Cambridge Investments V Et Al OCR

COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, SS SUPERIOR COURT

........ _Cl'lILACTIONNO._...
CAMBRIDGE PLACE INVESTMENT

MANAGEMENT INC.,
COMPLAINT and
JURY DEMAND
10 2741
Plaintiff,
v.
MORGAN STANLEY & CO., INC.;
CITIGROUP GLOBAL MARKETS INC.;
CREDIT SUISSE SECURITIES (USA) LLC;
RBS SECURITIES, INC.; DEUTSCHE
BANK SECURITIES, INC.; MERRILL
LYNCH, PIERCE, FENNER & SMITH,
INC.; UBS SECURITIES LLC; GOLDMAN,
SACHS & CO.; J.P. MORGAN SECURITIES
INC.; COUNTRYWIDE SECURITIES
CORPORATION; FBR CAPITAL
MARKETS & CO.; HSBC SECURITIES
(USA), INC.; BANC OF AMERICA
SECURITIES LLC; RESIDENTIAL
FUNDING SECURITIES, LLC; BARCLAYS
CAPITAL INC.; ACCREDITED RECEIVED
MORTGAGE LOAN REIT TRUST; ACE
SECURITIES CORPORATION; AEGIS JUL 092010
ASSET BACKED SECURITIES
SUPtR10K COURT· CIVIL
CORPORATION; ALLIANCE SECURITIES MICHAEL JOSEPH DONOVAN
CORPORATION; AMERICAN HOME CLERK I MAGISTRATE
MORTGAGE ASSETS LLC; AMERIQUEST
MORTGAGE SECURITIES INC.; ARGENT
SECURITIES INC.; ASSET BACKED
FUNDING CORPORATION; ASSET
BACKED SECURITIES CORPORATION;
BANC OF AMERICA MORTGAGE
SECURITIES, INC.; BCAP LLC; BEAR
STEARNS ASSET BACKED SECURITIES I [CAPTION CONTINUED
LLC; CITIGROUP MORTGAGE LOAN ON NEXT PAGEj
TRUST INC.; CREDIT SUISSE FIRST
BOSTON MORTGAGE SECURITIES
CORP.; CWABS, INC.; CWALT, INC.; FBR
SECURITIZATION, INC.; FIELDSTONE
MORTGAGE INVESTMENT
CORPORATION; FINANCIAL ASSET
SECURITIES CORP.; FREMONT
MORTGAGE SECURITIES
CORPORATION; GS MORTGAGE
SECURITIES CORP.; HSI ASSET
SECURITIZATION CORPORATION; J.P.
MORGAN ACCEPTANCE CORPORATION
I; LONG BEACH SECURITIES CORP.;
MERRILL LYNCH MORTGAGE
INVESTORS, INC.; MORGAN STANLEY
ABS CAPITAL I INC.; MORGAN
STANLEY CAPITAL I INC.; MORTGAGE
ASSET SECURITIZATION
TRANSACTIONS, INC.; NATIONSTAR
FUNDING LLC; NEW CENTURY
MORTGAGE SECURITIES LLC; NEW
CENTURY MORTGAGE SECURITIES,
INC.; NOVASTAR MORTGAGE FUNDING
CORPORATION; PARK PLACE
SECURITIES, INC.; PEOPLE’S CHOICE
HOME LOAN SECURITIES CORP.;
POPULAR ABS, INC.; RESIDENTIAL
ACCREDIT LOANS, INC.; RESIDENTIAL
ASSET MORTGAGE PRODUCTS, INC.;
RESIDENTIAL ASSET SECURITIES
CORPORATION; SACO I INC.; SAXON
ASSET SECURITIES COMPANY;
SECURITIZED ASSET BACKED
RECEIVABLES LLC; STANWICH ASSET
ACCEPTANCE COMPANY, L.L.C.;
STRUCTURED ASSET MORTGAGE
INVESTMENTS II INC.; and
WASHINGTON MUTUAL MORTGAGE
SECURITIES CORP.
Defendants.
TABLE OF CONTENTS
Page
I. NATURE OF THE ACTION ..............................................................................................1
II. JURISDICTION AND VENUE ..........................................................................................3
III. THE PARTIES.....................................................................................................................3

a. Plaintiff ....................................................................................................................3
b. The Wall Street Bank Defendants............................................................................4
c. The Depositor Defendants .....................................................................................11
IV. FACTUAL BACKGROUND ............................................................................................16

a. The Mechanics of Mortgage Securitization ...........................................................16
b. Securitization of Mortgage Loans: The Traditional Model ...................................17
c. The Systemic Violation of Underwriting and Appraisal Standards in the

Mortgage Securitization Industry ..........................................................................19
d. The Wall Street Banks Conduct Less Due Diligence ............................................25
e. Plaintiff’s Acquisition of the Securities .................................................................28
V. THE OFFERING DOCUMENTS CONTAINED UNTRUE STATEMENTS OF

MATERIAL FACTS AND OMISSIONS ABOUT THE MORTGAGE
ORIGINATORS’ UNDERWRITING STANDARDS AND PRACTICES ......................30
a. New Century Mortgage Corporation .....................................................................31
1. Defendants Made Untrue Statements of Material Facts About New

Century’s Underwriting Standards and Practices ..................................... 31
2. New Century Violated Its Stated Underwriting Standards ....................... 34
b. Long Beach Mortgage Company ...........................................................................39
1. Defendants Made Untrue Statements of Material Facts About Long

Beach’s Underwriting Standards and Practices ........................................ 39
2. Long Beach Violated Its Stated Underwriting Standards ......................... 41
c. WaMu ....................................................................................................................49
1. Defendants Made Untrue Statements of Material Facts About

WaMu’s Underwriting Standards and Practices ...................................... 49
i
2. WaMu Violated Its Stated Underwriting Standards ................................. 50
d. Fremont Investment & Loan ..................................................................................60

Fremont’s Underwriting Standards and Practices..................................... 60
2. Fremont Violated Its Stated Underwriting Standards ............................... 62
e. WMC Mortgage Corporation.................................................................................69

WMC’s Underwriting Standards and Practices ........................................ 69
2. WMC Violated Its Stated Underwriting Standards .................................. 72
f. The Ameriquest Loan Sellers.................................................................................74
1. Defendants Made Untrue Statements of Material Facts About the

Ameriquest Loan Sellers’ Underwriting Standards and Practices ............ 74
2. The Ameriquest Loan Sellers Violated Their Stated Underwriting

Standards ................................................................................................... 77
g. Option One .............................................................................................................80

Option One’s Underwriting Standards and Practices ............................... 80
2. Option One Violated Its Stated Underwriting Standards.......................... 82
h. Additional Mortgage Originators ...........................................................................85
VI. DEFENDANTS MADE MATERIAL UNTRUE STATEMENTS AND

OMISSIONS ......................................................................................................................87
a. Morgan Stanley’s Untrue Statements of Material Facts and Omissions ...............88
b. Bear Stearns’ Untrue Statements of Material Facts and Omissions ......................95
c. Citigroup’s Untrue Statements of Material Facts and Omissions ........................102
d. Credit Suisse’s Untrue Statements of Material Facts and Omissions ..................107
e. Greenwich Capital’s Untrue Statements of Material Facts and Omissions .........113
f. Deutsche Bank’s Untrue Statements of Material Facts and Omissions ...............117
g. Merrill Lynch’s Untrue Statements of Material Facts and Omissions ................121
ii
h. UBS’s Untrue Statements of Material Facts and Omissions ...............................126
i. Goldman Sachs’ Untrue Statements of Material Facts and Omissions ...............131
j. J.P. Morgan’s Untrue Statements of Material Facts and Omissions....................135
k. Countrywide’s Untrue Statements of Material Facts and Omissions ..................139
l. FBR’s Untrue Statements of Material Facts and Omissions ...............................144
m. HSBC’s Untrue Statements of Material Facts and Omissions ............................147
1. HASC 2005-NC2 .................................................................................... 148
2. FFML 2006-FF5 ..................................................................................... 150
n. Banc of America’s Untrue Statements of Material Facts and Omissions ............153
o. GMAC’s Untrue Statements of Material Facts and Omissions ...........................157
p. Barclays’ Untrue Statements of Material Facts and Omissions...........................159
q. The Depositor Defendants’ Untrue Statements of Material Facts and

Omissions.............................................................................................................163
VII. THE PERFORMANCE AND VALUE OF THE SECURITIES ....................................165

VIII. COUNT I AGAINST THE WALL STREET BANK DEFENDANTS:
VIOLATION OF MASSACHUSETTS UNIFORM SECURITIES ACT, MASS.
GEN. LAWS CH. 110A § 410(A)(2) ..............................................................................174
IX. COUNT II AGAINST THE DEPOSITOR DEFENDANTS: VIOLATION OF

MASSACHUSETTS UNIFORM SECURITIES ACT, MASS. GEN. LAWS CH.
110A § 410(A)(2) ............................................................................................................175
X. COUNT III AGAINST THE WALL STREET BANK DEFENDANTS:

GEN. LAWS CH. 110A § 410(B) ...................................................................................176
XI. RELIEF REQUESTED ....................................................................................................178
XII. JURY DEMAND .............................................................................................................178
iii
I. NATURE OF THE ACTION
1. The Defendants identified below in ¶¶ 15-32 offered or sold approximately $2.4
billion of residential mortgage-backed securities (the “Securities” or “RMBS”) to the investor
Plaintiff (as defined in ¶¶ 11-13), by means of untrue statements of material facts and omissions
of material fact. As a result of Defendants’ untrue statements to Plaintiff in Massachusetts,
Plaintiff has incurred losses exceeding $1.2 billion. Defendants’ written and oral untrue
statements concerned: (1) the mortgage originators’ underwriting standards that were purportedly
applied to evaluate the ability of the borrowers to repay the loans underlying the Securities; (2)
the appraisal standards that were purportedly applied to evaluate the value and adequacy of the
mortgaged properties as collateral; (3) the loan-to-value (“LTV”) ratios, debt-to-income ratios,
and purported occupancy status of the mortgaged properties, including whether the properties
were “owner occupied,” “second homes,” or “investment properties”; (4) the Wall Street Bank
Defendants’ due diligence of the loans and the mortgage originators’ underwriting practices; and
(5) various forms of credit enhancement applicable to certain tranches of Securities.
2. Defendants’ statements of material facts were not true. In reality, each of the
Defendants offered to sell and sold Securities backed by mortgages that came from a small group
of now notorious subprime mortgage originators that violated their own underwriting standards,
used faulty appraisals that overvalued the mortgaged properties, and accepted untrue information
in loan applications.
3. The Wall Street Bank Defendants were complicit in creating an environment of
improper lending practices by the mortgage originators; indeed, in many instances the Wall
Street Banks had personnel on site at the mortgage originators to monitor their loan underwriting
practices. The Wall Street Bank Defendants also fostered the environment for, permitted, and
profited from the mortgage originators’ rampant violations of sound lending practices. Driven to
profit from the lucrative securitization business, the Wall Street Bank Defendants demanded
enormous volumes of loans to securitize and sell to investors in the form of RMBS, leading to
erosion in lending standards.
1
4. As a result of the relationships between mortgage originators and the Wall Street
Bank Defendants, the Wall Street Banks had superior access to information about the business
and lending practices of the mortgage originators and data about the loans, such as loan
attributes, beyond what was conveyed to investors in the offering documents for RMBS.
Nevertheless, the Wall Street Bank Defendants repeated the untrue information from the
mortgage originators in the offering documents used to sell the Securities to investors.
5. While the Wall Street Banks stated to Plaintiff that they performed careful due
diligence into the loans and the mortgage originators’ underwriting practices, the Wall Street
Banks conducted inadequate due diligence and failed to satisfy their own responsibilities. Thus,
the statements of material facts that these Wall Street Banks made to Plaintiff in Massachusetts
while offering or selling the Securities were untrue and omitted material information.
6. In addition, the Wall Street Banks materially aided the Depositor Defendants, who
also offered or sold the Securities to the Plaintiff. The Depositor Defendants are Special Purpose
Vehicles (“SPVs”) that were created as part of the securitization process to acquire and securitize
the loans for sale to investors. Working together with the Wall Street Banks, the Depositor
Defendants drafted the offering documents that contained the untrue statements of material facts
and circulated them to investors.
7. The Plaintiff brings this action to recover damages incurred as a result of the
Defendants’ offer or sale of securities in Massachusetts by means of untrue statements of
material facts or omissions of material facts in violation of Mass. Gen. Laws Ch. 110A, § 410
(the “Massachusetts Securities Act”).
8. Plaintiff alleges the following upon personal knowledge as to itself and its own
acts and upon information and belief as to all other matters. Plaintiff’s information and belief are
based on the investigation conducted by and through counsel. The investigation included
interviews with confidential witnesses; documents filed in connection with investigations and
actions brought by the United States Securities and Exchange Commission (the “SEC”), the
Attorneys General of Massachusetts, New York, and California, and private litigants; testimony
2
before the Federal Financial Crisis Inquiry Commission; a report of a court-appointed
bankruptcy trustee; news reports; interviews published in the financial press; Congressional
testimony; and other available information. Some of the facts related to Plaintiff’s allegations
are known only by the Defendants named herein, or are exclusively within their custody or
control. Plaintiff believes that additional evidentiary support for the allegations set forth below
will be developed after a reasonable opportunity for discovery.
II. JURISDICTION AND VENUE

9. Jurisdiction is proper because the offer or sale of the Securities by the Defendants
occurred in Massachusetts (see Mass. Gen. Laws Ch. 110A, § 414). In addition, Plaintiff’s
principal place of business is located in the Commonwealth of Massachusetts, and many of the
Defendants have offices in Massachusetts. The amount in controversy exceeds $25,000.
10. Venue is proper pursuant to Mass. Gen. Laws Ch. 223, § 1 and Superior Court
Administrative Directive No. 09-01 because many of the Defendants have usual places of
business in Suffolk County.
III. THE PARTIES
a. Plaintiff
11. Cambridge Place Investment Management Inc. (“CPIM”) is a Delaware
corporation with its principal place of business in Concord, Massachusetts.

12. CPIM was responsible for the sourcing, review, analysis, and purchase decisions
for U.S. investments for its clients, including Caliber Global Investment Ltd., CAMBER 3 PLC,
CAMBER 4 PLC, CAMBER 5 Ltd, CAMBER 7 PLC, CPIM Structured Credit Fund 20 LP,
CPIM Structured Credit Fund 500 LP, CPIM Structured Credit Fund 1000 LP, and CPIM
Structured Credit Fund 1500 LP (collectively, the “Clients”).
13. CPIM is the exclusive assignee of, and the exclusive attorney-in-fact for and with
respect to, all of the Clients’ claims relating to the offer and sale of Securities that are the subject
of this Complaint. CPIM, as such exclusive assignee and attorney-in-fact of the Clients, is
referred to herein as the “Plaintiff.”
3
14. Plaintiff was solicited in Massachusetts by investment firms, underwriters, and
dealers (the “Wall Street Bank Defendants”) and by the Depositor Defendants (as defined in
¶ 31), who offered or sold the Securities to Plaintiff.
b. The Wall Street Bank Defendants
15. Morgan Stanley & Co., Inc.: Defendant Morgan Stanley & Co. Incorporated
(“Morgan Stanley”) is a Delaware corporation and an SEC-registered broker-dealer with its
principal place of business located at 1585 Broadway, New York, New York 10036 and an office
located at 1 International Place, Boston, Massachusetts 02110. The Defendant Morgan Stanley is
the broker-dealer subsidiary of Morgan Stanley, a Delaware corporation headquartered in New
York, New York. Defendant Morgan Stanley offered or sold the Securities to Plaintiff at face-to-
face meetings, including at least one meeting in Massachusetts, and by making telephone calls
and sending documents to Plaintiff in Massachusetts. The Morgan Stanley sales representatives
who offered or sold Securities to Plaintiff included Howard Hennick, Paul Knepple, and Ryan
Rossitto. Morgan Stanley, Knepple, and Rossitto are all licensed to sell securities in
Massachusetts. Other Morgan Stanley representatives who offered or sold Securities to Plaintiff
included investment bankers Michael Dubeck, Howard Hubler, Steven Shapiro (who is also
licensed to sell securities in Massachusetts), and Terry Smith. The Securities that Morgan
Stanley offered or sold to Plaintiff are listed in Appendix A.
16. Citigroup Global Markets, Inc.: Defendant Citigroup Global Markets, Inc.
(“Citigroup”) is a New York corporation and an SEC-registered broker-dealer with its principal
place of business located at 388 Greenwich Street, New York, New York. Citigroup
representatives from Citigroup’s office located at 2 International Place, Boston, Massachusetts
02110, offered or sold the Securities to Plaintiff at face-to-face meetings, including meetings in
Massachusetts, and by making telephone calls and sending documents to Plaintiff in
Massachusetts. The Citigroup sales representatives who offered or sold Securities to Plaintiff
included Douglas Meyer, John W. Murray (the manager of Citigroup’s Boston office), and David
Crean. Citigroup, Murray, and Crean are all licensed to sell securities in Massachusetts. Other
4
Citigroup representatives who offered or sold Securities to Plaintiff included investment bankers
James Demare, Matthew Cherwin, and Philip Seares (who is also licensed to sell securities in
Massachusetts). The Securities that Citigroup offered or sold to Plaintiff are listed in
Appendix B.
17. Credit Suisse Securities (USA) LLC: Defendant Credit Suisse Securities (USA)
LLC (“Credit Suisse”) is a Delaware limited liability company and an SEC-registered broker-
dealer with its principal place of business located at 11 Madison Avenue, New York, New York.
Credit Suisse representatives from Credit Suisse’s office located at 1 Federal Street, Boston,
Massachusetts 02110, offered or sold the Securities to Plaintiff at face-to-face meetings,
including meetings in Massachusetts, and by making telephone calls and sending documents to
Plaintiff in Massachusetts. The Credit Suisse sales representatives who offered or sold Securities
to Plaintiff included James “Jay” Allen (the manager of Credit Suisse’s Boston office) and
Andrew Mingle. Credit Suisse, Allen, and Mingle are all licensed to sell securities in
Massachusetts. Other Credit Suisse representatives who offered or sold Securities to Plaintiff
included syndicate manager Tricia Hazelwood and investment bankers Christopher Schoen,
Patrick Dodman, Gregory Richter, and Mark Tecotzky. The Securities that Credit Suisse offered
or sold to Plaintiff are listed in Appendix C.
18. RBS Securities, Inc., f/k/a Greenwich Capital Markets, Inc.: Defendant RBS
Securities, Inc., f/k/a Greenwich Capital Markets, Inc. (“Greenwich Capital”), is a Delaware
corporation and an SEC-registered broker-dealer with its principal place of business located at
600 Washington Boulevard, Stamford, Connecticut. Greenwich Capital representatives from
Greenwich Capital’s office located at 28 State Street, Boston, Massachusetts 02109, offered or
sold the Securities to Plaintiff at face-to-face meetings, including meetings in Massachusetts, and
by making telephone calls and sending documents to Plaintiff in Massachusetts. The Greenwich
Capital sales representatives who offered or sold Securities to Plaintiff included Christopher J.
Csrnko and Jeffrey Dimodica. Greenwich Capital, Csrnko, and Dimodica are all licensed to sell
securities in Massachusetts. Other Greenwich Capital representatives who offered or sold
5
Securities to Plaintiff included investment banker Adam Smith. The Securities that Greenwich
Capital offered or sold to Plaintiff are listed in Appendix D.
19. Deutsche Bank Securities Inc.: Defendant Deutsche Bank Securities Inc.
(“Deutsche Bank”) is a Delaware corporation and an SEC-registered broker-dealer with its
principal place of business located at 60 Wall Street, New York, New York. Deutsche Bank
representatives from Deutsche Bank’s office located at 225 Franklin Street, Boston,
Massachusetts 02110, offered or sold the Securities to Plaintiff at face-to-face meetings,
including at least one meeting in Massachusetts, and by making telephone calls and sending
documents to Plaintiff in Massachusetts. The Deutsche Bank sales representatives who offered
or sold Securities to Plaintiff included Alexandra DaCosta, Christopher Del Col, Laurence Pike,
and Chris Walter. Deutsche Bank, DaCosta, Del Col, and Pike are all licensed to sell securities
in Massachusetts. Other Deutsche Bank representatives who offered or sold Securities to
Plaintiff included syndicate managers Fred Brettschneider (who is also licensed to sell securities
in Massachusetts) and Brian Wiele, trader Greg Lippman, and investment bankers Michael
Commaroto, Paul Mangione, Joseph Swartz, and Ryan Stark. The Securities that Deutsche Bank
offered or sold to Plaintiff are listed in Appendix E.
20. Merrill Lynch, Pierce, Fenner & Smith, Inc.: Defendant Merrill Lynch, Pierce,
Fenner & Smith Incorporated (“Merrill Lynch”) a Delaware corporation and an SEC-registered
broker-dealer with its principal place of business located at One Bryant Park, New York, New
York. Merrill Lynch is a wholly owned subsidiary of Merrill Lynch & Co., which became a
wholly owned subsidiary of Bank of America Corporation on January 1, 2009. Merrill Lynch
representatives from Merrill Lynch’s office located at 1 Financial Center, Boston, Massachusetts
02111, offered or sold the Securities to Plaintiff at face-to-face meetings, including at least one
meeting in Massachusetts, and by making telephone calls and sending documents to Plaintiff in
Massachusetts. The Merrill Lynch sales representatives who offered or sold Securities to
Plaintiff included William Farrell, James Peck, and Greg St. Pierre. Merrill Lynch, Farrell, Peck,
and St. Pierre are all licensed to sell securities in Massachusetts. Other Merrill Lynch
6
representatives who offered or sold Securities to Plaintiff included investment bankers Matthew
Whalen, Paul Park, and Ketan Parekh. The Securities that Merrill Lynch offered or sold to
Plaintiff are listed in Appendix F.
21. UBS Securities LLC: Defendant UBS Securities LLC (“UBS”) is a Delaware
limited liability company and an SEC-registered broker-dealer with its principal place of
business located at 677 Washington Boulevard, Stamford, Connecticut 06901 and an office
located at 1 International Place, Boston, Massachusetts 02110. UBS offered or sold the
Securities to Plaintiff at face-to-face meetings, including meetings in Massachusetts, and by
making telephone calls and sending documents to Plaintiff in Massachusetts. The UBS sales
representatives who offered or sold Securities to Plaintiff included Blake Myers. UBS and
Myers are licensed to sell securities in Massachusetts. Other UBS representatives who offered or
sold Securities to Plaintiff included syndicate managers Jack McCleary and Richard Onkey and
investment bankers Jeffrey “Jay” Lown, Carole Mortenson, and Ketan Parekh. The Securities
that UBS offered or sold to Plaintiff are listed in Appendix G.
22. Goldman, Sachs & Co.: Defendant Goldman, Sachs & Co. (“Goldman Sachs”)
is a New York partnership and an SEC-registered broker-dealer with its principal place of
business located at 200 West Street, New York, NY 10282. Goldman Sachs maintains an office
at 125 High Street, Boston, Massachusetts 02110. Goldman Sachs offered or sold the Securities
to Plaintiff in at least one face-to-face meeting and by making telephone calls and sending
documents to Plaintiff in Massachusetts. The Goldman Sachs sales representatives who offered
or sold Securities to Plaintiff included Michael Cagnassola, Eric Feinstein, Samuel Hancock, and
Lorin Radtke. Goldman Sachs, Cagnassola, Feinstein, Hancock, and Radtke are all licensed to
sell securities in Massachusetts. Other Goldman Sachs representatives who offered or sold
Securities to Plaintiff included investment banker Kevin Gasvoda, who is also licensed to sell
securities in Massachusetts. The Securities that Goldman Sachs offered or sold to Plaintiff are
listed in Appendix H.
7
23. J.P. Morgan Securities Inc.: Defendant J.P. Morgan Securities Inc. (“J.P.
Morgan”) is a Delaware corporation and an SEC-registered broker-dealer with its principal place
of business located at 383 Madison Avenue, New York, New York 10179. J.P. Morgan is a
wholly owned subsidiary of JPMorgan Chase & Co., a financial holding company with its
principal place of business located at 270 Park Avenue, New York, New York 10017. J.P.
Morgan maintains an office at 2 International Place, Boston, Massachusetts 02110. J.P. Morgan
offered or sold the Securities to Plaintiff at face-to-face meetings, including meetings in
Massachusetts, and by making telephone calls and sending documents to Plaintiff in
Massachusetts. The J.P. Morgan sales representatives who offered or sold Securities to Plaintiff
included James McLaughlin of J.P. Morgan’s Boston office. J.P. Morgan and McLaughlin are
both licensed to sell securities in Massachusetts. Other J.P. Morgan representatives who offered
or sold Securities to Plaintiff included syndicate managers Andrew Cherna (who is also licensed
to sell securities in Massachusetts) and Brian McDonald. The Securities that J.P. Morgan offered
or sold to Plaintiff are listed in Appendix I.
24. J.P. Morgan, successor to Bear Stearns: In addition to Plaintiff’s claims based
on J.P. Morgan’s own offers or sales of Securities to Plaintiff, Plaintiff also brings claims against
J.P. Morgan as successor-in-interest to Bear Stearns & Co., Inc. (“Bear Stearns”), which was a
Delaware corporation and was an SEC-registered broker-dealer with its principal place of
business located at 383 Madison Avenue, New York, New York 10179. On October 1, 2008, J.P.
Morgan merged with and into Bear Stearns, with the surviving entity being Defendant J.P.
Morgan. Bear Stearns representatives from Bear Stearns’ office located at 1 Federal Street,
Boston, Massachusetts 02110, offered or sold the Securities to Plaintiff at face-to-face meetings,
Plaintiff in Massachusetts. The Bear Stearns sales representatives who offered or sold Securities
to Plaintiff included Daniel Kenslea, Jr., Felix Moy, Andrew Reese, and Steven Scari. Bear
Stearns was, and Kenslea, Moy, Reese, and Scarri all are, licensed to sell securities in
Massachusetts. Other Bear Stearns representatives who offered or sold Securities to Plaintiff
8
included investment bankers Scott Eichel, Keith Lind, and Chris Scott. Eichel and Lind are also
licensed to sell securities in Massachusetts. The Securities that Bear Stearns offered or sold to
Plaintiff are listed in Appendix J.
25. Countrywide Securities Corporation: Defendant Countrywide Securities

Corporation (“Countrywide”) is a California corporation with its principal place of business
located at 4500 Park Granada, Calabasas, California. Countrywide was an SEC-registered
broker-dealer during the relevant period. Countrywide was a subsidiary of Countrywide
Financial Corporation, which merged on July 1, 2008 with a wholly owned subsidiary of Bank of
America Corporation, making Countrywide an indirect wholly owned subsidiary of Bank of
America. Countrywide offered or sold the Securities to Plaintiff in Massachusetts by making
telephone calls and sending documents to Plaintiff in Massachusetts. The Countrywide sales
representatives who offered or sold Securities to Plaintiff included Matthew Kennedy, who is
licensed to sell securities in Massachusetts, and Elaine Pang. The Securities that Countrywide
offered or sold to Plaintiff are listed in Appendix K.
26. FBR Capital Markets & Co., f/k/a/ Friedman, Billings, Ramsey & Co., Inc.:
Defendant FBR Capital Markets & Co., formerly known as Friedman, Billings, Ramsey & Co.,
Inc. (“FBR”), is a Delaware corporation and an SEC-registered broker-dealer with its principal
place of business located at 1001 Nineteenth Street North, Arlington, Virginia 22209. FBR
maintains an office at 100 Federal Street, Boston, Massachusetts 02110. FBR offered or sold the
Securities to Plaintiff at face-to-face meetings, including at least one meeting in Massachusetts,
and by making telephone calls and sending documents to Plaintiff in Massachusetts. The FBR
sales representatives who offered or sold Securities to Plaintiff included John Calabrese. Other
FBR representatives who offered or sold Securities to Plaintiff included investment bankers Paul
Miller and Scott Valentin. FBR, Calabrese, Miller, and Valentin are all licensed to sell securities
in Massachusetts. The Securities that FBR offered or sold to Plaintiff are listed in Appendix L.
27. HSBC Securities (USA), Inc.: Defendant HSBC Securities (USA), Inc.
(“HSBC”) is a Delaware corporation and an SEC-registered broker-dealer with its principal place
9
of business located at 452 Fifth Avenue, New York, New York. HSBC offered or sold the
Securities to Plaintiff in Massachusetts by making telephone calls and sending documents to
Plaintiff in Massachusetts. The HSBC sales representatives who offered or sold Securities to
Plaintiff included Michael Sheldon and Wendy Horn. HSBC and Horn are licensed to sell
securities in Massachusetts. Other HSBC representatives who offered or sold Securities to
Plaintiff included investment bankers Jon Voigtman, Martin Priest, and Thomas Benz. The
Securities that HSBC offered or sold to Plaintiff are listed in Appendix M.
28. Banc of America Securities LLC: Defendant Banc of America Securities LLC
(“Banc of America”) is a Delaware limited liability company and an SEC-registered broker-
dealer with its principal place of business located at One Bryant Park, New York, New York
10036. Banc of America offered or sold the Securities to Plaintiff at face-to-face meetings,
Plaintiff in Massachusetts. Banc of America’s sales representatives who offered or sold
Securities to Plaintiff included Thomas Kanes and Kalefe Wright. Banc of America, Kanes, and
Wright are all licensed to sell securities in Massachusetts. Other Banc of America
representatives who offered or sold Securities to Plaintiff included syndicate manager Patrick
Beranek (who is also licensed to sell securities in Massachusetts) and investment bankers Chris
Henteman, Paul Jablansky (who is also licensed to sell securities in Massachusetts), and Jeff
Willoughby. The Securities that Banc of America offered or sold to Plaintiff are listed in
Appendix N.
29. Residential Funding Securities, LLC, d/b/a GMAC RFC Securities:

Defendant Residential Funding Securities, LLC, f/k/a Residential Funding Securities
Corporation (“GMAC”), is a Delaware limited liability company and an SEC-registered broker-
dealer with its principal place of business located at One Meridan Crossings, Richfield,
Minnesota 55423. Representatives of GMAC offered or sold the Securities to Plaintiff in at least
one meeting in Massachusetts and by making telephone calls and sending documents to Plaintiff
in Massachusetts. GMAC sales representatives who offered or sold Securities to Plaintiff
10
included Robert Djorup and Ted Kallina. The Securities that GMAC offered or sold to Plaintiff
are listed in Appendix O.
30. Barclays Capital Inc.: Defendant Barclays Capital Inc. (“Barclays”) is a

Connecticut corporation and an SEC-registered broker-dealer with its principal place of business
located at 745 Seventh Avenue, New York, New York 10019, and an office at 125 High Street,
Boston, Massachusetts 02110. Barclays offered or sold the Securities to Plaintiff at face-to-face
meetings, including at least one meeting in Massachusetts, and by making telephone calls and
sending documents to Plaintiff in Massachusetts. Barclays’ sales representatives who offered or
sold Securities to Plaintiff included James Hurst and Maria Palermo. Barclays and Hurst are
licensed to sell securities in Massachusetts. Other Barclays representatives who offered or sold
Securities to Plaintiff included investment bankers John Carroll and Paul Menefee. The
Securities that Barclays offered or sold to Plaintiff are listed in Appendix P.
c. The Depositor Defendants

31. To securitize and sell mortgage loans to investors, financial institutions created
SPVs to serve various roles in the securitization process. “Depositors” purchased or acquired the
mortgage loans, securitized them, and were the “issuers” of the Securities. See 17 CFR
§ 230.191. Working together with the Wall Street Banks, the Depositor Defendants set forth in
the table below prepared and circulated the registration statements, accompanying prospectuses,
and subsequent prospectus supplements, or private placement memoranda, through which the
Depositor Defendants and the Wall Street Bank Defendants offered and sold the Securities and
filed the registration statements, prospectuses, and prospectus supplements with the SEC.
Depositor Defendant, Offerings

Principal Place of Business
(State of Incorporation)
a Accredited Mortgage Loan REIT Trust, ACCR 2005-3
15253 Avenue of Science,
San Diego, CA 92128 (Maryland)
11
b Ace Securities Corporation, ACE 2005-HE2, ACE 2005-HE5, ACE
6525 Morrison Blvd., Ste. 318, 2005-HE6, ACE 2005-HE7, ACE 2006-
Charlotte, NC 28211 (Delaware) FM2, ACE 2006-HE1, ACE 2006-NC1,
ACE 2006-NC2, ACE 2006-OP1, ACE
2006-SL1, ACE 2006-SL2, ACE 2007-
HE2
c Aegis Asset Backed Securities AABST 2005-4, AABST 2005-5
Corporation, 3250 Briarpark, Ste 400,
Houston, TX 77042 (Delaware)
d Alliance Securities Corporation,1000 ALBT 2007-S1
Marina Blvd., Ste. 100, Brisbane, CA
94005 (Delaware)
e American Home Mortgage Assets LLC, AHMA 2007-3
538 Broadhollow Road, Melville, NY
11747 (Delaware)
f Ameriquest Mortgage Securities Inc., AMSI 2005-R6, AMSI 2005-R7, AMSI
1100 Town & Country Road, Orange, CA 2005-R8, AMSI 2006-R2
92868 (Delaware)
g Argent Securities Inc., 1100 Town & ARSI 2005-W2, ARSI 2005-W3, ARSI
Country Rd, Orange, CA 92868 (Delaware) 2006-W1, ARSI 2006-W3, ARSI 2006-
W5
h Asset Backed Funding Corp., 214 North ABFC 2005-HE1, ABFC 2006-OPT2
Tryon St, Charlotte, NC 28255 (Delaware)
i Asset Backed Securities Corporation, ABSHE 2005-HE1, ABSHE 2005-HE3,
11 Madison Ave., New York, NY 10010 ABSHE 2005-HE4, ABSHE 2005-HE5,
(Delaware) ABSHE 2006-HE3, ABSHE 2006-HE6,
ABSHE 2007-HE7
j Banc of America Mortgage Securities, BOAA 2006-6
Inc., 214 North Tryon St., Charlotte, NC
28255 (Delaware)
k BCAP LLC, 200 Park Avenue, BCAP 2006-6, EQLS 2007-1
New York, NY 10166 (Delaware)
12
l Bear Stearns Asset Backed Securities I AMIT 2005-1, BSABS 2005-AQ2,
LLC, 383 Madison Ave, BSABS 2005-HE10, BSABS 2005-
New York, NY 10179 (Delaware) HE4, BSABS 2005-HE8, BSABS 2005-
HE9, BSABS 2006-EC1, BSABS 2006-
EC2, BSABS 2006-HE1, BSABS 2006-
HE10, BSABS 2006-HE3, BSABS
2006-HE4, BSABS 2006-HE7, BSABS
2006-PC1, BSABS 2007-FS1, BSMF
2007-SL2, GPMF 2007-HE1, IRWHE
2005-A, SACO 2005-5, SACO 2005-7,
SACO 2005-8, SACO 2005-WM3,
SACO 2007-2
m Citigroup Mortgage Loan Trust Inc., CARR 2005-NC3, CMLTI 2005-9,
390 Greenwich Street, Fl 4, CMLTI 2005-HE1, CMLTI 2005-HE3,
New York, NY 10013 (Delaware) CMLTI 2006-HE1, CMLTI 2006-
WFH3, CMLTI 2007-FS1
n Credit Suisse First Boston Mortgage HEAT 2005-1, HEAT 2005-2, HEAT
Securities Corp., 11 Madison Ave., 2005-3, HEAT 2005-4, HEAT 2005-5,
New York, NY 10010 (Delaware) HEAT 2005-6, HEAT 2005-7, HEAT
2005-8, HEAT 2005-9, HEAT 2006-4,
HEAT 2006-7, HEMT 2005-5, HEMT
2006-2
o CWABS, Inc., 4500 Park Granada, CWL 2005-11, CWL 2006-17, CWL
Calabasas, CA 91302 (Delaware) 2006-18
p CWALT, Inc., 4500 Park Granada, CWALT 2005-82, CWALT 2005-J6
Calabasas, CA 91302 (Delaware)
q FBR Securitization, Inc., 1001 Nineteenth FBRSI 2005-5
St. North, Arlington, VA 22209 (Delaware)
r Fieldstone Mortgage Investment FMIC 2007-1
Corporation, 11000 Broken Land
Parkway, Ste 600, Columbia, MD 21044
(Maryland)
s Financial Asset Securities Corp., 600 EMLT 2005-1, FFML 2006-FF8, FHLT
Steamboat Road, Greenwich, CT 06830 2005-1, MMLT 2005-2, SVHE 2005-1,
(Delaware) SVHE 2005-A, SVHE 2005-DO1,
SVHE 2006-OPT2, SVHE 2006-OPT5
t Fremont Mortgage Securities Corp., FHLT 2005-A
2727 East Imperial Highway, Brea, CA
92821 (Delaware)
u GS Mortgage Securities Corp., 85 Broad GSAMP 2005-HE6, GSAMP 2006-
St, New York, NY 10004 (Delaware) HE6, GSAMP 2006-S1
13
v HSI Asset Securitization Corporation, FFML 2006-FF5, HASC 2005-NC2,
452 Fifth Ave, New York, NY 10018 HASC 2006-OPT3
(Delaware)
w J.P. Morgan Acceptance Corporation I, JPMAC 2005-FLD1, JPMAC 2005-
60 Wall Street, New York, NY 10260 OPT1, JPMAC 2005-OPT2, JPMAC
(Delaware) 2005-WMC1, JPMAC 2006-CH1,
JPMAC 2006-CW2, JPMAC 2006-
WMC1
x Long Beach Securities Corp., LBMLT 2005-1, LBMLT 2005-2,
1100 Town & Country Road, LBMLT 2005-WL1, LBMLT 2005-
Orange, CA 92868 (Delaware) WL2; LBMLT 2006-7, LBMLT 2006-
WL1
y Merrill Lynch Mortgage Investors, Inc., FFMER 2007-H1; MLMI 2005-AR1,
250 Vesey Street, 4 World Financial MLMI 2005-NCB, MLMI 2005-SL2,
Center, 10 Fl. New York, NY 10080 MLMI 2005-SL3, MLMI 2005-WMC1,
(Delaware) MLMI 2006-HE4, MLMI 2006-HE5,
MLMI 2006-SL1, SURF 2005-BC1
z Morgan Stanley ABS Capital I Inc., AMIT 2005-4, IXIS 2005-HE2, IXIS
1585 Broadway, New York, NY 10036 2005-HE3, IXIS 2005-HE4, IXIS 2006-
(Delaware) HE3, MSAC 2005-HE4, MSAC 2005-
NC2, MSAC 2005-WMC2, MSAC
2005-WMC3, MSAC 2005-WMC5,
MSAC 2005-WMC6, MSAC 2006-
HE3, MSAC 2007-HE3, MSHEL 2005-
1, MSHEL 2006-1, NTIX 2007-HE2
aa Morgan Stanley Capital I Inc., 1585 MSAC 2006-HE1
Broadway, New York, NY 10036
(Delaware)
bb Mortgage Asset Securitization FFML 2005-FF7, MABS 2005-FRE1,
Transactions, Inc., 1285 Ave of the MABS 2005-NC1, MABS 2006-AM2,
Americas, New York, NY 10019 MABS 2006-FRE2, MABS 2006-HE1,
(Delaware) MABS 2006-NC2, MABS 2006-WMC4
cc Nationstar Funding LLC, 550 Highland HELT 2007-FRE1
Drive, Lewisville, TX 75067 (Delaware)
dd New Century Mortgage Securities LLC, NCHET 2005-3, NCHET 2005-4,
18400 Von Karman, Irvine, CA 92612 NCHET 2005-D
(Delaware)
ee New Century Mortgage Securities, Inc., NCHET 2005-B, NCHET 2005-C
18400 Von Karman, Irvine, CA 92612
(Delaware)
ff NovaStar Mortgage Funding NHEL 2005-1, NHEL 2005-3
Corporation, 8140 Ward Parkway, Ste.
300, Kansas City, MO 64114 (Delaware)
14
gg Park Place Securities, Inc., 1100 Town & PPSI 2005-WHQ1, PPSI 2005-WHQ3
Country Rd., Orange, CA 92868
(Delaware)
hh People’s Choice Home Loan Securities PCHLT 2005-2, PCHLT 2005-4
Corp., 7515 Irvine Center Drive, Irvine,
CA 92618 (Delaware)
ii Popular ABS, Inc., 103 Springer Building, POPLR 2005-5
3411 Silverside Road, Wilmington, DE
19810 (Delaware)
jj Residential Accredit Loans, Inc., RALI 2006-QS17
8400 Normandale Lake Boulevard Ste 250,
Minneapolis, MN 55437 (Delaware)
kk Residential Asset Mortgage Products, RAMP 2005-EFC4, RAMP 2006-RZ3
Inc., 8400 Normandale Lake Boulevard Ste
250, Minneapolis, MN 55437 (Delaware)
ll Residential Asset Securities Corporation, RASC 2006-KS2, RASC 2006-KS6,
8400 Normandale Lake Boulevard Ste 250, RASC 2006-KS9
Minneapolis, MN 55437 (Delaware)
mm SACO I Inc., 383 Madison Avenue, New SACO 2005-1, SACO 2005-2, SACO
York, NY 10179 (Delaware) 2005-3, SACO 2005-4, BSSLT 2007-
SV1A
nn Saxon Asset Securities Company, 4860 SAST 2005-2, SAST 2006-3, SAST
Cox Rd., Ste. 300, Glen Allen, VA 23060 2007-2
(Virginia)
oo Securitized Asset Backed Receivables SABR 2005-FR4, SABR 2005-FR5,
LLC, 200 Park Avenue, New York, NY SABR 2006-WM2
10166 (Delaware)
pp Stanwich Asset Acceptance Company, CARR 2005-NC4, CARR 2005-NC5,
L.L.C., 9 Greenwich Office Park, CARR 2006-FRE1, CARR 2006-FRE2,
Greenwich, CT 06831 (Delaware) CARR 2006-NC2, CARR 2006-NC4,
CARR 2006-RFC1
qq Structured Asset Mortgage Investments SAMI 2005-AR6
II Inc., 383 Madison Avenue, New York,
NY 10179 (Delaware)
rr Washington Mutual Mortgage Securities WAMU 2005-AR2
Corp., 1201 Third Avenue, WMT 1706,
Seattle, WA 98101 (Delaware)
32. The Defendants identified in ¶ 31 are collectively referred to herein as the
“Depositor Defendants.”
15
IV. FACTUAL BACKGROUND
a. The Mechanics of Mortgage Securitization

33. Mortgage pass-through securities represent interests in a pool of mortgages; the
securities are shares in the pool that are sold to investors. The securities represent an equity
interest in the “issuing trust” that holds the pool. The pass-through securities entitle the holder to
payments from the pool of mortgage loans. Although the structure and underlying collateral of
the mortgages may vary, the basic principle of pass-through securities remains the same: The
cash flow from the pool of mortgages is “passed through” to the securities holders when
payments are made by the underlying mortgage borrowers.
34. The first step in creating a mortgage pass-through security is the acquisition by a
“depositor” of an inventory of loans from a “sponsor” or “seller,” which either originates the
loans or acquires the loans from other mortgage originators, in exchange for cash. The type of
loans in the inventory may vary, including conventional, fixed-rate or adjustable-rate mortgage
loans (or mortgage participations), secured by first liens, junior liens, or a combination of first
and junior liens, with various lifetimes to maturity. The depositor then transfers, or deposits, the
acquired pool of loans to an “issuing trust.”
35. The depositor then securitizes the pool of loans in the issuing trust so that the
rights to the cash flows from the inventory can be sold to investors. The securitization
transactions are structured such that the risk of loss is divided among different levels of
investment, or “tranches.” Tranches consist of multiple series of related RMBS offered as part of
the same offering, each with a different level of risk and reward. Any losses on the underlying
loans - whether due to default, delinquency, or otherwise - are generally applied in reverse order
of seniority. As such, the most senior tranches of pass-through securities are rated as the best
quality, or “AAA/Aaa.” Junior tranches, which usually obtained lower ratings, ranging from
“AA/Aa” to “BB/Bb,” are less insulated from risk, but offer greater potential returns.
36. Once the tranches are established, the issuing trust passes the securities back to
the depositor, who becomes the issuer of those securities, like the Depositor Defendants herein.
16
The depositor then passes the securities to one or more Wall Street banks, who offer and sell the
securities to investors in exchange for cash that is passed back to the depositor, minus any fees
owed to the Wall Street banks.
37. Wall Street banks play a critical role in the securitization process. They
underwrite the sale of the securities, that is, they purchase the securities from the issuing trust
through a depositor and then sell them to investors. Importantly, the Wall Street banks provide
the information that potential investors use to decide whether to purchase the securities.
38. Because the cash flow from the loans in the collateral pool of a securitization is
the source of funds to pay the holders of the securities issued by the trust, the credit quality of the
securities depends upon the credit quality of the loans in the collateral pool. The most important
information about the credit quality of the loans is contained in the “loan files” that the mortgage
originator develops while making the loans. For residential mortgage loans, each loan file
normally contains documents including the borrower’s application for the loan; verification of
the borrower’s income, assets, and employment; references; credit reports on the borrower; an
appraisal of the property that will secure the loan and provide the basis for important measures of
credit quality, such as loan-to-value ratios; and a statement of the occupancy status of the
property.
39. The collateral pool of loans for each securitization usually includes thousands of
loans. Instead of each potential investor reviewing thousands of loan files, the Wall Street banks
that underwrite the sale of the securities in a securitization are responsible for gathering,
verifying, and presenting to potential investors accurate and complete information about the
credit quality and characteristics of the loans that are deposited into the trust.
b. Securitization of Mortgage Loans: The Traditional Model

40. In the 1980s and 1990s, mortgage originators and Wall Street banks fulfilled their
respective obligations to comply with underwriting standards and provide accurate information
to investors. The mortgage securitization business, therefore, functioned well, to the benefit of
home buyers, financial institutions, and investors. For the securitization model to work properly,
17
the mortgage originators and the Wall Street banks must perform their roles properly. In
particular, it is necessary for the mortgage originators to underwrite loans and appraise properties
in accordance with their stated standards and to assure accurate information is obtained from
loan applicants. Likewise, it is necessary for the Wall Street banks to perform adequate due
diligence into the loan pools and to provide accurate information to investors.
41. In the traditional mortgage model, a mortgage originator originated loans to
borrowers, held the loans to maturity, and therefore retained the credit (default) risk. As such,
under the traditional model, the mortgage originator had a financial incentive to ensure that (1)
the borrowers had the financial ability to repay the loans, and (2) the underlying properties had
sufficient value to enable the mortgage originator to recover its principal and interest if the
borrowers defaulted on the loans.
42. Traditionally, mortgage originators financed their mortgage business primarily
using funds from depositors, retained ownership of the mortgage loans they originated, and
received a direct benefit from the income flowing from the mortgages. When a mortgage
originator held a mortgage through the term of the loan, the mortgage originator received
revenue from the borrower’s payment of interest and fees. The mortgage originator also bore the
risk of loss if the borrower defaulted and the value of the collateral was not sufficient to repay
the loan. As a result, the mortgage originator had an economic incentive to verify the borrower’s
creditworthiness through prudent underwriting and to obtain an accurate appraisal of the value of
the underlying property before issuing the mortgage loan.
43. With the advent of securitization, the traditional “originate to hold” model gave
way to the “originate to distribute” model, in which mortgage originators sell the mortgages and
transfer credit risk to investors through the issuance and sale of RMBS. Through securitization,
mortgage originators no longer hold the mortgage loans to maturity. By selling the mortgages to
investors through Wall Street banks, the mortgage originators obtain funds, enabling them to
make more loans. Securitization also enables mortgage originators to earn most of their income
from transaction and loan-servicing fees, rather than from the spread between interest rates paid
18
on deposits and interest rates received on mortgage loans as in the traditional model. Thus,
securitization gives the mortgage originators an incentive to increase the number of mortgages
they issue and reduces their incentive to ensure the mortgages’ credit quality. However, the
contractual terms of the securitization transactions and good business practices obligate
mortgage originators to underwrite loans in accordance with their stated policies and to obtain
accurate appraisals of the mortgaged properties.
44. During the 1980s and 1990s, the mortgage securitization business grew rapidly,
making it possible for mortgage originators to make more loans than would have been possible
using only the traditional primary source of funds from deposits. During that period, mortgage
originators made loans in accordance with their stated underwriting and appraisal standards and
provided accurate information about the loans, borrowers, and mortgaged properties to the Wall
Street banks that securitized the loans. In turn, the Wall Street banks provided accurate
information about the loans, borrowers, and properties to investors in the RMBS. In the 1980s
and 1990s, most mortgage securitizations were conducted through the major Government
Sponsored Enterprises (the “Agencies”), i.e., the Federal National Mortgage Association
(“Fannie Mae”), the Federal Home Loan Mortgage Corporation (“Freddie Mac”), and the
Government National Mortgage Association (“Ginnie Mae”). The Agencies purchased loans
from mortgage originators and securitized the loans. These Agency securitizations had high
credit quality because the Agencies required the underlying loans to be originated in accordance
with strict underwriting guidelines. Most non-Agency mortgage securitizations during this
period also complied with the Agencies’ underwriting standards.
c. The Systemic Violation of Underwriting and Appraisal Standards in

the Mortgage Securitization Industry
45. The securitization of mortgage loans fundamentally shifts the risk of loss from the
mortgage originator to the investors who purchase RMBS. As discussed in Section IV.b above,
traditionally, the mortgage originator had an economic incentive to verify mortgage borrowers’
creditworthiness and obtain accurate appraisals of the value of the underlying properties before
19
issuing mortgage loans because the mortgage originator held the loans to maturity. In
securitizations where the mortgage originator instead sells the loans to Wall Street banks, the
mortgage originator does not have the same economic interest in verifying borrowers’
creditworthiness or obtaining accurate appraisals in the loan origination process. Nevertheless,
the mortgage securitization process worked well during the 1980s and 1990s because both
mortgage originators and Wall Street banks played by the rules and complied with their
obligations to underwrite loans responsibly and provide accurate information to investors in
RMBS.
46. Mortgage originators began systematically to violate their stated underwriting and
appraisal standards, made loans with little or no documentation, and accepted untrue information
from loan applicants. The mortgage originators also began to provide untrue information about
their underwriting practices and about the borrowers, loans, appraisals, and mortgaged properties
in connection with the securitization of the loans. As a result of this pervasive breakdown of
compliance with proper practices among the mortgage originators, the Wall Street Banks that
securitized mortgages provided Plaintiff with untrue information about the mortgage originators’
practices and about the underlying mortgage borrowers, loans, and properties. The Wall Street
Banks also provided Plaintiff with untrue information about their own due diligence of the
mortgage originators and underlying loans.
47. To fund their loans, the mortgage originators maintained credit facilities with
warehouse lenders, including the Wall Street Banks. The Wall Street Banks loaned money to the
mortgage originators pursuant to “warehouse agreements,” so that the mortgage originators could
continue to make loans to home buyers. The mortgage originators borrowed from these credit
facilities to fund their loans, until the loans were sold and the warehouse agreement was repaid.
When loans serving as collateral lost value, the Wall Street Banks made margin calls requiring
the mortgage originators to pay cash back to the Wall Street Banks. As a result of the warehouse
arrangements between the mortgage originators and the Wall Street Banks, the Wall Street Banks
had superior access to information about the mortgage originators’ business and lending practices
20
and the mortgage loans’ characteristics and performance, including early warning signs of poor
credit quality in loans before the loans were securitized.
48. Fannie Mae and Freddie Mac provided investors in Agency-sponsored RMBS
with protection by guaranteeing that the investors would receive timely payments of principal
and interest. If the borrower for one of the underlying mortgages failed to make scheduled
principal or interest payments, the Agency that issued the RMBS would make the payments to
the trust. Because the Agencies were perceived to be backed by the federal government,
investors viewed their guarantees as essentially removing the credit risk from Agency-sponsored
RMBS.
49. Between 2001 and 2006, non-Agency loan originations and securitizations
increased dramatically, while Agency loan originations and securitizations decreased moderately,
as summarized in the following table:
2001 2006
Agency loan originations $1.433 trillion $1.040 trillion
Agency securitizations $1.087 trillion $904 billion
Non-Agency loan $680 billion $1.480 trillion

originations
Non-Agency securitizations $240 billion $1.033 trillion
(including $87.1 billion of (including $448 billion of
subprime securitizations) subprime securitizations)
Source: Inside Mortgage Finance (2007).
50. Thus, from 2001 to 2006, non-Agency loan originations grew by approximately
115%; non-Agency securitizations grew by approximately 330%; and non-Agency
securitizations of subprime loans grew by approximately 415%. According to Inside Mortgage
Finance (2009), non-Agency RMBS more than trebled in market share between 2003 and 2007,
peaking at about 38% of the market in 2006, from 6% in 2003. Another measure of the dramatic
growth of the non‐Agency RMBS market is that “[t]he amount of all outstanding mortgages held
in non‐[Agency] MBS rose notably from only $670 billion in 2004 to over $2,000 billion in
21
2006.” Financial Crisis Inquiry Commission (“FCIC”), “Preliminary Staff Report: Securitization
and the Mortgage Crisis,” April 7, 2010.
51. Starting in or about 2005, the growth in non-Agency mortgage securitizations was
accompanied by widespread violation by the mortgage originators of their stated underwriting
and appraisal standards. According to Ben S. Bernanke, Chairman of the Federal Reserve Board,
in a March 2008 speech, “[t]he deterioration in underwriting standards that appears to have
begun in late 2005 is another important factor underlying the current crisis. A large share of
subprime loans that were originated during this time feature high combined loan-to-value ratios
and, in some cases, layers of additional risk factors, such as a lack of full documentation or the
acceptance of very high debt-to-income ratios.” The loan-to-value (“LTV”) ratio is a significant
measure of credit risk, because both the likelihood of default and the severity of loss are higher
when borrowers have less equity to protect in the event of foreclosure. The debt-to-income ratio
is also a significant measure of credit risk, because borrowers who incur debt that is relatively
high compared to their income are more likely to default on their loans. In its March 2008
Policy Statement on Financial Market Developments, the President’s Working Group on
Financial Markets concluded that “[t]he turmoil in financial markets clearly was triggered by a
dramatic weakening of underwriting standards for U.S. subprime mortgages, beginning in late
2004 and extending into early 2007.” (Emphasis in original.) As U.S. housing prices
subsequently declined, the delinquency rates for such mortgages soared.
52. An important aspect of the mortgage originators’ violation of their stated
underwriting standards was their reliance on faulty appraisals. According to the April 7, 2010
FCIC testimony of Richard Bitner, a former executive of a subprime mortgage originator for 15
years and the author of the book Confessions of a Subprime Lender, “the appraisal process [was]
highly susceptible to manipulation, lenders had to conduct business as though the broker and
appraiser couldn’t be trusted, [and] either the majority of appraisers were incompetent or they
were influenced by brokers to increase the value.” He continued:
22
To put things in perspective, during my company’s history, half of all the loans
we underwrote were overvalued by as much 10%. This meant one out of two
appraisals were still within an acceptable tolerance for our end investors. Our
experience showed that 10% was the most an appraisal could be overvalued and
still be purchased by these investors. Another quarter that we reviewed were
overvalued by 11-20%. These loans were either declined or we reduced the
property value to an acceptable tolerance level. The remaining 25% of appraisals
that we initially underwrote were so overvalued they defied all logic. Throwing a
dart at a board while blindfolded would’ve produced more accurate results.1
53. Mr. Bitner testified about the implications of inflated appraisals:

If multiple properties in an area are overvalued by 10%, they become comparable
sales for future appraisals. The process then repeats itself. We saw it on several
occasions. We’d close a loan in January and see the subject property show up as
a comparable sale in the same neighborhood six months later. Except this time,
the new subject property, which was nearly identical in size and style to the home
we financed in January, was being appraised for 10% more. Of course, demand is
a key component to driving value, but the defective nature of the appraisal process
served as an accelerant. In the end, the subprime industry’s willingness to
consistently accept overvalued appraisals significantly contributed to the run-up
in property values experienced throughout the country.
* * *
If the appraisal process had worked correctly, a significant percentage of

subprime borrowers would’ve been denied due to a lack of funds. Inevitably, this
would have forced sellers to drop their exorbitant asking prices to more
reasonable levels. The rate of property appreciation experienced on a national
basis from 1998 to 2006 was not only a function of market demand, but was due,
in part, to the subprime industry’s acceptance of overvalued appraisals, coupled
with a high percentage of credit-challenged borrowers who financed with no
money down.
Mr. Bitner testified that the engine behind the increased malfeasance was the Wall
Street Banks: “[T]he demand from Wall Street investment banks to feed the
securitization machines coupled with an erosion in credit standards led the
industry to drive itself off the proverbial cliff.”
54. Patricia Lindsay, a wholesale underwriter for 10 years at New Century Financial
Corporation, testified before the FCIC on April 7, 2010, about the fraudulent practices of New
Century’s appraisers:
The role and practices of appraisers in subprime mortgage origination:
1 Throughout this Complaint, emphasis in quotations is added except where otherwise noted.
23
Properly valuing a property . . . is one of the most important components in a
loan. In my experience at New Century, fee appraisers hired to go to the
properties were often times pressured into coming in “at value”, fearing if they
didn’t, they would lose future business and their livelihoods. They would charge
the same fees as usual, but would find properties that would help support the
needed value rather than finding the best comparables to come up with the most
accurate value. Some appraisers would take boards off boarded up windows, to
take the needed photos, then board the properties back up once the shots were
taken. Or they would omit certain important elements of a property by angling
the camera a certain way or zooming close in to make the property look the best
possible. This level of appraiser activism compromises their objectivity.
55. Alan Hummel, Chair of the Appraisal Institute, testified before the Senate
Committee on Banking that the dynamic between mortgage originators and appraisers created a
“terrible conflict of interest” where appraisers “experience[d] systemic problems of coercion”
and were “ordered to doctor their reports” or they might be “placed on exclusionary or ‘do-not-
use’ lists.”
56. A 2007 survey of 1,200 appraisers conducted by October Research Corp., which
publishes Valuation Review, found that 90% of appraisers reported that mortgage brokers and
others pressured them to raise property valuations to enable deals to go through. This figure was
nearly double the findings of a similar study conducted just three years earlier. The 2007 study
also “found that 75% of appraisers reported ‘negative ramifications’ if they did not cooperate,
alter their appraisal, and provide a higher valuation.” Adding to these problems was the fact that
lenders were generally unable to assess the accuracy of the appraisals for loans originated by
mortgage brokers, since the lenders were typically located far from the properties and knew little
about the properties’ neighborhoods.
57. In addition, the mortgage securitization process was undermined by the
widespread industry practice of originating types of loans that were inherently risky and
extremely susceptible to delinquencies and default, including (1) stated income loans, where both
the income and assets of the borrower were taken as stated on the credit application without
verification; (2) “NINA” or No Income, No Asset loans, which were made without any
24
disclosure of the borrower’s income or assets; and (3) “No Doc” loans, which were made to
borrowers who did not disclose their income, assets, or employment history.
d. The Wall Street Banks Conduct Less Due Diligence

58. As the Wall Street Banks that profited from securitizations sought increasing
volumes of mortgage loans from mortgage originators, the mortgage originators gained
bargaining power over the terms on which they would sell the loans. Mortgage originators
demanded that the Wall Street Banks limit quality control reviews (i.e., due diligence) to smaller
percentages of loans prior to purchase. Additionally, if a Wall Street Bank chose to “kick out” a
large number of loans from a pool – because the loans failed to conform to the mortgage
originators’ underwriting guidelines or did not contain adequate documentation – the Wall Street
Bank risked being excluded from future loan purchases. As a result, the Wall Street Banks
performed increasingly cursory due diligence on the mortgage loans they securitized. The sheer
volume and pace of the securitization business during this period exacerbated such failures.
59. The Wall Street Banks often acquired large quantities of loans for securitization
from “loan auctions.” There, mortgage originators provided the Wall Street Banks with Bid
Stipulation Sheets (“Bid Sheets”) which stated the times and dates of the auctions and described
the general characteristics of the loan pools. The Bid Sheets also dictated: (1) the percentage of
the pool on which the Wall Street Banks would be permitted to conduct due diligence (e.g.,
25%); and (2) the number of loans the Wall Street Banks could “kick-out” due to borrower
deficiencies, payment delinquencies, early payment defaults, lack of requisite legal
documentation, and similar deficiencies. Prior to bid submission, mortgage originators also sent
the Wall Street Banks spreadsheets known as “Loan Tapes” which typically contained 50 to 100
columns of data regarding the loans. The Wall Street Banks were supposed to “crack” the Loan
Tapes, analyze them, and determine what prices to bid for the loan pools. Once this “bid
package” analysis was complete, the Wall Street Banks submitted their bids.
60. If the mortgage originator accepted a bid, the Wall Street Bank typically had a
short period of time prior to the settlement date (when cash was paid to the mortgage originator
25
for the loans) to conduct due diligence on the loans. The Wall Street Banks generally used their
own investment bankers to conduct due diligence. Many of the Wall Street Banks also hired
third-party due diligence firms such as Clayton Holdings, Inc. (“Clayton”) or the Bohan Group
(“Bohan”) to conduct this review under the supervision of the Wall Street Banks’ investment
bankers. Clayton’s Form 10-K filed March 14, 2008 specifically identified Wall Street Bank
Defendants Morgan Stanley and Deutsche Bank among its clients. Bohan’s clients included Bear
Stearns (predecessor-in-interest to Wall Street Bank Defendant J.P. Morgan Securities) and Wall
Street Bank Defendant Merrill Lynch.
61. For each loan pool, Clayton and Bohan reviewed the percentage of loans
designated in the Bid Sheet to ensure, inter alia, that the loans: (1) conformed to the mortgage
originators’ underwriting guidelines; (2) contained loan data matching the loan data in the Loan
Tape; and (3) contained the appropriate mortgage documents. Upon completion of the review,
Clayton and Bohan sent the Wall Street Bank a “due diligence report,” which it was supposed to
use to decide which loans should be “kicked out” of the pool prior to the settlement date. Wall
Street Banks, however, were incentivized to kick-out as few loans as possible because, as
explained above, (1) mortgage originators would not invite Wall Street Banks that consistently
kicked out large numbers of loans to future auctions; and (2) the securitization became smaller as
loans were kicked out, thus decreasing the underwriting fee.
62. As a result, the percentage of loans per pool that Clayton and Bohan were
instructed to review declined with time. Frank P. Filipps, Clayton’s chairman and CEO, stated
that “[e]arly in the decade, a securities firm might have asked Clayton to review 25% to 40% of
the sub-prime loans in a pool, compared with typically 10% in 2006.” Bohan President Mark
Hughes stated, “[b]y contrast, loan buyers who kept the mortgages as an investment instead of
packaging them into securities would have 50% to 100% of the loans examined.”
63. In June 2007, New York Attorney General Andrew Cuomo (“NYAG”)
subpoenaed documents from Clayton and Bohan related to their due diligence efforts. The
NYAG’s investigation focused on whether Wall Street banks failed to adequately disclose the
26
warnings they received regarding the number of loans that failed to meet lending guidelines.
Clayton also received an information request from the SEC and information subpoenas from the
Massachusetts and Connecticut Attorneys General.
64. On January 12, 2008, in an article entitled “Inquiry Focuses on Withholding of
Data on Loans,” the New York Times reported:

An investigation into the mortgage crisis by New York State prosecutors is now
focusing on whether Wall Street banks withheld crucial information about the
risks posed by investments linked to subprime loans. Reports commissioned by
the banks raised red flags about high-risk loans known as exceptions, which failed
to meet even the lax credit standards of subprime mortgage companies and the
Wall Street firms. But the banks did not disclose the details of these reports to
credit-rating agencies or investors. The inquiry, which was opened last summer
by New York’s attorney general, Andrew M. Cuomo, centers on how the banks
bundled billions of dollars of exception loans and other subprime debt into
complex mortgage investments.
65. On January 27, 2008, Clayton revealed that it had entered into an agreement with
the NYAG for immunity from civil and criminal prosecution in New York in exchange for
providing documents and testimony regarding its due diligence reports. That same day, in an
article entitled “Loan Reviewer Aiding Inquiry Into Big Banks,” the New York Times reported
that a person familiar with the NYAG’s investigation stated that as demand for loans surged,
mortgage originators were in a superior bargaining position and required that Wall Street Banks
have Clayton and other consultants review fewer loans. Incredibly, “investment banks directed
Clayton to halve the sample of loans it evaluated in each portfolio.”
66. On March 17, 2008, in an article entitled “Sub-Prime mortgage watchdogs kept
on leash; loan checkers say their warnings of risk were met with indifference,” the Los Angeles
Times reported that Clayton and Bohan employees (including eight former loan reviewers who
were interviewed for the article) “raised plenty of red flags about flaws [in subprime home loans]
so serious that mortgages should have been rejected outright – such as borrowers’ incomes that
seemed inflated or documents that looked fake – but the problems were glossed over, ignored or
stricken from reports.”
27
e. Plaintiff’s Acquisition of the Securities
67. Plaintiff, located in Massachusetts, was responsible for the sourcing, review,
analysis, and purchase decisions for the U.S. investments for the Clients, and made the decision
in Massachusetts to purchase the Securities on behalf of the Clients. At all relevant times,
Plaintiff had numerous employees in Concord, Massachusetts, and Plaintiff continues to have
employees in Concord.
68. Plaintiff decided to purchase each Security on behalf of the Clients on the basis of
the information contained in the applicable registration statement, prospectus, and prospectus
supplements filed with the SEC or the applicable private placement memorandum (the “Offering
Documents”), as identified in Appendices A-P, and based on additional information provided to
Plaintiff by the Wall Street Bank Defendants, as described below. In connection with their offers
or sales of the Securities to Plaintiff, the Wall Street Bank Defendants sent to Plaintiff’s office in
Massachusetts the Offering Documents and additional documents, such as statistical tables to be
included in the prospectus supplements. These documents included term sheets, pooling and
servicing agreements, data, computational material, data regarding the LTV and debt-to-income
ratios of the pools, computer models of the financial structures of the securitizations, tabular
sensitivity data, loan tapes, rating agency expected loss levels, emails, sampling data regarding
credit/compliance/appraisal and due diligence, “kickout” criteria and data, and collateral
characteristics. (“Kickout” refers to the mortgage originator’s contractual obligation under the
terms of the securitization transaction documents to repurchase or replace any mortgage loan that
had deficient documentation, an uncured material breach of a representation or warranty, a
payment default within a specified time period, or other specified deficiencies.)
69. These documents contained numerous statements of material facts about the
Securities, including statements concerning: (1) the mortgage originators’ underwriting
guidelines that were purportedly applied to evaluate the ability of the borrowers to repay the
loans underlying the Securities; (2) the appraisal guidelines that were purportedly applied to
evaluate the value and adequacy of the mortgaged properties as collateral; (3) the LTV ratios,
28
debt to income ratios, and purported occupancy status of the mortgaged properties, including
whether the properties were “owner occupied,” “second homes,” or “investment properties”; (4)
the Wall Street Banks’ due diligence of the loans and the mortgage originators’ underwriting
practices; and (5) various forms of credit enhancement applicable to certain tranches of
Securities. For example, one form of credit enhancement is overcollateralization, which means
that the total principal balance of the mortgage loans in the pool for a securitization (and
therefore presumably the total value of the underlying properties) exceeds the aggregate amount
of Securities issued and sold in the securitization. Another example of credit enhancement is
excess interest, which means that the amount of interest collected on the mortgage loans
underlying a securitization for each payment period is expected to be higher than the interest
distributable on the Securities and fees and expenses payable by the trust for that period; excess
interest may be applied both to absorb any interest shortfalls and to pay principal on the
Securities to the extent needed to maintain the required level of overcollateralization.
70. These statements of material facts were untrue because: (1) the mortgage
originators violated their stated underwriting guidelines and did not consistently evaluate the
borrowers’ ability to repay the loans; (2) inflated appraisals caused the listed LTV ratios and
levels of credit enhancement to be untrue; and (3) the actual numbers of riskier “second home”
and “investment property” mortgagees were higher than the stated numbers. In addition, metrics
such as debt-to-income ratios were untrue as a result of the mortgage originators’ acceptance of
untrue information from mortgage applicants. For example, the mortgage originators allowed
applicants for “stated income” loans to provide untrue income information and did not verify the
applicants’ purported income. Stated income loans were therefore widely known among
personnel of the mortgage originators as “liar loans.”
71. Often at meetings, including meetings in Massachusetts, the Wall Street Bank
Defendants also showed Plaintiff “pitch books” and other materials regarding the credit quality
of the Securities and the Wall Street Banks’ due diligence of the mortgage originators’
underwriting practices. Plaintiff, however, was not allowed to keep the pitch books. These pitch
29
books and other materials contained untrue statements similar to those described above. In
addition to the untrue statements and omissions in the documents provided or shown to Plaintiff,
the Wall Street Bank Defendants made additional untrue oral statements to Plaintiff during face-
to-face meetings and by telephone between 2005 and 2007. The representatives of the Wall
Street Bank Defendants who offered or sold the Securities to Plaintiff received compensation
based, directly or indirectly, on the volume of Securities they sold to investors, including the
Clients on whose behalf Plaintiff purchased Securities.
V. THE OFFERING DOCUMENTS CONTAINED UNTRUE STATEMENTS OF

MATERIAL FACTS AND OMISSIONS ABOUT THE MORTGAGE
ORIGINATORS’ UNDERWRITING STANDARDS AND PRACTICES
72. Most of the mortgage loans underlying the Securities purchased by Plaintiff on
behalf of the Clients came from the following eight mortgage originators (the “Mortgage
Originators”): New Century Mortgage Corp. (“New Century”), Long Beach Mortgage Company
(“Long Beach”), Washington Mutual (“WaMu”), Fremont Investment & Loan (“Fremont”),
WMC Mortgage Corporation (“WMC”), Argent Mortgage Company (“Argent”), Ameriquest
Mortgage (“Ameriquest”), and Option One Mortgage Corporation (“Option One”). Together
with Defendant Countrywide, which originated most of its own mortgage loans through its
affiliates, these eight Mortgage Originators accounted for approximately 70% of the loans
underlying the RMBS purchased by Plaintiff on behalf of the Clients. The remaining 30% of the
loans were originated by approximately 80 other mortgage originators. On information and
belief, the types of violations of underwriting and appraisal standards that are alleged below
specifically with respect to each of the eight larger Mortgage Originators were also prevalent
among the other, smaller mortgage originators.
73. All eight of these large Mortgage Originators have now failed, and numerous
consumer and securities fraud cases – both private and regulatory – have been lodged against
them. In an April 8, 2010 statement by John C. Dugan, Comptroller of the Currency, before the
FCIC, these Mortgage Originators were identified among the “Worst Ten in the Worst Ten,” a list
of the worst mortgage originators based on the number of foreclosures in the nation’s worst ten
30
metro areas (all except for WaMu, but WaMu’s subsidiary Long Beach was on the “Worst Ten”
list). During the time that Plaintiff, on the Clients’ behalf, was purchasing Securities from the
Wall Street Banks that contained mortgage loans provided by these Mortgage Originators, (1) the
Mortgage Originators violated their stated underwriting standards when issuing loans to
borrowers; (2) the underlying mortgages were based on appraisals that overstated the value of the
mortgaged properties and therefore understated the LTV ratios of the mortgage loans; and (3)
these underwriting deficiencies rendered the mortgage loans far less valuable and far riskier than
disclosed. As a result, the Securities that were issued by the Depositor Defendants and offered or
sold by the Wall Street Bank Defendants were backed by mortgage collateral that was much less
valuable and posed a significantly greater risk of delinquencies, foreclosures, and other forms of
default than the Wall Street Banks stated to Plaintiff.
a. New Century Mortgage Corporation

New Century’s Underwriting Standards and Practices
74. New Century originated Mortgage Loans that were included in the pools for the
following offerings:
Offering Depositor Defendant Wall Street Bank Defendant

CARR 2005-NC4 Carrington Mortgage Loan Trust Bear Stearns
CARR 2005-NC3 Carrington Mortgage Loan Trust Citigroup
ABSHE 2005-HE1 Asset Backed Securities Corp. Home Credit Suisse
Equity
Equity
ACE 2006-HE1 Ace Securities Corp. Deutsche Bank
ACE 2006-NC1 Ace Securities Corp. Deutsche Bank
ACE 2006-NC2 Ace Securities Corp. Deutsche Bank
ACE 2006-SL1 Ace Securities Corp. Deutsche Bank
NCHET 2005-4 New Century Home Equity Loan Deutsche Bank
Trust
31
IXIS 2005-HE4 IXIS Real Estate Capital Trust Morgan Stanley
SVHE 2005-B SoundView Home Loan Trust Greenwich Capital
HASC 2005-NC2 HSI Asset Securitization Corporation HSBC
Trust
MLMI 2005-NCB Merrill Lynch Mortgage Investors Merrill Lynch
MSAC 2005-NC2 Morgan Stanley ABS Capital I Morgan Stanley
MSAC 2006-HE3 Morgan Stanley ABS Capital I Morgan Stanley
NCHET 2005-3 New Century Home Equity Loan Morgan Stanley
Trust
NCHET 2005-B New Century Home Equity Loan Morgan Stanley
Trust
NCHET 2005-C New Century Home Equity Loan Morgan Stanley
Trust
NCHET 2005-D New Century Home Equity Loan Morgan Stanley
Trust
NTIX 2007-HE2 Natixis Real Estate Capital Trust Morgan Stanley
MABS 2005-NC1 MASTR Asset Backed Securities UBS
Trust
MABS 2006-NC2 MASTR Asset Backed Securities UBS
Trust
75. Defendants offered or sold to Plaintiff approximately $286.3 million of Securities
for which New Century originated some or all of the underlying mortgage loans.
76. The Offering Documents for these Securities all contained substantially similar, if
not identical, statements of material fact regarding New Century’s underwriting standards and
practices. For example, the prospectus supplement for Asset-Backed Securities Corporation
Home Equity Loan Trust, ABSHE Series 2005-HE4 stated:

The New Century Underwriting Guidelines are primarily intended to assess the
borrower’s ability to repay the mortgage loan, to assess the value of the
mortgaged property and to evaluate the adequacy of the property as collateral for
the mortgage loan. All of the mortgage loans in the mortgage pool were also
underwritten with a view toward the resale of the mortgage loans in the secondary
mortgage market. While the originator’s primary consideration in underwriting
a mortgage loan is the value of the mortgaged property, the originator also
32
considers, among other things, a mortgagor’s credit history, repayment ability
and debt service-to-income ratio, as well as the type and use of the mortgaged
property.
* * *
The mortgage loans will have been originated in accordance with the
underwriting guidelines. On a case-by-case basis, exceptions to the underwriting
guidelines are made where compensating factors exist. It is expected that a
substantial portion of the Mortgage Loans will represent these exceptions.
* * *
Exceptions. As described above, the foregoing categories and criteria are

guidelines only. On a case by case basis, it may be determined that an applicant
warrants a debt service-to-income ratio exception, a pricing exception, a loan-to-
value ratio exception, an exception from certain requirements of a particular risk
category, etc. An exception may be allowed if the application reflects
compensating factors, such as: low loan-to-value ratio; pride of ownership; a
maximum of one 30 day late payment on all mortgage loans during the last 12
months; and stable employment or ownership of current residence of four or more
years. An exception may also be allowed if the applicant places a down payment
through escrow of at least 20% of the purchase price of the mortgaged property or
if the new loan reduces the applicant’s monthly aggregate mortgage payment by
25% or more. Accordingly, a mortgagor may qualify in a more favorable risk
category than, in the absence of compensating factors, would satisfy only the
criteria of a less favorable risk category. It is expected that a substantial portion
of the Mortgage Loans will represent these kinds of exceptions.
77. The relevant Offering Documents also contained statements of material fact about
the information contained in New Century’s loan files. For example, the same prospectus
supplement stated:
Each applicant completes an application which includes information with respect
to the applicant’s liabilities, income, credit history, employment history and
personal information. The underwriting guidelines require a credit report on each
applicant from a credit reporting company. The report typically contains
information relating to matters such as credit history with local and national
merchants and lenders, installment debt payments and any record of defaults,
bankruptcies, repossessions or judgments.
78. The relevant Offering Documents also contained statements of material fact about
New Century’s appraisal standards and practices. For example, the same prospectus supplement
stated:
33
Mortgaged properties that are to secure mortgage loans are appraised by qualified
independent appraisers. These appraisers inspect and appraise the subject
property and verify that the property is in acceptable condition. Following each
appraisal, the appraiser prepares a report which includes a market value analysis
based on recent sales of comparable homes in the area and, when deemed
appropriate, replacement cost analysis based on the current cost of constructing a
similar home. All appraisals are required to conform to the Uniform Standards
of Professional Appraisal Practice adopted by the Appraisal Standards Board of
the Appraisal Foundation and are on forms acceptable to Fannie Mae and
Freddie Mac. The underwriting guidelines require a review of the appraisal by a
qualified employee of the originator or by an appraiser retained by the originator.
79. These statements are substantially similar, if not identical, to statements
concerning New Century’s appraisal standards and practices found in the other Prospectus
Supplements for the Securities whose underlying mortgage loans were originated by New
Century.
80. The above statements of material facts were untrue when made because, as
explained below in ¶¶ 81-95, they failed to disclose that New Century: (i) systematically failed to
follow its stated underwriting standards; (ii) allowed pervasive exceptions to its stated
underwriting standards in the absence of compensating factors; (iii) disregarded credit quality in
favor of generating increased loan volume; and (iv) violated its stated appraisal standards and in
many instances materially inflated the values of the underlying mortgaged properties in the loan
origination and underwriting process.
2. New Century Violated Its Stated Underwriting Standards

81. Defendants J.P. Morgan (as successor-in-interest to Bear Stearns), Citigroup,
Credit Suisse, Deutsche Bank, Goldman Sachs, Greenwich Capital, HSBC, Merrill Lynch,
Morgan Stanley, and UBS offered or sold to Plaintiff Securities containing loans originated by
New Century and made untrue statements to Plaintiff about New Century’s underwriting and
appraisal standards and practices and the loans underlying the Securities. These Wall Street
Banks had extensive business relationships with New Century, had access to New Century’s
mortgage origination personnel and internal information, and conducted due diligence into New
Century using their own personnel and third-party loan review firms. As a result of the Wall
34
Street Banks’ access to and due diligence into New Century, they were or reasonably should have
been aware of the untruth of the statements about New Century described above.
82. The court-appointed Bankruptcy Examiner issued a detailed report explaining
how New Century’s “brazen obsession” with loan originations undermined sound underwriting
standards. Moreover, New Century’s officers are the targets of both a civil class action and a
regulatory action brought by the SEC based on their knowledge of and perpetuation of these
practices, and allegations of New Century’s deficient underwriting practices have been endorsed
by several courts. New Century topped the Comptroller of the Currency’s list of the “Worst Ten
in the Worst Ten,” discussed above.
83. Once one of the nation’s largest mortgage origination companies, New Century
collapsed and filed for bankruptcy on April 2, 2007. Formed in 1996, New Century grew rapidly
to become one of the country’s largest subprime lenders, reporting $56.1 billion of total
mortgage originations and purchases in 2005 alone. Beginning in 2003, New Century secretly
loosened its own underwriting standards and made unjustified exceptions to those already
severely weakened standards. These allegations have been substantiated by many sources, as
discussed below.
84. On February 29, 2008, following New Century’s bankruptcy, Michael J. Missal,
the Bankruptcy Court Examiner for New Century, issued a detailed report on the various
deficiencies at New Century, including lax mortgage origination standards. The Examiner’s
report detailed “serious loan quality issues at [New Century] beginning as early as 2004”;
numerous “red flags” relating to loan quality; and the failure of New Century’s senior
management and board of directors to devote sufficient attention to improving loan quality until
it “was too late to prevent the consequences of longstanding loan quality problems in an
adversely changing market.”
85. During the course of his investigation, the Examiner conducted 110 interviews of
85 witnesses and reviewed millions of pages of documents from New Century, its outside
auditors, and others. In his 550-page Final Report, the Examiner concluded that:
35
• “New Century had a brazen obsession with increasing loan originations,
without due regard to the risks associated with that business strategy.
Loan originations rose dramatically in recent years, from approximately
$14 billion in 2002 to approximately $60 billion in 2006. The Loan
Production Department was the dominant force within the Company and
trained mortgage brokers to originate New Century loans in the aptly
named “CloseMore University.” Although a primary goal of any
mortgage banking company is to make more loans, New Century did so in
an aggressive manner that elevated the risks to dangerous and ultimately
fatal levels.” (Examiner’s Report, at 3.)
• “The increasingly risky nature of New Century’s loan originations created

a ticking time bomb that detonated in 2007. Subprime loans can be
appropriate for a large number of borrowers. New Century, however,
layered the risks of loan products upon the risks of loose underwriting
standards in its loan originations to high risk borrowers.” Id.
• “New Century also made frequent exceptions to its underwriting

guidelines for borrowers who might not otherwise qualify for a particular
loan. A Senior Officer of New Century warned in 2004 that the ‘number
one issue is exceptions to guidelines.’ Moreover, many of the appraisals
used to value the homes that secured the mortgages had deficiencies. Of
the New Century loans rejected by investors, issues with appraisals were
the cause of more than 25% of these ‘kick-outs.’” Id. at 3-4.
• “Senior Management turned a blind eye to the increasing risks of New

Century’s loan originations and did not take appropriate steps to manage
those risks. . . .” Id. at 4.
• “Senior Management was aware of an alarming and steady increase in

early payment defaults (‘EPD’) on loans originated by New Century,
beginning no later than mid- 2004. The surge in real estate prices slowed
and then began to decrease, and interest rates started to rise. The changing
market conditions exacerbated the risks embedded in New Century's
products, yet Senior Management continued to feed eagerly the wave of
investor demands without anticipating the inevitable requirement to
repurchase an increasing number of bad loans. Unfortunately, this wave
turned into a tsunami of impaired and defaulted mortgages.” Id. at 4.
86. The Examiner highlighted the severity of New Century’s improper conduct: “The
Examiner recognizes that the subprime mortgage market collapsed with great speed and
unprecedented severity, resulting in all of the largest subprime lenders either ceasing operations
or being absorbed by larger financial institutions. Taking these events into consideration and
attempting to avoid inappropriate hindsight, the Examiner concludes that New Century engaged
36
in a number of significant improper and imprudent practices related to its loan originations,
operations, accounting and financial reporting processes.”
87. According to Confidential Witness (“CW”) 1, a former New Century fraud
investigator and senior loan underwriter employed from January 1999 until April 2007 and who
examined numerous New Century mortgage loans, New Century’s problems began when it
“started to abandon prudent underwriting guidelines” at the end of 2003 in order to “push more
loans through” the system. According to CW 1, New Century, in effect, “stopped underwriting”
and adopted an approach that the Company would be “okay if [it] could out run [its] delinquency
rate.”
88. According to CW 2, a former New Century Senior Vice President employed from
July 2005 until April 2006 in Irvine, California, New Century could only meet its increasing
year-over-year sales projections by reducing the underwriting standards. According to CW 2, in
his position as Senior Vice President of New Century, he would approve just about any loan
under New Century’s “weak” underwriting standards.
89. According to CW 3, a former New Century underwriting unit manager employed
from 1998 through October 2006, underwriting standards were loosened in order to increase
sales volume. According to CW 3, exceptions to New Century’s underwriting standards were
“the norm” and employees were told to make loans “work.” At one meeting in the late spring of
2006, CW 3 and other underwriters were told by their operations manager that the underwriters
had to do what was necessary to increase volume.
90. Many lenders across the country allowed the sales personnel or account
executives at their retail or in-house origination facilities to order and control appraisals and the
appraisal process. According to CW 4, a former New Century underwriter employed by the
Company from May 2005 to March 2006 in Itasca, Illinois and, previously, from 2000 until 2003
in Cincinnati, Ohio, as an underwriter for New Century, he could not recall the last loan that he
looked at that did not have an exception; he handled close to 200 loans a month; and nearly every
loan had an exception such as debt ratio exceptions or loan-to-value exceptions. According to
37
CW 4, “the guidelines were thrown against a wall,” underwriters were instructed to “dig deep” in
order to make loans work, and all decisions were volume driven. According to CW 4, appraisals
even if turned down, were often accepted later as branch or regional sales managers “gave them
hell” for rejecting appraisals. According to CW 4, he was told by his superiors that New Century
was a volume based company and that New Century needed to increase its volume to outrun
“shrinkages” in the secondary market.
91. On May 7, 2007, the front page of the Washington Post reported “Pressure at
Mortgage Firm Led to Mass Approval of Bad Loans.” The Washington Post reported that a
former New Century appraiser Maggie Hardiman recounted that “[y]ou didn’t want to turn away
a loan because all hell would break loose,” and when she did reject a loan, “her bosses often
overruled her and found another appraiser to sign off on it.”
92. On March 12, 2007, USA Today reported that, one day after New Century “said its
lenders were cutting off financing because it didn’t have enough money, or prospects of new
assistance, to cover billions of dollars in obligations,” New Century disclosed that the SEC was
investigating the company. USA Today also reported that “New Century also said Tuesday that it
has received a grand jury subpoena requesting documents. The request is part of the U.S.
Attorney in Los Angeles’ criminal probe into the company.” On May 1, 2007, the New York
Times (Today in Business) reported that New Century was facing investigations by both federal
prosecutors and securities regulators, and on July 6, 2007, Reuters reported that the SEC had
elevated its investigation of New Century to “formal status” which “gives the SEC subpoena
power.”
93. On December 7, 2009, the SEC charged three of New Century’s top officers with
violations of the federal securities laws, and claimed that “New Century’s business was anything
but ‘good’ and it soon became evident that its lending practices, far from being ‘responsible,’
were the recipe for financial disaster.” SEC Complaint, ¶ 3. The SEC Complaint further details
the falsity of New Century’s assurances to the market about its “adhere[nce] to high origination
standards in order to sell [its] loan products in the secondary market,” and its policy to “only
38
approve subprime loan applications that evidence a borrower’s ability to repay the loan.” Id., ¶¶
19-20.
94. New Century’s systematic disregard for its underwriting guidelines led to
dramatic downgrades of the value of the Securities in which New Century acted as a mortgage
originator. On December 6, 2007, the New York Times reported that “[l]oans made by New
Century, which filed for bankruptcy protection …, have some of the highest default rates in the
industry. . . , according to data from Moody’s Investor Services.”
95. Allegations of New Century’s dismal underwriting have been sustained by Courts
in similar actions. For example, in New Jersey Carpenters Health Fund v. DLJ Mortgage
Capital, Inc., et al., an investor brought class claims against the dealer, issuer, and underwriter of
RMBS containing collateral loans underwritten by New Century, alleging that New Century
failed to comply with its “loan-approval oversight and control mechanisms as represented in [its]
underwriting guidelines.” The court substantially denied defendants’ motion to dismiss, holding
that the complaint properly alleged “systemic borrower defaults, complete lack of controls and
oversight, and flagrant violations of the Guidelines,” and that New Century, along with the dealer
and issuer defendants, “acted with reckless abandon in their zeal to generate loan volume and
profits.”
b. Long Beach Mortgage Company

Long Beach’s Underwriting Standards and Practices
96. Long Beach Mortgage Company (“Long Beach”) originated mortgage loans that
were included in the pools for the following offerings:

GSAMP 2006-S1 GS Mortgage Securities Corp. Goldman Sachs
LBMLT 2005-1 Long Beach Mortgage Loan Trust Greenwich Capital
LBMLT 2005-2 Long Beach Mortgage Loan Trust Goldman Sachs
LBMLT 2005-WL1 Long Beach Mortgage Loan Trust Greenwich Capital
LBMLT 2005-WL2 Long Beach Mortgage Loan Trust Credit Suisse
39
LBMLT 2006-7 Long Beach Mortgage Loan Trust Goldman Sachs
LBMLT 2006-WL1 Long Beach Mortgage Loan Trust Goldman Sachs
for which Long Beach originated some or all of the underlying mortgage loans.
98. The Offering Documents all contained substantially similar, if not identical,
statements of material facts regarding Long Beach’s underwriting standards and practices. For
example, prospectus supplement ACE 2006-SL2 stated:

All of the mortgage loans owned by the trust that have been originated by Long
Beach, have been originated by Long Beach through wholesale brokers or re-
underwritten upon acquisition from correspondents by Long Beach generally in
accordance with Long Beach’s underwriting guidelines described in this section.
Long Beach’s underwriting guidelines are primarily intended to evaluate the
prospective borrower’s credit standing and repayment ability as well as the value
and adequacy of the mortgaged property as collateral.
* * *
The adequacy of the mortgaged property as collateral is generally determined by

an appraisal of the mortgaged property that generally conforms to Fannie Mae and
Freddie Mac appraisal standards and a review of that appraisal. The mortgaged
properties are appraised by licensed independent appraisers who have satisfied the
servicer’s appraiser screening process.
* * *
On a case-by-case basis and only with the approval of an employee with

appropriate risk level authority, Long Beach may determine that, based upon
compensating factors, a prospective borrower not strictly qualifying under its
underwriting risk category guidelines warrants an underwriting exception.
demonstrated below in ¶¶ 100-127, they failed to disclose that Long Beach: (i) systematically
failed to follow its stated underwriting standards; (ii) allowed pervasive exceptions to its stated
40
many instances materially inflated the values of the underlying mortgage properties in the loan
2. Long Beach Violated Its Stated Underwriting Standards

100. Defendants Credit Suisse, Deutsche Bank, Goldman Sachs, and Greenwich
Capital offered or sold to Plaintiff Securities containing loans originated by Long Beach and
made untrue statements to Plaintiff about Long Beach’s underwriting and appraisal standards and
practices and the loans underlying the Securities. These Wall Street Banks had extensive
business relationships with Long Beach, had access to Long Beach’s mortgage origination
personnel and internal information, and conducted due diligence into Long Beach using their
own personnel and third-party loan review firms. As a result of the Wall Street Banks’ access to
and due diligence into Long Beach, they were or reasonably should have been aware of the
untruth of the statements about Long Beach described above.
101. In 1999, Long Beach was acquired by WaMu, a Washington corporation
headquartered at 1301 Second Avenue, Seattle, Washington 98101. WaMu was founded in 1889
and, before its bankruptcy, was the largest savings and loan association in the country. Long
Beach served as WaMu’s subprime loan origination division until January 1, 2006 and was
thereafter known as WaMu’s “specialty mortgage lending” channel. According to CW 5, who
served as a Long Beach Senior Underwriter in the Chicago area from 2004 through September
2007, WaMu sold subprime loans with interest-only and negative-amortization features,
increasing the riskiness of these loans.
102. The Senate Permanent Subcommittee on Investigations (“PSI”), after
investigating and holding hearings on Long Beach’s role in the recent financial crisis, concluded
the following about the company:

Subprime lending can be a responsible business. Most subprime borrowers pay
their loans on time and in full. Long Beach, however, was not a responsible
lender. Its loans and mortgage backed securities were among the worst
performing in the subprime industry.
41
103. Long Beach financially rewarded its employees for closing higher-risk loans and
instituted loan sales quotas. Long Beach loan officers, for example, received more money per
loan for originating higher-risk loans and for exceeding established loan targets. Loan
processing personnel were compensated according to the speed and number of the loans they
processed. Loan officers and their sales associates received still more compensation if they
charged borrowers higher interest rates or points than required in bank rate sheets specifying loan
prices, or included prepayment penalties in the loan agreements. That added compensation
created incentives to increase loan profitability, but not loan quality. Accordingly, Long Beach’s
employees targeted more and more borrowers who were less able to afford the loan payments
they would have to make, and many of whom had no realistic ability to meet the obligations
incident to the loans they were sold.
104. According to CW 6, a First Vice President in the Capital Markets Group and
Director of Investor Relations at WaMu Capital Corp. in New York, New York, from October
2004 until December 2007, Long Beach compensated its account executives and underwriters
based on the volume of loans that they brought in and closed, and their compensation structure
gave no consideration to the quality of those loans.
105. CW 7, an Account Executive for Long Beach in New Jersey from 1998 until
October 2007, noted a shift in underwriting philosophy in 2005 toward increasing loan volume at
all costs. When CW 7 first joined the subprime business, Long Beach relied on “common sense
underwriting” and was not exclusively focused on credit scores. CW 7 noted the change away
from a “know your borrower” focus beginning in the 2005 timeframe, with Long Beach relying
more on credit scores and less on common sense. The borrower needed to produce less and less
documentation, and Fair Isaac Credit Organization (“FICO”) credit scores became more
important than verifying income for Long Beach. In response, “volume really went through the
roof.”
106. Long Beach pushed through every loan it could close, through whatever means
necessary. CW 8, a Senior Underwriter for Long Beach in Dallas, Texas, from 2004 through
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April 2007, reported that on occasion CW 8 would express concerns to her manager over funding
some of the loans underwritten, but the manager’s “direction from corporate” was simply to fund
loans. CW 8 also reported that at month-end team meetings, it was often discussed that the
Company was trying to increase volume by getting more “borrowers to fit.”
107. CW 8 recalled that some of the “crazier” programs at Long Beach included stated-
income loans for W-2 wage earners, a program that started in 2005. Stated-income programs, to
the extent that lenders accepted them, were traditionally reserved for self-employed borrowers
with significant assets. At Long Beach, however, these “liar’s loans” were common, even for
those borrowers who were not self-employed. Long Beach would also approve 100% financing
for stated-income borrowers with FICO scores as low as 500.
108. CW 8 also described a “three letters of reference” program for self-employed
borrowers, where a borrower only had to submit three letters of reference from anyone for whom
they supposedly worked. CW 8 said no attempt was made to verify the information in the letters.
CW 8 related that some of the accepted letters included statements such as: “So-and-so cuts my
lawn and does a good job.” At Long Beach, FICO scores ranged from 500-620, but CW 8 said
that if Long Beach salespeople had a borrower with a 620, they were “hooping and hollering”
about having a borrower with good credit.
109. CW 8 also relayed that borrowers could get a loan with no established FICO score
merely by providing “three alternative trade lines.” An “alternative trade line” was anything that
did not appear on the borrower’s credit report, including documentation of car insurance
payments, verification of rent payment, or a note from a person claiming the borrower had repaid
a personal debt. CW 8 said that Long Beach originated “a significant amount” of these types of
problematic loans. CW 8 commented: “It was just a disaster.” Furthermore, CW 8 said that
these loans made up the majority of first payment defaults – i.e., loans on which the borrower
failed to make even the first payment – in the end of 2006.
110. CW 9 was a Wholesale Mortgage Underwriter at the Long Beach loan processing
center located in Lake Oswego, Oregon from August 2005 until December 2006. CW 9 first
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joined WaMu in Lake Oswego in 2003 as a Senior Credit Analyst and subsequently joined Long
Beach in 2004 as a Senior Loan Coordinator, ultimately becoming a Wholesale Mortgage
Underwriter. CW 9 said that at Long Beach there was always a sense of “working the
underwriting guidelines” to close loans, rather than to mitigate Long Beach’s credit risk. CW 9
said that there was simply an environment in the loan processing center to “approve, approve,
approve” and that any exception that was needed to approve a loan was not only done, but was
“sought after.” CW 9 felt that Long Beach consistently pressured its underwriters to “find a way
to make it work.”
111. According to CW 5, even the few loans that Long Beach underwriters refused to
approve were regularly pushed through by Long Beach management by granting exceptions to
the guidelines. According to CW 5, “There were so many exceptions.” Long Beach allowed
LTV ratio exceptions, and the “rate exceptions were ridiculous.” According to CW 5, WaMu
allowed even the salespeople to give interest-rate exceptions to borrowers to push loans through.
CW 5 explained: “There were really no restrictions to approve a loan,” and some “really bad
loans” went through the office. The attitude at WaMu was “push, push, push.”
112. Numerous other Long Beach employees agreed that exceptions to Long Beach’s
guidelines were commonplace. CW 10, a Senior Underwriter with WaMu in Livermore,
California from 2003 through September 2007, said that if Long Beach’s competitors could not
approve a loan, it was known to send the loan to Long Beach and they would make an exception
to get the loan through. CW 10 said that guidelines were “loose to the point of disbelief.” CW
10 described Long Beach’s lending approach as follows: “If [potential borrowers] were breathing
and had a heart beat, you could probably get the loan done.”
113. CW 9 stated that many employees at Long Beach were disappointed about the
decisions that were being made about loan quality, but they were resigned to simply “keep their
heads down.” According to CW 5, several WaMu employees contacted corporate headquarters
about the incessant underwriting exceptions, including issuing loans to unqualified borrowers.
CW 5 stated, “[w]e did a lot of underhanded stuff.” CW 5 stated that if an underwriter at Long
44
Beach refused to force a file through, they would be written up, not because they made a bad
decision but because the sales team did not like their decision. CW 5 said: “Basically, sales is
what ran Long Beach Mortgage, it wasn’t the Operations part.”
114. CW 11 served as a Quality Assurance Manager in the Long Beach Loan
Fulfillment Center (“LFC”) in Dallas, Texas from November 2005 until his termination in
August 2007. CW 11 explained that the Quality Assurance group in Dallas performed a monthly
audit on a random selection of subprime loans from the various loan origination centers around
the country. This analysis was not focused on loan-specific issues, but instead concerned
WaMu/Long Beach-wide trends that might suggest necessary changes in underwriting
guidelines, compliance standards, or other systems.
115. CW 11 observed that, despite the extensive analysis that the group performed to
determine the causes for WaMu/Long Beach-wide loan problems, WaMu/Long Beach ignored
the results. CW 11’s group continued to identify the same problematic trends again and again
without WaMu/Long Beach taking any steps to address the causes. According to CW 11,
although WaMu/Long Beach was “going through the motions” to present a façade of legitimate
quality control, in reality there was nothing but a “free for all to approve loans by the thousands.”
116. According to CW 12, an employee of Long Beach from 2001 until October 2006,
serving as an underwriter and later becoming a Quality Assurance Manager, a group of WaMu
employees regularly reviewed a percentage (typically around 20%) of Long Beach’s loans to
monitor Long Beach’s underwriting. CW 12 forwarded the report to Long Beach’s Loan
Servicing Center managers. The Long Beach managers receiving the reports had a certain
number of days to go through the loan files in question and respond to the findings in the reports.
117. According to CW 13, a Senior Default Foreclosure Loan Specialist with Long
Beach in Chatsworth, California from 2002 to September 2006, her department received
statistics every month that showed the number of first payment defaults from the prior month.
According to CW 13, at the end of 2004, the default numbers were at 6-7% and, “although they
may have increased slightly, did not go over 9%.” Suddenly, however, they increased “all at
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once” to as high as 14%. According to CW 13, first payment defaults just “seemed to go up and
up.”
118. In his opening statement at the first PSI hearing on Wall Street and the Financial
Crisis (related to the role of high risk home loans), Senator Carl Levin noted that an internal
WaMu audit of Long Beach in 2005 found that “relaxed credit guidelines, breakdowns in manual
underwriting processes, and inexperienced subprime personnel . . . coupled with a push to
increase loan volume and the lack of an automated fraud monitoring tool” led to deteriorating
loans. Many of the loans defaulted within three months of being sold to investors. Investors
demanded that Long Beach repurchase them. Long Beach had to repurchase over $875 million
in loans in 2005 and 2006, lost over $107 million from the defaults, and had to cover a $75
million shortfall in its repurchase reserves.
119. Senator Levin also noted that in response to the repurchase requests, WaMu “fired
Long Beach’s senior management and moved the company under the direct supervision of the
President of WaMu’s Home Loans Division, David Schneider” and that “WaMu promised its
regulator that Long Beach would improve. But it didn’t.” In April 2006, WaMu’s President,
Steve Rotella, emailed the CEO, Kerry Killinger, that Long Beach’s “delinquencies are up 140%
and foreclosures close to 70%. . . . It is ugly.” Five months later, in September, he emailed that
Long Beach is “terrible. . . . Repurchases, [early payment defaults], manual underwriting, very
weak servicing/collections practices and a weak staff.” Two months after that, in November
2006, the head of WaMu Capital Markets in New York, David Beck, wrote to Mr. Schneider that
“LBMC [Long Beach] paper is among the worst performing in the [market].”
120. In June 2007, WaMu shut down Long Beach and took over its subprime lending
operations. Currently, Long Beach mortgage backed securities report loan delinquency rates in
excess of 40%. At the end of 2007, a Long Beach employee was indicted for having taken
kickbacks to process fraudulent or substandard loans.
121. In April 2010, the Senate Permanent Subcommittee on Investigations (“PSI”) held
a series of hearings “to examine some of the causes and consequences of the crisis.” The goals
46
of the hearings were threefold: (1) to construct a public record of the facts to deepen public
understanding of what happened and to try to hold some of the perpetrators accountable; (2) to
inform the legislative debate about the need for financial reform; and (3) to provide a foundation
for building better defenses to protect Main Street from the excesses of Wall Street.
122. The hearings were based on an in-depth bipartisan investigation that began in
November 2008. The PSI conducted over 100 detailed interviews and depositions, consulted
with dozens of experts, and collected and reviewed millions of pages of documents. Given the
extent of the economic damage and the complexity of its root causes, the Subcommittee’s
approach has been to develop detailed case studies to examine each stage of the crisis.
123. On April 13, 2010, the PSI held a hearing that focused on the role high risk loans
played in the financial crisis, using WaMu as a case history. It showed how WaMu originated
and sold hundreds of billions of dollars in high risk loans to Wall Street Banks in return for big
fees, polluting the financial system with toxic mortgages.
124. The PSI reached the following findings of fact following the April 13, 2010
hearing:
1. High Risk Lending Strategy. Washington Mutual (“WaMu”) executives
embarked upon a high risk lending strategy and increased sales of high risk home
loans to Wall Street, because they projected that high risk home loans, which
generally charged higher rates of interest, would be more profitable for the bank
than low risk home loans.
2. Shoddy Lending Practices. WaMu and its affiliate, Long Beach

Mortgage Company (“Long Beach”), used shoddy lending practices riddled with
credit, compliance, and operational deficiencies to make tens of thousands of high
risk home loans that too often contained excessive risk, fraudulent information, or
errors.
3. Steering Borrowers to High Risk Loans. WaMu and Long Beach too
often steered borrowers into home loans they could not afford, allowing and
encouraging them to make low initial payments that would be followed by much
higher payments, and presumed that rising home prices would enable those
borrowers to refinance their loans or sell their homes before the payments shot up.
4. Polluting the Financial System. WaMu and Long Beach securitized over
$77 billion in subprime home loans and billions more in other high risk home
loans, used Wall Street firms to sell the securities to investors worldwide, and
47
polluted the financial system with mortgage backed securities which later
incurred high rates of delinquency and loss.
5. Securitizing Delinquency-Prone and Fraudulent Loans. At times,

WaMu selected and securitized loans that it had identified as likely to go
delinquent, without disclosing its analysis to investors who bought the securities,
and also securitized loans tainted by fraudulent information, without notifying
purchasers of the fraud that was discovered.
6. Destructive Compensation. WaMu’s compensation system rewarded

loan officers and loan processors for originating large volumes of high risk loans,
paid extra to loan officers who overcharged borrowers or added stiff prepayment
penalties, and gave executives millions of dollars even when its high risk lending
strategy placed the bank in financial jeopardy.
125. The PSI also concluded that “from 2004 to 2007, in exchange for lucrative fees,
Goldman Sachs helped lenders like Long Beach, Fremont, and New Century, securitize high risk,
poor quality loans, obtain favorable credit ratings for the resulting residential mortgage backed
securities (RMBS), and sell the RMBS securities to investors, pushing billions of dollars of risky
mortgages into the financial system.”
126. Long Beach and WaMu’s appraisal practices have also been the target of
governmental investigations. On November 1, 2007, New York State Attorney General Andrew
Cuomo announced that he was suing eAppraiseIT and its parent company First American
Corporation, charging them with caving into pressure from WaMu to use a list of preferred
“Proven Appraisers” who provided inflated appraisals on homes. People of the State of New York
v. First Am. Corp. and First Am. eAppraiseIT, Index No. 406796/2007 (N.Y. Sup. Ct.). Cuomo’s
suit alleged that eAppraiseIT colluded with WaMu (the parent of Mortgage Originator Long
Beach) to inflate the appraisal values of homes. According to Cuomo, between April 2006 and
October 2007, First American performed 262,000 appraisals for WaMu. When WaMu loan
officers began complaining that valuations by eAppraiseIT’s independent roster were coming in
too low, WaMu allegedly pressured First American to assign only appraisers on WaMu’s
approved list when appraising WaMu mortgage-related properties. WaMu allegedly threatened to
take its business elsewhere, and dangled the prospect of greater use of First American’s other
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settlement services, to convince eAppraiseIT to accede to its demands. In a press release that
accompanied the suit, Cuomo stated:

The independence of the appraiser is essential to maintaining the integrity of the
mortgage industry. First American and eAppraiseIT violated that independence
when Washington Mutual strong-armed them into a system designed to ripoff
homeowners and investors alike . . . . The blatant actions of First American and
eAppraiseIT have contributed to the growing foreclosure crisis and turmoil in the
housing market. By allowing Washington Mutual to hand-pick appraisers who
inflated values, First American helped set the current mortgage crisis in motion.
127. On June 8, 2010, the New York State Appellate Division, First Department, issued
a decision upholding Attorney General Cuomo’s complaint.
c. WaMu

WaMu’s Underwriting Standards and Practices
128. In addition to the loan originations by WaMu’s Long Beach subsidiary discussed
above, WaMu originated mortgage loans that were included in the pools for the following
Offerings:

SACO 2005-WM3 SACO I Trust Bear Stearns
WAMU 2005-AR2 Washington Mutual Greenwich Capital
for which WaMu originated some or all of the underlying mortgage loans.
statements of material facts regarding WaMu’s underwriting standards and practices. For
example, prospectus supplement WAMU 2005-AR2 stated:

[WaMu]’s underwriting standards are intended to evaluate the prospective
Mortgagor’s credit standing and repayment ability, and the value and adequacy of
the proposed Mortgaged Property as collateral. In the loan application process,
prospective Mortgagors will be required to provide information regarding such
factors as their assets, liabilities, income, credit history, employment history and
other related items. Each prospective Mortgagor will also provide an
authorization to apply for a credit report which summarizes the Mortgagor’s
credit history. With respect to establishing the prospective Mortgagor’s ability to
49
make timely payments, the Company will require evidence regarding the
Mortgagor’s employment and income, and of the amount of deposits made to
financial institutions where the Mortgagor maintains demand or savings accounts.
In some instances, Mortgage Loans which were originated under a Limited
Documentation Origination Program may be sold to the Company. For a
mortgage loan originated under a Limited Documentation Origination Program to
qualify for purchase by the Company, the prospective mortgagor must have a
good credit history and be financially capable of making a larger cash down
payment, in a purchase, or be willing to finance less of the appraised value, in a
refinancing, than would otherwise be required by the Company. Currently, the
Company’s underwriting standards provide that only mortgage loans with certain
loan-to-value ratios will qualify for purchase. If the mortgage loan qualifies, the
Company waives some of its documentation requirements and eliminates
verification of income and employment for the prospective mortgagor.
The Company’s underwriting standards generally follow guidelines acceptable to

Fannie Mae and Freddie Mac. In determining the adequacy of the property as
collateral, an independent appraisal is made of each property considered for
financing. The appraiser is required to inspect the property and verify that it is in
good condition and that construction, if new, has been completed. The appraisal
is based on the appraiser’s judgment of values, giving appropriate weight to both
the market value of comparable homes and the cost of replacing the property.
demonstrated below in ¶¶ 132-158, they failed to disclose that WaMu: (i) systematically failed to
2. WaMu Violated Its Stated Underwriting Standards

132. J.P. Morgan (as successor-in-interest to Bear Stearns) and Greenwich Capital
offered or sold to Plaintiff Securities containing loans originated by WaMu and made untrue
statements to Plaintiff about WaMu’s underwriting and appraisal standards and practices and the
loans underlying the Securities. These Wall Street Banks had extensive business relationships
with WaMu, had access to WaMu’s mortgage origination personnel and internal information, and
conducted due diligence into WaMu using their own personnel and third-party loan review firms.
50
As a result of the Wall Street Banks’ access to and due diligence into WaMu, they were or
reasonably should have been aware of the untruth of the statements about WaMu described
above.
133. In addition to the facts alleged above regarding improper underwriting and
appraisal practices by Long Beach, WaMu’s subprime mortgage subsidiary, WaMu also
pervasively violated its stated underwriting and appraisal standards in its purportedly prime
mortgage business. In order to generate a greater volume of risky loan products, WaMu
financially rewarded loan origination personnel for closing higher-risk loans and instituted
minimum loan sales quotas. Accordingly, WaMu’s employees targeted more and more borrowers
who were less able to afford the loan payments they would have to make, and many of whom
had no realistic ability to make payments on the loans they were sold.
134. CW 14, a WaMu Vice President and Senior Credit Quality Manager from 2005
until February 2008 and a Senior Credit Risk Manager from April 2004 through March 2005,
explained with regard to WaMu’s loans, “[t]he more you slammed out, the more you made.”
Similarly, CW 15, a Senior Loan Consultant with WaMu from 2005 to 2007, observed that
sometimes mortgage originators were surprised by the loans they could get approved. However,
as a loan officer, if CW 15 could personally earn $2,000 - $3,000 by closing a loan, then CW
15’s only concern was getting the loan approved. According to CW 15: “Once you get paid, you
don’t care what happens.” CW 16, a Senior Loan Coordinator for WaMu’s Home Loan Center in
Bethel Park, Pennsylvania from February 1998 until September 2007, felt that WaMu employees
were “greedy” and that the borrowers suffered as a result. CW 16 concluded, “[w]e could never
figure it out why people came to us [for loans].”
135. In a November 2, 2008 New York Times article titled “Was There a Loan It Didn’t
Like?,” former WaMu Senior Mortgage Underwriter Keysha Cooper, who started at WaMu in
2003 and left in 2007, explained that “[a]t WaMu it wasn’t about the quality of the loans; it was
about the numbers . . . . They didn’t care if we were giving loans to people that didn’t qualify.
Instead, it was how many loans did you guys close and fund?” According to the article, “[i]n
51
February 2007, . . . the pressure became intense. WaMu executives told employees they were not
making enough loans and had to get their numbers up . . . .” Ms. Cooper concluded, “I swear 60
percent of the loans I approved I was made to. . . . If I could get everyone’s name, I would write
them apology letters.”
136. Other former employees agreed that the primary factor driving WaMu’s mortgage
lending practices was to produce as much volume as possible. CW 17, who was a Closing Loan
Coordinator at WaMu in Bethel Park, Pennsylvania, from 2003 until July 2007, explained that
WaMu’s priority regarding loans was “always quantity rather than quality,” and her branch
closed an “insane” number of loans every day. WaMu loan personnel could meet these volume
expectations only because “[i]f you flew by the seat of your pants and didn’t look at everything,
you could get it done.” CW 17 observed that the branch goal was “hitting certain numbers every
month.” WaMu rewarded high-performing loan officers with “fabulous vacations” if they made
their numbers. CW 17 noted, “It was all about sell, sell, sell.”
137. Similarly, according to CW 18, a Loan Coordinator/Mortgage Processor for
WaMu in Jacksonville, Florida from March 2007 until December 2007, there was a company-
wide culture that required WaMu employees to do “whatever it took to get loans closed.” WaMu
managers would constantly press WaMu underwriters and salespeople to “push, push, push” to
close loans. CW 16 stated that “WaMu’s top priority was to get as many loans closed as quickly
as they could close and not worry – they just wanted the volume, and it didn’t seem to matter
how they got it . . . . Everybody just wanted their chunk of the money.” Not only did loan
coordinators receive bonuses for loans they closed, but also CW 16 understood that if loan
officers did not meet their quotas, WaMu fired them.
138. Mortgage originators were also paid more for originating loans that carried higher
profit margins for WaMu and had commensurately higher credit risk. For example, CW 19, a
Senior Loan Consultant with WaMu at Riverside, California, from 2005 through December 2007,
reported that “every year [WaMu] came out with a new commission outline and [WaMu’s] extra
commissions for teaser rate loans.” Further, according to CW 19, occasionally WaMu would
52
send out emails to mortgage originators about commission “specials.” One of WaMu’s
“specials,” CW 19 recalls, was to give mortgage originators extra commissions for Option ARM
loans. In addition, WaMu paid additional commissions for non-conforming loans. According
to CW 19, at WaMu “[i]t’s not about what’s best for the client; it’s about what’s best for the
Company.” According to CW 20, a Sales Manager with WaMu for twenty years until October
2006, WaMu managers also received increases in their bonuses if their group closed a certain
percentage of Option ARM loans.
139. CW 21, a former Loan Consultant for WaMu in Riverside, California, reported
that because of WaMu’s additional incentive compensation, WaMu salespeople undertook
particularly aggressive tactics to sell Option ARM loans. As CW 22, who served as a Senior
Underwriter with WaMu through a private mortgage insurance company, put it, “WaMu’s biggest
things are ARMs – they push those things like cotton candy.” According to CW 21, “most
borrowers” who came to WaMu “wanted the fixed rate loans.” Thus, selling Option ARM loans
required “pushing” them, which was done in a “nasty” way. WaMu loan officers would fail to
educate the borrower, so that Option ARM loan borrowers “would think they were paying the
fully-indexed rate, when they were only paying a portion of the interest” because the loan
consultants did not explain the programs thoroughly. WaMu loan consultants were under “a lot
of pressure” from their managers to promote and sell Option ARM loans. CW 21 originated only
“one or two” Option ARM loans because CW 21 was so morally opposed to these “risky” loans.
As a result, CW 21 was frequently reprimanded by CW 21’s managers at WaMu.
140. CW 23 was an employee at WaMu from 1993 to 2006 and was a “Senior Trainer”
from 2000-2004, training employees on processing, closing, underwriting, leadership, products,
and pricing. According to CW 23, Option ARM loans were suitable only for rental, non-owner
occupied properties or for “savvy investment people who play the stock market.” However,
many of the WaMu sales people in CW 23’s class did not understand the concept of negative
amortization and could not explain it to borrowers.
53
141. Indeed, an internal WaMu presentation on Option ARM loans shows that WaMu
focused on unsophisticated borrowers for its high-risk Option ARM loans. The internal WaMu
presentation states that appropriate “Option ARM Candidates” are:
• Savvy Investors
• First Time Home Buyers
• High Income Earners
• Self Employed Borrowers
• Retired Borrowers
• Real Estate Agents
The next page of the same presentation further explained that WaMu’s target borrowers were of:
• All Ages
• Any Social Status
• All Economic Levels
In other words, WaMu pushed its Option ARM loans on borrowers regardless of their
sophistication, income level, or financial stability.
142. WaMu financially incentivized its underwriters, who supposedly served as
WaMu’s “gatekeepers” of loan credit quality, to approve an enormous volume of loans without
regard to loan quality.
143. CW 24, a Senior Underwriter with WaMu in Livermore, California, from 2003
through September 2007, confirmed that loan underwriters received commissions based upon
volume of loans underwritten and closed. CW 6 confirmed that underwriters were compensated
on the volume of loans brought in and closed, with no consideration given to the quality of the
loans.
144. According to CW 14, underwriters were required to underwrite a minimum of
nine loans a day, and any loans underwritten in excess of that number provided for bonus
payments. Indeed, certain senior underwriters earned in excess of $100,000 annually because of
these bonuses; some underwriters received monthly bonus payments of $5,000 for underwriting
a high volume of loans.
54
145. Notwithstanding underwriters’ exorbitant volume-based bonuses, according to
CW 25, who worked at WaMu from 1997 to February 2008 and served as a Credit Quality
Manager and an Area Underwriting Manager, WaMu’s senior management believed that if
underwriters knew about underwriting problems that led to problem loans, WaMu’s underwriters
would “by nature” have tightened up WaMu’s lending standards. Thus, WaMu refused to
provide loan delinquency data to its underwriters.
146. Highly experienced mortgage underwriters who worked at WaMu during the
relevant period were shocked by how lenient WaMu was in its lending. CW 26 was a Senior
Underwriter in the Washington Mutual Wholesale loan fulfillment center in Lake Success, New
York, from June 2005 through February 2008. CW 26 had twenty-plus years of experience
underwriting home loans. When CW 26 arrived at WaMu, CW 26 was stunned to find that
WaMu’s supposedly “A paper” (i.e., prime loans) consisted of loans made to borrowers with
credit scores in the 500s, high LTV ratios, and Option ARM loans. CW 26 reported that there
was “only so much you could do” with the loans she underwrote, because they met WaMu’s
lenient underwriting guidelines and CW 26 did not want to discriminate among borrowers by
denying loans to some borrowers who met WaMu’s loose guidelines merely because CW 26 did
not think that borrower could actually repay the loan that WaMu had sold.
147. Similarly, CW 27, who served as a Senior Underwriter with WaMu through a
private mortgage insurance company for most of 2007, was appalled by the lenient standards in
place at WaMu. CW 27 reported that WaMu’s reputation in the mortgage industry was that “if
you had a pulse, WaMu would give you a loan.” CW 27 stated that the underwriting guidelines
at WaMu “changed every minute. . . . You would literally be getting an email every second that
the guidelines changed or would have a pissed off account executive at your desk asking why the
loan can’t go through.” Often, CW 27 reported, loans would be taken away from her to be
approved by another underwriter who was not as conscientious. CW 27 often saw active or
approved loans in the system that CW 27 had refused to underwrite and were ultimately signed
55
off on by someone else. According to CW 27, “They would give it to one of their ‘lead
underwriters’ to approve.”
148. Before a loan came to CW 27’s desk, it could be automatically underwritten
through a computer program, modeled after Fannie Mae’s “Desktop Underwriter” (“DU”)
program. Loans that could be underwritten using the DU system could be approved by a loan
processor without any involvement from an underwriter. CW 27 recalled that regularly, if a loan
was rejected by the computer, the loan consultant would repeatedly re-enter the loan’s
information, changing the information a little each time, “tweak[ing] the system.”
149. CW 16 recalled, “I saw underwriting managers and other managers waive a lot [of
supposed underwriting rules].” According to CW 16, “[o]nce a week you’d go in with your
manager, [and he’d say] ‘why didn’t this loan close, why didn’t that one close?’” CW 16 said
the pressure “was coming from the very top, the managers had to listen to the head manager,
who had to listen to corporate.” CW 16 added, “I almost had a nervous breakdown.” According
to CW 16, the underwriting procedures progressively loosened and “got really bad in 2006.”
WaMu’s “top priority was to get as many loans closed as quickly as they could close and not
worry – they just wanted the volume, and it didn’t seem to matter how they got it.”
150. Notwithstanding the fact that, according to regulatory agencies including the
Federal Deposit Insurance Corporation and the Office of Thrift Supervision, “prime” loans
should have been available only to borrowers with FICO scores of 660 or above, WaMu
regularly made loans to borrowers with FICO scores well below this standard. A WaMu training
document for subprime loan production employees, entitled “Specialty Lending UW
[Underwriter] HLCA [Home Loans Credit Authority] Training,” revised September 26, 2007,
makes clear that, regardless of a borrowers’ credit history or actual potential to repay a loan, if
the borrower WaMu targeted for one of its “prime” loans had a FICO score over 619, that
borrower was considered a “prime” borrower.
151. In one stunning example of how WaMu abused the watered-down “standard”
above, the Company instructed in an internal WaMu document to its underwriters that if a
56
borrower applied for a “5/1 Amortizing ARM” and the borrower had a bankruptcy “less than 4
years ago,” but had a FICO score of 621, WaMu would consider that borrower prime. In fact,
CW 28, a Loan Consultant for WaMu in New York from 2003 to 2006, stated that borrowers with
credit scores as low as 540 (well below any accepted prime threshold) were approved for
“prime” loans during the relevant period.
152. Various witnesses with direct experience in WaMu’s underwriting operations have
explained that during the relevant period, exceptions to WaMu’s already low prime underwriting
guidelines were the rule.
153. As observed by CW 29, who worked for WaMu from 1995 through 2008, most
recently as Assistant Vice President Credit Level 3, Underwriting Supervisor, no exception to the
underwriting guidelines was needed for many questionable loans, because WaMu’s “guidelines
were so generous.” However, for those loans that did not fit within the loose guidelines of
WaMu’s underwriting standards, exceptions were encouraged and readily available. CW 30, a
Senior Underwriter at the WaMu home loan center in Lake Success, New York from 2007 to
2008, agreed, stating that guideline exceptions were “part of the norm . . . it was so
commonplace to go outside of the guidelines.” Underwriting exceptions that were sent to
management for approval “were always approved, so it was just business as usual and
something that they were comfortable with.” CW 14 explained that WaMu encouraged loan
consultants to obtain exceptions to the underwriting guidelines whenever necessary to close more
loans. CW 31, a Senior Loan Processor at WaMu in Pittsburgh from 2004 through 2006 and
again in 2007, agreed that WaMu’s loans were exception-ridden: “You could pretty much get an
exception on any loan you wanted to.”
154. As an Area Underwriting Manager, CW 25 was one of four senior underwriters
with the Company charged with approving exceptions to WaMu underwriting guidelines for
loans greater than $3 million and exceptions beyond those that WaMu underwriting managers
were allowed to make. CW 25 stated that she and others in her position at WaMu were required
to make numerous exceptions to WaMu’s stated underwriting guidelines. Indeed, CW 25 stated
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that the Negotiated Transaction Managers would be under a great deal of pressure to approve
certain loans, especially where loan consultants had “important relationships.” Those loans for
which CW 25 and the other Negotiated Transaction Managers refused to make exceptions, even
after being pressured, were referred up WaMu’s chain of command to Mark Brown, National
Underwriting Manager, or Cheryl Feltgen, Division Executive Chief Risk Officer, for approval
where the loans would readily be approved.
155. According to CW 32, an underwriter with WaMu from 2002 through 2006 in
Portland, Oregon, even when “borrowers were simply not qualified,” WaMu’s loose
underwriting guidelines allowed borrowers to meet stated-income loan guidelines because of
their credit scores. For example, CW 32 recalled multiple times where underwriters wanted to
lower the stated income on the loan application, based on an evaluation of the borrower’s actual
circumstances, but WaMu would not allow such revisions. CW 32 said that stated income loans
were commonly referred to at WaMu as “lie-to-me loans.” Indeed, CW 32 reported that, over
underwriter objections, the Company began to accept a job description in lieu of proof of
employment for stated-income loans. CW 32 recalled that the borrower’s job description did not
even have to be produced by the borrower’s employer or have to be on their employer’s
letterhead: “it was sufficient to print out a job description found online.”
156. WaMu also did not underwrite its Option ARM loans to the fully-indexed rate.
CW 33, a Retail Loan Consultant with WaMu from 2002 through 2007, reported that throughout
the relevant period until late 2007, WaMu had underwritten its Option ARM loans to ensure
only that the borrower could make monthly payments at the “teaser” rate. When, in late 2007,
the Company changed its guidelines to finally require its underwriters to underwrite the loans to
the fully-indexed rate, it was a major change for the underwriters. CW 33 observed that “At the
time the loans started falling out of favor, they started underwriting based on the index rate and it
just snowballed from there.” CW 34, a WaMu Retail Loan Consultant in Kensington, Maryland
from 2001 through December 2007, confirmed that WaMu underwrote Option ARM loans to the
teaser rate, rather than the fully-indexed rate. In 2007, according to CW 34, WaMu’s new
58
guidelines resulted in fewer borrowers being able to qualify for Option ARM loans based on the
fully-indexed rate. Similarly, CW 35, a Senior Underwriter at WaMu’s Lake Success, New York
branch from June 2005 until February 2008, and CW 21 also confirmed that WaMu underwrote
its Option ARM loans to the “teaser” rate, rather than the fully-indexed rate.
157. Witnesses in other divisions of WaMu also have confirmed that WaMu
underwrote its Option ARM loans to their “teaser” rates, at least until August 2007. According to
CW 36, a Due Diligence Director in the WaMu Transaction Management group in Anaheim and
subsequently Fullerton, California, who spent over 17 years with WaMu from 1991 until 2008,
WaMu required loans that it purchased from third parties to conform with underwriting
guidelines that WaMu applied to the loans that it originated. Thus, WaMu periodically updated
its “Bulk Seller Guide” to conform to WaMu’s own underwriting requirements. WaMu’s
“Mortgage Securities Corp. Seller Guide Update – Announcement Concerning Qualifying Rate
and Qualifying Payment for Hybrid ARM, IO, and Option ARM Products” indicates that,
effective August 1, 2007, WaMu Option ARM loan underwriting shifted to require qualification
for such loans only at the fully-indexed rate.
158. On November 1, 2007, New York State Attorney General Andrew Cuomo filed a
complaint against First American Corporation and eAppraiseIT, which detailed that WaMu
pressured appraisers to inflate appraisal values. According to a November 2, 2007 New York
Times article, the complaint was filed after “investigators had spent nine months interviewing
hundreds of mortgage industry executives and poring over millions of documents obtained
through subpoenas.” The complaint alleges, on the basis of numerous internal emails, that
WaMu executives pressured eAppraiseIT to increase the appraised value of homes and that
eAppraiseIT improperly allowed WaMu’s loan production staff to hand-pick appraisers who
brought in appraisal values high enough to permit WaMu’s loans to close. Additionally, the New
York Attorney General’s complaint alleges that WaMu repeatedly pressured eAppraiseIT
appraisers to change appraisal values that were too low to permit loans to close.
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d. Fremont Investment & Loan

Fremont’s Underwriting Standards and Practices
159. Fremont Investment & Loan (“Fremont”) originated mortgage loans that were
included in the pools for the following offerings:

ACE 2006-FM2 Ace Securities Corp. Deutsche Bank
BSABS 2005-HE10 Bear Stearns Asset Backed Securities Inc. Bear Stearns
CARR 2006-FRE1 Carrington Mortgage Loan Trust Barclays Capital
CARR 2006-FRE2 Carrington Mortgage Loan Trust Barclays Capital
FHLT 2005-1 Fremont Home Loan Trust Greenwich Capital
FHLT 2005-A Fremont Home Loan Trust Credit Suisse
GSAMP 2005-HE6 GS Mortgage Securities Corp. Goldman Sachs
HELT 2007-FRE1 Home Equity Loan Trust Greenwich Capital
IXIS 2005-HE4 IXIS Real Estate Capital Trust Goldman Sachs
MABS 2005-FRE1 MASTR Asset Backed Securities Trust UBS
MABS 2006-FRE2 MASTR Asset Backed Securities Trust UBS
MABS 2006-HE1 MASTR Asset Backed Securities Trust UBS
MLMI 2005-SL2 Merrill Lynch Mortgage Investors Merrill Lynch
MLMI 2006-HE4 Merrill Lynch Mortgage Investors Merrill Lynch
SABR 2005-FR4 Securitized Asset Backed Receivables Barclays Capital
SVHE 2005-A SoundView Home Loan Trust Greenwich Capital
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for which Fremont originated some or all of the underlying mortgage loans.
statements of material facts regarding Fremont’s underwriting and appraisal standards and
practices. For example, the prospectus supplement for MLMI 2005-FM1 stated:
Mortgage loans are underwritten in accordance with Fremont’s current
underwriting programs, referred to as the Scored Programs (“Scored Programs”),
subject to various exceptions as described in this section. Fremont’s underwriting
standards are primarily intended to assess the ability and willingness of the
borrower to repay the debt and to evaluate the adequacy of the mortgaged
property as collateral for the mortgage loan. The Scored Programs assess the risk
of default by using Credit Scores as described below along with, but not limited
to, past mortgage payment history, seasoning on bankruptcy and/or foreclosure
and loan-to-value ratio as an aid to, not a substitute for, the underwriter's
judgment. All of the mortgage loans in the mortgage pool were underwritten with
a view toward the resale of the mortgage loans in the secondary mortgage market.
* * *
All of the mortgage loans were underwritten by Fremont’s underwriters having

the appropriate approval authority. Each underwriter is granted a level of
authority commensurate with their proven judgment, experience and credit skills.
On a case by case basis, Fremont may determine that, based upon
compensating factors, a prospective mortgagor not strictly qualifying under
the underwriting risk category guidelines described below is nonetheless
qualified to receive a loan, i.e., an underwriting exception. Compensating
factors may include, but are not limited to, low loan-to-value ratio, low debt
to income ratio, substantial liquid assets, good credit history, stable employment
and time in residence at the applicant's current address. It is expected that a
substantial portion of the mortgage loans may represent such underwriting
exceptions.
There are the three documentation types, Full Documentation (“Full

Documentation”), Easy Documentation (“Easy Documentation”) and Stated
Income (“Stated Income”). Fremont’s underwriters verify the income of each
applicant under various documentation types as follows: under Full
Documentation, applicants are generally required to submit verification of stable
income for the periods of one to two years preceding the application dependent on
credit profile; under Easy Documentation, the borrower is qualified based on
verification of adequate cash flow by means of personal or business bank
statements; under Stated Income, applicants are qualified based on monthly
income as stated on the mortgage application. The income is not verified under
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the Stated Income program; however, the income stated must be reasonable and
customary for the applicant’s line of work.
Fremont originates loans secured by 1-4 unit residential properties made to

eligible borrowers with a vested fee simple (or in some cases a leasehold) interest
in the property. Fremont’s underwriting guidelines are applied in accordance
with a procedure which complies with applicable federal and state laws and
regulations and require an appraisal of the mortgaged property, and if
appropriate, a review appraisal. Generally, initial appraisals are provided by
qualified independent appraisers licensed in their respective states. Review
appraisals may only be provided by appraisers approved by Fremont. In some
cases, Fremont relies on a statistical appraisal methodology provided by a third-
party. Qualified independent appraisers must meet minimum standards of
licensing and provide errors and omissions insurance in states where it is required
to become approved to do business with Fremont. Each uniform residential
appraisal report includes a market data analysis based on recent sales of
comparable homes in the area and, where deemed appropriate, replacement cost
analysis based on the current cost of constructing a similar home. The review
appraisal may be a desk review, field review or an automated valuation report that
confirms or supports the original appraiser’s value of the mortgaged premises.
demonstrated below in ¶¶ 163-182, they failed to disclose that Fremont: (i) systematically failed
to follow its stated underwriting standards; (ii) allowed pervasive exceptions to its stated
2. Fremont Violated Its Stated Underwriting Standards

163. Defendants Barclays, J.P. Morgan (as successor-in-interest to Bear Stearns),
Credit Suisse, Deutsche Bank, Goldman Sachs, Greenwich Capital, Merrill Lynch, Morgan
Stanley, and UBS offered or sold to Plaintiff Securities containing loans originated by Fremont
and made untrue statements to Plaintiff about Fremont’s underwriting and appraisal standards
and practices and the loans. These Wall Street Banks had extensive business relationships with
Fremont, had access to Fremont’s mortgage origination personnel and internal information, and
conducted due diligence into Fremont using their own personnel and third-party loan review
62
firms. As a result of the Wall Street Banks’ access to and due diligence into Fremont, they were
or reasonably should have been aware of the untruth of the statements about Fremont described
above.
164. Fremont originated subprime residential real estate loans nationwide on a
wholesale basis through independent loan brokers in nearly all 50 states. Fremont was one of the
country’s largest subprime lenders until March 2007, when the Federal Deposit Insurance
Corporation (“FDIC”) effectively forced Fremont out of the subprime lending business for
extending subprime credit “in an unsafe and unsound manner” and committing violations of law
and FDIC regulations. Fremont later filed for bankruptcy.
165. On March 7, 2007, following an extensive investigation, the FDIC issued a Cease
& Desist Order to Fremont, concluding that Fremont was, in fact, “operating with inadequate
underwriting criteria and excessive risk in relation to the kind and quality of assets held by
[Fremont],” “operating with a large volume of poor quality loans,” and “engaging in
unsatisfactory lending practices.”
166. According to the FDIC’s March 7, 2007 press release:

In taking this action, the FDIC found that [Fremont] was operating without
effective risk management policies and procedures in place in relation to its
subprime mortgage and commercial real estate lending operations. The FDIC
determined, among other things, that the bank had been operating without
adequate subprime mortgage loan underwriting criteria, and that it was marketing
and extending subprime mortgage loans in a way that substantially increased the
likelihood of borrower default or other loss to the bank.
167. In response to Fremont’s dangerous subprime lending practices, on October 4,
2007, the Commonwealth of Massachusetts, through its Attorney General, brought an
enforcement action against Fremont for an array of “unfair and deceptive business conduct,” “on
a broad scale.” Massachusetts v. Fremont Investment & Loan and Fremont General Corp., No.
07-4373 (Sup. Ct. Mass.) (the “Massachusetts Action”). Specifically, the Massachusetts Action
alleged that Fremont abdicated its underwriting standards, provided misleading or incomplete
63
information to borrowers, made subprime loans that it knew would fail, and participated in
predatory lending.
168. According to the Massachusetts Attorney General’s complaint, Fremont’s loans
were “structurally unfair due to their multiple layers of risk with no meaningful consideration
whether borrowers [could] afford to pay the loans.” Fremont “approve[ed] borrowers without
considering or verifying the relevant documentation related to the borrower’s credit
qualifications, including the borrower’s income”; “approv[ed] borrowers for loans with
inadequate debt-to-income analyses that do not properly consider the borrowers’ ability to meet
their overall level of indebtedness and common housing expenses”; “failed to meaningfully
account for [ARM] payment adjustments in approving and selling loans”; “approved borrowers
for these ARM loans based only on the initial fixed ‘teaser’ rate, without regard for borrowers’
ability to pay after the initial two year period”; “consistently failed to monitor or supervise
brokers’ practices or to independently verify the information provided to Fremont by brokers”;
and “ma[de] loans based on information that Fremont knew or should have known was
inaccurate or false, including, but not limited to, borrowers’ income, property appraisals, and
credit scores.”
169. On December 9, 2008, the Supreme Judicial Court of Massachusetts affirmed a
preliminary injunction obtained in conjunction with the Massachusetts Action that prevented
Fremont from foreclosing on thousands of its loans issued to Massachusetts residents. As a basis
for its unanimous ruling, the Supreme Judicial Court found evidence that “Fremont made no
effort to determine whether borrowers could ‘make the scheduled payments under the terms of
the loan,’” and that “Fremont knew or should have known that [its lending practices and loan
terms] would operate in concert essentially to guarantee that the borrower would be unable to
pay and default would follow.”
170. In reaching its decision, the Supreme Judicial Court relied in part on the affidavits
of two outside account executives who marketed Fremont’s loan products to brokers in
Massachusetts. Once loans were produced, these account executives worked with Fremont
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employees, such as underwriters and account managers, to process and close the loans.
According to their affidavits filed in the Massachusetts Action, both outside account executives
attested that Fremont purposefully relaxed its underwriting standards and made loans based on
documents known to be untrue.
171. The terms of the preliminary injunction were made permanent by a settlement of
the Massachusetts Action, reached on June 9, 2009. In addition to agreeing to the protections for
borrowers that would prevent Fremont from foreclosing on “unfair” loans, Fremont agreed to
pay the Commonwealth of Massachusetts $10 million in consumer relief, penalties, and costs.
172. Numerous confidential witnesses interviewed by Plaintiff’s counsel also
corroborate the findings of the FDIC and the Massachusetts Action. According to CW 37, an
Assistant Vice President, Regulatory Risk Examiner at Fremont, who was involved in the FDIC’s
investigation of Fremont, Fremont’s Regulatory Risk Management group (of which CW 37 was a
member) submitted numerous, repeated adverse written findings to senior Fremont executives in
2005 and 2006, which “mirrored” the FDIC’s eventual Cease & Desist Order, one to two years
later. CW 37 stated that these repeated adverse reports specifically highlighted, among other
things, unfair and deceptive acts in which Fremont was engaging, “pretty obvious” poor
underwriting, and problematic incentive compensation. CW 37 stated that these reports were
based on reviews performed by the Regulatory Risk Management group, including interviews of
underwriters, quality control, and other Fremont personnel. CW 37 stated that Fremont filed
repeated Suspicious Activity Reports (“SARs”) regarding broker fraud as to the same brokers,
but Fremont executives would not end relationships with the identified brokers. CW 37 stated
that some of the fraud was “so egregious” including “ridiculous” stated income applications, yet
nothing was being done about “obvious problems” including repeated broker fraud.
173. The personal accounts of other former employee confidential witnesses confirm
that Fremont failed to adhere to its established underwriting guidelines and promoted the wide
use of exceptions to Fremont’s underwriting standards in order to drive loan quantity at the
expense of quality. For example, Fremont underwriters were instructed that Fremont’s
65
guidelines and underwriting policies were a mere “guide,” and that they were to “think outside
the box” (according to CW 38, a senior underwriter from 2004 through March 2007 at Fremont’s
Downers Grove, Illinois center), “make it work” (according to CW 39, an underwriter at
Fremont’s Downers Grove center from August 2002 to January 2007, and CW 40, an assistant
operations manager at Fremont’s Anaheim, California center from October 2003 to January
2007), or “massage the file” (according to CW 41, a senior account manager at Fremont’s
Downers Grove, Illinois center from July 2001 to February 2007) to get loans approved.
174. As explained by CW 42, a former Fremont sales manager from August 1998
through March 2007, not only were Fremont’s guidelines loose, but there were frequent granted
exceptions to the guidelines. Underwriters made several types of exceptions “everyday,”
according to CW 43, an operations manager at Fremont’s Anaheim, California center from April
2004 to January 2007, and a lot of them were not warranted, according to CW 40. Indeed, an
estimated 30% of Fremont’s loans had some sort of exception, partly because anyone from an
assistant manager on up had the authority to sign off on exceptions, according to CW 44, an
underwriter at Fremont’s Anaheim, California center from May 2005 to March 2007.
175. According to CW 44 and CW 45 (an account manager at Fremont’s Downers
Grove, Illinois center from August 2005 to January 2007), when borrowers were rejected for
failing to meet Fremont’s underwriting criteria for fully documented loans, the loans were simply
converted to “stated income” loans – with a higher reported income than previously documented
– and approved. According to the separate accounts of CW 39 and CW 41, Fremont approved
loans with unrealistic stated incomes, including “pizza delivery men” with reported monthly
income of $5,000 or $6,000. Fremont accepted claims that “landscapers and housekeepers”
earned $10,000 in monthly income, according to CW 46 (a former senior underwriter at
Fremont’s Anaheim and Ontario, California centers from 2002 to 2007), and that “window
washers” made $75,000 per year, according to CW 41. In addition, Fremont continually ignored
obviously fraudulent documents when approving loans, according to CW 47, an account
manager from 2005 through May 2007. By way of specific example, Fremont ignored a case
66
where 40 loan files from the same broker had the exact same banking statements, according to
CW 48, a former quality control investigator at Fremont from 2002 until March 2007. Indeed,
fraudulent bank statements and W2s were discovered and ignored every day, according to CW
49, a quality control auditor with Fremont from May 2005 to February 2007. And, when
Fremont could not ignore fraudulent information, such as a false pay stub, Fremont simply
removed the information from the file or replaced it, according to CW 40.
176. According to CW 50, a senior underwriter at Fremont’s Anaheim, California
center from 1997 to September 2007, Fremont also loosened its debt-to-income-ratio
requirements. Before 2004, Fremont generally did not approve loans with more than a 50%
debt-to-income ratio. Thereafter, according to CW 50, Fremont approved loans with a 55% debt-
to-income ratio. And when CW 50 reviewed the loan files, he often determined that the debt-to-
income ratios actually were between 65% or 70%, or even up to 90%. In addition, CW 50 stated
that Fremont routinely approved stated-income loans with claimed incomes that were simply “off
the wall figures.”
177. In addition, according to CW 51, an account manager at Fremont’s Downers
Grove, Illinois center from January 2002 to July 2006, CW 51’s superiors would call property
appraisers and request that they inflate their appraisal values by at least a few thousand dollars,
and the appraisers would do so. According to CW 51, while auditing loans in the Due Diligence
Department and later, in connection with CW 51’s review of investor repurchase claims, CW 51
discovered, among other things, incomplete appraisals, appraisals that did not match the address
of the property, and appraisals that described the home as owner-occupied when it was rented, on
the large majority of the loans.
178. Further corroborating Fremont’s poor underwriting practices, Fremont’s business
partners have alleged that Fremont originated and sold large amounts of loans that were terribly
underwritten. In October of 2007, Morgan Stanley Mortgage Capital Holdings LLC sued
Fremont for breach of contract for Fremont’s failure to repurchase loans that Fremont sold from
May of 2005 through December of 2006 to Morgan Stanley’s predecessor-in-interest, Morgan
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Stanley Mortgage Capital, Inc. (referred to collectively with Morgan Stanley Mortgage Capital
Holdings LLC as “Morgan Stanley”). That action was captioned Morgan Stanley Mortgage
Capital Holdings LLC, as Successor-in-Interest to Morgan Stanley Mortgage Capital Inc. v.
Fremont Investment & Loan, No. 07-Civ.-9457 (S.D.N.Y.). According to the complaint, when
Fremont sold the loans at issue, Fremont warranted, among other things, that the loans met its
underwriting criteria and that Fremont had adequately verified the underlying information, such
as the borrowers’ income, credit history, and assets. Further, according to the complaint,
Fremont agreed to repurchase any loans that materially violated the warranties and indemnify
Morgan Stanley for any damages it suffered due to the defective loans.
179. Morgan Stanley alleged that it discovered “hundreds” of improperly underwritten
loans shortly after they were purchased. In particular, Morgan Stanley alleged that the “loans
fail[ed] to meet Fremont’s underwriting guidelines” because Fremont had “fail[ed] to verify
assets prior to closing,” performed “defective verification of rent, failed[ed] to obtain the
minimum credit history information, and [made] loans . . . to borrowers that did not have the
requisite credit score.” Morgan Stanley also alleged, consistent with the statements of former
Fremont employees set forth herein, that the “loan documents” contained “misrepresentations of
the income or employment of the borrower” and “misrepresentations concerning appraisal
values.” Morgan Stanley further alleged that the loans contained “misrepresentations of the
occupancy of the residence,” “misrepresentations of the assets of the borrower,” and
“misrepresentations of the condition of the property.”
180. Morgan Stanley is not the only one of Fremont’s business partners to sue the
Company for its improper underwriting. In June of 2007, Lehman Brothers Holdings, Inc. and
Lehman Brothers Bank, FSB (collectively, “Lehman Brothers”) also sued Fremont for breach of
contract and unjust enrichment for Fremont’s failure to repurchase loans that Lehman Brothers
had purchased beginning in March of 2004. That action was captioned Aurora Loan Services
LLC, et al. v. Fremont Investment & Loan Corp., No. 07-cv-01284-RPM (D. Colo.).
68
181. In that case, Lehman Brothers, just like Morgan Stanley, alleged that when
Fremont sold the loans at issue, Fremont warranted that the loans met its underwriting criteria
and that the underlying documentation was accurate as to the borrowers’ identity, income,
employment, credit history, and assets, among other things. Furthermore, Fremont agreed to
repurchase those loans that violated the warranties and indemnify Lehman Brothers for any
damages it suffered due to the defective loans.
182. After Lehman Brothers purchased the loans, according to its complaint, loan
servicers and other third parties notified Lehman Brothers of “certain issues” concerning the
loans. When Lehman Brothers “conducted further due diligence,” it “confirmed that Fremont
breached one or more representations and/or warranties” concerning the loans. According to the
Lehman complaint, the breached warranties included “[t]he conformance of the Mortgage Loans
with applicable underwriting guidelines and loan program requirements”; “[t]he accuracy and
integrity of all information and documentation regarding borrower identity, income,
employment, credit, assets, and liabilities used to originate the Mortgage Loans”; “[t]he validity
of all Mortgage Loan documentation”; “[t]he ownership, nature, condition, and value of the real
property securing the respective Mortgage Loans”; and “[b]orrower occupancy of the property
securing the Mortgage Loans.”
e. WMC Mortgage Corporation

WMC’s Underwriting Standards and Practices
183. WMC originated Mortgage Loans that were included in the pools for the

Equity
Equity
Equity
69
CMLTI 2005-HE1 Citigroup Mortgage Loan Trust Citigroup
JPMAC 2005- J.P. Morgan Mortgage Acquisition Corp. JP Morgan
WMC1
JPMAC 2006- J.P. Morgan Mortgage Acquisition Corp. JP Morgan
WMC1
MABS 2006-WMC4 MASTR Asset Backed Securities Trust UBS
MLMI 2005-WMC1 Merrill Lynch Mortgage Investors Merrill Lynch
MSAC 2005-WMC2 Morgan Stanley ABS Capital I Morgan Stanley
MSAC 2006-HE1 Morgan Stanley Capital I Morgan Stanley
SABR 2006-WM2 Securitized Asset Backed Receivables Barclays Capital
SVHE 2005-1 SoundView Home Loan Trust Greenwich Capital
for which WMC originated some or all of the underlying mortgage loans.
statements of material facts regarding WMC’s underwriting and appraisal standards and
practices. For example, the prospectus supplement for ABSHE 2005-HE5 stated:
Underwriting Standards. The mortgage loans have been originated generally in
accordance with the underwriting guidelines established by it (collectively, the
“Underwriting Guidelines”). WMC Mortgage Corp. also originates certain
other mortgage loans that are underwritten to the guidelines of specific
investors, which mortgage loans are not included among those sold to the
trust as described herein. The Underwriting Guidelines are primarily
intended to (a) determine that the borrower has the ability to repay the
mortgage loan in accordance with its terms and (b) determine that the
70
related mortgaged property will provide sufficient value to recover the
investment if the borrower defaults. On a case-by-case basis WMC Mortgage
Corp. may determine that, based upon compensating factors, a prospective
mortgagor not strictly qualifying under the underwriting risk category or
other guidelines described below warrants an underwriting exception.
Compensating factors may include, but are not limited to, low debt-to-
income ratio (“Debt Ratio”), good mortgage payment history, an abundance of
cash reserves, excess disposable income, stable employment and time in residence
at the applicant’s current address. It is expected that a substantial number of the
mortgage loans to be included in the trust will represent such underwriting
exceptions.
The mortgage loans in the trust will fall within the following documentation
categories established by WMC Mortgage Corp.: Full Documentation, Full-
Alternative Documentation, Limited Documentation, Lite Documentation, Stated
Income Documentation and Stated Income/Verified Assets (Streamlined)
Documentation. In addition to single-family residences, certain of the mortgage
loans will have been underwritten (in many cases, as described above, subject to
exceptions for compensating factors) in accordance with programs established by
WMC Mortgage Corp. for the origination of mortgage loans secured by
mortgages on condominiums, vacation and second homes, manufactured housing,
two- to four-family properties and other property types. In addition, WMC
Mortgage Corp. has established specific parameters for jumbo loans, which are
designated in the Underwriting Guidelines as mortgage loans with original
principal balances in excess of $650,000. However, WMC Mortgage Corp.
sometimes increases the original principal balance limits if borrowers meet other
compensating credit factors.
Under the Underwriting Guidelines, WMC Mortgage Corp. verifies the loan
applicant’s eligible sources of income for all products, calculates the amount of
income from eligible sources indicated on the loan application, reviews the credit
and mortgage payment history of the applicant and calculates the Debt Ratio to
determine the applicant’s ability to repay the loan, and reviews the mortgaged
property for compliance with the Underwriting Guidelines. The Underwriting
Guidelines are applied in accordance with a procedure which complies with
applicable federal and state laws and regulations and require, among other
things, (1) an appraisal of the mortgaged property which conforms to
Uniform Standards of Professional Appraisal Practice and (2) an audit of
such appraisal by a WMC Mortgage Corp.-approved appraiser or by WMC
Mortgage Corp.’s in-house collateral auditors (who may be licensed
appraisers), which audit may in certain circumstances consist of a second
appraisal, a field review, a desk review or an automated valuation model.
demonstrated below in ¶¶ 187-193, they failed to disclose that WMC: (i) systematically failed to
71
2. WMC Violated Its Stated Underwriting Standards

187. Defendants Barclays, Citigroup, Credit Suisse, Deutsche Bank, Greenwich
Capital, J.P. Morgan, Merrill Lynch, Morgan Stanley, and UBS offered or sold to Plaintiff
Securities containing loans originated by WMC and made untrue statements to Plaintiff about
WMC’s underwriting and appraisal standards and practices and the loans. These Wall Street
Banks had extensive business relationships with WMC, had access to WMC’s mortgage
origination personnel and internal information, and conducted due diligence into WMC using
their own personnel and third-party loan review firms. As a result of the Wall Street Banks’
access to and due diligence into WMC, they were or reasonably should have been aware of the
untruth of the statements about WMC described above.
188. According to Reuters, WMC originated “some of the worst-performing loans in
the . . . $575 billion market for home equity asset-backed securities.” According to a lawsuit
filed in September 2009, a review of WMC’s mortgage loan files showed that “in reality [WMC]
followed few, if any, objective standards or criteria in underwriting [mortgage loans] and showed
little concern if any, for any borrower’s ability to repay.” WMC’s reckless underwriting
standards and practices resulted in a huge amount of foreclosures, ranking WMC fourth in the
Comptroller of the Currency’s “Worst Ten of the Worst Ten” list presented in April 2010 to the
FCIC.
189. In 2004, WMC, then the sixth-largest subprime lender in the nation, was
purchased by General Electric from private equity firm Apollo Management. WMC’s
concentration was in nonprime loans and jumbo loans up to $1 million dollars. According to a
March 2007 article published by MortgageDaily.com, WMC was faced with growing
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delinquencies, and announced that it would no longer write mortgages with no down payments.
Soon after, on September 20, 2007, General Electric closed WMC’s operations, taking a $400
million charge as a result.
190. The market has now become aware of WMC’s reckless loan originating practices.
For example, on September 2, 2009, PMI Mortgage Insurance Co. (“PMI”) sued WMC in
California state court for misrepresentations and failure to adhere to its contractual repurchase
obligations relating to the securitization of a pool of certain subprime mortgage loans originated
by WMC (“PMI Complaint”). PMI alleged that WMC “made extensive representations and
warranties” about the underwriting of its mortgage loans and the accuracy of the information
underlying such loans. PMI Complaint, ¶¶ 21, 33. According to PMI, an external investigation
by Clayton into a sample of some of the thousands of WMC-originated loans revealed that WMC
“breached various representations and warranties . . . because, inter alia, the loan-to-value ratio
at the time of origination was greater than 100%; fraud, errors, misrepresentations, or gross
negligence took place on the part of WMC . . . ; the loans did not comply with WMC’s own
underwriting standards at the time of origination; certain documents were missing; and/or WMC
had failed to utilize a methodology in underwriting the loans that employed objective
mathematical principles designed to determine that, at the time of origination, the borrower had
the reasonable ability to make timely payments on the [m]ortgage [l]oans.” Id., ¶ 35.
191. According to the PMI Complaint, the Clayton investigation “demonstrate[d] a
systemic failure by WMC to apply sound underwriting standards and practices which cuts across
all of the [loans in the securitization].” In the defective loans, “Clayton discovered unreasonable
stated income and/or misrepresentations of income and/or employment by the borrower, the large
majority of which could have been discovered by WMC prior to transfer via simple diligence
procedures.” ¶ 36. Moreover, nearly a quarter of the loans sampled by Clayton were shown to
contain “misrepresentations of occupancy by the borrower, another factor that could have easily
been verified by WMC.” Id.
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192. WMC’s reckless loan originating practices were noticed by the regulatory
authorities as well. In June 2008, the Washington State Department of Financial Institutions,
Division of Consumer Services filed a Statement of Charges and Notice of Intention to Enter an
Order to Revoke License, Prohibit From Industry, Impose Fine, Order Restitution and Collect
Investigation Fees against WMC Mortgage and its principal owners individually: Amy C.
Brandt, WMC’s CEO and President; Mark Walter, WMC’s executive vice president; and Marc
Becker, WMC’s Director. The Statement of Charges was the result of a lengthy investigation in
which WMC’s and its business partners’ books were subpoenaed. The investigation found that
WMC had originated loans with unlicensed or unregistered mortgage brokers, understated
amounts of finance charges on multiple loans, understated amounts of payments made to escrow
companies, understated annual percentage rates by almost one-half of 1%, and committed many
other violations of Washington State deceptive and unfair practices laws. This investigation is
ongoing.
193. In January 2009, WMC Mortgage was sued in the United States District Court for
the Eastern District of California for violations of the Truth In Lending Act, 15 U.S.C. § 1601, et
seq. The plaintiff in that action is a mortgage borrower who alleges that, in an effort to maximize
the number of loans sold to consumers and to maximize WMC’s profits, WMC assured the
plaintiff throughout the loan application process that the plaintiff would have low mortgage
payments and failed to disclose the correct payment amounts or finance charges.
f. The Ameriquest Loan Sellers

the Ameriquest Loan Sellers’ Underwriting Standards and
Practices
194. ACC Capital Holdings (“ACC Capital”) was the nation’s largest subprime lender.
Argent was a wholly owned mortgage subsidiary of ACC Capital. Citigroup purchased Argent
on August 31, 2007. Ameriquest Mortgage Company (“Ameriquest”) was ACC Capital’s wholly
owned retail lending subsidiary. On August 1, 2007, Ameriquest announced that it would no
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longer be accepting loan applications. Ameriquest and Argent are, at times, collectively referred
to herein as the “Ameriquest Loan Sellers.”
195. Together, the Ameriquest Loan Sellers originated mortgage loans that were
included in the pools for the following offerings:

Equity
Equity
AMSI 2005-R6 Ameriquest Mortgage Securities Inc. Credit Suisse
AMSI 2005-R7 Ameriquest Mortgage Securities Inc. UBS
BSABS 2005-AQ2 Bear Stearns Asset Backed Securities Inc. Bear Stearns
CMLTI 2005-9 Citigroup Mortgage Loan Trust Citigroup
CMLTI 2007-AMC2 Citigroup Mortgage Loan Trust Citigroup
GSAMP 2006-HE6 GS Mortgage Securities Corp. Goldman Sachs
for which the Ameriquest Loan Sellers originated some or all of the underlying mortgage loans.
197. The Offering Documents for all these Securities contained substantially if not
exactly the same statements of material facts regarding the Ameriquest Loan Sellers’
underwriting standards and practices. For example, the prospectus supplement for AMSI 2005-
R8 stated:
The Mortgage Loans were originated generally in accordance with guidelines (the
“Underwriting Guidelines”) established by the Originator with one of the
following income documentation types: “Full Documentation,” “Limited
Documentation” or “Stated Income.” The Underwriting Guidelines are
primarily intended to evaluate: (1) the applicant’s credit standing and
repayment ability and (2) the value and adequacy of the mortgaged property
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as collateral. On a case-by-case basis, the Originator may determine that,
based upon compensating factors, a loan applicant, not strictly qualifying
under one of the Risk Categories described below, warrants an exception to
the requirements set forth in the Underwriting Guidelines. Compensating
factors may include, but are not limited to, loan-to-value ratio, debt-to-income
ratio, good credit history, stable employment history, length at current
employment and time in residence at the applicant’s current address. It is
expected that a substantial number of the Mortgage Loans to be included in the
mortgage pool will represent such underwriting exceptions.
198. The relevant Offering Documents also made statements of material facts about the
Ameriquest Loan Sellers’ appraisal standards and practices. For example, the same prospectus
supplement stated:
The Underwriting Guidelines are applied in accordance with a procedure which
complies with applicable federal and state laws and regulations and requires either
(A) (i) an appraisal of the mortgaged property which conforms to the Uniform
Standards of Professional Appraisal Practice and are generally on forms similar to
those acceptable to Fannie Mae and Freddie Mac and (ii) a review of such
appraisal, which review may be conducted by a representative of the Originator or
a fee appraiser and may include a desk review of the original appraisal or a drive-
by review appraisal of the mortgaged property or (B) an insured automated
valuation model. The Underwriting Guidelines permit loans with loan-to-value
ratios at origination of up to 95%, subject to certain Risk Category limitations (as
further described in that section). The maximum allowable loan-to-value ratio
varies based upon the income documentation, property type, creditworthiness,
debt service-to-income ratio of the applicant and the overall risks associated with
the loan decision. Under the Underwriting Guidelines, the maximum loan-to-
value ratio, including any second deeds of trust subordinate to the Originator’s
first deed of trust, is 100%.
199. These statements are substantially similar, if not identical, to statements
concerning the Ameriquest Loan Sellers’ underwriting standards and practices found in the other
Prospectus Supplements for the Securities whose underlying mortgage loans were originated by
Ameriquest and Argent.
demonstrated below in ¶¶ 201-210, they failed to disclose that the Ameriquest Loan Sellers: (i)
systematically failed to follow their stated underwriting standards; (ii) allowed pervasive
exceptions to their stated underwriting standards in the absence of compensating factors; (iii)
disregarded credit quality in favor of generating increased loan volume; and (iv) violated their
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stated appraisal standards and in many instances materially inflated the values of the underlying
mortgage properties in the loan origination and underwriting process.
2. The Ameriquest Loan Sellers Violated Their Stated

Underwriting Standards
201. Defendants Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, J.P.
Morgan (as successor-in-interest to Bear Stearns), and UBS offered or sold to Plaintiff Securities
containing loans originated by the Ameriquest Loan Sellers and made untrue statements to
Plaintiff about the Ameriquest Loan Sellers’ underwriting and appraisal standards and practices
and the loans. These Wall Street Banks had extensive business relationships with the Ameriquest
Loan Sellers, had access to the Ameriquest Loan Sellers’ mortgage origination personnel and
internal information, and conducted due diligence into the Ameriquest Loan Sellers using their
own personnel and third-party loan review firms. As a result of the Wall Street Banks’ access to
and due diligence into the Ameriquest Loan Sellers, they were or reasonably should have been
aware of the untruth of the statements about the Ameriquest Loan Sellers described above.
202. Both of the Ameriquest Loan Sellers appeared in the Comptroller of the
Currency’s list of the “Worst Ten in the Worst Ten,” discussed above.
203. While the Ameriquest Loan Sellers and the Wall Street Banks stated that the
Ameriquest Loan Sellers’ underwriting of mortgages was designed to ensure a prospective
borrower’s credit standing and repayment ability and the value and adequacy of the mortgaged
property as collateral, these statements were untrue. In fact, the Ameriquest Loan Sellers’
underwriting practices were designed to originate as many mortgage loans as possible without
regard to the ability of the borrowers to repay such mortgages, and the Ameriquest Loan Sellers
systematically disregarded or misstated the income, assets, and employment status of borrowers
seeking mortgage loans. Indeed, Argent and Ameriquest were the third and ninth among the
Comptroller of the Currency’s “Worst Ten” Mortgage Originators, respectively, based on the
number of foreclosures as of March 22, 2010 on loans originated between 2005 and 2007.
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204. According to a December 7, 2008, article in the Miami Herald, employees of
Argent, including a former vice president named Orson Benn who is currently in prison for his
role in the mortgage fraud schemes at Argent, actively assisted mortgage brokers in falsifying
borrowers’ financial information by “tutoring . . . mortgage brokers in the art of fraud.”
Employees “taught [brokers] how to doctor credit reports, coached them to inflate [borrower]
income on loan applications, and helped them invent phantom jobs for borrowers” so that loans
could be approved. According to Mr. Benn himself, “the accuracy of loan applications was not a
priority.” The Miami Herald examined the applications for 129 loans funded by Argent and
“found at least 103 that contained false and misleading information” and “red flags: non-existent
employers, grossly inflated salaries and sudden, drastic increases in the borrower’s net worth.”
As noted by the article, “[t]he simplest way for a bank to confirm someone’s income is to call the
employer. But in at least two dozen cases, the applications show bogus telephone numbers for
work references . . . .” Argent’s lack of verification was so extreme that a “borrower [who]
claimed to work a job that didn’t exist . . . got enough money to buy four houses.” Another
borrower “claimed to work for a company that didn’t exist – and got a $170,000 loan.”
205. Moreover, according to a May 11, 2008 Cleveland Plain Dealer article, Jacquelyn
Fishwick, who worked for more than two years at an Argent loan processing center near Chicago
as an underwriter and account manager, noted that “some Argent employees played fast and
loose with the rules” and stated “I personally saw some stuff I didn’t agree with.” Ms. Fishwick
“saw [Argent] account managers remove documents from files and create documents by cutting
and pasting them.”
206. In the summer of 2007, Citigroup acquired Ameriquest and Argent. Richard
Bowen, III, was Citibank’s Business Chief Underwriter for correspondent lending who
supervised 220 professional underwriters and exercised direct oversight of more than $90 billion
of correspondent residential mortgages annually. Mr. Bowen was involved in the due diligence
for that acquisition. In his April 7, 2010 testimony before the FCIC, Mr. Bowen testified that he
advised against the acquisition because “we sampled loans that were originated by Argent and
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we found large numbers that did not – that were not underwritten according to the
representations that were there.” He further testified that the number of loans that contained
untrue representations was significant enough to support his decision to oppose the acquisition
(although Citigroup did not follow his recommendation).
207. Argent has been the subject of several lawsuits alleging fraud in its underwriting
and lending practices. In January 2010, Argent, along with its parent company, Ameriquest,
participated in a $22 million settlement of claims brought in the Northern District of Illinois by
those who purchased mortgages after December 14, 2001 and who alleged fraudulent mortgage
lending practices.
208. On August 20, 2007, Business Week reported in an article titled “Did Big Lenders
Cross the Line?” that lawsuits by mortgage borrowers are increasingly blaming lenders’ lax
underwriting standards for loan delinquency. In one lawsuit against Ameriquest, plaintiff Mary
Overton alleges that loan officers at a Brooklyn, New York branch of Ameriquest coerced
Overton into signing a loan. Unbeknownst to Ms. Overton, Ameriquest created fake tax returns,
employment records, and a 401(k) to make it appear that the loan was affordable. According to
other court filings, at least 40 other borrowers allege Ameriquest doctored loan documents or
overstated borrowers’ income. According to Business Week, large lenders, such as Ameriquest,
were motivated to engage in these practices to keep up loan volume and generate sales. The
nationwide nature of these practices was confirmed by former Ameriquest employees in a
National Public Radio broadcast on May 12, 2007. A former Ameriquest loan officer in Tampa,
Florida, recalled that in order to sell a loan “at any cost,” “managers encouraged loan officers to
conceal the actual cost and interest rates on loans,” and “would white out numbers on W2s and
bank statements and fill in bigger amounts basically to qualify people for loans that they couldn’t
afford,” a practice “called taking the loan to the art department.” According to the National
Public Radio broadcast, these practices were not isolated and were confirmed by former
employees from Ameriquest offices around the country.
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209. On October 22, 2007, Mortgage Daily reported that Wachovia filed a lawsuit
against Ameriquest alleging that Ameriquest had not complied with repurchase requests on loans
with fraudulent files. According to Wachovia’s complaint, the 135 nonperforming loans sold to
Wachovia on December 29, 2005, contained incorrect credit scores, incorrect employment status,
and misstatements of the kind of home being financed. In addition, the complaint stated that the
loans had not been underwritten pursuant to the underwriting procedures that Ameriquest agreed
to apply and thus Ameriquest’s representations and warranties regarding the loans were untrue
and were breached by Ameriquest. Mortgage Daily, “Wachovia v. Ameriquest,” October 22,
2007.
210. In her January 14, 2010 testimony before the FCIC, Illinois Attorney General Lisa
Madigan explained how a multistate investigation of Ameriquest “revealed that the company
engaged in the kinds of fraudulent practices that other predatory lenders subsequently emulated
on a wide scale . . . includ[ing]: inflating home appraisals.”
g. Option One

Option One’s Underwriting Standards and Practices
211. Option One originated Mortgage Loans that were included in the pools for the

ABFC 2005-HE1 Asset Backed Funding Certificates NIM Bank of America
ABFC 2006-OPT2 Asset Backed Funding Corporation Bank of America
Equity
ACE 2006-OP1 Ace Securities Corp. Deutsche Bank
GSAMP 2006-S1 GS Mortgage Securities Corp. Goldman Sachs
SVHE 2006-OPT2 SoundView Home Loan Trust Greenwich Capital
SVHE 2006-OPT5 SoundView Home Loan Trust Greenwich Capital
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HASC 2006-OPT3 HSI Asset Securitization Corporation HSBC
Trust
JPMAC 2005-OPT1 J.P. Morgan Mortgage Acquisition Corp. JP Morgan
JPMAC 2005-OPT2 J.P. Morgan Mortgage Acquisition Corp. JP Morgan
for which Option One originated some or all of the underlying mortgage loans.
statements of material facts regarding Option One’s underwriting and appraisal standards and
practices. For example, the prospectus supplement for ABSHE 2006-HE3 stated:
The Mortgage Loans will have been originated generally in accordance with
Option One’s Guidelines (the “Option One Underwriting Guidelines”). The
Option One Underwriting Guidelines are primarily intended to assess the value of
the mortgaged property, to evaluate the adequacy of such property as collateral
for the mortgage loan and to assess the applicant’s ability to repay the mortgage
loan. The Mortgage Loans were also generally underwritten with a view toward
resale in the secondary market. The Mortgage Loans generally bear higher rates
of interest than mortgage loans that are originated in accordance with customary
Fannie Mae and Freddie Mac standards.
On a case-by-case basis, exceptions to the Option One Underwriting Guidelines

are made where compensating factors exist. Except as specifically stated herein,
the Option One Underwriting Guidelines are the same for first lien mortgage
loans and second lien mortgage loans.
Each mortgage loan applicant completes an application that includes information

with respect to the applicant’s liabilities, income, credit history, employment
history and personal information. The Option One Underwriting Guidelines
require a credit report and, if available, a credit score on each applicant from a
credit-reporting agency. The credit report typically contains information relating
to such matters as credit history with local and national merchants and lenders,
installment debt payments and any record of defaults, bankruptcies, repossessions
or judgments. A credit score is a statistical ranking of likely future credit
performance developed by Fair, Isaac and Co., Inc. and made available through
the three national credit data repositories—Equifax, TransUnion and Experian.
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Mortgaged properties that are to secure mortgage loans generally are appraised by
qualified independent appraisers. Such appraisers inspect and appraise the subject
property and verify that such property is in acceptable condition. Following each
appraisal, the appraiser prepares a report which includes a market value analysis
based on recent sales of comparable homes in the area and, when deemed
appropriate, replacement cost analysis based on the current cost of constructing a
similar home. All appraisals are required to conform to the Uniform
Standards of Professional Appraisal Practice adopted by the Appraisal
Standards Board of the Appraisal Foundation and are generally on forms
acceptable to Fannie Mae and Freddie Mac.
The Option One Underwriting Guidelines require that mortgage loans be

underwritten in a standardized procedure which complies with applicable federal
and state laws and regulations and require Option One’s underwriters to be
satisfied that the value of the property being financed, as indicated by an
appraisal, supports the loan balance.
demonstrated below in ¶¶ 215-223, they failed to disclose that Option One: (i) systematically
failed to follow its stated underwriting standards; (ii) allowed pervasive exceptions to its stated
2. Option One Violated Its Stated Underwriting Standards

215. Defendants Banc of America, Citigroup, Credit Suisse, Deutsche Bank, Goldman
Sachs, Greenwich Capital, HSBC, J.P. Morgan, and Merrill Lynch offered or sold to Plaintiff
Securities containing loans originated by Option One and made untrue statements to Plaintiff
about Option One’s underwriting and appraisal standards and practices and the loans. These
Wall Street Banks had extensive business relationships with Option One, had access to Option
One’s mortgage origination personnel and internal information, and conducted due diligence into
Option One using their own personnel and third-party loan review firms. As a result of the Wall
Street Banks’ access to and due diligence into Option One, they were or reasonably should have
been aware of the untruth of the statements about Option One described above.
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216. Option One was a national mortgage lender formerly owned by H&R Block, Inc.,
until its assets were sold to American Home Mortgage Servicing, Inc., in April 2008. Option
One is the sixth worst mortgage originator, by number of foreclosures as of March 22, 2010,
according to the Comptroller of the Currency’s “Ten Worst in the Ten Worst” list.
217. Former employees with first-hand knowledge have confirmed that Option One
violated its stated standards for underwriting and appraisals. For example, CW 52, a former
underwriter at Option One in Atlanta, Georgia from 2005 to 2006, said that if an underwriter
denied a loan and an account executive complained, the loan was escalated to the branch
manager, who then got in touch with the underwriter. With account executives, “the biggest
screamer and shaker of trees gets the most fruit.” For a “top-producing” account executive,
whatever red flags there were would be “overlooked,” and invariably the loan would be pushed
through. CW 52 estimated that at least 50% of the total loan volume in Option One’s Atlanta
branch was approved in this manner. CW 52 also stated that a loan applicant could tell “a
straight up lie” about his income, but the untrue information would be overlooked and the loan
would be approved, despite CW 52’s initial rejection of the application.
218. Similarly, CW 53, an underwriter at Option One’s Marietta, Georgia office in
2005, reported that Option One approved stated income loans “knowing good and well that those
people did not make that much money in the position they were in.” Likewise, CW 54, an
underwriter for Option One in Hawaii from November 2004 to January 2006, stated that “the
overwhelming majority of stated income loans were crafted,” meaning that the borrowers were
not making “anywhere near” what they claimed. However, CW 54 stated that he felt pressured
to push loans through because every loan generated income and “[i]f you applied any level of
rational thought, you were frowned upon.”
219. With respect to artificially inflated appraisals, CW 52 stated that “[o]f course they
inflated values” and that if an underwriter questioned the appraised value, the account executive
and branch manager would override the underwriter’s objection, as with any other red flag in a
loan file. Similarly, CW 55, a staff review appraiser for Option One working throughout the
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western United States from January 2004 to May 2007, stated that the appraisals “were all bad.”
He considered the appraisals borderline fraudulent, not merely incompetent, but was unable to
prevent loans based on the flawed appraisals. He explained, “Our job is supposed to be stopping
bad loans, but no one stopped them.” When CW 55 objected to loans because of flawed
appraisals, the loan officer would complain to the branch manager, who would complain to the
Appraisals Department at headquarters in Irvine, California, and on up the chain until someone
high enough in the Underwriting and Sales Department said to go forward with the loan.
220. Option One was motivated to violate its underwriting and appraisal standards in
order to increase the volume of loans it could sell to Wall Street Banks to be securitized. CW 56,
an Assistant Vice President of Option One from 2005 to 2007, worked in the Correspondent
Lending department, which purchased loans from small mortgage companies. CW 56 stated that
Option One purchased loans that raised concerns under the stated guidelines and that when he
raised such concerns he was essentially told, “Shut up, Wall Street will buy it; don’t worry about
it.”
221. Similarly, CW 57, who was an underwriter at Option One in Pleasanton,
California from October 2005 to October 2007, stated that “[i]f [a borrower] had a FICO and a
pulse, they could get a loan” from Option One. CW 57 also stated that:
I caught blatant fraud, and the [account executive] would still fight for it. [The
account executives and managers] would fight me because they didn’t care. They
knew they were going to sell it on the secondary market, and they didn’t care
because it wasn’t their money. They were going to get paid regardless. . . . At
Option One they didn’t have a portfolio; they sold everything, so they didn’t
care. . . . [Option One] didn’t have to worry about it, because once they’re done
with these crappy loans, they’d sell them off. They were the investors’ problem.
222. On June 3, 2008, the Attorney General for the Commonwealth of Massachusetts
filed an action against Option One, and its past and present parent companies, for their unfair and
deceptive origination and servicing of mortgage loans (the “Massachusetts Option One
Complaint”). According to the Attorney General, since 2004, Option One “increasingly
disregarded underwriting standards, created incentives for loan officers and brokers to disregard
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the interests of the borrowers and steer them into high-cost loans, and originated thousands of
loans that [Option One] knew or should have known the borrowers would be unable to pay, all in
an effort to increase loan origination volume so as to profit from the practice of packaging and
selling the vast majority of [Option One’s] residential subprime loans to the secondary market.”
Massachusetts Option One Complaint, ¶ 4. The Attorney General’s complaint alleges that
Option One’s agents and brokers “frequently overstated an applicant’s income and/or ability to
pay, and inflated the appraised value of the applicant’s home,” and that Option One “avoided
implementing reasonable measures that would have prevented or limited these fraudulent
practices.” Id., ¶ 8. Option One’s “origination policies . . . employed from 2004 through 2007
have resulted in an explosion of foreclosures.” Id., ¶ 10.
223. On June 4, 2008, the Wall Street Journal reported that the Massachusetts Attorney
General’s lawsuit “charges Option One with ‘recklessly facilitating the foreclosure of borrowers’
homes,’” and that Option One “proposed terms ‘that are as unfair and unsustainable as the
original loans.”
h. Additional Mortgage Originators

224. Other mortgage originators that provided loans for the pools underlying the
Securities that the Defendants offered or sold to Plaintiff included Aames, Accredited Home
Lenders, Inc. (“Accredited”), DLJ Mortgage Capital, and Equifirst, among others. The Offering
Documents for each securitization in which Defendants offered or sold Securities to Plaintiff set
forth the underwriting standards for the mortgage originators of the loans included in that
securitization. These statements of material facts were untrue and omitted material facts because
mortgage originators industry-wide systematically failed to follow their stated underwriting
standards.
225. For example, former employees of Accredited confirm the lack of underwriting
and appraisal standards. According to CW 58, a Corporate Underwriter at Accredited between
June 2004 and March 2005, managers on the sales side frequently overruled underwriting
decisions. CW 58 noted such loans were tracked internally, and it was well-known they
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performed poorly. Moreover, according to CW 58, in early 2005, Accredited approved risky
loans that did not comply with its own underwriting guidelines in an effort to reach monthly
production targets.
226. According to CW 59, a Corporate Underwriter at Accredited between August
2003 and February 2006 in Tampa, Florida, Operations Managers and Senior Operations
Managers constantly overruled decisions to reject loan applications. According to CW 59, “The
problem with the whole system was the overrides. The overrides were rampant. If the borrower
breathed, he got the loan.”
227. According to CW 60, a Corporate Underwriter at Accredited in San Diego
between May 2002 and November 2006, Accredited’s underwriters who reviewed and approved
or denied loans were being overridden, frequently resulting in loans that did not comply with
underwriting guidelines. According to CW 60, the number of overrides grew so large that
Accredited was forced to institute a system to track such overrides. The system included a box
on the loan file that an underwriter needed to check if a higher-level manager approved the loan
“as a business decision” over the recommendation of the underwriter.
228. According to CW 61, a Corporate Underwriter at Accredited between June 2000
and March 2007 in both the San Diego, California, and Austin, Texas, offices, “[a]t the end of the
month, we were handed loan files and told to just sign them with no audit.”
229. According to CW 62, the Chief Appraiser at Accredited for five years between
2002 and June 2007, Accredited allowed both corporate underwriters and sales managers to
override the decisions of licensed property appraisers. In many cases, an appraisal reviewer
working for Accredited would reject a loan application after concluding that the appraisal
submitted with the application was inflated. According to CW 62, the account executive who
submitted the loan application would become annoyed by the rejection and appeal the decision to
a sales manager who then would overturn the appraisal reviewer’s decision without any valid
justification. According to CW 62, overrides of appraisers’ decisions were rampant: “As of June
2006, between 12% and 15% of our business was being done through management overrides.”
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230. On May 1, 2009, Accredited filed for bankruptcy. Accredited faced huge
demands from Wall Street Banks to repurchase loans. In bankruptcy filings, Accredited stated
that it faces more than $200 million in repurchase claims. The Wall Street Banks assert that
certain loans they purchased are defective and violate the purchase agreements they made with
Accredited because they contain serious mistakes or borrowers defaulted too quickly.
231. On information and belief, substantially similar violations of underwriting and
appraisal standards were commonplace at Aames, DLJ Mortgage Capital, Equifirst, and the other
mortgage originators whose loans were included in the securitizations in which Defendants
offered or sold Securities to Plaintiff.
VI. DEFENDANTS MADE MATERIAL UNTRUE STATEMENTS AND OMISSIONS

232. The Depositor Defendants acquired mortgage loans and deposited them into
issuing trusts, and the Wall Street Bank Defendants offered or sold the Securities to Plaintiff
through the Offering Documents, other documents as described herein, and oral statements made
directly to Plaintiff. Each Depositor Defendant and Wall Street Bank Defendant participated in
drafting the prospectus supplement or private placement memorandum for each securitization
issued by that Depositor or underwritten by that Wall Street Bank. In addition, each Depositor
Defendant and Wall Street Bank Defendant was identified in these documents as the issuer or
underwriter, respectively, of the Securities, and approved the versions of these documents that
were delivered by the Wall Street Bank to Plaintiff.
233. The Defendants’ Offering Documents contained statements of material facts
regarding, inter alia, (i) the underwriting process and standards by which the loans held in the
issuing trusts were originated; (ii) the standards and guidelines used by the Depositor Defendants
and Wall Street Bank Defendants when evaluating and acquiring the loans; and (iii) the value of
the underlying real estate securing the loans pooled in the issuing trusts, including the loan-to-
value ratios and the appraisal standards by which such real estate values were measured.
234. The Offering Documents emphasized the underwriting standards used to originate
the underlying mortgage loans. Indeed, each Prospectus Supplement set forth the underwriting
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standards for the Mortgage Originators who originated a substantial portion of the underlying
mortgages in that issuing trust. Contrary to these statements of material facts, many of these
Mortgage Originators of the underlying mortgages did not originate loans in accordance with
their stated underwriting standards. Rather, as set forth above, these Mortgage Originators
extended loans that did not comply with their underwriting standards in order to increase loan
volume regardless of the borrowers’ ability to meet their obligations.
235. Additionally, the Offering Documents often made the statement of material facts,
in sum or substance, that “all prospective Mortgage Loans will be subject to the underwriting
standards adopted” herein; provided the Wall Street Banks’ underwriting standards; or identified
significant Mortgage Originators and provided the underwriting standards utilized by those
Originators.
236. The written and oral statements of material facts regarding the underwriting and
appraisal standards utilized by the Mortgage Originators and the Defendants’ own due diligence
were untrue and omitted material facts. Indeed, as detailed above, many of the identified
Mortgage Originators systematically violated their stated underwriting and appraisal guidelines,
and the Wall Street Bank Defendants made untrue statements about their own due diligence.
a. Morgan Stanley’s Untrue Statements of Material Facts and Omissions

237. Morgan Stanley offered or sold Securities to Plaintiff in Massachusetts in 2005,
2006 and 2007 for a total price of $219,379,620. A full list of these offerings and sales, along
with the relevant Offering Documents, the identities of the relevant Depositor Defendants and
Mortgage Originators, the dates of the purchases, and the amounts invested is contained in the
attached Appendix A.
238. Morgan Stanley sought to compete with its Wall Street peers and to expand its
share of the RMBS market by aggressively pursuing subprime lenders to purchase loans, offering
to pay more for mortgages than competing Wall Street Banks, and offering to perform less due
diligence than competitors. According to a December 6, 2007 article in the New York Times,
“Wary of Risk, Bankers Sold Shaky Mortgage Debt,” Morgan Stanley cultivated a relationship
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with New Century. As a result of this relationship, Morgan Stanley expanded its subprime
underwriting business by 25% from 2004 to 2006. According to a former New Century
executive, Morgan Stanley agreed to pay above-market prices for loans in return for a steady
supply of mortgages. According to the article, the former New Century executive said: “Morgan
would be aggressive and say, ‘We want to lock you in for $2 billion a month.’”
239. Through its affiliates and subsidiaries, Morgan Stanley was able to control nearly
every step in the mortgage securitization process. For example, Morgan Stanley formed
numerous SPVs including: (1) Depositor Defendant Morgan Stanley ABS Capital I Inc., which
served as the depositor and issuer for offerings of RMBS; (2) Morgan Stanley Capital I Inc.,
which served as the depositor and issuer for offerings of RMBS; and (3) Morgan Stanley
Mortgage Capital Inc., which originated or otherwise acquired residential mortgage loans to be
securitized and served as the sponsor in numerous offerings of RMBS. Defendant Morgan
Stanley offered or sold the Securities to Plaintiff. Morgan Stanley also provided financial
research on RMBS and related structured products.
240. In connection with its offer or sale of Securities to Plaintiff, Morgan Stanley sent
numerous documents to Plaintiff in Massachusetts. These documents included registration
statements, prospectuses, and prospectus supplements. Morgan Stanley also sent Plaintiff
numerous other documents, including term sheets and “loan tapes.” The loan tapes Morgan
Stanley sent to Plaintiff consisted of Excel spreadsheets that contained dozens of categories of
information related to the individual loans including, inter alia, the purpose of the mortgage
loans; the type of properties; the owner-occupancy status; and borrower FICO scores. Often,
Morgan Stanley also showed Plaintiff “pitch books” and other materials promoting the Mortgage
Originators’ underwriting practices and guidelines for the mortgages supporting Securities, the
data, and Morgan Stanley’s due diligence of the Mortgage Originators’ underwriting practices.
Morgan Stanley did not allow Plaintiff to keep the pitch books.
241. In the Offering Documents, Morgan Stanley made numerous statements of
material facts regarding the underwriting standards that had been followed in originating the
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underlying mortgage loans. For example, in offerings for which New Century originated all or a
significant amount of the underlying mortgage loans, Morgan Stanley reprinted New Century’s
“Underwriting Guidelines,” which stated, in sum or substance, that (a) New Century’s guidelines
were “intended to assess the borrower’s ability to repay the mortgage loan”; (b) New Century
reviewed not only the value of the property, but also considered “the mortgagor’s credit history,
repayment ability and debt service-to-income ratio, as well as the type of use of the mortgaged
property”; (c) “the mortgage loans [were] originated in accordance with the underwriting
guidelines”; and (d) exceptions to these guidelines would only be made “on a case-by-case basis
. . . where compensating factors exist.” See ¶ 76. Morgan Stanley made similar statements of
material facts for mortgage loans originated by other Mortgage Originators, including WMC.
See ¶ 185.
242. Moreover, the Offering Documents made statements of material facts regarding
the appraisal guidelines and practices of the relevant Mortgage Originators. Morgan Stanley
stated, for example, that New Century commissioned appraisals of mortgaged properties by
“qualified independent appraisers” who prepared appraisal reports that were “required to
conform to the Uniform Standards of Professional Appraisal Practice adopted by the Appraisal
Standards Board of the Appraisal Foundation and are on forms acceptable to Fannie Mae and
Freddie Mac,” and that were reviewed “by a qualified employee” of New Century or by an
appraiser retained by New Century. See ¶ 78. Morgan Stanley made similar statements of
material facts for appraisals commissioned, performed, or reviewed by other Mortgage
Originators, including WMC. See ¶ 185. In offerings in which a Mortgage Originator was not
identified in the Offering Documents, Morgan Stanley stated that “the depositor will not include
any loan in the trust fund for any series of securities if anything has come to the depositor’s
attention that could cause it to believe that the representations and warranties of a seller or
originator will not be accurate and complete in all material respects in respect of the loan as of
the date of initial issuance of the related series of securities.”
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243. In other documents sent or shown to Plaintiff, including “term sheets,” “loan
tapes” and “pitch books,” Morgan Stanley made additional statements of material facts regarding
the particular Securities and their underlying data, data quality, Mortgage Originator practices
and guidelines applicable to the loans underlying those Securities, and Morgan Stanley’s due
diligence of the Mortgage Originators’ underwriting practices. This information was material as
it allowed Plaintiff to perform sensitive calculations regarding the risk, cash flows, and value of a
Security and to determine whether to purchase the Security on behalf of the Clients.
244. Morgan Stanley made additional oral statements of material facts about the
Securities it offered or sold to Plaintiff. Some of Plaintiff’s meetings with Morgan Stanley
representatives occurred on or about July 13, July 22, and September 9, 2004 and May 16 and
and October 3, 2006. Some of these meetings occurred in Plaintiff’s offices in Concord,
Massachusetts. During these meetings, Morgan Stanley made statements of material facts
regarding Morgan Stanley’s upcoming RMBS deals, and assured Plaintiff that Morgan Stanley
conducted due diligence to ensure that the Mortgage Originators complied with their stated
underwriting guidelines, including by sampling loans in order to check underwriting process,
documentation, valuations, and compliance. Specifically, Morgan Stanley made oral statements
of material facts that it performed strong due diligence of New Century, stating to Plaintiff that
Morgan Stanley even had an employee on site at New Century to ensure compliance with the
underwriting standards described in the Offering Documents.
245. Each of the statements of material facts identified above regarding underwriting
and appraisal standards was untrue and contained material omissions. As detailed below, the
principal Mortgage Originators in the Morgan Stanley deals violated their stated underwriting
and appraisal standards. Moreover, Morgan Stanley’s statements regarding its own due diligence
were untrue and contained material omissions.
246. Morgan Stanley outsourced some due diligence by contracting with external firms
including Clayton to review whether the loans included in the RMBS that it underwrote
complied with the Mortgage Originators’ stated standards. As discussed in ¶¶ 63-66, Clayton
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and Bohan have been investigated by the New York Attorney General, SEC, and Massachusetts
and Connecticut regulators for engaging in improper underwriting practices, and in January
2008, the New York Attorney General granted Clayton immunity from prosecution in exchange
for documents and testimony regarding its due diligence reports.
247. In its most recent annual report, filed on Form 10-K with the SEC on February 26,
2010, Morgan Stanley confirmed that it is under direct investigation and is “responding to
subpoenas and requests for information from certain regulatory and Governmental entities
concerning the origination, purchase, securitization and servicing of subprime and non-subprime
residential mortgages and related issues including collateralized debt obligations and credit
default swaps backed by or referencing mortgage pass through certificates.”
248. On June 24, 2010, the Massachusetts Attorney General announced that Morgan
Stanley had agreed to pay $102 million to the Commonwealth and mortgage borrowers in the
Commonwealth to settle charges related to “Morgan Stanley’s role in facilitating predatory
lending by New Century.” Attorney General Coakley stated that:

Morgan Stanley funded, purchased and securitized New Century loans. Morgan
developed an intimate knowledge of New Century’s business over time. And
they uncovered signals pretty early on that the lending practices of New Century
were not sound. Morgan Stanley continued to fund and securitize subprime loans
even as New Century’s bad loans were causing the lender to collapse . . . .
Morgan knew because as part of its business it had to review New Century’s loan
portfolio in that relationship. Morgan discovered that New Century was making
loans that we allege were designed to fail. They started with low teaser rates, but
then they kicked to higher interest rates that borrowers predictably could not
afford and borrowers could only repay by financing.
***
Morgan Stanley had a number of red flags that these practices were unfair. For
instance, Morgan Stanley knew that New Century was using what we call “no doc
loans,” that is no documentation, loans with no paperwork, to the point of abuse.
New Century was not following its own underwriting guidelines for these loans
and New Century failed to account for whether borrowers could actually make
payments after the introductory or the so-called teaser rates on the loans have
expired.
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Morgan initially refused to fund these loans, but after New Century threatened to
pull their business, a Morgan banker approved hundreds of loans that their own
compliance team had rejected and Morgan then softened its oversight to let New
Century’s business continue. [Morgan Stanley c]ontinued to fund New Century
and provided the key financing that was needed to so that New Century could
continue to make those loans.
***
[O]ur investigation revealed that Morgan Stanley backed loans for homeowners
that they knew, or should have known, were destined to fail and then they failed
to disclose the riskiness of those loans to investors.
249. The Assurance of Discontinuance that the Massachusetts Attorney General filed in
Court in connection with the Morgan Stanley settlement specifically identifies untrue statements
in the loan tapes Morgan Stanley provided to investors such as Plaintiff:

On the loan tapes provided to investors in Morgan Stanley securitizations of New
Century loans, the DTI ratio was typically calculated based on the teaser rate and
did not reflect the Fully Indexed Mortgage Payment. Incorporating the Fully
Indexed Mortgage Payment in the DTI ratio using Morgan Stanley's reset DTI
analysis described above, the average DTI on the New Century tapes would be
substantially higher. A large number of the ARM loans would have Fully
Indexed DTI Ratios on this basis that were greater than 55%. Based on Morgan
Stanley's analysis described above, such borrowers could not afford to repay these
loans in accordance with their terms without refinancing. Such loans comprised a
significant portion of the overall loan pools.
***
As early as October 2005, Morgan Stanley's diligence team determined, in

reviewing and rejecting loans for purchase, that the stated income on a number of
New Century loans was unreasonable. In early 2006, a Morgan Stanley employee
commented that stated income credit was not adequately evaluated by New
Century. About 36% of the loans originated by New Century and reviewed by
Clayton in the diligence process were stated income loans. On average, the stated
income of these borrowers was approximately 42% higher than the income of
fully documented borrowers. The average stated income of these borrowers on an
annual basis was about $115,000.
Assuming that the stated income was closer to or similar to fully documented
income, the average actual DTI ratio for stated income borrowers would be much
higher than the DTI ratios reported by New Century in the loan tapes (averaging
41% for stated income loans), and a substantial number of these borrowers would
have DTI ratios on this basis exceeding 55%.
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250. The statements of material facts in the documents Morgan Stanley sent to Plaintiff
were untrue because the Mortgage Originators violated their stated underwriting guidelines, did
not consistently evaluate the borrowers’ ability to repay the loans, and made exceptions to their
underwriting standards absent the “compensating factors” required by their guidelines. For
example, subsequent investigations and lawsuits have demonstrated that New Century made
frequent exceptions to its underwriting guidelines for borrowers who would not otherwise
qualify for loans; New Century management “turned a blind eye” to risky loan originations; and
“New Century engaged in a number of significant improper and imprudent practices related to its
loan originations.” See ¶¶ 82-95. Moreover, former New Century employees witnessed
firsthand how exceptions to New Century’s underwriting became the “norm” because employees
had to do whatever was necessary to increase loan originations. See ¶¶ 89-91. The SEC recently
charged former New Century officers with making untrue assurances to the market about the
company’s “adhere[nce] to high origination standards in order to sell [its] loan products in the
secondary market.” See ¶ 93. The other Mortgage Originators of loans underlying the Morgan
Stanley Securities similarly violated their stated underwriting guidelines in exchange for
dramatically increased loan production. See Section V.
251. The statements of material facts in the documents Morgan Stanley sent to Plaintiff
were also untrue because the Mortgage Originators either knew of or participated in the inflated
appraisals of the mortgaged properties, which caused the listed LTV ratios and levels of credit
enhancement to be untrue. See, e.g., ¶¶ 51-57. A former New Century underwriter recently
confirmed New Century’s use of inflated appraisals in testimony before the FCIC, stating that
New Century hired fee appraisers who were “pressured” into inflating property values, at times
by tampering with the property, “fearing if they didn’t, they would lose future business and their
livelihoods.” ¶ 54. Another industry insider testified before the FCIC that, in his experience,
subprime appraisals were so overvalued that “throwing a dart at a board while blindfolded
would’ve produced more accurate results.” ¶ 52. Surveys performed in 2007 demonstrated that
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90% of appraisers felt pressured to raise property values in order to enable deals to go through.
¶ 56.
252. Morgan Stanley’s statements of material facts were also untrue because other key
data provided to Plaintiff by Morgan Stanley were untrue. For example, the data often
incorrectly identified properties as “owner occupied” when they were really second homes or
investment properties. The untruth of this information was material to Plaintiff’s analysis of the
loans’ credit quality and likelihood of default.
253. The result of the untrue statements and omissions described above is that the
Securities Morgan Stanley offered or sold to Plaintiff have all been downgraded, and their value
has collapsed. As of June 25, 2010, over 48% of the mortgage loans underlying the Securities
are in delinquency, default, foreclosure, bankruptcy, or repossession. Plaintiff and the Clients
have suffered significant losses on the Securities offered or sold by Morgan Stanley to Plaintiff.
b. Bear Stearns’ Untrue Statements of Material Facts and Omissions

254. Bear Stearns offered or sold Securities to Plaintiff in Massachusetts in 2005, 2006
and 2007 for a total price of $536,398,119. A full list of these offerings and sales, along with the
relevant Offering Documents, the identities of the relevant Depositor Defendants and Mortgage
Originators, the dates of the purchases, and the amounts invested is contained in the attached
Appendix J.
255. Bear Stearns was a pioneer in mortgage securitization. Through its affiliates and
subsidiaries, Bear Stearns was able to control nearly every step in the mortgage securitization
process. For example, to make certain the mortgage pipeline was always full, Bear Stearns
owned and operated three mortgage loan origination subsidiaries – EMC Mortgage Corporation
(“EMC”), Bear Stearns Residential Mortgage Corporation (“Bear Stearns Mortgage Corp.”), and
Encore Credit Corp. (“Encore”). EMC originated loans that were securitized by Bear Stearns,
served as the sponsor for many of Bear Stearns’ offerings, and serviced the loans underlying the
offerings after the offerings were complete.
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256. Bear Stearns also formed numerous SPVs to facilitate the issuance of RMBS.
These entities included Depositor Defendants Structured Asset Mortgage Investments II, Inc.
(“SAMI”) and Bear Stearns Asset Backed Securities I, LLC (“BSABS”), which served as the
depositors and issuers for Bear Stearns’ offerings. Bear Stearns offered or sold the Securities to
Plaintiff. Bear Stearns also provided financial research on RMBS and related structured
products.
257. Bear Stearns profited at every step in the securitization process, as it collected: (1)
loan-origination fees; (2) gains on sale of the mortgages to securitization trusts; (3) management
fees from hedge funds and other investment vehicles that purchased mortgage-backed structured
products; (4) underwriting fees; and (5) servicing fees. Bear Stearns summarized its
securitization business as follows: “Our vertically integrated franchise allows us to access every
step of the mortgage process, including origination, securitization, distribution and servicing.”
According to Inside Mortgage Finance, a leading trade publication whose data is used by the
federal government, from 2004 to 2007 Bear Stearns underwrote more than $97 billion in
subprime RMBS.
258. In connection with its offer or sale of Securities to Plaintiff, Bear Stearns sent
statements, prospectuses, and prospectus supplements. Bear Stearns also sent Plaintiff numerous
other documents, including term sheets and “loan tapes.” The loan tapes Bear Stearns sent to
Plaintiff consisted of Excel spreadsheets that contained dozens of categories of information
related to the individual loans including, inter alia, the purpose of the mortgage loans; the type of
properties; the owner-occupancy status; and borrower FICO scores. Often, Bear Stearns also
showed Plaintiff “pitch books” and other materials promoting the Mortgage Originators’
underwriting practices and guidelines for the mortgages supporting the Securities, the data, and
Bear Stearns’ due diligence of the Mortgage Originators’ underwriting practices. Bear Stearns
did not allow Plaintiff to keep the pitch books.
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259. In the Offering Documents, Bear Stearns made numerous statements of material
facts regarding the underwriting standards that had been followed in originating the underlying
mortgage loans. For example, Bear Stearns stated that: (1) the Mortgage Originators’
underwriting guidelines were intended to assess the borrowers’ ability to repay the mortgage
loans and considered the borrowers’ credit history, repayment ability, debt service-to-income
ratio, and other factors; (2) the Mortgage Originators assessed the value of the properties; and (3)
exceptions to the Mortgage Originators’ underwriting guidelines would only be made where
compensating factors existed.
260. Moreover, the Offering Documents included statements of material facts
regarding the originators’ appraisal guidelines. Bear Stearns stated, for example, that the
Mortgage Originators commissioned appraisals by qualified independent appraisers who
prepared appraisals that conformed to the Uniform Standards of Professional Appraisal Practice
adopted by the Appraisal Standards Board of the Appraisal Foundation.
tapes,” and “pitch books,” Bear Stearns made additional statements of material facts regarding
and guidelines applicable to the loans underlying those Securities, and Bear Stearns’ due
it allowed Plaintiff to perform sensitive calculations regarding the risk, cash flow, and value of a
262. Bear Stearns made additional, oral statements of material facts about the
Securities it offered or sold to Plaintiff. Some of Plaintiff’s meetings with Bear Stearns
representatives occurred on or about March 18, September 22, and November, 14, 2005, and
May 25, July 19, and August 3, 2006. Some of these meetings occurred in Plaintiff’s offices in
Concord, Massachusetts, and others were via teleconference. During these meetings, Bear
Stearns employees made statements of material facts regarding upcoming RMBS deals, and
assured Plaintiff that Bear Stearns conducted due diligence to ensure that the Mortgage
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Originators complied with their stated underwriting guidelines. Among other things, Bear
Stearns stated that its due diligence included sampling loans to check underwriting process,
documentation, valuations, and compliance.
263. Specifically, Bear Stearns repeatedly stated that it used Clayton to perform due
diligence on the mortgage loans and to ensure mortgage originator compliance with stated
underwriting standards. In June of 2007, the New York Attorney General subpoenaed documents
from Clayton and another due diligence firm, Bohan Group (“Bohan”), seeking information
regarding whether Wall Street Banks withheld information that should have been disclosed to
investors. Similar subpoenas were issued by the SEC and Massachusetts and Connecticut
regulators.
264. On January 27, 2008, the New York Attorney General entered into an agreement
with Clayton for immunity from prosecution in exchange for additional documents and
testimony regarding its due diligence reports. Both the New York Times and Wall Street Journal
published articles detailing the agreement and Clayton’s expected testimony. According to the
New York Times (J. Anderson and V. Bajaj, “Reviewer of Subprime Loans Agrees to Aid Inquiry
of Banks,” Jan. 27, 2008), Clayton “communicated daily with bankers putting together
securities,” and that “starting in 2005, it saw a significant deterioration of lending standards and
a parallel jump in lending exceptions.” In response, rather than change the “broad language
written in prospectuses” to reflect the environment, “some investment banks directed Clayton to
halve the sample of loans it evaluated in each portfolio.”
265. An article in the Los Angeles Times (E. Reckard, “Sub-prime Mortgage
Watchdogs Kept On Leash; Loan Checkers Say Their Warnings of Risk Met With Indifference,”
March 18, 2008) revealed that Clayton and Bohan employees “raised plenty of red flags about
flaws [in subprime home loans] so serious that mortgages should have been rejected outright –
such as borrowers’ incomes that seemed inflated or documents that looked fake – but the
problems were glossed over, ignored, and stricken from the reports.”
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266. Each of Bear Stearns’ statements of material facts identified above regarding
underwriting and appraisal standards was untrue and contained material omissions. As detailed
below, the principal Mortgage Originators in the Bear Stearns deals systematically violated their
stated underwriting and appraisal standards. Moreover, Bear Stearns’ additional statements of
material facts regarding its own due diligence were untrue and contained material omissions.
267. In late 2008, Ambac Assurance Corp. (“Ambac”) commenced an action against
EMC and Bear Stearns in the United States District Court for the Southern District of New York
alleging that the companies had built a “house of cards” through rampant misrepresentations in
the origination of mortgage loans used in securitizations. Ambac Assurance Corp. v. EMC
Mortgage Corp., No. 08-cv-9464 (S.D.N.Y.) (the “Ambac Complaint”). On November 6, 2008,
an article in the Associated Press reported the following with respect to the Ambac Complaint:
Bear Stearns leveraged its reputation and dominance in mortgage finance to entice
companies such as Ambac to insure loans plagued by rampant fraud. . . . Bear
Stearns promised that its mortgage loans originated through proper means and
didn’t result from fraud, misrepresentation or gross negligence. Yet . . . Ambac
discovered widespread breaches of representations in almost 80 percent of the
documents supporting 695 defaulted loans it studied.
Larry Neumeister, Lawsuit: Bear Stearns Built A ‘House of Cards,’ Associated Press, November
6, 2008.
268. According to the Ambac Complaint, after incurring more than $640 million in
losses, Ambac conducted a study of 1,486 loans with an aggregate principal of approximately
$86.9 million. The results of that review found:

Of these 1486 loans, 1332, over 89%, breached one or more of the representations
and warranties that EMC had made to Ambac. The most prevalent and troubling
of the breaches identified by Ambac across all four Transactions involve (1)
rampant misrepresentations about borrower income, employment, assets, and
intentions to occupy the purchased properties, and (2) the loan originators’ abject
failures to adhere to proper and prudent mortgage-lending practices, including
their own underwriting guidelines.
Ambac Complaint at ¶ 6.
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269. The Ambac Complaint lays out, in detail, the Bear Stearns “securitization
machine” and EMC’s crucial, and damaging, role within that machine:
[EMC] acted both as an “originator” and an “aggregator” of an enormous volume
of residential mortgage loans, “with the ultimate strategy of securitization into an
array of Bear Stearns’s securitizations.” EMC repeatedly executed on that
strategy, in many cases retaining the rights to act as servicer of the mortgage loans
that it securitized. In its role as aggregator, EMC prescribed loan origination
standards and approved the underwriting guidelines of a large number of
mortgage lenders…
Id. at ¶ 18.
270. EMC expanded its loan generation to supply Bear Stearns’ securitizations and, at
the same time, reassured the market that it would maintain the quality of the securitizations. Id.
at ¶ 26. But, in fact, “EMC’s inventory of mortgage loans was replete with loans (i) originated
by fraud, material misrepresentations, or omissions and (ii) underwritten without regard to
prudent standards or the fundamental principles of mortgage lending, which require a good-faith
assessment of the borrower’s ability and willingness to repay the loan.” Id. at ¶ 27. EMC
“convince[d] investors that the securities it sold were a safe and profitable investment, despite
the fact that, unbeknownst to Ambac and the market at large, those securities were backed by
unjustifiably risky loans.” Id. at ¶ 25.
271. The Ambac Complaint further makes clear that EMC and Bear Stearns expanded
acceptance and financing of “no doc” and “low doc” loan products “with a marked and
dangerous decline in the rigor and discipline with which [the companies] approached loan
origination and underwriting.” Id. at ¶ 28. Thus, EMC’s inventory of mortgage loans “was
replete with loans originated by fraud or underwritten pursuant to imprudent or non-existent
standards.” Id. at ¶¶ 29-30.
272. On March 16, 2009, the District Court denied EMC’s motion to strike portions of
Ambac’s Complaint that EMC asserted were “inflammatory” because they portrayed Bear
Stearns and EMC as “corporate villains . . . responsible for the mortgage-backed security crisis.”
In its decision denying EMC’s motion, the Court held that allegations such as that “[t]he Bear
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Stearns securitization machine was a house of cards, supported not by real value and sound
practices but by Bear Stearns’ appetite for loans and disregard as to the risks those loans
presented” were not unfairly prejudicial, but rather were relevant to whether EMC “‘materially
breached its representations and warranties’ . . . regarding, among other things, ‘the origination,
underwriting, servicing, and other key attributes of the loans[.]’” (Quoting Ambac’s Complaint;
alterations in original.) Ambac’s action against EMC is ongoing, and the parties are currently
engaged in pretrial discovery.
273. Matt Van Leeuwen, a mortgage analyst with EMC between 2004 and 2006, has
also confirmed the above allegations of negligent underwriting practices. Van Leeuwen revealed
that (a) Bear Stearns pushed EMC analysts to perform their loan analyses of the underlying
mortgages in only one to three days so that Bear Stearns would not have to hold the loans on its
books; (b) EMC analysts were encouraged to falsify loan data (such as FICO scores) if that
information was missing from the loan data and the mortgage originators did not respond to
requests for that information; (c) the documentation level (i.e., no documentation, partial
documentation) of the loans was often incorrectly identified; and (d) rather than going back to
the mortgage originator for clarification, such as verification of income, Bear Stearns would
avoid investigating and make the loan “fit.” Teri Buhl, “More Corruption: Bear Stearns Falsified
Information as Raters Shrugged,” The Atlantic, May 2010.
274. The statements of material facts in the documents Bear Stearns sent to Plaintiff
were untrue because the Mortgage Originators systematically violated their stated underwriting
guidelines, did not consistently evaluate the borrowers’ ability to repay the loans, and made
exceptions to their underwriting standards absent the “compensating factors” required by their
guidelines.
275. The statements of material facts in the documents Bear Stearns sent to Plaintiff
enhancement to be untrue. See, e.g., ¶¶ 51-57. An industry insider testified before the FCIC and
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stated that, in his experience, subprime appraisals were so overvalued that “throwing a dart at a
board while blindfolded would’ve produced more accurate results.” ¶ 52. Surveys performed in
2007 demonstrated that 90% of appraisers felt pressured to raise property values in order to
enable deals to go through. ¶ 56.
276. Bear Stearns’ statements of material facts were also untrue because other key data
provided to Plaintiff were untrue and contained material omissions. For example, the data often
identified properties as “owner occupied” when they were really second homes or investment
properties. The untruth of this information was material to Plaintiff’s analysis of credit quality
and likelihood of default.
277. The result of the untrue statements and omissions described above is that the
Securities Bear Stearns offered or sold to Plaintiff have all been downgraded, and their value has
collapsed. As of June 25, 2010, over 47% of the mortgage loans underlying the Securities are in
delinquency, default, foreclosure, bankruptcy, or repossession. Plaintiff and the Clients have
suffered significant losses on the Securities offered or sold by Bear Stearns to Plaintiff.
278. Defendant J.P. Morgan is the successor-in-interest to Bear Stearns as a result of
the merger of Bear Stearns with and into J.P. Morgan on October 1, 2008, with J.P. Morgan
Securities as the surviving entity.
c. Citigroup’s Untrue Statements of Material Facts and Omissions

279. Citigroup offered or sold Securities to Plaintiff in Massachusetts in 2005, 2006
Appendix B.
280. Citigroup sought to compete with its Wall Street peers and to expand its share of
the RMBS market by aggressively pursuing subprime mortgage originators including New
Century, Argent, and WMC for the purchase of subprime loans to be pooled and securitized as
Securities, offering to pay more for mortgages than competing Wall Street Banks, and offering to
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perform less due diligence than competitors. New Century, Argent and WMC were some of the
largest Mortgage Originators in these Citigroup Securities.
281. To facilitate the sale of RMBS, Citigroup formed SPVs including Depositor
Defendant Citigroup Mortgage Loan Trust Inc., which originated or otherwise acquired
residential mortgage loans to be securitized and served as the sponsor, depositor, and issuer in
numerous offerings of RMBS. Defendant Citigroup offered or sold the Securities to Plaintiff.
Citigroup also provided financial research on RMBS and related structured products.
282. In connection with its offer or sale of Securities to Plaintiff, Citigroup sent
statements, prospectuses, and prospectus supplements, and for one deal, a private placement
agreement. Citigroup also sent Plaintiff numerous other documents, including term sheets and
“loan tapes.” The loan tapes Citigroup sent to Plaintiff consisted of Excel spreadsheets that
contained over 60 categories of information related to the individual loans including, inter alia,
the purpose of the mortgage loans; the type of properties; the owner-occupancy status; and
borrower FICO scores. Citigroup also showed Plaintiff “pitch books” promoting, inter alia, the
Mortgage Originators’ underwriting practices and guidelines for the mortgages supporting the
Securities, the data, and Citigroup’s due diligence of the Mortgage Originators’ underwriting
practices. Citigroup did not allow Plaintiff to keep the pitch books.
283. In the Offering Documents, Citigroup made numerous statements of material facts
regarding the underwriting standards that had been followed in originating the underlying
mortgage loans. For example, in offerings for which New Century originated all or a significant
amount of the underlying mortgage loans, Citigroup reprinted New Century’s “Underwriting
Guidelines,” which stated in sum or substance, that (a) New Century’s guidelines were “intended
to assess the borrower’s ability to repay the mortgage loan”; (b) New Century not only reviewed
the value of the property, but also considered “the mortgagor’s credit history, repayment ability
and debt service-to-income ratio, as well as the type of use of the mortgaged property”; (c) “the
mortgage loans [were] originated in accordance with the underwriting guidelines”; and (d)
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exceptions to these guidelines would only be made “on a case-by-case basis . . . where
compensating factors exist.” See ¶ 76. Citigroup made similar statements of material facts for
loans originated by other Mortgage Originators, including Argent and WMC. See Section V.
the appraisal guidelines and practices of the relevant Mortgage Originators. Citigroup stated, for
example, that New Century commissioned an appraisal of mortgaged properties by “qualified
independent appraisers” who prepared an appraisal report that is “required to conform to the
Uniform Standards of Professional Appraisal Practice adopted by the Appraisal Standards Board
of the Appraisal Foundation and are on forms acceptable to Fannie Mae and Freddie Mac,” and
that was reviewed “by a qualified employee” of New Century or by an appraiser retained by New
Century. See ¶ 78. Citigroup made similar statements of material facts for appraisals
commissioned by or performed or reviewed by other Mortgage Originators, including Argent and
WMC. See Section V.
tapes,” and “pitch books,” Citigroup made additional statements of material facts regarding the
particular Securities and their underlying data, data quality, Mortgage Originator practices and
guidelines applicable to the loans underlying those Securities, and Citigroup’s due diligence of
the Mortgage Originators’ underwriting practices. This information was material as it allowed
Plaintiff to perform sensitive calculations regarding the risk, cash flow, and value of a Security
and to determine whether to purchase the Security on behalf of the Clients.
286. Citigroup made additional, oral statements of material facts about the Securities it
offered or sold to Plaintiff. Some of Plaintiff’s meetings with Citigroup occurred on or about
September 30, 2004; June 23, October 31, and December 8, 2005; and May 22, August 14, and
December 7, 2006. Some of these meetings occurred in Plaintiff’s offices in Concord,
Massachusetts. During these meetings, Citigroup made statements of material facts regarding
Citigroup’s upcoming RMBS deals, and assured Plaintiff that Citigroup conducted due diligence
to ensure that the Mortgage Originators complied with their stated underwriting guidelines,
104
including by sampling loans in order to check underwriting process, documentation, valuations,
and compliance.
and appraisal standards were untrue and contained material omissions. As detailed below, New
Century, Argent, and WMC, the principal Mortgage Originators in the Citigroup deals,
systematically violated their stated underwriting and appraisal standards. Moreover, Citigroup’s
additional statements of material facts regarding its own due diligence were untrue and contained
material omissions.
288. Citigroup stated that it retained external firms, including Clayton and Bohan, to
review whether the loans included in the RMBS that Citigroup underwrote complied with the
Mortgage Originators’ stated standards. As discussed in ¶¶ 63-66, Clayton and Bohan have been
investigated by the New York Attorney General, the SEC, and Massachusetts and Connecticut
regulators for improper activity in their mortgage due diligence services.
289. In its most recent annual report, filed on Form 10-K with the SEC on February 26,
2010, Citigroup Inc. (the parent company of Defendant Citigroup) confirmed that “beginning in
the fourth quarter of 2007, certain of Citigroup’s regulators and other state and federal
government agencies commenced formal and informal investigations and inquiries, and issued
subpoenas and requested information, concerning Citigroup’s subprime mortgage-related
conduct and business activities.”
290. The statements of material facts in the documents Citigroup sent to Plaintiff were
untrue because the Mortgage Originators systematically violated their stated underwriting
guidelines. For example, as described above, New Century’s statements that it underwrote loans
in accordance with its stated underwriting guidelines were untrue. See ¶¶ 82-95. The other two
Mortgage Originators underlying the Citigroup Securities, Argent and WMC, similarly violated
their stated underwriting guidelines in exchange for dramatically increased loan production. See
105
Section V. Citigroup’s statements of material facts about the appraisals of the underlying
properties were also untrue.
291. Citigroup’s statements of material facts were also untrue because other key data
provided to Plaintiff by Citigroup was untrue. For example, the data often identified properties
as “owner occupied” when they were really second homes or investment properties. The untruth
of this information was material to Plaintiff’s analysis of the loans’ credit quality and likelihood
of default.
292. The Financial Crisis Inquiry Commission (the “FCIC”) investigated Citigroup as
part of its statutory mission to determine “the causes … of the current financial and economic
crisis in the United States.” Fraud Enforcement and Recovery Act of 2009, Pub. L. No. 111-21,
§ 5(a) (May 20, 2009). In connection with its investigation, the FCIC interviewed senior
Citigroup executives with direct responsibility for the Company’s mortgage operations;
subpoenaed and reviewed thousands of internal Citigroup documents concerning those
operations; and held hearings on April 7-9, 2010.
293. The FCIC heard testimony from Richard M. Bowen, III, who was the Senior Vice
President and Chief Underwriter for Correspondent and Acquisitions for Citifinancial Mortgage
(Citigroup’s subprime mortgage lending subsidiary) from 2002 through 2005 and was promoted
in early 2006 to Business Chief Underwriter for Correspondent Lending in Citigroup’s Consumer
Lending Group (which included Citigroup’s prime mortgage lending, subprime mortgage
lending, and prime second lien mortgage businesses). As Business Chief Underwriter for
Correspondent Lending, Mr. Bowen was one of Citigroup’s most senior mortgage executives,
supervising 220 professional underwriters and exercising direct oversight over the underwriting
of more than $90 billion of residential mortgages annually.
294. Mr. Bowen testified that each year since 2005, Citigroup’s mortgage operation
systematically acquired tens of billions of dollars of risky loans that violated Citigroup’s own
underwriting criteria and were likely to default. He also testified that Citigroup’s Wall Street
Chief Risk Officer routinely overruled underwriters’ rejections of pools of subprime mortgages
106
that did not satisfy Citigroup’s underwriting criteria for purchase by the “Correspondent Wall
Street channel,” thus causing Citigroup to purchase billions of dollars of loan pools that fell far
short of underwriting standards. In sum, Mr. Bowen testified that “[d]uring 2006 and 2007, I
witnessed business risk practices which made a mockery of Citi credit policy. . . .”
295. Mr. Bowen also testified that he recommended that Citigroup not purchase
Ameriquest, because his due diligence found that Argent’s loans did not meet the standards they
had represented to Citigroup. Specifically, Mr. Bowen testified that “we sampled the loans that
were originated by Argent and we found large numbers that did not – that were not underwritten
according to the representations that were there.”
296. As a result of the untrue statements and omissions described above, the Securities
Citigroup offered or sold to Plaintiff have all been downgraded, and their value has collapsed.
As of June 25, 2010, 50% of the mortgage loans underlying the Securities are in delinquency,
default, foreclosure, bankruptcy, or repossession. Plaintiff and the Clients have suffered
significant losses on the Securities offered or sold by Citigroup to Plaintiff.
d. Credit Suisse’s Untrue Statements of Material Facts and Omissions

297. Credit Suisse offered or sold Securities to Plaintiff in Massachusetts in 2005, 2006
Appendix C.
298. Credit Suisse acquired hundreds of thousands of subprime mortgages and
securitized the mortgage loans into billions of dollars of RMBS, some of which were then
offered or sold to Plaintiff in a series of offerings containing subprime mortgage loans from
several different Mortgage Originators, including New Century, Ameriquest, WMC, Long Beach,
Argent, and Option One.
299. To facilitate the sale of RMBS, Credit Suisse’s parent company formed SPVs,
including Depositor Defendants Credit Suisse First Boston Mortgage Securities Corporation and
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Asset Backed Securities Corporation, which issued and were the depositors for numerous
offerings of RMBS. Defendant Credit Suisse offered or sold the Securities to Plaintiff. Credit
Suisse also provided financial research on RMBS and related structured products.
300. In connection with its offer or sale of Securities to Plaintiff, Credit Suisse sent
statements, prospectuses, and prospectus supplements. Credit Suisse also sent Plaintiff
numerous other documents, including term sheets and “loan tapes.” The loan tapes Credit Suisse
sent to Plaintiff consisted of Excel spreadsheets that contained dozens of categories of
Credit Suisse also showed Plaintiff “pitch books” and other materials promoting the Mortgage
Originators’ underwriting practices and guidelines for the mortgages supporting the Securities,
the data, and Credit Suisse’s due diligence of the Mortgage Originators’ underwriting practices.
Credit Suisse did not allow Plaintiff to keep the pitch books.
301. In the Offering Documents, Credit Suisse made numerous statements of material
mortgage loans. For example, in offerings for which New Century originated all or a significant
amount of the underlying mortgage loans, Credit Suisse reprinted New Century’s “Underwriting
Guidelines,” which stated in sum or substance, that (a) New Century’s guidelines were “intended
to assess the borrower’s ability to repay the mortgage loan”; (b) New Century reviewed not only
the value of the property, but also considered “the mortgagor’s credit history, repayment ability
and debt service-to-income ratio, as well as the type of use of the mortgaged property”; (c) “the
mortgage loans [were] originated in accordance with the underwriting guidelines”; and (d)
compensating factors exist.” See ¶ 76. Credit Suisse made similar statements of material facts
for Mortgage Loans originated by other mortgage originators, including Ameriquest, Argent,
Long Beach, WMC, and Option One. See Section V.
108
the appraisal guidelines and practices of the relevant Mortgage Originators. Credit Suisse stated,
for example, that New Century commissioned appraisals of mortgaged properties by “qualified
independent appraisers” who prepared appraisal reports that were “required to conform to the
that were reviewed “by a qualified employee” of New Century or by an appraiser retained by
New Century. See ¶ 78. Credit Suisse made similar statements of material facts for appraisals
commissioned, performed, or reviewed by other Mortgage Originators, including Argent and
WMC. See Section V.
tapes” and “pitch books,” Credit Suisse made additional statements of material facts regarding
and guidelines applicable to the loans underlying those Securities’ and Credit Suisse’s due
304. Credit Suisse made additional, oral statements of material facts about the
Securities to Plaintiff in meetings, including meetings at Plaintiff’s offices in Concord,
Massachusetts. Some of Plaintiff’s meetings with Credit Suisse occurred on or about September
9, 2004; August 29 and October 26, 2005; and March 2, May 17, and December 31, 2006.
During these meetings, Credit Suisse made statements of material facts regarding Credit Suisse’s
upcoming RMBS deals, and assured Plaintiff that Credit Suisse conducted due diligence to
ensure that the Mortgage Originators complied with their stated underwriting guidelines,
including by reviewing loans in order to check underwriting process, documentation, valuations,
and compliance.
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305. For example, Credit Suisse made oral statements of material facts to Plaintiff
about the strength and quality of the due diligence Credit Suisse performed on the “HEAT” series
of deals, in which Plaintiff purchased over $182,004,054 of Securities on behalf of the Clients
between 2005 and 2006. See Appendix C. Specifically, Credit Suisse stated to Plaintiff that
Credit Suisse performed a valuation review of 100% of the underlying loans, meaning that Credit
Suisse should have reviewed the data and documentation for each underlying loan before
accepting the loan for inclusion in the pool. In fact, Credit Suisse stated to Plaintiff that the due
diligence for the HEAT transactions was “superior” to the due diligence for most other RMBS
transactions because of this 100% valuation review.
and appraisal standards was untrue and contained material omissions. As detailed below,
Ameriquest, New Century, WMC, Long Beach, Argent, and Option One, the principal Mortgage
Originators of loans included in the Credit Suisse deals, systematically violated their stated
underwriting and appraisal standards. Moreover, Credit Suisse’s statements of material facts
regarding its own due diligence were untrue and contained material omissions.
307. Credit Suisse contracted with external firms including Clayton and Bohan to
review whether the loans included in the RMBS that Credit Suisse underwrote complied with the
Mortgage Originators’ stated standards. As discussed in ¶¶ 63-66, Clayton and Bohan have been
investigated by the New York Attorney General, SEC, and Massachusetts and Connecticut
regulators for engaging in improper underwriting practices. In January 2008, the New York
Attorney General granted Clayton immunity from prosecution in exchange for documents and
testimony regarding its due diligence reports.
308. The statements of material facts in the documents Credit Suisse sent to Plaintiff
were untrue because the Mortgage Originators systematically violated their stated underwriting
guidelines. For example, investigations and lawsuits have demonstrated that New Century made
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qualify for loans; New Century management “turned a blind eye” to the risky loan originations;
and “New Century engaged in a number of significant improper and imprudent practices related
to its loan originations.” See ¶¶ 82-95. Moreover, former New Century employees witnessed
had to do what was necessary to increase loan originations. See ¶¶ 89-91. The SEC has charged
former New Century officers with making untrue assurances to the market about the company’s
“adhere[nce] to high origination standards in order to sell [its] loan products in the secondary
market.” See ¶ 93. The other Mortgage Originators underlying the Credit Suisse Securities –
Ameriquest, WMC, Long Beach, Argent, and Option One – similarly violated their stated
underwriting guidelines in exchange for dramatically increased loan production. See Section V.
Indeed, the Senate Permanent Subcommittee on Investigations recently concluded that “Long
Beach . . . was not a responsible lender. Its loans and mortgage backed securities were among
the worst performing in the subprime industry.” ¶ 102.
309. The statements of material facts in the documents Credit Suisse sent to Plaintiff
enhancement to be untrue. See, e.g., ¶¶ 51-57. For example, a former New Century underwriter
recently confirmed New Century’s use of inflated appraisals in testimony before the FCIC,
stating that New Century hired fee appraisers who were “pressured” into inflating property
values, at times by tampering with the property, “fearing if they didn’t, they would lose future
business and their livelihoods.” ¶ 54. The Illinois Attorney General testified before the FCIC
that a multistate investigation “revealed that [Ameriquest] engaged in the kinds of fraudulent
practices that other predatory lenders subsequently emulated on a wide scale . . . includ[ing]:
inflating home appraisals.” ¶ 210. An industry insider testified before the FCIC that, in his
experience, subprime appraisals were so overvalued that “throwing a dart at a board while
blindfolded would’ve produced more accurate results.” ¶ 52. Surveys performed in 2007
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demonstrated that 90% of appraisers felt pressured to raise property values in order to enable
deals to go through. ¶ 56.
310. Credit Suisse’s statements were also untrue because other material data provided
by Credit Suisse to Plaintiff were untrue. For example, the data often incorrectly identified
properties as “owner occupied” when they were really second homes or investment properties.
The untruth of this information was material to Plaintiff’s analysis of the loans’ credit quality and
likelihood of default.
311. Credit Suisse is a defendant in numerous lawsuits directly related to its conduct as
an underwriter of RMBS. On March 29, 2010, the United States District Court for the Southern
District of New York sustained claims against Credit Suisse brought on behalf of a class of
investors who purchased subprime RMBS issued in 2006 and 2007 that contained underlying
mortgage loans from Mortgage Originators including New Century and WMC. New Jersey
Carpenters Health Fund v. DLJ Mortgage Capital, Inc., Docket No. 08-CV-5653 (PAC)
(S.D.N.Y.) (the “Credit Suisse RMBS Action”). The class’s claims in that action under the
Securities Act of 1933 are substantially similar legally and factually to Plaintiff’s claims in this
action.
312. In the Credit Suisse RMBS Action, the District Court held that the plaintiffs
adequately alleged that Credit Suisse’s offering documents “contain[ed] materially misleading
statements and omissions” relating to Credit Suisse’s “systematic disregard of loan-approval
oversight and control mechanisms as represented in underwriting guidelines by the Originators,”
which Credit Suisse failed to detect “because of wholly inadequate due diligence procedures.”
Like Plaintiff here, the plaintiffs in the Credit Suisse RMBS Action, allege that:
The [Securities] were issued pursuant to a number of core representations in
the Offering Documents each of which contained material misstatements and
omissions. It was represented that the home equity loans were originated
pursuant to underwriting guidelines detailed in both in the Registration
Statement and the Supplemental Prospectuses. These guidelines required an
analysis of borrower creditworthiness (i.e., ability to repay the loan) and an
appraisal of the mortgaged property pursuant to standard appraisal practices and
procedures. The guidelines also described that when loans were issued with
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limited or no borrower documentation there were compensating factors such as
the lender’s reliance primarily on the valuation of the mortgaged properties.
***
The Rating Agencies in downgrading the [Securities] from the highest investment
grade to junk bond status specifically attributed their actions to “aggressive
underwriting” deployed in originating the loans. Further, well after the
completion of the Offerings, disclosures began to emerge that the principal
home equity loan Originators - i.e., New Century, Accredited and WMC -
engaged in origination practices which flagrantly violated underwriting
guidelines set forth in the Offering Documents.
Credit Suisse conducted inadequate due diligence to ensure compliance with

the underwriting guidelines stated in the Offering Documents. It was
incentivized to acquire and securitize as many loans as possible since its profit
was achieved upon the sale of the securities. The due diligence Credit Suisse
did perform was in the period when it was acquiring the loans from third
parties – not in underwriting the issuance of the [Securities] - when there was
a serious disincentive for Credit Suisse to reject loans submitted for auction
by originators, for fear that they would be cut-off from access to further
loans for future securitization.
Credit Suisse RMBS Action Complaint, ¶¶ 10-12 (internal citations omitted).
313. As a result of the untrue statements of material facts and omissions described
above, the Securities that Credit Suisse offered or sold to Plaintiff have all been downgraded, and
their value has collapsed. As of June 25, 2010, over 42% of the mortgage loans underlying the
Securities are in delinquency, default, foreclosure, bankruptcy, or repossession. Plaintiff and the
Clients have suffered significant losses on the Securities offered or sold by Credit Suisse to
Plaintiff.
e. Greenwich Capital’s Untrue Statements of Material Facts and

Omissions
314. Greenwich Capital offered or sold Securities to Plaintiff in Massachusetts in 2005,
attached Appendix D.
113
315. Greenwich Capital underwrote more than $180 billion in securities backed by
subprime mortgages between 2002 and 2006. In particular, between 2005 and 2006, Greenwich
Capital sought to compete with its Wall Street peers and to expand its share of the RMBS market
by aggressively pursuing subprime lenders including Long Beach, Argent, Fremont, Option One,
and Meritage for the purchase of subprime loans to be pooled and securitized as Securities,
offering to pay more for mortgages than competing Wall Street Banks, and offering to perform
less due diligence than competitors.
316. To facilitate the sale of RMBS, Greenwich Capital formed SPVs, including
Depositor Defendant Financial Asset Security Corporation, which issued and was the depositor
for numerous offerings of RMBS. Defendant Greenwich Capital offered or sold the Securities to
Plaintiff. Greenwich Capital also provided financial research on RMBS and related structured
products.
317. In connection with its offer or sale of Securities to Plaintiff, Greenwich Capital
sent numerous documents to Plaintiff in Massachusetts. These documents included registration
statements, prospectuses, and prospectus supplements. Greenwich Capital also sent Plaintiff
numerous other documents, including term sheets and “loan tapes.” The loan tapes Greenwich
Capital sent to Plaintiff consisted of Excel spreadsheets that contained dozens of categories of
Greenwich Capital also showed Plaintiff “pitch books” and other materials promoting the
Mortgage Originators’ underwriting practices and guidelines for the mortgages supporting the
Securities, the data, and Greenwich Capital’s due diligence of the Mortgage Originators’
underwriting practices. Greenwich Capital did not allow Plaintiff to keep the pitch books.
318. In the Offering Documents, Greenwich Capital made numerous statements of
material facts regarding the underwriting standards and appraisal practices that had been
followed in originating the underlying mortgage loans. For example, for the offerings in which
Long Beach originated all or a significant amount of the underlying mortgage loans, Greenwich
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Capital reprinted Long Beach’s “Underwriting Guidelines,” which stated that: (1) Long Beach’s
guidelines were primarily intended to evaluate the prospective borrower’s credit standing and
repayment ability as well as the value and adequacy of the mortgaged property as collateral; (2)
appraisal of the mortgaged property generally conformed to Fannie Mae and Freddie Mac
appraisal standards; (3) appraisals were generally performed by licensed independent appraisers
who had satisfied the loan servicer’s appraiser screening process; and (4) exceptions were only
granted with the approval of an employee with appropriate “risk level authority” and in the
presence of compensating factors. See ¶ 98.
tapes” and “pitch books,” Greenwich Capital made additional statements of material facts
regarding the particular Securities and their underlying data, data quality, the relevant Mortgage
Originators’ practices and guidelines, and Greenwich Capital’s due diligence of the Mortgage
Originators’ underwriting practices. This information was material as it allowed Plaintiff to
perform sensitive calculations regarding the risk, cash flows, and value of a Security and to
determine whether to purchase the Security on behalf of the Clients.
320. Greenwich Capital made additional, oral statements of material facts about the
Securities it offered or sold to Plaintiff, including during meetings in Plaintiff’s offices in
Concord, Massachusetts. Some of Plaintiff’s meetings with Greenwich Capital occurred on or
about May 13 and September 2, 2004; March 2 and August 16, 2006; and January 10, 2007.
During these meetings, Greenwich Capital made statements of material facts regarding
Greenwich Capital’s upcoming RMBS deals, and stated that Greenwich Capital conducted due
diligence to ensure that the Mortgage Originators complied with their stated underwriting
guidelines, including by sampling loans in order to check underwriting process, documentation,
valuations, and compliance.
and appraisal standards was untrue and contained omissions. As detailed above and below, the
principal Mortgage Originators of the underlying loans systematically violated their stated
115
underwriting and appraisal standards. Moreover, Greenwich Capital’s statements of material
facts regarding its own due diligence were untrue and contained material omissions.
322. For example, the statements of material facts in the documents Greenwich Capital
sent to Plaintiff was untrue because Long Beach violated its stated underwriting guidelines, did
not consistently evaluate the borrower’s ability to repay, and made exceptions to its underwriting
standards in the absence of “compensating factors.” Subsequent investigations and lawsuits have
demonstrated that Long Beach ignored and made frequent exceptions to its underwriting
guidelines. See ¶¶ 102-127. Moreover, former Long Beach employees witnessed firsthand how
variance from Long Beach’s stated underwriting standard became the “norm” because employees
were incentivized to increase loan volume. Id. The Senate Permanent Subcommittee on
Investigations stated: “Long Beach . . . was not a responsible lender. Its loans and mortgage
backed securities were among the worst performing in the subprime industry.” See ¶ 102.
323. Likewise, subsequent investigations and lawsuits have demonstrated that
Fremont, another Mortgage Originator whose loans Greenwich Capital securitized, “engage[ed]
in unsatisfactory lending practices”; “ma[de] loans based on information that Fremont knew or
should have known was inaccurate or false, including, but not limited to, borrowers’ income,
property appraisals, and credit scores”; purposefully relaxed its underwriting standards and made
loans based on documents it knew to be untrue; made “everyday” exceptions to its underwriting
guidelines for borrowers who would not otherwise qualify for a loan; and continually ignored
fraudulent documents when approving loans. See ¶¶ 165-182. The other Mortgage Originators
of loans underlying the Greenwich Capital Securities similarly violated their stated underwriting
guidelines in exchange for dramatically increased loan production. See Section V.
324. The statements of material facts in the documents Greenwich Capital sent to
Plaintiff were also untrue because the inflated appraisals caused the listed LTV ratios and levels
of credit enhancement to be untrue. See, e.g., ¶¶ 51-57. For example, a former Fremont account
manager described how superiors would call appraisers and directly request that they inflate their
appraisal values in order to close a deal. ¶ 177. Another Fremont employee audited loans that
116
the company was asked to repurchase, and found alarming problem with the appraisals,
including appraisals that were incomplete, did not match the address of the property, or described
the home as owner-occupied when it was rented, on the large majority of the loans. Id. An
industry insider testified before the FCIC that, in his experience, subprime appraisals were so
overvalued that “throwing a dart at a board while blindfolded would’ve produced more accurate
results.” ¶ 52. Surveys performed in 2007 demonstrated that 90% of appraisers felt pressured to
raise property values in order to enable deals to go through. ¶ 56.
325. Greenwich Capital’s statements of material facts were also untrue because other
material data provided to Plaintiff by Greenwich Capital was untrue. For example, the data often
326. On March 8, 2008, RBS confirmed that its Greenwich Capital unit was subject to
an SEC investigation into the collapse of the subprime market and had been ordered to turn over
financial documents to the SEC regarding, among other things, the origination of mortgages,
accounting, due diligence, sales, and insider trading.
above, the Securities that Greenwich Capital offered or sold to Plaintiff have all been
downgraded, and their value has collapsed. As of June 25, 2010, 45% of the mortgage loans
underlying the Securities are in delinquency, default, foreclosure, bankruptcy, or repossession.
Plaintiff and the Clients have suffered significant losses on the Securities offered or sold by
Greenwich Capital to Plaintiff.
f. Deutsche Bank’s Untrue Statements of Material Facts and Omissions

328. Deutsche Bank offered or sold Securities to Plaintiff in Massachusetts in 2005,
117
attached Appendix E.
329. Deutsche Bank acquired and then converted subprime mortgages into billions of
dollars of RMBS, some of which Deutsche Bank offered or sold to Plaintiff in a series of
offerings and sales pursuant to the relevant Offering Documents and other statements.
330. Deutsche Bank offered or sold Securities to Plaintiff, and Plaintiff purchased
Securities on behalf of the Clients from Deutsche Bank, in four offerings and sales containing
subprime mortgage loans from several different Mortgage Originators, including Fremont, Long
Beach, and Option One.
331. To facilitate the sale of RMBS, Deutsche Bank formed SPVs, including Depositor
Defendant Ace Securities Corporation, which issued and was the depositor for numerous
offerings of RMBS. Defendant Deutsche Bank offered or sold the Securities to Plaintiff.
Deutsche Bank also provided financial research on RMBS and related structured products.
332. In connection with its offer or sale of Securities to Plaintiff, Deutsche Bank sent
statements, prospectuses, and prospectus supplements. Deutsche Bank also sent Plaintiff
numerous other documents, including term sheets and “loan tapes.” The loan tapes Deutsche
Bank sent to Plaintiff consisted of Excel spreadsheets that contained dozens of categories of
Deutsche Bank also showed Plaintiff “pitch books” and other materials promoting the Mortgage
the data, and Deutsche Bank’s due diligence of the Mortgage Originators’ underwriting practices.
Deutsche Bank did not allow Plaintiff to keep the pitch books.
333. In the Offering Documents, Deutsche Bank made numerous statements of
underlying mortgage loans. For example, in offerings for which Fremont originated all or a
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significant amount of the underlying mortgage loans, Credit Suisse reprinted Fremont’s
“Underwriting Guidelines,” which stated in sum or substance, that (a) Fremont’s guidelines were
“intended to assess the ability and willingness of the borrower to repay the debt and to evaluate
the adequacy of the mortgaged property as collateral for the mortgage loan”; (b) “the Fremont
mortgage loans were originated in accordance with the[se] underwriting criteria”; and (c)
exceptions to these guidelines would only be made “on a case-by-case basis . . . based upon
compensating factors.” See ¶ 161. Deutsche Bank made similar statements of material facts for
mortgage loans originated by other Mortgage Originators, including Long Beach and Option
One. See Section V.
334. Deutsche Bank’s Offering Documents also made statements of material facts
regarding the appraisal guidelines and practices of the relevant Mortgage Originators. Deutsche
Bank stated, for example, that “Fremont’s underwriting guidelines are applied in accordance with
a procedure which complies with applicable federal and state laws and regulations and require an
appraisal of the mortgaged property, and if appropriate, a review appraisal,” and that Fremont
commissioned appraisals of mortgaged properties by “qualified independent appraisers” who
prepared appraisal reports that were reviewed by Fremont. See ¶ 161. Deutsche Bank made
similar statements of material facts for appraisals commissioned, performed, or reviewed by
other Mortgage Originators, including Long Beach and Option One. See Section V.
tapes” and “pitch books,” Deutsche Bank made additional statements of material facts regarding
and guidelines applicable to the loans underlying those Securities, and Deutsche Bank’s due
336. Deutsche Bank made additional, oral statements of material facts about the
Securities it offered or sold to Plaintiff in meetings, some of which occurred in Plaintiff’s offices
119
in Concord, Massachusetts. Some of Plaintiff’s meetings with Deutsche Bank occurred on or
about October 28 and 31, 2005 and November 3 and December 6, 2006. During these meetings,
Deutsche Bank made statements of material facts regarding Deutsche Bank’s upcoming RMBS
deals, and stated that Deutsche Bank conducted due diligence to ensure that the Mortgage
Originators complied with their stated underwriting guidelines, including by sampling loans in
order to check underwriting process, documentation, valuations, and compliance.
and appraisal standards was untrue and contained material omissions. As detailed below,
Fremont, Long Beach, and Option One, the principal Mortgage Originators of loans included in
the Deutsche Bank deals, violated their stated underwriting and appraisal standards. Moreover,
Deutsche Bank’s statements of material facts regarding its own due diligence were untrue and
contained material omissions.
338. The statements of material facts in the documents Deutsche Bank sent to Plaintiff
were also untrue because the Mortgage Originators violated their stated underwriting guidelines,
did not consistently evaluate the borrowers’ ability to repay the loans, and made exceptions to
their underwriting standards absent the “compensating factors” required by their guidelines. For
example, investigations and lawsuits have demonstrated that Fremont “engage[ed] in
unsatisfactory lending practices”; “ma[de] loans based on information that Fremont knew or
should have known was inaccurate or false, including, but not limited to, borrowers’ income,
property appraisals, and credit scores”; purposefully relaxed its underwriting standards and made
loans based on documents it knew to be untrue; made “everyday” exceptions to its underwriting
guidelines for borrowers who would not otherwise qualify for loans; and continually ignored
fraudulent documents when approving loans. See ¶¶ 165-182. The other two principal
Mortgage Originators of loans underlying the Deutsche Bank Securities, Long Beach and Option
One, similarly violated their stated underwriting guidelines in exchange for dramatically
increased loan production. See Section V.
120
339. The statements of material facts in the documents Deutsche Bank sent to Plaintiff
enhancement to be untrue. See, e.g., ¶¶ 51-57. For example, a former Fremont account
manager described how superiors would call appraisers and directly request that they inflate their
appraisal values in order to close a deal. ¶ 177. Another Fremont employee audited loans that
the company was asked to repurchase, and found alarming problems with the appraisals on the
large majority of the loans, including appraisals that were incomplete, did not match the address
of the property, or described the home as owner-occupied when it was rented. Id.
340. Deutsche Bank’s statements of material facts were also untrue because other key
data provided to Plaintiff by Deutsche Bank was untrue. For example, the data often incorrectly
properties. The untruth of this information was material to Plaintiff’s analysis of the loans’ credit
quality and likelihood of default.
341. Deutsche Bank is one of eight Wall Street Banks targeted by New York State
Attorney General Andrew Cuomo, who, according to a May 12, 2010 article in the New York
Times, is investigating these Wall Street Banks to determine whether they provided untrue
information to rating agencies in order to inflate the ratings of mortgage securities.
above, the Securities that Deutsche Bank offered or sold to the Plaintiff have all been
downgraded, and their value has collapsed. As of June 25, 2010, over 52% of the mortgage
loans underlying the Securities are in delinquency, default, foreclosure, bankruptcy, or
repossession. Plaintiff and the Clients have suffered significant losses on the Securities offered
or sold by Deutsche Bank to Plaintiff.
g. Merrill Lynch’s Untrue Statements of Material Facts and Omissions

343. Merrill Lynch offered or sold Securities to Plaintiff in Massachusetts in 2005,
121
attached Appendix F.
344. Merrill Lynch & Co. sought to compete with its Wall Street peers and to expand
its share of the RMBS market by aggressively pursuing subprime lenders including Fremont,
WMC, and Option One for the purchase of subprime loans to be pooled and securitized as
Securities, offering to pay more for mortgages than competing Wall Street Banks, and offering to
perform less due diligence than competitors.
345. To facilitate the sale of RMBS, Merrill Lynch & Co. formed numerous SPVs
including: (1) Depositor Defendant Merrill Lynch Mortgage Investors, Inc., which served as the
depositor and issuer for offerings of RMBS; and (2) Merrill Lynch Mortgage Lending, Inc.,
which acquired residential mortgage loans to be securitized and served as the sponsor in
numerous offerings of RMBS. Defendant Merrill Lynch offered or sold the Securities to
Plaintiff. Merrill Lynch also provided financial research on RMBS and related structured
products.
346. In connection with its offer or sale of Securities to Plaintiff, Merrill Lynch sent
statements, prospectuses, and prospectus supplements. Merrill Lynch also sent Plaintiff
numerous other documents, including term sheets, collateral and computational materials, and
“loan tapes.” The loan tapes Merrill Lynch sent to Plaintiff consisted of Excel spreadsheets that
borrower FICO scores. Merrill Lynch also showed Plaintiff “pitch books” promoting, inter alia,
the quality of the Securities and Merrill Lynch’s due diligence of the Mortgage Originators’
underwriting practices. Merrill Lynch did not allow Plaintiff to keep the pitch books.
347. In the Offering Documents, Merrill Lynch made numerous statements of material
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mortgage loans. For example, in offerings for which Fremont originated all or a significant
amount of the underlying mortgage loans, Merrill Lynch reprinted Fremont’s “Underwriting
Guidelines,” which stated in sum or substance, that (a) Fremont’s guidelines were “intended to
assess the borrower’s ability and willingness of the borrower to repay the debt”; (b) the
“mortgage loans [were] underwritten in accordance with Fremont’s current underwriting
programs”; and (c) exceptions to these guidelines would only be made “on a case-by-case
basis . . . based on compensating factors.” See ¶ 161. Merrill Lynch made similar statements of
material facts for mortgage loans originated by other Mortgage Originators, including WMC and
Option One. See ¶¶ 185, 213.
the appraisal guidelines and practices of the relevant Mortgage Originators. Merrill Lynch
stated, for example, that “underwriting guidelines are applied in accordance with a procedure
which complies with applicable federal and state laws and regulations and require an appraisal of
the mortgaged property, and if appropriate, a review appraisal” and that Fremont commissioned
appraisals of mortgaged properties by “qualified independent appraisers.” See ¶ 161. Merrill
Lynch made similar statements of material facts for appraisals commissioned, performed, or
reviewed by other Mortgage Originators, including WMC and Option One. See ¶¶ 185, 213.
tapes,” and “pitch books,” Merrill Lynch made additional statements of material facts regarding
and guidelines applicable to mortgage loans underlying those Securities, and Merrill Lynch’s due
350. Merrill Lynch also made additional, oral statements of material facts about the
Securities it offered or sold to Plaintiff. Some of Plaintiff’s meetings with Merrill Lynch
representatives occurred on or about June 25, 2004 and September 21, 2006. During these
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meetings, Merrill Lynch made statements of material facts regarding Merrill Lynch’s upcoming
RMBS deals, and assured Plaintiff that Merrill Lynch conducted due diligence to ensure that the
Mortgage Originators complied with their stated underwriting guidelines, including by sampling
loans in order to check underwriting process, documentation, valuations, and compliance.
and appraisal standards were untrue and contained material omissions. As detailed below,
Fremont, Option One, and WMC, the principal Mortgage Originators of loans underlying the
Merrill Lynch deals, violated their stated underwriting and appraisal standards. Moreover,
Merrill Lynch’s statements of material facts regarding its own due diligence were untrue and
contained material omissions.
352. Merrill Lynch contracted with external firms including Clayton and Bohan to
review whether the loans included in the Securities that Merrill Lynch underwrote complied with
the Mortgage Originators’ stated standards, as discussed in ¶¶ 63-66.
353. The statements of material facts in the documents Merrill Lynch sent to Plaintiff
underwriting standards in the absence of the “compensating factors” required by their guidelines.
For example, investigations and lawsuits have demonstrated that Fremont made frequent
exceptions to its underwriting guidelines for borrowers who would not otherwise qualify for
loans; Fremont management encouraged risky loan originations; and Fremont was “operating
with inadequate underwriting criteria and excessive risk in relation to the kind and quality of
assets held by [Fremont].” See ¶¶ 165-182. Moreover, former Fremont employees witnessed
firsthand how exceptions to Fremont’s underwriting became the “norm” because employees had
to do what was necessary to increase loan originations. Id. The FDIC ultimately issued a Cease
& Desist Order to Fremont for extending subprime credit “in an unsafe and unsound manner”
and violating laws and FDIC regulations. See ¶¶ 165-166. The other Mortgage Originators of
loans underlying the Merrill Lynch Securities, including Option One and WMC, similarly
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violated their stated underwriting guidelines in exchange for dramatically increased loan
production. See Section V.
354. The statements of material facts in the documents Merrill Lynch sent to Plaintiff
enhancement to be untrue. See, e.g., ¶¶ 51-57.
355. Merrill Lynch’s statements of material facts were also untrue because other
material data provided to Plaintiff by Merrill Lynch was untrue. For example, the data often
loan’s credit quality and likelihood of default.
356. Merrill Lynch pressured Mortgage Originators to loosen their underwriting
practices in order to generate more loans to be securitized. For example, a New York Times
article titled “East Coast Money Lent Out West,” dated May 8, 2007, reported that “William D.
Dallas, the founder and chief executive of Ownit [Mortgage Solutions, a Mortgage Originator],
acknowledges loosening lending standards but says he did so reluctantly and under pressure from
his investors, particularly Merrill Lynch [which purchased a 20 percent stake in Ownit in 2005],
which wanted more loans to package into lucrative securities. He recalls being asked to make
more ‘stated income’ loans . . . . The message, he said, was simple: You are leaving money on the
table – do more of them.”
357. Among other investigations by various State Attorneys General and the SEC, the
New York Attorney General initiated an investigation to determine whether Merrill Lynch
concealed information, including the warnings it received about exceptions or mortgages that did
not meet minimum lending standards, in an effort to bolster ratings of RMBS and make them
more attractive to buyers. See Kate Kelly, Amir Efrati & Ruth Simon, “State Subprime Probe
Takes a New Track,” Wall Street Journal, Jan. 31, 2008.
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358. Merrill Lynch is also a defendant in a number of lawsuits which directly relate to
its conduct as an underwriter of RMBS. For example, in December 2008, investors filed a class
action alleging violations of the Securities Act of 1933 arising from Merrill Lynch’s sale of
RMBS using untrue offering documents. See Public Employees’ Retirement System of
Mississippi v. Merrill Lynch & Co. Inc., et al., 08-cv-10841 (JRS) (S.D.N.Y.). The consolidated
complaint in that action alleges that the Merrill Lynch offering documents contained untrue
statements related to (1) the underwriting guidelines used to originate the mortgage loans
underlying the Securities; (2) the accuracy of the appraisals for the properties underlying the
Securities; (3) the maximum LTV ratios used to qualify borrowers; (4) the debt-to-income ratios
permitted on the loans underlying the Securities; and (5) the credit ratings of the Securities. On
June 1, 2010, the District Court denied motions to dismiss the action and sustained Section 11
claims against Merrill Lynch. Specifically, the Court held that “the alleged repeated deviation
from established underwriting standards is enough to render misleading the assertion in the
registration statements that underwriting guidelines were generally followed.”
359. As a result of Merrill Lynch’s untrue statements of material facts and omissions,
the Securities that Merrill Lynch offered or sold to Plaintiff have all been downgraded, and their
value has collapsed. As of June 25, 2010, over 50% of the mortgage loans underlying the
Clients have suffered significant losses on the Securities offered or sold by Merrill Lynch to
Plaintiff.
h. UBS’s Untrue Statements of Material Facts and Omissions

360. UBS offered or sold Securities to Plaintiff in Massachusetts during 2005 and 2006
for a total price of $ 55,295,897. A full list of these offerings and sales, along with the relevant
Offering Documents, the identities of the relevant Depositor Defendants and Mortgage
Appendix G.
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361. UBS was one of the leading underwriters of RMBS. UBS and its affiliates
formed numerous SPVs to facilitate RMBS issuances including: (1) UBS Real Estate Securities
Inc., which served as the sponsor and seller for many of UBS’s RMBS offerings; and (2)
Depositor Defendant Mortgage Asset Securitization Transactions, Inc. (“MASTR”), a wholly
owned limited purpose finance subsidiary of UBS, which served as the depositor and issuer for
UBS’s RMBS offerings. Defendant UBS offered or sold RMBS to Plaintiff. UBS also provided
financial research on RMBS and related structured products.
362. In connection with its offer or sale of Securities to Plaintiff, UBS sent numerous
documents to Plaintiff in Massachusetts. These documents included registration statements,
prospectuses, and prospectus supplements. UBS also sent Plaintiff numerous other documents,
including term sheets and “loan tapes.” The loan tapes UBS sent consisted of Excel spreadsheets
containing dozens of categories of information related to the individual loans including, inter
alia, the purpose of the mortgage loans; the type of properties; the owner-occupancy status; and
borrower FICO scores. Often, UBS also showed Plaintiff “pitch books” and other materials
promoting the quality of the Securities and UBS’s due diligence of the Mortgage Originators’
underwriting practices. UBS did not allow Plaintiff to keep the pitch books.
363. In the Offering Documents, UBS made numerous statements of material facts
amount of the underlying mortgage loans, UBS reprinted Fremont’s “Underwriting Guidelines,”
which stated that (a) Fremont’s guidelines were “intended to assess the ability and willingness of
the borrower to repay the debt and to evaluate the adequacy of the mortgaged property as
collateral for the mortgage loan”; (b) “the Fremont mortgage loans were originated in accordance
with the[se] underwriting criteria”; and (c) exceptions to these guidelines would only be made
“on a case-by-case basis . . . based upon compensating factors.” See ¶ 161. UBS made similar
statements of material facts for mortgage loans originated by other Mortgage Originators,
including Aames. See Section V.
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364. Moreover, UBS’s Offering Documents made statements of material facts
regarding the appraisal guidelines and practices of Fremont and the other relevant Mortgage
Originators. UBS stated, for example, that “Fremont’s underwriting guidelines are applied in
accordance with a procedure which complies with applicable federal and state laws and
regulations and require an appraisal of the mortgaged property, and if appropriate, a review
appraisal,” and that Fremont commissioned appraisals of mortgaged properties by “qualified
independent appraisers” who prepared appraisal reports that were reviewed by Fremont. See
¶ 161. UBS made similar statements of material facts for appraisals commissioned, performed,
or reviewed by other Mortgage Originators, including Aames. See Section V.
365. In the other documents including term sheets, loan tapes, and pitch books UBS
sent or showed to Plaintiff, UBS made additional statements of material facts regarding the
particular Securities and their underlying data, data quality, and Mortgage Originator practices
and guidelines applicable to the loans underlying those Securities. This information was material
as it allowed Plaintiff to perform sensitive calculations regarding the risk, cash flows, and value
of a Security and to determine whether to purchase the Security on behalf of the Clients.
366. UBS made additional, oral statements of material facts about the Securities it
offered or sold to Plaintiff. Some of Plaintiff’s meetings with UBS representatives occurred on
or about July 12, July 14, and November 3, 2004; April 11, November 30, and December 5,
2005; May 18, September 28, and November 21, 2006; and March 12, April 11, April 16, July
18, and August 3, 2007. During these meetings, UBS made statements of material facts
regarding upcoming RMBS deals, and assured Plaintiff that UBS conducted due diligence to
ensure that the Mortgage Originators complied with their stated underwriting guidelines.
367. On March 5, 2008, investors commenced an action against UBS relating to
mortgage-related securities purchases. Pursuit Partners, LLC v. UBS AG, et al., 05-CV-08-
4013452 (Conn. Super Ct.). The plaintiffs in that action alleged that UBS marketed junk
Securities as investment-grade. Between July and October 2007, the plaintiffs in that action
purchased more than $50 million of mortgage-related Securities from UBS, and on October 10,
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2007, the securities were downgraded to junk status. On September 8, 2009, the Connecticut
Superior Court ordered UBS to set aside $35.5 million to cover a potential judgment against it,
finding that plaintiffs had “presented sufficient evidence to satisfy the probable cause standard.”
The court summarized the case as follows: “Through direct and circumstantial evidence, Pursuit
has established probable cause to sustain the validity of a claim that the UBS defendants were in
possession of material nonpublic information regarding imminent ratings downgrades on the
Notes it sold to the Plaintiffs, information UBS withheld from the Plaintiffs.”
368. On February 22, 2010, a pension fund commenced an action against UBS in the
United States District Court for the District of New Jersey regarding the issuance of RMBS.
Local 302 & 612 of the International Union of Operating Engineers-Employers Construction
Industry Retirement Trust v. Mortgage Asset Securitization Transactions, Inc. et al., 10-cv-
00898-DMC (D.N.J.). The pension fund plaintiff in that case alleges that the Offering
Documents pursuant to which UBS offered RMBS contained misstatements and material
omissions regarding: (1) the underwriting standards pursuant to which the underlying mortgage
collateral was originated; (2) the Securities’ true investment risk and credit ratings; and (3) the
amount and quality of the credit enhancement or credit support. The plaintiff in that case also
alleges that UBS failed to conduct adequate, or in many cases any, due diligence on the mortgage
loan applications and mortgaged properties before or during the securitization process. The
mortgage loans underlying the Securities in that case were principally originated by Countrywide
and IndyMac Bank, F.S.B. (“IndyMac”).
369. According to a May 12, 2010 article in the New York Times, UBS received a
subpoena from the New York State Attorney General in connection with an investigation into
whether UBS provided untrue information to rating agencies in order to inflate ratings of RMBS.
370. Each of the statements of material facts identified above made by UBS regarding
underwriting and appraisal standards was untrue and contained material omissions. As detailed
below, Fremont and the other Mortgage Originators of loans underlying the UBS Securities
systematically violated their stated underwriting and appraisal standards. Moreover, UBS’s
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statements of material facts regarding its own due diligence were untrue and contained material
omissions.
371. The statements of material facts in the documents UBS sent to Plaintiff were
untrue because Fremont and the other relevant Mortgage Originators systematically violated
their stated underwriting guidelines, did not consistently evaluate the borrowers’ ability to repay
the loans, and made exceptions to their underwriting standards absent the “compensating factors”
required by their guidelines. For example, subsequent investigations and lawsuits have
demonstrated that Fremont made frequent exceptions to its underwriting guidelines for
borrowers who would not otherwise qualify for loans; Fremont management encouraged risky
loan originations; and Fremont was “operating with inadequate underwriting criteria and
excessive risk in relation to the kind and quality of assets held by [Fremont].” See ¶¶ 165-182.
Moreover, former Fremont employees witnessed firsthand how exceptions to Fremont’s
underwriting became the “norm” because employees had to do whatever was necessary to
increase loan originations. Id. The FDIC ultimately issued a Cease & Desist Order to Fremont
for extending subprime credit “in an unsafe and unsound manner” and violating laws and FDIC
regulations. See ¶¶ 165-166. The other Mortgage Originators of loans underlying the UBS
Securities, including Aames, similarly violated their stated underwriting guidelines in order to
increase loan volume. See SectionV.
372. The statements of material facts in the documents UBS sent to Plaintiff were also
untrue because the appraisals of the mortgaged properties were systematically inflated, which
caused the listed LTV ratios and credit enhancement levels to be untrue. See, e.g., ¶¶ 52-57.
373. UBS’s statements of material facts were also untrue because other material data
provided to Plaintiff by UBS was untrue. For example, the data often identified properties as
“owner occupied” when they were really second homes or investment properties. The untruth of
this information was material to Plaintiff’s analysis of the loan’s credit quality and likelihood of
default. See Section V.
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above, all of the Securities that UBS offered or sold to Plaintiff have been downgraded, and their
Clients have suffered significant losses on the Securities offered or sold by UBS to Plaintiff.
i. Goldman Sachs’ Untrue Statements of Material Facts and Omissions

375. Goldman Sachs offered or sold Securities to Plaintiff in Massachusetts in 2005
Appendix H.
376. Goldman Sachs had several trading desks responsible for purchasing and selling
mortgage-related assets, including RMBS. From 2004 through 2007, Goldman Sachs actively
participated in the securitization markets and worked extensively with subprime Mortgage
Originators Long Beach, Fremont, and New Century.
377. To facilitate the sale of RMBS, Goldman Sachs formed numerous SPVs
including: (1) Goldman Sachs Mortgage Company, which served as the sponsor for many of
Goldman Sachs’ offerings; and (2) Depositor Defendant GS Mortgage Securities Corp., which
served as the depositor and issuer for Goldman Sachs’ offerings. Goldman Sachs offered or sold
the Securities to Plaintiff. Goldman Sachs also provided financial research on RMBS and related
structured products.
378. In connection with its offer or sale of Securities to Plaintiff, Goldman Sachs sent
statements, prospectuses, and prospectus supplements that were, or would become, publicly
available when filed with the SEC. Goldman Sachs also sent Plaintiff other documents,
including term sheets and “loan tapes.” The loan tapes Goldman Sachs sent to Plaintiff consisted
of Excel spreadsheets that contained over 60 categories of information related to the individual
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loans including, inter alia, the purpose of the mortgage loans; the type of properties; the owner-
occupancy status; and borrower FICO scores. Often, Goldman Sachs also showed Plaintiff
“pitch books” and other materials promoting the quality of the Securities and Goldman Sachs’
due diligence of the Mortgage Originators’ underwriting practices. Goldman Sachs did not allow
Plaintiff to keep the pitch books.
379. In the Offering Documents, Goldman Sachs made numerous statements of
underlying mortgage loans. For example, Long Beach originated all or a significant amount of
the underlying mortgage loans in the Goldman Sachs offerings Plaintiff purchased on behalf of
the Clients. In the Offering Documents, Goldman Sachs reprinted Long Beach’s “Underwriting
Guidelines,” which stated that: (1) Long Beach’s guidelines were primarily intended to evaluate
the prospective borrowers’ credit standing and repayment ability as well as the value and
adequacy of the mortgaged properties as collateral; (2) appraisals of the mortgaged properties
generally conformed to Fannie Mae and Freddie Mac standards; (3) appraisals were generally
performed by licensed independent appraisers who had satisfied the loan servicer’s appraiser
screening process; and (4) exceptions were only granted with the approval of an employee with
appropriate “risk level authority” and in the presence of compensating factors. See ¶ 98.
380. In the other documents sent or shown to Plaintiff, including “term sheets,” “loan
tapes” and “pitch books,” Goldman Sachs made additional statements of material facts regarding
the particular Securities and their underlying data, data quality, Long Beach’s practices and
guidelines, and Goldman Sachs’ due diligence of the Mortgage Originators’ underwriting
practices. This information was material as it allowed Plaintiff to perform sensitive calculations
regarding the risk, cash flows, and value of a Security and to determine whether to purchase the
Security on behalf of the Clients.
381. The statements of material facts in the documents Goldman Sachs sent to Plaintiff
were untrue because Long Beach violated its stated underwriting guidelines, did not consistently
evaluate the borrowers’ ability to repay, and made exceptions to its underwriting standards in the
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absence of “compensating factors.” Subsequent investigations and lawsuits have demonstrated
that Long Beach ignored and made frequent exceptions to its underwriting guidelines. See
¶¶ 102-127. Moreover, former Long Beach employees witnessed firsthand how variance from
Long Beach’s stated underwriting standard became the “norm” because employees were
incentivized to increase loan volume. Id. The PSI summed up Long Beach’s conduct by stating:
“Long Beach…was not a responsible lender. Its loans and mortgage backed securities were
among the worst performing in the subprime industry.” See ¶ 102.
382. The statements of material facts in the documents Goldman Sachs sent to Plaintiff
were also untrue because inflated appraisals caused the listed LTV ratios and levels of credit
enhancement to be untrue. See, e.g., ¶¶ 51-57. An industry insider who testified before the
FCIC stated that, in his experience, subprime appraisals were so overvalued that “throwing a dart
at a board while blindfolded would’ve produced more accurate results.” ¶ 52. Surveys
performed in 2007 demonstrated that 90% of appraisers felt pressured to raise property values in
order to enable deals to go through. ¶ 56.
383. Goldman Sachs’ statements of material facts were also untrue because other
material data provided to Plaintiff by Goldman Sachs was untrue. For example, the data often
384. Goldman Sachs also made additional, oral statements of material facts about the
Securities it offered or sold to Plaintiff. For example, in connection with the sale of the LBMLT
2005-2 deal, Goldman Sachs stated that in the 18 months before the deal, Long Beach had
shifted to significantly higher-quality collateral. Goldman Sachs also stated to Plaintiff that
Long Beach had stopped originating mortgages on mobile homes and that the concentrations of
loan balances in the pools below $50,000 were very small. Plaintiff met with Goldman Sachs
representatives on or about April 6 and June 15, 2004. During these meetings, Goldman Sachs
representatives made statements of material facts regarding upcoming RMBS deals, and assured
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Plaintiff that Goldman Sachs conducted due diligence to ensure that the Mortgage Originators
complied with their stated underwriting guidelines. Among other things, Goldman Sachs stated
that its due diligence included sampling loans to check underwriting process, documentation,
valuations, and compliance. Specifically, Goldman Sachs repeatedly stated that it performed due
diligence on the mortgage loans and to ensure Mortgage Originator compliance with stated
underwriting standards.
385. Goldman Sachs’ oral statements of material facts were untrue for the same
reasons listed in ¶ 381, above. Moreover, the statements of material facts were untrue because
Goldman Sachs failed to conduct adequate due diligence on the Mortgage Originators and the
mortgage loans underlying the Securities in accordance with its statements.
386. The PSI investigated Goldman Sachs and concluded that from 2004 to 2007,
Goldman Sachs “helped lenders like Long Beach, Fremont, and New Century, securitize high
risk, poor quality loans, obtain favorable credit ratings for the resulting [RMBS], and sell the
[RMBS] to investors, pushing billions of dollars of risky mortgages into the financial system.”
387. The PSI specifically profiled Goldman Sachs’ relationship with Long Beach,
which originated all the mortgages in the LBMLT 2005-2 deal Plaintiff purchased on behalf of
the Clients. A PSI exhibit showed that WaMu (Long’s Beach’s parent company), Long Beach,
and Goldman Sachs collaborated on at least $14 billion in loan sales and securitizations. The
PSI also stated that in 2005 and 2006, Long Beach’s RMBS were among the worst performing in
the market.
388. The PSI highlighted one example of how Goldman Sachs securitized Long Beach
mortgage loans, despite the fact that Long Beach was “one of the nation’s worst mortgage
lenders.” In May 2006, Goldman Sachs, along with its co-lead underwriter WaMu, sold $495
million in Securities backed by Long Beach loans. In less than a year, delinquencies and defaults
on the underlying loans began to skyrocket. By May 2007, the cumulative net loss on the
underlying mortgage pool was over 12 percent, erasing the deal’s loss protection and causing
downgrades of 6 out of 7 of the mezzanine tranches. By May 2008 – only two years later – even
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the AAA securities in the May 2006 deal had been downgraded to “default,” and by March 2010
the securities had recorded a cumulative net loss of over 66 percent.
389. Massachusetts Attorney General Martha Coakley recently investigated Goldman
Sachs’ role in securitizing loans in the Commonwealth. The investigation examined whether
Goldman Sachs engaged in the following practices:

• Failing to ascertain whether loans purchased from originators complied
with the originators’ stated underwriting guidelines;
• Failing to take sufficient steps to avoid placing problem loans in

securitization pools;
• Failing to correct inaccurate information in securitization trustee reports

concerning repurchases of loans; and
• Failing to make available to potential investors certain information

concerning allegedly unfair or problem loans, including information
obtained during loan due diligence and the pre-securitization process, as
well as information concerning Goldman Sachs’ practices in making
repurchase claims relating to loans both in and out of securitizations.
390. On May 7, 2009, Goldman Sachs entered into a settlement agreement with the
Massachusetts Attorney General in order “[t]o resolve any potential claims stemming from the
Attorney General’s investigation . . . .” Under the agreement, among other things, Goldman
Sachs paid $10 million to the Commonwealth.
above, the Securities that Goldman Sachs offered or sold to Plaintiff have all been downgraded,
and their value has collapsed. As of June 25, 2010, 50% of the mortgage loans underlying the
Clients have suffered significant losses on the Securities offered or sold by Goldman Sachs to
Plaintiff.
j. J.P. Morgan’s Untrue Statements of Material Facts and Omissions

392. J.P. Morgan offered or sold Securities to Plaintiff in Massachusetts in 2005 and
2006 for a total price of $41,802,784. A full list of these offerings and sales, along with the
135
Appendix I.
393. J.P. Morgan, seeking to compete with its Wall Street peers, formed numerous
entities to facilitate the sale of RMBS, including: (1) J.P. Morgan Chase Bank (“Chase Bank”),
which originated various types of mortgage loans to various types of borrowers, and also acted as
the servicers of the mortgage loans following their securitization; (2) Depositor Defendant J.P.
Morgan Acceptance Corporation I, which served as the depositor and issuer for offerings of
RMBS; and (3) J.P. Morgan Mortgage Acquisition Corporation, which acquired residential
mortgage loans to be securitized and served as the sponsor in numerous offerings of RMBS.
Defendant J.P. Morgan offered or sold the Securities to Plaintiff. J.P. Morgan also provided
394. In connection with its offer or sale of Securities to Plaintiff, J.P. Morgan sent
statements, prospectuses, and prospectus supplements. J.P. Morgan also sent Plaintiff numerous
other documents, including term sheets, collateral and computational materials, and “loan tapes.”
The loan tapes J.P. Morgan sent to Plaintiff consisted of Excel spreadsheets that contained over
60 categories of information related to the individual loans including, inter alia, the purpose of
the mortgage loans; the type of properties; the owner-occupancy status; and borrower FICO
scores. J.P. Morgan also showed Plaintiff “pitch books” promoting, inter alia, the quality of the
Securities and J.P. Morgan’s due diligence of the Mortgage Originators’ underwriting practices.
J.P. Morgan did not allow Plaintiff to keep the pitch books.
395. In the Offering Documents, J.P. Morgan made numerous statements of material
mortgage loans. For example, in offerings for which Option One originated all or a significant
amount of the underlying mortgage loans, J.P. Morgan reprinted Option One’s “Underwriting
Guidelines,” which stated that (a) Option One’s guidelines were “intended to assess the value of
the mortgaged property, to evaluate the adequacy of such property as collateral for the mortgage
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loan and to assess the applicant’s ability to repay the mortgage loan”; (b) the “Mortgage Loans
[were] originated generally in accordance with Option One’s [Underwriting] Guidelines”; and (c)
compensating factors exist.” See, ¶ 213. The Offering Documents for Securities that J.P.
Morgan offered or sold to Plaintiff made similar statements of material facts regarding mortgage
loans originated by Countrywide, WMC, Chase Bank and Fieldstone Mortgage Company
(“Fieldstone”). See Section V.
396. Moreover, the Offering Documents for Securities that J.P. Morgan offered or sold
to Plaintiff contained statements of material facts regarding appraisal guidelines and practices.
For example, the Offering Documents for the JPMAC 2006-CW2 Trust stated that
Countrywide’s underwriting standards “require an independent appraisal of the mortgaged
property” and the Offering Documents for the JPMAC 2005-WMC1 stated that WMC’s
underwriting standards required an appraisal of the mortgaged property “which conforms to
Uniform Standards of Professional Appraisal Practice.” The Offering Documents made similar
statements of material facts regarding appraisals for loans originated by Option One, Chase Bank
and Fieldstone. See Section V.
tapes,” and “pitch books,” J.P. Morgan made additional statements of material facts regarding the
particular Securities and their underlying data, Mortgage Originator practices and guidelines, and
J.P. Morgan’s due diligence of those practices and guidelines. This information was material as
398. J.P. Morgan also made additional, oral statements of material facts about the
Securities it offered or sold to Plaintiff. Some of Plaintiff’s meetings with J.P. Morgan
representatives occurred on or about April 13, April 28, September 29, and November 7, 2005,
and May 3 and November 7, 2006. During these meetings, J.P. Morgan made statements of
material facts regarding J.P. Morgan’s upcoming RMBS deals and assured Plaintiff that J.P.
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Morgan conducted due diligence to ensure that the Mortgage Originators complied with their
stated underwriting guidelines, including by sampling loans to check underwriting process,
and appraisal standards were untrue and contained material omissions. Option One, WMC,
Countrywide, Chase Bank, and Fieldstone, the principal Mortgage Originators of loans
underlying the J.P. Morgan deals, violated their stated underwriting and appraisal standards.
Moreover, J.P. Morgan’s statements of material facts regarding its own due diligence were untrue
and contained material omissions.
400. The statements of material facts in the documents J.P. Morgan sent to Plaintiff
underwriting standards in the absence of the “compensating factors” required by their guidelines.
For example, the Massachusetts Attorney General brought a lawsuit against Option One charging
that the company “increasingly disregard[ed] underwriting standards, creat[ed] incentives for
loan officers and brokers to disregard the interests of the borrowers and steer them into high-cost
loans, and originated thousands of loans that [Option One] knew or should have known the
borrowers would be unable to pay, all in an effort to increase loan origination volume so as to
profit from the practice of packaging and selling the vast majority of [Option One’s] residential
subprime loans to the secondary market.” The other Mortgage Originators of loans underlying
the J.P. Morgan Securities, WMC, Countrywide, Chase Bank and Fieldstone, similarly violated
their stated underwriting guidelines in an effort to increase loan production. See Section V.
401. The statements of material facts in the documents J.P. Morgan sent to Plaintiff
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402. J.P. Morgan’s statements of material facts were also untrue because other material
data provided to Plaintiff by J.P. Morgan was untrue. For example, the data often incorrectly
properties. The untruth of this information was material to Plaintiff’s analysis of the loan’s credit
quality and likelihood of default.
403. According to a May 13, 2010 Reuters news article, the SEC and “U.S. prosecutors
are conducting a broad criminal investigation of six major Wall Street Banks, including J.P.
Morgan” about whether they misled investors about mortgage-securities deals.
404. As a result of J.P. Morgan’s untrue statements of material facts and omissions, the
Securities that J.P. Morgan offered or sold to Plaintiff have all been downgraded, and their value
has collapsed. As of June 25, 2010, over 45% of the mortgage loans underlying the Securities
are in delinquency, default, foreclosure, bankruptcy, or repossession. Plaintiff and the Clients
have suffered significant losses on the Securities offered or sold by J.P. Morgan to Plaintiff.
k. Countrywide’s Untrue Statements of Material Facts and Omissions

405. Countrywide offered or sold Securities to Plaintiff in Massachusetts in 2005 and
Appendix K.
406. As one of the nation’s largest subprime Mortgage Originators, Countrywide
Financial was able to buy and sell vast amounts of subprime loans which were pooled and
securitized as Securities. In 2005 and 2006 alone, Countrywide Financial originated in excess of
$850 billion in home loans throughout the United States.
407. Through its affiliates and subsidiaries, Countrywide Financial was able to control
nearly every step in the mortgage securitization process. To facilitate the sale of RMBS,
Countrywide Financial formed numerous SPVs including: (1) Depositor Defendants CWABS,
Inc. and CWALT, Inc., which served as the depositors and issuers for offerings of Securities; and
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(2) Countrywide Home Loans, Inc. (“Countrywide Home”), which originated or otherwise
acquired residential mortgage loans to be securitized and served as the sponsor in numerous
offerings of Securities. Defendant Countrywide offered or sold Securities containing loans
originated by these SPEs to Plaintiff. Countrywide also offered or sold to Plaintiff Securities
containing loans originated by other mortgage originators such as Aames Investment
Corporation. Countrywide also provided financial research on RMBS and related structured
products.
408. In connection with its offer or sale of Securities to Plaintiff, Countrywide sent
statements, prospectuses, and prospectus supplements, and other documents that were, or would
become, publicly available when filed with the SEC. Countrywide also sent Plaintiff numerous
other documents, including term sheets, loan tapes, collateral tables, and summaries of loans
reports. The “loan tapes” Countrywide sent to Plaintiff consisted of Excel spreadsheets that
borrower FICO scores. Countrywide also showed Plaintiff “pitch books” promoting, inter alia,
the Mortgage Originators’ underwriting practices and guidelines for the mortgages supporting the
Securities, the data, and Countrywide’s due diligence of the Mortgage Originators’ underwriting
practices. Countrywide did not allow Plaintiff to keep the pitch books.
409. In the Offering Documents, Countrywide made numerous statements of material
mortgage loans. For example, in offerings for which Countrywide Home originated all or a
significant amount of the underlying mortgage loans, Countrywide reprinted Countrywide
Home’s “Underwriting Guidelines,” which stated, in sum or substance, that (a) Countrywide
Home’s guidelines were “intended to evaluate the value and adequacy of the mortgaged property
as collateral for the proposed mortgage loan and the borrower’s credit standing and repayment
ability”; (b) Countrywide Home reviewed not only the value of the property, but also considered
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“applicant’s assets, liabilities, income and employment history, as well as certain other personal
information”; (c) the mortgage loans were originated in accordance with the underwriting
guidelines; and (d) exceptions to these guidelines would only be made “[o]n a case by case basis
. . . based upon compensating factors.” CWL 2005-11 Prospectus Supplement. Countrywide
made similar statements with respect to loans originated by other mortgage originators, including
Aames Home Loan.
the Mortgage Originators’ appraisal guidelines. Countrywide stated, for example, that the
Mortgage Originators commissioned appraisals by qualified independent appraisers who
prepared appraisals that conformed to the Uniform Standards of Professional Appraisal Practice
adopted by the Appraisal Standards Board of the Appraisal Foundation.
tapes,” and “pitch books,” Countrywide made additional statements of material facts regarding
and guidelines applicable to the loans underlying those Securities, and Countrywide’s due
412. Countrywide also made additional, oral statements of material facts about the
Securities it offered or sold to Plaintiff. For example, on April 4, 2006, Plaintiff made a due
diligence visit to Countrywide’s offices to meet with Countrywide’s origination and servicing
staff. During these meetings, Countrywide representatives made statements of material facts
regarding Countrywide’s upcoming RMBS deals, and assured Plaintiff that Countrywide
conducted due diligence to ensure that the Mortgage Originators complied with their stated
underwriting guidelines, including by sampling loans in order to check underwriting process,
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and appraisal standards were untrue and contained material omissions. The principal Mortgage
Originators in the Countrywide deals systematically violated their stated underwriting guidelines,
did not consistently evaluate the borrowers’ ability to repay the loans, made exceptions to their
underwriting standards absent the “compensating factors” required by their guidelines, and either
knew of or participated in the inflated appraisals of the mortgaged properties. Moreover,
Countrywide’s additional statements of material facts regarding its own due diligence were
untrue and contained material omissions.
414. Countrywide’s statements of material facts were also untrue because other
material data provided to Plaintiff by Countrywide was untrue. For example, the data often
415. Countrywide Financial’s lending practices, including the subjects of the untrue
statements of material facts and omissions in the Offering Documents, are currently the target of
multiple state and federal investigations and proceedings. Various State Attorneys General,
including those from Massachusetts, California, Connecticut, Illinois, Florida, and Indiana, have
brought lawsuits or initiated investigations against Countrywide based on its lending,
underwriting, and appraisal practices for mortgage loans.
416. On March 24, 2010, Massachusetts Attorney General Coakley filed a Complaint
and Final Judgment by Consent against Countrywide’s parent, Countrywide Financial
Corporation, and its affiliates Countrywide Home Loans, Inc., Countrywide Mortgage Ventures
LLC, and Full Spectrum Lending, Inc. The Attorney General’s Complaint alleged that:
During 2006 and 2007, Countrywide was the largest lender in Massachusetts and
the nation and the largest subprime lender in Massachusetts. In originating
residential mortgage loans in Massachusetts from 2005 to 2007 (“loans”),
Countrywide engaged in unfair loan origination practices including approving
risk-layered loans that, at times, led to predictable borrower “payment shock” --
that is, a significant increase in a borrower’s payment based on changes to the
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calculation of a monthly payment, frequently attributable to a change in interest
rate for an adjustable rate mortgage (“ARM”) or the deferral of the payment of
principal on interest only or Pay Option ARMs. When originating these loans,
Countrywide knew or should have known that a substantial number of its
borrowers could not reasonably repay these loans according to the loans’ terms
and that the loans would be subject to predictable delinquency and default.
417. The Attorney General’s Complaint quotes emails sent by the Chairman of
Countrywide, Angelo Mozilo, in March and April 2006 in which Mozilo referred to
Countrywide’s 100% LTV subprime loans as “the most dangerous product in existence and there
can be nothing more toxic,” and “[i]n all my years in the business, I have never seen a more toxic
pr[o]duct.” Despite Mozilo’s awareness in early 2006 that such loans were toxic, the Attorney
General’s Complaint alleges that Countrywide continued to make such loans through 2007 and
into 2008.
418. The Attorney General’s settlement with Countrywide Financial Corporation, in
combination with settlements by other State Attorneys General, provides for $18 million in loan
modifications for Massachusetts homeowners, $3 billion in loan modifications for homeowners
across the country, and a $4.1 million payment by Countrywide Financial Corporation to the
Commonwealth.
419. Countrywide’s underwriting standards are also the subject of an investigation by
the Federal Bureau of Investigation (“FBI”), which was first reported on March 8, 2008 by The
Wall Street Journal in an article entitled “FBI Investigates Countrywide – U.S. Scrutinizes
Filings on Financial Strength, Loan Quality for Fraud.” The FBI investigation is focused on
“whether company officials made misrepresentations about the company’s financial position and
the quality of its mortgage loans in securities filings.”
420. On March 11, 2008, the Wall Street Journal published another article detailing the
FBI’s investigation of Countrywide’s lending practices. According to the sources interviewed by
the Wall Street Journal, federal investigators found that “Countrywide’s loan documents often
were marked by dubious or erroneous information about its mortgage clients, according to
people involved in the matter. The company packaged many of those mortgages into securities
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and sold them to investors, raising the additional question of whether Countrywide understated
the risks such investments carried.”
above, the Securities that Countrywide offered or sold to Plaintiff have all been downgraded, and
their value has collapsed. As of June 25, 2010, over 57% of the mortgage loans underlying the
Clients have suffered significant losses on the Securities offered or sold by Countrywide to
Plaintiff.
l. FBR’s Untrue Statements of Material Facts and Omissions

422. FBR offered or sold Securities to Plaintiff in Massachusetts in 2005 for a total
price of $22,149,863. A full list of these offerings and sales, along with the relevant Offering
Documents, the identities of the relevant Depositor Defendants and Mortgage Originators, the
dates of the purchases, and the amounts invested is contained in the attached Appendix L.
423. FBR sought to expand its share of the RMBS market by aggressively pursuing
subprime mortgage originators including Aames, offering to pay more for their mortgages than
competing Wall Street Banks, and offering to perform less due diligence than competitors. In an
effort to expand its subprime origination, servicing, and securitization business, FBR acquired
First NLC Financial Services, a mortgage originator headquartered in Florida, in 2005.
424. To facilitate the sale of RMBS, FBR formed SPVs, including Depositor
Defendant FBR Securitization, Inc., which served as the depositor and issuer for many of FBR’s
offerings. FBR offered or sold the Securities to Plaintiff. FBR also provided financial research
on RMBS and related structured products.
425. In connection with its offer or sale of Securities to Plaintiff, FBR sent numerous
prospectuses, and prospectus supplements. FBR also sent Plaintiff numerous other documents,
including term sheets, private placement term sheets, confidential offering memoranda,
computational materials, collateral terms sheets, and “loan tapes.” The loan tapes FBR sent to
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Plaintiff consisted of Excel spreadsheets that contained over 60 categories of information related
to the individual loans including, inter alia, the data, the mortgage originators’ underwriting
practices and guidelines for the mortgages supporting the purpose of the mortgage loans; the type
of properties; the owner-occupancy status; and borrower FICO scores. FBR also showed
Plaintiff “pitch books” promoting, inter alia, the mortgage originators’ underwriting practices
and guidelines for the mortgages supporting the Securities, the data, and FBR’s due diligence of
the mortgage originators’ underwriting practices. FBR did not allow Plaintiff to keep the pitch
books.
426. In the Offering Documents, FBR made numerous statements of material facts
mortgage loans. For example, in an offering for which Aames originated all of the underlying
mortgage loans, FBR stated, in sum or substance, that (a) Aames’ guidelines were intended to
assess the borrower’s ability and willingness to repay the debt; (b) the mortgage loans
underwritten in accordance with Aames’ underwriting standards; and (c) exceptions to these
standards would only be made on a case-by-case basis based on compensating factors. FBR
made similar statements of material facts for mortgage loans originated by other mortgage
originators.
the relevant mortgage originators’ compliance with their appraisal guidelines.
tapes,” and “pitch books,” FBR made additional statements of material facts regarding the
particular Securities and their underlying data, data quality, and mortgage originator practices
and guidelines applicable to mortgage loans underlying those Securities. This information was
material as it allowed Plaintiff to perform sensitive calculations regarding the risk, cash flow, and
value of a Security and to determine whether to purchase the Security on behalf of the Clients.
429. FBR also made additional, oral statements of material facts about the Securities it
offered or sold to Plaintiff in meetings, some of which were at Plaintiff’s offices in Concord,
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Massachusetts on or about August 9 and 11, 2004. Among other things, FBR stated that it
retained Clayton to conduct due diligence for credit, compliance, and appraisals on 100% of the
loans in FBRSI 2005-5, a securitization for which Aames originated all the loans.
and appraisal standards were untrue and contained material omissions. The mortgage originators
in the FBR deals systematically violated their stated underwriting and appraisal standards.
Moreover, FBR’s additional statements of material facts regarding its own due diligence were
untrue and contained material omissions.
431. The statements of material facts in the documents FBR sent to Plaintiff were
untrue because the mortgage originators systematically violated their stated underwriting
guidelines.
432. The statements of material facts in the documents FBR sent to Plaintiff were also
untrue because of the inflated appraisals of the mortgaged properties, which caused the listed
LTV ratios and levels of credit enhancement to be untrue.
433. FBR’s statements of material facts were also untrue because other material data
provided to Plaintiff by FBR was untrue. For example, the data incorrectly identified properties
as “owner occupied” when they were really second homes or investment properties. The untruth
of this information was material to Plaintiff’s analysis of the loans’ credit quality and likelihood
of default.
434. As a result of FBR’s untrue statements of material facts and omissions, the
Securities that FBR offered or sold to Plaintiff have all been downgraded, and their value has
suffered significant losses on the Securities offered or sold by FBR to Plaintiff.
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m. HSBC’s Untrue Statements of Material Facts and Omissions
435. HSBC offered or sold Securities to Plaintiff in Massachusetts in 2005 and 2006
for a total price of $64,313,293. A full list of these offerings and sales, including the relevant
Appendix M.
436. To facilitate the sale of RMBS, HSBC formed other special-purpose entities
including Depositor Defendant HSI Asset Securitization Corporation, which acquired residential
mortgage loans to be securitized and served as the depositor and issuer in numerous offerings of
RMBS. The Defendant HSBC offered or sold the Securities to Plaintiff. HSBC also provided
437. In connection with its offer or sale of Securities to Plaintiff, HSBC sent numerous
prospectuses, and prospectus supplements and, for FFML 2006-FF5, a Confidential Offering
Memorandum, prospectus, and prospectus supplement. HSBC also sent Plaintiff other
documents, including term sheets and “loan tapes.” The loan tapes HSBC sent to Plaintiff
consisted of Excel spreadsheets that contained over 60 categories of information related to the
individual loans including, inter alia, the purpose of the mortgage loans; the type of properties;
the owner-occupancy status; and borrower FICO scores. HSBC also showed Plaintiff “pitch
books” promoting, inter alia, the Mortgage Originators’ underwriting practices and guidelines
for the mortgages supporting Securities, the data, and HSBC’s due diligence of the Mortgage
Originators’ underwriting practices. HSBC did not allow Plaintiff to keep the pitch books.
438. This information was material as it allowed Plaintiff to perform sensitive
calculations regarding the risk, cash flows, and value of a Security and to determine whether to
purchase the Security on behalf of the Clients.
439. As discussed further below, the Offering Documents and other documents
provided by HSBC to Plaintiff contained statements of material facts regarding underwriting and
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appraisal standards applicable to the mortgage loans underlying the Securities. These statements
of material facts were untrue and contained material omissions. As detailed below, the principal
Mortgage Originators of loans underlying the HSBC deals violated their stated underwriting and
appraisal standards.
440. HSBC’s statements of material facts were also untrue because other material data
provided to Plaintiff by HSBC was untrue. For example, the data often incorrectly identified
441. HSBC met with Plaintiff on or about December 5, 2005 and November 22, 2006.
During the meetings, HSBC reiterated many of the statements of material facts in the documents
provided to Plaintiff. In addition, HSBC stated that HSBC conducted due diligence to ensure
that the Mortgage Originators complied with their stated underwriting guidelines, including by
sampling loans in order to check underwriting process, documentation, valuations, and
compliance.
442. These oral statements of material facts were untrue for the same reasons listed in
¶¶ 446-47. In addition, the statements of material facts were untrue because HSBC failed to
conduct adequate due diligence on the Mortgage Originators and the mortgage loans underlying
the Securities in accordance with its statements.
1. HASC 2005-NC2
443. The HASC 2005-NC2 Securities were offered or sold to Plaintiff pursuant to a
Registration Statement, a Prospectus Supplement, and a term sheet, and the M-10 class of HASC
2005-NC2 Securities was also offered or sold to Plaintiff pursuant to a private placement
agreement.
444. In the Offering Documents, HSBC made numerous statements of material facts
mortgage loans, most of which were originated by New Century. For example, HSBC reprinted
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New Century’s “Underwriting Guidelines,” which stated, in sum or substance, that (a) New
Century’s guidelines were “intended to assess the borrower’s ability to repay the mortgage loan”;
(b) New Century reviewed not only the value of the property, but also considered “the
mortgagor’s credit history, repayment ability and debt service-to-income ratio, as well as the type
of use of the mortgaged property”; (c) “the mortgage loans [were] originated in accordance with
the underwriting guidelines”; and (d) exceptions to these guidelines would only be made “on a
case-by-case basis . . . where compensating factors exist.” See ¶ 76. HSBC made similar
statements of material facts for Mortgage Loans originated by other Mortgage Originators.
the appraisal guidelines and practices of the relevant Mortgage Originators. HSBC stated, for
example, that New Century commissioned appraisals of mortgaged properties by “qualified
independent appraisers” who prepared appraisal reports that were “required to conform to the
that were reviewed “by a qualified employee” of New Century or by an appraiser retained by
New Century. See ¶ 78. HSBC made similar statements of material facts for appraisals
commissioned, performed, or reviewed by other Mortgage Originators.
446. The statements of material facts in the documents HSBC sent to Plaintiff were
untrue because the Mortgage Originators violated their stated underwriting guidelines, did not
consistently evaluate the borrowers’ ability to repay the loans, and made exceptions to their
underwriting standards absent the “compensating factors” required by their guidelines. For
example, subsequent investigations and lawsuits have demonstrated that New Century made
qualify for loans; New Century management “turned a blind eye” to risky loan originations; and
“New Century engaged in a number of significant improper and imprudent practices related to its
loan originations.” See ¶¶ 82-95. Moreover, former New Century employees witnessed
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had to do what was necessary to increase loan originations. See ¶¶ 89-91. The SEC has recently
charged former New Century officers with making untrue assurances to the market about the
company’s “adhere[nce] to high origination standards in order to sell [its] loan products in the
secondary market.” See ¶ 93. The other Mortgage Originators underlying the HSBC Securities
similarly violated their stated underwriting guidelines in exchange for dramatically increased
loan production.
also untrue because the Mortgage Originators either knew of or participated in the inflated
enhancement to be untrue. See, e.g., ¶¶ 51-57. A former New Century underwriter recently
confirmed New Century’s use of inflated appraisals in testimony before the FCIC, stating that
New Century hired fee appraisers who were “pressured” into inflating property values, at times
by tampering with the property, “fearing if they didn’t, they would lose future business and their
livelihoods.” ¶ 54. Another industry insider testified before the FCIC that, in his experience,
subprime appraisals were so overvalued that “throwing a dart at a board while blindfolded
would’ve produced more accurate results.” ¶ 52. Surveys performed in 2007 demonstrated that
90% of appraisers felt pressured to raise property values in order to enable deals to go through.
¶ 56.
2. FFML 2006-FF5
448. In the Offering Documents for FFML 2006-FF5, HSBC made numerous
statements of material facts regarding the underwriting standards that had been followed in
originating the underlying mortgage loans, substantially all of which were originated by First
Franklin, a division of National City Bank of Indiana (“First Franklin”), and were sold by First
Franklin to its affiliate First Franklin Financial Corporation (the “Mortgage Loan Seller”), which
in turn sold the mortgage loans to HSBC to be securitized.
449. HSBC stated that First Franklin originated the mortgage loans in accordance with
the underwriting criteria described in the Offering Documents, which stated that:
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The Mortgage Loan Seller’s acquisition underwriting standards are primarily
intended to assess the ability and willingness of the borrower to repay the debt
and to evaluate the adequacy of the mortgaged property as collateral for the
mortgage loan. The standards established by the Mortgage Loan Seller require
that the mortgage loans of a type similar to the Mortgage Loans were
underwritten by the third party originators [i.e., primarily First Franklin] with a
view toward the resale of the mortgage loans in the secondary mortgage market.
In accordance with the Mortgage Loan Seller’s guidelines for acquisition, the
third party originators must consider, among other things, a mortgagor’s credit
history, repayment ability and debt service to income ratio (“Debt Ratio”), as well
as the value, type and use of the mortgaged property.
* * * *
In accordance with the Mortgage Loan Seller’s guidelines for acquisition, all of
the mortgage loans of a type similar to the Mortgage Loans were required to be
underwritten by the third party originator’s underwriters having the appropriate
signature authority. Each underwriter is granted a level of authority
commensurate with their proven judgment, maturity and credit skills. On a case
by case basis, a third party originator may determine that, based upon
compensating factors, a prospective mortgagor not strictly qualifying under the
underwriting risk category guidelines described below warrants an underwriting
exception. Compensating factors may include, but are not limited to, low loan-to-
value ratio, low Debt Ratio, substantial liquid assets, good credit history, stable
employment and time in residence at S-42 the applicant’s current address. It is
expected that a substantial portion of the Mortgage Loans may represent such
underwriting exceptions.
First Franklin’s appraisal guidelines and practices. HSBC stated, for example, that:
In accordance with the Mortgage Loan Seller’s guidelines for acquisition, the
third party originators [i.e., primarily First Franklin] are required to comply with
applicable federal and state laws and regulations and generally require an
appraisal of the mortgaged property which conforms to Freddie Mac and/or
Fannie Mae standards; and if appropriate, a review appraisal. Generally,
appraisals are provided by appraisers approved by the Mortgage Loan Seller.
Review appraisals may only be provided by appraisers approved by the Mortgage
Loan Seller. In some cases, the third party originator may rely on a statistical
appraisal methodology provided by a third party.
Qualified independent appraisers must meet minimum standards of licensing and

provide errors and omissions insurance in states where it is required to become
approved to do business with the third party originators. Each Uniform
Residential Appraisal Report includes a market data analysis based on recent sales
of comparable homes in the area and, where deemed appropriate, replacement
cost analysis based on the current cost of constructing a similar home. The review
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appraisal may be an enhanced desk, field review or an automated valuation report
that confirms or supports the original appraiser’s value of the mortgaged
premises.
untrue because First Franklin violated its stated underwriting guidelines, did not consistently
evaluate the borrowers’ ability to repay the loans, and made exceptions to its underwriting
standards absent the “compensating factors” required by the guidelines.
also untrue because of inflated appraisals for the mortgaged properties, which caused the listed
LTV ratios and levels of credit enhancement to be untrue. CW 63, a Corporate Underwriter at
First Franklin from 2006 until June 2007 who audited appraisals, estimated that one in four
appraisals reviewed at First Franklin was inflated. CW 63 stated that most lenders maintained
blacklists for appraisers who submitted appraisals with inflated values or unsupported
comparables. First Franklin, however, maintained no such lists. Frequently CW 63 rejected
loans with overinflated appraisals, only to have them approved by managers.
453. In December 2006, Merrill Lynch purchased First Franklin from National City
Corporation (“National City”) for $1.3 billion. In April 2007, National City received a dispute
notice from Merrill Lynch asserting that the closing date net asset values and related purchase
price were overstated by $67 million. Merrill Lynch’s dispute notice alleged that National City
had breached representations or warranties concerning First Franklin’s alleged losses associated
with its obligation to repurchase defective loans. In May 2008, Merrill Lynch announced that it
would stop funding loans at First Franklin and explore selling the company. Thereafter, in June
2008, National City was notified that the SEC was investigating National City, and the SEC
requested documents concerning National City’s loan underwriting experience and the sale of
First Franklin. In November 2008, after Bank of America had agreed to acquire Merrill Lynch,
Bank of America determined that Merrill Lynch would have to take a goodwill charge of $2.3
billion, due in part to the failure of First Franklin.
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above, the Securities that HSBC offered or sold to Plaintiff have all been downgraded, and their
Clients have suffered significant losses on the Securities offered or sold by HSBC to Plaintiff.
n. Banc of America’s Untrue Statements of Material Facts and

Omissions
455. Banc of America Securities, LLC offered or sold Securities to Plaintiff in
Massachusetts in 2005 and 2006 for a total price of $50,407,959. A full list of these offerings
and sales, along with the relevant Offering Documents, the identities of the relevant Depositor
Defendants and Mortgage Originators, the dates of the purchases, and the amounts invested is
contained in the attached Appendix N.
456. Banc of America sought to expand its share of the mortgage securities market by
aggressively pursuing subprime Mortgage Originators including Option One, Accredited, and
GMAC Mortgage, offering to pay more for their mortgages than competing Wall Street Banks,
and offering to perform less due diligence than competitors. Option One was one of the the
largest Mortgage Originators in the Banc of America Securities.
457. To facilitate the sale of mortgage-backed securities, Banc of America’s parent
company formed SVPs, including Depositor Defendants Asset Backed Funding Corporation
(“ABFC”) and Banc of America Mortgage Securities, Inc., which served as the depositors and
issuers for many of its offerings. Banc of America offered or sold the Securities to Plaintiff.
Banc of America also provided financial research on RMBS and related structured products.
458. In connection with its offer or sale of Securities to Plaintiff, Banc of America sent
statements, prospectuses, and prospectus supplements. Banc of America also sent Plaintiff
numerous other documents, including term sheets, private placement term sheets, confidential
offering memoranda, computational materials, collateral terms sheets, and “loan tapes.” The
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loan tapes Banc of America sent to Plaintiff consisted of Excel spreadsheets that contained over
60 categories of information related to the individual loans including, inter alia, the purpose of
scores. Banc of America also showed Plaintiff “pitch books” promoting, inter alia, the Mortgage
the data, and Banc of America’s due diligence of the Mortgage Originators’ underwriting
practices. Banc of America did not allow Plaintiff to keep the pitch books.
459. In the Offering Documents, Banc of America made numerous statements of
underlying mortgage loans. For example, in offerings for which Option One originated all or a
significant amount of the underlying mortgage loans, Banc of America reprinted Option One’s
“Underwriting Guidelines,” which stated that (a) Option One’s guidelines were “intended to
assess the value of the mortgaged property, to evaluate the adequacy of such property as
collateral for the mortgage loan and to assess the applicant’s ability to repay the mortgage loan”;
(b) the “Mortgage Loans [were] originated generally in accordance with Option One’s
[Underwriting] Guidelines”; and (c) exceptions to these guidelines would only be made “on a
case-by-case basis . . . where compensating factors exist.” See, ¶ 213. Banc of America made
similar statements of material facts for mortgage loans originated by other mortgage originators,
including Accredited and GMAC Mortgage. See Section V.
the appraisal guidelines and practices of the relevant Mortgage Originators. Banc of America
stated, for example that Option One’s guidelines required that “[a]ll appraisals are required to
conform to the Uniform Standards of Professional Appraisal Practice adopted by the Appraisal
Standards Board of the Appraisal Foundation and are generally on forms acceptable to Fannie
Mae and Freddie Mac,” and that Option One commissioned an appraisal of mortgaged properties
by “qualified independent appraisers” and “require[d] that mortgage loans be underwritten in a
standardized procedure which complies with applicable federal and state laws and regulations
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and require Option One’s underwriters to be satisfied that the value of the property being
financed, as indicated by an appraisal, supports the loan balance.” See ¶ 213. Banc of America
made similar statements of material facts for appraisals commissioned, performed, or reviewed
by other mortgage originators, including Accredited and GMAC Mortgage. See Section V.
tapes,” and “pitch books,” Banc of America made additional statements of material facts
regarding the particular Securities and their underlying data, data quality, and Mortgage
Originator practices and guidelines applicable to the mortgage loans underlying those Securities.
This information was material as it allowed Plaintiff to perform sensitive calculations regarding
the risk, cash flow, and value of a Security and to determine whether to purchase the Security on
behalf of the Clients.
462. Banc of America also made additional, oral statements of material facts about the
Securities it offered or sold to Plaintiff in calls and meetings, some of which took place in
Plaintiff’s Massachusetts offices. Some of Plaintiff’s meetings with Banc of America
representatives occurred on or about September 15, 2004; April 4, June 2, November 28,
November 29, and December 5, 2005; January 2, January 31, May 23, and October 10, 2006; and
January 4, 2007. During these meetings, Banc of America’s employees made statements of
material facts regarding Banc of America’s upcoming RMBS deals, and assured Plaintiff that
Banc of America conducted its own due diligence to ensure that the Mortgage Originators
complied with their stated underwriting guidelines, including by sampling loans in order to check
underwriting process, documentation, valuations, and compliance.
and appraisal standards were untrue and contained material omissions. As detailed above,
Option One, the principal Mortgage Originator in the Banc of America deals, systematically
violated its stated underwriting and appraisal standards. Moreover, Banc of America’s additional
statements of material facts regarding its own due diligence were untrue and contained material
omissions.
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464. The statements of material facts in the documents Banc of America sent to
Plaintiff were untrue because the Mortgage Originators systematically violated their stated
underwriting guidelines, did not consistently evaluate the borrowers’ ability to repay the loans,
and made exceptions to their underwriting standards absent the “compensating factors” required
by their guidelines. For example, a subsequent lawsuit brought by the Attorney General for the
Commonwealth of Massachusetts against Option One, and its past and present parent companies,
alleged that Option One “increasingly disregard[ed] underwriting standards, creat[ed] incentives
for loan officers and brokers to disregard the interests of the borrowers and steer them into high-
cost loans, and originated thousands of loans that [Option One] knew or should have known the
borrowers would be unable to pay, all in an effort to increase loan origination volume so as to
profit from the practice of packaging and selling the vast majority of [Option One’s] residential
subprime loans to the secondary market.” The other Mortgage Originators of loans underlying
the Banc of America Securities, including Accredited and GMAC Mortgage, similarly violated
their stated underwriting guidelines in exchange for dramatically increased loan production.
465. The statements of material facts in the documents Banc of America sent to
Plaintiff were also untrue because the Mortgage Originators either knew of or participated in the
inflated appraisals of the mortgaged properties, which caused the listed LTV ratios and levels of
credit enhancement to be untrue. See, e.g., ¶¶ 51-57.
466. Banc of America’s statements of material facts were also untrue because other
material data provided to Plaintiff by Banc of America was untrue. For example, the data often
467. As a result of Banc of America’s untrue statements of material facts and
omissions, the Securities that Banc of America offered or sold to Plaintiff have all been
downgraded, and their value has collapsed. As of June 25, 2010, over 42% of the mortgage
loans underlying the Securities are in delinquency, default, foreclosure, bankruptcy, or
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repossession. Plaintiff and the Clients have suffered significant losses on the Securities offered
or sold by Banc of America to Plaintiff.
o. GMAC’s Untrue Statements of Material Facts and Omissions

468. GMAC offered or sold Securities to Plaintiff in Massachusetts in 2005 and 2006
for a total price of $11,350,513. A full list of these offerings and sales, along with the relevant
Appendix O.
469. GMAC sought to expand its share of the RMBS market by aggressively pursuing
subprime mortgage originators, offering to pay more for their mortgages than competing Wall
Street Banks, and offering to perform less due diligence than competitors.
470. To facilitate the sale of RMBS, GMAC formed SPVs, including Depositor
Defendants Residential Asset Securities Corporation (“RASC”), Residential Accredit Loans,
Inc., and Residential Asset Mortgage Products Inc. (“RAMP”), which served as the depositors
and issuers for many of GMAC’s offerings. GMAC offered or sold the Securities to Plaintiff.
GMAC also provided financial research on RMBS and related structured products.
471. In connection with its offer or sale of Securities to Plaintiff, GMAC sent
statements, prospectuses, and prospectus supplements. GMAC also sent Plaintiff numerous
other documents, including term sheets, private placement term sheets, confidential offering
memoranda, computational materials, collateral terms sheets, and “loan tapes.” The loan tapes
GMAC sent to Plaintiff consisted of Excel spreadsheets that contained over 60 categories of
information related to the individual loans including, inter alia, the data, the mortgage
originators’ underwriting practices and guidelines for the mortgages supporting the purpose of
scores. GMAC also showed Plaintiff “pitch books” promoting, inter alia, the Mortgage
157
the data, and GMAC’s due diligence of the Mortgage Originators’ underwriting practices.
GMAC did not allow Plaintiff to keep the pitch books.
472. In the Offering Documents, GMAC made numerous statements of material facts
mortgage loans. For example, in an offering for which Equifirst originated all of the underlying
mortgage loans, GMAC stated, in sum or substance, that (a) Equifirst’s guidelines were intended
to assess the borrower’s ability and willingness to repay the debt; (b) the mortgage loans
underwritten in accordance with Equifirst’s underwriting standards; and (c) exceptions to these
standards would only be made on a case-by-case basis based on compensating factors.
the relevant Mortgage Originators’ compliance with their appraisal guidelines.
tapes,” and “pitch books,” GMAC made additional statements of material facts regarding the
475. GMAC also made additional, oral statements of material facts about the Securities
it offered or sold to Plaintiff in a meeting at Plaintiff’s offices in Massachusetts on or about
August 17, 2005. Among other things, GMAC stated that it performed due diligence on 100% of
the loans it purchased from Equifirst for the RAMP 05-EFC4 securitization.
and appraisal standards were untrue and contained material omissions. The Mortgage
Originators in the GMAC deals systematically violated their stated underwriting and appraisal
standards. Moreover, GMAC’s additional statements of material facts regarding its own due
diligence were untrue and contained material omissions.
158
477. The statements of material facts in the documents GMAC sent to Plaintiff were
guidelines.
478. The statements of material facts in the documents GMAC sent to Plaintiff were
also untrue because of the inflated appraisals of the mortgaged properties, which caused the
listed LTV ratios and levels of credit enhancement to be untrue.
479. GMAC’s statements of material facts were also untrue because other material data
provided to Plaintiff by GMAC was untrue. For example, the data often incorrectly identified
480. As a result of GMAC’s untrue statements of material facts and omissions, the
Securities that GMAC offered or sold to Plaintiff have all been downgraded, and their value has
suffered significant losses on the Securities offered or sold by GMAC to Plaintiff.
p. Barclays’ Untrue Statements of Material Facts and Omissions

481. Barclays offered or sold Securities to Plaintiff in Massachusetts in 2005, 2006 and
Appendix P.
482. Barclays sought to expand its share of the RMBS market by aggressively pursuing
subprime Mortgage Originators including Fremont, WMC, Decision One, Option One, and
Encore, offering to pay more for their mortgages than competing Wall Street Banks, and offering
159
to perform less due diligence than competitors. Fremont was one of the largest Mortgage
Originators of loans underlying the Barclays Securities. In an effort to expand its subprime
origination, servicing, and securitization business in the United States, Barclays acquired two
large U.S.-based mortgage companies: HomEq Servicing Corporation in June 2006, and
EquiFirst Corporation in 2007.
483. To facilitate the sale of RMBS, Barclays’ parent company formed SPVs, including
Depositor Defendant Securitized Asset Backed Receivables LLC (“SABR”), which served as the
depositor and issuer for many of Barclays’ offerings. Barclays offered or sold the Securities to
Plaintiff. Barclays also provided financial research on RMBS and related structured products.
484. In connection with its offer or sale of Securities to Plaintiff, Barclays sent
statements, prospectuses, and prospectus supplements. Barclays also sent Plaintiff numerous
other documents, including term sheets, private placement term sheets, confidential offering
memoranda, computational materials, collateral terms sheets, and “loan tapes.” The loan tapes
Barclays sent to Plaintiff consisted of Excel spreadsheets that contained over 60 categories of
information related to the individual loans including, inter alia, the data, the Mortgage
Originators’ underwriting practices and guidelines for the mortgages supporting the purpose of
scores. Barclays also showed Plaintiff “pitch books” promoting, inter alia, the Mortgage
the data, and Barclays’ due diligence of the Mortgage Originators’ underwriting practices.
Barclays did not allow Plaintiff to keep the pitch books.
485. In the Offering Documents, Barclays made numerous statements of material facts
amount of the underlying mortgage loans, Barclays reprinted Fremont’s “Underwriting
Guidelines,” which stated, in sum or substance, that (a) Fremont’s guidelines were “intended to
160
assess the borrower’s ability and willingness of the borrower to repay the debt”; (b) the
“mortgage loans [were] underwritten in accordance with Fremont’s current underwriting
programs”; and (c) exceptions to these guidelines would only be made “on a case-by-case basis .
. . based on compensating factors.” See, ¶ 161. Barclays made similar statements of material
facts for Mortgage Loans originated by other Mortgage Originators, including WMC. See ¶ 185.
the appraisal guidelines and practices of the relevant Mortgage Originators. Barclays stated, for
example, that “underwriting guidelines are applied in accordance with a procedure which
complies with applicable federal and state laws and regulations and require an appraisal of the
mortgaged property, and if appropriate, a review appraisal” and that Fremont commissioned
appraisals of mortgaged properties by “qualified independent appraisers.” See ¶ 161. Barclays
made similar statements of material facts for appraisals commissioned, performed, or reviewed
by other Mortgage Originators, including WMC. See ¶ 185.
tapes,” and “pitch books,” Barclays made additional statements of material facts regarding the
488. Barclays also made additional, oral statements of material facts about the
Securities it offered or sold to Plaintiff. Some of Plaintiff’s meetings with Barclays occurred on
or about July 13 and October 27, 2004; January 19, 2005; and March 14 and November 6, 2006.
During these meetings, Barclays representatives made statements of material facts regarding
Barclays’ upcoming RMBS deals, and assured Plaintiff that Barclay conducted its own due
diligence to ensure that the Mortgage Originators complied with their stated underwriting
guidelines, including by sampling loans in order to check underwriting process, documentation,
valuations, and compliance. For example, Plaintiff met with Barclays at the ABS East industry
161
conference during November 2006. At this meeting, Barclays stated that Barclays employees
were on-site with the largest Mortgage Originators, “QCing” (i.e., quality controlling) the
underwriting and pool construction process, and that every exception to the Mortgage
Originators’ underwriting standards was supposed to be QC’ed by a Barclays employee.
and appraisal standards were untrue and contained material omissions. As detailed below,
Fremont, the principal Mortgage Originator in the Barclays deals, systematically violated its
stated underwriting and appraisal standards. Moreover, Barclays’ additional statements of
material facts regarding its own due diligence were untrue and contained material omissions.
490. The statements of material facts in the documents Barclays sent to Plaintiff were
guidelines. For example, subsequent investigations and lawsuits have demonstrated that
Fremont made frequent exceptions to its underwriting guidelines for borrowers who would not
otherwise qualify for a loan; Fremont management encouraged risky loan originations; and
Fremont was “operating with inadequate underwriting criteria and excessive risk in relation to
the kind and quality of assets held by [Fremont].” See ¶¶ 165-182. Moreover, former Fremont
employees witnessed firsthand how exceptions to Fremont’s underwriting became the “norm”
because employees had to do what was necessary to increase loan originations. Id. The FDIC
ultimately issued a Cease & Desist Order to Fremont for extending subprime credit “in an unsafe
and unsound manner” and committing violations of laws and FDIC regulations. See ¶¶ 165-166.
The other Mortgage Originators of loans underlying the Barclays Securities, including WMC,
similarly violated their stated underwriting guidelines in exchange for dramatically increased
loan production. See Section V.
491. The statements of material facts in the documents Barclays sent to Plaintiff were
also untrue because the Mortgage Originators either knew of or participated in the inflated
162
492. Barclays’ statements of material facts were also untrue because other material data
provided to Plaintiff by Barclays was untrue. For example, the data often incorrectly identified
493. As a result of Barclay’s untrue statements of material facts and omissions, the
Securities that Barclays offered or sold to Plaintiff have all been downgraded, and their value has
suffered significant losses on the Securities offered or sold by Barclays to Plaintiff.
q. The Depositor Defendants’ Untrue Statements of Material Facts and

Omissions
494. For their securitization businesses, financial institutions created SPVs, wholly-
owned subsidiaries, to serve as depositors that purchased or acquired the loans for securitization
and sale to investors. The limited corporate purpose of depositors was to package and sell loans
for the benefit of their parent banks. Revenues from the depositors’ securitization activities were
passed up to the parent banks.
495. Each of the Depositor Defendants served as a “depositor” for the sale of the
Securities. The Depositor Defendants, as “issuers” under Regulation AB (17 CFR § 230.191),
were sellers of the Securities and made false statements of material facts in the Offering
Documents.
496. Prior to issuing the Securities, the Depositor Defendants prepared and filed with
the SEC on Form S-3 registration statements under the Securities Act of 1933, 15 U.S.C § 77k,
indicating their intention to sell the Securities. The Depositors then issued the Securities
pursuant to the registration statements, accompanying prospectuses, and subsequent prospectus
163
supplements, or private placement memoranda. The Depositor Defendants and the Wall Street
Banks drafted the prospectus supplements or private placement memoranda and circulated these
documents to investors, including Plaintiff. The Depositor Defendants filed the prospectus
supplements with the SEC.
497. As alleged above, the prospectus supplements or private placement memoranda
purported to describe the mortgage pools underlying the Securities that the Depositor Defendants
offered and sold, making statements about the loan origination process, the quality of the loans,
and the adequacy of the collateral. Each prospectus supplement or private placement
memorandum included tables with data concerning the loans underlying the Securities, including
(but not limited to) the type of loans, the number of loans, the mortgage rate and net mortgage
rate, the aggregate scheduled principal balance of the loans, the purported weighted average of
original combined LTV ratios, the occupancy status of the mortgaged properties, and the
geographic concentration of the properties.
498. The prospectus supplements or private placement memoranda contained the
untrue statements of material facts set forth above in Section VI concerning the Securities,
including untrue statements regarding: (1) the Mortgage Originators’ underwriting guidelines
that were purportedly applied to evaluate the ability of the borrowers to repay the loans
underlying the Securities; (2) the appraisal guidelines that were purportedly applied to evaluate
the value and adequacy of the mortgaged properties as collateral; (3) the LTV ratios, debt-to-
income ratios, and purported occupancy status of the mortgaged properties, including whether
the properties were “owner occupied,” “second homes,” or “investment properties”; and (4)
various forms of credit enhancement applicable to certain tranches of Securities.
499. As detailed above, these statements of material facts concerning the Securities
were untrue because: (1) the Mortgage Originators violated their stated underwriting guidelines
and did not consistently evaluate the borrowers’ ability to repay the loans; (2) inflated appraisals
caused the listed LTV ratios and levels of credit enhancement to be inaccurate; and (3) the stated
numbers of riskier “second home” and “investment property” mortgagees were lower than the
164
actual numbers, and the stated numbers of less risky “owner occupied” mortgage loans were
higher than the actual numbers. In addition, metrics such as debt-to-income ratios were untrue as
a result of the Mortgage Originators’ acceptance of untrue information from mortgage applicants.
VII. THE PERFORMANCE AND VALUE OF THE SECURITIES

500. The rates of delinquency, foreclosure, and real estate owned (i.e., foreclosed and
not yet sold) on the Securities’ underlying mortgages have soared since issuance. As reflected in
the charts below (in which all figures are expressed as percentages), as of May 2010, the
percentage of those underlying loans that are currently either 60 days or more delinquent, in
foreclosure, or real estate owned exceeds 38%, on average, for the Securities offered or sold to
Plaintiff by each Wall Street Bank Defendant. These data provide a snapshot of the pools as
currently constituted and do not include loans that have been liquidated out of the original pools.
The pools and the related Securities suffered significant additional losses as a result of the
liquidation of defaulted loans that are not included in the tables below.
165
501. Morgan Stanley Performance
60 Days 90 Days In Real Estate Total
Deal Delinquent Delinquent Foreclosure Owned Delinquency
ACCR 2005-3 2.39 19.45 9.34 3.73 34.91
AMIT 2005-4 2.26 22.20 11.04 4.94 40.44
IXIS 2005-HE2 1.72 8.62 39.58 5.15 55.07
IXIS 2005-HE3 1.85 9.03 34.11 4.98 49.97
IXIS 2006-HE3 1.75 31.89 15.61 3.71 52.96
MSAC 2005-HE4 2.15 22.97 14.83 5.41 45.36
MSAC 2005-NC2 2.66 25.60 10.45 3.99 42.70
MSAC 2005-WMC2 2.65 28.42 17.06 2.74 50.87
MSAC 2005-WMC3 3.17 25.31 17.93 5.71 52.12
MSAC 2005-WMC5 2.83 31.79 14.19 3.97 52.78
MSAC 2005-WMC6 2.03 32.35 12.78 3.83 50.99
MSAC 2006-HE1 1.93 13.97 26.76 1.49 44.15
MSAC 2006-HE3 2.36 17.74 18.63 7.97 46.70
MSAC 2007-HE3 2.44 27.72 16.03 4.34 50.53
MSHEL 2005-1 2.24 7.19 13.17 2.70 25.30
MSHEL 2006-1 2.83 13.30 11.99 5.67 33.79
NCHET 2005-3 2.30 13.47 12.41 7.94 36.12
NCHET 2005-B 1.91 7.65 12.15 6.62 28.33
NCHET 2005-C 1.86 9.69 23.99 1.33 36.87
NCHET 2005-D 2.89 11.44 23.51 1.78 39.62
NTIX 2007-HE2 2.66 27.98 17.76 4.10 52.50
SAST 2006-3 1.88 14.76 20.46 4.96 42.06
Average
Delinquency
for Morgan
Stanley 43.82
502. Bear Stearns Performance

AABST 2005-5 2.68 8.17 13.88 5.52 30.25
AMIT 2005-1 2.75 13.75 20.81 8.19 45.50
BSABS 2005-AQ2 2.10 38.31 16.89 3.08 60.38
BSABS 2005-HE10 3.31 38.96 10.02 1.72 54.01
BSABS 2005-HE4 2.56 31.63 8.01 2.84 45.04
BSABS 2005-HE8 2.18 29.13 8.75 1.92 41.98
BSABS 2005-HE9 2.22 33.69 8.21 2.07 46.19
BSABS 2006-EC1 3.73 42.97 9.24 1.57 57.51
BSABS 2006-EC2 2.09 46.70 9.59 2.75 61.13
BSABS 2006-HE1 2.43 37.55 8.54 0.95 49.47
BSABS 2006-HE10 2.13 40.97 11.51 1.83 56.44
BSABS 2006-HE3 2.10 33.97 14.16 3.78 54.01
BSABS 2006-HE4 2.47 21.93 18.85 5.17 48.42
BSABS 2006-HE7 2.05 40.94 9.84 1.71 54.54
166
BSABS 2006-PC1 2.99 37.42 8.03 0.62 49.06
BSABS 2007-FS1 2.75 37.74 7.99 2.59 51.07
BSMF 2007-SL2 4.73 23.86 0.00 0.00 28.59
BSSLT 2007-SV1A 1.73 5.35 1.37 0.15 8.60
CARR 2005-NC4 2.08 8.78 11.34 24.92 47.12
CARR 2006-RFC1 2.07 15.87 12.86 17.72 48.52
GPMF 2007-HE1 2.68 8.49 0.00 0.00 11.17
IRWHE 2005-A 0.37 1.90 0.00 0.00 2.27
PCHLT 2005-2 2.82 15.59 18.27 8.54 45.22
PCHLT 2005-4 3.25 16.14 22.52 10.46 52.37
SACO 2004-3A 2.24 8.88 0.00 0.00 11.12
SACO 2005-1 2.09 9.49 0.00 0.00 11.58
SACO 2005-2 2.24 9.27 0.00 0.00 11.51
SACO 2005-3 2.67 11.86 0.14 0.00 14.67
SACO 2005-4 2.18 10.45 0.12 0.00 12.75
SACO 2005-5 2.24 10.76 0.19 0.00 13.19
SACO 2005-7 2.41 13.18 0.05 0.00 15.64
SACO 2005-8 2.60 11.73 0.15 0.00 14.48
SACO 2005-WM3 5.12 8.76 0.00 0.00 13.88
SACO 2007-2 3.96 9.72 0.31 0.00 13.99
SAMI 2005-AR6 1.92 19.94 9.79 2.26 33.91
Average
Delinquency
for Bear
Stearns 34.73
167
503. Citigroup Performance
AMIT 2005-2 0.73 5.13 27.06 11.92 44.84
ARSI 2005-W2 2.25 5.63 20.30 3.53 31.71
ARSI 2006-W1 2.41 6.63 27.83 5.00 41.87
CARR 2005-NC3 1.77 10.87 11.82 16.92 41.38
CARR 2005-NC5 1.62 12.03 12.50 28.08 54.23
CARR 2006-NC2 1.97 12.29 12.22 27.17 53.65
CARR 2006-NC4 1.98 13.39 13.54 21.78 50.69
CMLTI 2005-9 1.59 5.02 4.72 1.38 12.71
CMLTI 2005-HE1 2.67 7.55 20.12 5.90 36.24
CMLTI 2005-HE3 1.71 28.81 18.11 6.79 55.42
CMLTI 2006-HE1 2.27 12.83 16.44 5.20 36.74
CMLTI 2006-WFH3 2.49 14.61 12.59 6.30 35.99
CMLTI 2007-AMC2 2.21 18.60 18.42 5.61 44.84
CMLTI 2007-FS1 2.30 21.72 14.89 3.84 42.75
Average
Delinquency
for
Citigroup 41.65
504. Credit Suisse Performance

AABST 2005-4 2.32 6.63 11.88 4.67 25.50
ABSHE 2005-HE1 1.40 12.70 16.21 4.30 34.61
ABSHE 2005-HE3 1.93 33.76 16.05 3.43 55.17
ABSHE 2005-HE4 2.34 10.82 11.93 1.48 26.57
ABSHE 2005-HE5 1.18 25.77 24.87 3.27 55.09
ABSHE 2006-HE3 1.79 11.04 19.57 2.20 34.60
ABSHE 2006-HE6 2.68 13.24 15.26 4.63 35.81
ABSHE 2006-HE7 2.72 20.61 13.46 4.30 41.09
AMSI 2005-R6 2.28 5.73 16.78 2.39 27.18
AMSI 2005-R8 1.52 3.87 17.91 4.45 27.75
AMSI 2006-R2 1.99 7.16 18.80 3.47 31.42
FHLT 2005-A 2.89 16.84 19.16 9.19 48.08
FMIC 2007-1 3.30 14.59 13.35 6.96 38.20
HEAT 2005-1 2.21 11.94 12.11 5.40 31.66
HEAT 2005-2 1.65 12.13 9.85 5.46 29.09
HEAT 2005-3 2.81 14.41 15.10 6.65 38.97
HEAT 2005-4 2.10 10.82 10.93 5.72 29.57
HEAT 2005-5 2.40 12.83 10.32 4.59 30.14
HEAT 2005-6 3.32 11.55 11.96 3.93 30.76
HEAT 2005-7 2.02 15.64 15.30 5.03 37.99
HEAT 2005-8 2.67 16.51 11.72 5.21 36.11
HEAT 2005-9 3.19 15.23 13.63 5.83 37.88
168
HEAT 2006-4 1.96 15.34 19.81 5.43 42.54
HEAT 2006-7 2.85 24.23 14.81 6.27 48.16
HEMT 2005-5 2.21 7.92 0.32 0.00 10.45
HEMT 2006-2 2.47 5.49 1.46 0.00 9.42
LBMLT 2005-WL2 2.91 25.05 13.44 4.20 45.60
PPSI 2005-WHQ3 1.72 7.09 9.88 4.45 23.14
SAST 2005-2 2.34 9.56 14.59 4.02 30.51
Average
Delinquency
for Credit
Suisse 34.24
505. Greenwich Capital Performance

AHMA 2007-3 1.41 5.36 24.07 13.40 44.24
ARSI 2006-W5 2.38 7.24 27.24 5.13 41.99
EMLT 2005-1 1.59 11.03 12.77 1.86 27.25
FFML 2006-FF8 2.31 14.07 17.69 4.79 38.86
FHLT 2005-1 2.99 19.89 17.57 5.82 46.27
HELT 2007-FRE1 2.09 8.78 16.63 5.88 33.38
LBMLT 2005-1 2.75 20.98 10.72 2.51 36.96
LBMLT 2005-WL1 3.60 26.94 14.77 5.32 50.63
MMLT 2005-2 1.75 13.35 21.32 3.83 40.25
NAA 2007-S1 3.14 9.24 0.45 0.00 12.83
NHEL 2005-1 2.04 9.55 20.67 4.32 36.58
NHEL 2005-3 2.17 9.85 24.99 6.01 43.02
SVHE 2005-1 3.61 14.25 6.50 3.66 28.02
SVHE 2005-A 3.99 10.76 0.08 0.00 14.83
SVHE 2005-B 3.23 8.45 0.16 0.00 11.84
SVHE 2005-DO1 2.30 27.99 13.05 3.06 46.40
SVHE 2006-OPT2 2.85 7.29 22.61 3.80 36.55
SVHE 2006-OPT5 2.55 8.76 22.62 3.35 37.28
WAMU 2005-AR2 3.72 10.15 16.56 2.15 32.58
Average
Delinquency
for
Greenwich
Capital 34.72
169
506. Deutsche Bank Performance
ACE 2005-HE2 2.16 6.11 13.61 5.89 27.77
ACE 2005-HE5 2.87 18.66 21.46 7.67 50.66
ACE 2005-HE6 1.95 10.16 15.12 8.02 35.25
ACE 2005-HE7 1.34 17.31 23.65 7.31 49.61
ACE 2006-FM2 2.16 34.03 29.98 5.77 71.94
ACE 2006-HE1 1.96 18.64 22.74 7.58 50.92
ACE 2006-NC1 2.18 9.88 22.27 2.69 37.02
ACE 2006-NC2 2.23 41.35 20.43 4.56 68.57
ACE 2006-OP1 2.58 7.51 20.25 3.40 33.74
ACE 2006-SL1 2.64 7.07 0.29 0.00 10.00
ACE 2006-SL2 3.26 8.51 0.36 0.00 12.13
ACE 2007-HE2 2.52 10.79 14.46 7.94 35.71
ALBT 2007-S1 6.14 15.70 0.00 0.00 21.84
NCHET 2005-4 1.85 12.11 12.12 11.17 37.25
Average
Delinquency
for Deutsche
Bank 38.74
507. Merrill Lynch Performance

FFMER 2007-H1 2.29 20.27 20.70 6.03 49.29
MLMI 2005-AR1 2.29 25.40 20.99 4.83 53.51
MLMI 2005-NCB 5.46 3.47 0.48 0.00 9.41
MLMI 2005-SL2 5.93 5.81 0.00 0.00 11.74
MLMI 2005-SL3 2.38 5.00 0.00 0.02 7.40
MLMI 2005-WMC1 3.94 12.20 14.35 1.84 32.33
MLMI 2006-HE4 3.58 24.90 30.78 4.36 63.62
MLMI 2006-HE5 3.08 22.73 27.41 3.58 56.80
MLMI 2006-SL1 1.86 4.72 0.00 0.00 6.58
PPSI 2005-WHQ1 2.75 7.93 13.13 4.04 27.85
RALI 2006-QS17 3.01 7.65 15.78 3.10 29.54
SURF 2005-BC1 4.56 13.10 11.92 4.65 34.23
Average
Delinquency
for Merrill
Lynch 31.86
170
508. UBS Performance
AMSI 2005-R7 1.35 4.10 15.94 4.14 25.53
ARSI 2006-W3 2.07 8.08 28.62 4.97 43.74
FFML 2005-FF7 2.46 26.07 18.03 4.56 51.12
MABS 2005-FRE1 3.31 11.56 15.53 7.54 37.94
MABS 2005-NC1 1.87 5.96 9.28 5.29 22.40
MABS 2006-AM2 2.48 18.82 27.77 7.67 56.74
MABS 2006-FRE2 1.08 19.90 22.14 9.16 52.28
MABS 2006-HE1 2.33 20.31 17.28 6.41 46.33
MABS 2006-NC2 3.19 14.35 15.60 6.95 40.09
MABS 2006-WMC4 2.55 27.28 15.84 2.43 48.10
Average
Delinquency
for UBS 42.43
509. Goldman Sachs Performance

CBASS 2006-SL1 3.46 15.96 0.00 0.00 19.42
GSAMP 2005-HE6 2.13 7.36 14.65 6.16 30.30
GSAMP 2006-HE6 3.56 17.50 23.26 7.07 51.39
GSAMP 2006-S1 6.21 18.39 0.08 0.00 24.68
IXIS 2005-HE4 2.90 25.64 13.98 5.42 47.94
LBMLT 2005-2 2.16 23.23 11.61 4.43 41.43
LBMLT 2006-7 3.00 28.40 13.78 3.26 48.44
LBMLT 2006-WL1 2.92 24.47 14.78 3.67 45.84
Average
Delinquency
for
Goldman
Sachs 38.68
171
510. J.P. Morgan Performance
JPMAC 2005-FLD1 2.07 10.69 22.69 1.58 37.03
JPMAC 2005-OPT1 5.12 7.90 14.58 2.05 29.65
JPMAC 2005-OPT2 2.91 7.56 14.15 1.52 26.14
JPMAC 2005-
WMC1 2.13 11.39 24.73 1.75 40.00
JPMAC 2006-CH1 1.67 11.01 18.96 1.00 32.64
JPMAC 2006-CW2 2.20 22.94 26.74 5.10 56.98
JPMAC 2006-
WMC1 2.26 12.35 25.21 1.79 41.61
RASC 2006-KS6 2.83 12.77 17.03 3.33 35.96
Average
Delinquency
for J.P.
Morgan 37.50
511. Countrywide Performance

CWALT 2005-82 4.61 22.05 18.35 3.04 48.05
CWALT 2005-J6 1.48 2.28 3.58 0.83 8.17
CWL 2005-11 3.09 28.96 8.64 1.99 42.68
CWL 2006-17 2.89 38.18 15.17 2.83 59.07
CWL 2006-18 3.19 37.13 15.54 3.36 59.22
Average
Delinquency
for
Countrywide 43.44
512. FBR Performance

FBRSI 2005-5 1.37 20.11 19.06 3.73 44.27
POPLR 2005-5 2.66 13.22 15.74 5.80 37.42
Average
Delinquency
for FBR 40.85
172
513. HSBC Performance
FFML 2006-FF5 2.66 12.14 20.03 4.22 39.05
HASC 2005-NC2 3.05 29.43 13.6 2.64 48.72
HASC 2006-OPT3 2.70 7.33 17.91 3.38 31.32
Average
Delinquency
for HSBC 39.70
514. Banc of America Performance

ABFC 2005-HE1 2.58 6.58 16.7 3.88 29.74
ABFC 2006-OPT2 3.1 6.97 27.02 4.63 41.72
BOAA 2006-6 2.3 10.44 10.41 1.04 24.19
RAMP 2006-RZ3 2.55 11.71 18.40 1.34 34.00
Average
Delinquency
for Banc of
America 32.41
515. GMAC Performance

RAMP 2005-EFC4 2.77 10.7 19.45 0.87 33.79
RASC 2006-KS2 2.50 14.93 19.82 1.28 38.53
Average
Delinquency
for GMAC 36.16
516. Barclays Performance

ARSI 2005-W3 2.2 6.25 22.22 4.16 34.83
BCAP 2006-AA2 2.13 9.34 19.8 6.29 37.56
CARR 2006-FRE1 2.28 16.18 18.04 23.03 59.53
CARR 2006-FRE2 2.11 16.23 17.44 20.21 55.99
EQLS 2007-1 2.64 10.25 13.01 4.48 30.38
RASC 2006-KS9 2.07 12.57 27.88 1.61 44.13
SABR 2005-FR4 2.95 10.06 37.61 6.46 57.08
SABR 2005-FR5 1.67 11.05 40.59 12.84 66.15
SABR 2006-FR1 1.53 10.97 21.03 5.51 39.04
173
SABR 2006-WM2 3.26 7.43 28.12 2 40.81
SAST 2007-2 2.43 22.48 13.60 3.16 41.67
Average
Delinquency
for Barclays 46.11
VIII. COUNT I AGAINST THE WALL STREET BANK DEFENDANTS:

GEN. LAWS CH. 110A § 410(A)(2)
517. Plaintiff realleges and incorporates by reference the allegations contained in
paragraphs 1 through 516.
518. Each of the Securities was offered or sold to the Plaintiff in Massachusetts and
purchased directly or for the benefit of the Clients. Each Wall Street Bank Defendant offered or
sold Securities to Plaintiff in Massachusetts.
519. Massachusetts General Laws Chapter 110A, § 101 provides that “it is unlawful
for any person, in connection with the offer, sale or purchase of any security, directly or
indirectly (1) to employ any device, scheme or artifice to defraud, (2) to make any untrue
statement of a material fact or to omit to state a material fact necessary in order to make the
statements made not misleading, or (3) to engage in any act, practice, or course of business
which operates or would operate as a fraud or deceit upon any person.”
520. Massachusetts General Laws Chapter 110A, § 410(a)(2) provides for civil liability
in the event of any offer or sale of securities by means of an untrue statement or material
omission.
521. Each Wall Street Bank Defendant made an untrue statement of a material fact or
omitted to state a material fact necessary in order to make the statements made not misleading, in
connection with the offer or sale of the Securities to Plaintiff.
522. In connection with the offer or sale of the Securities to Plaintiff, each Wall Street
Bank Defendant violated § 410(a)(2) by making an untrue statement of a material fact or
omitting to state a material fact necessary in order to make the statements made not misleading,
concerning, inter alia, (1) the Mortgage Originators’ underwriting standards that were
174
purportedly applied to evaluate the ability of the borrowers to repay the loans underlying the
Securities; (2) the appraisal standards that were purportedly applied to evaluate the value and
adequacy of the mortgaged properties as collateral; (3) the LTV ratios, debt-to-income ratios, and
purported occupancy status of the mortgaged properties, including whether the properties were
“owner occupied,” “second homes,” or “investment properties”; (4) the Wall Street Bank
Defendants’ due diligence of the loans and the Mortgage Originators’ underwriting practices; and
(5) various forms of credit enhancement applicable to certain tranches of Securities. Plaintiff
made the decision to purchase the Securities on behalf of the Clients not knowing of the
Defendants’ untruths or omissions.
523. The Wall Street Bank Defendants’ actions and conduct violated Massachusetts
General Laws Ch. 110A.
524. Plaintiff has been damaged by the Wall Street Bank Defendants’ violations of the
Massachusetts Securities Act.
IX. COUNT II AGAINST THE DEPOSITOR DEFENDANTS:

GEN. LAWS CH. 110A § 410(A)(2)
purchased directly or for the benefit of the Clients. Each Depositor Defendant offered or sold
Securities to Plaintiff in Massachusetts.
175
528. Massachusetts General Laws Chapter 110A, § 410(a)(2) provides for civil liability
in the event of any offer or sale of securities by means of an untrue statement or material
omission.
529. Each Depositor Defendant made an untrue statement of a material fact or omitted
to state a material fact necessary in order to make the statements made not misleading, in
connection with the offer or sale of the Securities to Plaintiff.
530. In connection with the offer or sale of the Securities to Plaintiff, each Depositor
Defendant violated § 410(a)(2) by making an untrue statement of a material fact or omitting to
state a material fact necessary in order to make the statements made not misleading, concerning,
inter alia, (1) the Mortgage Originators’ underwriting standards that were purportedly applied to
evaluate the ability of the borrowers to repay the loans underlying the Securities; (2) the
appraisal standards that were purportedly applied to evaluate the value and adequacy of the
mortgaged properties as collateral; (3) the LTV ratios, debt-to-income ratios, and purported
occupancy status of the mortgaged properties, including whether the properties were “owner
occupied,” “second homes,” or “investment properties”; (4) the Wall Street Bank Defendants’
due diligence of the loans and the Mortgage Originators’ underwriting practices; and (5) various
forms of credit enhancement applicable to certain tranches of Securities. Plaintiff made the
decision to purchase the Securities on behalf of the Clients not knowing of the Defendants’
untruths or omissions.
531. The Depositor Defendants’ actions and conduct violated Massachusetts General
Laws Ch. 110A.
532. Plaintiff has been damaged by the Depositor Defendants’ violations of the
X. COUNT III AGAINST THE WALL STREET BANK DEFENDANTS:

GEN. LAWS CH. 110A § 410(B)
176
purchased directly or for the benefit of the Clients. Each Wall Street Bank Defendant offered or
sold Securities to Plaintiff in Massachusetts.
536. Massachusetts General Laws Chapter 110A, § 410(b) provides that “every broker-
dealer or agent who materially aids in the sale [of securities by a seller liable under subsection
(a) is] also liable jointly and severally with and to the same extent as the seller . . . .”
537. Each Wall Street Bank Defendant materially aided in the offer or sale of Securities
to Plaintiff pursuant to an untrue statement of a material fact or omission to state a material fact
necessary in order to make the statements made not misleading, in connection with the offer or
sale of the Securities to Plaintiff.
538. In connection with the offer or sale of the Securities to Plaintiff, each Wall Street
Bank Defendant violated § 410(b) by materially aiding the offer or sale of Securities pursuant to
an untrue statement of a material fact or omitting to state a material fact necessary in order to
make the statements made not misleading, concerning, inter alia, (1) the Mortgage Originators’
underwriting standards that were purportedly applied to evaluate the ability of the borrowers to
repay the loans underlying the Securities; (2) the appraisal standards that were purportedly
applied to evaluate the value and adequacy of the mortgaged properties as collateral; (3) the LTV
ratios, debt-to-income ratios, and purported occupancy status of the mortgaged properties,
including whether the properties were “owner occupied,” “second homes,” or “investment
properties”; (4) the Wall Street Bank Defendants’ due diligence of the loans and the Mortgage
Originators’ underwriting practices; and (5) various forms of credit enhancement applicable to
177
certain tranches of Securities. Plaintiff made the decision to purchase the Securities on behalf of
the Clients not knowing of the Defendants’ untruths or omissions.
539. The Wall Street Bank Defendants’ actions and conduct violated Massachusetts
General Laws Ch. 110A.
540. Plaintiff has been damaged by the Wall Street Bank Defendants’ violations of the
XI. RELIEF REQUESTED

WHEREFORE, Plaintiff requests entry of final judgment, as expressly provided by Mass.
Gen. Laws Ch. 110A, § 410, as follows: (i) recovery of the consideration paid for the Securities,
together with statutory interest from the date of payment, costs, and reasonable attorneys’ fees,
less the amount of any income received on the Securities, upon the tender of the Securities, or
(ii) damages in the amount that would be recoverable upon a tender of the Securities less the
value of the Securities when the buyer disposed of them, statutory interest from the date of
disposition, costs, and reasonable attorneys’ fees. In addition, Plaintiff requests such other and
further relief as the Court deems just and proper.
XII. JURY DEMAND

Plaintiff demands a trial by jury on all claims so triable.
[Remainder of Page Intentionally Left Blank]
178
Dated: July 9, 2010.
CAMBRIDGE PLACE INVESTMENT

MANAGEMENT INC.
By its attorneys,
T. Christopher
(BBO # 129930)
Michael S. D'Orsi
(BBO # 566960)
DONNELLY, CONROY & GELHAAR, LLP
One Beacon Street, 33d Floor
Boston, MA 02108
Tel: (617) 720-2880
Fax: (617) 720-3554
tcd@dcglaw.com
msd@dcglaw.com
Of Counsel (pro hac vice applications forthcoming):
BERNSTEIN LITOWITZ BERGER

& GROSSMANN LLP
Gerald H. Silk
David L. Wales
Jai K. Chandrasekhar
Lauren A. McMillen
1285 Avenue of the Americas, 38th Floor
New York, NY 10019
Tel: (212) 554-1400
Fax: (212) 554-1444
jerry@blbglaw.com
dwales@blbglaw.com
jai@blbglaw.com
lauren@blbglaw.com
-and-
David R. Stickney
Timothy A. Delange
Takeo Kellar
Matthew Jubenville
12481 High Bluff Drive, Suite 300
San Diego, CA 92130
179
Tel: (858) 793-0070
Fax: (858) 793-0323
davids@blbglaw.com
timothyd@blbglaw.com
takeok@blbglaw.com
matthewj@blbglaw.com
180
Appendix A
Morgan Stanley Certificates Purchased
Morgan Stanley
Certificates Offering Documents Depositor Defendant Originator(s) Acquisition Total Amount
Purchased Date(s) Paid
ACCR 2005-3 Prospectus, dated Accredited Mortgage Accredited 08/25/05 $5,820,000
6/14/2005 Loan REIT Trust
Prospectus Supplement,
dated 8/22/2005
AMIT 2005-4 Prospectus, dated Morgan Stanley ABS Aames 09/12/05 $20,044,642
5/10/2005 Capital I Inc.
dated 9/7/2005
IXIS 2005-HE2 Prospectus, dated Morgan Stanley ABS Accredited (7%) 05/26/05 $9,234,072
1/19/2005 Capital I Inc. Aegis
Prospectus Supplement, BNC
dated 5/23/2005 Encore (5%)
First Banc (10%)
First Horizon
Fremont
Home Loan
Impac (5%)
Lime
Master Financial
New Century (8%)
Other
Peoples Choice
ResMae (10%)
Unknown
Page 1
Morgan Stanley
IXIS 2005-HE3 Prospectus, dated Morgan Stanley ABS Accredited 08/30/05 $6,241,281
5/10/2005 Capital I Inc. Encore
Prospectus Supplement, First Banc (7%)
dated 8/29/2005 First Horizon (5%)
First NLC (11%)
Impac
Lime (8%)
Master Financial
New Century (16%)
Other
ResMae
Unknown
IXIS 2005-HE4 Prospectus, dated Morgan Stanley ABS Accredited 11/23/05 $3,705,708
5/10/2005 Capital I Inc. Chapel
Prospectus Supplement, Encore
dated 11/18/2005 First Horizon
First NLC
Fremont
Impac
Lime
New Century
NULL
Other
ResMae
Unknown
Page 2
Morgan Stanley
IXIS 2006-HE3 Prospectus, dated Morgan Stanley ABS New Century (16%) 09/29/06 $4,137,654
8/18/2006 Capital I Inc. Accredited (12%)
Prospectus Supplement, Encore (9%)
dated 9/26/2006 Unknown (61%)
MSAC 2005-HE4 Prospectus, dated Morgan Stanley ABS Accredited 08/26/05 $4,500,000
5/10/2005 Capital I Inc. Decision One
Prospectus Supplement, WMC
dated 8/23/2005
MSAC 2005-NC2 Prospectus, dated Morgan Stanley ABS New Century (100%) 04/29/05 $19,758,000
dated 4/22/2005
MSAC 2005-WMC2 Prospectus, dated Morgan Stanley ABS WMC (100%) 03/30/05 $5,000,000
dated 3/24/2005
dated 5/4/2005
dated 6/24/2005
Page 3
Morgan Stanley
dated 8/8/2005
MSAC 2006-HE1 Prospectus, dated Morgan Stanley Capital I Decision One 02/28/06 $1,484,594
7/27/2005 Inc. WMC
dated 2/24/2006
MSAC 2006-HE3 Prospectus, dated Morgan Stanley ABS Decision One 05/25/06 $2,889,000
3/14/2006 Capital I Inc. New Century
Prospectus Supplement, WMC
dated 5/22/2006
MSAC 2007-HE3 Prospectus, dated Morgan Stanley ABS Fremont 02/28/07 $23,300,000
2/22/2007 Capital I Inc. New Century
dated 2/27/2007
MSHEL 2005-1 Prospectus, dated Morgan Stanley ABS First NLC 01/28/05 $9,118,000
11/12/2004 Capital I Inc. Meritage
Prospectus Supplement, MILA
dated 1/24/2005 Wilmington
Page 4
Morgan Stanley
MSHEL 2006-1 Prospectus, dated Morgan Stanley ABS Accredited 01/26/06 $4,000,000
5/10/2005 Capital I Inc. Countrywide
Prospectus Supplement, Decision One
First NLC
dated 1/24/2006
Meritage
Wilmington
NCHET 2005-3 Prospectus, dated New Century Mortgage New Century (100%) 06/24/05 $20,000,000
4/20/2005 Securities LLC
dated 6/21/2005
NCHET 2005-B Prospectus, dated New Century Mortgage New Century 09/29/05 $7,500,000
8/12/2005 Securities, Inc.
dated 9/27/2005
NCHET 2005-C Prospectus, dated New Century Mortgage New Century 01/13/06 $4,689,248
9/27/2005 Securities, Inc.
dated 11/23/2005
NCHET 2005-D Prospectus, dated New Century Mortgage New Century (100%) 03/02/06 $10,413,421
9/27/2005 Securities LLC 12/25/05
dated 12/22/2005
Page 5
Morgan Stanley
NTIX 2007-HE2 Prospectus, dated Morgan Stanley ABS Accredited 04/30/07 $9,500,000
2/22/2007 Capital I Inc. CIT
Prospectus Supplement, First Horizon
dated 4/25/2007 First NLC
Lenders Direct
Lime
Mandalay
Master Financial
New Century
Platinum Capital
Unknown
SAST 2006-3 Prospectus, dated Saxon Asset Securities Saxon (100%) 10/10/06 $7,450,000
4/26/2006 Company
dated 10/5/2006
Page 6
Appendix B
Citigroup Certificates Purchased
Citigroup
ARSI 2005-W2 Prospectus, dated Argent Securities Inc. Argent (100%) 09/27/05 $17,397,300
4/15/2005 09/27/05
dated 9/23/2005
ARSI 2006-W1 Prospectus, dated Argent Securities Inc. Argent 02/07/06 $2,434,260
4/15/2005
dated 1/27/2006
CARR 2005-NC3 Prospectus, dated Citigroup Mortgage Loan New Century (100%) 06/07/05 $19,940,000
5/3/2005 Trust Inc.
dated 6/3/2005
CARR 2005-NC5 Prospectus, dated Stanwich Asset New Century (100%) 10/04/05 $31,027,100
7/7/2005 Acceptance Company,
Prospectus Supplement, L.L.C.
dated 9/29/2005
dated 6/16/2006
dated 9/25/2006
Page 1
Citigroup
CMLTI 2005-9 Prospectus, dated Citigroup Mortgage Loan Ameriquest 01/13/06 $9,691,438
9/29/2005 Trust Inc.
dated 11/29/2005
CMLTI 2005-HE1 Prospectus, dated Citigroup Mortgage Loan WMC (69%) 05/10/05 $6,926,512
4/15/2005 Trust Inc. Argent (20%)
Prospectus Supplement, Mortgage IT (10%)
dated 9/23/2005 ResMae
CMLTI 2005-HE3 Prospectus, dated Citigroup Mortgage Loan Accredited 09/13/05 $9,968,729
5/3/2005 Trust Inc. First Horizon
Prospectus Supplement, Impac
dated 9/9/2005 MortgageIT
WMC
CMLTI 2006-HE1 Prospectus, dated Citigroup Mortgage Loan Centex 03/30/06 $1,739,320
9/29/2005 Trust Inc. First Horizon
Prospectus Supplement, MortgageIT
dated 3/28/2006 Option One
Other
CMLTI 2006-WFH3 Prospectus, dated Citigroup Mortgage Loan Wells Fargo 10/31/06 $30,000,000
6/29/2006 Trust Inc.
dated 10/4/2006
CMLTI 2007-AMC2 Prospectus, dated Park Place Securities, Inc. Ameriquest 03/30/07 $77,000,000
12/13/2006 Argent
dated 2/15/2007
CMLTI 2007-FS1 Private Placement Citigroup Mortgage Loan Fieldstone 12/12/07 $3,509,794
Memorandum Trust Inc.
Page 2
Appendix C
Credit Suisse Certificates Purchased
Credit Suisse
AABST 2005-4 Prospectus, dated Aegis Asset Backed Aegis 08/30/05 $14,416,310
6/10/2005 Securities Corporation
dated 8/18/2005
ABSHE 2005-HE1 Prospectus, dated Asset Backed Securities New Century 02/04/05 $4,513,000
11/22/2004 Corporation WMC
dated 2/1/2005
ABSHE 2005-HE3 Prospectus, dated Asset Backed Securities WMC 04/04/05 $4,484,000
3/1/2005 Corporation
dated 3/31/2005
ABSHE 2005-HE4 Prospectus, dated Asset Backed Securities New Century 05/05/05 $8,046,700
3/1/2005 Corporation 05/03/05
dated 5/3/2005
ABSHE 2005-HE5 Prospectus, dated Asset Backed Securities WMC 06/06/05 $6,871,000
dated 6/1/2005
ABSHE 2006-HE3 Prospectus, dated Asset Backed Securities Option One 04/17/06 $6,110,113
dated 4/5/2006
Page 1
Credit Suisse
ABSHE 2006-HE6 Prospectus, dated Asset Backed Securities Ameriquest 11/30/06 $9,946,000
11/29/2006 Corporation Argent
Prospectus Supplement, Unknown
dated 11/29/2006
ABSHE 2006-HE7 Prospectus, dated Asset Backed Securities Ameriquest 11/30/06 $23,414,000
11/29/2006 Corporation Argent
dated
11/29/2006
AMSI 2005-R6 Prospectus, dated Ameriquest Mortgage Ameriquest 07/29/05 $31,583,752
4/22/2005 Securities Inc.
dated 7/27/2005
dated 9/23/2005
dated 3/9/2006
FHLT 2005-A Prospectus, dated Fremont Mortgage Fremont 02/22/05 $8,000,000
dated 2/18/2005
Page 2
Credit Suisse
FMIC 2007-1 Prospectus, dated Fieldstone Mortgage AHM 04/12/07 $9,750,000
6/8/2006 Investment Corporation Centex
Prospectus Supplement, Fidelity
dated 4/11/2007 Fieldstone
First Horizon
Gateway
GMAC
Home Loan
National City
Novastar
HEAT 2005-1 Prospectus, dated Credit Suisse First Boston DLG Mortgage Capital 01/31/05 $17,354,611
1/25/2005 Mortgage Securities
Prospectus Supplement, Corp.
dated 1/26/2005
dated 3/29/2005
dated 4/26/2005
dated 7/1/2005
Page 3
Credit Suisse
dated 8/1/2005
dated 8/30/2005
dated 9/29/2005
dated 10/31/2005
HEAT 2005-9 Prospectus, dated Credit Suisse First Boston Unknown (100%) 05/18/06 $3,480,440
dated 12/02/2005
HEAT 2006-4 Prospectus, dated Credit Suisse First Boston Aames 05/05/06 $16,761,283
4/26/2006 Mortgage Securities Aegis 05/01/06
Prospectus Supplement, Corp. Finance America
dated 5/1/2006 Other
Wells Fargo
Page 4
Credit Suisse
HEAT 2006-7 Prospectus, dated Credit Suisse First Boston DLJ Mortgage Capital 10/03/06 $50,000,000
dated 9/29/2006
HEMT 2005-5 Prospectus, dated Credit Suisse First Boston Unknown (100%) 12/29/05 $5,860,000
dated 7/27/2005
HEMT 2006-2 Prospectus, dated Credit Suisse First Boston Unknown (100%) 04/28/06 $5,282,988
dated 4/26/2006
LBMLT 2005-WL2 Prospectus, dated Long Beach Securities Long Beach 08/30/05 $21,662,382
2/10/2004 Corp. 11/04/05
dated 8/25/2005
PPSI 2005-WHQ3 Prospectus, dated Park Place Securities, Inc. Argent 05/26/05 $8,719,436
1/21/2005
dated 5/24/2005
SAST 2005-2 Prospectus, dated Saxon Asset Securities Saxon 06/07/05 $19,990,000
10/21/2004 Company
dated 6/1/2005
Page 5
Appendix D
Greenwich Certificates Purchased
Greenwich Capital
AHMA 2007-3 Prospectus, dated American Home AHM 06/12/07 $15,014,175
4/21/2006 Mortgage Assets LLC
dated 8/29/2006
ARSI 2006-W5 Prospectus, dated Argent Securities Inc. Argent (100%) 05/25/06 $5,250,525
3/31/2006
dated 5/12/2006
EMLT 2005-1 Prospectus, dated Financial Asset Securities Equifirst 03/17/05 $10,082,098
2/22/2005 Corp.
dated 3/14/2005
FFML 2006-FF8 Prospectus, dated Financial Asset Securities First Franklin 06/29/06 $1,325,146
4/26/2006 Corp.
dated 6/6/2006
FHLT 2005-1 Prospectus, dated Financial Asset Securities Fremont 03/29/05 $4,000,000
2/22/2005 Corp.
dated 3/24/2005
HELT 2007-FRE1 Prospectus, dated Nationstar Funding LLC Fremont 07/10/07 $12,580,000
6/26/2007
dated 6/28/2007
Page 1
Greenwich Capital
LBMLT 2005-1 Prospectus, dated Long Beach Securities Long Beach 03/11/05 $17,500,000
2/10/2005 Corp. 01/06/05
dated 1/3/2005
LBMLT 2005-WL1 Prospectus, dated Long Beach Securities Long Beach (100%) 09/15/06 $24,094,375
2/10/2004 Corp. 07/15/05
dated 7/13/2005
MMLT 2005-2 Prospectus, dated Financial Asset Securities Meritage (100%) 06/22/05 $17,536,250
2/22/2005 Corp.
dated 6/17/2005
NAA 2007-S1 Private Placement Nomura Asset Unknown 02/14/07 $34,005,213

Memorandum Acceptance Corporation
NHEL 2005-1 Prospectus, dated NovaStar Mortgage Novastar (100%) 02/22/05 $11,500,000
12/27/2004 Funding Corporation
dated 2/16/2005
NHEL 2005-3 Prospectus, dated NovaStar Mortgage Novastar (100%) 09/22/05 $15,500,000
12/27/2004 Funding Corporation
dated 9/19/2005
Page 2
Greenwich Capital
SVHE 2005-1 Prospectus, dated Financial Asset Securities Accredited 02/28/05 $11,783,000
2/22/2005 Corp. Argent 11/01/06
Prospectus Supplement, CIT
dated 2/24/2005 ResMae
WMC
SVHE 2005-A Prospectus, dated Financial Asset Securities Countrywide (54%) 06/23/05 $34,573,672
2/22/2005 Corp. Aames (20%)
Prospectus Supplement, Fremont (18%)
dated 6/17/2005 Meritage (5%)
Other
SVHE 2005-B Prospectus, dated Financial Asset Securities Aames 10/25/05 $12,681,338
9/26/2005 Corp. Countrywide
Prospectus Supplement, Fremont
dated 10/21/2005 Long Beach
Meritage
New Century
WMC
SVHE 2005-DO1 Prospectus, dated Financial Asset Securities Decision One (100%) 05/13/05 $6,319,594
2/22/2005 Corp.
dated 5/12/2005
SVHE 2006-OPT2 Prospectus, dated Financial Asset Securities Option One 04/07/06 $872,813
9/26/2005 Corp.
dated 3/14/2006
Page 3
Greenwich Capital
SVHE 2006-OPT5 Prospectus, dated Financial Asset Securities Option One (100%) 06/19/06 $5,581,438
4/26/2006 Corp.
dated 5/24/2006
WAMU 2005-AR2 Prospectus, dated Washington Mutual WaMu 01/26/05 $20,172,000
dated 1/21/2005
Page 4
Appendix E
Deutsche Bank Certificates Purchased
Deutsche Bank
ACE 2005-HE2 Prospectus, dated Ace Securities Corp. Ameriquest 03/29/05 $3,743,000
9/23/2004 Argent
Prospectus Supplement, Chapel
dated 3/23/2005 First Street Financial
Fremont
Millenium
Other
OwnIT
Wells Fargo
ACE 2005-HE5 Prospectus, dated Ace Securities Corp. Fremont (86%) 08/26/05 $17,410,623
6/23/2005 Impac
Prospectus Supplement, Lenders Direct
Peoples Choice
WMC
ACE 2005-HE6 Prospectus, dated Ace Securities Corp. Chapel (7%) 09/28/05 $11,660,978
6/23/2005 CIT
Prospectus Supplement, First Street Financial
dated 9/272005 Fremont (61%)
Lenders Direct
Master Financial
MortgageIT
Novastar (9%)
Other
Page 1
Deutsche Bank
ACE 2005-HE7 Prospectus, dated Ace Securities Corp. Chapel 11/28/05 $8,015,217
6/23/2005 Countrywide
Prospectus Supplement, Lenders Direct
dated 11/23/2005 Mandalay
Master Financial
Option One
Other
ResMae
WMC
ACE 2006-FM2 Prospectus, dated Ace Securities Corp. Fremont 10/30/06 $12,000,000
4/18/2006
dated 10/26/2006
ACE 2006-HE1 Prospectus, dated Ace Securities Corp. Fieldstone 02/28/06 $7,623,560
6/23/2005 First Street Financial
dated 2/24/2006 GreenPointLenders
DirectMillenium
New Century
Other
OwnIT
WMC
ACE 2006-NC1 Prospectus, dated Ace Securities Corp. New Century 03/13/07 $6,951,339
6/23/2005 01/30/06
dated 2/24/2006
Page 2
Deutsche Bank
ACE 2006-NC2 Prospectus, dated Ace Securities Corp. New Century 09/15/06 $1,470,000
4/18/2006
dated 9/14/2006
ACE 2006-OP1 Prospectus, dated Ace Securities Corp. Option One (100%) 05/25/06 $2,552,242
4/18/2006
dated 5/17/2006
ACE 2006-SL1 Prospectus, dated Ace Securities Corp. Ameriquest Mortgage 01/27/06 $6,224,000
6/23/2005 Company
Prospectus Supplement, Fremont Investment &
dated 1/26/2006 Loan
New Century
Other
ACE 2006-SL2 Prospectus, dated Ace Securities Corp. Ameriquest 03/28/06 $10,891,208
6/23/2005 Fremont (30%) 05/12/06
Prospectus Supplement, Lime
dated 3/24/2006 Long Beach (60%)
Millenium
MortgageIT
New Century
Other
Unknown
Page 3
Deutsche Bank
ACE 2007-HE2 Free Writing Prospectus Ace Securities Corp. CIT 03/08/07 $24,861,965
dated 2/26/2007 First NLC
First Street Financial
Impac
Lenders Direct
Lime
MortgageIT
Option One
Other
Peoples Choice
WMC
ALBT 2007-S1 Private Placement Alliance Securities Corp. Alliance Bancorp 04/13/07 $14,199,454
Memorandum
NCHET 2005-4 Prospectus, dated New Century Mortgage New Century Mortgage 08/17/05 $9,500,000
8/12/2005 Securities LLC Corporation
dated 8/12/2005
Page 4
Appendix F
Merrill Lynch Certificates Purchased
Merrill Lynch
FFMER 2007-H1 Prospectus, dated Merrill Lynch Mortgage First Franklin (100%) 10/17/07 $9,818,715
5/15/2007 Investors, Inc.
dated 10/9/2007
MLMI 2005-AR1 Prospectus, dated Merrill Lynch Mortgage Argent 09/29/05 $6,699,596
dated 9/27/2005
MLMI 2005-NCB Prospectus, dated Merrill Lynch Mortgage New Century 11/29/05 $7,272,506
dated 11/22/2005
Page 1
Merrill Lynch
MLMI 2005-SL2 Prospectus, dated Merrill Lynch Mortgage Accredited 06/28/05 $8,970,030
1/19/2005 Investors, Inc. Acoustic
Prospectus Supplement, CDC
dated 6/24/2005 Decision One (14%)
Fieldstone (10%)
First Franklin
First NLC
Fremont (14%)
Lime (6%)
MILA (13%)
Oakmont
Option One (16%)
Other
Unknown
8/26/2005 Investors, Inc. Acoustic 12/30/05
Prospectus Supplement, Option One
Other
dated 11/8/2005
MLMI 2005-WMC1 Prospectus, dated Merrill Lynch Mortgage WMC 01/27/05 $14,970,065
1/19/2005 Investors, Inc. 04/11/06
dated 1/25/2005
Page 2
Merrill Lynch
MLMI 2006-HE4 Prospectus, dated Merrill Lynch Mortgage First Horizon 07/25/06 $4,000,000
3/21/2006 Investors, Inc. First NLC (44%)
dated 7/21/2006 (5%)
Fremont
Impac
Lenders Direct (17%)
Novastar (32%)
MLMI 2006-HE5 Prospectus, dated Merrill Lynch Mortgage Accredited (13%) 09/28/06 $17,000,000
3/31/2006 Investors, Inc. Aegis (45%)
Prospectus Supplement, Alliance
dated 9/26/2006 Encore
Equifirst
Fieldstone (7%)
First Street Financial
Indy Mac (12%)
Meritage
Millenium
Other
Unknown
Page 3
Merrill Lynch
1/18/2006 Investors, Inc. Acoustic
Prospectus Supplement, Citigroup
dated 1/24/2006 GreenPoint
Home Loan
Lime
Option One
Other
Unknown
PPSI 2005-WHQ1 Prospectus, dated Park Place Securities, Inc. Argent 02/24/05 $12,000,000
1/21/2005 Unknown
dated 2/22/2005
RALI 2006-QS17 Prospectus, dated Residential Accredit GMAC 01/10/07 $10,023,625
12/6/2006 Loans, Inc.
dated 12/22/2006
SURF 2005-BC1 Prospectus, dated Merrill Lynch Mortgage Unknown 03/07/05 $6,512,000
dated 3/3/2005
Page 4
Appendix G
UBS Certificates Purchased
UBS
dated 8/23/2005
4/15/2005
dated 3/15/2006
FFML 2005-FF7 Prospectus, dated Mortgage Asset First Franklin 08/26/05 $3,000,000
6/2/2005 Securitization
Prospectus Supplement, Transactions, Inc.
dated 8/22/2005
MABS 2005-FRE1 Prospectus, dated Mortgage Asset Fremont 11/29/05 $4,435,498
dated 11/23/2005
MABS 2005-NC1 Prospectus, dated Mortgage Asset New Century 01/20/05 $5,000,000
dated 1/13/2005
MABS 2006-AM2 Private Placement Mortgage Asset Aames 07/28/06 $3,588,417
Memorandum Securitization
Transactions, Inc.
Page 1
UBS
MABS 2006-FRE2 Prospectus, dated Mortgage Asset Fremont 05/30/06 $2,053,596
dated 5/4/2006
MABS 2006-HE1 Prospectus, dated Mortgage Asset First Street Financial 03/02/06 $4,954,096
6/2/2005 Securitization Fremont
Prospectus Supplement, Transactions, Inc. Impac
dated 2/22/2006 National City
Unknown
MABS 2006-NC2 Prospectus, dated Mortgage Asset New Century 09/28/06 $1,450,000
dated 8/21/2006
MABS 2006-WMC4 Prospectus, dated Mortgage Asset WMC 11/30/06 $19,000,000

dated 11/3/2006
Page 2
Appendix H
Goldman Sachs Certificates Purchased
Goldman Sachs
CBASS 2006-SL1 Private Placement Credit-Based Asset Unknown 09/08/06 $8,997,000
Memorandum dated Servicing and
9/7/2006 Securitization LLC
GSAMP 2005-HE6 Prospectus, dated GS Mortgage Securities Acoustic 12/29/05 $3,346,720

11/17/2005 Corp. First NLC
Meritage
dated 12/22/2005
Unknown
GSAMP 2006-HE6 Prospectus, dated GS Mortgage Securities Ameriquest 09/14/06 $2,250,000

8/3/2006 Corp. Other
Prospectus Supplement, OwnIT
dated 9/13/2006 Unknown
GSAMP 2006-S1 Prospectus, dated GS Mortgage Securities Alliance 01/27/06 $6,800,000
11/17/2005 Corp. Goldman
Prospectus Supplement, Long Beach
dated 1/23/2006 M&T
NULL
Option One
Other
RFC
Southstar
Unknown
Page 1
Goldman Sachs
LBMLT 2005-2 Prospectus, dated Long Beach Securities Long Beach (100%) 04/05/05 $23,000,000
2/10/2004 Corp.
dated
3/31/2005
LBMLT 2006-7 Prospectus, dated Long Beach Securities Long Beach (100%) 08/30/06 $2,399,025
7/21/2006 Corp.
dated 8/24/2006
LBMLT 2006-WL1 Prospectus, dated Long Beach Securities Long Beach 02/08/06 $4,000,000
2/10/2004 Corp.
dated 1/25/2006
Page 2
Appendix I
J.P. Morgan Certificates Purchased
J.P.
MorganCertificates Offering Documents Depositor Defendant Originator(s) Acquisition Total Amount
JPMAC 2005-FLD1 Prospectus, dated J.P. Morgan Acceptance Fieldstone 08/03/05 $8,258,508
7/27/2005 Corporation I
dated 7/29/2005
JPMAC 2005-OPT1 Prospectus, dated J.P. Morgan Acceptance Option One 07/26/05 $3,566,333
dated 7/21/2005
JPMAC 2005-OPT2 Prospectus, dated J.P. Morgan Acceptance Option One 12/21/05 $4,639,353
dated 12/15/2005
JPMAC 2005- Prospectus, dated J.P. Morgan Acceptance WMC 10/27/05 $9,000,000
WMC1 8/25/2005 Corporation I
dated 10/24/2005
JPMAC 2006-CH1 Prospectus, dated J.P. Morgan Acceptance Chase 11/14/06 $6,546,000
dated 10/26/2006
JPMAC 2006-CW2 Prospectus, dated J.P. Morgan Acceptance Countrywide 08/08/06 $5,000,000
dated 8/2/2006
Page 1
J.P.
MorganCertificates Offering Documents Depositor Defendant Originator(s) Acquisition Total Amount
JPMAC 2006- Prospectus, dated J.P. Morgan Acceptance WMC 03/30/06 $1,302,225
WMC1 8/25/2005 Corporation I
dated 3/16/2006
RASC 2006-KS6 Prospectus, dated Residential Asset Unknown 07/28/06 $3,490,365

dated 7/26/2006
Page 2
Appendix J
Bear Stearns Certificates Purchased
Bear Stearns
AABST 2005-5 Private Placement Aegis Asset Backed Aegis 10/28/05 $3,380,671
Memorandum, dated Securities Corporation
10/27/2005
AMIT 2005-1 Prospectus, dated Bear Stearns Asset Aames 02/24/05 $8,986,369
4/26/2004 Backed Securities I LLC
dated 2/17/2005
BSABS 2005-AQ2 Prospectus, dated Bear Stearns Asset Ameriquest 12/08/05 $4,489,745
dated 11/17/2005
BSABS 2005-HE10 Prospectus, dated Bear Stearns Asset Acoustic (9%) 10/31/05 $18,546,031
6/24/2005 Backed Securities I LLC Century 12/21/05
Prospectus Supplement, First Horizon 02/09/06
dated 10/27/2005 Fremont
Maribella Mortgage
MortgageIT (8%)
Oak Street Mortgage
Opteum
Other
Peoples Choice (10%)
ResMae (41%)
Page 1
Bear Stearns
BSABS 2005-HE4 Prospectus, dated Bear Stearns Asset Acoustic (12%) 04/29/05 $10,735,486
4/26/2004 Backed Securities I LLC Fieldstone (10%) 05/09/05
Prospectus Supplement, First Horizon
dated 4/26/2005 HomEq
Homestar
MLN (5%)
MortgageIT
Other
Peoples Choice
Platinum Capital
Sebring Capital (11%)
BSABS 2005-HE8 Prospectus, dated Bear Stearns Asset Aames (8%) 08/31/05 $4,773,115
6/24/2005 Backed Securities I LLC Acoustic
Prospectus Supplement, AHM
dated 8/29/2005 Alliance
Cendant
Century
CIT (13%)
First Horizon
Maribella Mortgage
Millenium
MortgageIT
Oak Street Mortgage
Other
Platinum Capital
ResMae (21%)
Page 2
Bear Stearns
BSABS 2005-HE9 Prospectus, dated Bear Stearns Asset Aames 09/30/05 $25,820,000
dated 9/28/2005 Century
CIT
Encore
First Horizon
Maribella Mortgage
MortgageIT (13%)
Oak Street Mortgage
Opteum
Other
Platinum Capital
ResMae (43%)
BSABS 2006-EC1 Prospectus, dated Bear Stearns Asset Encore 01/30/06 $4,200,000
dated 1/26/2006
BSABS 2006-EC2 Prospectus, dated Bear Stearns Asset Encore 04/27/06 $4,883,746
dated 2/21/2006
Page 3
Bear Stearns
BSABS 2006-HE1 Prospectus, dated Bear Stearns Asset Encore 01/30/06 $2,769,000
06/24/2005 Backed Securities I LLC First Horizon
Prospectus Supplement, Maribella Mortgage
dated 1/26/2006 MILA
MLN
MortgageIT
Oak Street Mortgage
Other
Peoples Choice
Platinum Capital
ResMae
Unknown
Wilmington
BSABS 2006-HE10 Prospectus, dated Bear Stearns Asset Unknown 12/29/06 $50,000,000
12/18/2006 Backed Securities I LLC Other
Prospectus Supplement, Oak Street Mortgage
dated 12/28/2006 Millenium
Encore
Century
Bear Stearns
Page 4
Bear Stearns
BSABS 2006-HE3 Prospectus, dated Bear Stearns Asset Acoustic 03/30/06 $2,721,125
6/24/2005 Backed Securities I LLC Alliance
Prospectus Supplement, Ameriquest
dated 3/27/2006 Century
CIT
Encore
First American
Maribella Mortgage
MILA
MortgageIT
Oak Street Mortgage
Opteum
Other
Platinum Capital
Unknown
Page 5
Bear Stearns
BSABS 2006-HE4 Prospectus, dated Bear Stearns Asset Aames 04/28/06 $8,282,688
dated 4/25/2006 Cendant
Century
Encore
Fremont
Maribella Mortgage
MortgageIT
Oak Street Mortgage
Opteum
Other
Peoples Choice
ResMae
Unknown
Page 6
Bear Stearns
BSABS 2006-HE7 Prospectus, dated Bear Stearns Asset Alliance 08/30/06 $3,165,477
6/7/2006 Backed Securities I LLC Century
Prospectus Supplement, CIT
dated 8/28/2006 First NLC (28%)
Gateway
HomeBanc
Kensington
Millenium
Oak Street Mortgage
(5%)
Opteum
Other
Peoples Choice (18%)
Platinum Capital
Provident
Southstar
Sterling
Unknown (6%)
Wachovia
BSABS 2006-PC1 Prospectus, dated Bear Stearns Asset Peoples Choice 01/30/06 $1,650,000
dated 1/25/2006
BSABS 2007-FS1 Prospectus, dated Bear Stearns Asset Fieldstone 02/28/07 $75,000,000
dated 2/27/2007
Page 7
Bear Stearns
BSMF 2007-SL2 Prospectus, dated Bear Stearns Asset AHM 02/28/07 $55,000,000
12/18/2006 Backed Securities I LLC Aurora
Prospectus Supplement, Bear Stearns
dated 2/27/2007 Centex
Encore
Fidelity
Fieldstone
First American
First NLC
Frontier
Gateway
HomeBanc
Millenium
National City
Opteum
Other
PHH
Pinnacle
Platinum Capital
Provident
Sterling
Unknown
Wilshire
BSSLT 2007-SV1A Private Placement SACO I Inc. Unknown 03/30/07 $14,000,000
Memorandum
CARR 2005-NC4 Prospectus, dated Stanwich Asset New Century 08/16/05 $8,379,119
dated 8/11/2005
Page 8
Bear Stearns
CARR 2006-RFC1 Prospectus, dated Stanwich Asset GMAC (100%) 05/24/06 $2,078,775
dated 5/19/2006
GPMF 2007-HE1 Prospectus, dated Bear Stearns Asset GreenPoint 03/06/07 $50,000,000
dated 3/5/2007
IRWHE 2005-A Prospectus, dated Bear Stearns Asset Irwin 01/28/05 $37,062,000
4/26/2004 Backed Securities I LLC 12/13/07
dated 1/25/2005
PCHLT 2005-2 Prospectus, dated People’s Choice Home Peoples Choice (100%) 04/28/05 $8,421,000
4/26/2005 Loan Securities Corp.
dated 4/26/2005
PCHLT 2005-4 Prospectus, dated People’s Choice Home Peoples Choice (100%) 10/26/05 $3,365,049
6/10/2005 Loan Securities Corp.
dated 10/24/2005
SACO 2004-3A Private Placement Unknown Unknown 01/31/05 $3,049,464
Memorandum dated
12/30/2004
SACO 2005-1 Private Placement SACO I Inc. First Horizon 02/28/05 $13,867,028
Memorandum Opteum
Other
OwnIT
Waterfield
Page 9
Bear Stearns
SACO 2005-2 Private Placement SACO I Inc. American Home 04/29/05 $4,333,934
Memorandum First Horizon
Other
Southstar
Waterfield
SACO 2005-3 Private Placement SACO I Inc. American Home 05/31/05 $16,552,828
Memorandum Indy Mac
MILA
Opteum
Other
ResMae
SACO 2005-4 Private Placement SACO I Inc. Aames 06/30/05 $18,713,424

Memorandum American Home 07/05/05
Other
Union Federal
SACO 2005-5 Prospectus, dated Bear Stearns Asset Southstar (15%) 07/29/05 $19,500,349
6/24/2005 Backed Securities I LLC Finance America (13%)
Prospectus Supplement, Other (71%)
dated 7/28/2005
SACO 2005-7 Prospectus, dated Bear Stearns Asset American Home 09/30/05 $5,002,000
6/24/2005 Backed Securities I LLC Finance America
Prospectus Supplement, Opteum
Page 10
Bear Stearns
SACO 2005-8 Prospectus, dated Bear Stearns Asset Opteum (14%) 10/28/05 $5,337,000
6/24/2005 Backed Securities I LLC Other (85%)
dated 10/27/2005
SACO 2005-WM3 Prospectus, dated Bear Stearns Asset WaMu 06/29/07 $5,388,387
6/24/2005 Backed Securities I LLC 12/30/05
dated 10/26/2005
SACO 2007-2 Prospectus, dated Bear Stearns Asset Southstar 02/28/07 $27,000,000
12/15/2006 Backed Securities I LLC Other
dated 2/27/2007
SAMI 2005-AR6 Prospectus, dated Structured Asset Century 09/08/05 $9,944,306
12/20/2004 Mortgage Investments II Countrywide
Prospectus Supplement, Inc. First Horizon
dated 7/27/2005 GreenPoint
Millenium
Other
Platinum Capital
Southstar
Winstar
Page 11
Appendix K
Countrywide Securities Corporation Certificates Purchased
Countrywide
CWALT 2005-82 Prospectus, dated CWALT, Inc. Countrywide Home 12/29/05 $3,891,000
10/25/2005 Loans
dated 12/23/2005
CWALT 2005-J6 Prospectus, dated CWALT, Inc. Countrywide Home 05/31/05 $14,954,131
4/21/2005 Loans, Inc.
Prospectus Supplement, Flagstar Bank
dated 05/27/2005 Greenpoint Mortgage
Funding
CWL 2005-11 Prospectus, dated CWABS, Inc. Unknown (100%) 09/30/05 $9,961,913
6/10/2005
dated 9/23/2005
CWL 2006-17 Prospectus, dated CWABS, Inc. Countrywide 09/25/06 $40,000,000

8/28/2006
dated 9/22/2006
CWL 2006-18 Prospectus, dated CWABS, Inc. Countrywide 09/28/06 $25,000,000
8/28/2006
dated 9/27/2006
Page 1
Appendix L
FBR Certificates Purchased
Friedman Billings
FBRSI 2005-5 Prospectus, dated FBR Securitization, Inc., Aames 12/15/05 $9,659,265
9/7/2005
dated 12/9/2005
POPLR 2005-5 Prospectus, dated Popular ABS, Inc. Accredited 10/21/05 $12,490,598
10/17/2005 Encore
dated 10/17/2005 Franklin Mortgage
MILA
Other
Unknown
Wilmington
Page 1
Appendix M
HSBC Certificates Purchased
HSBC
FFML 2006-FF5 Prospectus, dated HSI Asset Securitization First Franklin (100%) 05/22/06 $47,000,000
dated 5/2/2006
HASC 2005-NC2 Prospectus, dated HSI Asset Securitization New Century (100%) 10/11/05 $16,461,005
dated 10/6/2005
HASC 2006-OPT3 Prospectus, dated HSI Asset Securitization Option One 04/05/06 $852,288
dated 4/3/2006
Page 1
Appendix N
Banc of America Certificates Purchased
Banc of America
ABFC 2005-HE1 Prospectus, dated Asset Backed Funding Accredited 08/04/05 $11,848,520
3/28/2005 Corporation Option One
dated 3/28/2005
ABFC 2006-OPT2 Prospectus, dated Asset Backed Funding Option One 10/23/06 $27,734,562
dated 10/10/2006
BOAA 2006-6 Prospectus, dated Banc of America Bank of America 06/30/06 $12,263,956
6/27/2006 Mortgage Securities, Inc.
dated 6/28/2006
RAMP 2006-RZ3 Prospectus, dated Residential Asset GMAC 08/04/06 $1,853,491
7/17/2006 Mortgage Products, Inc.
dated 8/2/2006
Page 1
Appendix O
GMAC Certificates Purchased
GMAC
RAMP 2005-EFC4 Prospectus, dated Residential Asset Equifirst 09/29/05 $10,193,160
7/26/2005 Mortgage Products, Inc.
dated 9/22/2005
RASC 2006-KS2 Prospectus, dated Residential Asset GMAC 02/27/06 $5,471,124
dated 2/22/2006
Page 1
Appendix P
Barclays Certificates Purchased
Barclays
Offering Documents Depositor Defendant Originator(s) Acquisition Total Amount
Certificates Date(s) Paid
Purchased
4/15/2006
dated 10/26/2005
BCAP 2006-AA2 Prospectus, dated BCAP LLC Indy Mac 11/30/06 $40,000,000
11/28/2006 Countrywide
dated 11/29/2006
CARR 2006-FRE1 Prospectus, dated Stanwich Asset Fremont 06/28/06 $2,347,000
dated 6/20/2006
CARR 2006-FRE2 Prospectus, dated Stanwich Asset Fremont 10/18/06 $20,000,000
dated 10/10/2006
EQLS 2007-1 Prospectus, dated BCAP LLC Equifirst 06/27/07 $3,609,371
3/14/2007
dated 6/26/2007
RASC 2006-KS9 Prospectus, dated Residential Asset GMAC 10/27/06 $8,000,000
dated 10/19/2006
Page 1
Barclays
Offering Documents Depositor Defendant Originator(s) Acquisition Total Amount
Certificates Date(s) Paid
Purchased
SABR 2005-FR4 Prospectus, dated Securitized Asset Backed Fremont 09/29/05 $10,761,740
5/20/2005 Receivables LLC
dated 9/22/2005
dated 11/1/2005
dated 2/21/2006
SABR 2006-WM2 Prospectus, dated Securitized Asset Backed WMC 10/26/06 $40,000,000
dated 10/19/2006
SAST 2007-2 Prospectus, Saxon Asset Securities Saxon 05/17/07 $3,062,303
dated4/26/2006 Company
dated 4/25/2007
Source: 4closureFraud.org
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COMMONWEALTH OF MASSACHUSETTS

SUFFOLK, SS SUPERIOR COURT

CAMBRIDGE PLACE INVESTMENT

II. JURISDICTION AND VENUE ..........................................................................................3

III. THE PARTIES.....................................................................................................................3

b. The Wall Street Bank Defendants............................................................................4

c. The Depositor Defendants .....................................................................................11

IV. FACTUAL BACKGROUND ............................................................................................16

b. Securitization of Mortgage Loans: The Traditional Model ...................................17

c. The Systemic Violation of Underwriting and Appraisal Standards in the

d. The Wall Street Banks Conduct Less Due Diligence ............................................25

e. Plaintiff’s Acquisition of the Securities .................................................................28

V. THE OFFERING DOCUMENTS CONTAINED UNTRUE STATEMENTS OF

1. Defendants Made Untrue Statements of Material Facts About New

b. Long Beach Mortgage Company ...........................................................................39

1. Defendants Made Untrue Statements of Material Facts About Long

1. Defendants Made Untrue Statements of Material Facts About

d. Fremont Investment & Loan ..................................................................................60

1. Defendants Made Untrue Statements of Material Facts About

2. Fremont Violated Its Stated Underwriting Standards ............................... 62

e. WMC Mortgage Corporation.................................................................................69

1. Defendants Made Untrue Statements of Material Facts About

2. WMC Violated Its Stated Underwriting Standards .................................. 72

f. The Ameriquest Loan Sellers.................................................................................74

1. Defendants Made Untrue Statements of Material Facts About the

2. The Ameriquest Loan Sellers Violated Their Stated Underwriting

g. Option One .............................................................................................................80

1. Defendants Made Untrue Statements of Material Facts About

2. Option One Violated Its Stated Underwriting Standards.......................... 82

h. Additional Mortgage Originators ...........................................................................85

VI. DEFENDANTS MADE MATERIAL UNTRUE STATEMENTS AND

b. Bear Stearns’ Untrue Statements of Material Facts and Omissions ......................95

c. Citigroup’s Untrue Statements of Material Facts and Omissions ........................102

d. Credit Suisse’s Untrue Statements of Material Facts and Omissions ..................107

e. Greenwich Capital’s Untrue Statements of Material Facts and Omissions .........113

f. Deutsche Bank’s Untrue Statements of Material Facts and Omissions ...............117

g. Merrill Lynch’s Untrue Statements of Material Facts and Omissions ................121

i. Goldman Sachs’ Untrue Statements of Material Facts and Omissions ...............131

j. J.P. Morgan’s Untrue Statements of Material Facts and Omissions....................135

k. Countrywide’s Untrue Statements of Material Facts and Omissions ..................139

l. FBR’s Untrue Statements of Material Facts and Omissions ...............................144

m. HSBC’s Untrue Statements of Material Facts and Omissions ............................147

1. HASC 2005-NC2 .................................................................................... 148

2. FFML 2006-FF5 ..................................................................................... 150

n. Banc of America’s Untrue Statements of Material Facts and Omissions ............153

o. GMAC’s Untrue Statements of Material Facts and Omissions ...........................157

p. Barclays’ Untrue Statements of Material Facts and Omissions...........................159

q. The Depositor Defendants’ Untrue Statements of Material Facts and

VII. THE PERFORMANCE AND VALUE OF THE SECURITIES ....................................165

IX. COUNT II AGAINST THE DEPOSITOR DEFENDANTS: VIOLATION OF

X. COUNT III AGAINST THE WALL STREET BANK DEFENDANTS:

XI. RELIEF REQUESTED ....................................................................................................178

XII. JURY DEMAND .............................................................................................................178

billion of residential mortgage-backed securities (the “Securities” or “RMBS”) to the investor

of material fact. As a result of Defendants’ untrue statements to Plaintiff in Massachusetts,

(5) various forms of credit enhancement applicable to certain tranches of Securities.

3. The Wall Street Bank Defendants were complicit in creating an environment of

erosion in lending standards.