ALLY FINANCIAL INC. f/k/a GMAC, INC.; ) GS MORTGAGE SECURITIES CORP.; ) GOLDMAN, SACHS & CO.; GOLDMAN ) SACHS MORTGAGE COMPANY; THE ) GOLDMAN SACHS GROUP, INC.; ) RBS SECURITIES INC. f/k/a GREENWICH ) CAPITAL MARKETS, INC.; INDYMAC ) MBS, INC.; J.P. MORGAN ACCEPTANCE ) CORPORATION I; J.P. MORGAN ) SECURITIES INC.; JPMORGAN ) SECURITIES HOLDINGS LLC; ) JPMORGAN CHASE & CO.; CHASE ) MORTGAGE FINANCE CORPORATION; ) UBS SECURITIES LLC; WAMU ASSET ) ACCEPTANCE CORP.; WAMU CAPITAL ) CORP.; WELLS FARGO ASSET ) SECURITIES CORPORATION; WELLS ) FARGO BANK, NATIONAL ) ASSOCIATION; WELLS FARGO & ) COMPANY, and JOHN DOE ) DEFENDANTS, 1-50, ) ) Defendants. ) Table of Contents I. NATURE OF THE ACTION ........................................................................................... 1 II. EXECUTIVE SUMMARY .............................................................................................. 2 A. PMLBS Defined.................................................................................................... 2 B. The Bank Purchased Only the Highest Rated (Triple-A-Rated) PLMBS ................................................................................................................. 3 C. The Mortgage Originators Who Issued Loans Backing the Certificates Abandoned Underwriting Guidelines and Issued Loans Without Ensuring the Borrowers’ Ability to Pay and Without Sufficient Collateral.............................................................................................. 4 D. The Defendants Provided Misleading Information About the Certificates in the Offering Documents They Prepared and Provided to the Bank............................................................................................. 5 E. The Bank Is Entitled to Rescission and Damages. ............................................... 8 III. JURISDICTION AND VENUE ....................................................................................... 9 IV. THE PARTIES................................................................................................................ 11 A. Plaintiff ............................................................................................................... 11 B. Defendants .......................................................................................................... 12 1. The Banc of America Entities................................................................. 12 2. The Bear Stearns Entities........................................................................ 13 3. The Countrywide Entities....................................................................... 14 4. The Credit Suisse Entities....................................................................... 15 5. The GMAC Entities................................................................................ 17 6. The Goldman, Sachs Entities.................................................................. 18 7. Greenwich Capital Markets, Inc. ............................................................ 19 8. IndyMac MBS, Inc.................................................................................. 20 9. The JP Morgan Chase Entities................................................................ 20 i 10. UBS Securities LLC ............................................................................... 21 11. The WaMu Entities................................................................................. 21 12. The Wells Fargo Entities ........................................................................ 22 C. Successor Liability Allegations Against Certain Defendants............................. 23 1. Successor Defendant Bank of America Corporation (Countrywide)......................................................................................... 23 2. Successor Defendant Merrill Lynch, Pierce, Fenner & Smith Incorporated (Banc of America Securities LLC). ........................ 32 D. Summary Charts of Defendants and Certificates................................................ 32 E. The John Doe Defendants................................................................................... 37 V. FACTUAL BACKGROUND......................................................................................... 37 A. Mechanics of Mortgage Backed Securities......................................................... 37 1. The Securitization Process...................................................................... 37 2. The Rating Process for PLMBS.............................................................. 40 B. The Mortgage Originators Abandoned Underwriting and Appraisal Standards............................................................................................................. 42 1. The Shift from “Originate to Hold” to “Originate to Distribute” Securitization Incentivized Mortgage Originators to Disregard Loan Quality. .................................................. 42 2. Mortgage Originators Abandoned Underwriting Guidelines in Order to Initiate High Cost Loans for Securitization.......................... 49 3. Mortgage Originators Manipulated Appraisals of Collateralized Real Estate in Order to Initiate Loans for Securitization. ......................................................................................... 50 4. Widespread Defaults and Delinquencies Reflected the Inevitable Consequence of Loans Issued Without Meaningful Underwriting. ...................................................................... 55 C. Federal and State Investigations, Press Reports, Publicly Available Documents Produced in Other Civil Lawsuits, and Analysis of the Mortgage Pools Underlying the Securities Identify Systematic Violation of Underwriting Guidelines by Mortgage Originators Whose Loans Back the PLMBS in this Case...................................................... 57 ii 1. Countrywide Home Loans, Inc............................................................... 58 a. Government actions against Countrywide, and documents produced therein, demonstrate Countrywide’s abandonment of sound underwriting practices. ..................................................................................... 58 b. Private actions against Countrywide demonstrate Countrywide’s abandonment of sound underwriting practices. ..................................................................................... 69 c. Confidential witnesses provide further evidence of Countrywide’s abandonment of sound underwriting practices. ..................................................................................... 76 d. The mortgages originated by Countrywide and securitized in the PLMBS purchased by the Bank provide further evidence of Countrywide’s abandonment of sound underwriting practices. .......................... 81 2. GMAC and Residential Funding Corp. .................................................. 82 a. Private actions against GMAC demonstrate GMAC’s abandonment of sound underwriting practices. ..................................................................................... 82 b. Confidential witness statements provide further evidence of GMAC’s abandonment of sound underwriting practices................................................................. 84 c. The mortgages originated by GMAC and securitized in the PLMBS purchased by the Bank provide further evidence of GMAC’s abandonment of sound underwriting practices.................................................. 85 3. IndyMac Bank, FSB................................................................................ 86 a. Government actions and related lawsuits and investigations demonstrate IndyMac’s abandonment of sound underwriting practices.................................................. 86 b. Private actions against IndyMac demonstrate IndyMac’s abandonment of sound underwriting practices. ..................................................................................... 91 c. Confidential witnesses provide further evidence of IndyMac’s abandonment of sound underwriting practices. ..................................................................................... 93 iii d. The mortgages originated by IndyMac and securitized in the PLMBS purchased by the Bank provide further evidence of IndyMac’s abandonment of sound underwriting practices. .......................... 96 4. Washington Mutual Bank....................................................................... 97 a. Government actions and related lawsuits and investigations demonstrate WaMu’s abandonment of sound underwriting practices.................................................. 97 b. WaMu manipulated the appraisal process. ............................... 101 c. WaMu engaged in reckless lending.......................................... 109 d. Confidential witnesses provide further evidence of WaMu’s failures to adhere to sound underwriting practices and manipulation of the appraisal process................. 113 e. The mortgages originated by WaMu and securitized in the PLMBS purchased by the Bank provide further evidence of WaMu’s abandonment of sound underwriting practices............................................................... 121 5. Wells Fargo........................................................................................... 122 a. Investigations, lawsuits and confidential witness statements demonstrate that Wells Fargo abandoned underwriting guidelines. ........................................................... 122 b. The mortgages originated by Wells Fargo and securitized