S 2.696,982 Nomura Home Equ¡W Loan Trust Series 2OO7-J. 4029r 7 S 09.224.9!1- S 2,942,923 Nomura Home EquiW Loan Trust 5 Ser¡es 2OO7-t 40291 8 S e6.609.785 S a.zro,493 Nomura Home Equity Loan Trust Ser¡es 2OO7-L 40291 I S s0.6ss.311 S :,sor,4u Nomura Home Equ¡W Loan Trust Series 2OO7-l 40291 tc 6 S 112,784,673 S E,8r7,641- Nomura Home Equ¡W Loan Trust Series 2OO7-I 40291 1 S 96,635,9i-9 S 4.16r.062 Nomura Home EquiW Loan Trust Ser¡es 2OO7-I 4¡291 t2 105,724,469 7 S s 4.s33.8o4 120000000 8 100000000 lv 9 80000000

60000000 10 Actual Cum. Gross Losses 40000000 11 - 20000000 t2 o 13 -20000000

t4 Deal Name ABSNet Deal ld Vlonth Actual Gross Losses Expected Gross Losses Soundview Home EquiW Loan Trust 2OO5-OpT4 3602s I s 1,272,M2 S 6.7r6.66a 15 Soundv¡ew Home Equ¡ty Loan Trust 2OO5-OpT4 3602s S 1.s].2.469 5 z.336.281 Soundview Home Equitv Loan Trust 2005-OPT4 36025 S 9,073,678 S 8. or1'7s4 t6 Soundview Home Equ¡W Loan Trust 2OO5-OPT4 36025 S s.331.1o9 5 4,747,873 Soundview Home Equity Loan Trust 2O05-OpT4 3602s S 5.676jl96 s 9.549.7a6 t7 Soundview Home EquitV Loan Trust 2OO5-OPT4 36025 S 12,008;"62 S i.0.423.o24 Soundview Home Equ¡W Loan Trust 2OO5-OPT4 36025 S 19.249.s43 S rr.373.5r2 Soundv¡ew Home Equ¡W Loan Trust 20O5-OpT4 3602s 5 z3,4z6,oos S r2.q7s9r 18 Soundview Home Equity Loan Trust 2005-OPT4 36024 S 40.776,311 S r:,s32.030 Soundview Home Equitv Loan Trust 2005-0PT4 3602s 1C S 35.034.668 S r+.7s4.o33 l9 Soundview Home Equitv Loan Trust 2OO5-OPT4 36025 t7 S q+,624.4a2 S ro,ogr,2s4 Soundview Home Equ¡W Loan Trust 2OO5-OPT4 3602s 12 S s2.s7o.99a 5 tt.s2t.79o 20 60000000

21 50000000

22 40000000

23 30000000 Actual Cum. Gross Losses

- '- '- Expected Gross Losses 24 20000000 -

25 10000000

26 o 0 27

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J 15000000 eum. Gross Losses 4 1000û000 -Actual- - - Expected Gross Losses 5 5000000

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