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Exhibit 15 -- Whistleblower Affidavit (Redacted)

Exhibit 15 -- Whistleblower Affidavit (Redacted)

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Published by annawitkowski88

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Published by: annawitkowski88 on Sep 19, 2012
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09/19/2012

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AFFIDAVIT OF S
s, being duly sworn, deposes and says:
1.
My name ids. I have personal knowledge of the facts in
this affidavit and am competent to testify to them if called upon to do so.
2.
I live at 1.
3.
I have worked in the mortgage industry for approximately eight years.From 2000 to 2005, I worked at CitiMortgage as a loan processor and, beginning in 2003, as a
loan originator. As a loan processor, my responsibilities included, among other things, preparingloan files for residential mortgage loans and conducting an initial review of the verificationdocuments provided by borrowers. As a loan originator, my responsibilities included acting as
the first point of contact for borrowers, assisting borrowers to complete the loan application, andselecting the appropriate mortgage program.
4.
From 2005 to 2006, I worked on a contract basis as a due diligence
underwriter Clayton Holdings, Inc. ("Clayton"). From 2006 to 2008, I worked on a contractbasis as a due diligence underwriter Mortgage Data Management Corporation and Watterson
Prime LLC ("Watterson"). As a due diligence underwriter, I reviewed loans that had alreadyclosed to determine whether the loans complied with the pertinent unde~criting guidelines and
applicable laws.
5.
At Clayton and Watterson, my responsibilities included conducting duediligence underwriting on pools of residential mortgage loans. Typically, these pools were beingpurchased by large financial institutions such as Bear, Steams & Co., Inc. and its affiliate EMCMortgage Corporation (collectively, "Bear Stearns"). These financial institutions then often"securitized" the loans by selling them to a trust that issued mortgage-backed securities that were
CONFIDENTIAL
ABK-EMC03479887
 
purchased by investors. Clayton and Watterson’s clients generally included the financial
institutions that were purchasing the pools of loans.
6.
When I started at Clayton, I participated in a one week training program in
Shelton, Connecticut. During the training program, I was taught how to use Clayton’s
proprietary computer system, known as "CLAS," which was used to conduct due diligenceunderwriting. When I started at Clayton I had no experience underwriting mortgage loans, and Ireceived no instructions about how to underwrite loans during the training program. Many of mycolleagues at Clayton also lacked underwriting experience and a number of them had held noprevious positions in the mortgage industry. I noticed that many senior Clayton employees, suchas Deb Medina, hired many of their family members to work as due diligence underwriters, evenwhen they had no experience in the mortgage industry.
7.
When I started at Watterson, I leamed how to use Watterson’s proprietary
computer system, known as "StratQ," which was used to conduct due diligence underwriting. !
received no instruction about how to underwrite loans. Many of my colleagues at Watterson also
lacked underwriting experience.
8.
At both Clayton and Watterson, at the beginning of a due diligenceproject, the "lead" (the supervisor who was in charge of the job) assembled the team andexplained the "job notes" or parameters of the due diligence review. This explanation included,among other things, a description of the type and level of review requested by the client and theunderwriting guidelines applicable to the loans. After the initial meeting, each due diligenceunderwriter began reviewing loan files to assess whether the loan was originated in compliancewith the underwriting guidelines and applicable anti-predatory lending laws.
2
CONFIDENTIAL
ABK-EMC03479888
 
9.
In order to perform a due diligence review, I began by entering data from
the loan file into CLAS or StratQ. Both CLAS and StratQ permitted the due diligence
underwriter to input and access information regarding each loan. For each loan, I entered,among other information, the borrower’s assets, liabilities, and income as reflected on the
various verification documents found in the loan file. CLAS and StratQ then calculated variousmetrics that were used to evaluate the borrowers’ creditworthiness, including DTI, LTV, andCLTV. In reviewing each loan, I assessed whether the loan met the underwriting guidelines.
¯ For example, underwriting guidelines typically specify a maximum DTI ratio and required that,for stated income loans, the borrower’s stated income listed on the loan application must be
reasonable. After reviewing the loan, due diligence underwriters graded it on a numerical scale.in CLAS or StratQ. Clayton and Watterson both used a three point scale. Loans that satisfied
the underwriting guidelines were supposed to be graded as 1 s. Loans with incurable defectswere supposed to be graded as 3s. Loans with small defects that were overcome by sufficientcompensating factors were supposed to be graded as 2s.
10. At Clayton and Watterson, underwriters - including me - were under a lot
of pressure from management to review loans quickly. Clayton supervisors asked us to review atleast one loan per hour, and often expected us to review loans at an even faster pace. I felt thatthis was not enough time to adequately review the loans. Performance at Clayton was based on
the numbers; the due diligence underwriters who reviewed the most loans received the best
reviews. Underwriters who worked quickly but made many errors during their review wereretained or promoted. Underwriters who worked at a slower pace and conducted quality
underwriting were typically not staffed on future projects, and were sometimes sent home in the
middle of a job. I remember one incident where, after sending a woman home because she did
CONFIDENTIAL
ABK-EMC03479889

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