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DOUBLE SALE &

NOTE PLEDGE FRAUD


IN SECURITIZATION &
FORECLOSURE

1/17/17 In Search of the Holy Trail!

COPYRIGHT 2017 NYE LAVALLE ALL RIGHTS RESERVED foreclosurefraudexpert@gmail.com


Double Sale & Note Pledge Fraud in Securitization & Foreclosure

Table of Contents
BACKGROUND .................................................................................................................................................... 4
ASSOCIATION OF CERTIFIED FRAUD EXAMINERS .............................................................................................................................. 4
FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL ............................................................................................................ 4
FANNIE MAE ..................................................................................................................................................................................... 6
BEAR STEARNS .................................................................................................................................................................................. 6
OVERVIEW ........................................................................................................................................................... 7
HISTORY OF MY PRODUCE THE NOTE STRATEGY ............................................................................................ 10
GA & FL SUPREME COURT OPINIONS ON BORROWERS OBLIGATION TO DETERMINE PROPER NOTE
OWNER/HDC BEFORE PAYING NOTE/DEBT ...................................................................................................... 11
PRODUCTION OF THE ORIGINAL NOTE IS CRITICAL ........................................................................................ 12
BLACK LETTER OUTLINE ON LAND TRANSACTIONS AND FINANCE ................................................................................................. 12
APPLYING THE UCC TO MY PRODUCE THE NOTE STRATEGY .......................................................................... 15
BAKER & HOSTETLER REPORT FOR FANNIE MAE THAT BEARS MY NAME & THE NEED TO IDENTIFY THE
NOTE HOLDER & PRODUCE THE NOTE! ..................................................................................................... 17
SYNOPSIS OF RELEVANT BAKER & HOSTETLER FINDINGS ............................................................................................................. 18
FANNIE MAE & INDUSTRY PROMISSORY NOTE POLICIES .............................................................................................................. 20
HISTORICAL PERSPECTIVE & MY PRIOR REPORTS & WARNINGS..................................................................... 22
SECURITIZATION FRAUD, NOT SECURITIZATION FAIL .................................................................................... 23
MY WARNINGS ABOUT SECURITIZATION FRAUD IN 2000 .............................................................................. 24
2010 PROOF OF SECURITIZATION FRAUD & MULTI-PLEDGING OF NOTES .................................................... 26
COLONIAL BANK, TAYLOR, BEAN & WHITAKER, AND OCALA FUNDING FAILURE & DOUBLE/MULTI-PLEDGE
NOTE FRAUD ..................................................................................................................................................... 28
OVERVIEW OF COLONIAL & TB&W FAILURE ..................................................................................................................... 28
THE BUSINESS OF TAYLOR BEAN & WHITAKER .................................................................................................................. 30
TB&W ORIGINATION, UNDERWRITING AND FUNDING OF MORTGAGE LOANS......................................................................... 30
TB&W MORTGAGE LOAN FUNDING PROCESS ........................................................................................................................... 32
TB&W MORTGAGE LOAN SALES TO INVESTORS ........................................................................................................................ 33
TB&W MORTGAGE LOAN SERVICING OPERATIONS ................................................................................................................... 35
TB&W REAL ESTATE OWNED (REO) ........................................................................................................................................ 37
TB&W ELECTRONIC DATA & DATABASES............................................................................................................................ 38
SERVICING RECONCILIATION ................................................................................................................................................ 38
AFFECTED FUNDS RECONCILIATION............................................................................................................................................... 39
SUMMARY OF COLONIAL BANK FUNDS ON DEPOSIT ................................................................................................................... 41
SUMMARY OF REGIONS BANK FUNDS ON DEPOSIT ..................................................................................................................... 42
BOOK-TO-BANK RECONCILIATIONS ............................................................................................................................................. 43
SERVICING ADVANCES RECONCILIATION ...................................................................................................................................... 45
BORROWER PROTOCOL ................................................................................................................................................................ 46
ASSET RECONCILIATION & DOUBLE/MULTI-PLEDGED NOTES ....................................................................................... 50
LITIGATION & CLAIMS RELATED TO TB&W AND COLONIAL CONDUCT ...................................................................... 51
SORTING THROUGH THE TB&W & OCALA FUNDING MULTI-PLEDGE NOTE FRAUD ................................................................... 52
THE COLONIAL COLB ................................................................................................................................................................... 62
COLONIAL AOT FACILITIES AND BOA EPF ................................................................................................................................... 64
USES OF CASH AND FUNDING SOURCES ...................................................................................................................................... 67
DEPOSITS INTO THE OCALA FUNDING COLLATERAL ACCOUNT .................................................................................................... 67

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DISBURSEMENTS FROM THE OCALA FUNDING COLLATERAL ACCOUNT ........................................................................................ 69
REO .............................................................................................................................................................................................. 70
CREATING CLEAN INSTRUMENTS, FILES, ALLONGES, ENDORSEMENTS & DUMMY COLLATERAL FILES &
NOTES ................................................................................................................................................................ 71
U.S. SUPREME COURTS STANCE ON SECURITIZATION FRAUD ....................................................................... 72
U.S. JUSTICE DEPARTMENTS POSITION ON SECURITIZATION FRAUD ........................................................... 73
CREDIT SUISSE DOJ SETTLEMENT RMBS FRAUD ........................................................................................................................... 74
DEUTSCHE BANK DOJ SETTLEMENT RMBS FRAUD ....................................................................................................................... 74
BARCLAYS BANK DOJ LAWSUIT RMBS FRAUD ............................................................................................................................ 74
BANK OF AMERICA DOJ SETTLEMENT RMBS FRAUD .................................................................................................................... 74
GOLDMAN SACHS DOJ SETTLEMENT RMBS FRAUD .................................................................................................................... 75
MORGAN STANLEY DOJ SETTLEMENT RMBS FRAUD ................................................................................................................... 75
CITIGROUP DOJ SETTLEMENT RMBS FRAUD ................................................................................................................................ 76
JPMORGAN CHASE DOJ SETTLEMENT RMBS FRAUD .................................................................................................................. 77
RTC & DOUBLE-PLEDGE FRAUD......................................................................................................................... 79
BANK OF AMERICA/COUNTRYWIDE EVIDENCE OF DOUBLE-PLEDGE FRAUD ................................................. 80
BONY/BANA EXPERT REPORT OF PHILLIP R. BURNAMAN, II ...................................................................................................... 80
ALLONGE & ENDORSEMENT FABRICATION TO SUPPORT DOUBLE-PLEDGE FRAUD ....................................................................... 83
EVIDENCE OF DIFFERING CHAINS OF ENDORSEMENTS & OWNERSHIP ......................................................................................... 84
INDUSTRY EVIDENCE OF DOUBLE-PLEDGE FRAUD & DUMMY COLLATERAL................................................... 86
VOLUSIA COUNTY, FL CASE EVIDENCES DOUBLE-PLEDGE FRAUD .................................................................. 87
NEWLY DISCOVERED EVIDENCE & RECORD EVIDENCES DOUBLE-PLEDGE FRAUD ......................................................................... 88
SPACE COAST CREDIT UNION VS. SHAW, BROWARD COUNTY, FL ........................................................................................... 111
WAMU RMBS - - FIRST MAGNUS CASE ............................................................................................................................. 116
JPMORGAN CHASE VS. RICHARD HOLT CASE ................................................................................................................. 121
ORANGE CO. WRIGHT/ZUNI MORTGAGE LOAN TRUST 2006-OA1 CASE ............................................................. 126
March 29, 2006 - - Wright Loan Closing ...................................................................................................................... 126
JUNE 26, 2006 - - ZUNI TRUST CREATION & TRUSTEE APPOINTMENT ............................................................... 131
TRUST AGREEMENT OF ZUNI TRUST - - JUNE 26, 2006 .......................................................................................... 131
ZUNI TRUST PSA TERMS & PROVISIONS - - JUNE 26, 2006 .................................................................................. 132
LASALLE MERGER AGREEMENT WITH BOA - - April 23, 2007 ................................................................................ 133
LASALLE MERGES WITH BANK OF AMERICA - - October 1, 2007 ......................................................................... 133
BOA BECOMES SUCCESSOR TRUSTEE OF ZUNI TRUST - October 1, 2007 ......................................................... 133
THORNBURG DECLARES BANKRUPTCY - - APRIL 1, 2009 ....................................................................................... 133
CEASE & DESIST ON YOUR-BEST-RATE FINAL - - APRIL 28, 2009 ........................................................................ 133
U.S. BANK FILES POC IN THORNBURG BANKRUPTCY - - JULY 31, 2009 ........................................................... 133
ASSIGNMENT OF WRIGHT MORTGAGE #1 - - OCTOBER 27, 2009 .................................................................... 133
WRIGHT FORECLOSURE ACTION FILED - - November 24, 2009 ........................................................................... 134
MERS SYSTEM SHOWS THORNBURG OWNS WRIGHT NOTE - - March 17, 2011 .......................................... 134
ZUNI ADVERSARY LAWSUIT FILED AGAINST BOA/CW - - APRIL 29, 2011....................................................... 135
MOTION TO SEAL SETTLEMENT AGREEMENT - - February 13, 2013 .................................................................... 135
FORECLOSURE MOTION TO SUBSTITUTE U.S. BANK - - May 8, 2013 ................................................................. 136
WRIGHT NOTIFIED LOAN PAID IN FULL - - JULY 3, 2013....................................................................................... 136
FORECLOSURE MOTION TO SUBSTITUTE U.S. BANK - - JULY 26, 2013 .............................................................. 136
BOA AOM TO U.S. BANK - - JULY 28, 2013 .............................................................................................................. 136
YOUR-BEST-RATE FINANCIAL/MERS AOM TO U.S. BANK - - JULY 29, 2013 ..................................................... 136
JUNK CASE SC & FEDERAL BK CASE.................................................................................................................................... 137
November - 2006 ............................................................................................................................................................... 137
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February - 2006 ................................................................................................................................................................. 137
February - 2006 ................................................................................................................................................................. 138
February - 2009 ................................................................................................................................................................. 138
March - 2009 ...................................................................................................................................................................... 138
April - 2009 ........................................................................................................................................................................ 138
May - 2009 ......................................................................................................................................................................... 138
June - 2009 ......................................................................................................................................................................... 138
July - 2009 .......................................................................................................................................................................... 138
August - 2009 ..................................................................................................................................................................... 138
September - 2009 .............................................................................................................................................................. 139
October - 2009 .................................................................................................................................................................. 139
November - 2009 ............................................................................................................................................................... 142
March - 2010 ...................................................................................................................................................................... 142
December - 2010 ................................................................................................................................................................ 144
April - 2011 ........................................................................................................................................................................ 147
June - 2011 ......................................................................................................................................................................... 147
August - 2011 ..................................................................................................................................................................... 147
January - 2012 ................................................................................................................................................................... 147
April - 2012 ........................................................................................................................................................................ 151
May - 2012 ......................................................................................................................................................................... 152
June - 2013 ......................................................................................................................................................................... 152
October - 2013 .................................................................................................................................................................. 153
RED FLAGS FOR DOUBLE SALE/PLEDGE NOTE & LOAN FRAUD .................................................................... 160
WHAT YOU MUST IDENTIFY, SEEK & GET PRODUCED .................................................................................... 162
CONCLUSION .................................................................................................................................................. 163
NEXT STEPS ...................................................................................................................................................... 164
CONTACT......................................................................................................................................................... 164

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Double Sale & Note Pledge Fraud


in Securitization & Foreclosure
IN SEARCH OF THE HOLY TRAIL!

BACKGROUND
Association of Certified Fraud Examiners
Mortgage fraud continues to threaten the health of our nations financial markets and economy. Anti-fraud
professionals are needed to combat this global problem. The Association of Certified Fraud Examiners
(ACFE) is the worlds largest anti-fraud organization with nearly 80,000 members who are committed to
reducing business fraud worldwide. The ACFE provides anti-fraud training and education to its members and
businesses across the world.

As part of their anti-fraud efforts in the mortgage markets, the ACFE provides training and exams in the area
of mortgage fraud. One such training course was developed that is titled Understanding the Basics of
Mortgage Fraud. In this course, ACFE members explore the history of the mortgage industry and its role in
the global financial crisis and examine the life cycle of a mortgage loan to identify potential areas for fraud
and learn techniques to recognize red flags of common mortgage fraud schemes and methods for prevention.

One such scheme is the focus of this report that I have been writing and warning about for two decades. Its
called the Double-Pledge or Double-Sale loan and note scheme where a borrowers promissory note and
loan are sold, transferred, or pledged to more than one lender. In Understanding the Basics of Mortgage
Fraud, the ACFE writes the following:
Fraud Trends Involving Lenders

A scheme used by lenders to raise capital is to the sell the same mortgage loan to more than one secondary-market
investor; this scheme known as the double-sold loan. The original loan documentation is duplicated and sold more than
once in the secondary market. To conceal the scheme, the lender remits the scheduled principal and interest payments
to the servicer. Since all loans remain current, the borrower is not aware that his mortgage has been double-pledged
unless one of the loans goes into foreclosure.

Red flags for this scheme include:

Someone other than the borrower is making payments on the loan.


The borrower receives late notices or tax invoices on more than one loan.
The borrower notices more than one loan on his credit report.
The lender fails to provide the note to the document custodian.

Federal Financial Institutions Examination Council


The Federal Financial Institutions Examination Council (FFIEC) was established pursuant to title X of Public Law
95-630, the Financial Institutions Regulatory and Interest Rate Control Act of 1978 (FIRA). The purpose of title
X was to create an interagency body empowered to prescribe uniform principles and standards for the federal
examination of financial institutions and make recommendations to promote uniformity in the supervision of these
financial institutions.
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As a part of its mandate, FFIEC conducts training programs for federal and state examiners and prescribes
uniform principles, standards, and report forms for the federal examination of financial institutions by the Board
of Governors of the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), the
National Credit Union Administration (NCUA), the Office of the Comptroller of the Currency (OCC), and the
Consumer Financial Protection Bureau (CFPB). FFIEC also makes recommendations to promote uniformity in the
supervision of financial institutions. In 2006, the State Liaison Committee (SLC) was added to FFIEC as a voting
member. The SLC includes representatives from the Conference of State Bank Supervisors (CSBS), the
American Council of State Savings Supervisors (ACSSS), and the National Association of State Credit Union
Supervisors (NASCUS).

FFIEC provides federal and state examiners with a broad range of training workshops, conferences,
publications, symposiums, workbooks and self-study programs.1 One such training white paper titled The
Detection and Deterrence of Mortgage Fraud Against Financial Institutions was produced by members
participating in the FFIEC Fraud Investigations Symposium from July 13 24, 2009. In this White Paper, FFIEC
described Double Selling of mortgage loans and notes as follows:
Double Selling

A mortgage loan originator accepts a legitimate application and related documentation from a borrower,
reproduces or copies the loan file, and sends the loan package to separate warehouse lenders to each fund the same
loan. In some instances, double selling is self-perpetuating because, to keep the scheme going, different loans must be
substituted for the ones on which documents cannot be provided. Under this scheme, the broker has to make payments
to the investor who received the copied documents or first payment default occurs.

Example

A mortgage company used a group of financial institutions (referred to as warehouse lenders) to temporarily fund
mortgage loans, which were then sold to another group of financial institutions as long-term investments. The scheme
was accomplished by reselling the same loans to multiple investors. Accumulated losses associated with this scheme
were in the millions of dollars.

Best Practices

Monitor parties involved in the closing of the loan.


Verify previous lien pay-off from the original lender.
Receive a complete closing package prior to funding.

Red Flags

A red flag is an indicator that calls for further scrutiny. One red flag by itself may not be significant; however,
multiple red flags may indicate an operating environment that is conducive to fraud.

Incomplete or unsigned loan application.


Incomplete or illegible appraisal.
Discrepancies between underwriting and closing instructions.
Outstanding trailing documents (e.g., executed note, deed, truth-in-lending, settlement statement, etc.)
Missing or illegible insured closing letter in the name of the originator from the title company.
Recent and numerous changes in the wiring instructions.
Incorrectly named insured and loss payee on the hazard insurance policy.
Missing mortgage insurance or guaranty, certificate of eligibility.
Missing purchase commitment from investor - investor lock.

1 See listing of FFICE training programs, workshops, courses, workbooks and downloadable documents at https://www.ffiec.gov/exam/courses.htm#speciality.
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Fannie Mae
The Federal National Mortgage Association, commonly known as Fannie Mae, is a United States government-
sponsored enterprise (GSE) under the conservatorship of the Federal Housing Finance Agency (FFHA) that
provides mortgage lenders with a variety of financing solutions in the secondary mortgage market. Fannie
Maes mission is to provide liquidity to the single-family market by purchasing and guaranteeing mortgage
loans that are made by their lender customers. This enables lenders to extend credit to families to buy homes
or refinance their existing mortgages. Fannie Mae is one of the leading purchasers and guarantors of
mortgage loans in America as well as governs many of the uniform standards, processes and forms used in the
origination, sale, and servicing of mortgage loans in the United States.

Fannie Mae provides extensive training materials, documents, webinars and programs to lenders, sellers,
servicers and their employees. One such program is Fannie Mae's Mortgage Fraud Program (MFP). The MFP is
committed to keeping Fannie Maes internal and external stakeholders aware of current fraud schemes
affecting the mortgage industry. As part of that program, Fannie Mae conducts training and provides
guidance and resources available on its website.2

In one of Fannie Maes MFP training documents titled Fraud Schemes and their Characteristics Resources to
Help You Combat Mortgage Fraud, Fannie Mae provides the following guidance and red flags of double
sale and pledge mortgage fraud.
Double Sale Characteristics

A double sale is the sale of one mortgage note to more than one investor.
Mortgage payments are made by an entity other than the borrower
Mailing address is not the borrowers address.
Two mortgages recorded on the same property.
Mortgage is not recorded in first lien position.
The lender is experiencing financial distress.
Two notes may be identical except for signatures (or one may be a color copy)

Bear Stearns
Simply put, a double sale or pledge scheme is when a borrowers note or copies of the note are sold to more
than one investor. The following Bear Stearns slide is self-explanatory.

2 See https://www.fanniemae.com/singlefamily/mortgage-fraud-prevention.
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OVERVIEW
Over the last decade, U.S. and foreign banks and servicers have paid hundreds of billions of dollars in
regulatory fines and lawsuit settlements. False and fraudulent foreclosure lawsuit pleadings; robo-signed
affidavits and assignments of mortgages; fabricated and forged evidence; and perjurious testimony have
permeated the American legal landscape and property title.

Despite all of the evidence, testimony, and hundreds of billions in fines and settlements, little has changed. In
fact, today's American courtrooms look like a crime scene and MASH unit for America's banks. Here, those
charged with resurrecting the nearly dead bodies of American mortgage loans, hone their craft, or rather
craftiness, to conceal the greatest financial crime of our lifetime.

The institutionally programmed fraud on our courts, supported by fraudulent, forged, and fabricated
evidence, as well as perjurious testimony, would make Mafia Dons like John Gotti and Carlo Gambino
envious. Winning, at any cost, let alone at all costs is the default servicing industry's programmed mantra!

Foreclosure robolawyers, who sold their souls and ethics to the banks they represent to pay back the student
loans they took to obtain their B or C law school degrees, replaced skilled lawyers, sworn to uphold highly
ethical standards. Making frivolous arguments; introducing forged and fabricated evidence, and suborning
perjury from their incompetent robo-witnesses has become the standard operating process for foreclosure
robolawyers. However, few judges or lawyers ask why?

A judge in Sarasota County, Florida once said to me, it used to be that I could take a lawyers word to the
bank that was before I met the banks lawyers. Today, the mere existence of a foreclosure mill law firm
appearing in a case is a bright red flag for fraud for any judge with a Batman spotlight shining bright.

Banks and servicers have a plethora of intertwining systems of records, mandated by law, that are specially
programmed to provide instant access to data, information and documentary evidence to support each claim,
agreement, fact, number, data, and calculation in a foreclosure case. A foreclosure case should be able to be
litigated to successful closure or settlement in a manner of a few months.

A delay or refusal to produce the known evidence, business records, data and collateral files, known to exist,
are red flags for foreclosure fraud. Americas courtrooms should not be allowed to become MASH units to
allow the banks and servicers to come in with dirty and bloody hands to clean and launder their dirty
promissory notes and collateral files.

In response to the role of Wall Street firms and Residential Mortgage-Backed Securities ("RMBS") in the 2008
Financial Crisis, in January of 2012, the U.S. Attorney General established the RMBS Working Group as part
of the Financial Fraud Enforcement Task Force.

The RMBS Working Group initiated, organized, and advanced new and existing investigations by federal
and state authorities into fraud and abuse in the RMBS market that helped precipitate the 2008 financial
crisis. Regulatory and lawsuit settlements related to mortgage securitization fraud exceed $100 billion!

Despite these settlements and the acknowledgment of wrong acts, Wall Street, banks, servicers and some
Courts continue to ignore the underlying motives and scienter for millions of fraudulent acts upon our
borrowers, investors, communities and courts.

Why did robo-signing exist? Why were original notes falsely and fraudulently claimed lost for decades in
legal action, only to appear towards trial dates mysteriously? Why did for over a decade, Mortgage
Electronic Registration Systems (MERS) falsely and fraudulently claim and testify to in judicial foreclosure
cases that they owned borrowers promissory notes? Why were pre-notarized assignments in blank placed in

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collateral files and never recorded? Why were servicers and MERS names placed on publicly recorded
assignments or notes and mortgage as owners of notes instead of Fannie Mae, Freddie Mac or other owners?

Why were allonges used on notes when there was plenty of space on the actual note for endorsements? Why
were endorsements in blank mandated to be placed on original notes, instead of specific endorsements? Why
were endorsements rarely, if ever dated? Why were there different versions of alleged original notes with
different tracking barcodes and endorsements chains? Why are only servicing records provided? Why arent
the many underlying contracts and agreements transferring borrowers notes and loans rarely produced?
Why cant the servicers get their stories straight? Why does it take so long to foreclose in a mere simple
foreclosure action? Why are so many records and evidence missing? Why arent document custody records
produced with each foreclosure action or motion for summary judgment?

Why do they need an assignment of note and mortgage when they had a Pooling and Servicing Agreement
(PSA)? Why has standing become such an issue Why do they have to fabricate evidence and provide
incompetent witnesses? Why were they fined tens of billions? Why did their investors and the U.S. government
sue them?

The reality is that the default servicing industry operates under old legacy foreclosure processes, systems,
evidence, witnesses, and attorneys that havent been updated to meet the complexities of a modern mortgage
transaction. Their systems and processes were created for the old traditional and legacy mortgage
transaction that has been out-of-date for decades now.

The legacy issues stem from systems of record that were first built in the 60s for the old traditional mortgage
model of originate to hold and not todays originate to sell or securitize model. The servicers system of
record most often used today, Black Knights LoanSphere MSP system, is software as a service (SaaS) that is
programmed and maintained by Black Knight and only licensed to servicers.

In the traditional model, the local bank and thrift kept the note in its vault; it wasnt endorsed, especially in
blank, unless there was a sale; and you could meet your loan officer face-to-face to discuss problems and
rework your mortgage loan. Foreclosure was the last, not the first resort and if needed. Only then, the banks
local branch manager would come into court with an original note and your ledger entries of payments to
testify. The manager would swear: 1) we have a note; 2) we have a debt owed; and 3) our records and
systems are accurate and reliable since they were done by hand, checked and verified.

However, as you will see in this report, the concept of a simple foreclosure went by way of the dinosaurs when
the industry moved from the traditional originate to hold mortgage model to an originate to sell, distribute
and securitize business model.

If it were so easy to foreclose, mortgagees and servicers could simply come in with known and easily
retrievable records, data, documents, and contracts from the securitizing parties and foreclose in mere weeks
with 100% certainty with no consequences to our system of justice. However, as illustrated in painstaking
detail in this report, each note and loan has dozens of contracts, agreements and related mortgage loan
schedules with trustees, servicers, sub-servicers, document custodians, originators, depositors, guarantors and
warehouse lenders.

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Add to this complexity the fact that: 1) ownership is not recorded in county records; 2) an organization called
Mortgage Electronic Registration Systems, Inc. (MERS) was created to mask further and obfuscate your
knowledge of who your contractual note holder and mortgagee is at any given moment in time; 3) an
organization you often are not contracted with called a servicer pretends to be your lender and the only
resort for your questions or problems; 4) the original note you executed is handed off both physically and
electronically from one entity to another and sometimes back again; 5) the original note you executed is
endorsed in blank and is claimed to be bearer paper; and 6) remediation firms are retained to fix
document defects and deficiencies found in the collateral.

In fact, the borrower is not the only party to the contract obligated to pay the loan. There are other co-
obligors as defined in the uniform note that created a new contractional definition of a note holder, outside
of the UCC. You must search through the chain of contracts, custody, and data related to the borrowers note
to identify just who is the note holder and most importantly, the mortgagee on any given day.

Trusting and taking the word, evidence and even testimony of a servicer has also gone by way of dinosaurs.
After three-decades of documented false pleadings, fabricated evidence, robo-signed affidavits, and
perjurious testimony from robo-witnesses, nothing can be accepted as true.

This report focuses on the movement and transfer of notes and even dummy and forged notes that are part of
fraudulent securitization and foreclosure schemes. The report will shine some light on the complexity
surrounding a modern day mortgage transaction with special emphasis on the securitization and foreclosure of
modern mortgage loans. It will answer many questions while raising others. The report is not for the meek,
weak, or faint of heart. While there are no free houses at the end of the rainbow, there are answers.

Borrowers and their lawyers must understand what double and multiple pledge fraud is and how the scheme
affects the enforceability of a borrowers note. Arguments about failed securitization must be put aide in
favor of a securitization and foreclosure fraud via a double note pledge fraudulent scheme.

With diligent effort; skilled and competent lawyers; and knowledgeable experts, you may find nuggets of
wisdom and gold at the end of this long and winding road and a path to perfection. Some of you will
understand the pun, others not. However, what each of you will gain after spending the time to read the
entirety of this report is an understanding that there are many red herrings and trails the secondary mortgage
industry has sent each of you as well as courts, regulators and even their investors and shareholders on.

Its no wonder they call our modern day banking system, the Shadow Banking System. Knowing how to
navigate its waters with the right navigational tools and most up-to-date GPS units with the proper maps is
critical to successful litigation. Swim alone and you might just drown in a swamp of fraud and deception. You
must give up your conditioned and carefully programmed thinking and keep an open mind as well as
pocketbook to win.

You will not win free houses, but you will secure good settlements, results, modifications and judgments if you
follow the yellow brick road of data and documents in carefully planned and targeted discovery. Set off in
the wrong direction by following the red herring and you will eventually tire of the battle. The Holy Grail is
really the Holy Trail of note transfers, custody, ownership, contracts, and payments that you must obtain then
follow. You must follow the trail of not only the original note executed at the closing table, but each copy,
scan and image of each note ever created.

Dates and numbers of scans, images, and copies must be determined as much as their movement. You are
tracking not only the trail of the original note and collateral file, but each dummy note and collateral file
created since the inception of the loan.

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HISTORY OF MY PRODUCE THE NOTE STRATEGY


When I came up with the Produce the Note legal strategy and tactic in the mid-nineties, I was embroiled in a
family foreclosure dispute in Dallas, Texas with EMC Mortgage and Washington Mutual. Friends of mine in the
banking industry had informed me of the many tricks of the trade. They instructed me to pay off my familys
promissory note, but to first obtain the original wet-ink promissory note my mom and dad executed and
ensure that it would be stamped canceled and paid in full!

A recent case in San Antonio reflected that at trial, the servicer showed up with a note naming a different
lender than who the borrowers were engaged in litigation. The San Antonio case and my research as
discussed below, made me demand that EMC or WAMU produce my parents original wet-ink note before we
shelled out over $100,000 or so to pay off the loan.

At the time, the Savings & Loan crisis had produced the Resolution Trust Corporation (RTC). The horror stories
of double-pledged notes and borrowers who were screwed over by unscrupulous banks as well as banks that
were screwed over by other banks pledging collateral and promissory notes they did not own were known to
many people. Under the holder in due course rule, if a borrower paid off the wrong owner of a note and the
true owner came and demanded payment, the borrower would be obligated to pay the note off again. Thus,
friends in banking and attorneys I consulted strongly encouraged me to secure my familys original note
before paying it off.

My banking friends also suggested that I audit the servicing history to ensure that all payments were applied
and the loan was properly amortized according to its terms, especially since it was a negative amortization
adjustable rate mortgage loan. When my calculations were over $18,000 difference on the pay off both
EMC and WAMU quoted me, I became overly anxious since they had engaged in harassing billing and
collection methods over a 3-year period from the very inception of the loan. They had also placed not one,
but three forced-place hazard insurance policies on top of our very own policy. The predatory practices of
WAMU and EMC led to constant disputes and the originally alleged lender, Savings of America, refusal to fix
or adjust the problems with the loan, only compounded the problem.

In my legal research at the time, I came across an interesting case in Georgia (Georgia Supreme Court, C. W.
GROOVER v. Erick PETERS, No. 28379) since I was residing in the summers there and working on the family
business. With the assistance of some law students and lawyers, I isolated a few other cases that became the
foundation for my produce the note strategy. Bear in mind, I was attempting to pay off a roughly $100,000
mortgage obligation in cash and needed to ensure that my family was paying the rightful owner of our
loan. Both EMC and WAMU claimed to own my familys promissory note and loan, but I suspected then and
years later learned that their representations were fraudulent.

EMC and WAMU were merely servicers for undisclosed and intentionally concealed investors who initially
were presumed to be either Fannie Mae or Freddie Mac and later privately securitized trusts managed by
Bear Stearns, EMCs parent. For over two decades, it was the industrys common practice to intentionally
conceal from public property records, borrower disclosures, legal proceedings and disputes the real owners
of a borrowers promissory note, mortgage, and loan. The concealment of the note's owners allowed the
servicing and default servicing industry to run amok and trample on the property and legal rights of
borrowers who were intentionally being set up and abused by the predatory practices of the special
servicers like EMC Mortgage.

In fact, as you will see from this report, it is your obligation and duty to not only identify who has possession
of your original note, but to only pay that person or their authorized agent unless you become liable for
paying the wrong party.

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GA & FL SUPREME COURT OPINIONS ON BORROWERS OBLIGATION TO


DETERMINE PROPER NOTE OWNER/HDC BEFORE PAYING NOTE/DEBT
A Georgia Supreme Court case that drew my attention was C. W. GROOVER v. Erick PETERS, No.
28379, wherein they addressed this very real concern on Nov. 29, 1973 where the Court opined:
The maker of a negotiable note and security deed must determine at the time of payment whether the payee is the
holder of the instrument or the authorized agent of the holder in order to protect himself against liability for double
payment. If the original grantee has assigned the instrument to another, who is a holder in due course, the burden
rests with the maker to determine same and pay only the holder or his authorized agent The long and short of the
matter is that the borrower must be as careful in repaying the debt as the lender presumptively was in making the
loan. [emphasis added] See Wilcox, Gibbs & Co. v. Aultman, 64 Ga. 544 (37 AR 92); Walton Guano Co. v.
McCall, 111 Ga. 114 (36 SE 469); Bank of the University v. Tuck, 96 Ga. 456, 465 (23 SE 467).

A relatively similar 1912 Florida Supreme Court case I found also stood for a similar proposition when in
Scott v. Taylor, 58 So. 30, 63 Fla. 612 (1912) the Court opined
Bill by Emma E. Taylor against J. Conrad Scott and others. Decree for complainant, and the Defendant Scott
appeals. Affirmed.

Taylor, J. The appellee Emma E. Taylor filed her bill in equity in the Circuit Court of Escambia county for
foreclosure of mortgage against the appellant J. Conrad Scott and his wife Alice K. Scott, and the Pensacola
Home & Savings Association, a corporation.

A mortgage executed as security for the payment of a negotiable promissory note is a mere incident of and ancillary
to such note. When it comes to payment thereof, the rights of the parties thereto, as well as of third persons, are
governed by the rules relating to negotiable paper; in other words, payment to any one other than the holder of
the negotiable instrument is at the risk of the payer, and is binding upon the holder of the paper only where
express or implied authority to receive such payment is established by the person making the same. Hence
payment of a negotiable note secured by mortgage by the mortgagor or his grantee, where made to the
original mortgagee who is not in possession of the note and mortgage, is not binding upon an assignee thereof
before maturity who was in possession of the papers at the time of payment, unless he had expressly or
impliedly authorized such payment. Smith v. First Nat. Bank of Cadiz, Ohio, 23 Okl. 411, 104 Pac. 1080, 29 L.
R. A. (N. S.) 576, and authorities cited in notes, 138 Am. St. Rep. 856. The duty of a maker of a negotiable note
to see that the person to whom he pays it has it in his possession before making the payment is not affected by
the fact that the note was on its face made payable at the office of the person to whom he makes the payment.
Powers v. Woolfolk, 132 Mo. App. 354, 111 S. W. 1187; Hoffmaster v. Black, 78 Ohio St. 1, 84 N. E. 423, 21
L. R. A. (N. S.) 52, 125 Am. St. Rep. 679, 14 Ann. Cas. 877; Baxter v. Little, 6 Mete. (Mass.) 7, 39 Am. Dec. 707.

The maker of a negotiable promissory note can satisfy it only by payment to the owner at the time of such payment,
or to such owners authorized agent; and, if the recipient of the money is not actually authorized, the payment is
ineffectual, unless induced by unambiguous direction from the owner, or justified by actual possession of the note;
and this rule applies generally to all negotiable paper, independently of the existence of any mortgage or other
security. Marling v. Nommensen, 127 Wis. 363, 106 N. W. 844, 5 L. R. A. (N. S.) 412, 115 AM. St. Rep. 1017,
7 Ann. Cas. 364; Baumgartner v. Peterson, 93 Iowa, 572, 62 N. W. 27; Burhans v. Hutcheson, 25 Kan. 625, 37
Am. Rep. 274; Birket v. Elward, 68 Kan. 295, 74 Pac. 1100, 64 L. R. A. 568, 104 Am. Rep. 688; Carpenter v.
Longan, 16 Wall, 271, 21, L. Ed. 313; Swift v. Bank of Washington, 114 Fed. 643, 52 C. C. C. 339.

Under the rules of law governing negotiable instruments as announced in the foregoing authorities, we think the
decree of the Court below appealed from this case was proper.

The defendant knew that he had made and delivered to D. Hale Wilson a negotiable promissory note that was
transferable by indorsement to another, and yet, without inquiring as to such transfer and without production of
the note and mortgage, he pays the amount due upon such note to Wilson, the original payee, when such note
had been transferred to the complainant and was then held and owned by her, and without any delegation of
authority from her to said Wilson either express or implied to receive such payment.

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Double Sale & Note Pledge Fraud in Securitization & Foreclosure
Under these circumstances, such payment so Wilson was unauthorized and the complainant is not affected
thereby. There is no merit in the contention that the conditions expressed in the mortgage rendered the note
nonnegotiable. Neither is there anything disclosed by the circumstances set forth in the pleadings from which it
can legally be implied that Wilson was authorized to act as agent for the complainant in receiving payment of
this note from the defendant. Finding no error, the decree appealed from his hereby affirmed at the costs of
appellant.

PRODUCTION OF THE ORIGINAL NOTE IS CRITICAL


Dale A. Whitman is a Professor Emeritus of Law at the University of Missouri (MU) where he served as dean of
their law school from 1982 1988. Professor Whitman is considered one of the nations premier experts on
property law and from 1991 1997, he served as co-reporter of the ALIs Restatement (Third) of Property
(Mortgages) with Professor Grant Nelson, formerly of MU. Professors Whitman and Nelson have collaborated
on five casebooks in real estate finance and property.

Professor Whitman has also written a comprehensive property treatise with Professor William Stoebuck. From
1994-97 he served on the executive committee of the Association of American Law Schools (AALS). In 2002,
he served as President of AALS. He was the reporter for the Uniform Non-Judicial Foreclosure Act, approved
in 2002. His teaching fields include Property, Real Estate Finance and Land Use Planning.

Over the past decade, Professor Whitman and I have clashed on our views and opinions regarding the
foreclosure crisis, MERS, Fannie Mae and the actions of servicers. Professor Whitman has historically sided with
banking interests. However, of late, Professor Whitman has not only acknowledged problems in the secondary
mortgage markets but offered interesting solutions as well as his analyses of lawyers and courts
interpretation of relevant law and issues surrounding the practices of the secondary market.

Black Letter Outline on Land Transactions and Finance


In a synchronistic twist of fate, as I was authoring this report, I once again crossed paths with Professors
Whitmans views when I was doing research into the fraudulent double-pledging of promissory notes. I
recalled the Groover V. Peters Georgia Supreme Court case and did a search for any recent legal citations
of the case or scholarly papers. I was delighted to see the case pop up in a chapter of a book titled Black
Letter Outline on Land Transactions and Finance authored by professor Whitman and his colleagues.3

Mortgagees (i.e. owners of promissory notes since the mortgage follows the note) often obtain loans by
pledging borrowers original notes and mortgages as collateral for loans to finance their operations. In
essence, this results in what might be termed a separate mortgage on a borrowers note and mortgage.
Sometimes the note owner who is the actual mortgagee may borrow money by pledging a single note and
mortgage as security for the financing of that mortgage loan or later the financing or future receivables
related to that mortgage loan.

Most commonly, mortgage bankers obtain short-term commercial financing from what are termed warehouse
banks for what is often referred to as a warehouse line of credit or warehouse loan. As security and
collateral for the warehouse line of credit, the warehouse bank takes delivery of a package of original
promissory notes and mortgages.4

When the originating mortgage banker finally finds investors for the purchase of their originated notes and
mortgages on the secondary market, they will often pay off the warehouse loan, take back possession of the
original notes and mortgages from the warehouse lender, and deliver them to the new purchasers of the
mortgage loan and note. The purchases are most often accomplished by agreements, commonly referred to as
3 Nelson, Grant, Dale Whitman, Ann Burkhart, and R. Freyermuth. Black Letter Outline on Land Transactions and Finance. 5th Edition ed. St. Paul, MN: West
Academic, 2016. Print.
4 Id.

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Double Sale & Note Pledge Fraud in Securitization & Foreclosure
Mortgage Loan Purchase Agreements. Due to the volatility inherent in the secondary market, there has
historically been a significant risk of being a warehouse lender. This is especially true when there are market
collapses and failures such as in 2007 and 2008.

Consistent with the rules discussed above (and for additional reasons discussed below), a prudent warehouse
lender would have the notes properly indorsed and would take possession of the notes. [Where the notes are
negotiable, this would place the warehouse lender in the position of a PETE should the mortgage banker
default on the warehouse loan.]

Often, however, the package of loans is delivered to the warehouse lender with no formal assignment or
endorsements. Sometimes, no physical delivery at all takes place, and the mortgage banker simply designates
itself as custodian for the warehouse lender. As illustrated directly below, this is a particularly risky procedure.

In their book, Black Letter Outline on Land Transactions and Finance, Professor Whitman and his colleagues
discuss how promissory notes and mortgages are transferred via UCC Article 9 and the need to possess the
collateral in order to perfect their security interest. Surprisingly, they also address the practice of double sale
and pledge mortgage fraud.
THE APPLICATION OF UCC ARTICLE 9 TO TRANSFERS OF MORTGAGE NOTES AS SECURITY

A transfer of a promissory note will automatically assign the mortgage that secures the note; no separate
assignment is necessary (although it may well be desirable). This is equally true of a transfer as security as it
is of an outright transfer by sale of the note.5

When a mortgage note is assigned as security, however, the assignee must also take care to
accomplish perfection of the assignees security interest. Perfection of security interests in promissory
notes (instruments) is governed by UCC Article 9. As the drafters of Revised Article 9 stated:

The security interest in the promissory note is covered by this Article even though the note is
secured by a real-property mortgage. Also [the creditors] security interest in the note gives [the
creditor] an attached security interest in the mortgage lien that secures the note. . . . One cannot
obtain a security interest in a lien, such as a mortgage on real property, that is not also coupled
with an equally effective security interest in the secured obligation. [U.C.C. 9109,
Comment 7.]

Perfection under Article 9 is critically important in two distinct contexts:

Assume that the original mortgagee, having transferred the note as security to an assignee, later
experiences financial distress and gives another security interest in the same note to another creditor.
[This is termed double-pledging the note, and it occurs more frequently than it should.] Which security
interest would have priority? In other words, which assignee would be entitled to collect the payments made
on the note?

The original assignee has priority over the later assignee only if its security interest in the note is
perfected and was perfected before the later assignee perfected its interest. See U.C.C. 9322(a)(1)
(Conflicting perfected security interests . . . rank according to priority in time of filing or perfection.);
U.C.C. 9322(a)(2) (A perfected security interest . . . has priority over a conflicting unperfected
security interest. . . .).

Assume that the original mortgagee, having transferred the note as security to an assignee, becomes
insolvent and files bankruptcy. A trustee in bankruptcy has the strong-arm power, under 544(a) of the
Bankruptcy Code, which gives the trustee that status of a judgment lien creditor of the bankrupt as of the
date of bankruptcy. Acting under this power, the trustee might claim the note as against the first assignee.
See U.C.C. 9317(a)(2)(A) (security interest is subordinate to judgment lien that arose before security

5Nelson, Grant, Dale Whitman, Ann Burkhart, and R. Freyermuth. Black Letter Outline on Land Transactions and Finance. 5th Edition ed. St. Paul, MN: West
Academic, 2016. Print.
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Double Sale & Note Pledge Fraud in Securitization & Foreclosure
interest was perfected). If the assignee had not taken steps to perfect its security interest before the
bankruptcy petition, the trustee can avoid (invalidate) the assignees unperfected security interest under
544(a). This would permit the bankruptcy trustee to collect the payments on the note and use those payments
for expenses of bankruptcy and payment of unsecured creditors.

If the assignee properly perfects its security interest in the note, Revised Article 9 makes it clear that the
assignee is also perfected as to the mortgage. See U.C.C. 9308(g) (Perfection of a security interest in a
right to payment or performance also perfects a security interest in a lien on personal or real property
securing the right, notwithstanding other law to the contrary.). Thus, if the assignee has properly perfected
its interest in the note, the assignee does not have to record a mortgage assignment in the real property
records to perfect as to the real estate collateral.

HOW IS PERFECTION ACCOMPLISHED?

UCC Article 9 characterizes a promissory note (whether it is negotiable or not) as an instrument, and it
provides two distinct methods of perfecting security interests in instruments:

The assignee may perfect by taking possession of the original note. This is the safest method. U.C.C. 9
313(a). Incidentally (but very importantly), taking possession really does require the physical moving of the
note. The courts are very disinclined to accept anything less than a manual transfer of possession to the
secured party assignee. For example, it is most unwise for the assignee to leave the note in the hands of the
mortgagee-assignor as the assignees trustee, nominee, agent, or the like. See, e.g., Prime Financial
Servs. LLC v. Vinton , 761 N.W.2d 694 (Mich.Ct.App.2008) (A debtor cannot qualify as the agent for a
secured party for purposes of taking possession of collateral because the continued possession by the
debtor establishes the opportunity for fraud.); In re Executive Growth Investments, Inc ., 40 B.R. 417
(Bankr.C.D.Cal.1984).

The assignee may perfect by filing a financing statement (a UCC1 form), typically with the Secretary of States
office. U.C.C. 9312(a).

WHICH METHOD OF PERFECTION SHOULD BE USED?

Financings secured by mortgage notes and other consumer notes are often for short periods of time and
involve large numbers of notes. Transferring physical possession of the notes to the creditor and back
again can be burdensome, and notes can become lost or mislaid. Filing a financing statement is obviously
much easier, because a single filing can cover a large number of notes, can be accomplished electronically
in most states, and costs only a small fee. For this reason, Article 9 permits the assignee of a mortgage note
to perfect its interest by filing a financing statement.

Nevertheless, perfection by filing is second-rate perfection, because it can be trumped if the debtor
later gives actual possession of the notes to a different creditor who gave value and did not know
about the first assignment. See U.C.C. 9330(d) ([A] purchaser of an instrument has priority over a
security interest in the instrument perfected by a method other than possession if the purchaser gives
value and takes possession of the instrument in good faith and without knowledge that the purchase
violates the rights of the secured party.). Filing a financing statement is sufficient to protect the assignee
against a subsequent trustee in bankruptcy of the assignor-mortgagee. However, it quite clearly cannot
protect the assignee in the double-pledging case, if a second assignee gets possession of the note and
does not know about the first assignment. The fact that the first assignee filed a financing statement is
simply irrelevant; the filing imparts no constructive notice to the second assignee, who (because he or
she is taking possession of an instrument) need not do a UCC search for prior conflicting interests in
the note.

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APPLYING THE UCC TO MY PRODUCE THE NOTE STRATEGY


In Black Letter Outline on Land Transactions and Finance, professor Whitman and his colleagues goes on to
explain the importance of my Produce the Note Strategy. Whitman provides the legal arguments, background
and portions of the UCC that support my arguments and opinions for conducting the extensive due diligence
necessary to determine each note holder, as defined in paragraph one of the borrowers uniform
promissory note. A reading of the following portions of Whitmans Black Letter Outline on Land Transactions
and Finance will illustrate for you the risks of paying or paying off the wrong party.
PAYMENT TO ASSIGNOR AS A DEFENSE

After the original mortgagee assigns the note and mortgage, to whom should the maker-mortgagor make
payments? Obviously, if the assignee notifies the mortgagor of the assignment, and the mortgagor
nevertheless makes payments to the original mortgagee, the mortgagor cannot raise those payments as a
defense to an action by assignee to collect the debt or to foreclose the mortgage.

The following material, however, focuses on the situation where no notice of the assignment is given and the
mortgagor innocently continues to make mortgage payments to the original mortgagee. All references
below are to the 1990 version of UCC Article 3. See generally Nelson, Whitman, Burkhart & Freyermuth,
Real Estate Finance Law 5.33 (6th ed.2015).

NEGOTIABLE NOTES

U.C.C. 3602 provides that a negotiable note is paid, and the payor is discharged, to the extent that
payment is made . . . to a person entitled to enforce the instrument (the PETE, as discussed above).
The PETE includes a holder to whom the note has been negotiated, U.C.C. 3301, and any person to
whom the note is delivered for the purpose of giving the right of enforcement, even if that person is not
a holder, U.C.C. 3203(a), (b). For example, a transfer by delivery of the note without an indorsement
will not constitute the transferee a holder, but the transferee is still a PETE if the delivery was made for
the purpose of transferring the right to enforce the note.

Why is payment to the actual possessor of the note necessary to discharge it?

[A negotiable] instrument is a reified right to payment. The right is represented by the instrument itself. The
right to payment is transferred by delivery of possession of the instrument by a person other than its issuer for the
purpose of giving to the person receiving delivery the right to enforce the instrument. [U.C.C. 3203
Comment 1.]

These UCC sections are widely understood to vest the power to discharge the obligation exclusively in the
PETE, even though the Code does not expressly so state. Hence, if the original payee has delivered
possession of a negotiable note to another person for the purpose of transferring the right of enforcement,
payment to the original payee is not recognized as discharging the obligation. The payment does not count
against the assignee. This is true whether or not the assignee is a HDC and is true even if the payor has
received no notice of the assignment.

EXAMPLE:

Mortgagor made 40 monthly installment payments of $450 each to Mortgagee on a mortgage whose
balance was $45,000 after the 40th payment was made. After the latter payment, mortgagee assigned the
note and mortgage to Assignee, who took possession of the note but did not notify mortgagor of the
transfer. Mortgagor thereafter made ten (10) more monthly installment payments to Mortgagee. Assignee
then declared the mortgage in default, accelerated the debt and commenced foreclosure. Mortgagor
defended on the ground that acceleration and foreclosure were improper because no default existed.

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Double Sale & Note Pledge Fraud in Securitization & Foreclosure
RESULT:

Foreclosure is permissible. The ten monthly payments made to Mortgagee after the assignment cannot
be credited to the amount of principal and interest due and owing on the debt. Black v. Adrian, 80 S.W.
3d 909 (Mp. Ct.App.2002); Groover v. Peters, 202 S.E. 2d 413 (Ga.1973).

This result has been widely criticized in the context of notes secured by mortgages. It is obviously
unrealistic for a mortgage or to demand to see the note itself before making each installment payment
to the original mortgagee. Yet in principle, the UCC would require precisely that sort of vigilance by
mortgagors. See Whitman, Reforming the Law: The Payment Rule as a Paradigm, 1998 B.Y.U. L. Rev. 1169
(1998). In 2002, the Permanent Editorial Board for the U.C.C. proposed changes to U.C.C. 3602 to overturn
this result and make payment to the original mortgagee binding until notice of the assignment is provided to the
mortgagor. As yet, however, these changes have been enacted in only twelve states.

Fortunately, in practice mortgagors are rarely harmed by this rule. This is because today most institutional
purchasers of mortgages on the secondary market designate the original mortgagee as agent to service ( i.e.
collect payments on) the loan. Payment to the mortgagee under such circumstances constitutes valid
payment to the assignee. If the secondary market assignee wishes to assign the servicing to some other
agent, or to assume direct servicing the loan, it will routinely notify the mortgagor of that fact, and
Federal law requires such notice. Hence, the real risks to mortgagors from reified right to payment
usually arise in the context of non-professional mortgagees and assignees.

NONNEGOTIABLE NOTES

If the note is nonnegotiable, the provisions of UCC Article 3 do not apply. There is, however, some case
authority for the same result, at least in the context of a final payoff of the note. See Assets Realization Co.
v. Clark , 98 N.E. 457 (N.Y.1912); Johnstone v. Mills , 22 B.R. 753 (Bankr.W.D.Wash.1982). However, the
better rule is that the assignee of a nonnegotiable note takes subject to all payments made to the assignor
before the mortgagor received notice of the assignment. Taylor v. Roeder, 360 S.E.2d 191 (Va.1987);
Restatement (Third) of Property: Mortgages 5.5 (1997).

EXAMPLE: (Same facts as in the previous example, except that the note is nonnegotiable. Result:
Foreclosure is impermissible.)

Payment to Mortgagee after the assignment constituted valid payment of the mortgage debt because no
notice of the assignment was given to Mortgagor. Thus no grounds for acceleration and foreclosure exist.
In re Kennedy Mortgage Co., 17 B.R. 957 (Bankr.D.N.J.1982) (dictum); contra, but finding the payment
effective on an estoppel theory, Rodgers v. Seattle-First Natl Bank, 697 P.2d 1009 (Wash.Ct.App.1985).

A few cases and statutes provide that the recording of a mortgage assignment constitutes constructive notice
of it to the mortgagor. See, e.g., EMC Mortg. Corp. v. Chaudhri , 946 A.2d 578 (N.J.App.Div.2008). This is a
minority view and represents a completely unrealistic approach. Few, if any, mortgagors routinely search the
public records prior to making their mortgage payments, and the burden of doing so would be immense. As
a practical matter, statutes and cases taking this approach remove the protection that maker-mortgagors of
nonnegotiable notes would otherwise expect and have.

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Double Sale & Note Pledge Fraud in Securitization & Foreclosure

BAKER & HOSTETLER REPORT FOR FANNIE MAE THAT BEARS MY NAME & THE
NEED TO IDENTIFY THE NOTE HOLDER & PRODUCE THE NOTE!
In 2005, Fannie Maes Office of Corporate Justice retained the law firm of Baker & Hostetler LLP to conduct
an independent investigation of concerns expressed by me about several Fannie Mae business practices in
connection with single-family mortgages.6 I accused Fannie Mae of "aiding, abetting and sanctioning ...
predatory lending and servicing schemes," as well as committing accounting and securities fraud, and possible
racketeering violations.

I viewed Fannie Mae as having responsibility for damage inflicted on mortgage borrowers by unscrupulous
lenders and servicers because Fannie Mae approved lenders and servicers, maintained servicer profiles and
ratings, approved mortgage document terms and servicing requirements, and benefited from the income
stream created by wrongdoing. I feared Fannie Mae's alleged failures could result in both civil and criminal
liability that would affect shareholder value. Through a series of communications to members of the Board of
Directors and others starting in December 2003, I called for an independent investigation of my allegations.7

The Fannie Mae Board of Directors decided to conduct an internal review of my concerns and on September
12, 2005, the Office of Corporate Justice retained Baker & Hostetler LLP to conduct the investigation and
issue a report.

The lawyers at Baker & Hostetler, Mark Cymrot and Ambika Biggs, reviewed more than 1,500 pages of
documents that I provided to Fannie Mae Baker & Hostetler. They held 17 conversations with me and then
identified six general areas of my concerns that included: (1) foreclosure policies and procedures, (2)
transparency, (3) protection of promissory notes, (4) predatory servicing, (5) fraud detection and reporting,
and (6) accounting and securities issues. Within each area, I identified multiple issues that were detailed in
their report. In investigating these concerns, Baker & Hostetler collected documents from me, Fannie Mae and
public sources, reviewed extensively eFannie.com, and interviewed at least 30 Fannie Mae employees.8

On May 19, 2006, Baker & Hostetler released to Fannie Maes CEO and board of directors its
independent counsel report bearing my name, titled Report to Fannie Mae Regarding Shareholder
Complaints by Mr. Nye Lavalle in OCJ (Office of Consumer Justice) Case No. 5595.
In the report, Baker & Hostetler informed Fannie Maes board of directors, general counsel and CEO of
the following findings that corroborate my decades-old concerns, allegations and findings about false
and/or fraudulent foreclosure pleadings, affidavits, lost promissory notes and the double sale/pledge
fraud and liability of borrowers to pay two notes if an original that is falsely claimed lost, came into the
hands of a Holder in Due Course.

6 I was an owner of Fannie Mae stock and beneficiary of Pew Family Trusts that owned Fannie Mae stock and debt, and held proxies from other Fannie Mae
shareholders. See Email dated July 22, 2005, from Nye Lavalle to Deborah M. House, Vice President and Deputy General Counsel; Daniel H. Mudd, President
and Chief Executive Officer; and Board of Director members Stephen Ashley, Ann Korologos, Frederic Malek, Donald Marron, Leslie Rahl, H. Patrick Swygert,
and John Wulff; and others; E-mail dated Feb. 15,2006, from Mr. Lavalle to Mark Cyrnrot and Ambika Biggs.
7 See, i.e., E-mail dated Dec. 19,2003, from Nye Lavalle to then Fannie Mae Chairman and Chief Executive Officer Franklin Raines and other individuals; E

mail dated Jan. 8, 2004, from Nye Lavalle to Vice President and Deputy General Counsel Deborah M. House; E-mail dated June 4, 2004, fromNye Lavalle
to Mr. Raines, Ms. House and other undisclosed recipients; E-mail datedJuly22.2005.fromNyeLavalletoMs.House.Mr. Mudd, and Board of Director members
Stephen Ashley, Ann Korologos, Frederic Malek, Donald Marron, Leslie Rahl, H. Patrick Swygert, and John Wulff, and others; E-mail dated July 25, 2005, to
the individuals referenced in July 22, 2005 email; E-mail dated July 26, 2005, from Nye Lavalle to the individuals referenced in the July 22, 2005, e-mail.
8 Mark A. Cymrot & Amika Biggs, Report to Fannie Mae Regarding Shareholder Complaints by Mr. Nye Lavalle (May 19, 2006) (unpublished, internal

report), available at http://4closurefraud.org/2012/02/04/ocjcase-no-5595-confidential-report-to-fannie-mae-regarding-shareholder-complaints-of-


foreclosure-fraud-by-mr-nye-lavalle/; see also Gretchen Morgenstern, A Mortgage Tornado Warning, Unheeded, N.Y. TIMES, Feb. 5, 2012, at BU1, available
at http://www.nytimes.com/2012/02/05/business/mortgage-tornadowarningunheeded.html?pagewanted=all, Page 6 (Baker & Hostetler Report)
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Double Sale & Note Pledge Fraud in Securitization & Foreclosure

We have found evidence that false statements by foreclosure attorneys are being routinely made in at least two
counties in Florida and appear to be occurring elsewhere. Apparently due to Mr. Lavalles ex parte communications,9 two
Florida judges ordered hearings to examine MERSs role in foreclosures. During consolidated hearings that resulted in the
judges dismissing 24 foreclosure actions, three judges (including one who took the time to observe and comment) criticized
MERS for routinely filing "sham" pleadings and "false" affidavits regarding its interest in promissory notes and supposed lost
promissory notes. One judge questioned whether large numbers of foreclosures would have to be reversed due to fraud on
the court.

MERSs counsel conceded false allegations are routinely made, and the practice should be "modified." He
acknowledged that foreclosure counsel used the Florida Supreme Courts form pleading for foreclosures without critically
analyzing the facts. The form contains an allegation that the plaintiff is the "owner and holder" of the promissory note. MERS
is neither.

Courts in several other states also have rejected foreclosures based upon "discrepancies" between MERS pleadings
and supporting documents. Other court opinions or reports from borrowers - provided by Mr. Lavalle - suggest the same
misrepresentations are made in other states. Our review of reported decisions and pleadings from Connecticut, Illinois,
Louisiana, New York, Ohio, Kentucky, and Georgia appear to contain similar false statements.

The Florida judges also criticized foreclosure counsel for routinely filing lost note affidavits and counts to reform
promissory notes. Mr. Lavalle has identified cases in which the original promissory notes were produced once the court
challenged the lost note affidavit. It appears the notes are not lost, and instead, false statements are being made in the
pleadings and affidavits.

Masked by the improper pleadings is a substantive legal issue of whether MERS or servicers have standing to
foreclose. In the two Florida cases, the judges held that MERS did not have the right to bring the foreclosure actions and
dismissed the actions. These opinions are on appeal. Fannie Maes policy instructs servicers and MERS to commence
foreclosure proceedings in their own names if permitted under state laws. While this policy is based upon reasonable legal
arguments and policy considerations, the issue is not resolved in case law.

It is axiomatic that the practice of submitting false pleadings and affidavits is unlawful. With his complaint, Mr.
Lavalle has identified an issue that Fannie Mae needs to address promptly.

Synopsis of Relevant Baker & Hostetler Findings


Fannie Maes board of directors and chief executive, as well as each of the servicers and firms in the
National Mortgage Settlement, were warned by me as early as 1998 and most by 2004 about the filing
false pleadings with lost note counts and false averments about note ownership and holder status and
fabricated evidence and testimony. They were provided my report and supporting evidence on EMC
Mortgage, Bear Stearns and Washington Mutual as well who were each taken over by JPMorgan Chase.
In the Baker Hostetler report that bears my name, Cymrot and Biggs wrote:
It is axiomatic that the practice of submitting false pleadings and affidavits is unlawful.10

He (Lavalle) expresses fear that Fannie Mae does not have adequate procedures to protect the 15 million freely
negotiable promissory notes in its portfolio. Mr. Lavalle has identified an important legal issue - lost notes threaten the
enforceability of Fannie Maes mortgages and expose borrowers to financial risks.11

Ownership interests in mortgages are now fractured into a variety of income streams due to the advent of mortgage-
backed securities ("MBS"). No single owner would have the means or authority to accept payments.12

As a result of the Florida cases, the Legal Department is formulating a more immediate solution for the issues raised in
those cases, including a directive to attorneys and servicers in Florida directing corrective action.13

9 I never had personal communications with these judges. They identified and read reports and papers I authored as well as my warnings that they referenced
and brought forth in their sua sponte hearings.
10 Mark A. Cymrot & Amika Biggs, Report to Fannie Mae Regarding Shareholder Complaints by Mr. Nye Lavalle (May 19, 2006) (unpublished, internal

report), available at http://4closurefraud.org/2012/02/04/ocjcase-no-5595-confidential-report-to-fannie-mae-regarding-shareholder-complaints-of-


foreclosure-fraud-by-mr-nye-lavalle/; see also Gretchen Morgenstern, A Mortgage Tornado Warning, Unheeded, N.Y. TIMES, Feb. 5, 2012, at BU1, available
at http://www.nytimes.com/2012/02/05/business/mortgage-tornadowarningunheeded.html?pagewanted=all, Page 6
11 Cymrot & Biggs, supra Page 9
12 Cymrot & Biggs, supra Page 8

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Double Sale & Note Pledge Fraud in Securitization & Foreclosure

Masked by the improper pleadings is a substantive legal issue of whether MERS or servicers have standing to
foreclose.14

Fannie Maes policy instructs servicers and MERS to commence foreclosure proceedings in their own names if permitted
under state laws. While this policy is based upon reasonable legal arguments and policy considerations, the issue is not
resolved in case law.15

It appears unlikely that substantial numbers of borrowers who have defaulted on their mortgages could meet the heavy
legal burden to avoid foreclosure. Borrowers seeking damages also would face a difficult burden to demonstrate
that Fannie Mae is responsible for the attorneys misconduct and the conduct was the proximate cause of
damages. Prompt correct action, however, should be taken and would mitigate these risks.16

On the issue of transparency, the mortgage industry has become more complex and more efficient as it has matured
but with a loss of transparency to borrowers.17

the requirement of having notes endorsed in blank and the creation of MERS were developments introduced to
reduce paperwork and the cost of transactions. They have, as Mr. Lavalle suggests, reduced somewhat the
transparency from the borrowers vantage.18

Mr. Lavalle proposes that Fannie Mae return to the days when each promissory note is endorsed and each note is
returned stamped paid in full. He wants an audit trail for mortgage servicing and ownership, and he proposes that
borrowers be entitled to circumvent predatory servicers by dealing directly with their note owners.19

These proposals are not practical, not legally required by the mortgage documents, and not necessary to meet
borrowers needs. Borrowers do not have a legal right or an identifiable interest in knowing the current owners of their
mortgages or in the complex transactions that underlie the secondary mortgage markets.20

Mr. Lavalles proposal that the owner or Fannie Mae, as trustee, should accept loan repayments or otherwise
interact directly with borrowers is contrary to the concept of a secondary market.21

13 Cymrot & Biggs, supra Page 6


14 Cymrot & Biggs, supra Page 6
15 Cymrot & Biggs, supra Page 6
16 Cymrot & Biggs, supra Page 7
17 Cymrot & Biggs, supra Page 7
18 Cymrot & Biggs, supra Pages 7-8
19 Cymrot & Biggs, supra Page 8
20 Cymrot & Biggs, supra Page 8
21 Cymrot & Biggs, supra Page 8
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Fannie Mae & Industry Promissory Note Policies


Specifically, in relationship to Fannie Mae and the Industrys Promissory Note policies and procedures, Baker
& Hostetler addressed the following issues regarding my concerns.
MR. LAVALLE'S CONCERNS

Mr. Lavalle expresses concern about two Fannie Mae policies regarding the handling of promissory notes: (I)
notes are required to be endorsed in blank, undated and without recourse,22 and (2) original notes are not
consistently returned to the borrower stamped cancelled and paid in full.23Mr. Lavalle questions whether
Fannie Mae has adequate procedures in place to keep track of 15 million promissory notes that it has in its
possession or is held for its account.24 Mr. Lavalle claims that the endorsement-in-blank policy leads to
trillions of dollars of missing or lost negotiable paper.25 Mr. Lavalle bases his claim that the problem is
widespread by extrapolating from routine filing of lost note affidavits in Florida foreclosure proceedings.26
He acknowledges that every entity operating in the secondary mortgage market has the same policy.27

According to his calculations, about $6 trillion worth of bearer paper exists due to this practice.28Since these
notes are negotiable instruments, Mr. Lavalle contends borrowers face dire consequences from their
mishandling.29 A holder in due course, for instance, can recover even when the maker has defenses or has
paid the note in full.30

Mr. Lavalle also criticizes Fannie Mae's policies regarding the return of original notes upon pay off. Fannie
Mae's policies allegedly are having an adverse impact on borrowers and on the value of Fannie Mae's
mortgages and mortgage-backed securities. Original promissory notes are not routinely returned to
borrowers stamped cancelled and paid in full when they pay off their loans. He feels that satisfactions
or lien releases, which are now permitted under state laws, do not adequately protect borrowers should
their original promissory notes end up in the wrong hands.31

Mr. Lavalle claims this practice leaves borrowers at risk for years after they have paid off the note.32 Mr.
Lavalle has supplied us with cases of borrowers subjected to claims by multiple lenders alleging ownership
of the same notes.33 Mr. Lavalle proposes that lenders be required to return the original promissory notes
stamped paid in full with each pay off. Mr. Lavalle fears that if the notes are mishandled, borrowers could
bring class action lawsuits, exposing Fannie Mae to great liability.

BORROWER'S RISK TO A HOLDER IN DUE COURSE

The risk Mr. Lavalle perceives from lost or mishandled notes arises from the rights given a holder in due
course by the UCC. A borrower can be required to pay a note twice - even one that is lost or stolen - if the
note comes into the hands of a holder in due course. Under UCC Article III, a maker of a note (i.e., the
borrower) is discharged of liability under the note once payment has been made in accordance with the
note.34

22 E-mail dated Dec. 19, 2003 from Nye Lavalle to then-Fannie Chairman and Chief Executive Officer Franklin Raines and other individuals.
23 E-mail dated July 22, 2005, from Nye Lavalle to Ms. House, Mr. Mudd, and Board of Director members Stephen Ashley, Ann Korologos, Frederic Malek,
Donald Marron, Leslie Rahl. H. Patrick Swygert, and John Wulff and others.
24 E-mail dated Dec. 19. 2003, from Nye Lavalle to then-Fannie Mae Chairman and Chief Executive Officer Franklin Raines and other individuals; E-mail

dated July 22, 2005, from Nye Lavalle to Ms. House. Mr. Mudd, and Board of Director members Stephen Ashley, Ann Korologos, Frederic Malek, Donald
Marron, Leslie Rahl, H. Patrick Swygert, and John Wulff: and others.
25 Telephone interview with Mr. Lavalle (Nov. 1, 2005).
26 Telephone Interview with Mr. Lavalle {Nov. 23, 2005).
27 Telephone interview with Mr. Lavalle (Nov. 1, 2005).
28 Id.
29 Id See also Benny L. Kass, Lost Mortgage Documenls May Cause Future Problems, Realty Times, Sept. 13, 2004, available at

http://realtytimes.com/rtcpages/20040913_lostdocs.htm.
30 U.C.C. Revised 3-305(b) and 3-60I.
31 Telephone interview with Mr. Lavalle (Nov. 1, 2005).
32 Id.
33 See First Union Natl. Bank v. Hufford. 767 N.E.2d 1206 (Ohio Ct. App. 2001); E-mail from Nye Lavalle to Mark Cymrot and Ambika Biggs, containing

postings by individuals claiming there were multiple foreclosures on the same property (Nov. 29, 2005). See also E-mail attachments from Carl Erickson, which
include an allegedly fraudulent promissory note (Nov. 30, 2005). Mr. Erickson claims that two different companies - Freddie Mac and the Charles F. Curry
Company- claimed to be the owner of the note at the same time. Mr. Erickson has communicated with Mr. Lavalle, as is evidenced in the e-mail.
34 U.C.C. Revised 3-602 (a). It states: "an instrument is paid to the extent payment is made by or on behalf of a party obliged to pay the instrument, and to

a person entitled to enforce the instrument. To the extent of the payment, the obligation of the party obliged to pay the instrument is discharged. "
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Double Sale & Note Pledge Fraud in Securitization & Foreclosure
If, however, the party who comes to possess the note is a holder in due course without notice of the
discharge, the discharge is not effective against that party.35 Generally speaking, a holder in due course is
a good faith purchaser of a note for value.36 An individual who finds or even steals a promissory note
endorsed in blank can become a person entitled to enforce the promissory note.37 Against a person entitled
to enforce, the borrower can assert defenses, such as the note has already been paid.38 If however, the lost
or stolen note is transferred to a holder in due course, the note can be enforced without regard to many of
the borrower's defenses, including discharge.39 The borrower is, thus, at risk to paying twice if the original
promissory note is not properly protected.40 The borrower would have the expensive and unenviable task of
trying to collect from the custodian that was negligent in losing the note, from the servicer that accepted
payments, or from others responsible for the predicament.

SATISFACTIONS AND LIEN RELEASES

Mr. Lavalle would like every original promissory note returned to the borrower once it is discharged in order
to mitigate the risk that it could get into the wrong hands. Fannie Maes policy is to require servicers to
satisfy a mortgage and release the lien in a timely manner and in accordance with the applicable state
law.41 The servicers also must return the cancelled note to borrowers if required by state law or the
borrower specifically requests the note.42 In other cases, the servicer either can return the documents to the
borrower or retain them.43 In our view, Fannie Mae can rely upon the dictates of state law. State legislators
presumably evaluated the risks Mr. Lavalle has expressed and determined that loan satisfactions and lien
releases are adequate to protect borrowers and a reasonable trade off for the added efficiencies to the
mortgage system.

FINDINGS REGARDING PROMISSORY NOTES

While Mr. Lavalles concern has a theoretical legal basis, we have not found evidence that large volumes of
promissory notes are being mishandled. He bases his assertion on the routine filing of lost note affidavits.
The affidavits, however, appear to be inaccurate, rather than the notes lost. Fannie Mae has policies for its
own in-house custodian and the 58 custodians it has certified that they seek to protect the mortgage
documents. We have found no evidence suggesting that these procedures are ineffective. With respect to
the return of original promissory notes, Fannie Mae is following state law. In the jurisdictions in which original
notes must be returned, they are. Fannie Mae also responds to requests from lenders and borrowers to
return original notes. If borrowers want their original notes, they can ask for them. In our view, Fannie Mae
can reasonably rely upon state law. The risk that Mr. Lavalle identifies has been evaluated by state
legislatures which have established rules for mortgages within their states.

35 U.C.C. Revised 3-60l (b). It states: "Discharge of the obligation of a party is not effective against a person acquiring rights of a holder in due course of the
instrument without notice of the discharge."
36 U.C.C. Revised 3-302.
37 U.C.C. Revised 3-205, Comment 2; U.C.C. Revised 3-301. Comment.
38 See U.C.C. Revised 3-302, Comment 3, which states: "Discharge is effective against anybody except person having rights of a holder in due course who

took the instrument without notice of the discharge." Section 3-305(a) provides other defenses.
39 U.C.C. Revised 3-60l (b). It states: Discharge of the obligation of a party is not effective against a person acquiring rights of a holder in due course of

the instrument without notice of the discharge." In cases involving lost note affidavits, courts have addressed Mr. Lavalles concern that a subsequent holder will
seek to recover against a borrower. See McKay v. Capital Resources Co., 940 S. W.2d 869, 871 (Ark. l 997)(reversing a foreclosure decree in which the
foreclosing party only produced a photocopy of the promissory note because the borrower may have been subjected to double liability if the holder of the
original note brought a claim); Shores v. First Florida Resource Corp., 267 So. 2d 696 (Fla. Dist. Ct. App. 1972) (in an action for reestablishment of a lost note,
the court held that evidence that the note and mortgage had not been assigned was inadequate because the borrowers were entitled to assurance that future
holders would not sue them on the instruments); Resolution Trust Corp v. First Federal Savings Bunks of Diamondsville, 36 F.3d 972 (10th Cir. 1994) (holding
that the debtor was adequately protected by the foreclosing party's agreement to indemnify the debtor for any liability arising from a claim by a person
who may become a holder of the lost note).
40 Notice of discharge does not prevent holder in due course status. See Official Comment to U .C C. 3-601, stating: Notice of discharge is not treated as

notice of a defense that prevents holder in due course status. However, if the holder in due course had notice of discharge when holder in due course status
was established, discharge is effective against the holder in due course. Id.
41 Servicing Guide. VI-103. It states: "We expect a servicer to take all actions necessary to satisfy a mortgage and release the lien in a timely manner

Procedures for satisfying the mortgage will vary depending on whether or not we are the owner of record for the mortgage; the party holding the custody
documents; and whether the mortgage is a portfolio mortgage or an MBS pool mortgage. Regardless of the procedure used, the servicer has the ultimate
responsibility for having the lien released in a timely manner." If Fannie Mae is the owner of record, it must execute any required release or satisfaction
documents, unless it has granted a limited power of attorney to the servicer. Servicing Guide, VI-103.01. If Fannie Mae is not the owner of record, the servicer
must execute the release or satisfactions documents in its or MERS' name. Servicing Guide, VI-1 03 .02. The servicer also must submit forms to either Fannie
Mae or the document custodian requesting the custody documents. See Servicing Guide, VI-103.01 and VI-103.02.
42 Id. It states: Once the required release or satisfaction documents are executed and the mortgage note is canceled, the servicer must immediately send the

canceled documents to the borrower if state law requires such action or the borrower specifically requests the return of the documents.
43 Id. (stating In other instances [when state law does not require the return of the documents and the borrower has not requested them], the servicer may

either return the documents to the borrower or retain them (as long as they are not destroyed until after the retention period required by applicable law].)
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HISTORICAL PERSPECTIVE & MY PRIOR REPORTS & WARNINGS


For over three decades, since the mid-nineties, I have warned and written about the double and multi-
pledging of original promissory notes to different entities. Once, participation loans were common, and
interests in loans could be divided up and sold to different banks. Then, double and multi-pledging fraud
occurred but was easier to find and fix.

However, as securitization came into existence, the ability to double and even multi-pledge the same loan and
collateral were made easier by the complexity of the systems involved in the process as well as the structure
of securitization itself. Winks and nods of cooperating trustees, who merely inventoried the contents of
collateral files as the designated bagman in the fraudulent securitization scheme, allowed the fraud to grow
to an exponential realm.

Double and multi-pledging promissory note fraud involves selling the same note or different copied or
imaged versions of the same note to multiple parties and collecting purchase proceeds from each note's
purchaser. However, there is only one mortgage recorded for each note and loan.

My three decades of warnings, reports, and testimony fill the nations blogs, courtrooms, newspapers, and
boardrooms. Some, like Fannie Mae, heeded my warnings and advice, while others have ignored it. In a day-
and-age of complex cyber-attacks that can rivet our airwaves, while silently stealing our wealth, the entire
world's financial system consists of mere digits and electronic impulses circulating the world at light speed. The
same is true of our mortgage loans and promissory notes.

Today, light-speed electronic systems use bar codes to track promissory notes endorsed in blank. Each
movement, shipment, and even file location of an original note and its collateral file is recorded in document
custody, tracking, and collateral systems of record. Trailing and tracking data is more complicated than
following the paper trail. This is one motivation why notes are endorsed in blank.

There are important motives for the industry standard of endorsing promissory notes in blank and leaving out
the date the endorsement was placed or executed. The motives are diabolical and nefarious. Think about this
scenario for a moment. If someone was going to send you a check for $10,000, a $100,000, or even $1
million, wouldnt you want your name printed on the check? Wouldnt you want the check dated? Wouldnt you
want the signature of the party executing it to be placed or authorized by the issuer executing the check?

Now, think of the following scenario. If you found an old checkbook from your dead grandparents, could you
go ahead and forge their signature on their check or make a stamp of their signature a decade later? As my
colleagues and I know, that is exactly what is going on today. If signatures of executives of dead companies
are missing on an old note and needed or an endorsement, remediation firms find the old signatures of dead
persons from public filings and make stamps to place on notes with a missing endorsement.

By attempting to turn what could be unenforceable and non-negotiable promissory note into valuable
negotiable instruments and bearer paper the industry has made it difficult for you, a court, investors, and
regulators to uncover each real transfer of the note as described in paragraph one of the borrower's note.
Keeping original notes endorsed in blank or putting unattached allonges in a collateral file to be later
attached allows whoever as control over the notes to sell, trade, hypothecate, pledge and even mortgage
the original mortgage as ANY time, even during foreclosure.

Claiming original notes are lost; refusing to allow inspection of the original note and collateral file; creating a
new assignment before foreclosure; concealing note certifications and exception reports; use of allonges; and
using an old or different version of an original note at foreclosure filing are just a few of the red flags for
securitization and foreclosure fraud as well as a possible double note sale or pledge.

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Double Sale & Note Pledge Fraud in Securitization & Foreclosure

SECURITIZATION FRAUD, NOT SECURITIZATION FAIL


Adam J. Levitin is a Professor of Law at the Georgetown University Law Center, in Washington, D.C., where
he teaches courses in structured finance, consumer finance, bankruptcy, contracts, and commercial law. Housing
finance and is a major focus of his scholarship. Levitin holds a J.D. from Harvard Law School, an M.Phil and an
A.M. from Columbia University, and an A.B. from Harvard College. In 2013 he was awarded the American
Law Institutes Young Scholars Medal.44

Professor Levitin has previously served as the Bruce W. Nichols Visiting Professor of Law at Harvard Law
School, as the Robert Zinman Scholar in Residence at the American Bankruptcy Institute, and as Special
Counsel to the Congressional Oversight Panel supervising the Troubled Asset Relief Program (TARP).45

Professor Levitin has chaired the Mortgage Committee of the Consumer Financial Protection Bureaus Consumer
Advisory Board. Before joining the Georgetown faculty, Professor Levitin practiced in the Business Finance &
Restructuring Department of Weil, Gotshal & Manges, LLP in New York, and served as law clerk to the
Honorable Jane R. Roth on the United States Court of Appeals for the Third Circuit.

Professor Levitin has authored numerous articles and provided testimony before Congress regarding the
shortcomings and failures of the mortgage servicing and securitization markets, particularly with what is known
as the securitization fail scenario. Professor Levitin did not receive any Federal grants nor has he received any
compensation in connection with his testimony, and he did not testify on behalf of any organization.

In his testimony before a congressional committee, Professor Levitin testified about what he and other
academics and some of my colleagues commonly refer to as the securitization fail scenario. In his testimony,
Professor Levitin testified to the following:46
The mortgage foreclosure process is beset by a variety of problems. These range from procedural defects (including,
but not limited to robosigning) to outright counterfeiting of documents to questions about the validity of private-label
mortgage securitizations that could mean that these mortgage-backed securities are not actually backed by any
mortgages whatsoever. While the extent of these problems is unknown at present, the evidence is mounting that it is
not limited to one-off cases, but that there may be pervasive defects throughout the foreclosure and securitization
processes. The problems in the mortgage market are highly technical, but they are extremely serious. At best they
present problems of fraud on the court, clouded title to property, and delay in foreclosures that will increase the
shadow housing inventory and drive down home prices. At worst, they represent a systemic risk of liabilities in the
trillions of dollars, greatly exceeding the capital of the USs major financial institutions.

I have the highest admiration and respect for Professor Levitin, and that is why I detailed his credentials and
accomplishments. However, I respectfully disagree with him on securitization fail. We should not refer to these
frauds as securitization fail but call it was it is, securitization fraud!. These widespread abuses were
specifically designed to defraud investors, government taxing authorities, courts, government, and borrowers
alike. Moreover, theyve been occurring for over three decades with no end in sight.

I have written extensively about the frauds that have permeated the RMBS marketplace for decades. As
shown below, I coined the term predatory mortgage securitization in the late 90s and placed it in my 21st
Century Loan Sharks Report issued in 2000. Before we begin to explore the evidence of the many fraudulent
issues related to Residential Mortgage-Backed Securitizations (RMBS), I believe it would be a good exercise
to see what I wrote back in the late 90s. It's this initial research and investigation that has led to tens of
billions in settlements for such frauds and abuses with government regulators.

44 "Written Testimony of Adam J. Levitin Professor of Law ..."financialservices.house.gov. N.p., n.d. Web. 27 Dec. 2016
<http://financialservices.house.gov/uploadedfiles/hhrg-113-ba00-wstate-alevitin-2>.
45 Id.
46 Problems in Mortgage Servicing from Modification to Foreclosure, Hearing Before the S. Comm. on Banking, Housing, & Urban Affairs, 111th Congress Cong.

(November 16, 2010) (testimony of Adam J. Levitin). Print.


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MY WARNINGS ABOUT SECURITIZATION FRAUD IN 2000


In my 21st Century Loan Sharks report, authored in the late 90s and released in 2000, I described how
predatory lending was not limited to subprime, small banks or mortgage companies. The largest banks and
Wall Street investment firms including Bear Stearns, Lehman Brothers, CitiGroup, and Washington Mutual
were all guilty of predatory lending practices.

I highlighted how the mortgage industry created special servicers such as EMC Mortgage, Fairbanks
Capital, Litton Loan and Ocwen that were mere toxic waste dumps for companies looking to dump
predatory loans. Some of these loans were created by fraudulent and deceptive means. Critical in my writing
then and critical to this report, were questions I asked of lawyers defending clients from what I called
wrongful foreclosure that questioned if the bank or mortgage servicer they were suing or foreclosing on
their clients home owned the note theyre foreclosing or collecting on? This was the foundation of my
Produce The Note strategy that took root in the nineties and rapidly spread across American courtrooms
over the next three decades.

On page 21, I described four [4] primary stages where predatory mortgage lending could occur that
included:47

1. Predatory Mortgage Securitization


2. Predatory Mortgage Origination
3. Predatory Mortgage Servicing
4. Predatory Mortgage Foreclosure

I was one of the first individuals to place the focus of these predatory abuses at the foot of Wall Street and
what I called Predatory Mortgage Securitization. Bear in mind (no pun), few people and especially lawyers
knew at this point in time, about the mass securitization of mortgages and especially its complexities. In writing
about Predatory Mortgage Securitization, I reported for the first time, various aspects of the process that are
now widely known and recognized by my colleagues as the securitization fail scenario and what I now call
securitization fraud! In my report, I wrote the following about Predatory Mortgage Securitization:48
Predatory Mortgage Securitization is a major phase of Predatory Mortgage Lending. In most cases, its the first phase
and step of the predatory mortgage lending process. Think of it like the drug traffickers and producers of the Colombian
drug cartel. They produce, manufacture and distribute the drug and offer protection and enforcement.

If the drugs werent manufactured, distributed and protections in place to guarantee their distribution to the local and
street dealers for sale to drug addicts, we wouldnt have a drug problem in America. Large-scale local operations would
be too easily detectable to local authorities.

Think of certain Wall Street investment banks in the same vein as the Colombian Drug Cartel. Local mortgage companies
or brokers would be broke [pardon the pun] if not for the supply of ready cash available to these brokers and to
unscrupulous home contractors. Without the purchase of notes, deeds and other financial instruments in whats termed
subprime and B & C credit markets by the Wall Street firms, the brokers would have no supply of money.

The Wall Street firms sell various securitizations of mortgage backed securities and derivative products to institutional
investors such as mutual funds, banks, pension funds and corporations. Many leaders and executives of the purchasers of
this subprime paper dont even know the effects of what their purchase is doing to millions of Americans.

Their CFOs and brokers charged with that responsibility only examine the return on investment of such security products
and not the risks, effects and social consequences of such investments. While some may be concerned about the various
social consequences, the firms should more closely monitor what predatory financiers are selling. The risks may be far
larger than stated, analyzed or contemplated.

47 Lavalle, Nye. 21st Century Loan Sharks. Rep. Boca Raton, FL: Americans Against Mortgage Abuse, 2000. Print.
48 Id.
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I wrote about how my investigation and analysis found twenty-three (23) various predatory mortgage
securitization practices that I outlined in numerical order. Below are what I believe are the most pertinent
predatory mortgage securitization practices with their corresponding numbers that are pertinent to this report
with certain practices related to this report, accentuated and highlighted:49
1. Securitizations that are termed and classified as whole loan and true sales without recourse that are really
financing mechanisms with undocumented side deals and agreements for recourse which may not be able to be
classified as investments in real estate and may have tax and reporting consequences for purchasers;

3. Failing to record in country records the true and real ownership, assignment and endorsements of promissory
notes, deeds and other mortgage documents which were part of sale, assignment or transfer;

4. Hiding and concealing from investors documented high risk item, litigation pending, gray legal opinion letters and
other items, court rulings, judgments, sanctions, fines, investigations and other matters or disclosure to investors in
flings with the SEC for mortgage securitizations;

5. Hiding or concealing from investors the focus on predatory lending in subprime securitizations and potential
regulatory actions;

8. Knowingly accepting loans and not disclosing to investors problems with loan documentation; missing, altered or
fraudulent documentation in loan file; chain of titles and ownership; threatened legal actions; current regulatory
actions or complaints made about loans assigned;

9. Reporting problems or improper custody, maintenance and control of promissory notes, deeds and other loan
documents;

10. Reporting problems in loan servicing, origination or underwriting operations;

12. Failing to perform detailed, independent and fail-safe due diligence on individual loans being purchased;

13. Failing to disclose the details of side deals, recourse and indemnification agreements between servicers, sellers
and buyers;

18. Offering for sale and securitization interests in notes, deeds or other mortgage instruments that the servicer or
securitizer does not have a real interest in;

19. Offering for sale and securitization interests in notes, deeds or other mortgage instruments that the servicer or
securitizer does not have in their custody or control;

20. Offering for sale and securitization interests in notes, deeds or other mortgage instruments that the servicer or
securitizer has offered for sale to someone else;

21. Offering for sale and securitization interests in notes, deeds or other mortgage instruments that the servicer or
securitizer is owned by someone other than party identified in the prospectus;

22. Understating historical prepayment or foreclosure rates;

23. Failing to disclose predatory lending practices, illegal, abusive or criminal collection and foreclosure measures
that may put portions of the loan pool at risk.

Bear in mind; I discovered these predatory mortgage securitization practices in the mid-to-late nineties when I
had minimal dial-up Internet access and had to travel across the nation inspecting court files, reading books,
magazines, and conducting interviews. As you will read in the following pages, the fraudulent and abusive
practices dealing with the RMBS market, I identified above, were later validated by the U.S. Justice
Department. Over a decade later the U.S Justice Department entered into tens of billions of dollars in
settlements with virtually every major bank and mortgage securitizer doing business in the United States.

49 Lavalle, Nye. 21st Century Loan Sharks. Rep. Boca Raton, FL: Americans Against Mortgage Abuse, 2000. Print.
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2010 PROOF OF SECURITIZATION FRAUD & MULTI-PLEDGING OF NOTES


On June 21, 2010, my friend and colleague Michael Redmans blog 4closurefraud.org, posted my comments
about predatory securitization a/k/a securitization fraud. In the post, I recounted:
In my 1999 21st Century Loan Sharks Report, I coined and defined the term Predatory Mortgage Securitization
(see http://en.wikipedia.org/wiki/Predatory_mortgage_securitization) in my report from MY PERSONAL RESEARCH
AND ANALYSIS I DEFINED SOME THE FOLLOWING PRACTICES THAT DEFINED Predatory Mortgage Securitization.
Securitizations that are termed and classified as whole loan and true sales without recourse that are
really financing mechanisms with undocumented side deals and agreements for recourse which may not be
able to be classified as investments in real estate and may have tax and reporting consequences for
purchasers;
Stamping, filing and recording loan and mortgage instruments that indicate loan was sold without recourse
when in fact there were recourse provisions;
Failing to record in country records the true and real ownership, assignment and endorsements of
promissory notes, deeds and other mortgage documents which were part of sale, assignment or
transfer;
Knowingly accepting via computer tapes the principal balances of loans offered for securitization when
the servicers, investment bank or securitizer has knowledge that problems or potential fraud existed in
the servicing operation of the bank, servicer, broker originating, selling, assigning or transferring the
loan;
Knowingly accepting via computer tapes the principal balances of loans offered for securitization when
the servicers, investment bank or securitizer has knowledge that problems or potential fraud existed in
the servicing operation of the bank, servicer, broker originating, selling, assigning or transferring the
loan and the new owners, servicer and assignee securitizing the loan pool does not possess the full
and complete loan transaction histories for each borrower;
Knowingly accepting loans and not disclosing to investors problems with loan documentation; missing,
altered or fraudulent documentation in loan file; chain of titles and ownership; threatened legal actions;
current regulatory actions or complaints made about loans assigned;
Reporting problems or improper custody, maintenance and control of promissory notes, deeds and
other loan documents;
Offering for sale and securitization interests in notes, deeds or other mortgage instruments that the
servicer or securitizer does not have a real interest in;
Offering for sale and securitization interests in notes, deeds or other mortgage instruments that the
servicer or securitizer does not have in their custody or control;
Offering for sale and securitization interests in notes, deeds or other mortgage instruments that the
servicer or securitizer has offered for sale to someone else;
Offering for sale and securitization interests in notes, deeds or other mortgage instruments that the
servicer or securitizer is owned by someone other than party identified in the prospectus;

In essence on thousands of occasions I stated to regulators, CEOS, banks, Fannie and Freddie that the practices
of the banks were that they were double and multi-pledging assets and pledging paid off and refinance notes to
securitizations. This is something April, Max and I have discussed for years now. Now, they come and admit that
each of my allegations were true. Without analyzing the deal, as complex as they are, you WILL NEVER KNOW IF
THE FORECLOSING PARTY HAS ANY RIGHT TO FORECLOSE!!!

The motives I identified for the Blank Endorsements and missing assignments and pre-notarized Blank
Assignments and Blank Allonges that were placed into the custodial/collateral files were to be able to:
Multi-pledge collateral (Notes) so as to cook the books;
In case of bankruptcy, allow the entity in possession of the notes to simply transfer to another entity to
be decided or themselves the notes etc so as to keep out of the bankruptcy estate of the bankrupt
creditor;
To pretend to show that a true sale occurred when in reality the so-called lenders were financing their
receivables;
Complete and change chains in titles to notes that were toxic where fraud was known and HDC could
be achieved;
Shuffle the ball (note) under the shell (owner) so as to subvert TILA, RESPA, and FDCPA claims and
other lawsuit claims and any related HDC and assignee liability issues.

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Double Sale & Note Pledge Fraud in Securitization & Foreclosure
Now, in BOAs Motion in the TB&W case, they prove my allegations that the notes were multi-pledged and my
statement for years that unless you see where each note comes on and off the books, and review the custodial
documents, you will NEVER KNOW WHO OWNS THE NOTE and has any right to accelerate, amend, modify,
settle, payoff, satisfy, return, and cancel the note, let alone authority or standing to foreclose.

Here is the key part from the motion.

On numerous occasions, the Debtor has informed the Court and other parties in interest that one of the
biggest challenges in this case will be sorting out the competing claims to cash and other assets that flowed
through the Debtors accounts prior to the bankruptcy filing. Indeed, it appears as though many loans and
other mortgage-related assets have been double and even triple-pledged to various constituencies.
According to the Debtor, the largest single source of disputed fundsmore than $548 million according to
the Debtors Second Interim Reconciliation Reportrelates to Freddie Mac. Indeed, BofA believes that there
were improper diversions of Ocala loans and assets from TBW to Freddie Mac, and Ocala may have valid
ownership claims with respect to a substantial portion of assets that relate to Freddie Mac. Accordingly,
there can be little doubt that BofA, in its representative capacities with respect to Ocala, has a valid and
pressing need for information regarding Freddie Macs extensive relationship with the Debtor, which is
directly relevant and necessary to evaluate the Debtors property, liabilities, and financial condition. In just a
few weeks, the Debtor intends to file an Asset Reconciliation Report that will identify with greater specificity
(but, importantly, not resolve) the remaining issues with respect to ownership rights. As a result, the need for
BofA to gain access to documents in Freddie Macs possession has become particularly urgent. Among other
things, BofA needs to obtain documents from and examine witnesses at Freddie Mac to (1) evaluate
competing claims against the estate, (2) test the assumptions contained in the Asset Reconciliation Report,
and (3) examine Freddie Macs claim of ownership with respect to certain mortgage assets and its custodial
arrangements with Colonial Bank for those assets. Despite these time sensitivities, Freddie Mac has so far
blocked BofAs ability to obtain any of this information, including those documents that have already been
produced to the Debtor and counsel for the Committee. In its objection, Freddie Mac goes to great lengths to
characterize the BofA 2004 Motion as overly burdensome, massively expensive, improperly motivated, and
generally disruptive to the ongoing discovery between the Debtor and Freddie Mac. Even if such arguments
had any merit under the circumstances (which they do not), the simple fact remains: nearly three months after
the Court entered its order on the Debtors Rule 2004 motion authorizing and directing examination of
Freddie Mac, BofA has not been able to review a single document

Nye Lavalle

The Colonial Bank failure brought into the open, the banking industrys dirty laundry and secrets about double
and multi-pledging of collateral. I had been warning of for over a decade back in 2010. Here, in full view of
the public, Bank of America had to air the dirty laundry of the industry for the whole world to see in a U.S.
Bankruptcy Court.

An examination and study of the TB&W Bankruptcy proceedings and related litigation shines a spotlight on
the back-office, off and on-balance sheet accounting maneuvers and complex financing agreements that
underlie each complex mortgage transaction. A Final Reconciliation Report issued by TB&W in their
bankruptcy proceeding not only provides a good schematic of the who, what, where, when and why the
money moves, but also concrete evidence of double/multi pledge fraud that resulted in the prosecution and
imprisonment of TB&Ws CEO.

Many of my colleagues always argue to follow the money! Unfortunately, the ability to follow the money is
intentionally obfuscated by participants in the secondary mortgage market. They dont want American
borrowers, investors, and courts to learn the dirty secrets of promissory note laundering as well as the multiple
and undisclosed note holders, as defined in paragraph one of the uniform promissory note.

A reading of the TB&W case history on the following pages will answer many questions including, but not
limited to 1) why promissory notes are endorsed in blank; 2) why are there no complete chains of
endorsements; 3) why loose paper called allonges are placed in collateral files; 4) why there are two or
more versions of original notes; 5) why forged assignments are created; and 6) why there are so many
document defects and deficiencies in collateral files?

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Double Sale & Note Pledge Fraud in Securitization & Foreclosure

COLONIAL BANK, TAYLOR, BEAN & WHITAKER, AND OCALA FUNDING


FAILURE & DOUBLE/MULTI-PLEDGE NOTE FRAUD
OVERVIEW OF COLONIAL & TB&W FAILURE
Starting in 2002, Colonial Bank began providing Taylor, Bean & Whitaker (TB&W) with additional funding
options through various participation facilities. Under the terms of these facilities, which were referred to as the
COLB facilities (the COLB), TB&W sold to Colonial a participation interest (usually 99%) in mortgage loans,
which were then sold to a mortgage investor or allocated to a particular mortgage security for which other
financing was available.50

TB&W and Colonial also entered into additional assignment of trade participation facilities commonly referred
to as the AOT facilities (the AOT)51 under which Colonial would purchase participation interests in trades held
by TB&W with respect to agency securities (both Freddie Mac and Ginnie Mae) and securities issued by
private label issuers. Once TB&W allocated a loan to an agency or private label securitization, a loan that
was previously funded on the COLB (or other facilities) could be moved to the AOT until the ultimate
settlement of the underlying trades.52

Collectively, the COLB and AOT facilities provided TBW with funding capacity through Colonial in excess of $3
billion for the origination, purchase, and ultimate sale of loans. In the months preceding TB&Ws collapse, the
exclusive source for funding individual loan closings was the Colonial COLB facility. As loans were funded,
they were assigned to that facility and then sold. As of August 24, 2009, Colonials records indicate that there
were 8,714 loans assigned to the COLB facility, with an associated advance balance in excess of $1.7 billion.
Of this total, there were 4,928 loans, with a cumulative advance balance of $909.6 million, that had been
sold to Ocala Funding and delivered to LGTS, its collateral agent, for which Colonial had not been paid.53

On August 14, 2009, Colonial Bank of Montgomery, AL was closed by the Alabama State Banking
Department, and the Federal Deposit Insurance Corporation (FDIC) was named Receiver.54 The Colonial Bank
failure was one of the largest financial failures in American history.55 The FDIC's seizure of Colonial's roughly
350 branches and $26 billion in assets made it the sixth-biggest bank failure in U.S. history and the third
largest since the beginning of the credit crisis that plunged our financial markets into turmoil in 2008 behind
Washington Mutual and IndyMac who failed in 2008.56

The bulk of Colonial's assets were transferred over to BB&T at an estimated cost of $2.8 billion to the FDIC's
insurance fund. The Colonial collapse exacerbated an already depleted FDIC further into crisis mode. In
September of 2009, the FDIC had to propose a plan to raise $45 billion to replenish its coffers.57

The underlying cause of Colonial Banks failure had its roots when on August 3, 2009, FBI special agents
raided the headquarters of TB&W in Ocala, Florida. The FBIs raid was in connection with an investigation

50 In Re: Taylor, Bean & Whitaker Mortgage Corp. Et Al, Debtors. Case 3:09-bk-07047-JAF Final Reconciliation Report of Debtor Taylor, Bean & Whitaker
Mortgage Corp. In the United States Bankruptcy Court for the Middle District of Florida Jacksonville Division. 1 July 2010. Print. Jeffrey W. Kelley; Ezra H.
Cohen; J. David Dantzler, Jr. of Troutman Sanders LLP as Special Counsel to Debtor Taylor, Bean & Whitaker Mortgage Corp. and Russell M. Blain; Edward J.
Peterson, III; and Amy Denton Harris, Attorneys for Debtor Taylor, Bean & Whitaker Mortgage Corp. (TB&W Final Reconciliation Report)
51 In the months leading up to TBWs collapse, TBW entered into similar AOT facilities with Cole Taylor Bank and USAmeribank.
52 See TB&W Final Reconciliation Report Supra
53 Id.
54 Federal Deposit Insurance Corporation. "FDIC: Failed Bank Information - Bank Closing Information for Colonial Bank, Montgomery AL." Www.fdic.gov.

Federal Deposit Insurance Corporation, 12 June 2014. Web. 15 Jan. 2017. <https://www.fdic.gov/bank/individual/failed/colonial-al.html>.
55 Finkle, Victoria. "Big Banks Lose Bid to Halt Crisis-Era Lawsuits." Www.nytimes.com. The New York Times Company, 10 Jan. 2017. Web. 15 Jan. 2017.

<https://www.nytimes.com/2017/01/10/business/dealbook/wells-fargo-credit-suisse-deutsche-bank.html?smid=fb-share>.
56 O'Keefe, Brian, Doris Burke, and Beth Kowitt. "The Man behind 2009's Biggest Bank Bust." Fortune.com. Time, Inc., 12 Oct. 2009. Web. 16 Jan. 2017.

<http://archive.fortune.com/2009/10/09/news/companies/bobby_lowder.fortune/index.htm>.
57 Id.

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Double Sale & Note Pledge Fraud in Securitization & Foreclosure
related to TB&Ws acquisition of a majority stake in Colonial BancGroup, the parent of Colonial Bank that
once was one of the 25 biggest depository banks in the nation.58

On August 24, 2009, TB&W filed a voluntary petition for relief pursuant to Chapter 11 of the United States
Bankruptcy Code (the Petition). Prior to the Chapter 11 filing, TB&Ws directors and officers resigned; two
new, independent restructuring professionals were appointed to comprise TB&Ws board of directors; and,
Neil Luria of Navigant Capital Advisors was appointed by the new board as Chief Restructuring Officer.59

In addition, new bank accounts were established at Regions Bank (Regions) to be used by TB&W as debtor
in the administration of the bankruptcy estate. In the earliest stages of their bankruptcy case, issues emerged
regarding the ownership of mortgages that were claimed to be collateral securing payment of promissory
notes issued by TB&Ws subsidiary, Ocala Funding, LLC (Ocala Funding), pursuant to the terms of a
commercial paper facility.60

According to Bank of Americas records, there were 9,111 mortgage loans that were collateral securing the
amounts owed on the Ocala Funding commercial paper facility as of August 24, 2009. However, it is now
evident that Ocala Funding or TB&W had previously sold and been paid for more than 8,600 of these
loans, with 7,192 having been sold to Freddie Mac. Another 301 of the loans that were purportedly
collateral for the facility, were either very old, had never closed, had been paid off, or were sold prior to
2007. Only 183 loans (including the 86 described in Paragraph 1, above) are assigned the Ocala
Funding investor code in the TB&W servicing system, and 23 of these loans were apparently sold to and
paid for by Freddie Mac.61

In addition, Ocala Funding or TB&W had previously sold 4,856 of the 8,714 loans to third-party
mortgage investors such as Freddie Mac, which included 4,254 of the loans that had been sold to Ocala
Funding (for which Colonial had not been paid). The result is that the respective records of Colonial, Ocala
Funding, and Freddie Mac (and other investors) each indicate that they are the owner of the same 4,254
mortgages!62

In sum, when TB&W collapsed, Ocala Funding did not have possession and control of mortgages that, when
coupled with available cash collateral, were sufficient to satisfy the amounts owed under the facility. Bank of
America, as indenture trustee of the facility, contended that Colonial was in possession of mortgages (or
related sales proceeds) that were collateral for the facility. Because Ocala Funding and the commercial
paper facility were managed by TB&W, these issues were relevant to the administration and ultimate
resolution of this bankruptcy estate. The TB&W bankruptcy and ensuing litigation provides an inside look into
the complex finance transaction that underlie the modern mortgage transaction and multi-pledge fraud!63

As part of their core bankruptcy proceedings, TB&W as debtor had to reconcile the issues and claims of
double and multi note pledge fraud presented to the bankruptcy court and other litigation, including criminal
prosecutions to follow.64

On June 16, 2010, an indictment filed against Lee Farkas, TB&Ws former Chairman and principal
shareholder, was unsealed in the Eastern District of Virginia wherein Farkas was charged with bank fraud,
wire fraud and securities fraud. It was apparent that some, but not all, of these charges arise from facts and

58 Schoenberg, Tom (March 20, 2012). "Ex-Taylor Bean Finance Chief Admits $3 Billion Fraud Role". Business Week. Retrieved November 23, 2013.
59 See TB&W Final Reconciliation Report Supra
60 See TB&W Final Reconciliation Report Supra
61 Id.
62 Id.
63 Id.
64 Id.
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Double Sale & Note Pledge Fraud in Securitization & Foreclosure
circumstances that were the subject of the Asset Reconciliation. However, a number of the charges related to
his earlier conduct. The criminal investigation was ongoing and Farkas was convicted.65

The following pages describe in intimate detail, the frauds of TB&W drawn from their own bankruptcy and
reconciliation reports filed with the Court. It provides an intricate look at the complex financing schemes used
by Americas banks, lenders and servicers in financing not only borrowers promissory notes and mortgage
loans but their operations as well.

THE BUSINESS OF TAYLOR BEAN & WHITAKER


Taylor, Bean & Whitaker (TB&W) offers us a glimpse into the underbelly and dark accounting secrets of the
secondary mortgage market. A study of TB&Ws operation, funding sources, sales and securitization conduits,
accounting practices, and servicing processes highlights the complexity of the modern-day mortgage
transaction from the selling of a dream to the reality of investor and borrower fraud.

Prior to TB&Ws bankruptcy, in July 2009, TB&W was originating approximately 14,500 mortgage loans per
month through a nationwide network of mortgage brokers and community banks. After origination, TB&W
would sell the mortgage loans to the Federal Home Loan Mortgage Corporation (Freddie Mac) and other
mortgage investors who used the loans to support the issuance of mortgage-backed securities or held them as
investments in their portfolio.

TB&Ws business, like other mortgage lenders, was complex and complicated. In general, its principal
operations included: 1) Origination, underwriting, processing and funding of conforming and non conforming
conventional and government-insured residential mortgage loans; 2) Sale of mortgage loans and securities
into the secondary market, principally to government-sponsored enterprises such as Freddie Mac and to
investors in Ginnie Mae insured securities and financial institutions; and 3) Mortgage payment processing and
loan servicing.66

TB&W Origination, Underwriting and Funding of Mortgage Loans


Through a large nationwide network of independent mortgage brokers and community banks, TB&W
provided mortgage financing to individual borrowers throughout the United States. TB&Ws ultimate
objective was to sell these mortgages to investors, including government-sponsored enterprises (e.g.,
Freddie Mac) and financial institutions (e.g., Wells Fargo), and retain the servicing rights to service the
mortgages for the purchasing investor.67

Because TB&W intended to sell the mortgage loans that they originated, its underwriting guidelines
conformed to the guidelines established by their investors. In effect, the investors guidelines became TB&Ws
underwriting guidelines.68

In the five years prior to the commencement of their bankruptcy, TB&W experienced tremendous growth in
the number of loans it originated. For calendar year 2004, TB&W closed or purchased a total of 59,129
loans representing a dollar value in excess of $9.5 billion. By calendar year 2008, that annual production
volume had increased to 184,227 loans with a dollar value in excess of $32.3 billion.69

By early 2009, TB&W was originating approximately 14,500 new loans every month, representing in
excess of $2.7 billion in monthly production. TB&Ws mortgage servicing operation experienced similar
growth. In December 2004, TB&W was servicing 73,345 loans with an unpaid principal balance (UPB) in

65 Id.
66 Id.
67 Id.
68 Id.
69 Id.
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Double Sale & Note Pledge Fraud in Securitization & Foreclosure
excess of $10.5 billion. By August of 2009, TB&Ws servicing portfolio had grown to more than 512,000
loans with a UPB in excess of $80 billion.70

In order to fund the individual mortgage loans at closing and then hold them until they could be sold,
TB&W required significant financing. At the same time, TB&Ws servicing operations required substantial
working capital in order to fund the necessary servicing advances required under their numerous servicing
agreements with investors. Therefore, TB&W financed its loan originations, mortgage sales, and servicing
operations using a variety of funding sources.71

A key component of TB&Ws financing was its long-standing relationship with Colonial Bank. Dating back to
1999, Colonial served as one of TB&Ws primary sources for loan funding through a number of different
lending facilities.72

Beginning in September of 1999, Colonial provided TB&W with a traditional mortgage warehouse lending
facility (the Colonial Mortgage Warehouse Facility), which continued in various forms until a hold was
placed on all of TB&Ws accounts in August 2009. Included in the Colonial Mortgage Warehouse Facility
was an overline facility (the Colonial Overline Facility or the Overline), which provided certain
additional funding capacity for TB&W.73

Starting in 2002, Colonial began providing TB&W with additional funding options through various
participation facilities. Under the terms of these facilities, which in recent years were referred to as the COLB
facilities (the COLB), TB&W sold to Colonial a participation interest (usually 99%) in mortgage loans, which
were then sold to a mortgage investor or allocated to a particular mortgage security for which other
financing was available.74

TB&W and Colonial also entered into additional assignment of trade participation facilities commonly
referred to as the AOT facilities (the AOT) under which Colonial would purchase participation interests in
trades held by TB&W with respect to agency securities (both Freddie Mac and Ginnie Mae) and securities
issued by private label issuers. Once TB&W allocated a loan to an agency or private label securitization, a
loan that was previously funded on the COLB (or other facilities) could be moved to the AOT until the
ultimate settlement of the underlying trades. Collectively, the COLB and AOT facilities provided TB&W with
funding capacity through Colonial in excess of $3 billion for the origination, purchase, and sale of loans.75

In addition to the Colonial facilities, TB&W had a number of other funding sources for the origination and
sale of mortgage loans, most of which were terminated prior to or at the beginning of 2009:76

From 2002 until January of 2009, TB&W was a party to a purchase facility with Credit Suisse First
Boston Mortgage Capital, LLC (CSFB). The CSFB facility began as a $125 million facility,
ultimately increased to a $700 million facility, and was thereafter paid in full and terminated in
January of 2009.77

From 2003 until 2007, TB&W and Washington Mutual Bank, FA were parties to an early purchase
facility which initially provided funding of $300 million, ultimately expanded to provide funding of
up to $700 million, and was paid in full by TB&W in July 2007.

70 Id.
71 Id.
72 Id.
73 Id.
74 Id.
75 Id.
76 Id.
77 Id.
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Double Sale & Note Pledge Fraud in Securitization & Foreclosure

TB&W entered into a purchase facility with Dresdner Bank AG in May of 2007 that provided an
additional $300 million in funding. The Dresdner facility was paid in full and terminated in
December of 2008.

TB&W entered into an early purchase facility with Bank of America in March of 2009 (the BoA
EPF). The BoA EPF initially provided funding for up to $500 million and was expanded in May of
2009 to provide for funding of up to $1 billion. This facility was in effect when TB&W ceased
operations in August 2009.

TB&Ws subsidiary Ocala Funding, LLC created a related commercial paper facility (the OFCP) in 2005 that
was ultimately expanded to a $4 billion facility. The facility was restructured in June of 2008 and reduced
to a $1.75 billion facility that remained in effect in August 2009.

In addition to the funding sources used for its loan origination and sale activities, TB&W also had two working
capital facilities to fund the companys servicing operations. From 2001 until May of 2009, Colonial served as
the lead in a syndicate of banks that provided TB&W with a working capital facility collateralized by a security
interest in certain TB&W mortgage servicing rights. In May of 2009, Sovereign Bank replaced Colonial as the
lead bank in the syndicate (the Colonial/Sovereign MSR Facility).78

The Colonial/Sovereign MSR Facility at one time provided working capital funding of up to $311.5 million,
but by August of 2009 had been reduced to approximately $168.2 million. Natixis Real Estate Capital Inc.
provided TB&W with another working capital facility secured by certain other mortgage servicing rights of
TB&W (the Natixis Facility). The Natixis Facility originally provided up to $133 million in working capital
that was later amended to provide for up to $200 million, but by August of 2009 had been reduced to
approximately $46.4 million outstanding on the facility.79

TB&W Mortgage Loan Funding Process


In general, wet funding is the provision of money to an individual borrower at the time of the closing of the
mortgage loan before the delivery of executed original loan documents that include the promissory note and
mortgage to the lender. Accordingly, because of the risk that there could be some issue with respect to the
perfection of a security interest after funds have been provided, there have historically been fewer sources of
wet funding than there are for other types of financing.80

Historically, TB&W had several sources of available wet funding, but over time, many of those
sources diminished or disappeared completely. At the time of the filing of their bankruptcy petition,
TB&Ws sole source of wet funding was the COLB at Colonial Bank. 81

When a mortgage loan dried i.e., the original loan documents were delivered to TB&W it was
eligible for sale to an investor. Most TB&W loans were sold to investors in pools. As pools of dry
loans were assembled, they were typically moved from a facility that provided wet funding to a
facility that provided for dry funding. If operating as designed, the net effect of the transfer of a
loan from a wet funding source to a dry funding source would be that monies were advanced to TB&W
from the dry funding source to be used to reduce the outstanding balance on the wet funding
source, so that the wet funding source would continue to be available to originate new loans. 82

78 Id.
79 Id.
80 Id.
81 Id.
82 Id.
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Double Sale & Note Pledge Fraud in Securitization & Foreclosure
As structured, TB&Ws dry funding sources provided interim financing and were available to
warehouse mortgage loans between the time that they dried and the time that they were sold to
investors (often referred to as take-out purchasers and investors). 83

TB&W also used available dry funding to purchase loans originated and closed by other mortgage
lenders, which could be included in pools sold to investors. Historically, the volume of purchased dry
loans from other originators was much smaller than the volume of TB&W-originated loans financed
by its wet funding sources. 84

Depending on the structure of the sale of a pool to an investor, several weeks could pass between the
time that TB&W entered into a contract to sell a pool of mortgages and the date that it received
payment for that sale. In general, when sales proceeds were received, they were or should have been
used to pay the associated wet or dry funding balances.

As a result of the processes described above, there was constant movement of loans among various
sources of funding between the time of origination and the ultimate sale to a take-out purchaser (i.e.,
investor).

TB&W Mortgage Loan Sales to Investors


TB&Ws mortgage loan sale process worked as follows:85

TB&W assimilated pools of loans for sale to investors, which were, most often, to be used to support
mortgage-backed securities.
As a part of the sales process, the loan pools were assigned to specific trades at the time that the
sales contract was entered into i.e., the loans were allocated to a specific issue of mortgage-backed
securities.
Purchase proceeds were not paid to TB&W until the trade to which the pools were assigned settled
i.e., the securities were issued and sold.

This followed the common process for mortgage sellers in the secondary market. In general, TB&W sold all
agency-eligible mortgage loans whether originated by TB&W or purchased from another originator, by one
of the following methods Conforming loans eligible for sale to Freddie Mac were either: 1) aggregated into
pools that were exchanged for mortgage-backed securities; or 2) individual loans were sold to Freddie Mac
for cash through the Freddie Mac cash window.86

FHA mortgage loans and VA mortgage loans originated by TB&W were generally pooled and sold either in
the form of Ginnie Mae mortgage- backed securities issued by TB&W or on an assignment-of-trade basis to
other approved Ginnie Mae sellers.87

Freddie Mac and Ginnie Mae securities collateralized by eligible loans were then sold to approved broker-
dealers. TB&W paid certain fees to Freddie Mac and Ginnie Mae in connection with these programs.
Historically, a majority of TB&Ws mortgage loans qualified under the various Freddie Mac and Ginnie Mae
program guidelines, which included specific property and credit standards, including a loan size limit. TB&W

83 Id.
84 Id.
85 Id.
86 Id.
87 Id.
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Double Sale & Note Pledge Fraud in Securitization & Foreclosure
generally sold conforming loans within 30 to 90 days of closing.88The time between a borrowers loan closing
to sale to an investor is commonly referred to as dwell time.

Loans not eligible to serve as collateral for Freddie Mac or Ginnie Mae securities e.g., jumbo loans, certain
types of reduced documentation (or Alt-A loans), certain types of second-lien loans, and subprime loans
were sold through a variety of other channels. Starting in 2006, TB&Ws primary mode of selling non-eligible
Alt-A collateral and certain jumbo loans was through private-label securitizations.

For other types of non-eligible collateral, TB&W sold the loans on a whole loan basis (either individually or in
bulk). Buyers of non-Freddie Mac and non- Ginnie Mae eligible loans and securities included large depository
financial institutions, large mortgage banks, securities dealers, real estate investment trusts, hedge funds and
other institutional loan buyers. These types of loan sales generally were consummated within 60 to 90 days of
loan origination. TB&W typically retained the servicing rights relating to loans that it originated, but on
occasion TB&W sold loans along with their servicing rights, and on occasion sold servicing rights in bulk.
TB&Ws loan sales were governed by agreements with each mortgage investor.89

These agreements established an ongoing program under which investors purchased or securitized certain loans,
as long as the loans offered for sale met agreed-upon underwriting standards and other reps and warranties.
In the case of conventional loans (i.e., a mortgage loan that is not guaranteed or insured by the federal
government), TB&W was generally at risk for any mortgage loan default until the loan was sold, subject to
the obligations of any mortgage insurer. Once the loan was sold, the risk of loss from default and
foreclosure generally passed to the purchaser or insurer of the loan.90

In the case of FHA and VA loans, TB&W generally was required to request insurance or a guarantee certificate
within 60 days of loan closing, and the loan had to be current at the time of the request. Once the insurance or the
guarantee certificate was issued, the insurance or guarantee generally was available for claims against foreclosure
and related losses as a result of a borrower default. Certain losses related to foreclosures and similar
procedures in connection with FHA mortgage loans were not covered by FHA insurance, nor were losses that
exceeded the VAs guarantee limitations. Additionally, FHA could request indemnification from TB&W for its
failure to comply with applicable guidelines in the origination or servicing of loans and could curtail insurance
claim payments based on failures to comply with FHAs claims guidelines. Likewise, the VA could reduce
guarantee payments based on failures to comply with VA requirements, and in certain cases the VA would
deny any liability under a guaranty.

In connection with its loan sales to investors, TB&W made representations and warranties customary in the
industry relating to, among other things, compliance with laws, regulations, certain program standards and the
accuracy of information contained in the loan file. There were also assurances and warranties related to the
documentation of each loan via the actual collateral in the promissory notes and mortgages. In the event of a
breach of these representations and warranties, TB&W could become liable to the purchasing investor for
certain damages and losses or could be obligated to repurchase the subject loans and bear any potential
related loss on the disposition of those loans.91

88 TB&W entered into sales contracts with Freddie Mac and Ginnie Mae using their automated selling systems.
89 See TB&W Final Reconciliation Report Supra
90 See TB&W Final Reconciliation Report Supra
91 Id.
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TB&W Mortgage Loan Servicing Operations


In general, mortgage servicing involves the administration of individual mortgages on behalf of investors,
including: the collection of monthly mortgage payments (including loan payoffs) from individual borrowers; the
disbursement of principal and interest payments to investors; payment of real estate taxes and insurance on
behalf of borrowers; and, the administration of loan defaults and foreclosures.92

Prior to the events that resulted in the filing of their bankruptcy petition, TB&Ws mortgage servicing
operations were substantial. As of August 3, 2009, TB&W serviced approximately 512,000 different
mortgage loans (primarily first-lien, fixed-rate mortgages), having a combined UPB in excess of $80 billion.
These mortgages ultimately were securitized through government-sponsored enterprises, including Freddie
Mac and Ginnie Mae (which, collectively, accounted for approximately 95% of the total UPB), or sold and
securitized in private label securitizations and held in trusts for which Wells Fargo and Bayview served as
master servicers (which accounted for roughly 5% of the total UPB). Finally, TB&W serviced mortgages for its
own portfolio and those of related entities, such as Platinum Community Bank (Platinum), and serviced
mortgages that were outstanding on various warehouse lines.

The key tool in TB&Ws servicing operation was their automated servicing system (Servicing System), the
fundamental component of which was a computer software product provided by Financial Industry Computer
Systems (FICS). FICS was used by numerous mortgage servicers in the United States. Borrower issues and
transactions (e.g., mortgage payments, defaults, payment of taxes and insurance), as well as investor issues
and transactions (e.g., record of the owner of each mortgage and the allocation and transmittal of borrowers
payments to the appropriate investor), were administered using the FICS Servicing System.93

Individual borrowers made mortgage payments to TB&W in a variety of ways, including: (a) by check made
payable to TB&W and mailed either to a lockbox maintained by Colonial or directly to TB&W; or, (b) by
various electronic payment methods. The borrower payments were initially deposited into a single TB&W
bank account maintained at Colonial commonly referred to as the Custodial Funds Clearing Account or
CFCA.94

As payments were received and deposited into the CFCA, they were recorded in TB&Ws Servicing System.
Each day, the prior days deposits, if recorded in the Servicing System, were pushed down (i.e., transferred)
from the CFCA to various custodial accounts commonly referred to as P&I (Principal and Interest) and T&I
(Taxes and Insurance) accounts maintained on behalf of the various investors. Borrower payments were
allocated among the investor P&I and T&I accounts using information maintained and administered in the
Servicing System. TB&Ws compensation, in the form of servicing fees, was also paid from the CFCA account.95

P&I payments were disbursed to investors each month. With the exception of Freddie Mac, investors received
P&I payments mid-month (usually on or about the 18th) for monthly mortgage payments and unscheduled
payments (e.g., loan pay offs) received in the prior month. Freddie Mac, TB&Ws largest investor, had two
programs known as ARC and Gold. For the ARC program, P&I payments were transmitted to Freddie Mac in
the early part of the month (usually the 6th). For the Gold program, P&I payments were transmitted mid-
month (usually the 18th). Other unscheduled payments were transmitted to Freddie Mac on a daily basis.96

As borrowers tax and insurance premium payments came due, monies were transferred from the appropriate
T&I accounts to Escrow Disbursement Clearing Accounts (EDCA). The following diagram provides a
simplified description of the flow of funds received from borrowers by TB&W:

92 Id.
93 Id.
94 Id.
95 Id.
96 Id.
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NOTE: The schematic above is intended to provide an overview of the complex banking system in place between TBW and Colonial Bank as of August 4, 2009.
For purposes of this report, this schematic is highly simplified--the actual banking system was comprised of approximately 100 separate bank accounts.

As indicated in the diagram above, the actual payments of real estate taxes and insurance premiums (as well
as other escrow related payments) were made from an EDCA account maintained at Platinum. In summary,
funds were transferred from the investor T&I accounts into an EDCA account at Colonial. The collected funds
were then transferred to the Platinum EDCA account. As a general rule, checks were written on this account on
a daily basis and refunds of excess T&I monies were paid to borrowers from the Platinum EDCA account.

Virtually all of TB&Ws servicing arrangements required that scheduled/scheduled payments be made to the
investors rather than actual/actual remittances. In a scheduled/scheduled payment arrangement, servicers such
as TB&W, are required to make the scheduled monthly P&I payments to investors in an amount equal to the
amount that should be received from each borrower per their note terms as if they had made payment on a timely
basis, whether the borrower makes a payment or not.

In an actual/actual remittance arrangement, servicers remit to investors only the actual interest due, if it is
collected from a borrower, and the actual principal payments collected. The result was that TB&W was
required to fund (i.e., advance) the payment of principal and interest due on mortgages for which borrowers
failed to make timely payment. Similarly, TB&W made tax and insurance advances for mortgages for which
insufficient escrow balances were on hand at the time that tax and insurance premium payments were due.

In general, for mortgage loans that were in default, TB&W made Servicing Advances (i.e., P&I advances
and T&I advances) until the time that a foreclosure was completed, which in many states was a number of
months after the first missed payment by the borrower.97

As servicer, TB&W also managed the foreclosure process and incurred foreclosure-related expenses. These
expenses are referred to as Corporate Advances. Ultimately, the Servicing Advances and the Corporate
Advances were recovered or should have been recovered by TB&W from the following: (i) payments received
from borrowers (for which advances were made); (ii) the proceeds of the sale of foreclosed houses or the
proceeds from short sales; or (iii) claim reimbursements from the investors or HUD for insured loans.

97 Id.
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TB&W Real Estate Owned (REO)


Following foreclosure, TB&W administered the underlying real estate in one of the following ways:98

a) For loans sold or securitized through Freddie Mac, once the foreclosure was completed the property
was transferred to Freddie Mac in the ordinary course of business, and TB&W would then file a claim
for Servicing Advances and Corporate Advances made with respect to that property;

b) For loans securitized through Ginnie Mae, once the property was foreclosed, TB&W transferred title
to the property to HUD provided that the property was in conveyance condition. If an inspection of
the property revealed that the property did not meet HUDs requirements for conveyance condition,
a property preservation company was retained to bring the property in compliance prior to
conveyance to HUD. TB&W filed claims with HUD for recovery of any available government guaranty
of the principal balance of the loan and Servicing Advances and Corporate Advances made as the
servicer;

c) For other loans held by TB&W directly or financed on one of the Colonial facilities or for loans
securitized in private label securitizations, TB&W continued to maintain and manage the properties
and market them until their ultimate disposition through the TB&W REO Department (REO
Department). Employees in the REO Department would coordinate the initial cleanup of the property,
arrange for any necessary repairs and maintenance, schedule periodic visits to the property, and
coordinate all sales activities with respect to the property until it was sold. Rather than using a
traditional nationwide network of real estate brokers and agents, TB&Ws REO Department relied
primarily on a methodology that employed the placement of signs at each REO property site
displaying 1- 800 numbers, which directed prospective buyers to TB&Ws REO Department using
certain call-capture technologies. At the time of commencement of TB&Ws Chapter 11 case, TB&W
had more than 4,400 properties under management in its REO Department.

Historically, TB&W accounted for REO properties as an on-balance-sheet asset on its financial statements
regardless of whether the property was financed using an on-balance-sheet facility or an off-balance-sheet
facility. Certain of the facilities used by TB&W, like the COLB and AOT facilities, were accounted for as off-
balance-sheet because the underlying funding transaction was treated as a true sale of a participation interest to
Colonial.99

In connection with the release of TB&Ws January 2009 interim financial statements, TB&W concluded that
REO properties financed on the AOT facilities should be taken off of the companys balance sheet, leaving on
the balance sheet only the REO assets financed through an on-balance-sheet facility or that were owned by
TB&W free and clear of liens. During the course of TB&Ws year-end audit conducted by Deloitte LLP
(Deloitte), the auditors raised questions regarding the change in treatment of REO on TB&Ws balance
sheet. Ultimately, Deloitte stopped working on the audit and withdrew from the field in June 2009 pending
the outcome of an internal investigation of this and other accounting issues to be conducted by independent
outside counsel. TB&W hired the law firm of Troutman Sanders LLP (Troutman) to conduct the investigation,
and Troutman was in the process of conducting that investigation when TB&W collapsed in early August
2009.100

98 Id.
99 Id.
100 Id.

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TB&W ELECTRONIC DATA & DATABASES


In performing the TB&W Reconciliations and related analysis and investigation for their bankruptcy, TB&Ws
counsel determined that it was reasonable and appropriate to rely upon the information in TB&Ws Servicing
System. As with large servicing operations, TB&W found errors and a very limited number of transactions
that had not been recorded timely in the Servicing System as of TB&Ws cessation of business operations
(e.g., borrower escrow balances from origination and upfront mortgage insurance payments). However,
these limited occurrences did not have a material impact on the overall quality of the information or the results
of the Reconciliations.

TB&Ws Servicing System used a series of investor codes (the Investor Codes) to track ownership of loans. From
the time of origination (or acquisition) by TB&W, loans initially were coded to Investor Code 001 regardless of
the financing facility to which the loan was assigned.101 When the loans were sold to an investor, the
designation in the Servicing System was changed to the purchasing investors Investor Code. Therefore,
the assigned Investor Code in the TB&W Servicing System was fundamental to making payments to investors
and in the TB&W compilation of servicing-related reports.

In and around late July and early August, TB&W continued to sell loans to investors. However, as the
company suddenly collapsed and ceased business operations, the change from 001 to the Investor Code
of the purchasing investor was not made for certain loan sales made during that time period. As servicing
was transferred to subsequent servicers in accordance with each investors instructions after August 4, 2009,
the change from 001 to the Investor Code for the purchasing investor was made by TB&W. However, rather
than making these adjustments in TB&Ws Servicing System, the changes in Investor Code were made in the
Lookup Database, which was a database compiled by TB&W for use in the Reconciliations. In short, the
Lookup Database included the information for all loans in TB&Ws Servicing System,102 which was then
adjusted to reflect the identity of the purchasing investor.

Accordingly, it is the identity of the investor as reflected in the Lookup Database that has been used for the
Reconciliations. In addition to the Lookup Database, TB&W developed a number of other databases based
on information extracted from TB&Ws Servicing System and records from TB&Ws accounting, treasury,
cashiering, investor reporting, and secondary marketing departments.

The investor allocations were made in the Servicing Reconciliation in the same way that TB&W would have
made them in the ordinary course of its business operation absent the Colonial account hold and the Chapter
11 filing. Except as described above, TB&W did not make any adjustments regarding the ownership of the
underlying mortgage assets or the corresponding monies based upon the results of the Asset
Reconciliation.103

SERVICING RECONCILIATION
TB&W believes that the findings set forth below, based upon the data in TB&Ws Servicing System and
TB&Ws various databases created in connection with the Reconciliations, were fair and accurate. As a result
of TB&Ws sudden collapse and the failure of Colonial, $860,642,822 in affected funds (the Gross Affected
Funds) were trapped in TB&Ws servicing complex and the Companys servicing-related accounts. The
reconciliation of those funds, which involved approximately 400,000 transactions and more than 512,000 loans,
was complicated and time-intensive.

101 Historically, a similar practice was used for loans originated or acquired using the OFCP, and the related Investor Code was 002. However, the use of the
002 Investor Code declined after June 30, 2008 and, ultimately, was not used by TB&W. As more fully explained elsewhere in this Report, there are only
183 loans with the 002 Investor Code.
102 TB&W maintained an archival database for loans liquidated prior to January 1, 2007. Loan data with respect to such loans is not included in TB&Ws

active Servicing System and is not included in the Access Database.


103 See TB&W Final Reconciliation Report Supra

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As it evolved, the Servicing Reconciliation included three distinct components: a) The Affected Funds
Reconciliation, under which TB&W performed a reconciliation and allocation of all monies that were affected
by the Colonial bank account hold beginning on August 5, 2009, Colonials subsequent failure and TB&Ws
bankruptcy; b) The Book-to-Bank Reconciliations, pursuant to which TB&W determined the amount of any
shortfalls in investors custodial accounts; and c) The Servicing Advances Reconciliation, pursuant to which
TB&W reconciled and accounted for unreimbursed advances (including Servicing Advances and Corporate
Advances) and servicing fees not paid to TB&W.

Affected Funds Reconciliation


The Affected Funds Reconciliation involved the allocation to investors of the $860,642,822 in Gross Affected
Funds (see Table 1, Line 43) that were trapped on and after August 5, 2009 as a result of the administrative
hold at Colonial and TB&Ws subsequent bankruptcy filing. Such funds, as described in more detail below,
included amounts at Colonial, Regions, Seaside, and Platinum, as well as certain amounts trapped either in
lockboxes or electronic suspense.104

As part of the Affected Funds Reconciliation, TB&W deducted from the Gross Affected Funds: (i) any Gross
Affected Funds that have been turned over to investors by TB&W or the FDIC-Receiver since August 5, 2009;
and, (ii) the Gross Affected Funds that were never monetized (i.e., electronic payments trapped in suspense).
After subtracting these amounts from the Gross Affected Funds, the remaining total Net Affected Funds on
Deposit as of April 30, 2010 is $396,014,173 (Table 1, Line 43), which represents the amount of Gross
Affected Funds currently on deposit at Colonial ($242,304,744), Regions ($148,709,430), and Seaside
($5,000,000).105

In its Second Report, TB&W provided its allocation of Gross and Net Affected Funds, as of November 30,
2009. (See, Second Report, Tables 1 and 3 respectively.) These included:106
Deposits in clearing accounts and custodial accounts at Colonial;
Deposits in accounts at Regions (including transfers from the Wachovia account);
Un-deposited checks maintained in the Colonial lockbox;
Initiated, but not completed, ACH transfers;
Deposits in a Freddie Mac-related custodial account at Platinum; and
Checks written on the Platinum EDCA (but not funded).

The allocation of affected funds was updated to reflect the Net Affected Funds on Deposit as of April 30,
2010 and included the following additions and revisions from TB&Ws Second Report:107
Allocations based upon bank activity after November 30, 2009, the cut-off date for the prior Report;
Inclusion of additional categories of affected funds that were not reflected in the Second Report;
Allocation of monies, deposits, wire transfers and REO proceeds not identified or allocated as of the
filing of the Second Report (see, Second Report, Table 2); and,
Changes in the allocation of certain mortgages to specific investors, primarily based upon warehouse
lender information and feedback received from subsequent servicers after servicing portfolios were
transferred.

A high-level review of the results of the Affected Funds Reconciliation and the investor level allocation of
Gross Affected Funds and Net Affected Funds on Deposit is set forth in greater detail in Table 1 below.108

104 See TB&W Final Reconciliation Report Supra


105 Id.
106 Id.
107 See TB&W Final Reconciliation Report Supra
108 See TB&W Final Reconciliation Report Supra
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The balances in a few accounts continued to change as a result of transactions after April 30, 2010, but it was
not anticipated that any subsequent changes would have a material effect on the Servicing Reconciliation set
forth herein. With the exception of $234,167 (Table 1, Column A, Line 42), all of the Gross Affected Funds
were allocated to investors.109

109 Id.
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The unallocated amounts consisted of various deposits at Colonial and Regions, certain custodial P&I and T&I
balances, and lockbox checks maintained by the FDIC-Receiver. Importantly, not all affected funds had
actually been monetized or deposited into bank accounts under the control of TB&W or the FDIC-Receiver.
Examples of such non-monetized items included electronic payments caught in suspense by the Colonial
administrative hold and lockbox checks distributed by the FDIC. Moreover, during the course of TB&W
bankruptcy, certain funds were transferred to investors and/or their subsequent servicers e.g., lockbox
checks and monies used to fund the Borrower Protocol payments. Such amounts as well were deducted from
the Gross Affected Funds in the analysis.

The affected funds did not include amounts on deposit in TB&Ws operating accounts at Colonial, Platinum,
Regions, and various other institutions or more than $200 million in borrower check payments received by
TB&W and forwarded to investors and/or their subsequent servicers without being posted in TB&Ws
Servicing System. TB&Ws monthly operating reports provide additional information regarding their
operating accounts.

Summary of Colonial Bank Funds on Deposit


The affected funds at Colonial were limited to seven categories of accounts. These account categories and
associated balances as of April 30, 2010 are summarized in Table 2 below:

Importantly, neither the calculation of Gross Affected Funds and Net Affected Funds set forth in Table 1
above nor the balances in Table 2 reflect funds that were transferred out of certain investor P&I and T&I
accounts between August 6, 2009 and August 25, 2009. During that period, Colonial and/or the FDIC-
Receiver released $673,429,353 to Ginnie Mae, $180,189,139 to Freddie Mac, and $4,367,581 to Henley
Holdings from their respective P&I and T&I accounts.110

110 See TB&W Final Reconciliation Report Supra


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Summary of Regions Bank Funds on Deposit


In addition to the TB&Ws operating accounts, there were 32 Regions accounts that were used to wind-down
TB&Ws servicing operation and to allocate monies among investors (though none of the Regions accounts
were custodial accounts). As of April 30, 2010, there was $228,529,585 on deposit in these 32 accounts.
Table 3 below is a summary of the balances in these Regions accounts as of April 30, 2010.

TB&W reviewed and analyzed $860,642,822 in Gross Affected Funds trapped in their servicing complex
and reconciled and allocated all but $234,167 to the appropriate investor.111

111 Id.
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Book-to-Bank Reconciliations
In order to determine whether any shortfalls existed in the various accounts maintained by TB&W for the
benefit of investors, TB&W undertook Book-to-Bank Reconciliations that compared investors balances in
TB&Ws Servicing System with amounts actually on deposit in the corresponding investor bank accounts
maintained by TB&W.112

With respect to P&I accounts, the reconciliations included a comparison of the Servicing System borrower
payments, cumulative P&I advances made by TB&W, and other expense items pursuant to the servicing
contracts to related bank balances. With respect to T&I accounts, the reconciliations included a comparison of
the Servicing System borrower escrow balances to the related bank balances. And, with respect to EDCA
accounts, the reconciliations included a comparison of outstanding EDCA checks to the related bank balances.

Because an administrative hold was placed on TB&Ws Colonial accounts on August 5, 2009, the last day that
banking transactions were conducted in the ordinary course of TB&Ws business was August 4, 2009. Thus, the
Book-to-Bank Reconciliations were undertaken as of August 4, 2009. The EDCA Book-to-Bank Reconciliations
were prepared through April 30, 2010 to reflect disbursements made pursuant to the Borrower Protocol.

The Book-to-Bank Reconciliations identified total shortfalls for investor P&I, T&I escrow, and EDCA bank
accounts in the aggregate amount of $25,145,274. In effect, this represents money collected by TB&W that
was not turned over to investors. The results of the Book-to-Bank Reconciliations are summarized as follows:

$5,626,200 shortfall in the P&I accounts of Freddie Mac, Ginnie Mae, and a number of other
investors. The P&I shortfall includes expense items owing to Freddie Mac and Ginnie Mae pursuant to
the terms of their respective servicing agreements.

$19,056,184 shortfall in investor T&I escrow accounts. Historically, escrow amounts collected from
borrowers at loan closings were used by TB&W to reduce the amount of funds TB&W transferred to
the title company closing the loan, and TB&W did not deposit the borrowers escrow amounts into a
segregated custodial bank account. Typically, when loans were sold to an investor, the necessary
amounts were then transferred to investors custodial accounts. Of the $19,056,184 shortfall in escrow
accounts, $18,681,936 is the amount that had not been funded as of August 4, 2009 in accordance
with this business practice.

$462,890 shortfall in EDCA accounts. The shortfall represents the difference between the balances in
TB&Ws EDCA accounts (including an account at Seaside)113 and the total adjusted checks written on
the Platinum EDCA account that were not and will not be honored. Adjustments were made to account
for the following: outstanding checks that were funded as a result of the approval of the Borrower
Protocol and checks written by TB&W on or after August 4, 2009 that were not funded from investors
T&I custodial accounts due to the administrative hold. As a result, money associated with these checks
is included in the balances of the investors custodial accounts.

112Id.
113This amount assumes full recovery of $5 million on deposit in a custodial account at Seaside Bank, for which a turnover demand has been made. In the
event that less than $5 million is recovered from Seaside, the amount of the EDCA shortfall will increase accordingly.
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As indicated in the following Table 4, TB&W allocated these shortfalls among investors:

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Servicing Advances Reconciliation


In connection with performing the Book-to-Bank Reconciliations, TB&W also analyzed and reconciled, pursuant
to the Servicing Advances Reconciliation, Servicing Advances and Corporate Advances made by TB&W on
behalf of investors for which it had not received reimbursement and servicing fees for which TB&W had not
received payment. Unreimbursed Servicing Advances and Corporate Advances totaled $237,988,341, and
unpaid servicing fees total $39,511,966. After accounting for advance reimbursements received by TB&W of
$13,506,507, the total remaining unreimbursed and unpaid amount is $263,993,800, the components of
which were:114

$71,376,950 in Net P&I Advances representing principal and interest payments advanced by TB&W
on behalf of investors.
$116,479,538 in T&I Advances representing amounts disbursed by TB&W for payment of taxes and
insurance premiums. TB&W made an adjustment to those amounts for outstanding checks issued that
did not clear the bank and were not funded.
$38,850,744 in Corporate Advances representing amounts paid by TB&W related to the foreclosure
of defaulted loans (e.g., attorneys fees and expenses). TB&W made an adjustment to those amounts
for outstanding checks issued that did not clear the bank and were not funded.
$11,281,109 in Other Unreimbursed Items representing outstanding unreimbursed amounts for
Servicing Advances and Corporate Advances not captured in other categories (including amounts
outstanding related to loans that were liquidated and/or modified).
$39,511,966 in Unpaid Servicing Fees representing fees earned on current and delinquent loans up
to the date such loan was released to a subsequent servicer.
$13,506,507 in Advance Reimbursements representing reimbursements of advances the Debtor has
received during the pendency of this case. The reimbursements received by TB&W included
reimbursement of $8,517,703 from the Regions Refund Account; $2,688,804 from the Regions REO
Proceeds Account; and $2,300,000 received from Wells Fargo and Bayview in accordance with
stipulations entered in connection with TB&Ws Chapter 11 case.

Table 5 below provides TB&Ws reconciliation and calculation of results by investor of total unreimbursed
advances and unpaid service fees and the reimbursements of those amounts, if any, from August 4, 2009.

114 See TB&W Final Reconciliation Report Supra


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Borrower Protocol
Beginning on August 4, 2009 and continuing thereafter, all TB&W investors demanded that the servicing of
their respective mortgage assets be transferred to a different servicer. As summarized in the following
schedule, the servicing of all mortgage assets was transferred to subsequent servicers except for 751 Net
Funded Loans described briefly below.

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Double Sale & Note Pledge Fraud in Securitization & Foreclosure

The abrupt nature of TB&Ws collapse, coupled with the administrative hold placed on the Colonial Bank
accounts, created numerous problems for borrowers and resulted in the filing of numerous state regulatory
actions. However, the combination of the Colonial receivership and the transfer of servicing to new servicers
prevented TB&W from remedying the borrower problems unilaterally.115

As a result of the collaborative efforts between TB&W and the FDIC-Receiver, on January 21, 2010, TB&W
filed a Motion for Approval of Protocol to Resolve Borrower Issues (Borrower Protocol). There were more
than 16,000 borrowers affected by one of the following issues:

Issue 1: Insurance Proceeds monies received by TB&W from property insurance companies based
on payment of individual borrower claims for loss or damage to property, but not paid to the
borrower as of the date of the administrative hold.

Issue 2: Tax and Insurance Escrow Proceeds T&I monies owed, but not paid, to borrowers who had
paid off their mortgages as of the date of the administrative hold.

Issue 3: Bounced Checks Written on Platinum EDCA checks written by TB&W to borrowers that were
not honored.

The total amount of cash required to resolve these three issues was $25,636,418 (i.e., the cumulative amount
owed to borrowers). In addition, in the Borrower Protocol TB&W identified a fourth issue regarding 788 (751
serviced at TB&W and 37 service-released) Net Funded Loans (Issue 4: Net Funded Loans). As more fully
described in the Borrower Protocol, TB&W had implemented a practice of refinancing certain mortgages but
waiting until the new loan was sold before paying off the old mortgage (rather than paying the old mortgage off at
closing). As a result of the TB&W events of August 2009, certain borrowers had two mortgages outstanding
because the old loan was not paid off. The Borrower Protocol proposed a resolution to this issue whereby the
appropriate investor would evaluate the old and the new loan and resolve the matter with each borrower so that
only one loan remained outstanding.116

After a hearing on the Borrower Protocol held on February 19, 2010, the Bankruptcy Court granted the
motion and approved the recommended Borrower Protocol by an Order entered on February 24, 2010. In
accordance with the approved Borrower Protocol, most affected investors opted to participate in the
resolution of Issues 1, 2 and 3. As of the filing of the Final Reconciliation Report, the FDIC-Receiver had
115 See TB&W Final Reconciliation Report Supra
116 See TB&W Final Reconciliation Report Supra
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Double Sale & Note Pledge Fraud in Securitization & Foreclosure
transferred $7,861,287 and TB&W had transferred $781,367 to various investors to be used in the
resolution of those issues. Four (4) investors (Wachovia, Central Mortgage, Five Mile Capital and Mercantile
Bank) did not opt in to the Borrower Protocol.117

In addition to the issues addressed in the Borrower Protocol, a number of other borrower issues were
identified as a result of the Servicing Reconciliation. These issues corresponded to many of the predatory
servicing issues I identified in my 21st Century Loan Sharks Report and were to be addressed by the
subsequent servicers. In certain circumstances, adjustments to individual borrowers servicing records were
necessary. The additional borrower issues identified were as follows:118

a. Borrower Payments Posted, Not Monetized As indicated above, $63,208,545 in ACH


borrower payments and $67,137 in Western Union borrower payments were posted in
TB&Ws Servicing System as received, but no cash was actually received by TB&W due to the
imposition of the administrative hold on the Colonial bank accounts. As a result, the servicing
records that were provided to subsequent servicers by TB&W indicated that a payment was
made by the borrower, yet no corresponding funds were on deposit at Colonial or Regions.
These payments were allocated among investors in Table 1. TB&W worked with subsequent
servicers to properly update borrower records to address this issue.

b. Western Union Clearing Account Funds As described in Exhibit C, $17,294,686 in partial


borrower payments were on deposit in the Western Union Clearing Account at Colonial when
the administrative account hold was implemented. While these amounts were accounted for as
Gross Affected Funds in the Servicing Reconciliation, the FDIC-Receiver turned these funds over
to Western Union on November 20, 2009. Based on discussions with Western Union, TB&W
understands that Western Union either: (i) sent the borrowers payments to the subsequent
servicer if there were enough funds for a full payment, or, (ii) sent the borrower a check if the
funds were not enough for a full mortgage payment.

If the affected borrowers received their portion of these funds from Western Union, then no
action was required. However, to the extent that any of these funds remained at Western
Union, the investors for the affected borrowers had to work with Western Union to determine
whether the funds should be released to the borrower or paid to the subsequent servicer with
appropriate adjustments made in any affected borrowers servicing records.

c. Borrower Payments Posted, Then Forwarded In the course of transferring loans to subsequent
servicers, there were instances of TB&W receiving borrower checks, posting them in the
Servicing System, and then forwarding the checks to the appropriate subsequent servicer
(rather than depositing the checks). These payments totaled $7,946,899. Investors and their
subsequent servicers needed to confirm that these checks were properly recorded in their
servicing records (i.e., confirm that the check was not entered as another payment by the
subsequent servicer upon receipt).

d. Payments on Deposit, But Not Posted There were approximately $136 million in borrower-
related payments deposited into the clearing accounts at Colonial or Wachovia (and
subsequently Regions), but the payments were not recorded in TB&Ws Servicing System for
one of the following reasons: (i) the requisite information was not sent to TB&W by Colonial
(e.g., lockbox checks deposited on August 10, 2009); or, (ii) the underlying loan had already
been released to a subsequent servicer, but the borrower payments were deposited into
Colonial and Wachovia accounts. Hence, the borrower made the payment and the payment

117 See TB&W Final Reconciliation Report Supra


118 See TB&W Final Reconciliation Report Supra
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Double Sale & Note Pledge Fraud in Securitization & Foreclosure
was received, and yet the payment was not recorded as received. The information necessary
to resolve this issue has been available to the applicable investors since January 2010. While
some investors and their subsequent servicers resolved this issue promptly, others have not
done so and have actually reported the affected borrowers to credit reporting agencies as
being delinquent. This is an important issue that requires immediate attention by the
applicable investors and subsequent servicers.

e. Escrow Refunds As indicated above, TB&W received $11,291,175 in refunds associated


with escrows such as force placed insurance, mortgage insurance, and overpayment of
taxes. Because these refunds were received after servicing was released, they have not been
recorded in the Servicing System. Subsequent servicers needed to update these borrowers
servicing records to reflect the refunds.

f. Bounced EDCA Checks As more fully described in the Borrower Protocol, the cumulative
amount of checks written on the Platinum EDCA account that were not and will not be honored
was $31,284,686. The checks written to borrowers (totaling $9,866,332) were addressed in
the Borrower Protocol; however, the balance of the checks, that included payments of taxes
and insurance premiums, was not addressed. As explained above, there are monies on deposit
at Colonial and Seaside that are related to these payments though there is a cumulative
shortfall in the EDCA accounts. To the extent not already done, subsequent servicers had to
make certain that the payments related to any remaining bounced EDCA checks had been
made. The affected borrowers servicing records needed to be adjusted accordingly.

g. Escrow Accounts As with any large servicing enterprise, TB&W, since the release of servicing,
discovered errors in the recorded borrower escrow balances of a limited number of
borrowers. TB&W provided and continued to provide information regarding these errors to the
appropriate investors so that adjustments were made in their servicing records.

h. Erroneous Credit Reporting As a result of some of these and, possibly, other issues, some
subsequent servicers falsely reported borrowers to credit reporting agencies as delinquent, even
though all mortgage payments were timely made. Investors and their subsequent servicers had
to correct these errors and reports.

f. Satisfaction of Paid-Off Mortgages There were TB&W serviced mortgages that were paid in
full, but as to which the appropriate recordings were not made at the time of TB&Ws
collapse. The recording process continued and working with investors, they retained
Nationwide Title Clearing Inc. (NTC) to make appropriate filings. TB&W and NTC worked
with investors to resolve any open satisfaction requests from borrowers.

Many of the above issues were resolved by some of the investors and their subsequent servicers. TB&W,
however, continued to receive communications from borrowers indicating that further efforts were required to
achieve complete resolution. TB&W had previously provided certain investors with information required to
address some of the issues after the filing of their Second Reconciliation Report. TB&W made additional
information available and worked with investors and their subsequent servicers in a continued effort to resolve
these issues properly. 119

Subsequent to the filing of their Final Reconciliation Report, TB&W made data available to the FDIC-Receiver
and investors that had an interest in the Gross and Net Affected Funds and provided further information with
respect to each investors applicable loan servicing and reconciliation records (subject to the execution of a
confidentiality agreement acceptable to the FDIC-Receiver and TB&W). The detailed information supporting

119 See TB&W Final Reconciliation Report Supra


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Double Sale & Note Pledge Fraud in Securitization & Foreclosure
the Debtors Servicing Reconciliation will be available on an investor-by-investor basis for review via
encrypted databases and spreadsheets.

ASSET RECONCILIATION & DOUBLE/MULTI-PLEDGED NOTES


From the earliest days of the TB&W bankruptcy, there were open questions about the nature, location and
ownership of certain mortgage assets originated, sold and/or serviced by TB&W. In an effort to clarify
these issues, the Asset Reconciliation began shortly after a Stipulation was approved. Early on, it was clear
that the parameters of the Asset Reconciliation would continue to evolve as facts were developed.

As indicated in their First Report, the initial focus of the Asset Reconciliation was 7,883 specific loans that were
the subject of litigation between Bank of America (as indenture trustee for the OFCP) and Colonial. However,
as the investigation and analysis of these assets progressed, it became apparent that there were significant
additional issues regarding other mortgage assets that were relevant TB&Ws bankruptcy.

In addition, issues emerged regarding TB&Ws use of certain funding sources. Ultimately, the Asset
Reconciliation included the investigation and analysis of the following interrelated components: a) the status,
as of the filing of the Bankruptcy Petition, of mortgage assets related to the Ocala Funding commercial paper
facility; b) the status, as of the filing of the Bankruptcy Petition, of mortgage assets related to the Colonial
COLB; c) the status, as of the filing of the Bankruptcy Petition, of mortgage assets related to the Colonial
AOT; and d) TB&Ws use of cash related to the OFCP and AOT.

Due to the claimed additional time and expense that would be involved, TB&W did not perform an extensive
tracing of their receipt and disbursement of funds during the course of its business operation. As indicated
below, the time period most relevant to the Asset Reconciliation was June 30, 2008 (i.e., the date of the
restructuring of the OFCP) through August 24, 2009 (i.e., the Bankruptcy Petition Date). However, during the
course of the TB&Ws investigation and reconciliation, certain facts and circumstances were discovered
regarding transactions and conduct prior to June 30, 2008.120

While the earlier conduct was believed to be relevant to the resolution of specific issues, TB&W did not
believe that these earlier transactions and conduct were central to the issues that were the subject of the Asset
Reconciliation in their Final Report to the Bankruptcy Court.121

The results of the Asset Reconciliation are summarized below. However, it is important to emphasize that
TB&Ws Final Report to the Bankruptcy Court was not intended to provide a comprehensive recitation of all
facts that were developed during the course of their investigation into these issues. Moreover, their Final
Report was not intended to be a determination or adjudication of the legal issues associated with these facts.
Rather, their Asset Reconciliation was developed in the hope and expectation that the relevant factual record
would be available to the Bankruptcy Court and interested parties to facilitate prompt resolution of various
legal issues related to TB&Ws Chapter 11 case.122

120 On June 16, 2010, an indictment filed against Lee Farkas, TBWs former Chairman and principal shareholder, was unsealed in the Eastern District of
Virginia. In sum, Mr. Farkas was charged with bank fraud, wire fraud and securities fraud. It was apparent that some, but not all, of these charges arise from
facts and circumstances that were the subject of the Asset Reconciliation. However, a number of the charges related to his earlier conduct. The criminal
investigation was ongoing and Farkas was convicted.
121 See TB&W Final Reconciliation Report Supra
122 See TB&W Final Reconciliation Report Supra

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LITIGATION & CLAIMS RELATED TO TB&W AND COLONIAL CONDUCT


The conduct of TB&W and Colonial officers, executives, board members, investors and even public accounting
firms became embroiled in dozens of contentious and complex litigation claims litigated in state and federal
courts across the nation, including criminal actions brought by the United States of America. The following is
just a representative sample and listing of the ensuing litigation:123

In re Ocala Funding, LLC, No. 3:12-bk-4524-JAF (Bankr. M.D.Fla)


Ocala Funding, LLC v. Deloitte & Touche. LLP, Case No. 11-30957 (Circuit Court of the 11th Judicial
Circuit in and for Miami-Dade County,
Bank of America v. Colonial Bank, Case No. 1:09-cv-22384 (S.D. Fla.);
Bank of America v. FDIC, Appeal No. 09-14844 (11th Cir. Apr. 26, 2010);
Bank of America v. FDIC, No. 1:10-cv-1681 (D.D.C.);
Bank of America v. FDIC, Case No. 2:13-mc-03657 (M.D. Ala.);
Bank of America, N.A. v. Taylor Bean & Whitaker Corp., No. 09 Civ. 22478 (S.D. Fla.);
BNP Paribas Mortgage Corp. v. Bank of America, N.A., Case No. 09 Civ. 9783 (S.D.N.Y.);
BNP Paribas Mortgage Corp. v. Bank of America, N.A., Case No. 10 Civ. 8630 (S.D.N.Y.);
Certain Underwriters at Lloyd's v. Taylor Bean Whitaker Mortgage Corp., Case No. 3:10-ap-243
(Bankr. M.D. Fla.);
Colonial BancGroup, Inc. v. Ernst & Young LLP, Case No. 2:11-ap-3065 (Bankr. M.D. Ala.);
Colonial BancGroup. Inc. v. FDIC, Case No. 2:10-mc-3502 (M.D. Ala.);
Colonial BancGroup, Inc. v. FDIC, Case No. 2:10-mc-3503 (M.D. Ala.);
Colonial BancGroup, Inc. v. FDIC, Case No. 2:10-cv-198 (M.D. Ala.);
Colonial BancGroup. Inc. v. FDIC, Case No. 2:09-ap-3087 (Bankr. M.D. Ala.);
Colonial BancGroup, Inc. v. FDIC, Case No. 2:10-mc-133 (M.D. Ala.);
Colonial BancGroup, Inc. v. FDIC, Case No. 2:10-cv-411 (M.D. Ala.):
Colonial BancGroup, Inc. v. FDIC, Case No. 2:10-ap-3018 (Bankr. M.D. Ala.);
Colonial BancGroup, Inc. v. FDIC, Case No. 2:10-mc-3504 (M.D. Ala.);
Colonial BancGroup, Inc. v. FDIC, Case No. 2:10-cv-410 (M.D. Ala.);
In re Colonial BancGroup, Inc., Case No. 2:10-cv-409 (M.D. Ala.);
In re Colonial BancGroup, Inc., ERISA Litigation, Case No. 2:09-cv-792 (M.D. Ala.);
Deutsche Bank AG v. Bank of America, N.A., Case No. 09 Civ. 9784 (S.D.N.Y.);
Deutsche Bank AG v. Bank of America, N.A., Case No. 10 Civ. 8299 (S.D.N.Y.);
Deutsche Bank AG v Deloitte & Touche, LLP, Case No. 11-48778 CA (40) Court of the 11th Judicial
Circuit in and for Miami-Dade County, Florida);
FDIC v. Banc of America Funding Corp., Case No. CV-2012-901035 (Circuit Court of Montgomery
County, Alabama);
FDIC v. Banc of America Funding Corp., Case No. 2012-cv-791 (M.D. Ala.);
FDIC v. Chase Mortgage Finance Corp., Case No. 1:12-cv-6166 (S.D.N.Y.);
FDIC v. Citigroup Mortgage Loan Trust, Inc., Case No. CV-2012-901036 (Circuit Montgomery County,
Alabama);
FDIC v. Citigroup Mortgage Loan Trust, Inc., Case No. 2:12-cv-790 (M.D. Ala.);
FDIC v. Colonial BancGroup, Inc., Case No. 10-cv-877 (M.D. Ala.);
FDIC v. Countrywide Securities Corp., Case No. 2:12-cv-691 I (C.D. Cal.)

123 See TB&W Final Reconciliation Report Supra


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FDIC v. Countrywide Securities Corp., Case No. CV-2012-901037 (Circuit Court Montgomery County,
Alabama);
FDIC v. Countrywide Securities Corp., Case No. 2:12-cv-784 (M.D. Ala.);
FDIC v. Federal Ins. Co., Case No. 2:11-cv-00610 (M.D. Ala.);
Ocala Funding. LLC v. Deloitte & Touche, LLP, Case No. 11-30957 CA (40) (Court of the 11th Judicial
Circuit in and for Miami-Dade County, Florida);
Neil F. Luria, Plan Trustee v. Deloitte & Touche, LLP., Case No. 11-30967 (40) (Court of the 11th
Judicial Circuit in and for Miami-Dade County, Florida);
Securities & Exchange Commission v. Desiree E. Brown, Case No. 1:11-cv-00192 (E.D. Va.);
Securities & Exchange Commission v. Lee. B. Farkas, Case No. 1:10-cv-00667 (E.D. Va.);
Securities & Exchange Commission v. Teresa A. Kelly, Case No. 1:11-cv-00268 (E.D. Va.);
Securities & Exchange Commission v. Catherine L. Kissick, Case No. 1:11-cv-00215 (E.D. Va.);
Taylor, Bean & Whitaker Mort. Corp. v. GMAC Mortgage Corp., Case No. 5:05-cv-260 (M.D. Fla.);
United States ex rel. Friddle v. Taylor, Bean & Whitaker Mort. Corp., Case No. 1:06-cv-3023 (N.D.
Ga.);
United States v. Paul Allen, Case No. 1:11-cr-00165 (E.D. Va.);
United States v. Raymond Edward Bowman, Case No. 1:11-cr-00118 (E.D. Va.);
United States v. Desiree Elizabeth Brown, Case No. 1:11-cr-0084 (E.D. Va.);
United States v. Lee Bentley Farkas, Case No. 1: 10-cr-200 (E.D. Va.);
United States v. Lee Bentley Farkas, Case No. 5:10-mj-010128 (M.D . Fla.)
United States v. Teresa A. Kelly, Case No. 1:11-cr-00119 (E.D . Va.);
United States v. Catherine Kissick, Case No. 1:11-cr-00088 (E.D . Va.);
United States v. Sean William Ragland Case No. 1:11-cr-00162 (E.D . Va.).

Sorting Through the TB&W & Ocala Funding Multi-Pledge Note Fraud
As TB&Ws Asset Reconciliation Report progressed, TB&W was in communication with interested parties
regarding the process and its preliminary findings. Records and information, including extensive mortgage and
financial databases and the electronic evidence database compiled during the course of the reconciliation process,
were made available, as appropriate. The information was available to investors, creditors and other
interested parties, subject to appropriate agreements regarding maintenance and use of the confidential
information.124

Ocala Funding was a limited liability company formed by TB&W in 2005 as a bankruptcy remote
subsidiary. TB&W was the managing member of Ocala Funding and, as a practical matter, was fully
responsible for all of its business activities. On or about April 2005, Ocala Funding established a commercial
paper facility i.e., the OFCP. The controlling documents were voluminous and very complicated. However, in
summary, the OFCP was structured as follows:125

a. Ocala Funding issued short-term promissory notes (Secured Loan Notes) to participants in the
OFCP, most, if not all, of which were large financial institutions.

b. The proceeds of the note sales were used to fund mortgages originated by TB&W (i.e., wet
funding) and to purchase mortgages from other lenders.

124 See TB&W Final Reconciliation Report Supra


125 See TB&W Final Reconciliation Report Supra
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c. Even though Ocala Funding provided the funding, most, if not all, mortgage loans were made (or
acquired) in the name of TB&W.

d. TB&W sold the mortgages financed by Ocala Funding to take-out purchasers such as
Freddie Mac and large financial institutions engaged in the issuance of mortgage-backed
securities.

e. Ocala Fundings principal bank was LaSalle Bank in Chicago (which subsequently was
acquired by Bank of America). As a result, disbursements to fund mortgage loans and loan
purchases, along with the proceeds from the sale of Secured Loan Notes and mortgages, were
maintained in and administered through accounts at LaSalle Bank. While there were various
accounts over time, the one that is most relevant to the Asset Reconciliation is the Ocala
Funding Collateral Account, that was used throughout the life of the OFCP.

f. Under the terms of the controlling documents, the amounts owed by Ocala Funding pursuant to
the issued and outstanding Secured Loan Notes were to be secured by collateral consisting of
mortgages and cash owned by Ocala Funding.

g. As Secured Loan Notes matured, they were either: (a) paid in full; or, (b) rolled, with
accrued interest paid on the maturity date and new notes issued to the same investors.

LaSalle Global Trust Services (LGTS), an operating unit of LaSalle Bank, was the trustee under the
controlling indenture for the OFCP. In that capacity, it acted on behalf of the purchasers of the Secured Loan
Notes in dealing with Ocala Funding (and TB&W). LGTS also served as custodian and collateral agent for
the facility. In those capacities, LGTS acted as the custodian of mortgages for Ocala Funding and as the
party who dealt with Ocala Funding regarding the status of the collateral for the Secured Loan Notes
i.e., mortgages and cash.126

Typically, Secured Loan Notes were issued as business activities dictated, and they typically matured between
one and thirty days after issuance. As a result, there were multiple issuances of Secured Loan Notes each month.
Every time new notes were issued, including when maturing notes were rolled as described above, the underlying
collateral was reviewed by Ocala Funding and LGTS to determine whether there was sufficient collateral available
to support the new issue. This collateral check was to be performed in accordance with the controlling
agreements.127

From its inception, the OFCP was an important funding source for TB&W, and the amount of issued and
outstanding notes increased as TB&Ws mortgage volume and business grew. In May 2005, there was a total
of $325 million in issued and outstanding Secured Loan Notes. By June 2007, the outstanding balance of
issued Secured Loan Notes had grown to more than $4.4 billion. In addition, Ocala Funding owed $67.5
million in subordinated debt.128

In August 2007, the asset-backed commercial paper market crashed. As a result, Ocala Funding was unable to
continue issuing new Secured Loan Notes as it had done in the past, and many of the participants in the OFCP
stopped purchasing Secured Loan Notes. As a result, between August 2007 and October 2007, Ocala Funding
redeemed almost $2.8 billion in Secured Loan Notes.

The OFCP was restructured as of June 30, 2008. By this time, the amount of issued and outstanding Secured
Loan Notes had been reduced to $895 million, which meant that the total indebtedness under the facility,
including the subordinated debt amount, was $962.5 million. However, it now appeared that the value of the

126 Id.
127 Id.
128 See TB&W Final Reconciliation Report Supra
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Double Sale & Note Pledge Fraud in Securitization & Foreclosure
underlying collateral i.e., the value of the mortgages plus the eligible cash totaled only $250.4 million.
Hence, there was a collateral shortfall of more than $712 million at the time of the restructuring.129

The changes to the OFCP resulting from the restructuring included: a) the maximum amount of Secured Loan
Notes that could be issued and outstanding was reduced to $1.75 billion; b) the two remaining participants in
the OFCP Deutsche Bank (DBK) and BNP Paribas (BNP) were the only purchasers of Secured Loan
Notes; c) mortgages assigned as collateral for the OFCP were specifically allocated among the two participants; d)
wet funding was no longer permitted i.e., cash proceeds could not be used to fund mortgage originations.
Cash could only be used to purchase mortgages that had dried; e) Ginnie Mae approved mortgages were
not eligible collateral for the facility; and f) mortgages were eligible collateral for the facility for no more than
60 days after purchase by Ocala Funding.130

The net effect of the changes to the OFCP was that after June 2008, the primary business activity of Ocala
Funding was intended to be the purchase of mortgages from Colonial and other lenders. With the
restructuring of the OFCP in June 2008, TB&Ws principal source for wet funding became the COLB at
Colonial Bank. At all relevant times, money paid to Colonial for the purchase of mortgages funded on the
COLB (or assigned to the AOT) was deposited into the TB&W (or Seaside) Investor Funding Accounts at
Colonial. While these accounts were maintained in TB&Ws name, TB&W did not have signature authority
over them. Rather, it appears that TB&W provided Colonial with information, which, in effect, was direction to
Colonial about how deposits should be applied by Colonial with respect to mortgage purchases.131

Contemporaneously with the restructuring of the OFCP on June 30, 2008, new Secured Loan Notes were
issued, so that the cumulative amount of issued and outstanding Secured Loan Notes was increased from $895
million to $1,682,485,000, with approximately $1.2 billion of the notes owned by Deutsche Bank and the
balance owned by BNP. From then until the Petition Date, the amount issued and outstanding on the OFCP
remained unchanged. Hence, in the ensuing fourteen months, the Secured Loan Notes issued to DBK and BNP
were rolled each month.132

As a result of the issuance of the new Secured Loan Notes at the time of the restructuring, $783 million in
purchase proceeds (from DBK and BNP) was deposited into Ocala Funding accounts at Bank of America
(formerly LaSalle) on June 30, 2008. On the same day, more than $237 million was transferred from those
accounts to the Investor Funding Account at Colonial to purchase mortgages off of the COLB.133

In the weeks following the restructuring, Ocala Funding continued to use the remaining cash proceeds to
purchase mortgages off of the COLB and, to a much lesser extent, from others. By August 20, 2008, Ocala
Funding had used virtually all of the new cash to acquire mortgages, which increased the apparent value of
its mortgage collateral by almost $735 million. However, during this same period of time, the disparity
between the value of the collateral and the amounts owed under the OFCP continued to increase. It now
appears that on August 20, 2008 the value of the collateral was $723 million less than the cumulative amount
Ocala Funding owed to DBK and BNP, which was an $11 million increase in the shortfall since the restructuring
on the OFCP in June 2008.

While there were changes to the OFCP as a result of the restructuring, many practical aspects of the
relationship between TB&W, Ocala Funding, Colonial, and LGTS (and Bank of America) remained the same.

129 Obviously, the shortfall was substantial and inconsistent with the terms of the controlling agreements. As of the filing of the Final Reconciliation Report,
TB&W had not identified transactions prior to August 2008 in which cash in Ocala Funding accounts was used to fund other aspects of TBWs business or that
otherwise was transferred to third-parties. Conversely, the Debtor has identified significant cash transactions on and after August 18 or 20, 2008 that are
inconsistent with the controlling documents.
130 See TB&W Final Reconciliation Report Supra
131 See TB&W Final Reconciliation Report Supra
132 See TB&W Final Reconciliation Report Supra
133 See TB&W Final Reconciliation Report Supra

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The logistics regarding purchases off of the COLB generally worked as follows immediately following the
restructuring:134

a. TB&W originated and initially funded individual mortgage loans on the wet sublimit of
COLB.

b. The mortgage loan documents were shipped from the closing agent/attorneys office to
TB&Ws Central Document Facility in Ocala. The documents were inspected by TB&W and
the loan information was loaded into TB&Ws Servicing System.

c. The mortgage loan documents were then sent to the Warehouse Lending Group at
Colonial, where they were also inspected. After Colonial confirmed the mortgage was
dry, it was reassigned to the dry sublimit of COLB, thus freeing up funding space on the
wet sublimit.

d. TB&W arranged for mortgages to be sold off of the COLB to Ocala Funding and shipped to
LGTS. Simultaneously, TB&W also arranged for the ultimate sale of the mortgages from
Ocala Funding to take-out purchasers, primarily Freddie Mac.

e. Prior to June 30, 2008, TB&W sent LGTS a Gatekeeper report typically each day
which identified all mortgages that had been funded using the OFCP and that were being
shipped to LGTS. After the restructuring, TB&W continued to use the Gatekeeper report to
identify for LGTS the mortgages that were being submitted for purchase by Ocala Funding
that had been previously shipped to LGTS. At the same time, TB&W provided wire-transfer
instructions for the payment to purchase the mortgages.

f. Upon LGTSs approval of the Gatekeeper report, LGTS wired funds as instructed. For
mortgages being purchased off of the COLB, the purchase money was wired to the TB&W
Investor Funding account at Colonial.

g. As mortgages were sold to Ocala Funding, the original loan documents were shipped from
Colonial to LGTS, as custodian for Ocala Funding. These documents were transferred to LGTS
subject to the terms of a general bailee letter.135 An example of one of these letters is
excerpted below:

134 See TB&W Final Reconciliation Report Supra


135 TB&W did not confirm the existence of a bailee letter for every shipment of loans from Colonial to LGTS
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Double Sale & Note Pledge Fraud in Securitization & Foreclosure

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Double Sale & Note Pledge Fraud in Securitization & Foreclosure
h. When loan documents were received by LGTS, they were reviewed and, after being
confirmed as suitable collateral for the OFCP, were entered into LGTSs collateral
management system as being on hand. The effect of this designation was that LGTS was in
possession of loan documents for a mortgage that qualified and was treated as collateral for
the OFCP.

i. As mortgages were sold from Ocala Funding to the ultimate take-out purchasers, LGTS
shipped the subject loan documents to the custodian for the purchaser, subject to the terms of a
bailee letter.136 An example of one of these letters is excerpted below:

j. Because TB&W typically arranged for sales to take-out purchasers simultaneously with selling
loans to Ocala Funding, LGTS typically did not retain possession of saleable loan collateral
for more than a few days. When loan documents were shipped by LGTS subject to a bailee
letter, their status in the LGTS collateral management system was changed to active release.
The effect of this designation was that LGTS did not have physical possession of loan
documents for the subject mortgage, even though it continued to be counted as collateral for
the OFCP.

k. As the custodians for take-out buyers received, reviewed and approved the loans shipped by
LGTS, the purchase proceeds paid to Ocala Funding should have been wired by the take-out
buyer to the Ocala Funding Collateral Account at Bank of America.

l. Each morning, TB&W received an automated report from LGTS identifying all on-hand and
active release loans i.e., a complete listing of all mortgages that LGTS counted as
collateral for the OFCP.

136 TB&W did not confirm the existence of a bailee letter for every loan shipment by LGTS.
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Double Sale & Note Pledge Fraud in Securitization & Foreclosure
m. Every day TB&W prepared an internal Ocala Funding Pipeline report. In general, this report
tracked TB&Ws accounting for the mortgages that were collateral for the facility, as well as
the loans purportedly purchased by take-out purchasers that day.

n. Beginning in July 2008, TB&W sent separate daily pipeline reports to DBK and BNP
identifying the mortgages assigned as collateral to each OFCP investor. Beginning in the fall
of 2008, LGTS sent separate daily collateral reports to DBK and BNP.

o. The vast majority of mortgages shipped to LGTS were ultimately sold to Freddie Mac with
TB&W retaining the servicing rights. For these loans sold to Freddie Mac, Colonial served as
the document custodian (through its Corporate Trust group), which meant that these loan
documents were shipped back from LGTS to Colonial.

p. As a part of the Freddie Mac purchase process, lien holders are required to execute a
Freddie Form 996. It appears that TB&W prepared these forms and submitted them to LGTS
for execution. An example of one of these forms is illustrated below:

q. When LGTS removed loans from the Ocala Funding collateral listing, the status in the
collateral management system was changed to inactive.

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The purchase and sale process described above was directed by TB&W. Moreover, TB&W also directed the
disbursement of monies from the Ocala Funding Collateral Account. Within months of the restructuring of the
OFCP, the process described in the preceding paragraph changed. By December 2008:137

a. TB&W continued to send Gatekeeper reports to LGTS identifying mortgages that were
purchased off of the COLB, however, in many instances, there was no corresponding request
to transfer funds to the TB&W Investor Funding Account at Colonial. In other words, mortgages
were being shipped to LGTS and/or purchased by Ocala Funding, but the purchase
payment was not being made to Colonial.

b. Consistent with past practices, upon receipt and review of the loan documents, LGTS
entered mortgages into its collateral management system as being on hand and, then,
when shipped out as being on active release in accordance with its historical practice.

c. As loans were shipped from LGTS in connection with sales to take-out purchasers, the sales
proceeds were paid to Ocala Funding (into the Ocala Funding Collateral Account), however,
the sales proceeds were not used to pay Colonial for the loans being sold. Instead, it now
appears TB&W directed Bank of America to wire money to Colonial from the Ocala Funding
Collateral Account to pay for mortgages that had been shipped to LGTS earlier (an average
of 25 days) and which had already been sold and paid for in the intervening time. As a
result, numerous mortgages remained in active release status in the LGTS collateral system
after they were sold to take-out purchasers.

d. Because payment to Colonial was not being made in a manner that actually corresponded to
purchase and sale activity by Ocala Funding, mortgages remained on the COLB (i.e.,
collateral/assets supporting the total amount advanced on the COLB) and were simultaneously
listed as collateral for the OFCP.

The net effect of this course of conduct was that thousands of loans were sold to take out purchasers but
continued to be listed as collateral for the OFCP in the LGTS collateral management system after the sale.
Moreover, a substantial number of these loans also remained on the COLB because Colonial was not paid
at the time of purchase by Ocala Funding or at the time of sale of the mortgages to take-out purchasers.138

During 2009, the balance owed for the loans shipped to Ocala Funding off of COLB, but for which Colonial
was not paid at the time of sale, steadily increased. According to Colonials records, at the end of May 2009,
the amount owed to Colonial for loans shipped to LGTS, but not paid for, totaled nearly $600 million. By
August 5, 2009, that amount had increased to over $900 million.

When TB&W collapsed in early August 2009, the process described above came to an abrupt halt. At that
time, the outstanding balance owed by Ocala Funding on the Secured Loan Notes continued to be
approximately $1.68 billion (approximately $1.2 billion being owed to DBK and approximately $481 million
being owed to BNP). However, the value of the mortgages physically located at LGTS (693 mortgages with a
UPB of $89.1 million), coupled with the cash on deposit in the Ocala Funding bank accounts (approximately
$75 million) was far less than the amount owed.139

137 See TB&W Final Reconciliation Report Supra


138 Moreover, the available evidence indicates that 2,979 mortgages that appear to have been sold to Ocala Funding were actually paid for using
proceeds from the BoA EPF. Apparently, mortgages were shipped to LGTS, listed as collateral for the OFCP, then shipped back to Colonial as described
above with no payment from Ocala Funding to Colonial. All of these mortgages were then sold by TBW to Freddie Mac in connection with the issuance of
mortgage-backed securities, and were assigned to the BoA EPF pending settlement of the trade. Proceeds from that facility were then used to pay Colonial
for the subject mortgages.
139 Some of the 693 loans are old. TB&W was able to confirm that Ocala Funding purchased 290 of these loans, but the identity of the seller has not been

ascertained in all instances.


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Double Sale & Note Pledge Fraud in Securitization & Foreclosure
On or about August 12, 2009, Bank of America, in its capacity as indenture trustee and collateral agent for
the OFCP, filed suit seeking emergency injunctive relief against Colonial alleging that Colonial was in
possession of 7,883 loans or the proceeds of the sale of those loans (TRO Loans) that constituted collateral
for the OFCP. Hence, Bank of America asserted that Colonial should return or pay for these loans. The FDIC
was appointed receiver for Colonial shortly thereafter. Bank of America made similar assertions regarding
these loans early in the TB&W bankruptcy case, which prompted the TB&W Asset Reconciliation Report.140

As more fully explained below, it now appears that, as a result of the processes described above, these TRO
Loans were listed as OFCP collateral in active release status in the LGTS collateral management system
despite the fact that they had actually been sold by Ocala Funding (and/or TB&W) and paid for by a take-
out purchaser. Moreover, more than half of these loans remained on the COLB because Colonial had not been
paid for them.

TB&W, with assistance from Bank of America, identified a total of 9,111 mortgage loans (which includes all of
the TRO Loans) that, according to the LGTS collateral management system, were collateral for the OFCP
i.e., either on hand or on active release as of August 2009 and available to secure repayment of the
issued and outstanding Secured Loan Notes. The list of loans was compiled from four different sources that
included: (a) the August 5, 2009 LGTS collateral report; (b) the August 13, 2009 LGTS collateral report; (c)
the list of TRO Loans attached to Bank of Americas complaint filed against Colonial; and, (d) a physical count
conducted by LGTS after August 2009 of the mortgage loans on-hand i.e., in the physical possession of
LGTS. The 9,111 mortgage loans were recorded in the LGTS collateral management system as follows:

Of these 9,111 loans, 8,256 were first included as collateral for the OFCP on or after April 9, 2009. In stark
contrast to the LGTS records, other investors were identified as the owners of all but 183 of these 9,111
mortgage loans in TB&Ws Servicing System.141 This disparity was a focal point of TB&Ws Asset
Reconciliation Report and related investigation.142

TB&W located 9,084 of the subject 9,111 mortgage loans in TB&Ws Servicing System (i.e., there is no record
for 27 of the mortgages). Of the 9,084 loans for which there are records, 110 had been paid off by the
borrower; 49 had never been funded; 9 were listed as real property owned by TB&W; 60 were Net Funded
Loans; and 46 had been disposed of prior to 2007.143

Accordingly, of the 9,111 mortgage loans on the LGTS collateral list for the OFCP, there were 8,810
mortgage loans that were actually reviewed as part of the Asset Reconciliation Report. Because all but 183
of these loans were assigned to other investors in TB&Ws Servicing System, TB&W endeavored to determine
whether the indicated investor paid for its assigned mortgages. Multiple sources of information were used to
perform this analysis. Where necessary and appropriate, TB&W validated loan level data by reconciling it to
actual cash deposits. In addition, pursuant to its ongoing discovery under Rule 2004 of the Federal Rules of
140 See TB&W Final Reconciliation Report Supra
141 The servicing of these 183 loans were transferred to RoundPoint in September 2009. At that time, the UPB of these loans totaled $37.3 million.
142 See TB&W Final Reconciliation Report Supra
143 See TB&W Final Reconciliation Report Supra
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Double Sale & Note Pledge Fraud in Securitization & Foreclosure
Bankruptcy Procedure, TB&W obtained from Freddie Mac copies of Freddie Mac purchase advices and Form
996s, which were tested, but not thoroughly analyzed. The testing done to the date of the Final Reconciliation
Report indicates that the records were consistent with TB&Ws findings regarding the subject loans.144

In general, TB&W verified that the investor indicated in the Lookup Database did make payment to Ocala
Funding or to TB&W for the assigned loans in connection with a purchase transaction. However, as a result of
this analysis, TB&W discovered a few erroneous assignments of loans to investors in the Servicing System
based on the purchase and cash transactions. The following Table 8 summarizes the TB&Ws analysis of the
8,810 loans:

7,883 TRO Loans were included in the analysis summarized above. The available information indicated that
either Ocala Funding or TB&W was paid by investors for the vast majority of the TRO Loans. In addition to
the foregoing, TB&W endeavored to ascertain how many of the subject 8,810 loans had actually been paid

144 See TB&W Final Reconciliation Report Supra


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Double Sale & Note Pledge Fraud in Securitization & Foreclosure
for in connection with Ocala Fundings apparent purchases from Colonial or other lenders. All cash
disbursements from the Ocala Funding bank accounts at Bank of America from June 30, 2008 through August
4, 2009 were thoroughly analyzed.145

As part of this analysis, TB&W identified the disbursements that were used to purchase loans on behalf of
Ocala Funding during this period, as well as the loans related to each such disbursement. In sum, of the 8,810
loans, it appears that: a) Ocala Funding actually paid for 691; b) Colonial was not paid for 4,928, which
remained on the COLB as of August 2009; and c) the remaining 3,191 were not paid for by Ocala
Funding, but were paid for using other funding sources unrelated to Ocala Funding or the OFCP.146

As of August 2009, Ocala Funding owed approximately $1.68 billion to DBK and BNP pursuant to the terms
of issued and outstanding Secured Loan Notes. Of the 9,111 loans listed as collateral to secure the
repayment of those notes, Ocala Funding actually purchased and paid for 691. The vast majority of these
loans were then sold off to Freddie Mac and other take-out purchasers, who made payment to Ocala Funding
or to TB&W for those purchases. The servicing for most, if not all, of these loans was transferred to the
subsequent servicers for the take-out purchasers in accordance with TB&Ws servicing records. Moreover,
Colonial was not paid for 4,928 of these loans even though they were originally funded using the COLB and
shipped to LGTS as custodian and collateral agent for Ocala Funding.147

The Colonial COLB


As indicated above, the Colonial COLB was an important funding source for TB&W. In general, the COLB
facility operated as follows:148

a. Advances from the COLB were made to TB&W on a daily basis and were used to fund loan
closings and, to a lesser extent, to purchase dry loans from other lenders. The money
advanced to TB&W was deposited into the Colonial Master Advance account.

b. Typically, Colonial created a participation certificate for the prior days advance on the
COLB. The certificate was provided to TB&W, signed and then returned to Colonial. Colonial
executed the certificate after receiving the executed version from TB&W. This exchange was
typically accomplished electronically, using e-mail. Colonial retained a hard copy of the
participation certificate. The specific loan listings associated with each days advance were
not attached to the participation certificate but were maintained in electronic form by
Colonial.

c. TB&W sent funding tapes to Colonial multiple times each day. The funding tapes provided
Colonial with directions regarding wiring funds from the Master Advance Account to fund
individual loan closings and loan purchases.

d. Loans funded at closing using advances from the COLB were initially assigned to the wet
sublimit of COLB.

e. After the closing and related activities were completed, loan documents were shipped by the
closing agent to TB&Ws Central Document Facility in Ocala. TB&W inspected the documents,
entered the loan into the Servicing System, and then shipped them to Colonials Warehouse
Lending Group in Orlando, Florida.

145 See TB&W Final Reconciliation Report Supra


146 See TB&W Final Reconciliation Report Supra
147 See TB&W Final Reconciliation Report Supra
148 See TB&W Final Reconciliation Report Supra
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Double Sale & Note Pledge Fraud in Securitization & Foreclosure
f. When Colonial confirmed that the loan was dry, the loan was reassigned to the dry
sublimit of COLB.

g. TB&W directed and managed the sale of the COLB loans to investors. When loans assigned
to the COLB were sold, Colonial shipped the loans to the purchasing investors custodian for
inspection. In the case of loans sold to Freddie Mac, Colonial simply transferred the loan
documents from its Warehouse Lending Group to its Corporate Trust Department, which
served as custodian for Freddie Mac.

h. Every day, Colonial prepared a pipeline report, which identified, among other things, the
loans assigned to the COLB, including the mortgages funded with advances and those that
had been shipped to investors but not yet paid for. In addition, the pipeline report identified
loans paid down (i.e., paid for) that day, which would be removed from the next days
pipeline report.

i. At the end of each day, Colonial created a pay down file, which identified the specific
deposits into the Investor Funding Account that were being used to pay down the COLB, as
well as the AOT and other TB&W warehouse lines. It appears that this report was used by
TB&W and Colonial to make decisions regarding the use of monies deposited into the Investor
Funding Account, including payments applied to the various Colonial financing facilities and
transfers to other TB&W accounts at Colonial.

TB&W was the servicer of the mortgages on the COLB. Payments received from borrowers on these
mortgages were deposited into the CFCA and, from there, into TB&Ws operating account as they were
received. Each month, TB&W made interest payments to Colonial based on the outstanding balance of the
COLB.149

As of the appointment of the FDIC-Receiver on August 14, 2009, Colonials records indicated that there were
8,714 loans assigned to the COLB, with an associated advance amount in excess of $1.7 billion for these
loans. Comparing this listing to TB&Ws Servicing System, it appears that 29 of these loans were either paid
off by the borrower or not maintained in TB&Ws Servicing System. TB&W analyzed 8,685 COLB loans for
which there were TB&W servicing records.150

Of the 8,685 COLB loans that were reviewed, TB&W determined that 3,829 loans, with an UPB of
approximately $825.9 million had not been sold by Colonial.151 The other 4,856 were ultimately sold to and
paid for by the following investors: Freddie Mac (4,802); Wells Fargo (30); and, CitiMortgage (24). TB&W
was able to trace cash payments from Freddie Mac, Wells Fargo, and CitiMortgage for these loans. As
indicated in the Ocala Funding section, above, there are 4,928 loans assigned to the COLB that were also on
the LGTS collateral list for the OFCP that were not paid for by Ocala Funding. The cumulative COLB balance
associated with these 4,928 loans was $909.6 million.152

Of the 4,856 COLB loans sold to Freddie Mac, CitiMortgage, and Wells Fargo described in the preceding
paragraph, 4,252 of these loans (with an associated balance on the COLB of $779.9 million) were also
among the 4,928 loans on the LGTS collateral list.153

Of the 8,714 loans assigned to the COLB as of August 14, 2009, 29 were not located. Colonial was in
possession of and had not sold 3,829. The other 4,856 had been sold by TB&W or Ocala Funding and paid

149 See TB&W Final Reconciliation Report Supra


150 See TB&W Final Reconciliation Report Supra
151 The servicing for the vast majority of these loans was released to RoundPoint Mortgage Company (RoundPoint), the subsequent servicer for the FDIC-
Receiver.
152 See TB&W Final Reconciliation Report Supra
153 See TB&W Final Reconciliation Report Supra

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Double Sale & Note Pledge Fraud in Securitization & Foreclosure
for by other investors, but Colonial had not been paid. Of these loans sold to other investors, 4,252 had
initially been sold to Ocala Funding and shipped to LGTS before being shipped to the purchasing investor
(or its custodian).154

Colonial AOT Facilities and BoA EPF


In addition to the COLB facility, TB&W had access to funding through the AOT facilities. Like the COLB, the
AOT was designed as a participation facility i.e., Colonial was granted a participation (i.e., ownership)
interest in the mortgage pools assigned to the facility. Unlike the COLB, wet funding was not available under
the AOT. Rather, it was designed as an interim funding source used to warehouse dried mortgage loans as
pools were being finalized for sale to investors who were issuers of mortgage-backed securities. In general,
the AOT (like other assignment of trade facilities) was designed to operate as follows:155

a. TB&W entered into a trade with an issuer of mortgage-backed securities, which means that
the issuer agreed to purchase pools of mortgages that would support the issuance of the
securities.

b. Under the terms of the contract with the purchaser/issuer, TB&W was not paid until the trade
settled i.e., the securities were sold and the proceeds received by the issuer.

c. Between the contract date and the settlement date, the mortgage pools were assigned to the
AOT. At the time of the assignment of a pool to the AOT, Colonial acquired a 99% interest in
the mortgage pool and paid corresponding cash to TB&W.

d. TB&W used the proceeds from the AOT to pay down the warehouse lines that had been used
initially to finance the loans in the pool.

e. When the trade settled, the purchase proceeds were to be wired to the Investor Funding
Account at Colonial and should have been used to pay down the AOT.

Trades involving both agency approved securities (e.g., Freddie Mac) and private label securities were
allowed on the AOT. TB&W was the servicer of the mortgages in the pools assigned to the AOT. Each month,
TB&W made an interest payment to Colonial based on the outstanding balance of the AOT, and TB&W retained
monthly interest from borrowers.

From 2005 to 2008, the balance on the AOT increased from approximately $500 million to almost $2 billion.
By early August 2009, the balance had decreased to just under $1.5 billion. On March 31, 2009, TB&W
entered into a new financing arrangement that was similar in structure to the AOT but allowed for only
agency-approved securities. This new interim funding source was the BoA EPF facility (wholly unrelated to
Ocala Funding and OFCP). Initially, the size of the BoA EPF was $500 million but it eventually grew to $1
billion. In sum, the BoA EPF worked as follows:156

a. TB&W aggregated mortgage loans into mortgage pools and submitted the pools to Freddie
Mac and Ginnie Mae for approval as eligible collateral for mortgage-backed securities.

b. Once approved, these pools were sold into trades i.e., securities issued by Freddie Mac or
securities insured by Ginnie Mae. The vast majority of the trades, which were identified in the
underlying document by the trade number and pool numbers, were assigned to the BoA EPF.

154 See TB&W Final Reconciliation Report Supra


155 See TB&W Final Reconciliation Report Supra
156 See TB&W Final Reconciliation Report Supra
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Double Sale & Note Pledge Fraud in Securitization & Foreclosure
c. At the time of the assignment to the BoA EPF, Bank of America transferred 95% of the
purchase proceeds to TB&Ws Investor Funding Account at Colonial. With very limited
exceptions, these funds were then used to pay down the COLB.

d. However, unlike the AOT, Bank of America (rather than TB&W) received and controlled the
purchase proceeds when the trade settled.

e. Upon receipt of the settlement proceeds, Bank of America transferred the remaining 5% of
the purchase price to the Investor Funding Account at Colonial.

In general, it appears that the BoA EPF operated as designed, although the Committee of Unsecured
Creditors filed an adversary proceeding against Bank of America seeking to recover amounts owed to TB&W
under the terms of the BoA EPF. During the course of its investigation and analysis of Ocala Funding, TB&W
determined that there were substantial deposits into the Ocala Funding Collateral Account that originated as
draws by TB&W on the AOT, but which seemed wholly inconsistent both with the purpose of Ocala Funding
and the design of the AOT.157

Similarly, TB&W determined that there were substantial disbursements from the Ocala Funding Collateral
Account that were used to pay down the balance owed on the AOT. These disbursements typically occurred
on the same day and in amounts similar to an advance from the AOT that was deposited with Ocala Funding.
Again, these disbursements were inconsistent with the structures of Ocala Funding and the AOT. In the course
of investigating the AOT-related deposits into and disbursements from the Ocala Funding Collateral Account,
TB&W determined that there was a correlation between the trades assigned to the BoA EPF and the trades
assigned to the AOT, which can be summarized as follows:158

a. Each trade TB&W entered into was assigned a unique internally generated ticket number. In
addition, each mortgage-backed pool that was created by TB&W and approved by Freddie
Mac or Ginnie Mae was assigned a unique pool number.

b. When a trade was assigned to the BoA EPF, the pool number and the ticket number were
each included in the documents supporting the trade assignment.

c. Within days of assigning a trade to the BoA EPF, TB&W assigned to the AOT the same ticket
number and pool number that had been used for the BoA EPF trade. The characteristics (e.g.,
the amount and settlement date) of the pools assigned to the AOT were similar but not
identical to those of the pools previously assigned to the BoA EPF.

d. In addition, the actual mortgages purportedly included in the pool assigned to the AOT were
completely different from the corresponding mortgages included in the pool assigned to the
BoA EPF. While the loans in the pools assigned to the BoA EPF were the actual loans
approved by Freddie Mac or Ginnie Mae, the loans included in the corresponding pools
assigned to the AOT were, in general, a collection of old loans, loans that had been paid off
or sold and that now appear to be fictitious i.e., non-existent loans. Hence, the loans
actually included in the pools assigned to the AOT were of questionable value and validity.

e. Upon assignment of one of these pools to the AOT, monies were advanced by Colonial and
deposited into the Ocala Funding Collateral Account. At the time of many of these advances,
a disbursement was made from the Ocala Funding Collateral Account and deposited into the
Investor Funding Account at Colonial and used to pay down the AOT, thereby removing a

157 The only instances in which advances on the AOT might have been paid to Ocala Funding would have been for loans owned by Ocala Funding that were
included in the trades assigned to the AOT.
158
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Double Sale & Note Pledge Fraud in Securitization & Foreclosure
prior trade from the collateral listing and replacing it with the new trade. Some of the
deposits from the AOT into the Ocala Funding Collateral Account were used for various other
purposes.

As of August 5, 2009, there were 124 trades assigned to the AOT. The cumulative purchase price (i.e.,
outstanding balance) of these trades was $1,473,868,368. The Debtor has determined that 112 of these
trades correspond to actual trades that had been assigned to the BoA EPF prior to being assigned to the
AOT.159 Five of the assigned trades cannot be found in TB&Ws secondary trading system, and seven are
primarily comprised of loans having little value, if any at all. In other words, none of the 124 mortgage pools
assigned to the AOT was actually associated with a real, pending trade. Hence, the collateral value of
these trades is zero.160

In addition to analyzing the 124 trades assigned to the AOT as of early August 2009, TB&W also analyzed
the individual loans that were assigned to the AOT. The last pipeline report in which Colonial provided TB&W
with a list of loans assigned to the AOT was dated July 24, 2009. This listing included 7,867 loans. However,
by the time of the FDICs appointment as receiver, the list included 9,304 loans shown as having been
assigned to the AOT with an assigned purchase price totaling $1.26 billion. Given that the balance of the
AOT as of August 5, 2009 was approximately $1.47 billion, there is a shortfall of $211 million even if all of
the loans exist, are performing, and are owned by Colonial.

When the loans are actually analyzed, it is evident that the value of the loans that might actually be
collateral for the AOT is well below the $1.47 billion balance. Using TB&Ws servicing records and other
available information, TB&W analyzed the 9,304 loans purportedly assigned to the AOT as of early August
2009 and has determined that:

a. 231 loans either had never been serviced by TB&W or had not been serviced since 2006. The
cumulative purchase price of these loans according to the AOT loan listing exceeds $31
million.

b. 2,752 loans, with assigned purchase prices totaling $323,846,996, had been previously sold
to other investors, but had not been removed from the AOT loan listing.

c. 1,206 loans with assigned purchase prices totaling $136,028,808 had been charged off or
paid off by the borrower, but had remained on the AOT loan listing.

d. 1,837 loans had been foreclosed, meaning that the underlying collateral is actually REO
(which is not permitted collateral under the terms of the AOT).161 This includes some second
liens (e.g., home equity lines of credit) and properties that had been conveyed to HUD and
the VA prior to August 2009. The aggregate purchase prices assigned to this group of loans
total $295,831,301.

e. 3,278 loans were coded 001 in TB&Ws Servicing System, which was the code used for
loans owned by TB&W and/or assigned to one of the Colonial facilities.24 The purchase
prices for this group of loans according to the AOT loan listing total $474,881,623.

The loan documents for much of the REO and many of the 001 loans were in the possession of the
Warehouse Lending Group at Colonial as of the appointment of the FDIC-Receiver.162

159 Bank of America advanced funds to TB&W for all 112 of these trades prior the advance being made on the AOT. The BoA EPF proceeds were used by
TB&W to pay down loans on COLB, Platinum and the Overline.
160 See TB&W Final Reconciliation Report Supra
161 1,197 of these REO properties were part of the Section 363 bulk sale approved by the Bankruptcy Court and closed in December 2009.
162 See TB&W Final Reconciliation Report Supra

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Uses of Cash and Funding Sources


In light of the circumstances surrounding Ocala Funding and the AOT, TB&W analyzed the funding sources in
place at the time that the bankruptcy petition was filed i.e., the COLB, AOT, OFCP and BoA EPF and how
monies advanced on each were used by TB&W. Given the length of time that the COLB, AOT, and OFCP
were in place, TB&W did not endeavor to review thoroughly every transaction on each of these facilities.163

Rather, overall activity on each funding source was analyzed in reverse chronological order. As a result of this
high level review (and in the context of other facts developed during the course of the TB&Ws investigation),
they ascertained the following:

a. The transactions associated with the BoA EPF appear to be consistent with its purpose and
structure.

b. The wet funding of loan originations and related transactions associated with the COLB
appear to be consistent with its purpose and structure. However, as explained above,
payments to Colonial for loans sold off of the COLB were not made in accordance with the
terms of the controlling agreements.

c. The Debtor has conducted a general review of cash activity in the Ocala Funding Collateral
account for the year 2007 and a detailed review of the activity in that account for 2008 and
2009. Based upon this review, the Debtor has not identified any activity in the Ocala Funding
Collateral Account prior to June 30, 2008 that is clearly inconsistent with the purpose and
structure of the OFCP. Conversely, the Debtor has identified numerous deposits into and
disbursements from that account since June 30, 2008 that appear to be inconsistent with the
purpose and structure of the OFCP.

d. TB&W identified numerous transactions related to the AOT going back to 2004 that appear
to be inconsistent with the purpose and structure of the AOT. It appears that the transactions
that most affected the Asset Reconciliation occurred after June 30, 2008 and involved
deposits into and disbursements from the Ocala Funding Collateral Account.

Hence, TB&Ws analysis of the uses of cash centered on transactions involving the Ocala Funding Collateral
Account since June 30, 2008.

Deposits into the Ocala Funding Collateral Account


Between June 30, 2008 and August 4, 2009, more than $19.9 billion was deposited into the Ocala Funding
Collateral Account. Deposits from financial institutions that purchased loans (e.g., Freddie Mac, Citibank, CSFB,
and Wells Fargo) appear to have been consistent with the purpose and structure of Ocala Funding and the
OFCP. However, other deposits into the Ocala Funding Collateral Account were not consistent with the design
of Ocala Funding and the OFCP.164

It appears that more than $8 billion deposited into the Ocala Funding Collateral Account between June 30,
2008 and August 4, 2009 was not related to the operation of Ocala Funding or the OFCP. Among other
things, these deposits appear to be:165

Advances on the AOT used to pay off worthless trades previously assigned to the AOT;

163 See TB&W Final Reconciliation Report Supra


164 See TB&W Final Reconciliation Report Supra
165 See TB&W Final Reconciliation Report Supra
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Double Sale & Note Pledge Fraud in Securitization & Foreclosure
Advances on the AOT used to fund payments to mortgage investors or other aspects of
TB&Ws operations; and,

Short term transfers that correspond to collateral confirmations performed in connection with
the operation of the OFCP.

The following Table 9 summarizes the deposits into the Ocala Funding Collateral Account at Bank of America
from June 30, 2008 through August 4, 2009:166

166 See TB&W Final Reconciliation Report Supra


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Double Sale & Note Pledge Fraud in Securitization & Foreclosure

Disbursements from the Ocala Funding Collateral Account


From June 30, 2008 to August 4, 2009, more than $19.9 billion was disbursed from the Ocala Funding
Collateral Account. Certain disbursements were consistent with the purpose and structure of Ocala Funding
and the OFCP; however, others were not. It appears that these inconsistent disbursements were used to167:

Pay down expiring trades assigned to the AOT;

Fund P&I servicing advances to investors;

Finance TB&Ws operations; and,

Repay very short-term deposits i.e., one or two days into the Ocala Funding Collateral
Account (apparently in conjunction with collateral confirmations performed in connection with
the operation of the OFCP.

The following Table 10 summarizes the disbursements from the Ocala Funding Collateral Account at Bank of
America from June 30, 2008 through August 4, 2009:

167 See TB&W Final Reconciliation Report Supra


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Double Sale & Note Pledge Fraud in Securitization & Foreclosure
It appears that more than $2 billion in funds disbursed from the Ocala Funding Collateral Account between
June 30, 2008 and August 4, 2009 were not related to the operation of Ocala Funding or the OFCP. Despite
the extensive commingling of funds in the Ocala Funding Collateral Account, it is apparent that TB&W used
monies obtained from Colonial (principally from the AOT) and from Ocala Funding to fund these Inconsistent
Disbursements.168

REO
TB&Ws REO portfolio included properties that were owned outright by TB&W and properties that had been
financed as loans on one of the Colonial facilities or securitized in a private label securitization. As of August
4, 2009, there were a total of 4,481 REO properties being managed by TB&W. By April 30, 2010, only
499 of these properties remained. The following Table 11 summarizes activity related to the REO properties
since August 4, 2009:169

The reduction in REO properties since August 4, 2009 was due to two factors: a) the turnover of 2,152
properties to Wells Fargo, Bayview and BB&T in connection with servicing transfers; and, b) the sale of 1,830
properties, a majority of which were either owned by TB&W (594 properties) or assigned to the AOT (947
properties).170 The remaining 499 properties are divided between TB&W-owned properties (175
properties) and properties assigned to the AOT (250 properties) and the Overline (74 properties).171

As indicated in Table 11, above, TB&W realized proceeds totaling $156.2 million from the sale of REO
properties and recovered $4.5 million in funds related to the management of the REO.172 $160.7 million in
REO-related funds was deposited into the Wachovia operating account (subsequently transferred to the
Regions REO Proceeds account), the RBC REO Specialists bank account (subsequently transferred to the
Regions REO Specialists account) and directly into the Regions REO Proceeds account. TB&W transferred
$69.4 million from the sale of REO owned by it from the REO Proceeds account to their operating account,
which was also at Regions. After this transfer, the remaining REO related proceeds totaled $91.2 million as of
April 30, 2010.173

168 See TB&W Final Reconciliation Report Supra


169 See TB&W Final Reconciliation Report Supra
170 These REO properties were sold either in the ordinary course or in the bulk sale via the Court-approved Section 363 auction process.
171 See TB&W Final Reconciliation Report Supra
172 The $4.5 million includes the collection of mortgage insurance refunds and the recovery of advances made by TB&W to preserve the value of the REO.

These advances were made to cover property taxes, insurance premiums and maintenance costs.
173 See TB&W Final Reconciliation Report Supra

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CREATING CLEAN INSTRUMENTS, FILES, ALLONGES, ENDORSEMENTS &


DUMMY COLLATERAL FILES & NOTES
Darrell W. Pierce is a Michigan lawyer for the national law firm of Dykema Gossett. Mr. Pierce served as
member of the Article 9 Study Committee for the Permanent Editorial Board for the Uniform Commercial
Code, as Chair of the Article 9 Filing Project and as the primary drafter of the International Association of
Commercial Administrators Model Administrative Rules for Article 9 filing offices. He is a frequent lecturer
and writer regarding UCC matters. Mr. Pierce authored an article for the Association of Corporate Counsel
titled Allonges: Separate Indorsements Not Effective Unless Affixed.

In his article, Mr. Pierce exposes the lenders dirty secret of the motives and use of allonges and clean
collateral files by the mortgage industry when he writes:174
Secured lenders routinely take pledges of instruments (including negotiable instruments under UCC Article 3 and
other promissory notes) as collateral. Instruments are subject to special priority rules. Security interests perfected
merely by filing a UCC1 financing statement are junior to security interests perfected by possession, without regard to
time of filing or possession.

Security interests perfected by control (possession plus indorsement) are senior to those perfected merely by
filing or possession. Accordingly, secured parties who are relying on instruments as collateral will want to have control
over the instruments.

Instruments may be indorsed to secured parties, but it is a cumbersome process that has to be unwound when the loan
is repaid as expected. It is, therefore, convenient and common practice to have the requisite indorsements supplied on a
separate piece of paper. This keeps the instrument clean so that it can be returned clean when the secured
obligations are paid. The separate piece of paper is kept with the instrument but is not typically attached to it, though
the lender or its custodian has authority to do so, at least upon default.

This practice works well in most cases. Even though the lender is not yet a holder under Article 3, because the
indorsement is not attached, the lender has possession and the related loan documents should cause the lender
to be a nonholder in possession of the instrument who has the rights of a holder, that is one who can enforce
the instrument as such under UCC 3-301, and compel indorsement under UCC 3-203.

In addition, secured parties in (mere) possession have priority over other secured parties except those who have
control (possession plus indorsement), so the failure to achieve full control does not normally impair priority (no
one else will have possession except in rare cases). UCC 9-330(d). So, even if a separate indorsement is not
initially affixed to an instrument, a secured party in possession normally maintains first priority and has the
power to negotiate the instrument upon default.

There are occasions, however, when having an indorsement is critically important. One would be the relatively
rare case where one competing secured party has possession for itself as well as for the other competing
secured party, so both would be in possession and priority could depend on the effectiveness of an
indorsement. Another would be where the maker of a negotiable instrument has defenses against the named
payee but the secured party, with the indorsement, would be a holder in due course. Yet another would be an
assignment of a note or a casual pledge where the related documents do not clearly provide the lender with the
rights of a holder.

Under UCC Article 3, which applies to negotiable instruments (as defined in Article 3) and which is commonly
applied by courts to non-negotiable instruments, indorsement means a signature on an instrument For the
purpose of determining whether a signature is made on an instrument, a paper affixed to the instrument is a part of
the instrument. UCC 3-204(a) (emphasis supplied). Under this rule, a separate assignment document is not
sufficient to create the requisite indorsement, unless it is affixed to the instrument.

Some Michigan assignees found out the hard way how important it is to have ones separate indorsement
affixed. In one case, a separate indorsement was not attached to the note in question and the assignee was

174Pierce, Darrell W. "Allonges: Separate Indorsements Not Effective Unless Affixed | Lexology." Lexology. Dykema Gossett PLLC, 20 Aug. 2014. Web. 13
Dec. 2016. <http://www.lexology.com/library/detail.aspx?g=75efc020-16c9-434c-a637-1785a82846be>.
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unwilling to produce the underlying assignment of loans agreement. The court held the separate indorsement was not
effective and, because it referenced the unproduced underlying agreement, it did not prove an absolute
assignment was intended. Brown Bark, II, LP v. Bay Are Floor Covering & Design, Inc., Case No. 296660, (Mich. Ct.
App. May 31, 2011). In the other case, the assignee ultimately had two problems after it took a note and placed it in
an envelope with a separate indorsement. Not only was the separate indorsement ineffective because it was not
affixed to the note, it turned out the note was in fact a color copy of the original note, so the assignee did not even have
possession of the note. Without ever having had possession, the assignee did have standing to enforce the note as
a lost note under UCC 3-309. Shaya v. Karam, Case No. 308905 (Mich. Ct. App. May 6, 2014).

Pledgees and other assignees of notes need to ensure that original notes are delivered to them, and if
indorsements are separately provided, that transaction documents properly authorize them to attach the separate
indorsements when appropriate.

In essence, Mr. Pierce describes how it was the mortgage industrys common practice to have a loose and an
unattached piece of paper containing a blank endorsement on it that they called an allonge contained in
the collateral file! However, an allonge is a blank piece of paper already affixed to the actual original note
that an endorsement is then placed on while affixed to the original note. An endorsement on a blank piece of
paper is not an allonge nor is it a valid endorsement placed upon the original note.

As you saw evidenced in the prior Taylor Bean & Whitaker case history, promissory notes and loans flow
through several financing vehicles and facilities, even before its ultimate sale or securitization. Even the
original funding source, such as TB&Ws Ocala Funding, is concealed from borrowers, public recording, courts
and the actual note itself. There are no recorded assignments in public records containing the actual funding
source; no endorsements on the note for the actual funding source; and often no disclosure to the borrower of
the funding source.

U.S. SUPREME COURTS STANCE ON SECURITIZATION FRAUD


In August 2012, the FDIC sued several major banks that issued or underwrote over $300 million in mortgage-
backed securities that Colonial purchased in 2007 that contributed to its failure. The FDIC and regulators said
the disclosures on the RMBS securities purchased by Colonial contained false information and misrepresented
the health of the underlying mortgages.175

The FDIC's lawsuit was filed under the Financial Institutions Reform, Recovery, and Enforcement Act, ("FIRREA")
that gives the F.D.I.C. when acting as a receiver, additional time to bring claims to court by overriding statutes
of limitations outlined in other securities laws.176

In October of 2016, First Horizon, Credit Suisse, Deutsche Bank, HSBC, RBS, UBS, and Wells Fargo petitioned
the Supreme Court to review a May ruling by the U.S. Court of Appeals for the Second Circuit, saying the
matter affected at least 12 pending lawsuits and more than $30 billion in claims by federal regulators.177

The Second Circuit, with one judge dissenting, ruled that the Federal Deposit Insurance Corporation could sue
institutions that issued or underwrote mortgage-backed securities purchased the failed Colonial Bank, even
though the FDIC filed its claims after the expiration of the three-year statute of repose under the Securities
Act of 1933.178 On January 9, 2017, the U.S. Supreme Court turned away a petition by several major banks
urging review of the Second Circuit ruling that gives federal regulators more time to sue them (First Horizon
Securities Inc. v. FDIC, U.S., No. 16-cv-00463, cert. den. 1/9/17 ).

175 Finkle, Victoria. "Big Banks Lose Bid to Halt Crisis-Era Lawsuits." Www.nytimes.com. The New York Times Company, 10 Jan. 2017. Web. 15 Jan. 2017.
<https://www.nytimes.com/2017/01/10/business/dealbook/wells-fargo-credit-suisse-deutsche-bank.html?smid=fb-share>.
176 Id.
177 10, 2017 January. "Banks Rejected by Supreme Court on FDIC Mortgage-Bond Suits." Banks Rejected by Supreme Court on FDIC Mortgage-Bond Suits |

Bloomberg BNA. The Bureau of National Affairs, Inc., 10 Jan. 2017. Web. 20 Jan. 2017. <https://www.bna.com/banks-rejected-supreme-
n73014449530/>.
178 Id.

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U.S. JUSTICE DEPARTMENTS POSITION ON SECURITIZATION FRAUD


The RMBS Working Group was original created as a collaborative effort led by five co-chairs including
Assistant Attorney General for the Criminal Division Lanny Breuer, Acting Assistant Attorney General for the
Civil Division Stuart Delery, U.S. Attorney for the District of Colorado John Walsh, Director of Enforcement for
the U.S. Securities and Exchange Commission (SEC) Robert Khuzami, and New York State Attorney General
Eric Schneiderman.179

The working group focused its efforts on investigating possible false or misleading statements, deception or other
misconduct by market participants in the creation, packaging and sale of mortgage-backed securities. The RMBS
working group and its members specific efforts were law enforcement sensitive and, therefore, had to remain
confidential. The working group: identified specific RMBS offerings for priority investigation through the use of
various forensic tools including risk-based analytics; analyzed pending private RMBS litigation throughout the
country for important evidentiary connections to existing law enforcement investigations; and convened
operational meetings among investigators, attorneys, analysts and RMBS market experts and insiders.
"The RMBS website is a new call to those insiders who know about fraud that occurred in the RMBS market, who know it's
time to expose that fraud, and who want to help us hold accountable those individuals and institutions who broke the law
in pursuit of bigger paydays," said Acting Associate Attorney General Tony West. "Although the working group and its
members have done a tremendous amount of investigative work already including having issued more than 25 civil
subpoenas we know that hearing from insiders is particularly valuable. There are scores of people who worked in
the RMBS market who acted responsibly but who also may have witnessed greed and misconduct that crossed the
legal line and created havoc for investors, homeowners and our economy. We want to hear from them."

"The working group's approach to RMBS investigations is systematic and smart cross-agency teams comprised of
experienced prosecutors and investigators utilizing market experts and risk-based criteria to triage transactions for
review, and bringing to bear the entire palette range of state and federal legal theories and remedies," said RMBS
Working Group Co-Chair Robert Khuzami, Director of the SECs Division of Enforcement. The numbers reveal the
working group effort and commitment; the SEC alone brings to the effort more than 40 SEC staff from eight SEC
offices trained in securitized products. The SEC teams bring substantial ongoing investigatory work to the effort as
well. Since 2010, the SEC has issued over 300 subpoenas or document requests resulting in more than 30 million
pages of documents with interviews or sworn testimony taken from over 180 witnesses, all focused on whether firms
failed to disclose important information when selling RMBS securities.

The RMBS Working Group consisted of a broad coalition of state and federal officials with dedicated
lawyers, investigators, analysts and staff. The RMBS Working Group was and still is a federal and state law
enforcement effort focused on investigating fraud and abuse in the RMBS market that helped lead to the
2008 financial crisis.

The RMBS Working Group brought together more than 200 attorneys, investigators, analysts and staff from
dozens of state and federal agencies. The group included members of the Department of Justice, 10 U.S.
attorneys offices, the FBI, the Securities and Exchange Commission (SEC), the Department of Housing and
Urban Development (HUD), HUDs Office of Inspector General, the FHFA-OIG, the Office of the Special
Inspector General for the Troubled Asset Relief Program, the Federal Reserve Boards Office of Inspector
General, the Recovery Accountability and Transparency Board, the Financial Crimes Enforcement Network,
and more than 10 state attorneys general offices around the country.180181

As shown below, the RMBS Working Group filed lawsuits as well as entered into settlement agreements with
virtually every major American and foreign banks involved in the RMBS marketplace in the United States.

179 "USDOJ: Residential Mortgage-Backed Securities (RMBS ..." www.stopfraud.gov N.p., n.d. Web. 07 Jan. 2017 <http://www.stopfraud.gov/iso/opa/stopfraud/2012/12-opa-672.html>.
180 "Department of Justice Sues Bank of America for Defrauding ..." www.justice.gov. N.p., n.d. Web. 07 Jan. 2017
<https://www.justice.gov/opa/pr/department-justice-sues-bank-america-defrauding-i>.
181 "Bank of America to Pay $16.65 Billion in Historic Justice ..." www.justice.gov. N.p., n.d. Web. 07 Jan. 2017 <https://www.justice.gov/opa/pr/bank-

america-pay-1665-billion-historic-justice-de>.
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Their work and investigation validated many of my findings and opinions as described in the predatory
mortgage securitization section of my 2000 21st Century Loan Sharks Report.182

Credit Suisse DOJ Settlement RMBS Fraud


Just weeks ago, as I was writing this report, Credit Suisse agreed in principle to pay U.S. regulators $2.48
billion to settle claims it misled investors in the residential mortgage-backed securities it sold in the run-up to
the 2008 financial crisis. Credit Suisse also agreed to provide $2.8 billion in consumer relief over five years
from the settlement. The deal is subject to negotiation of final documentation and approval by Credit Suisses
board of directors.183

Deutsche Bank DOJ Settlement RMBS Fraud


On the same day, Deutsche Bank said it would pay $7.2 billion to the U.S. Department of Justice, related to
its issuance and underwriting of residential mortgage-backed securities (RMBS) and other activities from 2005
to 2007. However, the settlement agreement was less than the $14 billion the United States asked Deutsche
Bank to pay in September to settle the claims. That figure caused Deutsche Bank's stock to plummet and raised
questions about the bank's stability and the risks it posed to the worlds financial system. Under its settlement,
Deutsche Bank will pay a civil monetary penalty of $3.1 billion and provide $4.1 billion in consumer relief in
the United States.184

Barclays Bank DOJ Lawsuit RMBS Fraud


The U.S. Justice Department also sued Barclays PLC, alleging the bank fraudulently sold more than $30 billion
of mortgage securities that helped fuel the financial crisis, after long-running settlement negotiations broke
down.185 Over the past few years, the U.S. Justice Department reached settlements with other lenders and
Wall Street firms over mortgage-backed securities fraud.

Bank of America DOJ Settlement RMBS Fraud


On Thursday, August 21, 2014, U.S. Attorney General Eric Holder and Associate Attorney General Tony
West announced that the Department of Justice reached a $16.65 billion settlement with Bank of America
Corporation. The settlement with Bank of America was the largest civil settlement with a single entity in
American history. It resolved federal and state claims against Bank of America and its former and current
subsidiaries, including Countrywide Financial Corporation and Merrill Lynch. As part of this global resolution,
the bank agreed to pay a $5 billion penalty under the Financial Institutions Reform, Recovery and
Enforcement Act (FIRREA). The $5 billion payment was the largest FIRREA penalty ever and provide billions of
dollars of relief to struggling homeowners.

182 "Residential Mortgage-Backed Securities (RMBS) Working ..." www.justice.gov. N.p., n.d. Web. 07 Jan. 2017
<https://www.justice.gov/opa/pr/residential-mortgage-backed-securities-rmbs-worki>.
183 Reuters. "Credit Suisse Agrees $5.3 Billion US Deal on Mortgages." CNBC. CNBC, 23 Dec. 2016. Web. 27 Dec. 2016.

<http://www.cnbc.com/2016/12/23/credit-suisse-says-it-will-pay-248-billion-to-the-doj-over-us-mortgage-case.html>.
184 Reuters. "Deutsche Bank Reaches $7.2 Billion Settlement with DOJ on Mortgages Case." CNBC. CNBC, 22 Dec. 2016. Web. 27 Dec. 2016.

<http://www.cnbc.com/2016/12/22/deutsche-bank-reaches-settlement-with-doj-on-mortgages-case.html>.
185 Colchester, Max, Devlin Barrett, and Jenny Strasburg. "U.S. Sues Barclays Over Toxic Mortgage-Backed Securities." The Wall Street Journal. Dow Jones &

Company, 22 Dec. 2016. Web. 27 Dec. 2016. <http://www.wsj.com/articles/u-s-sues-barclays-over-mortgage-securities-in-rare-step-1482437193>.


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The funds helped to defray tax liability as a result of mortgage modification, forbearance or forgiveness. The
settlement did not release individuals from civil charges, nor did it absolve Bank of America, its current or
former subsidiaries, and affiliates or any individuals from potential criminal prosecution186
This historic resolution - the largest such settlement on record - goes far beyond the cost of doing business, said
Attorney General Holder. "Under the terms of this settlement, the bank has agreed to pay $7 billion in relief to
struggling homeowners, borrowers and communities affected by the banks conduct. This is appropriate given the size
and scope of the wrongdoing at issue.

At nearly $17 billion, todays resolution with Bank of America is the largest the department has ever reached with a
single entity in American history, said Associate Attorney General West. But the significance of this settlement lies
not just in its size; this agreement is notable because it achieves real accountability for the American people and
helps to rectify the harm caused by Bank of Americas conduct through a $7 billion consumer relief package that
could benefit hundreds of thousands of Americans still struggling to pull themselves out from under the weight of the
financial crisis.

The Justice Department and Bank of America settled several of the departments ongoing civil investigations.
The investigations were related to the packaging, marketing, sale, arrangement, structuring, and issuance of
RMBS collateralized debt obligations (CDOs), and the banks practices concerning the underwriting and
origination of mortgage loans. The settlement includes a statement of facts, in which the bank acknowledged
that it sold billions of dollars of RMBS without disclosing to investors key facts about the quality of the
securitized loans. When the RMBS collapsed, investors, including federally insured financial institutions,
suffered billions of dollars in losses. The bank also conceded that it originated risky mortgage loans and
made misrepresentations about the quality of those loans to Fannie Mae, Freddie Mac and the Federal
Housing Administration (FHA)).187

Goldman Sachs DOJ Settlement RMBS Fraud


On April 11, 2016, the Justice Department, along with federal and state partners, announced a $5.06 billion
settlement with Goldman Sachs related to Goldmans conduct in the packaging, securitization, marketing, sale
and issuance of residential mortgage-backed securities (RMBS) between 2005 and 2007. The settlement
requires Goldman to pay $2.385 billion in a civil penalty under the Financial Institutions Reform, Recovery
and Enforcement Act (FIRREA) and also requires the bank to provide $1.8 billion in other relief, including relief
to underwater homeowners, distressed borrowers and affected communities, in the form of loan forgiveness
and financing for affordable housing. Goldman also agreed to pay $875 million to resolve claims by other
federal entities and state claims. Investors, including federally-insured financial institutions, suffered billions of
dollars in losses from investing in RMBS issued and underwritten by Goldman between 2005 and 2007.188

Morgan Stanley DOJ Settlement RMBS Fraud


On February 11, 2016, the Justice Department announced that Morgan Stanley will pay a $2.6 billion
penalty to resolve claims related to Morgan Stanleys marketing, sale and issuance of residential mortgage-
backed securities (RMBS). The settlement constitutes the largest component of the set of resolutions with
Morgan Stanley entered by members of the RMBS Working Group.

186 "Bank of America to Pay $16.65 Billion in Historic Justice ..." www.justice.gov. N.p., n.d. Web. 07 Jan. 2017 <https://www.justice.gov/opa/pr/bank-
america-pay-1665-billion-historic-justice-de>.
187 "Bank of America to Pay $16.65 Billion in Historic Justice ..." www.justice.gov. N.p., n.d. Web. 07 Jan. 2017 <https://www.justice.gov/opa/pr/bank-

america-pay-1665-billion-historic-justice-de>.
188 Department of Justice Office of Public Affairs. "Goldman Sachs Agrees to Pay More than $5 Billion in Connection with Its Sale of Residential Mortgage

Backed Securities." Goldman Sachs Agrees to Pay More than $5 Billion in Connection with Its Sale of Residential Mortgage Backed Securities | OPA | Department
of Justice. U.S. Justice Department, 11 Apr. 2016. Web. 27 Dec. 2016. <https://www.justice.gov/opa/pr/goldman-sachs-agrees-pay-more-5-billion-
connection-its-sale-residential-mortgage-backed>.
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As part of the settlement agreement, Morgan Stanley acknowledged in writing that it failed to disclose critical
information to prospective investors about the quality of the mortgage loans underlying its RMBS and about
its due diligence practices. Investors, including federally insured financial institutions, suffered billions of
dollars in losses from investing in RMBS issued by Morgan Stanley in 2006 and 2007. Justice Department
officials had the following comments:
Todays settlement holds Morgan Stanley appropriately accountable for misleading investors about the subprime
mortgage loans underlying the securities it sold, said Acting Associate Attorney General Stuart F. Delery. The
Department of Justice will not tolerate those who seek financial gain through deceptive or unfair means, and we will
take appropriately aggressive action against financial institutions that knowingly engage in improper investment
practices. Those who contributed to the financial crisis of 2008 cannot evade responsibility for their misconduct,
said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Departments Civil Division.
This resolution demonstrates once again that the Financial Institutions Reform, Recovery and Enforcement Act is a
powerful weapon for combatting financial fraud and that the department will not hesitate to use it to hold
accountable those who violate the law.

Citigroup DOJ Settlement RMBS Fraud


On Monday, July 14, 2014, the Justice Department, along with federal and state partners, announced a $7
billion settlement with Citigroup Inc. to resolve federal and state civil claims related to Citigroups conduct in
the packaging, securitization, marketing, sale and issuance of residential mortgage-backed securities (RMBS)
prior to Jan. 1, 2009. The resolution included a $4 billion civil penalty the largest penalty to date under the
Financial Institutions Reform, Recovery and Enforcement Act (FIRREA). As part of the settlement, Citigroup
acknowledged it made serious misrepresentations to the public including the investing public about the
mortgage loans it securitized in RMBS. The resolution also required Citigroup to provide relief to underwater
homeowners, distressed borrowers and affected communities through a variety of means including financing
affordable rental housing developments for low-income families in high-cost areas. The settlement did not
absolve Citigroup or its employees from facing any possible criminal charges.
This historic penalty is appropriate given the strength of the evidence of the wrongdoing committed by Citi, said
Attorney General Eric Holder. The bank's activities contributed mightily to the financial crisis that devastated our
economy in 2008. Taken together, we believe the size and scope of this resolution goes beyond what could be
considered the mere cost of doing business. Citi is not the first financial institution to be held accountable by this
Justice Department, and it will certainly not be the last.

The settlement included an agreed upon statement of facts that describes how Citigroup made representations
to RMBS investors about the quality of the mortgage loans it securitized and sold to investors. Contrary to
those representations, Citigroup securitized and sold RMBS with underlying mortgage loans that it knew
had material defects. As the statement of facts explains, on a number of occasions, Citigroup employees
learned that significant percentages of the mortgage loans reviewed in due diligence had material defects. In one
instance, a Citigroup trader stated in an internal email that he went through the Diligence Reports and think[s]
[they] should start praying . . . [he] would not be surprised if half of these loans went down. . . Its amazing that
some of these loans were closed at all. Citigroup nevertheless securitized the loan pools containing defective
loans and sold the resulting RMBS to investors for billions of dollars. This conduct, along with similar conduct
by other banks that bundled defective and toxic loans into securities and misled investors who
purchased those securities, contributed to the financial crisis.
Today, we hold Citi accountable for its contributing role in creating the financial crisis, not only by demanding the
largest civil penalty in history, but also by requiring innovative consumer relief that will help rectify the harm caused
by Citi's conduct, said Associate Attorney General Tony West. In addition to the principal reductions and loan
modifications we've built into previous resolutions, this consumer relief menu includes new measures such as $200
million in typically hard-to-obtain financing that will facilitate the construction of affordable rental housing, bringing
relief to families pushed into the rental market in the wake of the financial crisis.

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JPMorgan Chase DOJ Settlement RMBS Fraud


On Tuesday, November 19, 2013, the Justice Department, along with federal and state partners announced
a $13 billion settlement with JPMorgan - the largest settlement with a single entity in American history - to
resolve federal and state civil claims arising out of the packaging, marketing, sale and issuance of residential
mortgage-backed securities (RMBS) by JPMorgan, Bear Stearns and Washington Mutual prior to Jan. 1,
2009. As part of the settlement, JPMorgan acknowledged it made serious misrepresentations to the public -
including the investing public - about numerous RMBS transactions. The resolution required JPMorgan to
provide much needed relief to underwater homeowners and potential homebuyers, including those in
distressed areas of the country. The settlement did not absolve JPMorgan or its employees from facing any
possible criminal charges. This settlement was part of the ongoing efforts of President Obamas Financial
Fraud Enforcement Task Forces RMBS Working Group.
Without a doubt, the conduct uncovered in this investigation helped sow the seeds of the mortgage meltdown, said
Attorney General Eric Holder. JPMorgan was not the only financial institution during this period to knowingly bundle
toxic loans and sell them to unsuspecting investors, but that is no excuse for the firms behavior. The size and scope of
this resolution should send a clear signal that the Justice Departments financial fraud investigations are far from over.
No firm, no matter how profitable, is above the law, and the passage of time is no shield from accountability. I want
to personally thank the RMBS Working Group for its tireless work not only in this case, but also in the investigations
that remain ongoing.

The settlement includes a statement of facts, in which JPMorgan acknowledged that it regularly represented to
RMBS investors that the mortgage loans in various securities complied with underwriting guidelines. Contrary
to those representations, as the statement of facts explains, on a number of different occasions, JPMorgan
employees knew that the loans in question did not comply with those guidelines and were not otherwise
appropriate for securitization, but allowed the loans to be securitized and those securities to be sold
without disclosing this information to investors. This conduct, along with similar conduct by other banks that
bundled toxic loans into securities and misled investors who purchased those securities, contributed to
the financial crisis.
Through this $13 billion resolution, we are demanding accountability and requiring remediation from those who helped
create a financial storm that devastated millions of Americans, said Associate Attorney General Tony West. The
conduct JPMorgan has acknowledged - packaging risky home loans into securities, then selling them without disclosing their
low quality to investors - contributed to the wreckage of the financial crisis. By requiring JPMorgan both to pay the largest
FIRREA penalty in history and provide needed consumer relief to areas hardest hit by the financial crisis, we rectify some of
that harm today.

Todays global settlement underscores the power of FIRREA and other civil enforcement tools for combatting financial
fraud, said Assistant Attorney General for the Civil Division Stuart F. Delery, co-chair of the RMBS Working Group.
The Civil Division, working with the U.S. Attorneys Offices and our state and agency partners, will continue to use every
available resource to aggressively pursue those responsible for the financial crisis.

Abuses in the mortgage-backed securities industry helped turn a crisis in the housing market into an international financial
crisis, said U.S. Attorney for the Eastern District of California Benjamin Wagner. The impacts were staggering.
JPMorgan sold securities knowing that many of the loans backing those certificates were toxic. Credit unions, banks and
other investor victims across the country, including many in the Eastern District of California, continue to struggle with losses
they suffered as a result. In the Eastern District of California, we have worked hard to prosecute fraud in the mortgage
industry. We are equally committed to holding accountable those in the securities industry who profited through the sale of
defective mortgages. Today's settlement represents another significant step towards holding accountable those banks
which exploited the residential mortgage-backed securities market and harmed numerous individuals and entities in the
process, said U.S. Attorney for the Eastern District of Pennsylvania Zane David Memeger. These banks packaged and
sold toxic mortgage-backed securities, which violated the law and contributed to the financial crisis. It is particularly
important that JPMorgan, after assuming the significant assets of Washington Mutual Bank, is now also held responsible for
the unscrupulous and deceptive conduct of Washington Mutual, one of the biggest players in the mortgage-backed
securities market.

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The settlement resolved only civil claims arising out of the RMBS packaged, marketed, sold and issued by
JPMorgan, Bear Stearns and Washington Mutual. The agreement did not release individuals from civil
charges, nor does it release JPMorgan or any individuals from potential criminal prosecution. In addition, as
part of the settlement, JPMorgan pledged to fully cooperate in investigations related to the conduct covered
by the agreement.

To keep JPMorgan from seeking reimbursement from the federal government for any money it paid pursuant
to the settlement, the Justice Department required language in the settlement agreement that prohibits
JPMorgan from demanding indemnification from the FDIC, both in its capacity as a corporate entity and as
the receiver for Washington Mutual.
The settlement announced today will provide a significant recovery for six FDIC receiverships. It also fully protects
the FDIC from indemnification claims out of this settlement, said FDIC Chairman Martin J. Gruenberg. The FDIC will
continue to pursue litigation where necessary in order to recover as much as possible for FDIC receiverships, money that is
ultimately returned to the Deposit Insurance Fund, uninsured depositors and creditors of failed banks.

NCUAs Board extends our thanks and appreciation to our attorneys and to the Department of Justice, who have
worked closely together for more than three years to bring this matter to a successful resolution, said NCUA Board
Chairman Debbie Matz. The faulty mortgage-backed securities created and packaged by JPMorgan and other
institutions created a crisis in the credit union industry, and were pleased a measure of accountability has been reached.

JPMorgan and the banks it bought securitized billions of dollars of defective mortgages, said Acting FHFA Inspector
General Michael P. Stephens. Investors, including Fannie Mae and Freddie Mac, suffered enormous losses by purchasing
RMBS from JPMorgan, Washington Mutual and Bear Stearns not knowing about those defects. Todays settlement is a
significant, but by no means final step by FHFA-OIG and its law enforcement partners to hold accountable those who
committed acts of fraud and deceit. We are proud to have worked with the Department of Justice, the U.S. attorneys in
Sacramento and Philadelphia and the New York and California state attorneys general; they have been great partners and
we look forward to our continued work together.

The attorneys general of New York, California, Delaware, Illinois and Massachusetts also conducted related
investigations that were critical to bringing about this settlement.
Since my first day in office, I have insisted that there must be accountability for the misconduct that led to the crash of the
housing market and the collapse of the American economy, said New York Attorney General Eric Schneiderman, Co-
Chair of the RMBS Working Group. This historic deal, which will bring long overdue relief to homeowners around the
country and across New York, is exactly what our working group was created to do. We refused to allow systemic frauds
that harmed so many New York homeowners and investors to simply be forgotten, and as a result weve won a major
victory today in the fight to hold those who caused the financial crisis accountable.

JP Morgan Chase profited by giving Californias pension funds incomplete information about mortgage investments,
California Attorney General Kamala D. Harris said. This settlement returns the money to Californias pension funds
that JP Morgan wrongfully took from them.

Our financial system only works when everyone plays by the rules, said Delaware Attorney General Beau Biden.
Today, as a result of our coordinated investigations, we are holding accountable one of the financial institutions that, by
breaking those rules, helped cause the economic crisis that brought our nation to its knees. Even as the American people
recover from this crisis, we will continue to seek accountability on their behalf.

We are still cleaning up the mess that Wall Street made with its reckless investment schemes and fraudulent conduct,
said Illinois Attorney General Lisa Madigan. Todays settlement with JPMorgan will assist Illinois in recovering its losses
from the dangerous and deceptive securities that put our economy on the path to destruction.

This is a historic settlement that will help us to hold accountable those investment banks that played a role in creating and
exacerbating the housing crisis, said Massachusetts Attorney General Martha Coakley. We appreciate the work of
the Department of Justice and the other enforcement agencies in bringing about this resolution and look forward to
continuing to work together in other securitization cases.

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RTC & DOUBLE-PLEDGE FRAUD


Even then, the evidence at my disposal reflected what is called double-pledge fraud. History has a funny way
of repeating itself, over and over again. In the 1980s, deregulation and desupervision of U.S. savings and
loan organizations led to a collapse and a subsequent federal bailout that cost American taxpayers over
$300 billion.189 Studies reflect that one-fourth to one-half of these losses were due to fraud and insider
trading in a "Cowboy Capitalism" environment that might be described as a federally-sponsored Ponzi
scheme.

Some of the fraudulent mortgage schemes included nominee loans, double pledging of collateral, reciprocal
loan arrangements, land flips, embezzlement and check kiting. There were also allegations of involvement on
the part of organized crime. The banking and thrift industry became increasingly sophisticated while the
regulatory mentality remained trapped in the 1930s.

The Federal Home Loan Bank Board, the U.S. Justice Department, and FBI were unprepared to deal with the
new thrift environment and the savings and loan scandal brought on by deregulation.190

The Resolution Trust Corporation (RTC) was a U.S. government-owned asset management company run by
Lewis William Seidman and charged with liquidating assets, primarily real estate-related assets such as
mortgage loans, that had been assets of savings and loan associations (S&Ls) declared insolvent by the Office
of Thrift Supervision (OTS) as a consequence of the savings and loan crisis of the 1980s. It also took over the
insurance functions of the former Federal Home Loan Bank Board (FHLBB).191

Between 1989 and mid-1995, the Resolution Trust Corporation closed or otherwise resolved 747 thrifts with
total assets of $394 billion. Its funding was provided by the Resolution Funding Corporation (REFCORP) which
still exists to support the debt obligations it created for these functions. It was established in 1989 by the
Financial Institutions Reform Recovery and Enforcement Act (FIRREA), and was overhauled in 1991.192

In 1995 its duties were transferred to the Savings Association Insurance Fund (SAIF) of the Federal Deposit
Insurance Corporation (FDIC). In 2006 the SAIF and its sister fund for banksthe bank insurance fund (BIF)
also administered by the FDIC, were combined to form the Deposit Insurance Fund (DIF) under the provisions
of the Federal Deposit Insurance Reform Act of 2005.

189 "NCJRS Abstract - National Criminal Justice Reference Service." www.ncjrs.gov. N.p., n.d. Web. 27 Dec. 2016
<https://www.ncjrs.gov/App/publications/Abstract.aspx?id=132554>.
190 Id.
191 "Resolution Trust Corporation - Wikipedia." Insert Name of Site in Italics. N.p., n.d. Web. 27 Dec. 2016

<https://en.wikipedia.org/wiki/Resolution_Trust_Corp>.
192 Id.

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BANK OF AMERICA/COUNTRYWIDE EVIDENCE OF DOUBLE-PLEDGE FRAUD


In the thousands of pages of reports I have authored over the last three-decades, I have written extensively
about the failure of mortgage sellers to lawfully and properly convey, transfer, assign and deliver the
original promissory notes of borrowers to their intended securitized trusts. While all of these various
fraudulent schemes are too complex to detail herein, the evidence in foreclosure and bankruptcy matters
involving Bank of America and Countrywide as servicers or originators, reflects that they and others held onto
the originals for the undisclosed benefit of others while only conveying images and copies to RMBS Trusts.

BONY/BANA Expert Report of Phillip R. Burnaman, II


On June 28, 2011, The Bank of New York Mellon (BNYM or the Trustee), in its capacity as trustee or
indenture trustee of 530 RMBS trusts (the Covered Trusts) entered into a settlement agreement (the
Settlement Agreement) with Bank of America Corporation (BAC), BAC Home Loans Servicing, LP
(BACHLS and, together with BAC, BANA), Countrywide Financial Corporation (CFC) and Countrywide
Home Loans, Inc. (CHL and, together with CFC, Countrywide), regarding claims belonging to the Covered
Trusts concerning (i) alleged breaches by Countrywide of representation and warranties related to certain of
the residential mortgage loans sold by Countrywide to the Covered Trusts, (ii) alleged servicing breaches by
the Master Servicer for the Covered Trusts, and (iii) alleged documentation defects.

In addition to BANA and Countrywide agreeing to pay a settlement payment of $8.5 billion (the Settlement
Amount), BANA agreed to perform its servicing obligations under the Covered Trusts governing
agreements in accordance with a series of servicing protocols designed to improve the servicing
operations of the loans, including, in some cases, transferring the responsibility for servicing of certain
non-performing loans to specialty Subservicers (such servicing protocols, which are set out in Paragraph 5
of the Settlement Agreement, are referred to herein, collectively, as the Servicing Improvements).

Burnaman and his company, The GreensLedge Group LLC, were retained to provide expert opinions and
analyses pertaining to certain issues related to repurchase demands made by certificate holders in
Countrywide/BANA related RMBS securitizations. Pertinent to this report are the following opinions, comments,
and information excerpted from Burnamans expert report:193
Background:

In the late 1970s and early 1980s, the residential mortgage lending industry began to transition to a model in
which the servicing, nominal ownership and economic ownership of residential mortgage loans could be separated
after origination and sold individually to unrelated parties. The practice of originating, selling and securitizing
residential mortgage loans in the United States expanded significantly prior to the financial crisis of 2008, and a
number of contentious issues were raised in the aftermath of the crisis. The Settlement Agreement that I have been
asked to review addresses, among others, the issue of contractual representations and warranties made by a
mortgage loan originator/seller to residential mortgage backed securities (RMBS) trusts.

Assessing the amounts a loan originator owes to RMBS trusts for the repurchase of mortgages that breached the
originators representations and warranties is a complex and now heavily litigated aspect of mortgage finance.
Unlike the quantification of estimated cumulative losses on a mortgage portfolio, where the industry standard
methodology is generally accepted and the primary issues arise from the assumption set to be used, the calculation of
breach and repurchase rates relies heavily on subjective analysis, estimation and experience.

Opinions:

In my opinion, BANAs obligation to cure or indemnify the Covered Trusts for certain document deficiencies, as
provided for in Paragraph 6 of the Settlement Agreement, is an additional and potentially valuable benefit to the

193Burnaman, II, Phillip R. "Expert Report of Phillip R. Burnaman, II - Opinion on Settlement Amount, Valuation of Servicing Improvements and Certain Document
Exception Cures." FILED: NEW YORK COUNTY CLERK 03/14/2013 Index No. 651786/2011 (2013): 1-72. Cwrmbssettlement.com. Garden City Group, LLC,
14 Mar. 2013. Web. 27 Dec. 2016. <http://www.cwrmbssettlement.com/docs/No.%20539.pdf>.
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Covered Trusts beyond the Servicing Improvements. As I describe more fully in Section 13, I elected not to calculate a
monetary value for this benefit because doing so would require me to make several additional assumptions, which
cannot be further refined without additional data.

In order to determine useful data points on repurchase rates for comparative purposes, I reviewed (i) the total
consideration paid by BANA/Countrywide to Fannie Mae in order to resolve Fannie Maes representation and
warranty claims, including the January 6, 2013 and December 31, 2010 settlements between those parties, and all
other repurchases on the population covered by those settlements, and (ii) the total consideration paid by
BANA/Countrywide to Freddie Mac 33 to resolve Freddie Macs similar claims, including the December 31, 2010
settlement between those parties and all other repurchases in the population covered by that settlement. I understand
that the 2010 Freddie Mac settlement and 2013 Fannie Mae settlement each represented a full and final settlement
with the applicable GSE. In order to determine the total cost of these resolutions, which is not publicly available, I
relied upon information which was provided to me by BANA. That information indicated that, taking the all-in cost of
the settlements and other previous repurchase activity (the appropriate measure, since repurchases completed before
a full and final settlement would be expected to reduce the ultimate settlement amount), the repurchase rates for the
Freddie Mac and Fannie Mae populations were 12.3% and 14.5% respectively.

Using the repurchase rates from the resolutions between BANA/Countrywide and Fannie Mae and Freddie Mac as a
reference point, I compared the negotiating positions of BANA and the Institutional Investors by applying the Fannie
Mae and Freddie Mac repurchase rates to each partys estimate of cumulative losses. This yielded an estimated
range of potential repurchase liability of $8.3 to $9.8 billion for BANA and $13.3 to $15.6 billion for the
Institutional Investors. In my opinion, these items of market data serve as helpful data points, not guidelines, on a
gauge of relative scale because they relate to claims substantially similar to those in the Settlement Agreement, and
concern loans also originated by Countrywide. Moreover, they are the result of a negotiated settlement.

8.3 Cure of Certain Document Exceptions

For all loans in the Covered Trusts, BANA was required to submit an Initial Exceptions Report Schedule, followed by
Monthly Exception Reports, enumerating all loans listed as having both a Mortgage Exception and Title Policy Exception, as
defined in the Settlement Agreement. The Mortgage Exceptions and the Title Policy Exceptions enumerated in the
Settlement Agreement relate to documentation defects whose combined effect may impair the enforceability of the loan
or mortgage on behalf of the relevant Covered Trust. For loans listed on the then current Monthly Exceptions Report, to
the extent BANA does not cure the Mortgage Exception or Title Policy Exception and the exception for a particular
loan results in a loss to the applicable Covered Trust in connection with the foreclosure on such loan, BANA is required
to reimburse the relevant Covered Trust up to 100% of the Realized Loss on such loan.

9 Servicing Improvement Valuation Methodologies

The amount of payment advances made by the servicer will also contribute to loss severity. While a loan is
delinquent, the servicer is generally required to make Protective Advances and may choose to make recoverable194
advances of interest and principal payments to the RMBS trust in the form of a servicer advance in order to keep
the certificateholders current. When the property is ultimately sold, the servicer will recover the amounts it had
advanced to the trust from the propertys sale proceeds as a priority payment. Servicers are permitted to stop
making advances of principal and interest to the RMBS trust if the servicer may not be able to recover the amounts it
195advances. All else equal, the Loss Severity on a loan will be higher the greater the amount of advances made by

the servicer.

The second assumption in my valuation construct was that the Settlement Agreement incentivizes the Master Servicer to
accelerate the disposition of delinquent loans held by the Covered Trusts, whether they are retained by the Master
Servicer or transferred to subservicing. Transferring High Risk Loans to Subservicers who are both expert in loss
mitigation techniques and are properly incentivized, would be expected to improve the performance of a portfolio of
mortgage loans. Subservicers in this context can reasonably be expected to reduce the time to foreclosure and
improve upon the re-performance rate of the loan portfolios that they are compensated to service. From my reading
of the record, all the parties in the negotiation intended to improve portfolio results by engaging the selected

194 The master servicer is obligated to make advances with respect to delinquent payments of principal of or interest on each Mortgage Loan to the extent
that the advances are, in its reasonable judgment, recoverable from future payments and collections or insurance payments or proceeds of liquidation of the
related Mortgage Loan. Prospectus, CWALT 2007- OA6.
195 Trustees Loan- Level Exception Reports BNYM_CW-00243975 to BNYM_CW-00244091.

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Subservicers, and the concept of transferring delinquent loans to a specialized high-touch delinquent loan servicing
has been a technique used in the mortgage finance industry previously.196

13 Cure of Certain Documentation Exceptions

Paragraph 6 of the Settlement Agreement addresses certain mortgage documentation exceptions, which could
prevent foreclosure if not cured. Prior to the execution of the Settlement Agreement, BNYM provided to BANA a loan
level report for certain of the Covered Trusts outlining the total number of document deficiencies tracked by the BNYM.
The loan level reports contained 117,899 loans with any type of document deficiency.

As per the Settlement Agreement, BANA submitted to BNYM an Initial Exception Report Schedule, including all the
Mortgage Exception and Title Policy Exception loans in the Covered Trusts. On an ongoing basis, the Settlement
Agreement requires BANA to issue an updated Monthly Exception Report listing current Mortgage Exceptions and
Title Policy Exception loans as well as loans with respect to which a Mortgage Exception or Title Policy Exception was
Cured during the reporting period.

Applying the Settlement Agreement document deficiency criteria to the loans within the BNYM loan level report, the
number of loans listed on the Initial Exceptions Report Schedule was 1,116.197 The Settlement Agreement requires
BANA to reimburse the Covered Trusts for any loss associated with a loan listed on the then-current Monthly Exception
Report if that loan has defaulted and a loss is incurred due to the Master Servicers inability to foreclose as a first-
lien holder by reason of an outstanding Mortgage Exception and the trust is not made whole by title policy as a
result of an outstanding Title Policy Exception.

To maintain the privacy of the borrowers, loan identification numbers have been removed from the Exception Report.
As such, I cannot identify the individual characteristics of these loans and must make assumptions as to the balance
and delinquency status to determine a value for this Paragraph 6 of the Settlement Agreement.

In my opinion, the document deficiency section in the Settlement Agreement is a benefit to the Covered Trusts,
because BANA will reimburse the Covered Trusts for losses due to Mortgage Exceptions and Title Policy Exceptions
for the life of the loans. In order to calculate an estimated benefit for this improvement, I must assume that the loans
on the Exception Report are of average balance and are distributed across delinquency statuses as the rest of the
Covered Trust loans, and make further assumptions as to the disposition of the loans in the event of default.

While it clearly would carry an expectation of a monetary value to the Covered Trusts, I elected not to calculate a
specific value for this benefit as it is subject to further assumptions that I would need more information to refine.

As shown in their own experts report in the $8.5 billion settlement agreement with the Bank of New York
Mellon, Bank of America, N.A. has a strong incentive to fabricate foreclosure evidence and testimony in order
to keep from paying out to certificate holders of RMBS trusts 100 on the dollar for any losses stemming from
their wrongful and/or unlawful behavior in not transferring, conveying or delivering original wet-ink notes to
their designated trustees and document custodians.

The evidence in our possession reflects a complete wanton disregard for the rule and application of law and
subversion of the state and federal court systems by servicers in order to not only conceal their known
fraudulent behavior in our nations financial markets, but their intentional, fraudulent and evasive schemes to
evade property taxes, recording fees, lender liability, HOA fees, code violation fines, and financial losses by
the systemic promulgation of the fabrication of evidence supported by intentionally false, misleading and
perjurious written and live testimony in state and federal courts across the nation.

196 Recovery-focused specialty servicers became prevalent during the RTC liquidation of S&L assets, and continue to evolve. I was directly involved in this area
during the 1990s.
197 The August 2011 Monthly Exception Report

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Allonge & Endorsement Fabrication to Support Double-Pledge Fraud


I have previously spoken about the trial testimony of a high-ranking Bank of America executive, Linda
DeMartini, in a federal bankruptcy court further propped these carefully planned and executed fraudulent
foreclosure and bankruptcy schemes up to closer scrutiny. Bank of America, N.A. (BANA) is the successor by
merger to BAC Home Loan Servicing, LP. Linda DeMartini, was a supervisor and operational team leader for
the Litigation Management Department for BAC Home Loans Servicing L.P. (BAC Servicing), who testified at
trial before the Honorable Federal District Judge Judith H. Wizmur, Chief Bankruptcy Judge for the District of
New Jersey in the case of Kemp v. Countrywide Home Loans, Inc., (440 B.R. 624, 628-629 (D. N.J. Bkrtcy
(2010)). In Kemp, Judge Wizmur found an allonge purporting to negotiate the note to the Bank of New York
was not executed until shortly before the original trial date, and was not affixed to the original note until the
second trial date. Id. 631

Judge Wizmur noted that that the new allonge was prepared in anticipation of this litigation, and that it was
signed several weeks before the trial by Sharon Mason. Id. at 628. According to page 15 of Ms. DeMartinis
trial testimony transcript she stated in August of 2009:
Q. Now, you were asked about whether or not the note could be -- was endorsed at the bottom. Is it generally
the practice to endorse the actual note or to use an allonge?

A. Its -- Ive never seen an actual note that has an endorsement on the bottom.

Q. So would you say its normal

A. Its generally more --

Q. -- to have an allonge?

A. Yeah, it would be more normal to have an allonge.

At pages 16 and 17 of the Kemp trial transcript, Ms. DeMartini testified:

Q. So between 2006 and 2009 when you got a phone call from counsel that said weve got a problem,
prepare an allonge, there was no allonge, correct?

A. There wasnt an allonge prior to that, no. This loan, like I said, it was always -- this was a loan that we
originated that has always been within the company that yes, it was sold to -- as Bank of New York as the
trustee and securitized, but there wasnt a need for an allonge prior to this case.

Q. Because there was no litigation pending, correct?

A. Well, because there was no litigation -

At pages 19 through 21, Judge Wizmur personally questioned Ms. DeMartini to clarify her testimony and
found:
Q. So the question is whether you know whether its normal practice for Countrywide to execute an allonge at
the time that that transfer takes place.

A. I dont believe that theyre always executed exactly when the transfer takes place. I believe that it often
times happens that it happens after the fact.

Q. And does it always happen?

A. I can speak that it always happens, no.

Q. So theres no routine that requires internally, to your knowledge, that the allonge be executed in
connection with the transfer of ownership?

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A. No, I dont think that there is a norm in that respect because in a normal course of action and for -- and
normal is kind of a hard word anyway -- but

Q. A normal business practice, an ordinary

A. but as a normal business practice with a normal loan, often times there really isnt a need for it unless the
loan is going to continually to be sold, and since this loan was -- yes, it was transferred to Bank of New York
as trustee as it was securitized, but it wasnt that another mortgage company had the loan and then we
bought it from them. Like I mentioned, this was always done by Countrywide and we securitized it and we --
you know, we sold it to them

Q. This was done --

A. --and so--

Q. -- Im not asking whether it was necessary, I am asking whether there was an ordinary business practice to
sign an allonge and the answer is no, there was not?

A. I dont believe so.

Finally, Ms. DeMartini later noted at page 48, In 2-5 that as of 2009, It never used to be to where the
originals were ever requested but lately more and more of the time of day of things around the country, we
are being asked to physically produce the originals more frequently.

As Ms. DeMartini testified truthfully when she stated original notes from Countrywide loans originated
between 2006 and 2009 were never endorsed. It was the practice in 2009 to create allonges just before
foreclosure trial as a normal practice. Ms. DeMartinis testimony that no notes were endorsed before they
were needed for trial is consistent with the fact that thousands of foreclosures were filed without endorsements
on original notes as I first discovered decades ago and the need to conceal their various transfers, purchases
and even repurchases for the motives stated.

Evidence of Differing Chains of Endorsements & Ownership


Yet, based on these lawsuits, new court decisions and on my own personal investigation, research, knowledge,
and experience servicers and their foreclosure counsel are still providing and filing false and fraudulent
pleadings, affidavits, and evidence in judicial foreclosure and mortgage actions in the state of Florida despite
consent agreements and multi-billion dollar settlements with state and federal regulators.

What has been most alarming is the concealment of evidence that occurs to conceal differing chains of titles,
owners, and missing documentation. If other evidence showing a different chain is destroyed or if the
endorsement was placed on a blank piece of paper and days, months, or years later attached to a note, then
the servicers and plaintiffs in foreclosure actions may have to answer to regulators and courts for their actions.

As DeMartini testified, it was a common industry practice to create an unattached and an undated
endorsed in blank piece of paper the industry wrongly inferred and labeled was an allonge! The
unattached piece of paper with an executed endorsement upon its face would then be placed in a file with or
without a note, scanned and imaged into an imaging system and then discarded, destroyed, concealed, or
even later attached if necessary, upon default by a borrower when a servicer needed to create evidence of
note ownership or holder status.

Under UCC Article 3, indorsement means a signature on an instrument, not on a blank piece of paper. In
order for the endorsement on an allonge to be valid, the proper document custody process that should have
been followed was to: a) determine if room existed on the last page of the note or its backside to see if any
room existed for the endorsement; b) only if no room existed, a blank piece of paper should be firmly
affixed to the last page of the original wet-ink note, so as to prevent its removal and replacement; c) the
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Double Sale & Note Pledge Fraud in Securitization & Foreclosure
first page on the face of the note should then be stamped Allonge Attached; d) identifying information on
the note such as origination date, borrower name, property address, loan number etc. should be placed upon
the blank piece of paper; and then e) the endorsement stamp and signature should be placed on the affixed
piece of paper to the note (i.e. an allonge).

An unattached to an original note blank piece of paper is not an allonge. An unattached to an original note
blank piece of paper with an endorsement on its face is not an allonge either. If the endorsement is placed
upon the blank piece of paper and then the endorsement and signature are placed on the blank piece of
paper while unattached, all someone has endorsed was the blank piece of paper, not the original note itself.

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INDUSTRY EVIDENCE OF DOUBLE-PLEDGE FRAUD & DUMMY COLLATERAL


As shown above, allonges were pre-executed and endorsed on blank pieces of paper and then, only upon
default, attached to original wet-ink promissory notes to provide holder status when in fact, the endorsement
was never made ON the original note. This common industry wide practice is designed to keep a clean file
and not evidence all the transfers or negotiations of the note. Its also an admission that the allonge is only
attached during default when litigation is contemplated and evidence that no endorsement EVER took place
ON the original wet-ink note.

Such an industry wide practice allows lenders to conceal all of the contractual transfers of the original note
and its income streams which occur by contract and electronic data transfers. This conceals repurchases, repo
agreements, double pledges, and other transfers and pledges of the promissory note and its payment stream.
In addition to allonges being pre-executed, they are also being fabricated and forged for lenders who no
longer exist and went bankrupt years earlier.

In a document provided to me before a deposition, U.S. Bank was the original custodian and is named
trustee, I was provided a document that as excerpted below, an allonge and endorsement were requested
to be created and executed for a lender that was out of business for years.

Some may ask what does this mean? The attorney has already been sent the alleged original note and if an
endorsement is missing, asks for one to be created. Such an endorsement can only be on a separate piece of
blank paper (i.e. fabricated allonge) that is then sent to the attorney after a Wells Fargo employee
executes the endorsement.

Numerous Florida Courts have cited Booker v. Sarasota, Inc., 707 So. 2d 886, 887 (Fla. 1st DCA 1998)
(quoting Blacks Law Dictionary 76 (6th ed. 1990)) that an allonge is a piece of paper annexed to a
negotiable instrument or promissory note, on which to write endorsements for which there is no room on the
instrument itself. Such must be so firmly affixed thereto as to become a part thereof.

Thus, the fraudulent allonge practices described herein are troublesome for the industry. When there are no
dates on the endorsement; room on the face of the note; no reference of allonge on the front of the note; and
a ta da moment when an endorsement or allonge appear that are different that prior generations of the
note, any lawyer or judge must question the legal validity and propriety of the note and/or allonge
submitted. Evidence submitted. The mere fact that an allonge was scanned and imaged into a servicer or
document custodians imaging or document management system is prima facie evidence that the allonge was
not attached and was scanned as a separate piece of blank paper.

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VOLUSIA COUNTY, FL CASE EVIDENCES DOUBLE-PLEDGE FRAUD


The facts of this case198 are extensive and we obtained very limited discovery. SPS and Black Knight fought
vigorously to prevent discovery. However, what was produced provided substantial evidence of a double-
pledge fraud scheme. Please note, the diligence necessary in this and any case is substantial. Each mortgage
and especially a foreclosure case should provide tens of thousands of pages of documents and data. Even,
with the limited production we obtained, you will see a portion of the meticulous timeline I was able to
recreate for the Court that has now opened the door for a new hearing on the Courts original judgment with
new questions the judge himself has.

As shown below, the data and information available in each case should provide the trier of fact with a
documented roadmap to answer questions about physical and constructive possession of original notes, copies
of notes, and even scans of each note. It will also provide you a roadmap and dossier to the claimed chains of
title, ownership, transfers, custody, holders, and servicers for each loan.

There are substantial regulations and subsequent compliance issues that each servicer, trustee, and originator
must abide by. Thus, all records and data must be preserved and easily retrievable for regulators such as the
CFPB. When servicers claim the process is burdensome, irrelevant, or not likely to lead to admissible
discovery, you need to make the point that these are sophisticated banks with sophisticated systems that due
to regulatory mandates, need to have this information available and ready to produce in a matter of days,
not even weeks.

As I mentioned, for a few years Ive been involved in a case in Volusia County, Florida. Prior to and during the
course of this litigation of over seven years, the RMBS Trusts own trustee199 and federal regulators warned
the servicers for the foreclosing plaintiff not to engage in false pleadings and fraudulent judicial foreclosure
actions making false averments and providing false evidence of standing. Yet, despite such warnings and
even a consent agreement with the OCC, newly discovered evidence in this matter along with the existing
record reflects servicers, lawyers and witnesses for the foreclosing plaintiff:
1) Fabricated vital and relevant evidence in the form of an assignment of the Borrowers note and mortgage and
endorsement on the promissory note filed with the Court to create previously non-existent evidence of standing;
2) Concealed, destroyed and even admittedly shredded vital and relevant evidence and records related to critical
issues in this case, especially the location and custody of two (2) claimed original notes that were falsely claimed lost
and missing for several years;
3) In order to overcome admittedly known hearsay issues with their evidence, Plaintiffs lawyer, Kathleen Angione, and
witness, Lawrence Nardi, falsely and intentionally with deception introduced and testified to an alleged SPS business
records (Trial Exhibit 6) of a prior servicer (Bank of America) created especially for trial immediately prior to trial
(March, 2015) as the alleged existing servicers own business records that were boarded and audited years earlier
(August of 2012) when in fact they were never part of such a boarding process and were created just weeks earlier;
and
4) Intentionally concealed the whereabouts and circumstances surrounding the knowingly false and fraudulent claims of
a lost note with false evidence, testimony, interrogatory responses, affidavits and evidence, including the
concealment, destruction, shredding and fabrication of evidence.

These actions were specifically designed to conceal relevant evidence from the Court and Defendants that
reflect evidence of a double and/or multi-pledge or fraudulent sale scenario of the borrowers note,
mortgage and loan wherein two (2) different promissory notes with differing loan numbers were created and
the alleged original Borrowers Note was sold forward and delivered to the foreclosing plaintiff with a
different chain of ownership, negotiation and custody while the original note presented to the Court was
evidenced to be owned and held by other disclosed and undisclosed parties immediately prior to and during
trial.

198
199 Deutsche Bank National Trust Company (DBNTC)
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Newly Discovered Evidence & Record Evidences Double-Pledge Fraud


Newly discovered evidence and the current existing record in one Volusia County, Florida case I am an expert
in supports and reflects the following facts:

On May 1, 2006, a Sixth Amended and Restated Mortgage Loan Purchase and Warranties
Agreement executed as of May 1, 2006 (Purchase Agreement), between Morgan Stanley
Mortgage Capital Inc. as the Purchaser and NC Capital Corporation as the Seller was executed
for purchase of the Borrowers loan.200

A Price and Terms Agreement (PPTA) was executed as of May 24, 2006, between Morgan
Stanley Capital Inc. and NC Capital Corporation (NCCC) that evidences a forward sale and
transfer of the borrowers note and mortgage in advance of its execution and transfer from
NCMC to NCCC that specifically states on Page 1 that:

Morgan Stanley Mortgage Capital Inc., as Purchaser, confirms its agreement to purchase and NC
Capital Corporation, as Seller, confirms its agreement to sell, on a mandatory delivery basis, a pool
of fixed and adjustable rate, first and second lien, residential mortgage loans described herein (the
Mortgage Loans) on a servicing released basis, on the terms and conditions set forth below.
Ownership of the Mortgage Loans shall be evidenced by delivery of the Mortgage Loans as whole loans
pursuant to this Purchase Price and Terms Agreement, the Purchase Agreement and the Servicing
Agreement.201

A Funding Memo202 reflects the Investor as Morgan Stanley for the purchase of 8,795 loans
with a trade date of May 24, 2006, a cutoff date of 8/18/2006, and a settlement date of
8/25/2006 for a current balance of $1,716,523,939.28 and a total wire amount of
$1,758,854,737.60. The Funding Memo reflected a trade price of 102.2800 and Final
Adjusted Price of 101.9516 and was prepared by Lynette Nagy, presumed to be Steve Nagys
spouse.203

The Funding Memo reflects the following breakout for wire payments: Morgan Stanley
$676,783,950.23; UBS $61,562,310.52; Barclays $115,187,162.40; Bank of America
$215,536,799.91; Bear $89,352,858.47; CDC/IXIS $37,381,484.83; CSFB
$367,540,197.90; Salomon $4,844,566.69; Von Karman $136,790,195.38; and New
Century $53,875,211.27. CSFB is known to me to be a common acronym for Credit Suisse First
Boston, the parent company of Select Portfolio Servicing, Inc.,204 (SPS) the current alleged
servicer of the borrowers loan in the matter.

The borrowers loan was closed on June 28, 2006 and a promissory note was executed.

On July 6, 2006, one version of the borrowers original note was scanned into New Century
Mortgage Corporations (NCMC) imaging system and contained no endorsement whatsoever
and contained a NCMC barcode on its face as was Exhibit A to the foreclosing plaintiffs
operative complaint (Original Note 1).

On July 6, 2006 an unrecorded and blank assignment of the borrowers note and mortgage was
executed.

200 Docket # 461.5 - NC_ Borrower_00000348 - 430


201 NC_Borrower_00000461 - 477
202 NC_Borrower_00000456
203 Nagy Bankruptcy Petition reflects relationship
204 Select Portfolio Servicing (SPS) services mostly subprime single-family residential mortgage loans and the company collects on impaired-credit loans and

non-performing loans for clients such as mortgage companies, banks, and bond insurers. It also performs loss recovery and contingency collections and offers
valuation services through its Residential Real Estate Review affiliate. SPS servicing portfolio is worth some $30 billion. Founded in 1999, SPS operates offices
in Jacksonville, Florida, and Salt Lake City. Credit Suisse bought SPS and its parent, SPS Holding, from mortgage insurer PMI Group in 2005 for more than
$140 million. See http://www.hoovers.com/company-information/cs/company-profile.select_portfolio_servicing_inc.12e6a1b7055b1caf.html
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On August 25, 2006, the borrowers loan, note and mortgage were sold from NC Capital
Corporation to Morgan Stanley Mortgage Capital Inc. according to the provisions contained in
Exhibit U to the foreclosing plaintiffs PSA, the Sixth Amended and Restated Mortgage Loan
Purchase and Warranties Agreement dated May 1, 2006.

Plaintiffs PSA reflects that it is dated as of November 1, 2006 and contains a Cut-Off date of
November 1, 2006. The defined Closing Date of November 28, 2006 corresponds with the Bill
of Sale dated the same day.

A Notice of Assignment, Sale or Transfer of Servicing Rights for New Century Mortgage Loan
No: 1008687478 was sent to the borrower stating that the servicing of the his mortgage was
being assigned, sold or transferred from New Century Mortgage Corporation to Countrywide
Home Loans.

The defined Depositor in Article I of the foreclosing plaintiffs PSA was Morgan Stanley ABS
Capital I Inc., and the defined Closing Date was November 28, 2006. Article II, Section 2.01 of
Plaintiffs PSA specifies the specific steps Morgan Stanley ABS Capital I Inc. was to covey,
transfer and assign original notes and mortgages, like the Borrowers note and mortgage, to the
Plaintiffs trust.

Article II, Section 2.01(b) of the foreclosing plaintiffs PSA stated that: in connection with the
transfer and assignment of each Mortgage Loan, the Depositor has delivered or caused to be
delivered to the Trustee for the benefit of the Certificateholdcrs (i.e. investors) the following
documents or instruments with respect to each Mortgage Loan; and wherein Article II, Section
2.01(b) (i viii.) specified each of the original and copied documents that Morgan Stanley ABS
Capital I Inc., as Depositor, had already delivered or would cause to be delivered to Deutsche Bank
National Trust Company including: i) the borrowers original (i.e. wet-ink) Mortgage Note
bearing all intervening endorsements showing a complete chain of endorsement from the originator
to the last endorsee, endorsed Pay to the order of _______________ without recourse and
executed in the name of the last endorsee by an authorized officer that may execute the
endorsement by a facsimile signature; ii) the original of any guaranty executed in connection with
the Mortgage Note; iii) the original Mortgage with evidence of recording thereon or a certified
true copy of such Mortgage submitted for recording; iv) the originals of all assumption,
modification, consolidation or extension agreements; v.) the original Assignment of Mortgage
(AOM) for each Mortgage Loan endorsed in blank; vi.) originals of all intervening assignments
of Mortgage (if any) evidencing a complete chain of assignment from the applicable originator
to the last endorsee; vii.) the original or a photocopy of mortgagee title insurance policy or a
copy of the related policy binder or commitment for title issued by the title insurance company;
and viii.) the original of any security agreement, chattel mortgage or equivalent document
executed in connection with the Mortgage.

NC Capital Corporation agreed to deliver to the DBNTC each applicable recorded document
upon receipt from each respective recording office, but in no event later than on or about March
28, 2007. Additionally, at various times, both NC Capital Corporation and Countrywide Home
Loans would send DBNTC additional original documents such as modification and assumption
agreements to be placed into the Custodial Files held by DBNTC for the benefit of the
foreclosing plaintiffs certificate holders.

On April 2, 2007, New Century Financial Corporation along with several affiliated companies
including New Century Mortgage Corporation and NC Capital Corporation filed for Chapter 11
bankruptcy in the United States Bankruptcy Court, District of Delaware located in Wilmington,
Delaware, case number 07-10416 (KJC) in The United States Bankruptcy Court, District of
Delaware. (New Century Bankruptcy).
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On August 1, 2007 the borrower is alleged to have defaulted on the mortgage payment of
$2,670.42 due and a subsequent foreclosure action was referred by CHL to the law office of
David Stern.

On August 30, 2007, DBNTC and DBTCA issued a warning memo to their servicers, posted on the
foreclosing plaintiffs own investors website, warning servicers including Countrywide, BOA and
SPS of false and misleading pleading practices and instructing them in paragraph 4. to at all
times properly identify your representative capacity, as servicer, and DBNTCs or DBTCAs
capacity as Trustee of [insert name of relevant Trust]" in all notices, pleadings, correspondence or
other documents relating to the mortgage loans. REO properties and other Trust assets. Title to
properties should never be held, and notices concerning properties should never be issued, in
DBNTCs or DBTCAs name without identification of our trustee capacity.

On November 30, 2007, in order to effectuate the first foreclosure action against the Defendants
in this matter, a second assignment of the Borrowers note and mortgage (Subject AOM),
prepared by disbarred attorney David Stern, was executed by a known Countrywide Home
Loans employee205named Carrie Hoover, a nationally renowned robo-signer, who claimed to
be authorized to act as both 1st Vice President and Vice President for the bankrupt New Century
Mortgage Corporation who filed for Chapter 11 protection, eight (8) months earlier. The Subject
AOM purported to assign rights in the Borrowers note and mortgage from the bankrupt New
Century Mortgage Corporation directly to the Plaintiff, bypassing the chain dictated in the
Plaintiffs own PSA and FWP that reflected that each transfer, assignment, negotiation and/or
sale should be as follows: Lender A: New Century Mortgage Corporation (NCMC) >
Lender/Note Holder B: New Century Capital Corporation (NCCC) > Lender/Note Holder C:
Morgan Stanley Mortgage Capital, Inc. (MSMC) > Lender/Note Holder D. Morgan Stanley
ABS Capital I Inc. > Lender/Note Holder E. Deutsche Bank National Trust Company as Trustee
for Morgan Stanley ABS Capital I Inc., Trust 2006-NC5, Mortgage Pass-Through Certificate,
2006-NC5.

As of November 30, 2007, there had already been one prior AOM, (the First AOM/Blank AOM)
executed with a Nagy facsimile stamp on July 5, 2006 as well as an alleged sale via the Sixth
Amended and Restated Mortgage Loan Purchase and Warranties Agreement executed on May 1,
2006 that the NCMC/NCCC Liquidating Trustee alleges sold and transferred the Borrowers
note, mortgage and loan from New Century Capital Corporation to Morgan Stanley Mortgage
Capital, Inc. on August 25, 2006. The Subject AOM was executed outside the presence of a
notary and was not notarized for another 3-months.

As of November 30, 2007, the execution date of the Subject AOM, neither New Century
Mortgage Corporation or New Century Capital Corporation claimed any beneficial interest in
the Borrowers note and mortgage being assigned and did not list either the Borrowers note,
mortgage, and/or loan as an asset in their Chapter 11 Federal Bankruptcy Proceedings.
According to the evidence recently presented and the representations of the Liquidating Trustee,
neither New Century Mortgage Corporation or New Century Capital Corporation had any right
in the Borrowers note, mortgage and/or note to assign on November 30, 2007 nor was Carrie
Hoover either a First Vice President or Vice President of either NCMC or NCCC nor a designated
agent or attorney in fact for either company or the trustee of their bankruptcy.

That it was Original Note 1, not the alleged Original Note with a blank endorsement produced
at trial by the foreclosing plaintiff (Original Note 2) that was sold and transferred to the
foreclosing plaintiffs predecessors in interest and securitizing parties.

205 See Exhibit 3 attached, LinkedIn profile of Carrie Hoover


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I was provided system notations from David Sterns records custodian. Sterns system notates that
on January 7, 2008, a Countrywide foreclosure complaint against the Defendants was sent for
filing by the David Stern law firm and filed with the Court on January 8, 2008 in Civil Action:
2008-30015-CICI. On January 3, 2008, a foreclosure complaint against the Defendants was
filed by the David Stern law firm (First Foreclosure Complaint) and contrary to the foreclosing
plaintiffs own trustee (DBNTC) and CSFBs agent (DBTCA) warnings in its August 30, 2007 memo
to its own servicers for the Plaintiffs trust, including Countrywide, the First Foreclosure Complaint
did not provide an averment that Countrywide Home Loans Servicing, LP was the servicer acting
in that capacity.

Despite having copies and/or images of Original Note 1 and/or Original Note 2 in their
physical possession, CHL as servicer for the foreclosing plaintiff in this case and numerous other
foreclosure actions, directed their law firms to carry out intentional misrepresentations in a false
and/or fraudulent averments that claimed in Count II of the First Foreclosure Complaint that: 1)
the Plaintiff was not in possession of original Note and Mortgage; and a) the Plaintiff was in
possession of the Note and Mortgage and was entitled to enforce THEM when the loss of
possession occurred; b) the loss of possession was not the result of a transfer by Plaintiff or lawful
seizure; and c) the Plaintiff cannot reasonably obtain possession of the Note and Mortgage
because THEIR whereabouts cannot be determined. In paragraph 21 of Count II the Plaintiff
falsely averred that the terms of the Note are shown on the attached ledger of loan marked as
Exhibit B. While in possession of copies, images and/or originals of Borrower Original Note 1
and Original Note 2, Plaintiff, its lawyers and Countrywide Home Loans fabricate and attach to
their First Foreclosure Complaint, Exhibit B printed on Countrywide Home Loans letterhead falsely
listing the Borrower notes principal balance as $394,348.46 when the original terms of the
Borrower Note provided a $394,400.00 original principal balance; a monthly payment amount
of $2,670.07 when the original terms of the Borrower Note provided a $2,670.42 monthly
payment. Exhibit B also claimed an August 1, 2007 due date when the original terms of the
Borrower Note provided a first payment date a year earlier of August 1, 2006.

Most recently, in my review and search of other foreclosures throughout Florida involving the
foreclosing plaintiff and Morgan Stanley/Countrywide/BANA securitizations related to New
Century originated notes and mortgages, the identical lost note scheme and use of no copy of a
borrowers note and in their stead, the use of a Countrywide Home Loans Letterhead was found
in numerous other foreclosure cases.

Countrywide Home Loans Servicing LP, the Stern Law Firm, DBNTC, their lawyers and witnesses
intentionally mislead the Court in this case and other cases as shown herein, that any of the
versions of the Borrowers Original Note, whether Original Note 1 or Original Note 2 were lost,
stolen or destroyed was knowingly and falsely averred in Count II.

On February 28, 2008 the fabricated AOM was notarized approximately 3-months later and
was created especially for the purpose of litigation to establish standing for the foreclosing
plaintiff who falsely alleged in their January 3, 2008 foreclosure complaint that the Borrowers
original note was lost and missing. Foreclosing Plaintiffs own designated corporate
representative testified in deposition testimony accepted and entered into the matter as the
testimony of the foreclosing plaintiff, that contrary to the their counsels arguments about the
fabricated AOM, the fabricated AOM had no effect. The foreclosing plaintiff testified about the
fabricated AOM as follows: Im saying just because its dated this, it doesnt mean thats when it
happened. It could have happened sooner. You know, it was -- its showing the intent of where the
note and mortgage is, is what an assignment shows you.

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Double Sale & Note Pledge Fraud in Securitization & Foreclosure

Despite the preceding testimony of the foreclosing plaintiff, their attorney via SPS witness
introduced the fabricated AOM and argued that this was the assignment that gave the
foreclosing plaintiff standing in the foreclosure matter despite the fact that the First AOM/Blank
AOM was the ONLY AOM referenced and noted in SPS own collateral file for the borrowers
loan with no notation whatsoever of the recorded and fabricated AOM.

The fabricated AOM purported to assign both the borrowers Note and Mortgage directly from
New Century Mortgage Corporation to the foreclosing plaintiffs RMBS Trust ignoring and
bypassing other claimed, alleged and contractual sales, assignments, and transfers that included
an alleged sale and transfer from NCMC to NCCC; NCCC to Morgan Stanley Mortgage Capital,
Inc. via the executed Purchase Agreement; Morgan Stanley Mortgage Capital, Inc. to the
Plaintiffs depositor, Morgan Stanley Mortgage ABS Capital I, Inc., via an alleged Bill of Sale,
dated November 28, 2006; and then a transfer and conveyance via Article II, Sections 2.01 and
2.02 of the Plaintiffs PSA.

The fabricated AOM attached as Exhibit C to the foreclosing plaintiffs complaint, purported to
assign both the Borrowers Note and Mortgage one-year and three months after the claimed sale
of the loan on August 25, 2006 via the copy of the executed Purchase Agreement provided to
Defendants by NCMCs Liquidating Trustee that was made part of foreclosing plaintiffs own PSA
as Exhibit U.

However, as of November 30, 2007, according to the evidence at hand, the borrowers note,
mortgage and loan were already sold from NC Capital Corp. to Morgan Stanley Mortgage
Capital, Inc. on or about August 25, 2006.

On February 28, 2008, an employee of the David Stern Law Firm, Cheryl Samons, as purported
attorney in fact for and on behalf of Countrywide Home Loans, Inc. not the Plaintiff or trustee for
the Plaintiff, executed an affidavit (Samons Affidavit) in support of summary judgment wherein
she testified in paragraph 4 that that each and every allegation in the Complaint is true, except
that the Plaintiff has recovered the Original Note. Recently discovered and provided records from
the custodian of records for the David Stern law firm I reviewed, indicate that they had in their
possession images and copies of the two different versions of the borrowers note.

On July 28, 2008, once again, DBNTC and DBTCA sent a memo to its servicers, including
Countrywide/BANA that is posted on Plaintiffs own website, warning them to adhere to court
rules, laws and procedures and stated in part: the Trustee respectfully requests that all servicers
review the First Servicer Memorandum and adhere to the practices that it describes, as well as those
described in this Memorandum. the increased numbers of delinquencies and foreclosures and
resulting financial losses, have led to a climate in which the performance of securitization parties is
being scrutinized carefully by various constituencies. Against this background, the Trustee therefore
asks that all servicers servicing loans on behalf of the Trusts remain particularly mindful of the
following issues:

a) Foreclosure Procedures: Proof of Ownership of Loans. As stated in the First Servicer


Memorandum, servicers must exercise diligence to assure that they conduct all foreclosures and other
actions in compliance with all federal, state, and local laws, rules, regulations and court
procedures. b) some courts are demanding that the party seeking to foreclose prove
ownership and other particulars of loans earlier in the proceedings and with more exacting
standards of proof, than has previously been customary. Other courts are evaluating the propriety of
various other servicing, foreclosure, and workout practices, because loan servicers have contractual
obligations to handle workouts and foreclosures in compliance with law and in accordance with
industry standards, they must make sure that all servicing personnel and professionals handling
foreclosures on behalf of the Trusts, including legal counsel retained by servicers, fully understand
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Double Sale & Note Pledge Fraud in Securitization & Foreclosure
and comply with these changing standards and legal requirements. Failure to do so may result in
servicer liability to the Trusts for losses caused by delays or, in some situations, forfeiture of
collateral; c) In this regard, the Trustee is concerned that servicers make clear to their
servicing personnel and other professionals, including legal counsel retained by servicers,
that securitization trusts typically become the owners of, and take title to, mortgage loans at
be time the securitization trusts are formed. While the use of powers of attorney to complete
recorded chains of title may be appropriate in some circumstances, servicers must take care not to
confuse the record regarding the time at which securitization trusts actually first obtain legally
enforceable rights in the mortgage loans. Servicers must ensure that loss mitigation personnel and
professionals engaged by servicers, including legal counsel retained by servicers, understand the
mechanics of relevant securitization transactions and related custodial practices in sufficient detail to
address such questions in a timely and accurate manner. In particular, servicing professionals must
become sufficiently familiar with the terms of the relevant securitization documents for each Trust for
which they act to explain and, where necessary, prove those terms and the resulting ownership
interests to courts and government agencies.

Bank of New York Mellon claimed to be the holder of Original Note 2 immediately prior to trial
and Original Note 2 was not owned or held by the foreclosing plaintiff, but was claimed to be
owned by unidentified parties per agreements for transactions that occurred in 1996 and 1997.

Two (2) different versions of an alleged Original Note206 were created, sold, transferred and
tracked with two (2) different barcodes for tracking original notes along with differing chains of
title, ownership, transfer, endorsement, negotiation, and document custody;

Two (2) different versions of a borrowers Collateral File were created and tracked with at least
two (2) differing chains of title, note ownership, transfer, endorsement, negotiation, and document
custody;

Someone related to Countrywide Home Loans, not NCMC, placed the an endorsement upon
Original Note 2 filed with the Court;

The document custody and imaging records and systems of the foreclosing plaintiffs alleged
agents and servicers including, but not limited to Countrywide Home Loans (CHL), Bank of
America, N.A. (BANA), and Select Portfolio Servicing (SPS) maintained images of each of the
two (2) different versions of the alleged borrowerrs Original Note and tracking data related to
each notes location, whereabouts, ownership and safekeeping at all times pertinent to case since
December of 2006;

Sterns system entries reflect that the file was stalled and on hold without Countrywide going
back to the Court and withdrawing its know false and fraudulent pleadings and affidavits. On
November 18, 2009, Sterns System entry reflects a notation that the File on Hold Per
Countrywide and file was closed on November 16, 2009 and docs and file to went to dismissals
on December 14, 2009. Of critical import in Sterns notations was that on December 14, 2009
some unknown or both versions of Original Note 1 and/or Original Note 2 were found in file and
on December 15, 2009, a version of the Borrowers original note was scanned and the
documents, presumably the alleged original note was returned to an unknown party and, most
importantly, left Sterns office on December 15, 2009 via UPS TRACKING#
lZVF94550291017534.

206 Exhibit A attached to Plaintiffs complaint and recently produced by NCMCs Liquidating Trustee without endorsement and with NCMC barcode on its face
to track sale, possession and custody of original note (Original Note 1) and Plaintiffs
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On May 25, 2010, in an Affidavit in Support of Summary Judgment filed with the Court at
Docket No. 26 by Plaintiff and prepared and executed by Kathy Repka (Repka Affidavit), an
employee of Countrywide Home Loans/Bank of America. Repka testifies via her affidavit that
she, the affiant:

o 1) Plaintiff is the owner and holder of that certain mortgage and note given by
borrower; dated June 28, 2006 and recorded July 12, 2006, in 0. R. Book 5870, Page
4507 of the Public Records of Volusia County, Florida; 2) Plaintiff holds the note and
mortgage by virtue of an assignment; 3) Attached hereto are copies of the note, mortgage
and assignment; 4) A copy of the note and certified copies of the mortgage and
assignment will be filed with the Court prior to or at the judgment hearing; 5) The original
note was lost and is not in the custody or control of the Plaintiff. However, the Plaintiff, its
assignor, or its servicer was in possession of the note and was entitled to enforce the note
when the loss occurred; 6) A thorough search has been made for the note, but Plaintiff cannot
reasonably obtain possession of the note because its whereabouts cannot be determined. The
note has not been endorsed, sold, or given to any other entity or person. All parties who may
have an interest in the note have been included in this proceeding.

o In paragraph 15, Ms. Repka provides the following testimony that your undersigned
(Repka) has reviewed the complaint and states that all of the allegations contained therein
are true, accurate and correct.

Critical to this case, as of the date of her Affidavit, May 25, 2010, the copy of the Borrowers
Note presented to the Defendants and the Court is the Operative Original Note 1, WITH NO
ENDORSEMENT and not a copy or version of Original Note 2 that was presented to the Court
and Defendants, in Spring of 2015, despite being in the possession, control, custody and records
of agents and servicers for the foreclosing plaintiff who concealed facts related to chain of title,
holder status, ownership status, custody records, physical and constructive possession.

On or about August 8, 2010, DBNTC and DBTCA issued yet another warning to its servicers,
including Bank of America and SPS that was titled URGENT AND TIME-SENSITIVE
MEMORANDUM attached as Exhibit G referencing Allegations Regarding Certain Servicing
Foreclosure Procedures being instituted by Bank of America and other services wherein, DBNTC
and DBTCA warned of the following:

We write to express the Trustee s serious concern regarding allegations of potential defects in foreclosure
practices, procedures and/or documentation used by certain major loan servicers and their agents
(collectively, the Alleged Foreclosure Deficiencies) that have been the subject of recent media reports.
This Memorandum reiterates to all Servicers the importance of their duties and obligations relating to such
matters.

As the Trustee has advised on more than one occasion, all Servicers and their agents (including any
subservicers, subcontractors and professionals engaged by Servicers and/or by their agents) must conduct
all servicing activities, including foreclosure proceedings, in accordance with the Governing Documents and
all applicable laws. Please review again, in particular, the Trustees memoranda to all Servicers dated
August 30, 2007 and July 28, 2008 (the "Prior Memoranda"), copies of which are enclosed.

Recent media reports suggest the Alleged Foreclosure Deficiencies may include the execution and filing by
certain Servicers and/or their agents of potentially defective documents, possibly containing alleged
untrue assertions of fact, in connection with certain foreclosure proceedings. The reported scope of such
alleged practices raises the possibility that such documents may have been filed in connection with
foreclosure proceedings relating to mortgage loans owned by the Trusts and may have been executed
under color of one or more powers of attorney granted to Servicers pursuant to the Governing Documents.
Any such actions by a Servicer or its agents would constitute a breach of that Servicers obligations under
the Governing Documents and applicable law.

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In light of these recent developments, the Trustee demands that each Servicer (including its agents),
immediately: Inform the Trustee of:

Any Alleged Foreclosure Deficiencies relating to mortgage loans serviced by the Servicer on
behalf of the Trusts; and (ii) any suspensions by the Servicer of foreclosure proceedings
relating to mortgage loans serviced by the Servicer on behalf of the Trusts due to any such
Alleged Foreclosure Deficiencies.

Cease and desist from taking any unlawful or improper action with respect to the servicing of
Trust assets, including, but not limited to, making any false or misleading statements in any
filing, notice, document or paper of any kind.

Cease and desist from executing any document on behalf of the Trustee or on behalf of any
Trust, under any power of attorney or otherwise, unless and until the Servicer and its agents
have: (a) verified that all statements in such document are true complete and correct; and (b)
determined that the execution and filing of such document are in full compliance with all
applicable laws, rules and regulations, including all applicable rules of court.

Cease and desist from executing any document in a manner that indicates or suggests that the
signatory is an officer or employee of the Trustee.

Require each of its agents to comply with the foregoing demands and all legal requirements
applicable to any services that they perform on behalf of the Trusts.

Please be advised the Trustee will require each Servicer to indemnify and hold harmless
Deutsche Bank, individually and in its capacity as Trustee, the Trusts and the investors in the
Trusts from all liability, loss, cost and expense of any kind (including attorneys fees and costs)
arising directly or indirectly from any Alleged Foreclosure Deficiencies or from any other
alleged acts or omissions of the Servicer and/or its agents relating to any servicing activities
in breach or violation of the Governing Documents and/or applicable law, including, without
limitation, an) liability, loss, cost or expense arising from any related legal proceedings and
government or regulatory Investigations. The cost of any such indemnification and any
remedial actions by a Servicer in respect of any Alleged Foreclosure Deficiencies or any other
servicing activities in breach or violation of the Governing Documents and /or applicable law
must be paid by the Servicer out of its own funds and should not be charged by any Servicer
against any Trust. The Trustee reserves, and docs not waive, any other rights or remedies that
it and/or the Trusts may have under the Governing Documents regarding these matters.

Despite warnings by myself, DBTCA and DBNTC as trustees to RMBS trusts, Bank of America
continued their unlawful, unethical and fraudulent ways in this Court and others until the U.S.
Federal government finally took action. The Comptroller of the Currency of the United States of
America (Comptroller), through its national bank examiners and other staff of the Office of the
Comptroller of the Currency ("OCC"), as part of an interagency horizontal review of major
residential mortgage servicers, conducted an examination of the residential real estate mortgage
foreclosure processes of Bank of America, N.A., and identified certain deficiencies and unsafe or
unsound practices in their residential mortgage servicing and in the Banks initiation and handling
of foreclosure proceedings.

The OCC informed the Bank of America of its findings resulting from their examination and on
April 13, 2011, Bank of America, N.A. entered into a Consent Agreement, as attached as
Exhibit H, with the Comptroller. In the Consent Agreement, Bank of America was found by the
OCC/Comptroller to have:

Filed or caused to be filed in state and federal courts affidavits executed by its employees or employees
of third-party service providers making various assertions, such as ownership of the mortgage note and
mortgage, the amount of the principal and interest due, and the fees and expenses chargeable to the
borrower, in which the affiant represented that the assertions in the affidavit were made based on
personal knowledge or based on a review by the affiant of the relevant books and records, when,

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in many cases, they were not based on such personal knowledge or review of the relevant books
and records;

Filed or caused to be filed in state and federal courts, or in local land records offices, numerous
affidavits or other mortgage-related documents that were not properly notarized, including those
not signed or affirmed in the presence of a notary;

Litigated foreclosure proceedings and initiated non-judicial foreclosure proceedings without always ensuring
that either the promissory note or the mortgage document were properly endorsed or assigned and, if
necessary, in the possession of the appropriate party at the appropriate time;

Failed to devote sufficient financial, staffing and managerial resources to ensure proper administration
of its foreclosure processes;

Failed to devote to its foreclosure processes adequate oversight, internal controls, policies, and
procedures, compliance risk management, internal audit, third party management, and training; and

Failed to sufficiently oversee outside counsel and other third-party providers handling foreclosure-
related services.

By reason of the conduct set forth directly above, the OCC/Comptroller found that Bank of
America engaged in unsafe or unsound banking practices. As part of its Consent Agreement,
Bank of America agreed to a Compliance Program wherein it agreed to implement and number
of corrective processes within 120 days of the order (approx. August 13, 2011). As part of that
Compliance Program, BOA agreed to establish:

Processes to ensure that all factual assertions made in pleadings, declarations, affidavits, or other sworn
statements filed by or on behalf of the Bank are accurate, complete, and reliable; and that affidavits and
declarations are based on personal knowledge or a review of the Banks books and records when the
affidavit or declaration so states;

Processes to ensure that the Bank has properly documented ownership of the promissory note and mortgage
(or deed of trust) under applicable state law, or is otherwise a proper party to the action (as a result of
agency or other similar status) at all stages of foreclosure and bankruptcy litigation, including appropriate
transfer and delivery of endorsed notes and assigned mortgages or deeds of trust at the formation of
a residential mortgage-backed security, and lawful and verifiable endorsement and successive assignment
of the note and mortgage or deed of trust to reflect all changes of ownership;

Processes to ensure that the Bank has the ability to locate and secure all documents, including the
original promissory notes if required, necessary to perform mortgage servicing, foreclosure and Loss
Mitigation, or loan modification functions.

On November 15, 2012, an entry is made in SPS Document Control system database that reads
per BofA current location of collateral file is_DEUTSCHE BANK and custodian is_DEUTSCHE
BANK indicating, per testimony of their own witness about collateral files, the exact location of
the Borrowers original note, whether it was Original Note 1 and/or Original Note 2.

A January, 2014 Investor Report for the foreclosing plaintiff references the NCMC Loan Number
of 1008687478 for the borrowers Loan associated with Original Note 1 even though NCMC is
bankrupt and out of business. Furthermore, it does not reference either the Countrywide, Bank of
America or SPS loan number.

Evidence recently obtained and produced after discovery and trial was closed conclusively
proves my testimony was accurate in that a Lost Note Affidavit contained in the collateral file
was intentionally destroyed; the original Blank AOM was concealed and not produced; the series
of contracts and MLS alleged to have sold the Borrowers note and loan were concealed and not
produced; the original NCMC loan history was intentionally concealed and/or destroyed; an
allonge was concealed; and other contracts and evidence such as DBNTC and DBTCA records,
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trust receipts, certification and exception reports and mortgage loan schedules were not
produced or made available.

On May 14, 2014, SPS Document Control Data for Document Tracking reflects the following
auto task entry: per BofA custodian Is_DEUTSCHE BANK and current file location is_ DEUTSCHE
BANK.

On August 1, 2008, New Century Mortgage Corporation went out of business as per its Chapter
11 liquidation bankruptcy filing.

On October 23, 2014, SPS Document Control Data for Document Tracking reflects a request for
an Allonge in Request ID # 1834357 and a request for Collateral in Request ID # 1834356.
Also on October 23, 2014, SPS Document Control Data for Document Tracking reflects the
following entry by Sandra Widdowson Please audit and Imaged file and let Sandi know when
Images are available. Sandra Widdowson is also conducting an Allonge Review according to
SPS Document Control Data for Document Tracking and on October 23, 2014, she make an
entry that states LPS allonge review.

On October 24, 2014, SPS Document Control Data for Document Tracking reflects an auto task
entry that states: Requested file from DB.

On November 13, 2014, SPS Document Control Data for Document Tracking reflects an auto
task entry that states: Requested status from DB.

As shown in the documents produced on the next to last day of trial, on November 13, 2014,
three (3) separate REQUEST FOR RELEASE OF DOCUMENTS were sent from Greg Ott, SPS
Director of Document Control, to the Collateral Request Unit at Deutsche Bank. In the reference
line for each of the Request for Release of Documents form, as required by and contained in the
Subject PSAs Form J, the reference line does not refer to the Plaintiff whatsoever, but to
Transaction No. 1996-D and 1997-1 and specifically states in each document: In connection
with the custody of certain documents in respect of mortgage loans identified in this documents of the
annexed Mortgage Loan Schedule which are held by you as Custodian pursuant to the above
agreement, we request the release of the collateral file, for the reason indicated.

Yet, the above agreement and its Transaction No. (1996-D and 1997-1) referenced is a
transaction presumably dated in 1996 and 1997, a decade or almost a decade prior to the
creation of the Plaintiffs PSA in November of 2006 and the actual execution of the Borrowers
Loan documents on June 28, 2006. Furthermore, the attached Mortgage Loan Schedule was not
the MLS for the Subject PSA, but an entirely different MLS with var various loans that apparently
were not related to the Plaintiff. The attached MLS on November 13, 2014 reflected for the
Borrowers Loan a Loan Number of XXX3359062; the Prior Loan Numberof XX393699;
Status of Foreclosure; MSP Bank of AS6; a Pool Number of BOABA011; the Borrowers
Name of Scott Lawson; and the Investor Loan Number of XX54292.

An email also accompanied the Document Requests from SPS from Betsy Ozmore at
Betsy.ozmore@spservicing.com to santaana.custodyrequests@db.com dated Thursday,
November 13, 2014 11:59 AM titled Status Request copying Bill Koch and attaching a document
titled 20141113094447320.pdf; DB.xlsx. Just minutes later on Thursday, November 13, 2014
at 12:07 PM Sahira Diaz at sahira.diaz@db.com, on behalf of Santa Ana Custody Requests at
santaana.custodyrequests@db.com sends an email reply to Betsy Ozmore that states Betsy, Can
you please provide DB Loan Numbers. Also on the same date of November 13, 2014 at 8:59
AM, Betsy Ozmore from her email address at Betsy.ozmore@spservicing.com sends a separate
request to Deutsche Bank Trust Company Americas (DBTCA), the former Bankers Trust who took a
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security interest in the Borrowers note upon closing at their contact
SantaAnaCustodyRequests/db/dbcom@DBAmericas. She copied SPS Bill Koch at
Bill.Koch@spservicing.com and the email provided to us for review did not contain the attached
file as the other emails, while yet reading: Please provide the status of the attached files. Thank
you. It appears the email may have been intentionally redacted to conceal a separate MLS
other than the one provided.

On November 20, 2014, SPS Document Control Data for Document Tracking reflects an auto
task entry that states: Requested status from DB. On this same date, there are a number of
emails and communications between SPS Betsy Ozmore and DBNTC and DBTCA. One such email
was sent from Betsy Ozmore at Betsy.ozmore@spservicing.com on Thursday, November 20,
2014 10:52 AM to santaana.custodyrequests@db.com and copied Bill Koch that had a
heading of Status request and attached files coded 20141120083753036.pdf; DB.xlsx. The
message of this email stated: Please provide the status of the attached files. Thank you. On the
same day, Betsy Ozmore at Betsy.ozmore@spservicing.com at 7:51 sent a communication to
SantaAnaCustodyRequests/db/dbcom@DBAmericas and copied Bill Koch at
Bill.Koch@spservicing.com and sought a Status request but there was no named attachment
while the message read: Please provide the status of the attached files. Thank you. This
message was sent to DBTCA, not DBNTC as custodian for the Plaintiff. It once again appears the
attachment line may have been intentionally redacted.

A reply was sent from Sahira Diaz at sahira.diaz@db.com on behalf of SantaAna


CustodyRequests at santaana.custodyrequests@db.com on Thursday, November 20, 2014
5:27 PM to Betsy Ozmore and Bill Koch and referenced Status request and a file
attached coded 20141120083753036.pdf; DB.xlsx wherein the message stated: Besty, So I
tried my best to find a match for your 71 loans but with the information provided I was unable to
identify. Please let me know if you need anything else.

On December 30, 2014, SPS Document Control Data for Document Tracking reflects a request
for a LNA, a common industry abbreviation for Lost Note Affidavit, in Request ID # 1943412
and SPS Document Control Data for Document Tracking also reflects auto task entries that state:
Reviewing for LNA and Create LNA and bundle together for Bill. Copy allonge process.

SPS Document Control Data for Document Tracking also reflects that critical to the creation of a
false Lost Note Affidavit is that SPS assigned this task to its Collateral Rep named Richmond in
their Document Control Data for Document Tracking that based on my personal knowledge and
understanding is an abbreviation for a company named Richmond Monroe which is known to me
to fabricate evidence for the purposes of litigation as reflected in my comments to the Florida
Supreme Court.

On December 31, 2014, SPS Document Control Data for Document Tracking reflects an entry by
Sandra Widdowson that state LNA in process.

On January 26, 2015, before even providing any depositions in the matter, foreclosing plaintiffs
attorneys filed a Motion for Final Summary Judgment supported by knowingly and intentionally
false, misleading, and fraudulent and potentially perjurious testimony. In this motion, the
foreclosing plaintiff falsely averred that the Borrowers Mortgage was assigned to Deutsche Bank
prior to the filing of the Complaint in paragraph 5 of their motion.

In support of Plaintiffs motion for summary judgment, the foreclosing plaintiff provided an
affidavit as Exhibit 2 executed by Michelle Simon, a document control officer for SPS, the
alleged servicer of the subject loan wherein Simon testifies that: 1) I am a Document Control

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Officer at Select Portfolio Servicing, Inc. ("SPS"), and am competent to make this Affidavit based
upon my personal knowledge.

Key to Simons testimony, is that imaging and document custody records at SPS reflected that not
one, but two different original notes with barcodes and different loan numbers and custody
existed. 14) The original Note has been lost and is not in the custody or control of Plaintiff; 15)
The Note was continuously in possession and control of Plaintiffs assignor(s) and predecessor(s)
from the date of its execution until the loss and has not been paid or otherwise satisfied, assigned or
transferred; and 16) Plaintiffs assignor(s) and predecessor(s) were in possession of the Note and
entitled to enforce it when the loss occurred.

In paragraph 20 of her affidavit, Simon testifies: the Loan Records indicated that on November
30, 2007, prior to the filing of the Complaint, the original lender executed an Assignment of the
Mortgage, with the Promissory Note, to the Plaintiff. A copy of the Assignment of Mortgage is
attached hereto as Exhibit E. However, the operative complaint that is the subject of this lawsuit
was filed in 2010, years after the assignment. The Subject AOM that Simon is referring to was
created for the first litigation to support the first foreclosure complaint filed in January of 2008.

In paragraph 21 of her affidavit, Simon provides a legal conclusion and testifies that: Plaintiff is
the holder of the Note and Mortgage and was the holder of the Note and Mortgage prior to the
filing of the Complaint.

This testimony was made despite the fact that Simon, SPS and Plaintiff knew the exact location of
Original Note 2 that was referenced in SPS own business records and that versions of both
Original Note 1 and Original Note 2 were contained in SPS alleged business records
transferred from BANA, but intentionally concealed from the Court and Defendants. SPS and
BANA also knew that the Borrowers loan, note and mortgage were previously sold from NCCC
to Morgan Stanley Mortgage Capital.

On February 15, 2015, the previously noted corporate rep deposition of the foreclosing
Plaintiff took place. I prepared deposition questions for said deposition of the their designated
corporate rep, not a representative of any servicer or person. The corporate witnessed testified
that:

o Testified that Plaintiff did not know who had physical possession of the Borrowers
original note on the date this foreclosure action was filed;207

o Testified that Plaintiff did not know if there were any endorsements on the Borrowers
original note on the date this foreclosure action was filed;208

o Testified Original Note 1, not Original Note 2 was the copy of the Borrowers original
note with a NCMC tracking barcode and no endorsement contained in Plaintiffs business
records;209

o Testified that it was SPS, not the Plaintiff, that was seeking the payment of principal and
interest from Defendants in this lawsuit;210

o Testified that Plaintiff didnt know if the First AOM was contained in Plaintiffs business
records even though it was noted in SPS Document Control records;211
207 Plaintiffs Designated Corporate Rep (Kuerzi) Deposition take on February 5, 2015 at Page 107 Line 24 to Page 108 Line 2.
208 Plaintiffs Designated Corporate Rep (Kuerzi) Deposition take on February 5, 2015 at Page 108 Lines 3 6.
209 Plaintiffs Designated Corporate Rep (Kuerzi) Deposition take on February 5, 2015 at Page 109 Lines 1 22.
210 Plaintiffs Designated Corporate Rep (Kuerzi) Deposition take on February 5, 2015 at Page 97 Line 24 to Page 98 Line 4.
211 Plaintiffs Designated Corporate Rep (Kuerzi) Deposition take on February 5, 2015 at Page 123 Line 24 to Page 124 Line 1.
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o Testified that Plaintiff didnt know if NCMC was still in business on November 30th, 2007,
the date the Subject AOM was executed and didnt know if Plaintiff had any documents
in their file that would show that New Century Mortgage Corporation had the power on
November 30th, 2007, to assign assets to another entity;212

o Testified Plaintiff didnt know where the original of its own Subject AOM was located
despite SPS own evidence produced at trial indicating the exact whereabouts;

o Testified Plaintiff didnt know if the Plaintiff had access to either Borrowers Original
Note 1 or 2 to look at and examine despite their own evidence produced at trial
indicating the exact whereabouts at all times and request for its production prior to
Plaintiffs testimony;213

o Testified Plaintiff didnt know if the Borrowers Original Note 1 or 2 was in its trustees
possession contrary to evidence they admitted at trial and concealed for several
years;214

o Testified extensively that Plaintiff had provided Defendants all of the documents they
were going to use at trial;215

o Testified that Plaintiffs records show no other purchase or transfer of the Borrowers loan
and original note and mortgage other than the assignment directly from NCMC to the
Plaintiff in November, 2007;216

o Testified Plaintiff didnt know what its own Mortgage Loan Schedule (MLS) looked
like;217

o Testified Plaintiff didnt know if its own Mortgage Loan Schedule was static of subject to
change;218

o Claimed that a note, now known to be sold by NCCC to Morgan Stanley Mortgage
Capital, Inc. (MSMC) on August 25, 2006, was assigned directly from NCMC the loans
originator directly to the trust bypassing the sale transaction and transfer from NCCC to
MSMC; a transfer from MSMC to the Plaintiffs Depositor, Morgan Stanley ABS Capital I
Inc., the alleged depositor and then to Plaintiffs RMBS trust;219

o Was unfamiliar with provisions of Plaintiffs own PSA when its the very document that
created the Plaintiffs trust;220

o Didnt know the location of the Borrowers note Plaintiff claims it owned when its alleged
servicer and trustees record reflect the exact location by date;221

o Didnt know where Plaintiffs own evidence of a sale and transfer from its alleged
depositor to the trust was located;222

212 Plaintiffs Designated Corporate Rep (Kuerzi) Deposition take on February 5, 2015 at Page 124 Line 10 to Page 125 Line 21.
213 Plaintiffs Designated Corporate Rep (Kuerzi) Deposition taken on February 5, 2015 at Page 86, Lines 12 18.
214 Plaintiffs Designated Corporate Rep (Kuerzi) Deposition take on February 5, 2015 at Page
215 Plaintiffs Designated Corporate Rep (Kuerzi) Deposition take on February 5, 2015 at Page 126 Line 1 to Page 128 Line 15.
216 Plaintiffs Designated Corporate Rep (Kuerzi) Deposition take on February 5, 2015 at Page 132 Line 1 to Page 136 Line 25.
217 Plaintiffs Designated Corporate Rep (Kuerzi) Deposition take on February 5, 2015 at Page 77 Line 1 to Page 79 Line 24.
218 Plaintiffs Designated Corporate Rep (Kuerzi) Deposition take on February 5, 2015 at Page 80 Lines 11 14.
219 Plaintiffs Designated Corporate Rep (Kuerzi) Deposition take on February 5, 2015 at Page 81 Lines 20 23.
220 Plaintiffs Designated Corporate Rep (Kuerzi) Deposition take on February 5, 2015 at Page 81 Lines 20 23.
221 Plaintiffs Designated Corporate Rep (Kuerzi) Deposition take on February 5, 2015 at Page 86 Lines 13 23.
222 Plaintiffs Designated Corporate Rep (Kuerzi) Deposition take on February 5, 2015 at Page 87 Lines 5 7.
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o Testified as to the Subject AOM, but testified there was only one AOM, ignoring the First
AOM noted in SPS own records;223

o Testified that as of the date of deposition, February 5, 2105, the Borrowers Original
Note 1 or 2 were still lost despite SPS and DBNTC records indicating otherwise and the
exact location of the note.224

o Testified that Plaintiff would provide lost note affidavits at trial, that they didnt bring to
deposition or produce, that would prove the loss of note despite the fact its alleged
agents knew its exact location in its record and that same system reflected the Lost Note
Affidavit she testified about was shredded days after her testimony on 4/1/15;225

o Testified that Plaintiff didnt know if its trustee performed a search for the lost mortgage
note, despite the fact its alleged agents knew in its record reflected a search for the
note;226

o Testified that Plaintiff didnt know its own Acceptance by trustee provisions of its own
PSA in Section 2.02;227

o Testified that Plaintiff didnt need to do a new or updated search for the lost Borrowers
note since they already had a lost note affidavit that they intentionally shredded days
after the deposition;228

o Testified that Plaintiff could Plaintiff go to Court with a lost note affidavit only after a
search and they know they are 100% sure they dont have the note contrary to what the
SPS and DBNTC indicated;229

o Testified Plaintiff did not know about any pool or LPMI policies related to the Plaintiff
and any losses;230

o Testified Plaintiff never reviewed any certification report as per its PSA indicating its
trustee certified the receipt of the Borrowers Original Note 1 or 2;231

o Testified Plaintiff never reviewed any exception report as per its PSA indicating its
trustee identified any document defects or deficiencies with Borrowers Original Note 1
or 2;232

o Testified Plaintiff didnt know the last entity that had possession of the original note
before its alleged loss, despite the records of DBNTC and SPS reflecting its exact
location;233

o Testified that NCMC, not Morgan Stanley ABS Capital I Inc. (MSACI) as depositor, was
the entity that assigned the Borrowers Note to the Plaintiff contrary to the provisions

223 Plaintiffs Designated Corporate Rep (Kuerzi) Deposition take on February 5, 2015 at Page 87 Lines 8 11.
224 Plaintiffs Designated Corporate Rep (Kuerzi) Deposition take on February 5, 2015 at Page 87 Lines 12 14.
225 Plaintiffs Designated Corporate Rep (Kuerzi) Deposition take on February 5, 2015 at Page 88 Lines 13 14 and 21.
226 Plaintiffs Designated Corporate Rep (Kuerzi) Deposition take on February 5, 2015 at Page 91 Lines 1 3.
227 Plaintiffs Designated Corporate Rep (Kuerzi) Deposition take on February 5, 2015 at Page 91 Lines 4 16.
228 Plaintiffs Designated Corporate Rep (Kuerzi) Deposition take on February 5, 2015 at Page 91 Lines 8 24.
229 Plaintiffs Designated Corporate Rep (Kuerzi) Deposition take on February 5, 2015 at Page 92 Lines 3 8.
230 Plaintiffs Designated Corporate Rep (Kuerzi) Deposition take on February 5, 2015 at Page 92 Lines 12 to Page 93 Line 25.
231 Plaintiffs Designated Corporate Rep (Kuerzi) Deposition take on February 5, 2015 at Page 94 Lines 1 3.
232 Plaintiffs Designated Corporate Rep (Kuerzi) Deposition take on February 5, 2015 at Page 94 Lines 1 3.
233 Plaintiffs Designated Corporate Rep (Kuerzi) Deposition take on February 5, 2015 at Page 94 Lines 4 8.
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contained in its PSA and Exhibit U in its PSA later provided to Defendants by NCMC and
NCCCs liquidating trustee;234

On February 26, 2015, SPS Document Control Data for Document Tracking reflects an entry by
Susan Johnson that states: Putting In signing tray for Jeff Young as well as the LNA was
requested by Betsy O from SPS Document Control Department who made the prior written
emails requests to both DBNTC and DBTCA for either Original Note 1 and/or Original Note 2.

On March 13, 2015, SPS Document Control Data for Document Tracking reflects an entry by Bill
Koch that states: Requested Collateral File from the Deutsche Bank website with ln#
1008687478. Contains Orig Note, DB confirmation: Request ID 156953851 has been submitted
for processing Request 156953651 Updated. As previously reflected herein the 1008687478
loan number was the original NCMC loan number reflected in Original Note 1.

On March 18, 2015, SPS Document Control Data for Document Tracking reflects an entry by Bill
Koch that states: Per Deutsche Bank I have requested to have this file pulled and will update
you once the file has been located.

On March 19, 2015, SPS Document Control Data for Document Tracking reflects an entry by Bill
Koch that states: Per DB website Current Withdrawal Information Item FILE Sent To: Reason
LITIGATION SELECT PORTFOLIO SERVICING, INC. 3815 S WEST TEMPLE SALT LAKE CITY, UT
84115 Attention: BILL KOCH Withdrawn On 3/19/2015 By valdroc Air Bill Number
1Z46453W0268445640 Transmittal 1792927 Transmitted On 3/19/2015 Authorized by BILL
KOCH.

On March 23, 2015, SPS Document Control Data for Document Tracking reflects entries by Bill
Koch that state: Rcvd fm Deutsche Bank. Fwd to Betsy for processing and Rcvd executed Note
Cert. Fwd file to Ana for processing. Need to ship next day to atty at: McGlinchey Stafford c/o
Daniel Pasky 10407 Centurion Pkwy. N., Suite 200 Jacksonville, FL 32256.

The SPS Document Control Data for Document Tracking document that reflects the above
information also now contained additional and very detailed information about the contents of
the collateral file that included notations that: 1) there was no recorded assignment found in the
collateral file nor was the Subject AOM in the collateral file; 2) the First/Blank AOM that was
unrecorded, but executed was found in the collateral file; 3) Bailee letters were required; 4)
there were both an original and copy of either Original Note 1 and/or Original Note 2 in the
file; 5) there was an original mortgage in the file; 6) there was an original title policy in the file;
and 6) there was only a copy, not original, of the unrecorded First/Blank AOM.

It was also noted that FC at LPS, not SPS, the Plaintiff or the Plaintiffs trustee requested the
collateral file and that the collateral was requested on 3/13/15 and completed on 3/23/15.

On March 23, 2015, the Plaintiffs filed their amended witness and exhibit list at Docket #260
and list an original note with blank endorsement that Simon first testified about at her deposition
on March 9, 2015.

On March 24, 2015, the Plaintiffs file a motion to voluntarily dismiss Count II of their complaint
and admit that an original note will be filed with the Court at Docket # 261.

On March 25, 2015, the Plaintiffs file a motion at Docket # 262 for the Court to take Judicial
Notice of the Plaintiffs public filing of their PSA with the SEC. Such filings along with their
234 Plaintiffs Designated Corporate Rep (Kuerzi) Deposition take on February 5, 2015 at Page 102 Line 8 to Page 104 Line 5.
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Mortgage Loan Schedules are indicative of what is intended to occur on that specific date, but
may not be what actually occurred. In fact, the Subject PSA was subject to amendment and
change. The production of a document that actually established the Plaintiff that is obtained from
a public electronic source instead of the best evidence of the agreement, a certified copy of the
most recent executed Subject PSA with all current and updated amendments, schedules and
exhibits is a red flag for securitization and/or foreclosure fraud.

On April 1, 2015, SPS Document Control Data for Document Tracking reflects an entry by SPS
Betsy Ozmore that states: shredding LNA - original docs were rcvd.

Days and weeks before trial, the attorneys for foreclosing plaintiff produce three documents that
indicated that sometime in 2006, there was an indorsed note in possession of Countrywide; that
SPS claimed a beneficial interest in Original Note 2; and that SPS records reflected that the
foreclosing plaintiff was the investor, but that an entirely different entity, not the foreclosing
plaintiff or its trustee, Bank of New York, was the holder of either Original Note 1 or Original
Note 2.

Additional records in other Bank of America/Countrywide cases I have reviewed reflect the same
identical pattern and practice that include:

o Two different versions of a borrowers original note contained in Bank of Americas


imaging system of record;

o Differing chains of custody, title, allonges and endorsements to the note;

o Original NCMC notes filed in Florida Courts did not contain ANY endorsements
whatsoever when filed years after NCMC bankruptcy;

o Some notes returned later with stamped NCMC endorsements;

o Bank of Americas Investor Information screens show no transaction between depositors to


trusts, but years later, transaction from other parties and originators directly to trusts.

Evidence introduced at trial235 reflects that Bank of New York Mellon was the alleged holder of
the alleged Original Note 2236 filed with the Court as of the date of trial;

Evidence introduced at trial237 reflects that SPS claimed an unknown beneficial interest in the
alleged Original Note 2238 filed with the Court as of the date of trial for its behalf or on behalf
of another undisclosed entity, not the Plaintiff;

Evidence introduced at trial239reflects that in November of 2014, SPS made separate and
different requests for the release of the borrowerrs Original Note and collateral file from:

o Two (2), not one (1), different Deutsche Bank related document custodians, Deutsche Bank
National Trust Company (DBNTC) and Deutsche Bank Trust Company Americas
(DBTCA) using:

235 SPS MSP MAS1/INV1 screenshot


236 Original Note 2
237 SPS Bailee Letter
238 Original Note 2
239 SPS Document Control Data introduced at Trial
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Two (2), not one (1) corresponding Mortgage Loan Schedules (MLS) containing
at least three (3) different loan numbers in two (2) differently labeled Excel
spreadsheets of which only one Excel spreadsheet was produced and the other
concealed from the Court and/or destroyed;

Three (3) different Requests for Release of Document forms sent from Greg Ott,
SPS Director of Document Control, to the Collateral Request Unit at Deutsche Bank
on behalf of unnamed and undisclosed entities pursuant to agreements created in
1996 and 1997, a decade before Plaintiffs creation and not Exhibit J of
Plaintiffs PSA and with no reference to the Plaintiff.240

Newly discovered evidence in the form of a New Century Mortgage Corporation Servicing
Transaction History241 obtained from the NCMC Liquidating Trustee that Plaintiff, SPS and BANA
claimed was missing and/or destroyed reflects a CHANGE IN PRIMARY BORROWERS NAME
for the Borrower loan on August 10, 2006 more than a month after its origination;

Newly discovered evidence produced by the Liquidating Trustee for New Century Mortgage
Corporation reflects that Credit Suisse First Boston (CSFB), the parent company for SPS, was the
warehouse lender for the Borrower loan;

Evidence introduced at trial reflects that paragraph 6 of a Limited Power of Attorney (LPOA)
received into evidence at trial in this matter as Plaintiffs Exhibit 4 instructs its sub-servicer, SPS to
correct or otherwise remedy any errors or deficiencies contained in any transfer or reconveyance
documents provided or prepared by Trustee or a prior transferor, including, but not limited to note
indorsements.

Evidence produced at trial reflects an unaccounted for allonge that was previously reviewed and
then either concealed from the Court and/or destroyed.

Evidence obtained after trial reflects that contrary to the testimony and representations of
foreclosing plaintiffs trial witness, Lawrence Nardi, that copies and scans of individual promissory
notes, mortgages, assignments and other collateral documents were noted, inventoried and
individually tracked by SPS document custody system;

Evidence and testimony produced at trial reflects a Letter to Closing Agent, introduced at trial
as Defense Exhibit 2 was provided to Borrowers Title Company and informed the Borrower
Closing Agent that in addition, you are hereby notified that Bankers Trust Company (n/k/a
Deutsche Bank Trust Company Americas), as agent for certain lenders and a certain lessor (in such
capacity, the Agent) has a security interest in the deed of trust or mortgage note, deed of trust or
mortgage, and all other supporting documents for the above referenced loan.

Recently discovered evidence, provided by the NCMC/NCCC Liquidating Trustee, informed


Defendants and myself that the unknown lender or lessor referenced above may have been
Credit Suisse First Boston (CSFB), the parent company of Plaintiffs alleged servicer, SPS, who
was the warehouse lender for the Borrower Loan.

240 SPS documents produced on the next to last day of trial reflect that on November 13, 2014, three (3) separate REQUEST FOR RELEASE OF
DOCUMENTS were sent from SPS to DBNTC and DBTCA using two different MLS. In the reference line for each of the Request for Release of Documents
form, as required by and contained in the Subject PSAs Form J, the reference line does not refer to the Plaintiff whatsoever, but to Transaction No. 1996-D
and 1997-1 and specifically states in each document: In connection with the custody of certain documents in respect of mortgage loans identified in this
documents of the annexed Mortgage Loan Schedule which are held by you as Custodian pursuant to the above agreement, we request the release of the collateral
file, for the reason indicated.
241 NC Borrowers 00000001

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The evidence taken above in this foreclosure matter is indicative and reflective of a double-pledge fraud
scheme. There simply isnt a non-nefarious motive to have two different original notes traveling with different
endorsements, chains of custody, loan numbers and records as reflected in the images below:

Note Exhibit to 1st Foreclosure Complaint First Page

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Note Exhibit to 2nd Foreclosure Complaint First Page

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Note Exhibit to 2nd Foreclosure Complaint Last Page

As shown above, the first page of the certified original note contained a NCMC original note tracking
barcode and the last page did not contain any endorsement whatsoever. Testimony in the case reflected that
barcode labels are only placed on original documents, not copies. This version of the note was also scanned
into NCMCs imaging system on July 6, 2006, shortly after its execution and was the only version of the
original note contained in their system up until July of 2016 when provided by NCMCs custodian of records.

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Note Exhibit Produced as Trial First Page

As shown above, the first page of the alleged original note produced at trial did not contain the NCMC
original note tracking barcode in the upper right hand corner as in Exhibit A to the complaint, but now
contained a Countrywide/ReconTrust/Bank of America original note tracking barcode at the bottom of the
right side of the first page of the note.

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Note Exhibit Produced as Trial Last Page

As shown above, the last page of the alleged original note produced at trial now contained an endorsement.
When I inspected this note (Original Note 2) in May of 2015, the alleged endorsement was highly suspect of
a potential forgery in that it was a two-step instead of one-step facsimile stamp wherein the signatorys
signature was not only placed over the prior NCMC stamp, but also had inconsistent ink-coverage with
apparent trace-lines on the outside of the Nagy signature that in my opinion required additional expert ink-
dating analysis and further research.

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The Steve Nagy signature contained in the endorsement below was significantly different than the an actual
Steve Nagy personal signature I obtained from Steve Nagys federal bankruptcy filing in Pacer as shown in
the following images.

BLOWN UP PHOTOGRAPH OF NAGY STAMP ON NOTE

NAGY SIGNATURE ON BK PETITION

Yet, despite these facts and the overwhelming fraud committed by Select Portfolio Servicing (SPS), the
subornation of perjury throughout the process by McGlinchey Stafford lawyers Kathleen Angione and Daniel
Pasky, for whom there will be certainly additional repercussions, and the outright lies and perjury of their
witness, Lawrence Nardi, on several counts that contradict their own fabricated evidence.

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Space Coast Credit Union vs. Shaw, Broward County, FL


If anyone questions that double-pledge fraud occurs, then they must look at a case I was brought in to
analyze in Broward County, Florida. In this case that originally went to an unnecessary appeal before
Floridas 4th DCA. The Appeals Court recitation of the case warrants a reading before I get into additional
facts that will prove the double pledge. In their opinion, they wrote:
Jacqueline Shaw Johnson ("appellant") appeals the trial court's final summary judgment of foreclosure in favor of
Space Coast Credit Union ("appellee"). We agree with appellant that appellee failed to present sufficient proof of
its standing to foreclose to support the entry of summary judgment, and reverse.

Appellant executed a promissory note and mortgage with Eastern Financial Credit Union for the purchase of a home.
Eastern then sold both the note and the mortgage to the Federal Home Loan Bank of Atlanta (the "Bank") pursuant
to a Participating Financial Institution Agreement (the "PFIA"), and thereafter Eastern became the servicer for
appellant's loan. Shortly after appellant defaulted on the loan, appellee merged with Eastern and assumed its
assets, liabilities, and obligations under the prior PFIA, and also entered into its own PFIA with the Bank. This second
PFIA established appellee as the Bank's servicer.

Three years after the default, appellee filed a verified initial complaint of foreclosure against appellant, claiming
that it was bringing the action as the servicer for the Bank, which owned the note and mortgage. Appellee stated that
Eastern delivered both the mortgage and the note, endorsed in blank, to the Bank before Eastern and appellee
merged. Appellee attached both the note and mortgage to the complaint, but the note was payable to Eastern and
did not contain any endorsements. Appellee also attached an assignment of the mortgage executed by Eastern, but
the document did not list an assignee. Finally, appellee attached a certificate of merger to substantiate its merger
with Eastern as well as its assumption of Eastern's duties under the first PFIA.

During the litigation, appellee filed an affidavit signed by its real estate loss mitigation manager in an attempt to assert an
additional count to reestablish a lost note (the "Lost Note Affidavit"), even though a lost note count was not raised in the
initial complaint. The Lost Note Affidavit stated that the original note had been lost and could not be found, and included as
an attached exhibit a copy of the note with an allonge bearing an undated, blank endorsement from Eastern. Appellee
never formally moved to amend the complaint to add the lost note count.

Appellee then filed a motion for final summary judgment of foreclosure. In her defense against the motion,
appellant argued, in pertinent part, that appellee failed to show it had possession of the original note when the
complaint was filed, and that there was no evidence that the Bank ever owned or possessed the note.

In response, appellee filed the affidavit of an assistant manager of mortgage program operations/bank officer for
the Bank, who claimed that appellee was "authorized to foreclose on any and all loans that are subject to the"
two PFIAs, and attached copies of both agreements. The assistant manager also averred that the Bank owned
the note and mortgage and that appellee was a holder of the instruments. That same day, appellee filed an
amended motion for summary judgment containing allegations consistent with the assistant manager's
affidavit, claiming that it had standing to foreclose based upon its status as servicer for the Bank and its
possession of the note bearing the blank endorsement from Eastern.

The trial court conducted a hearing on appellee's motion for summary judgment and rendered final summary
judgment in favor of appellee. This timely appeal followed. We have held that "[a] plaintiff must tender the original
promissory note to the trial court or seek to reestablish the lost note under section 673.3091, Florida Statutes."
Servedio v. U.S. Bank Nat'l Ass'n, 46 So.3d 1105, 1107 (Fla. 4th DCA 2010); see also State St. Bank & Trust Co. v.
Lord, 851 So.2d 790, 791 (Fla. 4th DCA 2003) ("To maintain a mortgage foreclosure, the plaintiff must either
present the original promissory note or give a satisfactory explanation for its failure to do so."). Additionally, "[i]ssues
that are not pled in a complaint cannot be considered by the trial court at a summary judgment hearing." Reddy v.
Zurita, 172 So.3d 481, 484 (Fla. 5th DCA 2015) (quoting Saralegui v. Sacher, Zelman, Van Sant Paul, Beily, Hartman
& Waldman, P.A., 19 So.3d 1048, 1051 (Fla. 3d DCA 2009)).

Here, appellee attempted to pursue a claim that was not included in its initial complaint and never raised in an
amended complaint; namely, a claim to reestablish a lost note. Instead, appellee filed the Lost Note Affidavit
stating that the note had been lost, which contradicted the assertions in the initial complaint, and attached a
different copy of the note which included an allonge bearing a blank endorsement from Eastern. This version of
the note was not attached to any other pleading besides the Lost Note Affidavit.

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Because appellee never formally requested leave to amend the complaint, the count to reestablish the lost note was
not properly before the trial court at the summary judgment hearing. See Feltus v. U.S. Bank Nat'l Ass'n, 80 So.3d
375, 375-77 (Fla. 2d DCA 2012) (holding that a pleading attempting to assert an additional claim that is not filed in
accordance with Florida Rule of Civil Procedure 1.190(a) is a nullity, and such claims are not properly before the trial
court at the summary judgment stage); see also Reddy, 172 So.3d at 484 (holding that a trial court cannot consider
issues that were not raised in a complaint at the summary judgment stage). By extension, any attachments to the Lost
Note Affidavit were irrelevant to the proceedings before the court. Thus, the only properly filed version of the note
the trial court could consider at the summary judgment hearing was the note attached to the initial complaint,
which listed Eastern as the payee and did not contain any subsequent endorsements.

The fact that appellee attempted to raise a lost note count and filed a more recent version of the note with the Lost
Note Affidavit indicates that the copy of the note attached to the initial complaint was not the original. As such, the
original note was never properly filed with the trial court. Even if it had been, appellee still did not present any
summary judgment evidence regarding when the blank endorsement from Eastern was placed on the copy of note
attached to the Lost Note Affidavit, or when appellee came into possession of that instrument. A "plaintiff must prove
that it had standing to foreclose when the complaint was filed." McLean v. JP Morgan Chase Bank Nat'l Ass'n, 79
So.3d 170, 173 (Fla. 4th DCA 2012). When attempting "to enforce a note endorsed in blank, a foreclosing party
must show that they had possession of the note at the inception of the lawsuit." Guzman v. Deutsche Bank Nat'l Trust
Co., 179 So.3d 543, 546 (Fla. 4th DCA 2015).

Appellee argues that it had standing to foreclose as the holder of the original note, and because it was authorized
by the Bank to bring the action as the servicer. Assuming these claims are true, they still do not remedy appellee's
failure to properly file the original note with the trial court, as required. Servedio, 46 So.3d at 1107; see also Lord,
851 So.2d at 791. In light of the fact that the note attached to the initial complaint (the only note the trial court could
consider at the summary judgment stage) was payable to Eastern and did not contain any subsequent endorsements,
appellee's claims lack merit.

"If the record reflects the existence of any genuine issue of material fact, or the possibility of any issue, or if the
record raises even the slightest doubt that an issue might exist, summary judgment is improper." Dennis v. Kline, 120
So.3d 11, 20 (Fla. 4th DCA 2013) (quoting Shaw v. Tampa Elec. Co., 949 So.2d 1066, 1069 (Fla. 2d DCA 2007)).
Considering appellee failed to properly file the original note, it cannot be said that there were no issues of material
fact regarding its standing to foreclose in this case.

Because we reverse the trial court's entry of final summary judgment in favor of appellee on the issue of standing, we
see no need to address the other issues raised by appellant on appeal.

So, some bank lawyers may be asking, whats the big deal here since lost note counts have been made for
decades. Others might say, well, they owe the money to someone and the borrower got off paying their
rightful obligation. They may be right. However, the unique twist to this story as will be illustrated in the
following pleading recitations is this. Shaws son was in real estate in New York. He trailed the note and found
his moms note for sale by a distressed debt seller. His real estate company purchased the original note his
mom executed for approximately $25,000.

His mother verified that the note in his possession was the one she executed. I verified its existence in the
summer of 2015 after the son contacted me. For a time, the son was going to transfer the note to me to make
me the holder. The note was not lost or missing. In fact, the original note was sold to another entity that sold
it to the son. In their false and potentially perjurious lost note affidavits, the affiants claimed and lawyers
averred in motions that the note was never sold, transferred, hypothecated or assignment. So then, how did
the borrowers some come into possession? How did the entity he paid for the note come into possession?

So, lets now pick up the arguments of both sides via the pleadings they filed in the Broward County case.
First, after the appeal came back, Space Coast Credit Union on behalf of the Federal Home Loan Bank of
Atlanta filed a new and amended foreclosure complaint. In the amended complaint, the foreclosing plaintiff
that was now Space Coast Credit Union, as Servicer for Federal Home Loan Bank of Atlanta made the
following pertinent averments:

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This is an action (a) for damages that does exceed $15,000.00 in amount exclusive of interest, attorneys' fees and
costs; (b) for suit to enforce a promissory note; ( c) for foreclosure of a mortgage on real property located in
Broward County, Florida; ( d) for other legal and equitable relief.

Plaintiff is a State Chartered Credit Union its principal place of business in Brevard County, Florida.

Borrowers reside in Broward County, Florida and are otherwise sui juris. Borrowers executed and delivered a
promissory note (the "Note") and a mortgage (the "Mortgage") securing payment of the note to Eastern Financial
Florida Credit Union. The Mortgage was recorded on March 19, 2007, in Official Records Book 43760 at page
1657 of the public records of Broward County, Florida, and mortgaged the property (the "Mortgaged Property")
described in the mortgage then owned by and in the possession of the mortgagor(s). A true and correct copy of the
Note is attached as Exhibit "A." A true and correct copy of the Mortgage is attached as Exhibit "B." The Note and
Mortgage may be collectively referred to as the "Financing Instruments."

Eastern Financial Florida Credit Union ("Eastern") originated the subject loan and received the promissory note and
mortgage. Eastern, as an approved seller of mortgages to the Federal Home Loan Bank of Atlanta ("FHLB") and
pursuant to the Mortgage Partnership Finance Program ("MPF"), sold the fmancing instruments to FHLB. Eastern
delivered to FHLB the original mortgage, original note endorsed in blank and an Assignment of Mortgage in blank,
which has not been further hypothecated, assigned or transferred to any other party. A copy of the blank assignment
of mortgage is attached hereto as Exhibit "C". Eastern, as an approved servicer of the mortgages held by FHLB, was
the originator of the loan and then the servicer. On June 30, 2009, Eastern merged into Space Coast Credit Union. A
copy of the Certificate of Merger is attached hereto as Exhibit "D". Space Coast, as successor in interest to Eastern,
assumed Eastern's obligations pursuant to the Assumption of the Participating Financial Institution Agreement. A copy
of the agreement is attached hereto as Exhibit "E". On August 6, 2009, Space Coast Credit Union entered into its own
Participating Financial Institution Agreement. A copy is attached hereto as Exhibit "F". FHLB is the owner of the
Financing Instruments and Space Coast is the holder of the Financing Instruments. Space Coast is bringing this action
on behalf ofFHLB as its servicer.

Borrowers have defaulted under the Financing Instruments by, among other things, failing to pay the payment due
March 1, 2009 and all subsequent payments.

All sums owed under the Note and Financing Instruments, including principal, accrued interest, late charges, attorneys'
fees and costs have been declared and are hereby declared to be due and payable in full.

Borrowers owe Plaintiff the sum of $275,683.66 principal under the Note, plus accrued interest at the default rate,
late charges, attorneys' fees and costs.

Plaintiff has performed all conditions precedent to commencement of this action.

Plaintiff has retained the law firm of Blaxberg, Grayson, Kukoff & Forteza, P.A. to represent Plaintiff in this action
and is obligated to pay such firm a reasonable attorneys' fee.

Borrower(s) have defaulted under the Financing Instruments by, among other things, failing to pay installments under
the Note when due.

The following persons or entities may have or claim an interest in the Mortgaged Property by virtue of the following
but any such claims are subordinate, inferior and subject to the interest of Plaintiff

Borrowers owe Plaintiff the sums stated above on the Note and Mortgage plus accrued interest at the default rate,
late charges, attorneys' fees, taxes and insurance Plaintiff may have paid, or may need to pay, in order to protect
the Mortgaged Property, and title search expenses for ascertaining the necessary parties to this action, all of which is
secured by the lien of the Mortgage.

Now, the previous averments are actually correct in many respects and serve as a model of what a
foreclosure complaint should reflect. It identifies the servicer as Space Coast who is servicing the loan for the
FHLB/Atlanta. It also references the actual contracts and agreements that created the relationship. However,
there are a few missing details like the mortgage loan schedules.

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A major point is that anyone can show you a copy of an agreement there are thousands. However, who has
custody of the existing agreement with each of the current and live loan schedules attached? A copy or a
copy of a scan is just that. The industry has fabricated evidence for over three decades, a contract and loan
schedule is no different. It is here where Space Coast, the FHLB/Atlanta and their lawyers start the old fraud
on the court lost note averment. They know where the note is, so it cant be lost.

In Count III, Space Coast acting on behalf of the FHLB/Atlanta seeks reestablishment of a falsely claimed lost
note! Remember, the opinion earlier explained about UCC 9 and how notes are really transferred. Also, you
must analyze the concept that a thief can have standing. Yet, we dont have a thief here and we dont have a
lost note. We have an original note that is in the hands of another party who paid cash for the note. The only
problem, the party foreclosing is not the party in possession of the original and they know it. Space Coast and
its lawyers then go on to explain
Plaintiff realleges and reavers paragraphs 1 through 10 as if fully set forth herein.

The original Note has been lost or destroyed and is not in the custody or control of Plaintiff.

Plaintiff is the owner [the servicer to FHLB, the owner] of the Note and Plaintiff has not hypothecated, assigned or
transferred the Note.

Plaintiff was entitled to enforce the instrument when the loss of possession occurred.

Plaintiff is not certain of the time or manner of the loss or destruction of the Note.

Plaintiff is aware of the allegations made by The Hoeg Corporation, which purports to have possession
following an assignment by a third-party. The Plaintiff is currently investigating whether this is the case, and if
so, whether that transfer was bona fide. Accordingly the Plaintiff reserves the right to amend this Complaint to
reflect appropriate causes of action against proper parties.

The copy of the Note attached hereto as Exhibit "A" is a true and correct copy of the Note.

Plaintiff, FHLB, the Defendants and The Hoeg Corporation are the only persons known to Plaintiff who are
interested for or against the reestablishment of the Note.

The copies of the written instruments attached hereto are true and correct and substantial copies of the originals.

Plaintiff agrees to indemnify the Defendant pursuant to Fla. Stat. 673.3091 and 702.11.

So, here you have an admission that another party is laying claim to the original note. You also have
additional averments that can be used to a borrowers benefit when Space Coast avers: Plaintiff is aware of
the allegations made by The Hoeg Corporation, which purports to have possession following an assignment by a
third-party. The Plaintiff is currently investigating whether this is the case, and if so, whether that transfer was
bona fide. Accordingly the Plaintiff reserves the right to amend this Complaint to reflect appropriate causes of
action against proper parties.

In its response, Shaw and her lawyers simply admitted that the note was not in custody of Space Coast and
denied it was ever lost or destroyed since her son had possession. They added just three affirmative defenses
wherein they claimed: 1) Failure to Include Indispensable Parties: Plaintiff has failed to include indispensable
arties, particularly the holder of the note; 2) Standing: Plaintiff does not have proper standing to bring the instant
action. Plaintiff by its own admission is not currently in possession of the original Mortgage Note and Mortgage
and is aware that the Mortgage Note is in the possession of a third party; and 3) Real Party in Interest: the
Plaintiff is not the real party in interest.

The borrowers son brought forth a motion to intervene since his company owned the note that was claimed to
be lost that the FHLB/Atlanta was foreclosing upon. In their motion to intervene, they wrote

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Intervenor, The Hoeg Corporation ("Hoeg") , by and through the undersigned counsel, pursuant to Fla. R. Civ. P.
1.230, hereby comes to intervene in this cause, and in support thereof state as follow:

Houg claims an interest in this pending litigation pursuant owning and holding the promissory note at issue. Despite
Hoegs owners hip of this promissory note. Plaintiff incorrectly purport to have a right to enforce the terms of the note.

Originally, borrowers , Jacqueline Shaw and Thomas N. Johnson executed and delivered the promissory note, along
with a mortgage to secure payment thereto. See attached copy of note as Exhibit A.

On or about March 6, 2012, the Note was purchased by Hoeg pursuant to a Note Purchase Agreement. See
attached copy of Note Purchase Agreement as Exhibit B; thus, Hoeg is the holder of a promissory note.

The Note Purchase Agreement transferred the original note from JMC Partners to Hoeg. The original promissory note
was transferred and endorsed to Hoeg, which owns and holds it. As a result, Hoeg has an interest in this pending
litigation and should therefore, be permitted to intervene.

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WAMU RMBS - - FIRST MAGNUS CASE


As shown by the evidence pulled from the Orange Co., FL case below, the note exhibit to the complaint
contained a note tracking barcode on the upper right hand corner of the first page of the note. As you can
see in this note example, there is an original note tracking system barcode on the upper right hand corner of
this particular note.
IN THE CIRCUIT COURT OF THE 9th JUDICIAL CIRCUIT OF FLORIDA, IN AND FOR ORANGE COUNTY

CASE NO: 2009-CA-040559-O


FILING DATE: December 29, 2009
PLAINTIFF: U.S. Bank, National Association, as Trustee for WaMu Mortgage Pass-Through Certificate for WMALT Series
2007-OA1 Trust
DEFENDANT(S): Jaime Espinoza; et al. including Florida Department of Revenue

NOTE EXHIBIT TO COMPLAINT FIRST PAGE

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The last page of this same note as shown below shows no endorsement whatsoever. So, the exhibit reflects
that First Magnus Financial Corp. was the only lender who had standing to foreclose on the date the
foreclosure action was filed on December 29, 2009. However, First Magnus filed for Chapter 11 bankruptcy
protection on August 22, 2007, more than two years before the filing date.242

NOTE EXHIBIT TO COMPLAINT LAST PAGE

242REUTERS. "Big Mortgage Lender in Chapter 11 Filing." The New York Times. The New York Times, 21 Aug. 2007. Web. 26 Dec. 2016.
<http://www.nytimes.com/2007/08/22/business/22lender.html>.
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As shown below, the original note was filed with the clerk on February 26, 2010. Notice that the prior
barcode is not on the note on the upper right hand corner of the first page.

ORIGINAL FILED IN OFFICE LYDIA GARDNER CLERK CIRCUIT COURT ORANGE CO, FL ON
2/26/2010 AT 4:32 PM ORIGINAL NOTE FIRST PAGE

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Notice there still is no endorsement on the note when the original was filed reflecting that this note, at least
using endorsements and allonges, was not part of the Plaintiffs trust and was not properly conveyed and
transferred to the trust in accordance with the provisions of the trust agreements. It shows a note with no
endorsement or allonge and the named lender on the note, had already entered federal bankruptcy
proceedings three years earlier.

ORIGINAL NOTE LAST PAGE

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As shown by the docket entries below, a voluntary dismissal was taken on May 10, 2012 and a motion for
return of the original note was taken the same day with an order directing the clerk to return the original note
without an endorsement on May 11, 2012. The question is what happened to the original note after its return?
Did a suddenly appearing endorsement for a dead man (i.e. bankrupt company) suddenly appear on the
note or allonge at a later date?

There are thousands of similar examples of original notes not containing ANY endorsements whatsoever, that
servicers later attempted foreclosure and in many cases, actually obtained foreclosure judgments on with no
right to do so via their own submitted evidence.

Date Description Pages

5/11/2012 Order 2

Comments: directing clerk to return original docs

5/10/2012 Notice of Dismissal 2

5/10/2012 Motion 2

Comments: FOR RETURN OF ORIGNAL NOTE AND MORTGAGE

5/10/2012 Final Disposition Form 1

Comments: Final Disposition Form

5/10/2012 Voluntary Dismissal 2

Comments: AND DISCHARGE OF LIS PENDENS sent to rec 5/10

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JPMORGAN CHASE VS. RICHARD HOLT CASE

Yet evidence of another double-pledge fraud exists in the decade-old JPMorgan Chase/WAMU case with
Richard Holt in Connecticut who I have consulted. In one filing, Holt, an attorney, filed a motion to impose or
uphold a stay. In his motion, Holt writes the following:

There are pertinent reasons to observe a stay. The Appellant filed a petition for Chapter 13 bankruptcy in The
Federal Bankruptcy Court of the Southern District of New York at White Plains on May 19, 2015, case no. 15-
22704-rdd. As a consequence of that filing, the Appellee herein, JP Morgan Chase Bank, NA, filed a proof of
claim therein, claim no. 3. Enclosed with the proof of claim was a completely different note for the instant loan
then adduced as full exhibit # 3 in the trial court on March 27, 2015, 15-A, which was also the note attached to
the original complaint in the instant case, see exhibit "A" herein. As a comparison, the note filed with the proof
of claim in the White Plains bankruptcy court is enclosed, see exhibit "B" herein.

The indorsement by Cynthia Riley is not on the note on the proof of claim, instead two other questionable
indorsements. It is unheard of in the history of jurisprudence, as far as the Appellant knows, that evidence is changed
or altered by a Plaintiff, the Appellee, in an ongoing live trial. As a note is a necessity as a condition precedent in a
foreclosure action, the presentation of a fraudulent note as evidence renders the trial Court without personal and
subject matter jurisdiction to continue the case.

As the Appellant's reason for filing the instant appeal was to file an action with the Malm Tingsrtten Court in
Sweden, case no. T6996-15, to avoid irreparable harm, applying State v. Curcio, 191 Conn. 27, 31, 463 A.2d 566
(1983), see the Appellant's preliminary issues of appeal. The statute of limitation on a payment for a significant
amount, approximately $99,000 was running out, for which the Appellee could not account. The payment had
originally been sent from Sweden. In this matter, the statute of limitation in Sweden would be ten years, and the
payment had been posted in August of 2005, requiring a filing by August 2015.

The party that could account for the payment, the FDIC as Receiver for Washington Mutual Bank, "WaMu" the
original lender, and the law firm of Hunt-Leibert were not parties before the Connecticut trial court. The Appellant
had previously motioned the trial Court to add WaMu to the case which had been denied.
Now, without a proper note herein, the present Plaintiff, the Appellee simply does not have any proof of standing
and capacity before the Connecticut courts, and the matter of the false and fraudulent notes would be better and
more efficiently served by a hearing in the Swedish court. The Appellant therefore asks the court to uphold and
impose a stay until the Appellant's appeal has been resolved, and]or until a ruling by the Swedish Court. The
Appellant presumes that the law firms having appeared on the behalf of the Plaintiff, the Appellee, Halloran &
Sage, and Bendett McHugh, and their client, the Appellee herein, will withdraw their appearance and terminate the
trial court case. The Appellant expects them to do so by end of business on Monday October 12, 2015.

The Appellant cannot imagine that the present parties have caused the false documents to be filed and adduced as
evidence in two different courts, the Connecticut trial court, and the Bankruptcy Court in White Plains, and that these
false documents must have originated with parties that the FDIC as Received for Washington Mutual must or would be
aware of. The Appellant brought up the matter briefly before Judge Drain in the White Plains Bankruptcy court on
October 8, 2015, but got the impression that the Bankrupcty court, also not having the proper parties before it,
would have it resolved elsewhere or in a different manner. The FDIC is under the jurisdiction of the Federal courts,
and the Connecticut courts would not be the appropriate forum. The Swedish court on the other hand has full
jurisdiction over the FDIC, because of specific treaties applicable herein. Wherefore, the Appellant asks the
Appellate court to impose an order of stay on the trial court herein, to take effect immediately.

HISTORY

On December 2, 2008, the Plaintiff, the Appellee, filed the original complaint in the trial court the Connecticut
Superior Court in Stamford, Connecticut, assigned docket number FST-CV08-5009720-S JPMORGAN CHASE BANK
v. HOLT,RICHARD Et Al. The trial court has set trial dates by the request of the Appellee-Plaintiff JP Morgan Chase
Bank NA despite a pending motion to dismiss precluding any other motions or events, the next trial date set for
October 14, 2015.

The Appellant subsequently filed his notice of appeal to the State of Connecticut Supreme Court on July 8, 2015,
which was then moved to the State of Connecticut Appellate Court , where time to file the preliminary statement of

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issues and other documents was notified to be due on August 13, 2015. The case in the Appellate court is in the
briefing stage, with a date to file brief yet to be determined.

To illustrate the evidence of a possible double pledge fraud scheme, one need only examine the differing
notes and endorsement chains on each note in two separate legal proceedings involving the same parties as
illustrated directly below:

First Page Holt/WAMU Original Note Filed in CT Action (Exhibit A)

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Last Page WAMU Original Note Filed in CT Action with Cynthia Riley Endorsement (Exhibit A)

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First Page Holt/WAMU Original Note Filed in Fed BK Action (Exhibit B)

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Last Page Holt/WAMU Original Note Filed in Fed BK Action (Exhibit B)

A comparison of the alleged original notes, filed in both cases, reflects the following. In the alleged original
note filed in the Bankruptcy Court (BK) as shown directly above, there are two (2) endorsements contained
on the last page of the note as Exhibit B that contradict the one (1) endorsement by a different entity and
individual contained on the alleged original note filed in the Connecticut state trial court. Also, a target is
contained on the upper right side of the first page in the BK note (Exhibit B) that is reflective of Chases policy
to place an ink-stamp blue snail symbol on the upper right of first pages of original notes to reflect such
documents are original wet-ink notes. In addition to the differing endorsement chains to the two (2) notes, the
Connecticut state trial court (Exhibit A) note does not contain the target or blue snail symbol on the upper right
hand corner of the first page of the note reflective of Chases policy of placing such a symbol to indicate
original notes. Thus, two very different notes with differing marks and endorsement chains were claimed as
original notes in two separate and distinct legal proceedings.

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ORANGE CO. WRIGHT/ZUNI MORTGAGE LOAN TRUST 2006-OA1 CASE


Each case I involve myself in, I become even more amazed at the brazen fraud and cover-ups the servicers
and their foreclosure counsel go to in order to conceal their fraud. In this matter, the borrower spent over $2
million on a property whose loan was not only designed to fail, but in which he would never have clear title to
his property, but would not know who he could settle his claims with. The following is a timeline of facts and
the evidence and records in the

March 29, 2006 - - Wright Loan Closing


1. Wright purchased a homestead property in Orange County, Florida located at 5182 Isleworth Country Club
Drive, Windermere, FL 34786 on or about March 29, 2006.

2. On or about March 29, 2006, Wright executed with his signature in ink, an original wet-ink promissory note
(Note) to an alleged lender defined and named in his Note as YOUR-BEST-RATE FINANCIAL, L.L.C., a
Georgia LLC.

3. Wright also executed a Mortgage that represented that Mortgage Electronic Registration Systems, Inc.
(MERS) was to be the mortgagee of record to be recorded in the Orange County public property
recording records. The mortgage contained the MERS MIN: 1001698-0000033293

4. Wright was provided a first generation direct and clear copy of the note he executed along with two, not
one, unattached and prefilled documents labeled Allonges that were alleged to later be attached to the
original note and copies of the original allonges, as presented to him at closing.

5. One alleged allonge was an alleged allonge in blank (Original alleged Allonge 1) and the other alleged
allonge was a specific endorsement to Countrywide Bank, N.A. (Original alleged Allonge 2).

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ORIGINAL NOTE FIRST PAGE

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ORIGINAL NOTE LAST PAGE

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ORIGINAL ALLEGED ALLONGE 1

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ORIGINAL ALLEGED ALLONGE 2

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6. Both the note and the mortgage contained a number of provisions and terms as outlined and detailed herein.

7. The first paragraph of Wrights note, as emphasized directly below contained the following language:

I understand that the LENDER may transfer this note. The Lender or anyone who takes this note by transfer
AND who is entitled to receive payment under this note is called the NOTE HOLDER.

8. The ninth paragraph of Wrights note, as emphasized directly below contained the following language:

Any person who is a guarantor, surety OR endorser of this Note is also obligated to do these things. Any
person who takes over these obligations, including the obligations of a guarantor, surety or endorser of
this Note, is also obligated to keep all of the promises made in this Note.

JUNE 26, 2006 - - ZUNI TRUST CREATION & TRUSTEE APPOINTMENT


9. LaSalle Bank N.A. was appointed Trustee and Custodian for the Zuni Mortgage Loan Trust 2006-OA1 on
June 26, 2006 on the creation of the trust via its PSA.

10. According to Securities and Exchange Commission (SEC) records, on June 26, 2006 GREENWICH CAPITAL
ACCEPTANCE, INC., a Delaware corporation, was alleged to act as a Depositor in forming the Zuni
Mortgage Loan Trust 2006-OA1, as a Delaware statutory trust (the Trust) pursuant to a Trust Agreement,
dated as of June 26, 2006 (the Original Trust Agreement). A Certificate of Trust was filed with the
Secretary of State of the State of Delaware on June 26, 2006.

11. A Pooling and Servicing Agreement (PSA) dated June 1, 2006 was alleged to have been executed by and
between GREENWICH CAPITAL ACCEPTANCE, INC., as depositor (the Depositor), THORNBURG
MORTGAGE HOME LOANS, INC., a Delaware corporation, as seller (the Seller), WELLS FARGO BANK,
N.A., a national banking association, as Master Servicer and Securities Administrator, WILMINGTON
TRUST COMPANY, a Delaware banking corporation, as the Delaware Trustee and most importantly to this
letter, LASALLE BANK NATIONAL ASSOCIATION, a national banking association, as the original Trustee of
the Trust and Custodian for the Trust.

12. Greenwich Capital Financial Products, Inc. was formed in November 1990 to issue securities backed by
residential mortgage loans that it purchased from its affiliates, Greenwich Capital Acceptance, Inc. and
Financial Asset Securities Corp. However, these affiliates did not originate any mortgage loans themselves,
but instead purchased mortgage loans from third-party originators.

TRUST AGREEMENT OF ZUNI TRUST - - JUNE 26, 2006


13. A Trust Agreement was executed as of June 26, 2006, by and among (i) Greenwich Capital Acceptance,
Inc. as the "Depositor, LaSalle Bank National Association, as the ''Trustee" and Wilmington Trust Company,
as the 'Delaware Trustee with the trust being created called the Zuni Mortgage Loan Trust 2006-OA1 and
the sum of $10.00.

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ZUNI TRUST PSA TERMS & PROVISIONS - - JUNE 26, 2006

14. Section 2.01 of the Trust PSA related to the Conveyance of Mortgage Loans stated in part that the:

Depositor, concurrently with the execution and delivery hereof, does hereby transfer, assign, set over and
otherwise convey to the Trustee without recourse for the benefit of the Certificateholders all the right, title
and interest of the Depositor, including any security interest therein for the benefit of the Depositor, in and to
(i) each Mortgage Loan (other than the right to receive any Retained Interest or any Prepayment Penalty
Amounts) identified on the Mortgage Loan Schedule.

15. Section 2.01 of the Trust PSA also states in part that:

The Trustee agrees to execute and deliver to the Depositor on or prior to the Closing Date an
acknowledgment of receipt of the original Mortgage Note (with any exceptions noted), substantially in the
form attached as Exhibit G-1 hereto.

16. Section 2.02 of the Trust PSA related to the trustees Acceptance by the Trustee of all the assets in the
Trust Fund as that term is defined in the Trust PSA. Included in the definition of Trust Fund, the PSA
included the following assets: , : (i) such Mortgage Loans as from time to time are subject to this Agreement,
together with the Mortgage Files relating thereto, and together with all collections thereon and proceeds
thereof (but not including any Prepayment Penalty Amounts), (ii) any REO Property, together with all
collections thereon and proceeds thereof, (iii) the Trustees rights with respect to the Mortgage Loans
under all insurance policies required to be maintained pursuant to this Agreement and any proceeds
thereof, (iv) the Depositors rights under the Mortgage Loan Purchase Agreement (including any security
interest created thereby); (v) the Depositor's security interest in the Additional Collateral, (vi) the
Distribution Account (subject to the last sentence of this definition), any REO Account and such assets
that are deposited therein from time to time and any investments thereof, together with any and all
income, proceeds and payments with respect thereto, (vii) all right, title and interest of the Depositor in
and to each security or pledge agreement in respect of Additional Collateral, (viii) all right, title and
interest of the Seller in and to each of the Servicing Agreements, (ix) the Yield Maintenance Account and
(x) all proceeds of the foregoing.

17. In addition, Section 2.02 called for an Interim Certification (PSA Exhibit G-2) of the loans within 90-days
and a Final Certification (PSA Exhibit G-3)
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18. Section 2.03 of the PSA details the Repurchase or Substitution of Mortgage Loans by the Seller as
evidence reflects has occurred.

LASALLE MERGER AGREEMENT WITH BOA - - April 23, 2007


19. On or about April 23, 2007, an agreement was made to sell LaSalle Bank Corporation to Bank of America.

LASALLE MERGES WITH BANK OF AMERICA - - October 1, 2007


20. Bank of America Corp officially took over LaSalle Bank Corp on October 1, 2007.

BOA BECOMES SUCCESSOR TRUSTEE OF ZUNI TRUST - October 1, 2007


21. LaSalle was succeeded by merger with Bank of America after Bank of Americas acquisition of LaSalle on
October 1, 2007 wherein Bank of America became the successor trustee of the Zuni Mortgage Loan Trust
2006-OA1.

MOODYS REPORTS U.S. BANK TRUSTEE FOR ZUNI - - JANUARY 2, 2009

22. According to Moodys, on January 2, 2009, Bank of America resigned as trustee of the Zuni Mortgage Loan
Trust 2006-OA1, and U.S. Bank was appointed as successor trustee.

GEORGIA ISSUES CEASE & DESIST ON YOUR-BEST-RATE - - MARCH 26, 2009

23. A Cease and Desist Order by the State of Georgias Department of Banking and Finance was issued against
Your-Best-Rate Financial, LLC (license no. 15697) on March 26, 2009.

THORNBURG DECLARES BANKRUPTCY - - APRIL 1, 2009


24. Thornburg Mortgage was a United States real estate investment trust (REIT) that originated, acquired and
managed mortgages, with a specific focus on jumbo and super jumbo adjustable rate mortgages. The
company experienced financial difficulties related to subprime mortgage crisis in 2007 and filed for
bankruptcy on April 1, 2009.

25. Thornburg Mortgage was a United States real estate investment trust (REIT) that originated, acquired and
managed mortgages, with a specific focus on jumbo and super jumbo adjustable rate mortgages. The
company experienced financial difficulties related to subprime mortgage crisis in 2007 and filed for
bankruptcy on April 1, 2009.

CEASE & DESIST ON YOUR-BEST-RATE FINAL - - APRIL 28, 2009


26. The Cease and Desist Order by the State of Georgias Department of Banking and Finance issued against
Your-Best-Rate Financial, LLC (license no. 15697) on March 26, 2009 became final on April 28, 2009.

U.S. BANK FILES POC IN THORNBURG BANKRUPTCY - - JULY 31, 2009


27. On July 31, 2009, U.S. Bank filed Proof of Claim No. 664 against TMHL, asserting potential claims on behalf
of the Trust against TMHL arising from potential documentary defects and breaches of representations and
warranties made by TMHL in the June 2006 Mortgage Loan Purchase Agreement and the PSA with respect to
the mortgage loans related to the Zuni Trust.

ASSIGNMENT OF WRIGHT MORTGAGE #1 - - OCTOBER 27, 2009

28. ASSIGNMENT OF MORTGAGE & NOTE claims that the ASSIGNOR is MORTGAGE ELECTRONIC
REGISTRATION SYSTEMS INCORPORATED AS NOMINEE FOR YOUR-BEST-RATE FINANCIAL LLC to

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ASSIGNEE LASALLE BANK NATIONAL ASSOCIATION, AS TRUSTEE OF THE ZUNI MORTGAGE LOAN
TRUST 2006-OA1. AOM was Prepared by Marshall Watson Law Firm.

WRIGHT FORECLOSURE ACTION FILED - - November 24, 2009


29. On or about November 24, 2009, LASALLE BANK N.A., AS TRUSTEE, NOT BANK OF AMERICA OR U.S.
BANK filed a bare and simple two-page unverified Foreclosure Complaint on behalf of THE ZUNI
MORTGAGE LOAN TRUST 2006-OA1 ( Zuni Trust) wherein:
a. In paragraph 2 Plaintiff alleges that Wright executed and delivered a promissory note and
Purchase Money Mortgage securing same to Mortgage Electronic Registration Systems, Inc. as
nominee for Your-Best-Rate Financial LLC.
i. There is no mention of Countrywide, Thornburg or any other party to the securitization nor
can MERS ever take delivery of a promissory note.
b. Paragraph 2 also claims that the Wright Mortgage (not note) was subsequently assigned to
LASALLE BANK N.A., AS TRUSTEE of THE ZUNI MORTGAGE LOAN TRUST 2006-OA1.
c. Paragraph 2 also states a copy of the note, assignment and mortgage are attached hereto and
made a part hereof.
i. It does not reflect a verified copy nor a true and correct copy of the note.
d. Paragraph 3 only alleges that Plaintiff OWNS the Wright note, not holds the note or have
possession of the note as is standard in foreclosure judicial actions.

30. There was no evidence of how the Zuni Trust came to own the Wright note or have authority to foreclose.

31. Furthermore, there was no mention of any party having authority to enforce the Wright note for any alleged
note holder and no one claimed to own the mortgage in the Foreclosure Complaint as well.

32. On the date of foreclosure on November 24, 2009

a. LaSalle had not been the trustee of the trust for over 2-years;
b. Bank of America that succeeded LaSalle had not been the trustee for 11-months;
c. U.S. Bank was the successor trustee;
d. MERS records indicated that Thornburg, not Plaintiff, Countrywide, or BOA owned the Wright note;
e. Thornburg was in Federal Bankruptcy proceedings;
f. The Plaintiff did not own the mortgage or the note;
g. The Plaintiffs servicer, not the Plaintiff, only had physical possession of a copy of an image of the
note;
h. The note provided was entirely different than the note presented to Wright at closing;
i. Two prior allonges provided were not part of the note;
j. An entirely different allonge was provided;
k. The allonge was unattached.

MERS SYSTEM SHOWS THORNBURG OWNS WRIGHT NOTE - - March 17, 2011
33. On March 17, 2011, a search of the MERS database system was conducted on Wrights MERS MIN number
of 1001698-0000033293-0. MERS record reflects that the MIN is Active and had not been deactivated
and it was for a note that was alleged to have been executed on 3/29/06 the same date the Wright Note
was executed.

34. Of paramount importance to this search result is as of March 17, 2011, MERS, the party that is alleged to
have transferred the Wright Note AND Mortgage shows in its very own internal records that Bank of
America as Servicer was responsible for populating the MERS system and that the Investor (i.e. owner) of
the Wright Note was TMST Home Loans Inc. F/K/A Thornburg Mortgage Home Loan Inc.

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ZUNI ADVERSARY LAWSUIT FILED AGAINST BOA/CW - - APRIL 29, 2011
35. On April 29, 2011, an adversary lawsuit was filed by Joel I. Sher, Chapter 11 Trustee (11 Trustee or
Sher) for TMST, Inc. f/k/a Thornburg Mortgage, Inc. TMST), TMST Home Loans, Inc. f/k/a Thornburg
Mortgage Home Loans, Inc. ( TMHL), TMST Hedging Strategies, Inc. f/k/a Thornburg Mortgage Hedging
Strategies, Inc. and TMST Acquisition Subsidiary, Inc. f/k/a Thornburg Acquisition Subsidiary, Inc., and Zuni
Investors, LLC (Zuni Investors, together with the Trustee, Plaintiffs) for their complaint against Countrywide
Home Loans, Inc. and Bank of America Corporation in the Thornburg Bankruptcy proceeding.

MOTION TO SEAL SETTLEMENT AGREEMENT - - February 13, 2013


36. On February 13, 2013, Joel I. Sher, Chapter 11 Trustee (the Trustee) for (i) TMST, Inc. f/k/a Thornburg
Mortgage, Inc. (TMST), (ii) TMST Acquisition Subsidiary, Inc. f/k/a Thornburg Acquisition Subsidiary, Inc.
(TAS), (iii) TMST Home Loans, Inc. f/k/a Thornburg Mortgage Home Loans, Inc. (TMHL), and (iv) TMST
Hedging Strategies, Inc. f/k/a Thornburg Mortgage Hedging Strategies, Inc. (TMHS) (collectively, the
Debtors), moves pursuant to 11 U.S.C 105(a) and 107(b) and Fed. R. Bankr. P. 9018, for entry of an
order authorizing the Trustee (I) to publicly file a redacted form of a Settlement Agreement (the Settlement
Agreement) by and among the Trustee, Zuni Investors, LLC (Zuni Investors), Och-Ziff Capital Management
Group LLC (Och-Ziff and, together with Zuni Investors, the Zuni Parties), and Countrywide Financial
Corporation, Countrywide Home Loans, Inc. (Countrywide), Bank of America, N.A., and Bank of America
Corporation (Bank of America, and together with Countrywide, the Defendants), and (II) to file under seal
a complete form of Settlement Agreement and exhibits thereto, with respect to the Trustees forthcoming
motion seeking approval of the Settlement Agreement.

37. In paragraphs 9 and 10 of the motion (Exhibit 23), Bank of America stated:

9. Defendants have also specifically requested that the Trustee omit from any document he
publicly files with the Court (i) the specific mortgage loans at issue (set forth as Schedule A
and Schedule B to the Settlement Agreement, collectively the Loan Schedules), (ii) the
amount of consideration that the Defendants will pay to the Zuni Trust under the Settlement
Agreement, and (iii) the reference in 2-3 of the Settlement Agreement to the number of
loans being repurchased or for which a make whole payment will be made. Furthermore,
because certain principal and accrued interest amounts of the mortgage loans being repurchased
by Countrywide may change from month to month, the final approval version of the Settlement
Agreement that the Trustee is submitting for Court approval does not set forth the amount that
Countrywide is paying to the Zuni Trust. But the Parties have determined Countrywides
expected payments under the Settlement Agreement, setting them forth in a separate,
preliminary schedule (the Expected Payments Schedule).

10. In order to assist the Court in its review of the Motion to Approve, the Trustee wishes to
provide the Court with a copy of the Loan Schedules and the Expected Payments Schedule, as
well as a complete copy of the Settlement Agreement. However, in order to comply with the
request of the Defendants as more fully set forth in the Settlement Agreement, the Trustee
seeks the entry of an Order, pursuant to 11 U.S.C. 107(b), permitting him to: (I) publicly
file with the Motion to Approve a redacted version of the Settlement Agreement (omitting
the number of loans being repurchased or for which a make whole payment will be
made and the Loan Schedules and Expected Payments Schedule), and (II) file under seal
the complete form of the Settlement Agreement, the Loan Schedules and the Expected
Payments Schedule.

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FORECLOSURE MOTION TO SUBSTITUTE U.S. BANK - - May 8, 2013
38. On May 8, 2013 it was reported that the ZUNI 2006-OA1 trust received a payment of about US $50
million emanating from loan buy-backs and loss reimbursements for the prior month. The pay-out equated to
around 15% of the bonds outstanding (US$322m), making it one of the larger instances of RMBS loan-level
repurchases according to MBS analysts at Barclays Capital.

39. The Zuni Trusts PSA stated that Thornburg (now bankrupt) was responsible for repurchasing defectively
originated loans. However, half of the loans in the ZUNI transaction were originated by Countrywide and
eventually transferred to Thornburg.

40. This is evidenced by the alleged Countrywide endorsements on the unattached and same allonge.

41. Per the mortgage loan purchase and servicing agreement (MLPSA) between the two, Countrywide was
responsible for repurchasing the mortgage loans from Thornburg that were found to breach reps and
warranties.

42. As previously shown, the Zuni investors and Thornburg's Chapter 11 trustee filed a lawsuit in April 2011
against Bank of America due to its failure to repurchase the faulty loans and a settlement was reached in
February of 2013.

43. Based on loan-level data provided to others and not produced to Wright, it appears that Bank of America
agreed to repurchase certain mortgages (not note and including Wright) with the proceeds paid to the Zuni
bondholders in May of 2013.

WRIGHT NOTIFIED LOAN PAID IN FULL - - JULY 3, 2013


44. On or about July 3, 2013, Wright receives a notice from QBE Insurance Co. that the insurance that Bank of
America N.A had taken out on Wrights property was cancelled as of 6/28/13 due to the fact that the
Loan was Paid in Full!

FORECLOSURE MOTION TO SUBSTITUTE U.S. BANK - - JULY 26, 2013


45. Soon after the settlement, and more than four and a half years after U.S. Bank is alleged to have become
the successor trustee to the Zuni Trust, they file a motion to substitute party in the Wright foreclosure action as
trustee, when in fact, they were the trustee when the foreclosure lawsuit was initiated and Bank of America
filed a fraudulent action claiming LaSalle was trustee and the first fraudulent assignment of the Wright
mortgage.

BOA AOM TO U.S. BANK - - JULY 28, 2013


46. Days after the motion to substitute U.S. Bank as successor trustee, four and a half years after U.S. Bank is
alleged to have become the successor trustee to the Zuni Trust, Choice Legal f/k/a The Law Offices of
Marshall Watson prepares and records a new assignment of mortgage assigning ONLY THE MORTGAGE,
NOT THE NOTE from from Bank of America as successor trustee by merger to LaSalle Bank for the Zuni Trust
whose address is c/o BAC Home Loan Servicings address in Plano, TX.

YOUR-BEST-RATE FINANCIAL/MERS AOM TO U.S. BANK - - JULY 29, 2013


47. One day after the BOA assignment of only the mortgage to U.S. Bank as successor trustee for the Zuni Trust,
the Wright Notes originator, almost four years after the filing of the foreclosure lawsuit; seven years after
the loans origination; four years after it was forced to cease and desist from conducting business, MERS as
nominee for a non-member and non-existent company via Nationstar and its vendor NTC create and record
yet another assignment of mortgage from MERS as nominee for Your-Best-Rate Financial LLC to U.S. Bank as
trustee for the Zuni Trust, seven years after its alleged securitization and months after the settlement.

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JUNK CASE SC & FEDERAL BK CASE


David Dayens award-winning book, Chain of Title, describes my relationship with my friend and colleague,
Daniel (Dan) Junk. Dan was intimately involved in working with me in exposing foreclosure, servicing and
securitization fraud over the last decade. Dan, a former associate at Simpson Thatcher and an e-discovery
expert, worked with me in creating a report to present to his sister, Jennifer Brunner. Jennifer, a current Ohio
Appeals Court judge was the former Secretary of State for Ohio and responsible for the oversight of notaries
in her state.

Jennifer and her office conducted an investigation into our reports on robo-signing and fraudulent foreclosure
actions to validate our research, investigation, and findings into robo-signing notarization abuses. Based on
her offices review of our reports and findings, she made a criminal referral to the U.S. Attorney in Ohio that
led to first, the national foreclosure moratorium by all major banks and servicers followed by the national
foreclosure investigation and eventual settlement with U.S. Attorney General and forty-nine state Attorneys
General.

As illustrated below, Dans journey into the predatory securitization, servicing and foreclosure abyss began
when he learned his original mortgage company, American Home Mortgage, imploded and filed for federal
bankruptcy protection. Upon his investigation, Dan realized that there were many misrepresentations made
with his mortgage loan and within the legally prescribed timeframe, Dan rescinded the refinance mortgage on
his South Carolina property. This set off a decade of legal actions as described below, that to date, still has
not even seen the discovery stage for the frauds and abuses CitiGroup is concealing. Below, is a factual
timeline related to Dans case.

November - 2006
The Junks refinanced a $845k note on a $1.2m appraisal dated Sept. 05 with a $1.5m appraisal and
$1.2m note listing American Home Mortgage (AHM) as the Lender and a mortgage listing MERS as
nominee for American Home Mortgage a Corporation organized and existing under the laws of the State
of New York with the MIN representing the MERS member by its identification number and this loan number
within the MERS tracking system listed on the face of the mortgage as 100024200014902262. American
Home Mortgage Servicing, Inc. (n/k/a Homeward Residential) (AHMS) is the initial servicer.

The MERS member represented by the MIN on the Junks mortgage was American Home Mortgage Holdings,
Inc. a Delaware corporation (AHMHI) making MERS the nominee for AHMHI a Delaware corporation not
AHM a New York Corporation. AHMHI was not listed or identified in the transaction other than in the MERS
MIN on the mortgage.

The HUD-1 Statement reflected American Home Mortgage, Inc. as the lender when Junk could not identify a
corporate entity named American Home Mortgage Inc. The Lenders Title Policy issued at closing was in the
name of American Home Mortgage Acceptance, Inc. a Maryland Corporation (AHMAI) not AHM an alleged
New York Corporation listed as the Lender.

A copy of the wire transfer funding the refinanced loan that was received in the escrow account of Junks
closing attorney in the amount of $1.19m was from American Home Mortgage Investment Corp. a Maryland
corporation (AHMIC) not AHM the listed Lender on the note and mortgage.

February - 2006
Servicing the Junks mortgage was allegedly transferred from AHMS to CitiMortgage, Inc. (CMI) after the
Junks make first their payment to AHMS.

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February - 2006
AHMHI, AHMS, AHMIC, AHMAI filed for bankruptcy protection under Chapter 11. Notable, there is no entity
named AHM, a New York Corporation or an entity named "American Home Mortgage, Inc." listed in the AHMI
bankruptcy filing.

February - 2009
The AHMHI bankruptcy Order of Liquidation the AHMHI conglomerate was not able to reorganize and was
ordered liquidated.

March - 2009
In his research, Dan Junk realized the HUD-1 entity named as their lender "American Home Mortgage, Inc."
wasnt listed in the liquidation order or bankruptcy and withheld the March 09 payment and sent a RESPA
QWR to CMI, AHM and MERS asking for identification of owner of the Junks note and debt who was CMI
sending the Junks payments to now that the Lender named on the note was out of business and that the
lender named on the HUD-1 didnt exist - in other words they realized their true lender was never disclosed to
them at the refinance closing table. CMI refused to answer the Junks QWR.

The Junks then rescinded the loan within 3 years for failure to disclose the true Lender at closing under Reg.
Z. Also, on March 2009, the Junks sent a notice of claim and rescission purporting to rescind the November
2006 loan transaction and the Note and the Mortgage. Ex. 20 to J.E. 46; Tr. at 159. The Junks received no
response to their notice. Tr. at 159-60[])" Junk v. CitiMortgage, Inc. (In re Junk), 512 B.R. 584, 592 (S.D. Ohio
2014)

April - 2009
The Junks record a satisfaction of mortgage on behalf of AHM based on the QWR terms they believed was
consented to by AHM and the Junks send CMI a copy of recorded satisfaction of mortgage and asked that
CMI close their account and return any unpaid escrow monies. Instead, CMI sent the Junks letters warning of
debt acceleration and foreclosure.

May - 2009
CMI sent the Junks letters warning of debt acceleration and foreclosure.

June - 2009
CMI sent the Junks letters warning of debt acceleration and foreclosure. CMI also sends the Junks a letter of
thank you for being a customer and transfers servicing only to Bayview Loan Servicing. LLC (BV) effective
July 1, 2009.

July - 2009
BV sends the Junks a welcome letter and says it wants them to bring their account up to date and BV sends
Debt Verification Letter under FDCPA. Junks send BV a letter responding to Debt verification Letter and
dispute debt under FDCPA.

August - 2009
BV answers the Junks FDCPA letter with a loan history showing an investor sale and investor purchase both
occurring on 08/03/09. BV through South Carolina counsel #1 files a lis pendens against the Junks property
captioned BV as servicer for CMI with the lis pendens stating that MERS as nominee for AHM assigned the
note and mortgage to AHM prior to 8/25/09 and that assignment was yet to be recorded.

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September - 2009
Junks file a Quiet Title action against AHM, MERS and John Does 1-5,000 in Beaufort County, South Carolina.
American Home Mortgage Corp. a New York corporation (AHMC) and a Co-Petitioner in the AHMHI
bankruptcy not AHM answers by filing a Suggestion of Bankruptcy. Junks dismiss AHM without prejudice
even though AHMC is the entity that filed the Suggestion of Bankruptcy.

MERS alleges to assign the Junks note and mortgage as nominee for bankrupt AHM a 2nd time in a row to
Bayview.

October - 2009
MERS files its answer to the Junks Quiet Title complaint stating it should be dismissed because it assigned the
note and mortgage to Bayview on September 25th after it had already been served in the Quiet Title action
regardless the doctrine of lis pendens.

MERS records the 9/25/09 assignment to Bayview through its SC #1 foreclosure counsel, Riley Pope & Laney.
Riley Pope & Laney file a second Lis Pendens this time with Bayview as the Plaintiff not as servicer for
CitiMortgage any longer as in the first Lis Pendens that was filed on 8/25/09.

Riley Pope & Laney files the foreclosure action rather than appear and defend the assignment from MERS in
the Junks Quiet Title action naming Bayview as owner and holder of note243 with the note attached to
complaint specifically indorsed to CitiMortgage. Complaint was verified by affidavit under oath on
personal knowledge by Riley Pope & Laney attorney Heidi Carey, Esq. that Bayview owned and held the
note. The version of the Junk promissory note attached to the Bayview complaint contained a specific and
undated endorsement stamp to CitiMortgage placed upon the prior blank alleged endorsement unto an
admittedly forged endorsement signature by Danille Sterling.

243 See paragraph 3 of complaint.


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Despite the obvious issues that any first year law student could identify, attorney Heidi B. Carey not only signs
the pleading, but signs a fraudulent affidavit in support of her fraudulent and false pleading as shown below
wherein she swears under penalties of perjury that:
PERSONALLY appeared before me the undersigned, who, being duly sworn, says that he is the attorney of and
makes this Affidavit upon behalf of the said Plaintiff; that he has read the foregoing Complaint and that the
allegations therein contained are true of his own knowledge, except those matters therein contained on information and
belief, and as to those, he believes them to be true; deponent further states that the reason why this verification is
not made by the plaintiff is that the action is bounded upon written instruments for the payment of money only
and such instruments are in the possession of deponent, which said instruments, together with an examination of
records on file in the Office of the Clerk of Court and/or R.M.C for Beaufort County, from the source of deponent's
information and the grounds of his belief; and also based upon information furnished to your deponent by the
plaintiff.

Heidi B. Carey is a female, not a male and the affidavit is written in the masculine tense. Obviously, if she had
examined the documents, including the alleged note attached to Complaint, she would have recognized that
Bayview was not the owner and holder of the Junk note since there was no blank endorsement and no
endorsement unto Bayview on her note Exhibit A as shown below:

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As shown herein, the alleged officer of American Home Mortgage, Danille Sterling, issued an affidavit
disavowing that she ever executed the signature on this endorsement and that the mark or signature on the
endorsement was made by her or authorized by her.

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November - 2009
Junks file a motion to dismiss foreclosure complaint under SC rules: 12(b)(6), 13(a), and 12(b)(8). Junks filed a
motion for judgment on the pleadings in Quiet Title action. Junks filed a motion for MERS to post bond for lost
mortgage (from original loan that was refinance and is subject BV foreclosure action). MERS filed a motion to
dismiss Junks Quiet Title action.

March - 2010
One of the troubling issues I have had for decades with fraudulent foreclosures is not only the routine
perjurious robo-signing and robo-testimony of servicer witnesses, but that of their lawyers. Lawyers

Citi states under oath that Bayview sold them the Junks note and mortgage in March 2010. Bayview
allegedly returned the servicing of the Refi MOM and purported Refi Note back to CitiMortgage with an
effective date of March 9, 2010. Bayview purportedly assigns the Refi Note and the Refi MOM to
CitiMortgage. Bayview and CitiMortgage file a Rule 25(c) SCRCP joint motion to substitute CitiMortgage for
Bayview in the foreclosure action as a result of a merger or sale during the pendency of the Quiet Title action
and the Foreclosure Action.

The Joint Motion also sought to substitute Nelson Mullins Riley & Scarborough (CitiMortgage counsel) as
counsel for Bayview in the Foreclosure action and MERS in the Quiet Title action. The Joint Motion contained
the Jennifer Oakes 1 Affidavit in support, stating under oath and the penalty of perjury on personal
knowledge, that Defendant CitiMortgage purchased Debtors alleged Refi Note from Defendant Bayview on
March 9, 2010, and that Defendant Bayview indorsed the Junks Refi Note to Defendant CitiMortgage on or
about March 9, 2010.

On March 25, 2010, Jennifer Oaks, a CitiMortgage employee files an Affidavit (Oakes Affidavit #1) in
Support of Substitution of Plaintiff on behalf of CitiMortgage as shown below. In Oakes Affidavit #1, Oakes
swears under penalties of perjury that:

On or about March 9, 2010, CitiMortgage acquired the Promissory Note ("Note") and Mortgage
that are the subject of this action from Bayview Loan Servicing, LLC ("Bayview"). Mortgage
Electronic Registration Systems, Inc. ("MERS") is the mortgagee under the Mortgage as nominee for
CitiMortgage and, previously, as nominee for Bayview. The original Note and Mortgage are in
CitiMortgage's possession, and the Note has been indorsed to CitiMortgage by Bayview.

Thus, unequivocally, CitiMortgage is claiming in Oakes Affidavit #1 that: 1) on or about March 25, 2010,
CitiMortgage acquired the Junk promissory note from Bayview and that the Junks note was indorsed to
CitiMortgage by Bayview. Yet, as seen below, there is no endorsement from Bayview to CitiMortgage, but a
prior blank endorsement was stamped with CitiMortgage by an unknown entity, at an unknown date and time,
with unknown authority.

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December - 2010
On December 6. 2010, prior to CitiMortgage being made a party to the foreclosure action, Defendant
Bayviews then counsel, Nelson Mullins, which was also CitiMortgages counsel at that time, submitted the
"Supplemental" Oakes 2 Affidavit, sworn to under the penalty of perjury on personal knowledge that the
Oakes 1 Affidavit was wrong. Defendant Bayview had never been a holder or been the owner of Debtors
Refi Note; that CitiMortgage did not purchase Debtors Refi Note from Bayview; and, that Bayview did not
indorse the Junks Refi Note to CitiMortgage - rather, allegedly AHM and Danielle Sterling indorsed it to
CitiMortgage when CitiMortgage now allegedly purchased it from AHM.

Specifically, the Oakes 2 Affidavit states on personal knowledge that:


6) I am informed and believe that the original Note is in the possession of CitiMortgage' s attorneys, Nelson Mullins
Riley & Scarborough, LLP;

7) CitiMortgage purchased the Note from American Home Mortgage and took possession of the original indorsecl
Note on or before January 22, 2007;

8) CitiMortgage's possession of the original Note on January 22, 2007, is evidenced by the fact that the Note was
imaged into CitiMortgage's electronic records system on that date. The Note that was imaged into Citi Mortgage's
records on January 22, 2007, bears an indorsement on page 5 of the Note stating "PAY TO THE ORDER OF
CitiMortgage, Inc. WITHOUT RECOURSE BY: AMERICAN HOME MORTGAGE" signed by Danille Sterling, Asst.
Secretary. This is the only indoresement on the Note. A copy of the imaged Note retrieved by me from
CitiMortgage's electronic records system is attached hereto as Exhibit A;

9) CitiMortgage also assumed servicing rights with respect to this loan effective February 1, 2007. CitiMortgage's
records indicate that on February 7, 2007, CitiMortgage informed Mr. and Mrs. Junk in writing that the servicing of
their loan would be handled by CitiMortgage;

10) The servicing rights for this loan were later transferred by CitiMortgage to Bayview Loan Servicing, LLC
("Bayview"). On June 15, 2009, CitiMortgage informed Mr. and Mrs. Junk in writing that, effective July I, 2009, their
Joan would be serviced by Bayview. A copy of this letter is attached hereto as Exhibit B;

11) In March 2010, the servicing rights for this loan were transferred back to CitiMortgage from Bayview. On March
23, 2010, CitiMortgage notified Mr. and Mrs. Junk in writing thut the servicing rights for this loan had been
transferred from Bayview back to CitiMortgage, effective March 9, 20 l 0. A copy of this letter is attached hereto as
Exhibit C;

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12) Paragraph 2 of my prior Affidavit, dated March 25, 2010 states that CitiMortgage acquired the Note from
Bayview and that the Note had been indorsed to CitiMortgage by Bayview. Upon further investigation, as described
above, I have determined that the Note was indorsed to CitiMortgage by American Horne Mortgage and the Note
has been owned by CitiMortgage since January 2007. The only transfer between CitiMortgage and Bayview that
occurred on or about March 9, 2010, was a transfer of the servicing rights for this loan from Bayview to
CitiMortgage.

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April - 2011
The SC Court orders dismissal of the Junks Quiet title w/out prejudice and denied the Junks other motions and
directed the Junks to bring their quiet title claim in their answer to the Foreclosure action. The Junks appeal the
order.

June - 2011
The Junks filed their Answer, Counterclaims and Third-party Complaint against 20+ entities for slander of title
and civil conspiracy, among other causes of action.

August - 2011
The Junks move to Ohio for Dan to take a job in Ohio.

January - 2012
The Junks settle their third party complaint against Danielle Sterling and Danielle Sterling provides an
affidavit that the indorsements on the CitiMortgage notes - both the indorsement in blank and the specific
indorsement to CitiMortgage were forgeries and not her signature and that the Oakes 1 and 2 Affidavits are
false.

The Junks had sued Sterling since her name appeared in the endorsement and was believed to be a forgery
when compared to other exemplars of her signature Dan and I reviewed. When she was served, Sterling
admitted that was not her signature on the indorsement contained on the Junks note. She provided the
following affidavit wherein in part she said:
16. I have reviewed the signatures on both stamps attached to these Exhibits, and they are NOT my signature.

17. I can say without a doubt that I NEVER signed these documents.

18. The signatures that purport to be mine are NOT MINE.

19. As a Collateral Reviewer for American Home Mortgage, I did have the authority to endorse documents for
American Home Mortgage as I was instructed to endorse the last page of a Note using my stamp and
signature from time to time.

20. However, I did not sign the Notes attached hereto and did NOT endorse these Notes in any way.

21. I have reviewed the Affidavit of Jennifer Oaks filed December 6,2010, in the Office of the Clerk of Court
for Beaufort County in Case No. 2009-CP-07-05088, which has the same case number as this case, but with
a different Plaintiff.

22. I have no knowledge of CitiMortgage's purchase of any Note from American Home Mortgage.

23. I did not sign the Note as described in Paragraph 8 of Ms. Oakes' Affidavit.

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Sterling Affidavit Page 1

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Sterling Affidavit Page 2

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Sterling Affidavit Page 3

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April - 2012
The SC Master in Equity denies Junk' Third Party Complaint under Rule 12(b)(6) with prejudice. SC Master in
Equity denies Junk's Counterclaims against CitiMortgage under 12(b)(6) stating the statute of limitations had
run to claim rescission under USC 1635(a) and that the Junks didn't send notice of rescission timely.

Junks discover that AHM worked together with all or many of the other named Defendants to transfer and/or
assign and/or sell the Original Note - AFTER IT HAD BEEN PAID OFF - to a mortgage backed securitization
trust issued with a January 1, 2007, effective date, registered with the United States Securities and Exchange
Commission (SEC) under Registration No. 333-124032-10 HSI Asset Loan Obligation Trust 2007-AR1
(HALO AR1) identified by Committee on Uniform Securities Identification Procedures (CUSIP) 40431LAR96
and/or US40431LAR96.

On April 24, 2012, Steven D. Sass as Plan trustee for the AHM Liquidating Trust executed an affidavit
detailing what American Home Mortgages records stated in relationship to the Junk loan wherein he swore to
the following:

6) AHM Corp.'s records show that on November 3, 2006, an InterestFirst Adjustable Rate Note
("Note") in the amount of $1,200,000;00 was given by Daniel L. Junk and Christine H. Junk, as
borrowers, to American Home Mortgage, as lender. A copy of this Note is attached to this Affidavit as
Exhibit A.

7) On or about December 22, 2006, AHM Corp. transferred this Note to CitiMortgage, Inc. ("
CitiMortgage") for the purpose of giving CitiMortgage the right to enforce the Note. As part of this
transaction, AHM Corp. was paid an agreed upon dollar amount by CitiMortgage.

8) This Note was transferred prior to AHM Corp. filing Bankruptcy, and this loan is not among the
assets listed in the schedules filed with the Bankruptcy Court.

9) AHM Corp. does not contest the indorsement of this Note to CitiMortgage as the holder of the Note
who took for value (with said value being received and retained by AHM Corp.) on or about
December 22, 2006.

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May - 2012
Junk's Appeal the denial of the Third Party complaint with prejudice and the denial of their Counterclaims and
rescission claim and defense with prejudice.

June - 2013
Junks file Chapter 11 individual bankruptcy, listing the debt for the refinance transaction as unsecured and
undocumented based on the wire transfer from AHMIC and also list the $845k original loan that had been
paid off with Deutsche Bank as the creditor since they never got their first original note back and had
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documentation that DB was the trustee for the note when they paid it off, yet they found it was issued in the
HSBC securitizations two months after it had been paid off.

October - 2013

CitiMortgage files Proof of Claim (POC) as creditor, not servicer on behalf of creditor, with different note
than the note filed in the South Carolina action and an assignment from MERS to Bayview of the note and
mortgage no indicia that CitiMortgage has any rights in the note or mortgage assignment. CitiMortgage
amends its POC as to amounts only reducing claim by $100k.

The POC filed by CitiMortgage is a copy of a reduced copy of an unknown and undated generation of a
Junk promissory note with a blank endorsement as shown below on the first and last page. You can tell a
copy of an image when a copy or image is 1) substantially smaller and reduced from a letterhead or legal
size paper size; 2) contains border lines on the sides or top or bottom of a page; 3) may contain shading or
smudges or visual larger puncture marks from staples; 4) may be off-centered from borders; and 5) the
clarity of the reduced image may be slightly to highly degraded.

The following is a copy of the alleged Junk note filed in a Federal Bankruptcy proceeding as a Proof of
Claim (POC) on October 4, 2013.

JUNK BK 10/4/13 POC NOTE FIRST PAGE

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JUNK BK 10/4/13 POC NOTE LAST PAGE

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November - 2013

The Junks as Debtor in Possession (DIP) file an objection to the CitiMortgage claim by way of an adversary
proceeding to avoid the mortgage and counterclaims and include 20+ defendant entities in the adversary
complaint.

January - 2014

CitiMortgage substitutes bankruptcy counsel Graydon Head & Ritchey for Lerner Sampson and J. Michael
Debbeler, Esq. the new lawyer is a former Lerner Sampson partner. Lerner Sampson is a known foreclosure
mill law firm in Ohio that had historically filed false and fraudulent foreclosure pleading in Ohio. J. Michael
Debbeler amends claim himself for CitiMortgage a second time now including the note indorsed to
CitiMortgage and the assignment of the note and mortgage from Bayview to CitiMortgage.

CUT INS.

February - 2014

CitiMortgage files Motion for Relief from Stay to continue appeals in SC and foreclosure action in SC.
CitiMortgage files Motion to Dismiss Bankruptcy as a bad faith filing.

May - 2014

Hearing on BK Motion to Lift Stay and send back to South Carolina CitiMortgage files the record from South
Carolina as its evidence.

July - 2014

BK order granting Relief from Stay to finish foreclosure litigation as Owner of note and mortgage staying
the adversary proceeding until the South Carolina action is final and ordering CitiMortgage to seek further relief
from the bankruptcy court to sell the property if CitiMortgage is successful in obtaining a foreclosure judgment in
South Carolina.

The BK order denied CitiMortgage's motion to lift the stay for lack of equity in the property stating In re Junk,
512 BR 584, 605 Bankr. S.D. Ohio (2014) (It appears that the Junks will lack equity in the Oldfield property
only if the Mortgage is unenforceable. Because lack of equity is a predicate to granting relief from stay under
362(d)(2), if the Court were to grant CitiMortgage relief from stay under that subsection, the Court effectively
would be adjudicating the issue of the enforceability of the Note and the Mortgage, an issue that the remainder
of the Court's analysis demonstrates should be determined by the South Carolina state courts. Therefore,
CitiMortgage is not entitled to relief from stay under 362(d)(2) at this time.).

August 2014

CitiMortgage replies to the Junks 12 CFR 1024 Request for Information and admits that Citibank NA became
the owner of the note in April 2009 and that CitiMortgage has always been just a servicer of the note the
entire 5 past years of litigation- making all its prior 5 years of litigation against the Junks claiming
CitiMortgage was the owner of their debt evidenced by the note a complete fraud on the courts and a fraud
on the Junks.

Junks appeal Order granting CitiMortgage lift of stay - CitiMortgage does not appeal its denied relief
claiming the Junks lacked equity in the property. Junk's bring motion seeking relief from the lift stay order for
fraud on the court based on the August 28, 2014 CitiMortgage letter admitting it had lied in SC and that the
court should reconsider its lift stay motion as a result; the bankruptcy court denied the motion.

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On August 8, 2014, CitiMortgages counsel sends the following letter claiming that CitiMortgage, Inc. is both
the owner and holder of the Junks note.

Then, a few weeks later, on August 28, 2014, CitiMortgages counsel sends the following letter claiming that
xxxxx, Inc. is both the owner and holder of the Junks note. And

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October 2014

Junk's Ch 11 counsel withdraws; bankruptcy judge holds status conference on CitiMortgage motion to dismiss
bankruptcy and issues Order to Show Cause for conversion from Ch 11 to Ch 7 or to have a Trustee
appointed or to be dismissed with a January hearing date.

January 2015

Junk's request an extension of the hearing to retain new counsel and the bankruptcy court denies the request
after Junk's hireed new counsel the week of the hearing. At the hearing the bankruptcy court denies the Junk's
counsel's appearance saying it wasn't allowed the way they did it; make the Junks proceed pro se; sequester
Mrs. Junk during Mr. Junk's testimony despite being counsel and a party; and converted the Junks to Ch 7
from Ch 11 on the same day the Supreme Court unanimously issued the Jesinoski opinion on rescission.

Myron Terlecky appointed Ch 7 Trustee. The Junk's appeal the order converting to Chapter 7 and prior
appeal of lift stay order is consolidated with appeal of Ch 7 conversion..

August 2015

US District Court Judge denies consolidated Appeals of order to lift stay order and Ch 7 conversion - says it
must be decided by South Carolina courts Does not address Junks arguments on rescission under Jesinoski.

September 2015

Junk's Appeal District Court order to 6th Cir.; Junks file a motion to stay bankruptcy proceedings citing
Jesinoski and void mortgage since the bankruptcy court found that ([I]n March 2009, the Junks sent a notice
of claim and rescission purporting to rescind the November 2006 loan transaction and the Note and the
Mortgage. Ex. 20 to J.E. 46; Tr. at 159. The Junks received no response to that notice. Tr. at 159-60[])" Junk
v. CitiMortgage, Inc. (In re Junk), 512 B.R. 584, 592 (S.D. Ohio 2014)

November 2015

6th Circuit denies Junks' motion to stay bankruptcy proceedings pending appeal and completely ignores the
Junks rescission argument and Jesinoski.

May 2016

6th Cir. Ct. Appeals affirms U.S. District Courts order and again completely ignores the rescission argument
but states that under the constitution it cannot review the affirmation of the bankruptcy judges order
abstaining on the adversary proceeding and the claims process until the State Courts of South Carolina issue a
final, non-appealable order as to whether the note and mortgage are valid and enforceable.

June 2016

6th Cir. Denies Junks' motion to stay mandate.

July 2016

U.S. Supreme Court denies Petition to Stay Mandate based on Jesinoski and 6th Cir. Denies Junks' petition for
rehearing.

September 2016

Ch 7 Myron Terlecky files compromise motion to sell CitiMortgage all of the Junks claims in South Carolina
litigation and every other claim they have that arises from their 2006 refinance transaction for $60k stating
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that based on CitiMortgage's mortgage the Junks lacked equity in the property without ever appearing in the
SC litigation and despite the 6th Cir. mandate that requires a final non-appealable order from the state of
South Carolina since these were issues of first impression for that state's law.

October 2016

Junks file a Writ Of Prohibition in the 6th Cir. Stating that an Article 1 bankruptcy judge cannot approve the
Chapter 7 Trustee's conclusion that CitiMortgage has a valid mortgage and that the Junks lacked equity in the
property until Mr. Terlecky gets a final non-appealable order from South Carolina and because Mr. Terlecky
cannot decide on his own that the Junks lacked equity in the property when the mandate says that is a South
Carolina state court issue and the fact that CitiMortgage never appealed its denial of its motion for relief for
lack of equity so it cannot now get that relief from the Ch 7 Trustee through the backdoor. Ch 7 Trustee Myron
Terleck files motion for injunction against the Junks from violating the compromise settlement.

6th Cir. Denies Writ of Prohibition stating the Junks still have not exhausted all judicial review because they
can still appeal any approval of the Compromise Motion.

December 2016

Debtors (Junks) offer $65,000 and 75% of proceeds of litigation or settlement if they can buy back claims.
Junks retain Kathleen Cully, Esq. as expert witness on sale of mortgages between financial institutions who
issues an opinion.

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RED FLAGS FOR DOUBLE SALE/PLEDGE NOTE & LOAN FRAUD


As shown throughout this report, double sale/pledge note and loan fraud is rampant and one of the dirty
secrets of the mortgage banking industry. There are many dirty secrets the mortgage industry does not want
borrowers, investors, shareholders, regulators and courts to discover. The identification of any of the following
double sale/pledge mortgage fraud red flags warrants further due diligence, investigation and discovery:

Red Flags for Double-Sale/Pledge Scheme Include, But Are Not Limited to:

Color Laser Copies Made Of Note;


Lost Note Claimed Or Affidavit Referenced Or Found In Servicing, Delivery, Or Custody
Records;
There Are Unexplainable Multiple Loan Numbers Identified In Servicing, Custody, Sales
And Delivery Records;
There Are Requests To Different Document Custodians For The File Or Note;
The Words Or Terms Dummy, Remediate, Remediation, Title Cure, D&D, Document
Defect, Or Document Deficiency Appear In Servicing, Custody, Or Delivery System
Records;
Someone Other Than The Borrower Is Making Payments On The Loan Including Servicing
Advance Facilities;
The Borrower Receives Late Notices Or Tax Invoices On More Than One Loan;
Original Note Paid Off In Refinance Is Not Returned;
The Borrower Notices More Than One Loan On His Credit Report;
The Lender Fails To Provide The Note To The Document Custodian As Required Per PSA;
Incomplete Or Unsigned Loan Application Contained In File;
Incomplete Or Illegible Appraisal;
Discrepancies Between Underwriting And Closing Instructions;
Request For Repurchase Identified;
Differing Trustee Listed As Holder In Servicing System Than Trustee Named In PSA;
Outstanding Trailing Documents (E.G., Executed Note, Deed, Truth-In-Lending, Settlement
Statement, Etc.);
Missing Or Illegible Insured Closing Letter In The Name Of The Originator From The Title
Company;
Recent And Numerous Changes In The Wiring Instructions;
Incorrectly Named Insured And Loss Payee On The Hazard Insurance Policy;
Missing Mortgage Insurance Or Guaranty, Certificate Of Eligibility;
Missing Purchase Commitment From Investor - Investor Lock;
Mortgage Payments Are Made By An Entity Other Than The Borrower;
Servicing Records Reflect Borrowers Name Changed When No Such Change Occurred;
Mailing Address Is Not The Borrowers Address;
Two Mortgages Recorded On The Same Property;
Mortgage Is Not Recorded In First Lien Position.
The Lender Is Experiencing Financial Distress;
MERS Records Identify Different Investors;
Two Notes May Be Identical Except For Signatures (Or One May Be A Color Copy)
Authentic Looking Copies Made Of The Original Note;

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Notes, Images And Copies Of The Same Executed Note With Differing Endorsement Chains
And Allonges;
Removal And Replacement Of Allonges;
Endorsements Placed On Unattached Pieces Of Paper Labeled An Allonge;
Endorsement Appears For First Time On Note After Company Has Gone Bankrupt;
One Note Copy Shows A Specific Endorsement While Another Note Copy Shows A Blank
Endorsement;
Servicers Refuse To Produce All Custody Tracking Data For Notes;
Differing Barcodes On Notes;
Servicer Or Custodian Claims Constructive Possession In Pleadings, Testimony, Or
Argument;

In Relationship To Notes That Are Part Of Securitization, The Following Are Red Flags For Fraud:

Exception Reports Reflect Original Note Not Received Within 90 Days Of Closing Date;
Exception Reports Reflect LNA, Missing Original Note, Missing Endorsement;
Borrowers Note Not On Certification Report;
Borrowers Original Not Endorsed;
There Are Differing Versions Of A Promissory Note Produced At Different Times;
There Is A Blank Endorsement On The Promissory Note;
There Is Not A Complete Chain Of Intervening Endorsements Contained On The
Promissory Note From Originator To Depositor To Blank;
There Is No Evidence Of Delivery Of The Original Note To The Depositor;
Servicing, Custodian And Trust Records Do Not Reflect The Depositor In Their
Ownership/Investor Maintenance Data And Records;
There Are Differing Note Tracking Barcodes On Promissory Notes Produced;
Imaged Copies Of Notes Are Used As Exhibits Instead Of First Generation Copies Of An
Original;
A Certified And/Or Conformed Image Or Copy Of The Note Made At Closing Is Used
As An Exhibit Or Evidence;
There Is An Assignment Of Note And/Or Mortgage (AOM) From The Originator Directly
To The RMBS Trust;
An Alleged Allonge Was Created When There Was Sufficient Room On The Note For An
Endorsement;
A Loose Allonge Was Contained In Collateral File;
A Blank AOM Contained In Collateral File;
A Notation To Create An Allonge Is Found In Servicing, Custody,
AOM To RMBS Trust Is Not From The Named Depositor In PSA;
AOM Is Created Immediately Before Foreclosure;
Tracking Data Related Only To Collateral Files & Not Individual Notes Are Produced;
Different Copies And Images Of Note With Differing Allonges/Endorsements Are
Contained In Imaging Systems;
Stacking Order, Shipping And Delivery Forms Reference A Separate Allonge;
Original Note Is Claimed Missing, Lost, Or Destroyed For Any Period Of Time More Than
A Month;
AOM Is Prior Blank AOM Notarized Years Earlier And Then Filled In Before Foreclosure;
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A Blank AOM Was Created Or Placed In Collateral File;


Servicer And Document Custodian Refuse To Produce:
o Certification And Exception Reports
o Each Release Of Note/File Form
o Document Tracking & Custody Data
Servicing, Custody, Or Collateral Records Identify A Known Document Remediation Firm;
Servicing Agreements And Powers Of Attorney Authorize Fixing Known Document
Defects And Deficiencies In Conveyance Documents Including Endorsements;

WHAT YOU MUST IDENTIFY, SEEK & GET PRODUCED


As shown throughout this report, double sale/pledge note and loan fraud is rampant and one of the dirty
secrets of the mortgage banking industry. There are many dirty secrets the mortgage industry does not want
borrowers, investors, shareholders, regulators and courts to discover. The identification of any of the previous
double sale/pledge mortgage fraud red flags warrants further due diligence, investigation and discovery.

Paragraph one of the uniform Fannie Mae/Freddie Mac promissory note, used by the vast majority of
lenders, specifically states I understand that the Lender may transfer this Note. The Lender or anyone who
takes this Note by transfer and who is entitled to receive payments under this Note is called the Note Holder.

When evidence or facts of the prior red flags are presented, it is the borrower, their lawyers and experts
duty to conduct the proper due diligence necessary to identify each 1) note holder as defined in paragraph
one of the uniform note from application to current date; 2) transfer of the note and the document, contract,
agreement or assignment evidencing each contract; 3) entity that came into physical and/or constructive
possession of the borrowers original promissory note from date of loan closing; 4) wire instruction and wire
made for purchase of the borrowers note and loan; 5) warehouse lending and financing agreement related
to the borrowers note and loan; 6) UCC financing statement used for the borrowers note and loan; 7) each
sale, pledge, or borrowing related to the borrowers note and loan; 8) copy and image made of the
borrowers note contained in the servicers, owners, mortgagees, and custodians DMS, custody and imaging
systems; 9) each document placed in and removed from the borrowers collateral and custodial file and
changes to any document in the file; 10) document or title cure remediation order, instruction, and document;
11) monthly paper and electronic mortgage loan schedule (MLS) related to the borrower each PSA, sale,
purchase, pledge, insurance, custodial, repurchase and servicing agreement; 12) historical entry into the
investor and holder fields, screens, windows of each servicer since origination; 13) wire receipt and release
for the loan from warehouse lenders; 14) authorizing corporate resolution for facsimile stamps for
endorsement placed on notes; 15) index of documents and images contained in each custodian, servicer and
owners DMS and other imaging systems; 16) signature list and card for authorized signatures for execution of
endorsements and assignments; 17) data entry in each servicer, law firm, seller, and custodians document
custody and tracking system of record; 18) notation in each log/notation record from servicers, custodian and
law firm; 19) policy and procedure manual for document custody, delivery and shipment; 20) air bill tracking
document, bill and number for each shipment of collateral file/note; 21) paper and electronic foreclosure
referral package transmitted or delivered to foreclosure attorneys; 22) accounting entries reflecting
acceleration of loan; 23) electronic and paper release for collateral file/note; 24) stacking order for
borrowers loan; 25) communication, document, release and wire to document custodian for warehouse lender;
and communication and report to mortgage insurers.

The above list is not all-inclusive, but a good start for any lawyer, regulator or court.

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CONCLUSION
A review of evidence, case histories and many issues outlined in this report should conclusively prove to any
lawyer or any judge that 1) when different versions of a promissory note appear in a case at different points
in time; or 2) the named plaintiff or assignee does not match the evidence presented, then such facts are red
flags for a) a possible double sale/pledge fraudulent mortgage scheme; or b) unreliable, untrustworthy, and
incompetent systems of record, processes and procedures that mandate additional due diligence, discovery
and analysis.

Highly sophisticated document management, collateral, custody, tracking, servicing, and accounting systems of
record, as evidenced herein and especially in the Colonial/TB&W case history, track every minute transaction,
despite the complexity, due to CFPB, Sarbanes-Oxley and other regulations and rules. There is no room for
such massive errors and error rates in cases, pleadings, procedures etc. that exceed a point or two. Banking
and mortgage banking should be precise like a science. If not, this draws into questions the legitimacy of the
borrowers mortgage transaction and what, if anything, the servicer and other institutions are concealing.

There is a plethora of inexpensively and easily retrievable and producible electronic data, records and
documents that will answer many of your and the Courts questions such as

Who is really pushing the foreclosure action and getting the benefits of the money? What is the effect of
servicers using servicing advance receivables trusts to finance advances of principal and interest payments to
investors? What is the effect of Fannie and Freddies guarantee? What about lender placed mortgage
insurance? How do these affect the actual debt obligation? How much of the amounts being claimed are
actually going to the foreclosing plaintiff or other undisclosed parties? Has the actual foreclosing trust and
their certificate holders been made whole?

How were any make whole payments made to any note holder accounted for towards the borrowers
mortgage debt obligation? Are the various payments outside the note that come from the mortgage, secured
or unsecured, collectible or non-collectible? Was there ever a true sale? What are the chain of note holders?
What contracts and mortgage loan schedules transferred ownership of the note? How many versions of an
original note are there? How many copies and scans have been made? Where is the note tracking barcode
data for each note with a barcode? Where are the document custody records? Was the note accelerated?
Was the note ever delivered to the named lender on the note? Did a warehouse lender foreclose on the
collateral?

Last, but certainly not least, was double sale or pledge fraud involved?

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NEXT STEPS
Retain a competent and knowledgeable consulting/testifying expert to assist you in:

Developing Appropriate And Targeted:


o Pleadings, Motions, Answers And Memorandums Of Law;
o Admissions, Interrogatories, Requests For Production And Inspection;
o Corporate Rep Deposition Notices & Corresponding Duces Tecums;
o Deposition and Trial Interrogation Scripts;
o E-Discovery Protocols And Requests.

Reviewing And Analyzing:


o Document Custody And Servicing Records And Data;
o Deposition, Affidavits, & Trial Testimony;
o Sales, Securitization, And Delivery Records And Data;
o Sales, Servicing, Sub-Servicing, Purchase, Custodial, and Other Agreements &
Contracts;
o Document Custody, Sales, Servicing, & Delivery Policies & Procedures.

Providing Reports, Testimony & Affidavits Containing:


o Pertinent Facts, Timelines & Evidence;
o Relevant Opinions & Analyses;
o Interpretation of Data & Information Produced.

Assisting You at Trial & Depositions

CONTACT
Any law firm or lawyer desiring to retain our services can reach us via email at mortgagefrauds@aol.com or
foreclosurefraudexpert@gmail.com or can message me via instant messenger on Facebook or in a LinkedIn
message under Nye Lavalle.

2017 Nye Lavalle ALL RIGHTS RESERVED

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