IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS COUNTY DEPARTMENT, CHANCERY DIVISION FEDERAL HOME LOAN BANK OF ) CHICAGO, ) Plaintiff, ) No. 10 CH 45033 ) v. ) CORRECTED AMENDED COMPLAINT ) FOR RESCISSION AND DAMAGES BANC OF AMERICA FUNDING ) CORPORATION; BANC OF AMERICA ) SECURITIES LLC; BANK OF AMERICA, ) JURY TRIAL DEMANDED NATIONAL ASSOCIATION; BANK OF ) AMERICA CORPORATION; ) SECURITIZED ASSET BACKED ) RECEIVABLES, LLC; BARCLAYS ) CAPITAL INC.; CITIGROUP MORTGAGE ) LOAN TRUST INC.; CITIGROUP ) GLOBAL MARKETS INC.; CITIGROUP ) FINANCIAL PRODUCTS, INC.; ) CITIGROUP INC.; COUNTRYWIDE ) SECURITIES CORPORATION; ) COUNTRYWIDE FINANCIAL ) CORPORATION; CREDIT SUISSE ) SECURITIES (USA) LLC F/K/A CREDIT ) SUISSE FIRST BOSTON LLC; FIRST ) HORIZON ASSET SECURITIES, INC.; ) FIRST TENNESSEE BANK, NATIONAL ) ASSOCIATION; RESIDENTIAL ASSET ) MORTGAGE PRODUCTS, INC.; ) RESIDENTIAL ASSET SECURITIES ) CORPORATION; RESIDENTIAL ) FUNDING MORTGAGE SECURITIES I, ) INC.; RESIDENTIAL FUNDING ) SECURITIES LLC F/K/A RESIDENTIAL ) FUNDING SECURITIES CORPORATION; ) RESIDENTIAL FUNDING ) CORPORATION; GMAC MORTGAGE ) GROUP LLC F/K/A GMAC MORTGAGE ) GROUP INC.; ALLY FINANCIAL INC. ) F/K/A GMAC INC.; GS MORTGAGE ) SECURITIES CORP.; GOLDMAN, SACHS ) & CO.; GOLDMAN SACHS MORTGAGE ) COMPANY; THE GOLDMAN SACHS ) GROUP INC.; FINANCIAL ASSET ) SECURITIES CORP.; RBS ACCEPTANCE ) INC. F/K/A GREENWICH CAPITAL ) ACCEPTANCE, INC.; RBS SECURITIES ) INC. F/K/A GREENWICH CAPITAL ) MARKETS, INC.; RBS HOLDINGS USA ) INC. F/K/A GREENWICH CAPITAL ) HOLDINGS, INC.; SAND CANYON ) ACCEPTANCE CORPORATION F/K/A ) OPTION ONE MORTGAGE ) ACCEPTANCE CORPORATION; ) AMERICAN ENTERPRISE INVESTMENT ) SERVICES, INC.; AMERIPRISE ) FINANCIAL SERVICES, INC.; ) AMERIPRISE ADVISOR SERVICES, INC. ) F/K/A H&R BLOCK FINANCIAL ) ADVISORS, INC.; SAND CANYON ) CORPORATION F/K/A OPTION ONE ) MORTGAGE CORPORATION; H&R ) BLOCK, INC.; HSBC SECURITIES (USA) ) INC.; INDYMAC MBS, INC.; J.P. ) MORGAN SECURITIES INC.; MERRILL ) LYNCH MORTGAGE INVESTORS, INC.; ) MERRILL LYNCH, PIERCE, FENNER & ) SMITH INCORPORATED; MORGAN ) STANLEY ABS CAPITAL I INC.; ) MORGAN STANLEY & CO. ) INCORPORATED; MORGAN STANLEY; ) PNC INVESTMENTS LLC; THE PNC ) FINANCIAL SERVICES GROUP, INC.; ) NOMURA HOME EQUITY LOAN, INC.; ) NOMURA SECURITIES ) INTERNATIONAL, INC.; NOMURA ) HOLDING AMERICA INC.; SEQUOIA ) RESIDENTIAL FUNDING, INC.; RWT ) HOLDINGS, INC.; REDWOOD TRUST, ) INC.; MORTGAGE ASSET ) SECURITIZATION TRANSACTIONS, ) INC.; UBS SECURITIES LLC; UBS ) AMERICAS INC.; 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. JURISDICTION AND VENUE....................................................................................... 9 III. THE PARTIES................................................................................................................10 A. Plaintiff ............................................................................................................... 10 B. Defendants .......................................................................................................... 12 C. Successor Liability Allegations Against Certain Defendants............................. 32 1. Successor Defendant Bank of America Corporation.............................. 32 2. Successor Defendants American Enterprise Investment Services, Inc. and Ameriprise Financial Services, Inc............................ 37 3. Successor Defendant The PNC Financial Services Group, Inc. .......................................................................................................... 38 D. Summary Charts of Defendants and Certificates................................................ 40 E. The John Doe Defendants................................................................................... 47 IV. FACTUAL BACKGROUND......................................................................................... 48 A. Mechanics of Mortgage Backed Securities......................................................... 48 1. The Securitization Process...................................................................... 48 2. The Rating Process for PLMBS.............................................................. 51 B. The Mortgage Originators Abandoned Underwriting and Appraisal Standards and Engaged in Predatory Lending.................................................... 52 1. The Shift from “Originate to Hold” to “Originate to Distribute” Securitization Incentivized Mortgage Originators to Disregard Loan Quality. .................................................. 52 2. Mortgage Originators Abandoned Underwriting Guidelines in Order to Initiate High Cost Loans for Securitization.......................... 59 3. Mortgage Originators Manipulated Appraisals of Collateralized Real Estate in Order to Initiate High Cost Loans for Securitization.......................................................................... 61 i 4. Mortgage Originators Engaged in Predatory Lending in Order to Initiate High Cost Loans for Securitization.............................. 67 5. Widespread Delinquencies Reflected the Inevitable Consequence of Loans Issued Without Regard to Meaningful Underwriting. ...................................................................... 72 C. Federal and State Investigations, Press Reports, Publicly Available Documents Produced in Other Civil Lawsuits, and Analysis of the Loan Pools Underlying the Certificates Identify Systematic Violation of Underwriting Guidelines, Appraisal Guidelines, and Predatory Lending by Mortgage Originators Whose Loans Back the PLMBS in this Case...................................................................................... 74 1. Countrywide Home Loans, Inc. and Countrywide Home Loans Servicing LP................................................................................. 75 a. Government actions against Countrywide and documents produced therein demonstrate Countrywide’s failure to adhere to sound underwriting practices................................................................. 76 b. Private actions against Countrywide demonstrate Countrywide’s failure to adhere to sound underwriting practices................................................................. 87 c. Confidential witnesses provide further evidence of Countrywide’s failure to adhere to sound underwriting practices................................................................. 94 d. The mortgages originated by Countrywide and securitized in the PLMBS purchased by the Bank provide further evidence of Countrywide’s failure to adhere to sound underwriting practices. ..................................... 99 e. Press reports, government investigations and related litigation, and confidential witnesses demonstrate that Countrywide engaged in predatory lending....................... 100 f. Confidential witnesses provide further evidence of Countrywide’s predatory lending practices. ............................. 102 2. New Century Mortgage Corp................................................................ 103 a. Government actions and related lawsuits and investigations demonstrate New Century’s failure to adhere to sound underwriting practices. ................................... 104 ii b. Confidential witnesses provide further evidence of New Century’s failure to adhere to sound underwriting practices............................................................... 106 c. The mortgages originated by New Century and securitized in the PLMBS purchased by the Bank provide further evidence of New Century’s failure to adhere to sound underwriting practices. ............................... 110 d. Confidential witnesses also provide evidence of predatory lending. ..................................................................... 111 3. IndyMac Bank, FSB.............................................................................. 111 a. Government actions and related lawsuits and investigations demonstrate IndyMac’s failure to adhere to sound underwriting practices, applicable appraisal standards, and predatory lending............................... 112 b. Private actions against IndyMac demonstrate IndyMac’s failure to adhere to sound underwriting practices. ................................................................................... 116 c. Confidential witnesses provide further evidence of IndyMac’s failure to adhere to sound underwriting practices. ................................................................................... 119 d. The mortgages originated by IndyMac and securitized in the PLMBS purchased by the Bank provide further evidence of IndyMac’s failure to adhere to sound underwriting practices. ................................... 122 4. Fremont Investment & Loan................................................................. 123 a. Government actions and related lawsuits and investigations demonstrate Fremont’s failure to adhere to sound underwriting practices and its predatory lending. ..................................................................... 123 b. The mortgages originated by Fremont and securitized in the PLMBS purchased by the Bank provide further evidence of Fremont’s failure to adhere to sound underwriting practices. ................................... 127 5. GMAC and Residential Funding Corp. ...............................................