Welcome to Scribd, the world's digital library. Read, publish, and share books and documents. See more
Download
Standard view
Full view
of .
Save to My Library
Look up keyword or section
Like this
5Activity
0 of .
Results for:
No results containing your search query
P. 1
Allstate v. Countrywide Complaint

Allstate v. Countrywide Complaint

Ratings: (0)|Views: 884 |Likes:
Published by Isaac Gradman
Allstate lawsuit against Countrywide and Bank of America for fraud, negligent misrepresentation and Securities Act violations stemming from Countrywide's abandonment of underwriting guidelines and standards, and misrepresentation regarding same, related to mortgage backed securities bought by the insurer. Read analysis regarding this complaint and its importance at http://subprimeshakeout.blogspot.com/2010/12/mbia-sampling-order-signals-shorter.html.
Allstate lawsuit against Countrywide and Bank of America for fraud, negligent misrepresentation and Securities Act violations stemming from Countrywide's abandonment of underwriting guidelines and standards, and misrepresentation regarding same, related to mortgage backed securities bought by the insurer. Read analysis regarding this complaint and its importance at http://subprimeshakeout.blogspot.com/2010/12/mbia-sampling-order-signals-shorter.html.

More info:

Published by: Isaac Gradman on Dec 29, 2010
Copyright:Attribution Non-commercial

Availability:

Read on Scribd mobile: iPhone, iPad and Android.
download as PDF, TXT or read online from Scribd
See more
See less

02/01/2013

pdf

text

original

 
Case 1:10-cv-09591-AKH Document 1-3 Filed 12/27/10 Page 1 of 145
 
 iNATURE OF ACTION ...................................................................................................................1
JURISDICTION AND VENUE ....................................................................................................12
SUBSTANTIVE ALLEGATIONS ...............................................................................................13
I.
ALLSTATE’S INVESTMENTS IN COUNTRYWIDE CERTIFICATES ......................13
II.
COUNTRYWIDE’S MANDATE TO MATCH ANY PRODUCT ON THEMARKET REQUIRED IT TO SYSTEMATICALLY IGNORE ITS STATEDUNDERWRITING PROCEDURES .................................................................................16
A.
Countrywide Makes Origination Volume King .....................................................16
B.
Countrywide Cedes its Underwriting Policy to the Market’s LowestCommon Denominator By Way of a “Matching” Mandate ..................................18
C.
The “Matching” Policy Demanded the Systemic Abandonment of Countrywide’s Own Policies .................................................................................19
D.
Securitization Allowed Countrywide to Transfer the Risks Created by ItsUnderwriting Abandonment to Investors Like Allstate .........................................22
III.
COUNTRYWIDE’S MATERIAL MISREPRESENTATIONS .......................................25
A.
General Underwriting Guidelines ..........................................................................25
B.
Owner-Occupancy Statistics ..................................................................................26
C.
Loan-to-Value Ratios and Appraisals ....................................................................26
D.
Debt-to-Income ......................................................................................................28
E.
No Adverse Interest in Selection ...........................................................................28
F.
Ratings ...................................................................................................................29
G.
Share of Mortgage Loans Granted Pursuant to Full-DocumentationProcedures ..............................................................................................................30
H.
Servicing Quality ...................................................................................................30
I.
Case-by-Case Underwriting Exceptions ................................................................31
IV.
ALL OF THE REPRESENTATIONS WERE UNTRUE AND MISLEADINGBECAUSE COUNTRYWIDE SYSTEMATICALLY IGNORED ITS OWNUNDERWRITING GUIDELINES ....................................................................................31
Case 1:10-cv-09591-AKH Document 1-3 Filed 12/27/10 Page 2 of 145
 
 iiA.
A Statistical Analysis of Allstate’s Certificates Shows That theRepresentations Were False ...................................................................................35
(1)
The securities’ high default rates and souring credit ratings .....................35
(2)
There are numerous indications that borrowers did not actuallyoccupy the mortgaged properties as claimed .............................................38
(3)
Re-calculating the loan-to-value ratios ......................................................41
(4)
Statistical studies by others have similarly revealed that theproblems in Countrywide-originated loans were tied tounderwriting abandonment ........................................................................45
(5)
Other parties’ reviews of Countrywide’s full loan files haverevealed even greater deviations ................................................................46
B.
Countrywide’s Own Internal Documents Demonstrate It Abandoned Its“Theoretical” Underwriting Standards ..................................................................49
(2)
Countrywide’s internal post-mortem shows it systematicallyignored the risks created by its “matching” strategy .................................50
(3)
Mozilo’s emails show he “personally observed a serious lack of compliance” ...............................................................................................51
(4)
Internal quality reviews highlight that loans were being issuedoutside of Countrywide’s underwriting guidelines ....................................53
(5)
Exceptions were used as a way to deploy the “matching” strategy,despite Countrywide’s “theoretical” underwriting guidelines ...................57
(6)
Countrywide admits to “cherry picking” deals ..........................................60
(7)
In short, Countrywide “basically continued to operate as thoughthey never received” risk policies. .............................................................60
C.
The Sworn Testimony of Countrywide’s Own Former OfficersDemonstrate That It Abandoned Its “Theoretical” Underwriting Standards .........62
(1)
Chief Risk Officer John McMurray: “Matching policy” resulted in“routinely” using loan “exceptions” ..........................................................62
(2)
Vice President of Credit Risk Management Christian Ingerslev:“Focus groups” confirmed borrowers were misrepresenting income ........65
(3)
Managing Director Frank Aguilera: “Matching” strategy was “nota tolerable process” for subprime products ................................................66
Case 1:10-cv-09591-AKH Document 1-3 Filed 12/27/10 Page 3 of 145

Activity (5)

You've already reviewed this. Edit your review.
1 hundred reads
1 thousand reads
odarkone liked this
Ren liked this
Ren liked this

You're Reading a Free Preview

Download
/*********** DO NOT ALTER ANYTHING BELOW THIS LINE ! ************/ var s_code=s.t();if(s_code)document.write(s_code)//-->