Appendix Vol I (NXPL)

/ ( Attomey for Plaintiff

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4

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SUPERIOR COURT O F THE STATE OF CACIFORNIA

Nancy Dnffy MeCarron, CBN 164780 Law Ofice of Nancy Due McCarron 950 Roble Lane Santa Barbara, CA 93 103 805-450-0450 805-965-3492 [email protected]

Real %ate Broker Lie. 853086 Notary Public Lic 1791117 Certified Arbitrator for BBB 30329

11 FOR THE COUNTY OF SANTA BARBARA (AWACAPA DIVISION)

DAVID W. GATES, Trustee for the DAVID W. GATES ) Case No: 1384851.:. )

. ,. Trust dated August 5,1996 Plaintiff, ) VERIFIED COMPLAINT

M. ) 1

for

) DECLARATORY & INJUNCTIVE RELIEF MGC Mortgage, Inc., Texas Corporation 1

1 (WRONGFUL FORECLOSURE)

LPP Mortgage Ltd., LP, Texas Corporation ) SLANDER OF TITLE & CONSPIRACY TO SLANDER

Loan Acquisition Corporation, Texas Corporation ) FRAUD (misrepresentation and conceaIment) 1 ) QUASI-CONTRACT (reslitution)

Cal-Westan Reconveyance Corporation, Texas Corporation ) )

ELDER ABUSE Welfare & Institutions Code 5 15610.10

DB Structured Products, Inc., Delaware Corporation ) BREACH OF FIDUCIARY DUTY (constructive &ud)

Deutachc Bank National Trust Company, as trustee ) 1 QUIET TITLE (declaratory relief)

) CONTRACT RESCISSION '0 1 1 W-ton Mutual B* a national banking association ! COMMON LAW ACCOUNTING

I 1 ) Warnu AssetAc'Wtanw C o r p O m SPV vehicle bank ) Request for Attomey Fees W&l. $15657; CCP 81021.5

22

23

24

25

- 1 - ......................................................................................... VERIFIED COMF'LAINT

\ ~ * 1, ,,

) Civil Code Q1717 Washington Mutual Mortgage Securities Corporation, bank )

) DEMAND FOR JURY TRIAL AS ALLOWED BY LAY JP Morgan Chase Bank., National Association, a bank )

) Filed nab Motion for Temwrawlniunetiou against DOES 1 through 50, inclusive, Defendmk ) foredosure set for 2-62011 and request for hearing on

prelimiuary injunction pending outcnme of litigation

2 6

21

28

Plaintiff respectfUlIy asks the court to study EXEUBIT C before reading this ccxnplaint as securitization of

a mortgage into a "Pool of Loans" to be m a r k W s o l d as (RMBS) and

Collateralized Debt Oblirrations (CW's) on Wall Street is very d i i c u l t to imderstand without broker bin@

Plaintiff's loan was securitized on 9-29-05. Backwound alleations are imperative for the court's understanding

INTRODUCTION

1. Plaintiff brings this action against defendants and Does 1-50 lor ~ i n g to sell his Propcrty at a bustee's

sale set for February 6,2012 which win deprive Plaintiff of his property without a lawful claim. Plaintiff

seeks to clear his title and recover damages for the malicious and intentional acts of fraud against plaintiff.

Defendant LPP Mortgage Ltd., (LPP) does not have standing to foreclose because LPP is not the owner of

plaintiffs Note, LPP is not a holder of the Note, and LPP is not a beneficiar~i under the Note. LPP does not

claim, nor has it ever claimed to be the owner or holder ofthe Note, nor can LPP claim to be a beneficiary.

2. 1. Even if LPP could prove that it is a loan

servicer, LPP still could not foreclose on plaintiffs property without authorization from the Lender under

Paragraph 22 of plaintiffs Dced of Trust.(see E d . A-25) 1,PP has no standing to foreclose and had no

power to substitute a trustee. Paragraph 24 of the deed of trust recites that only the lender may substitute.

CWRC has no power to foreclose as its agency power is derived and thus limited by it's principal's power.

3. Furthermore defendant CWRC failed to comply with the provisions of CCP $2924 governing foreclosure

Plaintiff's loan was originated on September 25,2005. No foreclosure could be prosecuted without fust

contacti~~g the borrower to try to work out a loan modification. CCP 82923.5 No defendant ever complied.

Secondly, the trustee was required to wait until the substitution of trustee was recorded before recording a

notice of default. The trustee failed to follow the strict requirements of the code; accordingly the court must

resbain this illegal foreclosure. Defendants failed to identify the beneficiap as mandated by 15 USC $ 1 6 4 1 ~

The notice recites the trustee is "either the original trustee, the duly appointed substituted hustee, or acting a

agent for the trustee or beneficiary under a deed ofhrst." This nebulous recitation woehlly fails to compl>r.

Since trustee failed to comply with basic requirements under CCP $2924 et seq. foreclosure is void ub iizirio.

I . Notwithstanding the procedural deficiencies of the trustee and substantive deficiencies in that LPP has no

standing to foreclose because it has no legal or beneficial interest in the Note obligation, the foreclosure is

void ah initin as it is based on fraudulently manufactured instruments which were likely forged. (see Exh. M)

The questioned instruments must be examined for validity and should not be automatically accepted as valid.

NOTE: Some defendants werelare doing business illegally without reg~stering at the Secretary of State's office.

Plaintiff will object to participation of my defendant until first curing their deficiency with the SOS.

The state of California needs the funds. These bankstem have evaded registering to avoid paying our state.

VERIFIED COMPLAIN?

1. a

HISTORICAL ALLEGATIONS

'ARTIES:

5. PlaintiEDAVID W. GATES, (hereinafter GATES) is a resident of Santa Barbara and brings this action

as Trustee for DAVID W. GATES TRUST dated August 5,1996 which owns real property at 1200 Palominc

Road, Santa Barbara, CA, the subject of this action. (see Exh. A-Valid Chain of Title). l'he foreclosure is

illegal and void ab injtio because it is based upon fraudulent and possibly forged instruments recordcd again$

the properly which purports to assign the trust deed, violating Penal Code S115,132-135. (Exh R 1 to B 4)

6 . The assignmcnt was recorded by a corporation (LPP) having no legal or beneficial interest in the propea

Only a real party in interest may prosecute an action. GATES executed a note and a trust deed (Exh.A-5,All

to Washington Mutual Bank, FN on 9-25-2005. The trust deed was void ab initio because Washington

Mutual Bank FN was defunct by 4-25-2005 and thus had no power to transferanythu~g on 9-25-05.

7. GATES is a 69 year-old widower who has been disabled since age 45. GATES wife of 20 years died of

anorexia on 11-19-08 and his home of 30 years burned down in the Jesusita fue in Santa Barbara on 5-6-09.

The stress of losing his wife and then his home was too much to bear causing heart problems ncccssitating

heart surgery. Friends and volunteers helped GATES to rcbuild in the past 3 years which is 80% fmished.

LPP (the pretend lendcr) tricd to convert GATES'S fue insurance proceeds which forms the basis for the frau

claim and the financial elder abuse claim. At all relevant times GATES wash disabled and a senior citizen

as defmed under C M ~ C. $ 1 761. GATES is afforded protection fium financial abuse. W&I Code $15610.27

9. Defendant MGC Morteane. Inc. (MGC) is a Texas corporation doing business in California, who since

July 1,2009 has held itself out to be the "loan service? acting on behalf of thepretend lender. (Exh. F-3)

. Defendant LPP Morteaee. Inc. (LLP) is a Texas corporation wbo at all relevant times since August 22,

2008 has falsely represented itself to be the lender and assignee of the recorded trust dccd. (Exh. B-1)

10. Defendant Loan Acauisition Cowration (LAC) is a Tcxas corporation who since August 22,2008 has

Ialsely representcd itsclf as a party to a purported "Master Loan Sale and Interim Servicing Agreement"

("the purchase agreement") together with "DB Structured Products, Inc." (Exh. B-3)

I I. Defendant Cal-Western Reconvevance Corporation (CWRC) is a Texas corporation doing business in

California as a foreclosure mill working for v&ous lenders (real lenders and pretend lenders). CWRC is

\~igorously pursuing a fraudulent foreclosure despite warnings and demands to cease and desist from same.

VERIFIED COMPLAINT

I . 3

12. CWRC noticed a sale for 1200 Palomino on February 6,2012 despite notice of the fraud. (Exh. B-13)

* CWRC is so cavalier in its fraudclosure camvaim that it often imores restraining, orders issued bv courts.

13. Defendant Deutsche Bank National Tmst Comvany (DB) wadis the current trustee for a large "Pool of

Loans" (RMBS's) which includes GATES' loan after it was conveyed into the trust by the loan's originator.

14. Defendant Washingtonutual Bank (WMB) is a national banking association which, through affiliates,

subsidiaries, agents, securities dealers and brokers, packaged thousands of residential mortgage loans from

2001 to 2008 into Poob ofZoans converted into securities and marketedlsold to investors on Wall Street.

This securitization of residential loans through "Pooling and SeMcing Agreements" is explained at Exh. C.

15. Defendant WaMu Asset Acceptance Comoration (WAAC) was a "special purpose vehicle" (SPV) create

by WMB and authorized by the Tax Reform Act of 1986 to act as a Real Estate Mortgage Investment Coudu

(REMIC) to issue tax-freepassthroughs in securitizing a mortgage into cerh~crrres sold to investors as bonds

16. Defendant WaMu Mutual Mor t ew Securities Comoration (WMMSC) is an affiliate of WMB who, on

information and belief, was involved in transmuting GATES' loan into a residential morteaee backed securit

(RMBS) and who worked on his loan package during the so-called undenvriting of GATES' loan.

17. Defendant JP Mor~an Chase Bank. National Associatio~~ (CHASE) is the bank who acquired the assets

and liabilities of Wamu Bank on September 25, 2008 for 1.9 billion dollars. The FDIC-appointed receiver

worked the deal with CHASE after the Ofice of Thrift Supervision seized it. Wamu fde Ch. 11 bankruptcy.

IOES:

18. Plaintiff is ignorant of the names of those Defendants sued as Does 1-50, and for that reason has sued

them by said fictitious names. PlaintifFu~ill seek leave of the court to amend this complaint to add the name!

when they have been ascertained. Plaintiff believes the DOES are liable for their actslomissio~~s as alleged o

are in some way liable to GATES for damages, or claim a beneficial interest, title or estate in his property.

LGENCY:

19. In doing the acts alleged, defendants and each of them acted as either agents, servants, andlor employees

of their co-defendants, acting within the course and scope of said agency, service andlor employment, and

with the knowledge, wnsent, and approval of their w-defendants; each defendant's conduct was ratifled by

his or her co-defendants, and each defendant acted in a conspiracy to defraud consumers including GATES.

VERTVIED COMPLAINT

114

GENERAL BACKGROUND ALLEGATIONS

20. After the Great Depression of 1934, as part of the New Deal our government enactcd thc National

Housing Act of 1934 to revive the economy and encourage Americans to work toward home ownership.

The government continued this pattern by creating Fannie Mae, Freddie Mac, Ginnie May, FHA, etc.

Congress passed the Tax Reform Act of 1986 in which it created Real Estate Mortaaee Investment Conduits

(REMIC's) to encourage loan originations through a process called securitization. Prior to 1986 a bank lent ;

customer funds (from deposits) and held the note in aporNlio until paid. Upon default the bank foreclosed.

21. The process of securitization is more complicated. Eghibit C is a flow- chart summarizing how it work

with a few pages describing its history, its process, its participants and the dangers of losing its tau-free status

Securilization involvcs the crcation and sale of securities (RMBS certificates) backed by an underlying pool

of thousands of collateralized mortgages held in a trust created for such purpose. The fmancial institution

sponsoring the securitization originates or acquires mortgages; it then assigns the notes (as "seller") which ar

transferred into the REMIC trust, often through a special purpose vehicle (SPV) typically called the deposifoi

The trust then issues different classes of securities and sells them to investors in the form of cerhpcales.

Each certificate entitles the investor to periodic disbursements from the cash flow available in the REMIC

trust from monthly payments made 011 the uuderlying mortgages, which are allocated to that class of security

in accordance with governing rnles of the trust. The trustee manages trust assets and ensures distribution of

trust funds to investors in accordance with a governing document called "Pooling andsenicing AgreemenZ'

(P&S) signed by the parties. The P&S is a tax-free statutory trust and IRS codes must he strictly followed to

avoid losing its tax-free status. REMIC's are governed very strictly by Intend Revenue Code $860(d).

!2. The Chart at Exhibit D shows who the participants were in the GATES loan and includes what GATES

believes is the P&S governing his loan. ' W W . ' '

Although defendants havc refused to provide GATES'S P&S he helieves this is the one as it closed 2 days

after his escrow closed. Each loan, upon closing, was transferred into the next AR series. Once the securitie!

offering closed a depositor had only 90 days to add a new loan to the loan pool to comply with IRS mandates

Since GATES' escrow closed on September 29,2005 and AR-13 offering closed October 1,2005---the last

day that any mortgage could be transferred into the AR-13 trust was December 28,2005. By that date Wamx

no longer owned the loan because it necessarily would have to be conveyed inlo the trust by that dotc.

V E R I F I E D COMPLAINT

/ I S

23. GATES' note is dated September 20,2005. (Exh. A-5). The copy shows fold marks because it was

received in the mail after GATES requested it. GATES lost many files when his home burned down in the

Jesusita fire on 5-6-2009. GATES signed ihe note and tmst deed while hc was in Idaho on vacation on or

about September 23,2005 and was not given a copy of any of the documents. (Exh A1-34). GATES was 1101

given any explanation or counseling. During the loan processing a WaMu employee called GATES to warn

him not to answer the phone to avoid ail underwriter's call to verify his income. No one ever explained that

the recited interest rate (5.5%) was a teaser rate on the $1,142,302 principal balance.

24. Most of the funds were used to pay off existing WaMu loans. No one explained that his $7,014.73 per

month payment would rise significantly when the teaser rate expired and the adjustable rate kicked in later.

Because he had tenants who paid rent GATES was able to make the payments faithfully for several years.

25. On September 23,2005 GATES believed that be was borrowing money from WaMu as a loan. NO one

involved in the loan process ever disclosed or explained that his loan would be securitized; i.e. "sliced and

diced" and "sold and resold" and "&aded and re-traded" until lost in a pool of thousands of unide~~t'ified loans

26. From 2000 to 2008 WaMu's CEO Keny Winger took home $100,000,000.00 while he led WaMu into

bankruptcy. WaMn in 2006 estimated its internal profit margin from subprime loans could be more than10

times for a govenunent-backed loan product and more than 7 times for a fixed rate product.

27. From the CEO down to loan off~cers WaMu's agenda was to close as many subprime loans as possible tc

surpass Countrywide in market share. Killinger ordered the highest commissions to be paid for the riskiest

loans; i.e. loans with tearer rates switchiig to high interest adjustable rates later. Everyone jumped on the

bandwagon; i.e, bankers, loan brokers, stockbrokers, and every person who could grab a piece of the action t

extort hefty commissions on loans destined for foreclosure. Players counted on a continuing rise in the real

estate frenzy or that borrowers would sell before rates rose. It is commonly known the bubble burst in 2008.

In September 2008 (3 years after GATES' loan) WaMu collapsed. COUNTRYWIDE also collapsed.

There were record foreclosures nationwide. The Office of Thrift Supervision seized both failed banks and pl

them into receivership with the FDIC. The FDIC's receiver immediately worked a deal with JF' MORGAN

CHASE BANK to acquire the assets and liabilities of the failed WMu bank. On September 25,2008 this dee

was consummated by way of a "Purchasc and Assumption Agreement" (P&A) between the FDIC and

JPMORGAN CHASE. (see Exh 1-1 -excerpts)

28. WaMu filed for Chapter 11 bankruptcy which prompted thousands of creditors to file claims, resulting ir

billions in claims from other banks, consumers, insurers, etc. and even from successor CHASE. (Exh. 16)

WaMu then sued the FDIC for indemnifkation for billions in claims arising dnring bankruptcy. (Exh. 1-12)

Many of these claims are currently under appeal (Exh. 1-17) including WaMu's appeal against the FDIC.

29. Defendant was the Trustee in the P&S WaMu AR-13 governing the pool olloans including GATES.

DB was the lead Issuer offcring Residential Mortwa~e Backed Securities (RMBS) on Wall Street to investors

while offering high commission to brokers to push RMBSs. DB made billions selling RMBSs to investors.

30. When DB realized most of the RMBSs it sold were losing money because borrowers were defaulting or

the homes had already foreclosed, DB created a subsidiaty to hedge bets against the very products DB was

peddling to unsuspecting investors. (explained at Exh.G) Meanwhile DB put in claims to the government

agencies who insured the trust against losses, including AIG. All mortgages closed with ALTA insurance

policies to protect against borrower defaults. DB submitted claims and mllected on these insurance policies.

DB filed a claim for $10 billion dollars in the bankruptcy court against WaMu who was 111 Chapter 11,

arguing that DB's claim should be given priority as an "administrative expense." (Exh. G-5)

31. DB, one of the most profitable banks in Lhe world created ncw ways to profit fiom the market collapse.

DB submined the same claim for $I 0 billion dollars to FDIC. (Exh H-4). After the court sustained FDIC's

demurrer to its complaint, havuig read FDIC's arguments that CHASE was liable for WaMu's liabilities as

successor, DB filed an amended complaint enjoining CHASE . DB prayed for $10 billion in cash payments

for alleged WaMu breaches of aduty to repurchase defaulting loans. The basis of DB's claim is that in its

joint venture with WaMu it failed to use proper underwriting procedures in issuing risky loans to borrowers.

DB argued if FDIC does not owe them $10 billion then CHASE owes it as successor to the bankrupt WaMu.

The theory upon which DB based its claim is that WaMu failed to repurchase defaulting loans pursuant to the

terms of the governing PBS's in which WaMu promised to repurchase non-performing loans. (Exh. G-6)

32. DB did not stop at seeking $10 billion from FHA, FDIC, and the WaMu Chapter 11 bankruptcy assets.

On information and belief, DB paid off Edward Liddy, the government-installed CEO of AIG (govenunent

insurer of the RMBS's) to push through a $180 billion government bail out funded by the same American

taxpayers who lost their homes in fraudulent foreclosures as a result of the DBlWaMu fraudulent loans, as

well as the same American taxpayerlinvestors who were duped into buying DB's worthless RMBS's.

V Z R I F I E 3 COMPLAINT

117

33. DB profited even further by creating Yefault credit swaps" shorts against the products it peddled.

As soon as AIG received the $180 billion from taxpayers, AIG issued $165,000,000 in bonuses to AIG

executives and sent $11.8 billion to Deutsche Bank in Germany. DB fmaUy got its $10

billion in cash. Despite this windfall fiom our taxpayers as a reward for its fiand DB continues to pursue the

same $10 billion claims as described above against FDIC, FHA, the Bankruptcy Court, insurers and others.

34. The WaMu defendants (WIvlB, WAAC, WMSC, WMMSC) and successor JP Morgan Chase (CHASE)

are engaged in prolific litigation against each other, against Deutsch Bank, the FDIC and bank~~ptcy court.

The litigations are aU related to the collapse of WaMu who is jointly liable for the securitization debacle.

35. While these predators employed lawyers to pursue claims in federal courts 50 state courts, they devised

yet another scheme to bilk even more money by stealing borrowers' homes UI wongful foreclosures.

In breach of DB's trustee duty to preserve trust assets for certijkate holders---DB "assigned the trust deeds.

The P&S ddmes a beneficial bolder as "a Person holding a beneficial interest in any Book-En* Certificate

as or through a DTC Participant or an indirect DTC Participant or a Person holding a beneficial interest in

any Definitive Certif~cate." (see Exh. D-7 top)

36. DB blatantly violated its expressed duties assumed by the governing P&S (see Exh. D-9 middle) becaust

those same trust deeds it was selling (assigning) secured the underlying debts on the loans in the pool.

Section 2.02 expressly prohibited the trustee fiom alienating any trust asset and to "consider the interest of its

t r u s ~ . " (see Exh D-9) The P&S does not aUow the trustee to "possess or assign the

assets" of the trust. (D-9). DB violated an express duty not to defeat the REMIC trust's tax-&ee status.

(see D-12) The section recited, 'Weither the trustee nor the Tax Matters Person shall knowingly and

intentionally take any action that would cause the termination of the REMIC status." (D-9)

37. The governing P&S expressly set forth the duties and liabilities of the imstee to maintain trust assets and

prohibited the splitting of Trust Deeds from Notes because if the Trust Deed is assigned to another it renders

the NOTE unsecured, thereby making the cerh$cates worthless and defeating the trust's IRS tax-free status.

38. WaMdChase breached their fiduciary duty to theu borrowers by facilitating this additional fiaud.

CHASE and DB initiated a campaign to illegally sell arsignment.~ of trust &e& securing loans in the pools.

This enabled greedy banksters to buy these illegal and unenforceable assignments and to illegally confiscate

thousands of American homes through illegal foreclosures based upon assignments which were void ab initio

V E R I F I E O COMPLAINT

j :g

39. DB andlor CHASE, in conjunction with other conspirators, began to manufacture thousands of fraudulen

"assigizments of tnrst deeds" with "cut and paste" techniques whenever it was necessary to back-date them.

All of these illegal acts exposed the creators of these fraudulent bust deed assignments to cximinal liability

under Penal Codes, Sections 115, 132,133,134 and 135. (Exh. K-13). DBICHASE hired a conspiring enti6

Cal-Western Recouvevance Com~anv to foreclose on homes based on the fraudulent trust deed assignments.

These foreclosures were fraudulent because the pretend 1ender.s had no beneficial interest in these notes.

The only pelsous who had a beneficial interest in the notes were certificate holders who funded the loans.

Splitting off GATES' hust deed which secured the note violated the express terms of the P&S. (Exh. D-9)

40. DB, as trustee, had the power to order foreclosure on any non-performing loan in the respective loan pool

DB HAD NO POWERTO SELL OR ASSIGN TRUST DEEDS TO PRETEND LENDERS. But this is

exactly what DBNaMu did. DBNaMu sold trust deeds topretend lenders who had no interest in the loans.

These assignments were void a6 initia, not only because they were fraudulently manufactures by persons wh~

lacked authority to execute them, but because the JIB bustee was not authorized to sell anv assets in the trust.

DB, WaMu and CHASE manufactured, back-dated, and recorded a fraudulent conveyance on June 12,2009.

CONGRESSIONAL INVESTIGATION OF DEUTSCHE BANKlWAMU FRAUD

41. Fraudulent foreclosures became so prolific across America that homeowners began to revolt against the

predators by hiring lawyers to defend foreclosures, demanding a Congressional Investigation and making

complaints to state and federal prosecutors. Prosecutors began to investigate DB~WaMulChase (see Exh. E).

42. On April 13,201 1 CONGRESS released a 632 page report entitled "Wall Street and the Financial Crises'

Exh E2 - E8 is 6-pages outlining Deutsche Bank fraud.

43. The United States Attorney filed a civil against Deutscl~e May 3,201 1 allegu~g DB

repeatedly lied to its agents to he included in a government program to select mortgages to be insured by the

government, who paid out billions in losses caused by Deutsche Bank and its affiiiate MortgageIt (Exh E-9)

44. Then Fannie Mae, et a1 filed a wmplau~t for mortgage fraud against Deutsche Bank. @xh. J)

45. On Friday, January 11,201 1 United States Attorney Eric Holder held a press conference to announce tht

launching of a morteage fraud task force including state and federal prosecutors who will join in a campaign

to seek justice against Wall Street predators and bank conspirators who caused a collapse in USA's economy,

Eric Holder discussed the "robosigning scandal" and promised Americans he would prosecute the predators.

VERIFIED COMPLAINT

1 L9

WEY THE RECORDED ASSIGNMENT OF TRUST DEED IS UNENFORCEABLE

AND EVEN I F IT WERE ENFORCEABLE WHYTHE FORECLOSURE IS ILLEGAL

46. CCP $2924 requires that a non=iudicial foreclosure sale shall not take place unless it is done on behalf oi

the benepciaiy of the note secured by the trust deed. Therefore, only a benejciary has standing to foreclose.

The Notice of Default fails to identify any benejciary. (Exh. B-5) It merely lists "LPP Mortgage L T D as

the contact to find out how much must be paid to avoid foreclosure. At no time has LPP Mortgage LTD eve.

held any beneficial interest in the NOTE, nor could LPP have acquired any beneficial interest in the NOTE

because the NOTE was assigned to DB Structured Products Inc. on September 25,2005. @xh. A-10)

47. There is a stamp under GATES signature which reads, "Pay to the order of DB Structured Products, Inc

Without Recourse Washington Mutual Bank, FA By Cynthia Riley Vice President." DB was the trustee on

the P&S agreement which securitized GATES note. (Exh. D2). The offering on the pool of loans including

GATES' loan closed on October 1,2005. (Exh. D2). Once the note was assigned to DB on 9-25-05 the note

became an asset of the trust. Pursuant to the goveining documents of the P&S and IRS code, all loans had to

be added 90 days after closing.

48. Therefore, GATES loan became a trust asset as no later than December 29,2005 (90 days post closing)

Accordinglv. there could be no further assiwment to anyone. Once in the trust, the trustee could not spli

the trust deed from the NOTE. The trustee was required to hold the original note and trust deed. (Exh. D7)

Additionally the trustee must bold originals of all assignments on the note as part of the mortgage file @-7).

The P&S defmes the "beneficial holder" as a person holding a beneficial interest in a certificate. (0-7)

The trust deed is a voluntary e~icumbrance executed by the property owner. The power of sale is voluntaril:

given by the homeowner; thus the trustee may only foreclosure as set forth in the power granted by the trust0

49. The GATES note states in paragraph 7 (Exh. A-7) "If1 am in default, the Note Holder may send me a

witten notice telling me that if 1 do not pay the overdue amount by a certain date, the Note Holder may

require me to pay immediately the full amount of Principal that has not been paid and all the interest that I

owe on that amount." The Note Holder is defmed in the P&S as any person holding a certificate.

LPP is not a note holder. Only the trustee @B) could foreclose on behalf of the certificate holders.

50. Exhibit K contains and appendix of relevant UCC codes governing negotiable instruments for court revie7


VERIFIED COMPLAINT

i \

5 1. A loan smicer is not aNote Holder or a lender and lacks the power or authority to foreclose a note.

Even if a semicer could foreclose on the properly it would not be LLP because it is not the loan servicer.

52. The GATES trust deed, at paragraph 24 authorizes only a lender to substitute a trustee. (Exh. A-26)

The Substitution of Trustee recorded against GATES' property on 11-1 5-1 1 is executed by LPP. (Exh. B 10)

LPP is not, and never has been a lender. A lender is the person(s) who funded GATES loan; i.e. certificate

holders who purchased the RMBS's in the WAMUDeutsche AR-13 offering. LPP is not one of them.

LPP is nothing more than apretend lender.

53. Andrew Beal (BEAL) from Plano Texas is a billionaire who owns BEAL BANK. On information and

belief, plaintiff alleges BEAL orchestrated thousands of fraudulent foreclosures to acquire California homes.

BEAL owns MGC (Plano Texas) who purports to be the loan servicer and LPP (Plano, TX). BEAL controls

(and may own part of) defendant CWRC---the foreclosure fm which has barreled through California like a

tornado seizing homes and discarding homeowners' property like trash onto their lawns or into dumpsters.

This may be how BEAL became a billionaire. DB is currently in litigation with CHASE and WaMu in state

and federal courts, as well as the bankruptcy court. (Exh.G, H and I). The gravamen of DB's claim is that it

wants to enforce the warranties given by WaMu in the governing P&S. WaMu had agreed to repurchase any

defaulting loan. DB alleged that WaMu continues to deny DB access to files so it can identify defaults.

54. DB alleges that it is entitled to $10 billion in cash damages instead of an order to compel WaMu to

repurchase the defaulting loans. By this argument DB admits that no loans have been removed from the trust

FDIC and the bankruptcy court have frozen assets until all of the disputes are resolved as to a repurchase dut)

Accordingly, GATES' mortgage file, with the NOTE may be under the continuing jurisdiction of the

bankruptcy court and other state courts, until these litigations are resolved. (Delaware andNew York).

55. GATES acquired the subject property, 1200 Palomino Road on February 15,1977 and conveyed the asset

into the GATES tnrst on 6-19-88. (Exh. A). GATES executed a note and tmst deed on 9-23-05. @xh.A5-34:

56. The trust deed is unenforceable and void ab initio because GATES could not promise to pay a dead entity.

The SEC website i~ii~:::\ .trx-~z, .sciii~~o.coi~1il$/SEC/R~~~1~~rn~1~,asp?C'iK=lil.i82S'i shows the last entry on 2002

Washiupton Mutual Bank. FN ended on 3/21/02 (Sec 15-12G) "Certification of Termination of Registration

of a Class of Securities Form 15). There were no further fdings. The entity was defunct as of 4-25-05. It is

hornbook, common knowledge, that one can not promise to pay a dead person, whether it be a human or not.

57. Even if Washinaton Mutual Bank. EN were not a defunct entity on 9-25-05 when GATES closed escrou

the NOTE is still unenforceable. The signature stamp of Cynthia Riley appears at the bottom of the note.

(Exh. A10) Riley signed as Vice-President of Washington Mutual Bank, FA. Cynthia Riley could have not

authority to execute any assignment for an enti@ which was defunct long before 9-25-05.

58. Cynthia Riley's name also appears at the bottom of the manufactured assignment of trust deed (Edl. B1)

This instrument was rewrded against 1200 Palomino on June 12,2009 although it was purportedly executed

on August 30,2006---- nearly THREE YEARS EARLIER It is common knowledge that Cynthia Riley has

already been identified as a ''robosigner" (a person's name converted into a STAMP used on thousands of

foreclosure documents). Cynthia Riley and the notary who notarized her signature (G.F. Carney) are both

employees of CHASE in Florida. A close look at the document shows the bottom half of the document does

not lime up with the top half. The part including the notarized signature of this robosigner Cynthia Riley is th,

part which is on an angle. The only way this could happen is if the bottom section (on an angle) was pasted

to the document. (Exh B-I) Plaintiffbelieves this document was created with "cut and paste" notarization

previously used on some other document. Also, why would it be executed on 8-30-06 but not recorded until :

years later 6-12-09 (Exh.B-l)? Riley could not convey any interest because it had already been assigned to

DB Structure Products, Inc. two years prior.

59. Typically if an assignee receives an assignment w-orth $1,000,000 he/she would generally record it to

maintain priority in the chain of title. Who would sell a million dollar asset for $lo? (Exh. B-I).

60. Secondly, Cynthia Riley was never the Vice President of Washington Mutual Bank, FN and even if she

were on 8-30-2006 she had no power to assign a trust deed to DB Structured Products, Inc. because this bank

did not exist on 8-30-2006. It was completely defunct as of 4-25-2005 with its last filing at SEC in 2002.

Finally, it is obvious that the hand-written entries on the instrument were intejected after the assignment

was executed by the purported Vice President of the bank (robosigner Cynthia Riley). Both of these persons

(Riley and Carney) currently work for CHASE (successor to WaMu). Accordingly, the more reasonable

explanation is that CHASE'S low-level employees, at the direction of managers, manufactured the fraudulent

document so they could pawn off the trust deeds (which they knew were unenforceable) on secondw market

loan purchasers. On information and belief, plaintiff alleges that CHASE, as successor to WaMu on 9-28-08

manufactured this document in the spring of 2009 and backdated the execution of the document to 8-30-2006


/,/I

It could not have been dated in the spring of 2009 because all assets were f m z n in the WaMu Chapter 1 1

bankruptcy filed in August 2008 so CHASE would have been unable to assign any interest to DB in 2009.

61. la

Com~troller of Currencv CHASE (consent order AA-EC-11-15) against pursuing foreclosures. (see Exh. M)

The assignment of trust deed from Washineton Mutual Bank. FN (a defunct bank as or 4-25-2005) to DB

Shuclured Products. Inc. is a forgcd and a fraudulently instrument created with (B-1)

62. Accordingly, the Wamu trust deed assignment recorded 6-12-09 is unenforceable, illegal and ineffective.

The subsequent assignment (recorded aminute after the fust bogus assignment) was also manufactured, just

like the prior assignment, and possible forged by another robosigner Shirley Arroyo.

63. Shirley Arroyo was never Vice-Resident of DB Suuctured Products, IIIC. (DB). Arroyo had no power or

authority to execute and assignment from DB Structured Products, Inc. to LPP Mortgage LTD, It is hornboo.

knowledge that one can not get good title from a thief. Since the earlier assignment from the defunct bank to

DB Structured Products was void ab inifitio, invalid and assigned nothing, the subsequent was also void.

One cannot make chowlate mousse out of ww dong.

64. Assuming the first assignment were valid (it was 1101) DB could not assign the trust deed because the P&S

expressly prohibited the DB trustee from assigning any assets of the trust as alleged in detail above. Secondly

on 9-25-08 WaMu fded for bankruptcy and whether it will be co~npelled to repurchase the failing loans from

the trust has yet to be adjudicated. AU of these cases are still pending in state, federal and bankruptcy courts.

65. Considering that the evidence shows DB and WaMu conspired in the securitization of GATES loan to

defraud borrowers as well as investors the more likcly cxplauation for all the improprieties in the fabricated

assignments is that DB and WaMuICHASE conspired again by fabricating the fraudulent assignments with

specific intent to create a new "product" they could sell to other bankters in the secondary market. In this

case, they sold the product to LPP. Or LPP was an additional conspirator who participated in the fraud.

Plaintiff intends to discover the answers to these questions by way of vigorous discovery in this casc.

66. PlauttiCf believes that CWRC intends to barrel forward with the foreclosure, !mowing it is fraudulent,

and then convey the property into its parent PROMISS SOLUTIONS, and PROMISS HOMEOWNERS

SOLUTIONS to be recycled in the sales market to generate even more profits for the conspirators.

67. PlauttiKseeks a temporary restraining order and preliminary injunction to determine validity of foreclosure


),I3

I FIRST CAUSE OF ACTION

1 (DECLARATORY AND INJUNCTNE RELIEF) (to enjoin foreclosure and quiet title)

(against all defendants and Does 1-50)

68. Plaintiff incorporates allegations in the preceding paragraphs by reference as though set forth in full.

69. An actual controversy exists amongst the parties as to the validity of the loan, validity of the trust deed,

validity of the foreclosure proceediugs, and to who has cxclusive right to foreclose, if such right exists at all.

Because such controversy exists thc court is empowered to resolve the disputes by declaring the rights and

responsibilitics of the parties. The court has power to issue a temporary order to restrain foreclosure set for

February 6,2011 under CCP 8526 and to set a hearing for a preliminary injunction (CCP 9526s) to restrain

foreclosure until the court can ascertain which party, if any, has standing to pursue foreclosure. The court ca

issue a permanent injunction to forever restrain any party from foreclosing, effectively quieting title.

GATES hereby seeks such determinations of the court and files a motion for a restraining order with this

complaint. Whatever powers not expressly granted to courts by statute they are granted under CCP $187.

70. A temporav restraining order, and preliminary injunction are necessq in this case because GATES

properly is unique, rendering money damages inadequate, he has worked to improve the pruperty for 30 year

and worked diligently to rebuild the home after it burned down in the JESUSITA fire tluee years ago.

71. GATES would be irreparably harmed if he loses the property that he has worked on for 30 years.

72. Defendants are not prejudiced by waiting for the court's determinations as the home can only increase it

value as GATES continues to rebuild it. 'The rebuilding is only 80% liuished so it can not be marketed now

The property cannot be sold by GATES as defendants' fraudulent hust deed assignment clouds his title.

73. Defendants are violating GATES rights by foreclosing. A restrainiug order and preliminan injunction

would prevent a muItiplicity of actions because it the home sells on Feb. 6,201 1 the sale will be void ab initi

because it is based on a trust deed assignment which is at best unenforceable under California law, and at

worst, criminally fraudulent under Penal Codes $115,132-134 and $532.

74. GATES seeks a declaration that the trust deed is unenforceable andlor fraudulent. GATES seeks to

permanently enjoin foreclosure and order cancellation of both trust deeds so that title to the property vests

only in GATES in fee simple, free and clear of all liens. GATES seeks to recover all damages for havu~g to

bring the action including attorney fees and costs pursuant to Civil Code $1717.

- 14 - -------------------------------------------------------.---------------------------------

VERIF IZD COYIELAINT

SECOND CAUSE OF ACTION (SLANDER OF TITLE AND CONSPIRACY TO SLANDER TITLE)

(against all dcfcndants and Does 1-50)


76. Defendants, and each of them as agents of each other and co-conspirators, co~ispired with other to

fabricate the false documents recited in the next paragraph and caused them to be recorded against plaintiffs

property in the County of Sanla Barbara County Recorder's Office.

77. On June 12,2009 defendants caused to be recorded, in the County of Santa Barbara Recorder's Office;

two false instruments, which they knew were false before they recording them; to wit, Document Numbers

2009-0034366 and 2009-0034367. From 8-9-201 1 until through January 18,201 1 defendants caused a series

of false documents to be recorded in the County of Santa Barbara Recorder's Office; to wit, a series of

Notices of Default, Notices of Sale and Substitution of Trustee.

78. Dcfcndnnts willfully, maliciously and without privilege recorded all ofthese false publications which

impaired the vendibility of GATES property and clouded his title. The publications were motivated by

oppression and fraud in that defendants knew the statements in recorded instruments were false when made.

These acts violated Penal Codes $1 15, 132, 133, 134, 135 532. Plaintiff is entitled to compensatory damages

for the costs of removing the slanderous statements and false instruments from the record. Plaintiff is entitlcc

to punitive damages pursuant to Civil Code $3294. Plaintiff is entitled and seeks an order expunging all false

documents recorded to cloud plaintiffs title.

THIRD CAUSE OF ACTION (FRAUD AND CONSPIRACY TO DEFRAUD)



80. Defendants, and each of them as agents of each other co-conspirators of each other, and alter egos of eacl

other conspired with other to manufacture the false documents recited in the next paragraph and caused them

to be recorded against plaintiffs property in the County of Santa Barbara County Recorder's Ofice.

8 1 . Defendants willfully, maliciously and without privilege recordcd all of these falsc publications which

impaired the vendibility of GATES property and clouded his title and did so with intent to steal the property.

=RIFTED COMPLAINT

) # I S

82. The publications were motivated by oppression and fraud in that defendants knew the statements in the

recorded instrumei~ts were false when made. These acts violated Penal Codes 8115, 132, 133, 134, 135, 532

1 83. Defendants caused the false instmments with false statements to be recorded with specific intent to

facilitate stealing plainWs property and to enable the trustee to foreclose and sell plaintiff's property.

Defendants acts were motivated by insatiable greed and w-ith a desire to wronghlly evict plaintiff.

84. These acts violated Penal Codes $115, 132,133, 134, 135,532. Plaintiff is entitled to compensatory

damages for the costs of removing the slanderous statements and false instmments from the record. Plaintiff

is entitled to punitive damages pursuant to Civil Code $3294.

85. Defendants ask the court to refer this case to the District Attorney for criminal prosecution under Penal

Codes $1 15,132, 133, 134, 135,532 once the evidence proves these documents were fraudulently

manufactured for a malicious and oppressive purpose; and for monetary gain at the d e h e n t to plaintiff.

86. On June 16,2009 which was only 4 days after recording fraudulently manufactured documents with

kiiowingly false statements, MGC sent GATES a letter nohfying him that they were the new loan servicers.

MGC and LLP are sister corporations or parent child corporations and both are controlled by Andrew Bed,

a billionaire in Plano Texas, who may have acquired his billions though schemes such as these. For the past

two years plaintiffhas been making payments to MGC who concealed the fact that they had no right to collet

money from him because they were not a lender nor a beneficiary of his note. See UCC codes (Exh. K)

87. Plaintiff has been damaged in that MGC has wrongfully and maliciously collected thousands of dollars

from GATES who did not discover the fraud until he sought the advice of counsel during the past year.

88. On 5-6-09 plaintiffs home burned down in the Jesusita fire. GATES submitted a claim to his insurer,

Fanners who processed his claim. Farmers told GATES they would not pay out on the claim until he rebuilt

the home. Plaintiff was forced to borrow money on credit cards to pay for material to rebuild the home,

which is an ongoing process about 80% f ~ s h e d to date. The first week of February 2010 GATES received :

Farmers checks for a total of $202, 548.64 which were reimbursements for materials used to rebuild. (Exh F1

For some unknown reason Farmers issued the checks jointly to MGC and GATES. When he called MGC

they told him to sign the checks and forward them to MGC for signature, with a promise to mail the checks

back to GATES after they were signed off at MGC. GATES complied. MGC cashed the checks but did not

mail them back to GATES. Instead they kept the cash and ignored GATES when he called and wrote letters.

VERIFIED CONPLAINT

~ I I L

89. For nearly six months (from January- 30,2010 until May of 2010) MGC ignored GATES desperate pleas

to release the funds to him. GATES was forced to hire counsel to compel MGC to return the funds he was

entitled to receive; to wit, the proceeds on a policy in which he was the named beneficiary as owner. Counsel

was able to negotiate and get half of the funds released. MGC sent $113,622.96 on 5-12-10 (see E d . F2,F3)

90. At the end of 2010 GATES received a 1099 form from the IRS entitled "cancellation 01 debt." (Exh.F4)

Plaintiff'brought the form to counsel for review. The boxes to enter the amount of debt and interest cancelled

were left blank. This was suspicious at best. Plaintiff is informed and believes that MGC or Dovenmuehle

Mortewe. Inc. (the name on the 1099 form) took a significant tax write-off by charging off the loan. MGC

may have submitted its own claim on either its ALTA policy (lenders insurance policy) or some other policy.

IRS regulations requires a 1099 form to be sent to the borrower whenever a lender charges off a loan.

91. Defendant MGC willfully, maliciously and without privilege defrauded plaintiff by concealing their trick

to get him to mail them the Farmers fue insurance proceeds checks, and by willfully ignoring his desperate

pleas to release the funds with specific intent to steal his money. All of the above-described acts and evil

contrivances were motivated by oppression, fraud and insatiable greed. in that defendants knew the promises

to mail him back the checks were false when made. Defendants knew GATES was elderly and disabled.

32. GATES justifiably relied on the promises MGC made and was damaged. GATES had to use high interest

credit cards for two years after the fire just to survive while MGC confiscated his insurance proceeds with

specific intent to keep them forever. If was only after threats by counsel to file a RICO cases against them dic

they actually release a check for half the proceeds to counsel after holding the funds for five months and

collecting interest on over $202,548.64. Plaintiff is entitled to compensatory damages and full restitution.

Plaintiff is entitled to punitive damages pursuant to Civil Code g3294. Plaintiff seeks attonley fees pursuant

to his contract with the pretend lender.

FOURTH CAUSE OF ACTION (BREACH OF FIDUCIARY DUTY -CONSTRUCTIVE FRAUD)


93. Plaintiff inwrporatcs allegations in the veceding paragraphs by reference as though set forth in full.

94. Defendants, and each of them, as lender, trustee, mortgage broker, financial advisor, at all relevant times

had, and have a fiduciary duty to plaintiffto advise him and place him on notice of all disclosures that me

required by law, especially in a real estate loan transaction, and to provide him with the true facts upon which

VERIFIED COMPLAINT

1113

he could make a determination as to his need to either close the loan or look for more favorable financing.

Plaintiff alleges that on or about September 23,2005 and thereafter, defendants, and each of them, breached

their fiduciary duty by failing to provide Plaintiff with the disclosure notices required in Civil Code 51788

Rosenthal Fair Debt Collection Act. As a result of defendants breaches of a duty of care Plaintiff has been

damaged and injured both at equity and law, in that plaintiffs property is scheduled for non-judicial

foreclosure sale on February 6,2012 aud Plaintiff has no other remedy at law to address defendants'

breaching conduct, other than to deny them the opportunity to confiscate his home.

95. Plaintiff is entitled to damages for all costs related to the predatory loan foisted upon him by defendants

in the interest of profiteering , and high commissions. Plaintiff is entitled to rescind the loan.

FIFTH CAUSE OF ACTION (ELDER ABUSE W&I $1 5657)


96. Plaintiff incorporates allegations in the preceding parag~aphs by reference as though set forth in full.

97. Plaintiff is a 69-year old disabled widower. Plaintiff is in a special class of "elders" protected from abuse

under W& I $15657 including fmancial abuse, and is also protected because has been disabled since 45.

98. On June 16,2009 which was only 4 days after recording fraudulently mannfactured documents with

knowingly false statements, MGC sent GATES a letter nobfy-ing him that they were the new loan servicers.

MGC and LLP are sister corporations or parentlcluld corporations and both are controlled by Andrew Beal,

a billionaire in Plano Texas who may have acquired his billions though schemes such as what happened here

For the past tw-o years plaintiff has been making payments to MGC who concealed the fact that they had no

right to collect money from him because they were never a lender nor a beneficiary or obligee on his note.

99. Plaintiff has been damaged in that MGC wrongfully and maliciously collected thousands of dollars from

GATES who did not discover the fraud until he sought the advice of counsel during the past year.

100. On 5-6-09 plaintiffs home burned down in the Jesusita fire. GATES submitted a claim to his insurer,

Fanners who processed his claim. Fanners told GATES they would not pay out on the claim until he rebuilt

the home. Plaintiff was forced to borrow money on credit cards to pay for material to rebuild the home,

which is an ongoing process about 80% fmished to date. The f ~ s t week of February 2010 GATES received :

Fanners checks for a total of $202,548.64 which were reimbursements for materials used to rebuild. (Exh F1

VERIFIED COMPLAINT

1-18

For some unknown reason Farmers issued thc checks jointly to MGC and GATES. When he called MGC

they told him to sign the checks and forward them to MGC for signature, with a promise to mail the checks

back to GATES after they were signed off at MGC. GATES complied. MGC cashed the checks but did not

mail them back to GATES. Instead they kept the cash and ignored GATES w h a ~ hc called and wrote letters.

101. For nearly six months (from January 30,2010 until May of 2010) MGC ignored GATES dcsperate pleas

to release the funds to him. GATES was forced to hire counsel to compel MGC to rehun the funds hc was

entitled to receive; to wit the proceeds on a policy in which he was the named beneficiary as owner. Counsel

was able to negotiate and get half of the funds released. MGC sent $113,622.96 on 5-12-10 (see Exh. F2,F3)

102. At the end of 2010 GATES received a 1099 form from the IRS entitled "cancellation of debt."

Plaintiff brought the form to counsel for review. The boxes to enter the amount of debt and interest cancellec

were left blank. This was suspicious at best Plaintiff is informed and believes that MGC or Dovenmuehle

Mortgage, Inc. (the name on the 1099 form) took a siguificant tax write-off by charging off the loan. MGC

may have submitted its own claim on either its ALTA policy (lenders insurance policy) or some other policy.

IRS regulations requires a 1099 form to be sent to the borrower whenever a lender charges off a loan.

103. Defendant MGC willfully, maliciously and without privilege defrauded plaintift-by concealing their trick

to get him to mail them the Fanners fue insurance proceeds check, and by willfully ignoring his desperate

pleas to release the funds with specific intent to steal his money. All of the above-described acts aid evil

contrivances were motivated by oppression and fraud in that defendants knew the promises to mail him back

the checks werc fnlse when made.

104. GATES justifiably rclied on the promises MGC made and was damaged. GATES had to use high interest

credit cards for two years after the Elm just to survive while MGC confiscated his insurance proceeds with

specific intent to keep them forever. If was only after threats by wunsel to file a RICO cases against them

which caused them to release the checks to counsel a i t a holding the funds for five months. Plaintiff is

entitled to compensatory damages and full restitution. Plaintiff is entitled to punitive damages pursuant to

Civil Code $3294. Plaintiffseeks attorney fees pursuant to his contract with the pretend lender.

105. In engaging in such acts defendants intended to defraud plaintiff, and did de€raud plainti@ as defined hy

Welfare and Institutions Code $15610.30.

- 19 - ............................

VERIFIED COMPLAINT

106. As a direct and proximate cause plaintiff has been deprived of his property, namely his money, and has

sustained related damages such as attorney fees to pursue his remedies and stop the wrongful foreclosure.

107. Defendants conduct constituted recklessness, malice, oppression and malignant heart. The acts were

willful and intentional. Plaintiff is entitled to recover damages for the sake of example and by way of

pu~~ishing defendants for fmancial abuse pursuant to W& I 515657.5 and Civil Code 53294. Plaintiff is

entitled to recover reasonable attorney fees and costs for fmancial abuse under W&I $15657.5

SIXTH CAUSE OF ACTION (QUASI-CONTRACT RESTITUION) (against all defendants and Does 1-50)


109. MGC demandedmonthly mortgage payments from Plaintiff starting on July 1,2009 and continued to

collect payments from Plaintiff for the past two years. Plaintiff reasonably relied upon MGC's assertion that

was entitled to payments.

110. MGC knowingly accepted payments and retained them for its own use knowing that MGCLLP was no1

a beneficiary under PlainWs Note on the date that its assets were transferred to DB Structured Products, Inc

and therefore MGCLLP did not acquire my right from DB to accept or keep Plaintiffs payments. It would

be inequitable for MGCLLP to retain the payments it received from Plaintiff. The equitable remedy of

restitution, when unjust emichment has occurred, is an obligation created by the law without regard to the

intent of the parties, and is designed to restore the aggrieved party to his or her former position by return of

the thing or its equivalent in money.

11 1. The DOT states in Paragraph 23 (Exh. A25): "Upon payment of all sums secured by this Security

Instrument, Lender shall request Trnstee to reconvey the Property and shall surrender this Security Instrumer

and all notes evidencing debt secured by this Security Instrument to Trnstee." The obligations to WaMu node

the DOT were fulfilled when WaMu received the balance on the Note as proceeds of sale through

securitization to private investors, who provided funds to close GATES escrow. MGC has been unjustly

enriched by demanding and collecting monthly payments 6om Plaintiff in the amount to be determined in th~

accounting claim below.

VERIFIED COPIPLAINT

1~~

112. Plaintiff seeks restitution for any payments he made to MGClLPP/Wamu that were not paid to the lender

or beneficiarq, if any, and were i~njustly retained hy MGClLPPNaMn. Plaintiff also seeks damages in exces!

of $100,000 for depreciation to his property as a result of the ~ ~ o n g f n l foreclosure proceedings initiated by

CWRC on behalf of MGCLLP.

SEVENTH CAUSE OF ACTION (QUIET TITLE)



114. Plaintiff seeks to quiet title against the claims of Defendants and all persons claiming any legal or

equitable right, title, estate, lien, or adverse interest in the Wilshire Property as of the date the Complaint was

filed pursuant to Cal. Code Civil Procedure 8760.020.

115. Plaintiff is the titleholder of the 1200 Palomino Property according to the terms of Grant Deed (Exh A-3).

116. WaMu securitized Plaintiffs single-family residential mortgage loan through Washiurnon Mutual

Morteage Securities Corn, andlor Washington Mutual Asset Acceptance Corporation.

117. Plaintiff is informed and believes that the lawful beneficiary (the investors) have been paid in full.

11 8. The DOT states in $23 (Exh. A5):

23. Reconveyance. Upon payment of all sums secured by this Security Insbument, lender shall

request Trustee to reconvey the Property and shall surrender this Security Instrument and all notes

evidencing debt secured by this Security Instrument to trustee. Trustee shall reconvey the Property

without warranty to the person or persons legally entitled to it.

119. The DOT does not state that Plaintiff must pay all sums. It states that all secured sums must be paid

The obligations owed to WaMu under the DOT were fulfilled and the loan was fully paid when WaMu

reccivcd the balance on the Note as proceeds of sale through securitization of the loan and insurance proceeds

from Credit Default Swaps. Chase did not purchase the loan from the FDIC on 9/25/08.

120. Defendants' claims are adverse. None defendant can proye any interest in the Note or show that the Note

is secured by the DOT, as well for the reasons set forth in the preceding causes of action. As such, Defendant!

have no right, title, lien, or interest in the 1200 Palomino Property. Plaintiff therefore seeks a judicial

declaration that the title to the Properly is vested solely in Plaintiff and that Defendants have no right, title,

estate, lien, or interest in the Property and that Defendants and each of them are forever enjoined from

asserting any right, title, lien or interest in the Property adverse to Plaintiff.

- 21 - .........................................................................................

VERIFIED COMPLAINT

EIGHTH CAUSE OF ACTION (CONTRACT RECISION)



122. PlaintBis informed and believes that WaMu routinely approved predatory real estate loans to

unqualified buycrs in 2005 and implemented unlawful lending practices by encouraging brokers and loan

officers to falsify borrowers' income and assets to meet underwriting guidelines when borrowers were not

qualified. WaMu employees falsified Plaintitrs Income, Assets and Liabilities.

123. Plaintiff followed the instructions of WaMu's loan officer when he submitted a Loan Application to

WaMu that contained only his name, address, phone number, social security numbcr, and bank accounts.

GATES believes, but is not sure, that an employee filled out the application and presented it for Plaintiffs

signature on 9-23-05 showing an inflated market value for the 1200 Palomino property.

124. Plaintiff is informed and believes that WaMu pre-sold Plaintiffs mortgage to investors based on inflated

valuation. Immediately after he signed the Note, WaMu transferred all of its interest in the Note to an

investment bank that bundled Plaintiffs Note with numerous otllcr residential mortgages into residential

mortgage-backed securities ("RMBS") which were structured into synthetic collateralized debt obligations

("CDOs") and sold to investors in Washington Mutual Mortgage Pass-Through Certificate AR-13.

125. Plaintiff is informed and believes that the investment bank intended to short the portfolio it helped to

select by entering into credit default swaps to buy protection against the certain event that the promissory

notes would default. WaMu expectcd that Plaintiff would not have the ability to repay the loan. It was not jusl

that WaMu was unconcerned with a possible outcome that Plaintiff would default; WaMu knew that he could

not perform and expected him to default on the loam

126. Washington Mutual Bank, the sponsor of the securitization transaction, was a wholly owned subsidiary of

Washington Mutual Inc. Securitizatiou of mortgage loans was an integral part of Washington Mutual Inc.'s

management of its capital. It engaged in securitizations of first lien single-family residential mortgage loans

through Washington Mutual Mortgage Securities Corporation, as depositor, beginning in 2001. WaMu acted

only as a servicer of Plainlss loan.

- 22 - .........................................................................................

TiERI FIED COMPLAINT

127. WaMu failed to disclose to Plaintiffthat its economic interests were adverse to Plaintiff and that WaMu

expected to profit when Plaintiff found it impossible to perform his obligation and defaulted on his mortgage,

128. A necessary element in the formation of au enforceable contract under the common law is a meeting of

the minds. Two or more parties must share some expectation that a future event will occur. Plaintiff expected

that he would borrow money from WaMu, he would pay it back, and then he would own the Property. WaMl

expected that Plaintiff would borrow money, he would not be able to pay it back, and then WaMu or the

investors would own the Property. Since there was no shared expectation-no meeting of the minds-no

contract was formed between Plaintiff and WaMu when WaMu falsified his application to quallfy for the

loan.

129. In addition to WaMu's expectation that PlaintiEwould lose title to the 1200 Palomino Property through

foreclosure, WaMu anticipated transferring the Note to investors immediately after Plaintiff signed the Note.

Plaintiff is informed and believes that WaMu purchased credit default insurance so that WaMu would receive

the balance on the Note when Plaintiffdefaulted, in addition to any money and commissions WaMu rcccived

when it securitized the Note and sold it to investors.

130. Not only did WaMu dispense with conventional underwriting practices in 2005, it also paid premium fee

and other incentives to mortgage brokers who signed up the riskiest borrowers. Fueled by spiraliug profits to

Cbasc, WaMu, and other banks, common law principles of contract formation, customary undenvriting

practices, and statutory procedures for transferring interests in real property, including the recordation of

transfers of interests in real property, disintegrated and the system ceased to function as a reliable means to

transfer clear tltle to property.

13 1. WaMu expected that Plaintiff would not perform as merely one victim in a scheme in which:

132. Plaintiffs participation in the mortgage contract was procured by overt and covert misrepresentations an1

nondisclosures. The parties did not share a single expectation with respect to any of the terms or the mortgag(

contract and therefore the contract was void ah initio.

133. No enforceable contract was formed between Plaintiff and WaMu, so his Note and DOT were never assets

of WaMu that could be acquired or assumed by Chase f?om the Federal Deposit Insurance Corporation

(FDIC) as receiver after WaMu wns seized by the Off~ce of ThriA Supervision on September 25,2008.

134. Plaintiffrequests a judicial determination that the contract was void ah initio and unenforceable.

- 2 3 - .........................................................................................

VERIFIED COMP-.ATNT

'1.23

NINTH CAUSE OF ACTION (ACCOUNTING)



136. On Augusl9, 201 1 CWRCLLPNGC caused to be recorded in the Santa Barbara County Recorder's

Office a Notice of Default which recited that plaintiffowed $73,351.90 signed by with robosigner stamp of

Marco Marquez. (Exh. B6). It recited: By LSI Title Company, as agent. The LSI company is not in good

standing with the State of California. (see Exk L) Not surprisingly LSI was cited for insurance violations o

CCR 52694a5 (failed to respond to allegations) and CIC $880 (failed to use its own name)

137. Amazingly, only two months later on Oct. 13,201 1 a subsequent Notice of Default was filed which

recited that plaintiff owed $91,754.18. (Exh. B7) It belies logic to believe that $18,000.00 could be added in

only two months when plaintiffs monthly payments were a little over $5,000. This subsequent notice had a

different stamp at the bottom with yet another robosigner Vangie Ortega "serviceLink, as agent." (Exh. 88)

138. Both of the above notices were signed by persons who had no personal knowlcdge of what was owed in

contravention to the purpose of the statute which requires the affidavit. It was enacted to make sure the

amount recited to cure the default is accurate and not fraudulently inflated with illegal fees and penalties.

139. Due to these irregularities, and suspected forgeries, and the likelihood these amounts are not accurate,

plaintiff is entitled to a full accounting fmm all loan servicers andlor lenders from September 25, 2005 until

the present day of all amounts paid by plainla, aU charges, ctc. so that plaintiiTcan determine what he is

entitled to by way of restitution for various causes of action herein. Plaintiff requests accounting as follows:

1. An accounting as to all money received by any loan servicer or lender (7-25-05 - to date)

2. An accounting as to money on hand.

3. An accounting as to all money disbursed.

4. An accounting as to aU accounts outstanding and due.

5 . An accounting by the trustee DB as to how much was paid to investors from AR-13 REMIC trust

VERIFIED COMPLAINT

1

WHEREFORE, Plainarequests judgment as follows:

1. That this court issue a Temporary Restraining Order and Preliminnry Injunction restraining Defendants, md eacb of them, during the pendency of this action, from continuing with their efforts to conduct a Trustee's sale of the 1200 Palomino Property, and Lhal a permanent injunction to forever restrain defendants from breclosing or attempting to sell 1200 Palomino.

2. That the attempted foreclosure of the Palomino Property be declared illegal and void; and that Defendant ~e forever enjoined and restrained from selling the Palomino Property or attempting to sell it or causing it to be old, either under power of sale pursuant to trust deed or by foreclosure action, and from posting, publishing, or ecording any notice of default or notice of trustee's sale contrary to state or federal law.

3. That the underlying loan transaction be declared void as a result of Defendants'misrepresentations, fraud :oncealment, and predatory lorn practices.

4. That Defendants make restitution to Plaintiff according to proof for payments made to MGC that were nc leposited in the account of the actual lender; i.e. the certiiicate holders in the trust as alleged.

5 . Actual damages for depreciation to the Property in excess of $100,000.00 and related costs

6. General and compensatory damages

7. For pnnitive damages under Civil Code $3294 and treble damages under CC $3345

8. For a judgment determining that Plaintiff is owner in fee simple of the 1200 Palomu~o Property against

he adverse claims of Defendants and that Defendants havc no interest in the subject properly adverse to Plaintff

7. For attorney fees under Civil 81717, Civi11021.5; and attorney fees under Welt & Inst. $15657(a).

8. For interest, including pre-judgment interest where authorized

9. For all costs authorized under the law.

10. For any and all other and further relief that may be just in this matter.

DEMAND FOR JURY TRIAL :

Plaintiff demands a jury trial on all causes of action and for all damages.

(OTICE: Plaintiff demands that all defendants take notice of Penal Codes §$115,132,133,134,135

These codes make it a crime (either felony or misdemeanor) to enter any document into a proceeding vhich is forged, altered, back-dated, fabricated, or fraudulently altered in any way. It is also a crime to prepare my document to offered into this proceeding which violates any of these sections. The full text is u~clndcd. %is notice provides the "mens rea" need to satisfy the intent element needed for prosecution of the crime.

'enal Code 0 I15

a) Every person who knowingly procures or offers any false or forged instn~ment to be fded, registered, or recorded in any

~ublic office within this state, which instrument, if genuine, might be filed, registered, or recorded under any law of this statf

tr of the United States, is guilty of a felony,

- 25 - .........................................................................................

V E R i F i E D COMPLAINT

@) Each instrument which is procured or offered to be f d d registered, or recorded in violation of subdivision (a) shall

constitute a separate violation of this section.

(c) Except in unusual cases where the interests of justice would best be saved if probation is granted, probation shall not

granted to, nor shall the execution or imposition of sentence be suspended for, any of the following persons:

(1) Any person with a prior conviction under this section who is again convicted of a violation of this section in a separate

proceeding.

(2) Any person who is convicted of more than one violation of this section in a single proceeding, with intent to defraud

another, and where the violations resulted in a cumulative financial loss exceeding one hundred thousand dollars ($100,000:

(d) For purposes of prosecution under this section, each act of procurement or of offering a false or forged instrument to b

filed, registered, or recorded shall be considered a separately punishable offense.

Penal Code Q 132

Every person who upon any trial, proceeding, inquiry, or investigation whatever, authorized or permitted by law, offers in

evidence, as genuine or true, any book, paper, docnment, recod or other instrument in writing, knowing the same to have

been forged or fraudulently altered or ante-dated, is guilty of felony.

Penal Code 8 133

Every person who practices any fraud or deceit, or knowingly makes or exhibits any false statement, representation, toke& I

writing, to any witness or person about to be called as a witnes upon any trial, proceeding, inquiry, or investigation

whatever, authorized by law, with intent to affect the testimony of such witness, is guilty of a misdemeanor^

Penal Code Q 134

Every person guilty of preparing any false or ante-dated bookpaper, record, instrument in writing, or other matter or thing,

with intent to produce i t or allow it to be produced for any fraudulent or deceitlid purpose, as genuine or true, upon any h a

proceeding,or inquUy whatever, anthorized by law, is guilty of felony.

Penal Code 5 135

Every person who, knowing that any book, paper, m r 4 instrument in writing, or other matter or thing, is about to be

produced in evidence upon any trial, inquiry, or investigation whatever, authorized by law, willfully destmys or conceals th

same, with intent thereby to prevent it fmm being produced, is gmlty of

a misdemeanor.

II NOTICE: ALL DEFENDANTS MUST VERIFY THEIR ANSWERS pursuant to CCP 5446

Plaintiff will move to strike any answer which has not been verified under penalty of pe jury as mandated.

- 26 - .........................................................................................

-VXRIFIED COMPLAINT

/ * 26

Law office of Nancy Duffy McCarron

950 Roble Lane Santa Barbara, CA 93103

VERlFICATION

4 DAVID GATES, as hustee for the David W. Gates Trust dated August 5,1996 declare:

I am platntiffm the within actJon. I have read the complaint in its entn-ety and declare, under penalty of

erjwy and the laws of this state, the allegatmns set forth therein are based on p=rsonal knowledge, except as to

hose alIegahms made on informahon and behef and as to those allegations I believe them to be me.

kecuted on January 3 1 , 2012.

D ~ V I D GATES, as trustee for the David W. Gates Trust dated August 5,1996

- 27 - .- - * " - - - - - - - " " - - % - - ? - - - - - -------.-------- -.--~.----.--------------------"-.---....------~?-

VERIFIED COMPrnINT I, Z I

EXHIBIT LIST

Valid Chain of Title Docs

Fraudulent Recorded Docs

Securitization of Mortgage Backed Securities W S )

Securitization of GATES loan

WaMu Deutsche Fraud -US Financial Crisis

MGC Mortgage Inc. Docs

Deutsche Bank Docs

FDIC - Deutsche -Warnu - Chase Docs

WaMu Bankruptcy Docs

JX.4 Docs

Appendix - Codes

LSI violations

Class Action Against Chase for fabricating assignments of trust deeds

these exhibits are available by request to: ~ia~~~:,~;~?ufh~!;i~f<Jvaf~oo.co~?~ they will be emailed to the requestor

GATES v. MGC Mortgage Inc., et a1 1384851

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SAN'TA R.ARRARA.Cn Page 2 0f 2 ~IOCII~ICII~: IID 1q98.5~462

FIXEDIADJUSTABLE RATE NOTE (1 Year Treasury Index - Rate Caps)

THlS NOTE PROVIDES FOR A CHANGE IN MY FIXED INTEREST RATE TO AN ADJUSTABLE INTEREST RATE. THlS NOTE LIMITS THE AMOUNT MY ADJUSTABLE INTEREST RATE CAN CHANGE AT ANY ONE TIME AND THE MAXIMUM RATE I MUST PAY.

1200 PALOMINO DRIVE, SANTA BARBARA, CA 93105 ... (Property Address)

1. BORROWER'S PROMISE TO PAY In return for a loan that I have received, I promise to pay U.S. $ 1,142,302.00 (this

amount is called "Principal'). plus interest, to the order of the Lender. The Lender is Waehinqton Mutual ~anlc , FA . I will make all payments under this

Note in the form of cash, check or money order. 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." 2. INTEREST

Interest will be charged on unpaid Principal until the full amount of Principal has been paid. I will pay interest at a yearly rate of 5.500 %. The interest rate I will pay may change in accordance with Section 4 of this Note.

The interest rate required by this Section 2 and Section 4 of this Note is the rate I will pay both before and after any default described in Section 7(8) of this Note.

3. PAYMENTS (A) Time and Place of Payments I will pay Principal and interest by making payments every month.

1 will make my monthly payment:; on the first day of each month beginning on November 1st. 2005 , I will make these payments every month until I have paid all of the Principal and interest and any other charges described below that I may owe under this Note. Each monthly payment will be applied as of its scheduled due date and will be applied to interest before Principal. If, on October 1st. 2035 , I still owe amounts under this Note, I will pay those amounts in full on that date, which is called the "Maturity Date".

I will make my monthly payments at LOAN SBRVICE, 9451 CORBIN AVE, - NORTKRIDGE, CA 91324 or at a different place if required by the Note Holder.

(0 ) Amount of My Initial Monthly Payments Each of my initial monthly payments will be in the amount of U.S. $ 7,014.73 . This

amount may change. (C) Monthly Payment Changes Changes in my monthly payment will reflect changes in the unpaid Principal of my loan and in

the interest rate that I must pay. The Note Holder will determine my new interest rate and the changed amount of my monthly payment in accordance with Section 4 of this Note.

4610 103.011 Page 1 of 6

4. INTEREST RATE AND MONIHLY PAYMENT CHANGES (Al Change Dates The interest rate I will pay may change on the first day of October, 2010

and on that day every 12th month thereafter. Each date on which my adjustable interest rate could change, is called a "Changa Date.'

(B1 The lndex Beginning with the first Change Date, my interest rate will be based on an lndex. The "Index"

is the weekly average yield on United States Treasury securities adjusted to a constant maturity of 1 year, as made available by the Federal Reserve Board. The most recent lndex figure available as of the dnte 46 days before each Change Date is called the "Current lndex."

If the lndex is no longer available, the Note Holder will choose a new index which is based upon comparable information. The Note Holder will give me notice of this choice.

ICI Calculation of Changes Before each Change Date. the Note Holder will calculate my new interest rate by adding

Two & seventy-Pive-Hundredths percentage points ( 2 .750 1%) to the Current Index. The Note Holder will then round the rasult of this addition to the nearest one-eighth of one percentage point (0.125%). Subject to the limits stated in Section 4(D) below, this rounded amount will be my new interest rate until the next Change Date.

The Note Holder will then determine the amount of the monthly payment that would be sufficient to repay the unpaid Principal that I am expected to owe at the Change Date in full on the Maturlty Date at my new interest rate in substantially equal payments. The result of this calculation will be the new amount of my monthly payment.

(Dj Limits on Interest Rate Changes The interest rate I am required to pay at the first Change Date will not be greater than

10.500 % or less than 2.750 . Thereafter, my interest rate will never be increased or decreased on any single Change Data by more than two percentage points (2.0%) from the rate of interest I have been paying for the preceding 12 months. My interest rate will nwer be greater than 10.500 %.

(E) Effective Date of Changes My new interest rate will become effective on each Change Date. I will pay the amount of my

new monthly payment beginning on the first monthly payment date after the Change Date until the amount of my monthly payment changes again.

(Fl Notices of Changes The Note Holder will deliver or mail to me a notice of any changes in my interest

rate and the amount of my monthly payment before the effective date of any change. The notice will indude the amount of my monthly payment, any information required by law to be given me and also me title and telephone number of a person who will answer any question I may have regarding the notice.

(GI Failure to Make Adjustments If for any reason Note Holder fails to make an adjustment to the interest rate or payment

amount as described in this Note, regardless of any notice requirement, I agree that Note Holder may, upon discovery of such failure. then make the adjustment as if they had been made on time. 1 also agree not to hold Note Holder responsible for any damages to me which may result from Note Holder's failure to make the adjustment and to let the Note Holder, at its option, apply any excess monies which I may have paid to partial prepayment of unpaid Principal. 5. BORROWER'S RIGHT TO PREPAY

I have the right to make payments of Principal at any time before they are due. A payment of Principal only is known as a "Prepayment." When I make a Prepayment, I will tell the Note Holder

4 8 ~ 0 ro=.o1! Page 2 of 6

in writing that I am doing so. I may not designate a payment as a Prepayment if I have not made all the monthly payments due under the Note.

I may make a full Prepayment or partial Prepayments without paying m y Prepayment charge. The Note Holder will use all of my Repayments to reduce the amount of Rincipal that 1 owe under this Note. However, the Note Holder may apply my Prepayment to the accrued and unpaid interest on the Prepayment amount, before applying my Prepayment to reduce the Principal amount of the Note. If I make a partial Prepayment, there will be no changes in the due dates of my monthly payments unless the Note Holder agrees in writing to those changes. My partial Prepayment may reduce the amount of my monthly payments after the first Change Date following my partial Prepayment. However, any reduction due to my partial Prepayment may be offset by an interest rate increase. 6. LOAN CHARGES

lf a law, which applies to this loan and which sets maximum loan charges, is finally Interpreted so that the interest or other loan charges collected or to be collected in connection with this loan exceed the permined limits, then; (at any such loan charge shall be reduced by the amount necessary to reduce the charge to the permitted limit: and (bt any sums already collected from me that exceeded permined limits will be refunded to me. The Note Holder may choose to make this refund by reduclng the Principal I owe under this Note or by making a direct payment to me. If a refund reduces Principal, the reduction will be treated as a partial Prepayment.

Mlscelleneous Fees: I understand that the Note Holder will also charge a return item charge in the event a payment that I make in connection with repayment of this loan is not honored by the financial institution on which it is drawn. The current fee is $ 15.00 . Lender reserves the right to change the fee from time to time without notice except as may be required by law. 7. BORR0WER.S FAILURE TO PAY AS REQUIRED

( A l Late Charges for Overdue Payments If the Note Holder has not received the full amount of any monthly payment by the end of

Fifteen calendar days after the date it is due, I will pay a late charge to the Note Holder. The amount of the charge will be 5.000 % of my overdue payment of Principal and interest. I will pay this late charge promptly, but only once on each late payment.

(el aetault If I do not pay the full amount of each monthly payment on the date it is due, I will be in

default. (C) Notice of Default If I am in default, the Note Holder may send me a written notice telling me that if I do not pay

the overdue amount by a cartain date, the Note Holder may require me to pay immediately the full amount of Principal that has not been paid and all the interest that I owe on that amount. That date must be at least 30 days after the date on which the notice is mailed to me or delivered by other means.

(D) No Waiver By Note Holder Even if, at a time when I am in default, the Note Holder does not require me to pay immediately

in full as described above, the Note Holder will still have the right to do so if I am in default at a later time.

(E) P m t of Note Holder's Cash and Expenses If the Note Holder has required me to pay immediately in full as described above, the Note

Holder will have the right to be paid back by me for all of its costs and expenses in enforcing this Note to the extent not prohibited by Applicable Law. Those expenses include, for example, reasonable attorneys' fees.

*,<,Z> *>.<.., Page 3 of 6

8, GIVING OF NOTICES Unless applicable law requires a different method, any notice that must be given to me under

this Note will be given by delivering it or by mailing it by first class mail to me at the Property Address above or at a different address if I give the Note Holder a notice of my different address.

Any notice that must be given to the Note Holder under this Note will be given by delivering it or by mailing it by first class mail t o the Note Holder at the address stated in Section 3(Al above or at a different address if I am given a notice of that different address. 9. OBLIGATIONS OF WRSONS UNDER THIS NOTE

If more than one person signs this Note, each person is fully and personally obligated to keep all of the promises made in this Note, including the promise to pay the full amount owed. 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. The Note Holder may enforce its rights under this Note against each person individually or against all of us together. This means that any one of us may be required to pay all of the amounts owed under this Note. 10. WAIVERS

I and any orher person who has obligations under this Note waive the rights of presentment and notice of dishonor. "Presentment" means the right to require the Note Holder to demand payment of amounts due. "Notice of Dishonor" means the right to require the Note Holder to give notice to other persons that amounts due have not been paid.

11. UNIFORM SECURED NOTE This Note is a uniform instrument with limited variations in some jurisdictions. In addition to the

protections given to the Note Holder under this Note, a Mortgage. Deed of Trust or Security Deed (the "Security Instrument"), dated the same date as this Note, protects the Note Holder from possible losses that might result i f I do not keep the promises which I make in this Note. That Security Instrument describes how and under what conditions I may be required to make immediate payment in f d l of all amounts I owe under this Note. Some of those conditions are described as follows:

(A) UNTIL MY INITIAL FIXED INTEREST RATE CHANGES TO AN ADJUSTABLE INTEREST RATE UNDER THE TERM STATED IN SECTION 4 ABOVE. UNIFORM COVENANT 1 8 OF THE SECURITY INSTRUMENT SHALL READ AS FOLLOWS:

Transfer of the Property or a Beneficial Interest in Borrower. As used in this Section 18, "Interest in the Property" means any legal or beneficial interest in the Propew. including, but not limited to, those beneficial interests transferred in a bond for deed, contract for deed, installment sales contract or escrow agreement, the intent of which is the transfer of title by Borrower at a future date to a purchaser.

if all or any part of the Property or any Interest in the Property is sold or transferred (or if a beneficial interest in Borrower is sold or transferred and Borrower is not a natural person) without Lender's prior written consent, Lender may, at its option, require immediate payment in full of all sums secured by this Security Instrument. However, this option shall not be exercised by Lender if exercise is prohibited by Applicable law.

If Lender exercises this option, Lender shall give Borrower notice of acceleration. The notice shall provide a period of not less than 30 days from the date the notice is given in

an10 03 OII Page 4 of 6

accordance with Section 15 within which Borrower must pay all sums secured by this Security Instrument. If Borrower fails to pay these sums prior to the expiration of this period, Lender msv invoke any remedies permitted by this Security Instrument without further notice or demand on Borrower.

(B) WHEN MY INITIAL FIXED INTEREST RATE CHANGES TO AN ADJUSTABLE INTEREST RATE UNDER THE TERMS STATED IN SECTION 4 ABOVE, UNIFORM COVENANT 18 OF THE SECURITY INSTRUMENT AS DESCRIBED IN SECTION 11(A) ABOVE SHALL THEN CEASE TO BE IN EFFECT, AND UNIFORM COVENANT 18 OF THE SECURITY INSTRUMENT SHALL INSTEAD READ AS FOLLOWS:

Transfer of the Property or a Beneficial Intarest in Borrower. As used in this Section 18, "Interest in the Property" means any legal or beneficial interest in the Roperty, including,'but not limited to, those beneficial interests transferred in e bond for deed, contract for deed, installment sales contract or escrow agreement, the intent of which is the transfer of title by Borrower at a future date to a purchaser.

lf all or m y part of the Property or any interest in it is sold or transferred lor if a beneficial interest in Borrower is sold or transferred and Borrower is not a natural person) without Lender's prior written consent. Lender may, at its option, require immediate payment in full of all sums secured by this Security Instrument. However, this option shall not be exercised b y Lender if exercise is prohibited by Applicable Law as of the date o f this Security Instrument. Lander also shell not exercise this option if: (al Borrower causes t o be submitted t o Lender information required by Lender to evaluate the intended transferee as if a new loan were being made to the transferee: and lb) Lender reasonably determines that Lender's security will not be impalred by the loan assumption and that the risk of a breach of any covenant or agreement in this Security Instrument is acceptable to Lender.

To the extent permitted by Applicable Law, Lender may charge a reasonable fee as a condition to Lender's consent to the loan assumption. Lender may also require the transferee to sign an assumption agreement that is acceptable to Lender and that obligates the transferee to keep all the promises and agreements made in the Note and in this Security Instrument. Borrower will continue to be obligated under the Note and this Security lnstrument unless Lender releases Borrower in writing.

If Lender exercises the option to require immediate payment in full. Lender shall give Borrower notice of acceleration. The notice shall provide a period of not less than 30 days from the date the notice is given in accordance with Section 15 within which Borrower must pay all sums secured by this Security Instrument. If Borrower fails t o pay these sums prior to the expiration of this period, Lender may invoke any remedies permitted by this Security lnstrument without further notice or demand on Borrower.

12. MISCEUANEOUS PROVISIONS In the event the Note Holder at any time discovers that this Note or the Security lnstrument or

any other document related to this loan, called collectively the "Loan Documents." contains an error which was caused by a clerical or ministerial mistake, calculetion error, computer error, printing error or similar error (collectively "Errors"), I agree, upon notice from the Note Holder, to reexecute any Loan Documents that are necessary to correct any such Errors and I also agree that I will not hold the Note Holder responsible for any damage to me which may result from any such Errors.

If any of the Loan Documents are lost, stolen, mutilated or destroyed and the Note Holder delivers to ma an indemnification in my favor, signed by the Note Holder, then I will sign and deliver to the Note Holder a Loan Documer~t identical in form and contant which will have the effect of the original for all purposes.

I,. ,: try+ P 3 , Page 5 a1 6 /?

WITNESS THE HANDfS) AND SEAUS) OF THE UNDERSIGNED.

pay m uw order of DB SWTURED PRODUCTS, INC.

Without RecOUrSe WASHINGTON 1 MUTUAL BANK, PA

Nashington kutua~ Bank, F.A. !2 I 0 Enterprise Drive 'loreme, SC 29501 QTTN: Doc Ops Mailstop FSCE 440

Recorded I RtC FEE 76.W

I Ufficial Records I Count Of I

S(r(1R $IRB(\HA 1 JOSEPH E. IULLMO I

i wc W:88F11 Z95ep-2885 1 Page 1 o f 24

--A [Space Above Thim Une For Recordkrg Dotal -- --

FIDSLITP EUTIOHAL TITLE CO 220641

DEED OF TRUST

Words I M O ~ in multipla sections of this document ere defined M o w and other words ere deftnod in Sections 3, 11, 13, 18, 20 end 21. Certain rules regarding the uMge of words used in this document are dso provided in Section 16.

1A1 '8.anlcy knhummt' means this document, which Is doted -, together with ail Rid076 to this d0~uIYNrlt. (B) 'Bow-' is DAVID W. GATES, TRUST66 OF THE DAVm W. GAm8 TRUST DATED A-T 5 . 1996

--- --

Grrower is the trwtor under this Security Inatrumant. 1C) "L.nd.rm is fi ' ' '& tender is a organized and existing u&r the laws of

, Lender's address is I D 0 - 0

Lender ir the beneficiary under this Seourlty Inwument. (Dl "T~sh . ' is WIKRUIA V CiMPIWy -- ( E ) " N O W means me pmmlasory note rignod by Borrower snd dated September ao, zoos . The Note Mates t h e Borrower owes Lender - o T ~ v - ~

L 00/100

-- Dollars (U.S. $ 1,142,302 .OO I bIus intmmt. Borrower has p r o m i d to pay this debt in regular Periodic Payments and to pay tha debt in full not later than 1. 2035 . IF) 'Roprry" moms the propeny tha I6 dd.cribed below under the heading 'Transfer of Rlgha in the PropMy." (G) 'Loan' meana tho debt btdenced by the Note. Dlun intoma. any prqmvment chwgea m d ime

UL charger due under the Note, and all surna d , under this Security Inatrumant, plur interest.

CCUFORNIA ~ 2 ~ x 8 mom -

(H) 'Rldm" means dl R i i r s to this Securitv lnarument that we executed by Borrower. The following Rlders are to be executed by Barrowar [check box as appllcebbl:

@ AdJusmMs Ras Rlda OcanQmmumRidr 1 4 FarnW M a r [7 Gradustad Pavrnent R h Plrnnd Unit Dwekmml R#n Blwashiy P a m m Rlder [7 B&an Rider [ZI Rm Impmuamant Rider Second Home Rklm

I omeru rs~scifv~

(I1 'AppkWo law" means dl controlling spplkable fadad, state and local amuma, regulations, ordlnancea and sdministrdve rules end orders (that have the effect of law) aa well M all applicable flnal, non-appdable judicial 4nlons. (J1 'Camnnmlry Aaaod.tkn Dwa. h... m d hwnmmle- mema dl d m , fees, a8seasm0nm and other chergw that are imposed on Borrower or the Ropsr~y by a condominium association, homeowners msoclaion or similar orgsnlzmion. (K) 'El.c(mnk Fund. Trmafar' means any transfer of funds, other thm a tranoactlon originated by check, draft, or aimllar paper instrument. which is initluted through an dectronlc terminal, telephonic Instrument, computer. or magnatlc tape so as to order. Instruct, or authorize a financial institution to debb or credit an account. Such term I-, but ie not Ilmitad to, point-of-rele trsnsfers, automated teller machlne t r e n s ~ o ~ , wanofera initiated by telephone, wire transfers, and automated cieeringhouae transfers. (C) ' h a o w I-" means those items that are dwrlbad in Section 3. (M1 'Mbmlheow Ramb" means m y comp.n*alon. settlement. awerd of damages, or p r o d s . whether by way of judgment. d e m n t or otherwise, paid by any third party (other than insurance proceeds paid under the ~ e r a g ~ deecrlbed in Ssction 5) for: (i) damage to, or dentruetion of, me Property: iii) condemnation or other taking of all or any pert of the Property; fiii) canveyance in lieu of condemnation; or (Iv) misrwrseentations of, or omissions as to, the value andlor condition of the Property. (NI "M- Imunner" means insurance Protecting Lender against the nonpayment of, or default on, tho Lorn. (0) 'P.rkdic Pqmmt' means the w u l d y adduisd mount due for li) principal and interest unda the Note, plus (A) any mourns under Section 3 of thk Security Instrument. (P) 'RESPA" means the Red Eaats Ssttlamant Roceduras Act (12 U.S.C. Suction 2801 a am.) and its implwnantlng regulation, Regulation X (24 C.F.R. P a 3600). rn they might be amended trom time to tlme, or any sddltlond or aucwawr legirlotlon or regulation that governs the ssme subject matter. As ueed in this SOCurIty Instrument, -RESPA' refers to all rwulremants and rsstrictlom that are lmpawd in regard to a 'federally dated mortgage loon" even if the Loan does not qusllfy em a "federally rd& mortgage loanC under RESPA. (a) "Sumow- h lnnrrt of Eawowa" means my paw that has taken tltk, to the Propany. whether or not than partv has assumed Borrower'r obligetiorw under the Note endtor this Security Instrument.

TRANSFER OF RIGHTS IN THE PROPERTY

This Securky lnmrummt recur- to M a r : (1) the mpaymmt of the Loan. and all renewals, extendona and m o d i i l ~ l o n r of the Note; and (Ill the patonnm~a of Borrower's covenants and agrwments under thin Securlty Instruman W the Note. For this purpose. Borrower irrevocably

grents and conveys to Trumm, in trust, with power of sale, the folbwing deacrlbed property located In Santa Barbara County, Cdiiornia:

JJXU& DESCRIPTION ATTACHBb HERBTO AND MADB A PART HERBOF.

which currently has tho address of - [SuDatl

93105 -. , California ("Property Address'): R l p l

TOGETHER WITH all the improMmsng now or herwfmf cnected on tha property, and dl swanente. appunmancsa. m d fixtures nuw or hereafter a pan of the proparty. All rapt-ents and additlone shall also be covered by this Sacwlty Instrument. AN of the foregoing Is refwed to in this Sacurity instrument M the "Property."

BORROWER COVENANTS t h a Borrowor ir IawtuHy asisad of the eatate hereby wnveymd md has tha right to grant and convey tho P r o m and that the Ropsrty is unsncumbsred, except for encumbrance8 of record. Borrower warmta Md will detsnd ganerdly the title to ths Property against dl clrlms snd demanda, subject to any sncumbrmcsa of rewrd.

THIS SECURlM INSTRUMENT comblnes uniform covenants for national use and non-uniform covenants with llmlted vsriations by jurlrdlctlon to constitute a uniform mcurity instrument covering red p r o m .

UNIFORM COVENANTS. Bonowsr and L d 6 f C Q V m Mid agrse 88 MlOWS: 1. PnymNlt of Rkrdpd, Irmfert, lEwronr itmr. R.p.ynnnt chugs. rrd lato ChmrgaD.

Borrower shell pay when due the principal of, end hereclt on, the dabt evidenced by the Note a d any prepayment charges and lste chergea dm under the Note. Borrower shall slao pay funds for Escrow Items pu rwa t to Sectlon 3. Paymento due under the Note and this Security Instrument shdl be msde in U.S. currency. Howwu. If env check or otha instrument rsodved by Lender a, payment under the Note or thls !%curlty ln8trumsnt is ramad to Lender unpaid, LeMLw may require that any or dl wbaequent paymsms due unda 7he Note and this Security lrutrumsnr be made in one of more of the following forms, en selected by Lsndsr: (a) m h ; (b) money order; Icl certlffed check, bank check, treasurer's check or cashier's check, provlded any such check is drawn upon 8n InaiMlon whose daposirs are Insured by 0 federal egency, instrumentality, or entity; or (dl Electronic Funds Trenefer.

Paymento are dwmad received by Lendsr when rer*ivsd at the I d o n designated in the Note or a such other location w mey b. dodonaad by Lender In accordmca wlth the notice provlsions h Sadon 15. Iander may mtwn any p s y M or p d d payment if the payment or pertial vayments are inwfflcimt to brlng th. Loan current. Lender may accept any payment or partiel payment insuffkient to bring the Lorn currant, without weher of wry rigMs hereunder or prsludlce to its rights to r W ouch psyment or pertid pay- in the future, but Lender is not obligsted to apply such payments at the t h e ruch PaVmen(r are accepted. If each Periodic

Psyment is applied as of its scheduled due date, thsn Lendsr need not pay intermt on unspplied funds. Lender may hold such unwplled funds until Borrower makm payment to bring the Loan current. If Borrower d m not do so withln a reasonable period of tlme. Lender shan elthsr apply such funds or return them to Borrower. If not applied earlii, such funds will be appiled to the outstanding principal balance under the Note lmmedistslv prlor to foreclosure. No offsst or claim whlch Borrower might have now or in the future egalnrt Lender shall rellwe Borrower from making payments due under the Note and thls Security ln8trummt or performing the covenants end agreements socurad by this Security Instrument.

2. AppRaUm of PEymmb or -. E x w t as otherwise described in this W o n 2, dl payments accepted snd applled by Lander ahall be applied in the following order of priority: (a) Interest: due under the Note; (bl principal due under the Note; fc) cvnounm due undw Section 3. Such payments shell be applled to each Periodic Payment in the order in which it became due. Any remeinlng amounts shall be applied first to late charges, second to any other amounts due under thb Security inlrument, and then to reduce the principal bdance of the Note.

If Lender recelves a payment from Borrower for a delinquent Periodic Payment which indudss a suffldent amount to pey any charge due, the paymem may be applled to the dellnqwnt payment and the late charge. if mom than one Periodk Payment is outstandlng. Lmdw may apply any payment received from Borrower to the rqmvment of the Paiodk Payments if, and to the extent that, each payment can be pJd in full. To the extent thst any e x w e exista after the payment is applied to the full payment of one or more Periodic Payments, such excess may be applied to any late oharges due. Voluntary prepayments shall be applied first to any prepayment charges and then as described in the Note.

Any appllcaion of payments, inauranor praceeda, or Miacallsneaus R o d s to principal due under the Note shdl not extend or pompone the due date, or change the amount. of the Periodic Payments.

3. Fund. tol. €&wow I-. Borrower .hall pay to Lender on the day Periodic Psyments are due under the Note, until the Note is pald In full, a rum (the "Funds') to provide for pbyment of smounts due for: (a) taxm and aseesaments and other items whkh can mein prlority over this Securlw lnetrumsnt 8s a lkn or encumbrance of the Roputy; fb) leasehold payments or ground rents on the Property, il my: fc) premluma for any and all Insurance required by Lsnder under Seetlon 6: and (d) Mongage Insurance prsmlume, if any, or m y sums payable by Borrower to Lender in lieu of the payment of Mortgage lnsurnrcs prwnlums in accordonce with the provisions of SeGtion 10. Thee I t m n are called 'Escrow Item." At origination or a any tlme during the Term of the Loan, Lendw may require that Community Association Dues, Fees, end Assessments, if any, be escrowed by Barrowex. and auch dues, fesm and awaments shell be en Escrow Item. Borrower shall promptly furnlsh to Lender all notices of amounts to be w i d under thii Sectlon. Borrower shall pay Lender the Funds for Escrow Items u n b Lander waives Borrower's obligation to pay the Funds for any or dl Escrow Items. Lender may wdve Borrower's obligation to pay to Lender Funds for any or all Escrow ltems al any tlme. Any a h Wdver may onw be in writing. In the event of such waiver, Borrower shall pay dlrectly. when and where payable, the amounts due for any Emrow Items for which payment of Funds has boon wdved by Lender end, If Lsnder requires, shell furnish to Lander receipts wldenclng such payment wlthin such time perlod sa Lender may require. Borrower's obligation to make wch pavmenta and to provide recdpts shall for all purposes be to be a covenant ad agmSmant contained In thls Se42urlty instrument, as the phrase 'covenant and agreement' Is wed in Sealon 9. If Bwrowar lo obligated to pay Escrow items directly, pursuant to a waiver, and Borrower fdls to pay the amount due for en Escrow Item, Lender may exwcise Its rlghtn Undsr Sectlon 9 a d pay such mount and knower shall then be obligated under S d o n 9 to repay to Lander m y such amount. Lender mey revoke

03-0643-070494803-3

the waiver as to any or all Escrow Iterne at m y time by a m i c e ghrm in accordance with S e u h 15 and, upon such revocation, Borrower shdl pW to h d e r all Funda, and in such mounts, that era then required unda this Section 3.

Lender may, at m y time. cdlsct and hold Funds in an mount (01 sufficient to psnnlt Lender to apply the Funds at the tlme specified under RESPA, end (b) not to erccwd tb msximum emount a lender can requlre under RESPA. Lender shall d m a t e the amount of Funds due on the basts of current data and reasonable mimetea of expmdltwea of future Escrow Items or otherwise in accordance with Applicable Law.

The Funds shdl be hdd in m inatitutlon whom dspo&t!~ are inrured by a fsderd agency, Ineaumentdil. or sntw lincludin~ Lander, if Lmnder Is an inainnion whose depoelts are sa Imufed) or in m y W e m l Home Lorn Bank. Lender shdl spply the Funds to pay the b r o w Items no later than the time swif ied under RESPA. Lender Shall not charge Borrower for holding end applying tha Funda. annually analyzing the escrow amount, or verifying the Eacrow Items, unlage Lender pays Bormwer interest on the Funds and Appllwble Law permits Lender to make such e chnge. Unless an egrwment is made in wrltlng or Applicable Law requires interest to be peid on the Funds, lander shdl not be required w pay Borrower m y interest or emings on rho Funds. Borrower and Lender cen agree In writing, however, that intomat shall be paid on the Fun&. Lender shall give to Bwrower, wlthout &We, en M a t accounting of tfrs Funds 88 required by RESPA.

H there in s wrplw of Funds held in escrow, M ddinsd under RESPA, Lander shall account to Borrower for the excess funds In accordance with RESPA. If there is a shortage of Funds hdd in escrow, as defined under AESPA, Lender ehdl notify Borrower ss required by RESPA. and Borrower shall pay to Lenda the amUnt wcasciafy to make up the short.ge In accordance with RESPA, but in no more than twelve monthly payment.. If them is a deficiency of Funda hold in sscrow, w defined under RESPA. Lender shall notify Borrower as required by RESPA, end Borrowsr ahell pay to Lender the mount necessary to make up the deficiency In accordance wlth RESPA, but in no more them twdve monthly payments.

Upon payment In full of all sums secured by thla Sacurity Instrument, Lender shall promptly refund to Borrowsr any Funds held by Lander.

4. Chafgm: b. Borrower ahdl pay an taxes, ansomwnts. charges, fines, a d impositions attrlbutsble to me Propsrty whlch oan attdn priority over this Security Instrument. lowehold payments or ground rents on the PropoW. if any, end Community Association Dues, Fees, end Aeaetaament~, If any. To the extent that there items ere Escrow Items, Borrower shall pay them in the manner prwlded in Section 3.

Borrower shall promptly discharge my lien whlch h m prlorlg over thls Sewrlty Instrument unless borrower: (8) agrsss in writing to tho payma'It ot the otdigaion escursd by the tien in a manner accaptabb m Lander, but only ao long aa Borrower is psrformlng such agreement: (b) conteats the lien In good faith by. or dstsnd. agdnst m f o r m t af the lien In, legd procsedinga which In Lender's opinion operate to prevent the enforcement of the llon whlla those proceedings are pandlng, but only untll such prooaadlngs are Concluded; or (c) M c u r a from the holder of the lien en agrwment sstiafactorv to Lender eubordlnstlna the lion to M a Seourlty Instrument. If Lender determines that any part of ths Property is subject to a lien whlch can attain prlorig over this Securky In~rument. Lander may glve Barrower a notice idmtifylng tha lion. WRhln 10 days of ths date on whlch that notice 1s given. Borrower shall d a f y the Aen or take om, or more of the actions set fbrth above In thls Sectlon 4.

Lender may require Borrowef to pay a one+ttlme Charge for a d atsta tax Mtiflcatim mdlor reporting sewice uWd by Lender in eonneotlon wlth thlr Loan.

6. Proprrty k n u ~ . Borrower rhdl Loop the irnprovemnts now axining or hereafter erected on the Propeny lnwred ~ I W IOM by fire, hazard8 included within the term "extandeci coverage,' and any other hazards indudlng, but not llmitsd to, earthqu&m and floods, f w which Lander requires insurance. This insurance shell ba mclintdned in the amount. (including deductible levels) and tor the periods that Lender rqukw. ma Lender requlra pursuant to the preceding sentsnces can change dudng the term of the ban. The insurance carrier providing the insurance shall be chosen by Borrower s u W t to Lender's right to dinspprove Borrower's choice, which right shall not be exercised unreasonably. Lendw may rOqul10 Borrower l o pey, in connection with this Lorn, either: (a) a onatime charge for flood zone dotenninetion, csnificatlon and tracking mvicm; or (b) a onetime charge for noad zone doterminmlon and mlficst ion savices and subsequent charges each time remsppinge or dmiln changsa occur which reasonably mlght affect such dstsrmlnation or certification. Bonowar shall dso be rssponribk, f a the payment of any imposed by the Federal Emergency Managemem Agency in connection with the revlew of any flood zone determination rssolting trom en o ~ t l o n by Borrower.

If Borrower fails to maintain any of tha coverqeu deacrlbed above, Lender may obtain insurance coverage. at Lander's option and Borrowor's expense. b n d e r 1. under no obligation to purchase any psnicuia type or mount of coverage. Lender may purehaw such Insurance from or through m y cornpony aCcaplab(e to L& InddnE, wfthout limltdon. an dlliate of Lendar. and Borrowsr aoknowledgss end agree8 that Lender's atfillme mw recelve wrmidwmion for such purchase. nerdore, such coverage Shdl cover Lender. but might or might not protect Borrower, Borrower's equity in the Property, or the wntcnts of the Ropenv, wainst m y risk, hazard or lrsblllty and mlght provide areater or lesser coverage than wss prevlwsly in effect. Borrower acknowledges that the cost of the insurenm covarclge ao obtained might significantly m d the c w t of lnaurance that Borrower could hareobmlned. Any mount8 disbursed by Lendw under this Section 6 shall become sddiiianal debt of Bbrrower secured by this Securm/ Inatrumat. Thane amounts shall bear interaclr at the Note rate from the date of disbursement and shall be psyable, with auch interset, upon notlw from Lender to Bonower r e i n n payment.

AII insursnee policiea required by Lender and renewals of such poliocw shall be subject to Lender'e right to disapprove such pollciss, shall inctuds a standard m m ~ e clause. and MI name Lender w mortgagee andlor as an addMona1 low payee and Borrower futttw agrsee to -ally mslgn rights to inuurancn proceeds the holder of the Note up to the amount of the outatonding loon b a l m . Lender 8Mll hare the rlght to hold the pdicier, and renewal cmtiticatas. If Lender requires, Borrower shali promptly QIVB to Lander all receipts of pdd premiums and ranewal notices. If Borrower obtains any form of insurance coverage, not otherwise required by Lender, for damage to, or deetruction of, the Ropartv, such policy shall include a standard mortgage dause and shdl name Lmdm se mong.gee and101 a8 On additionel loss peyw.

Barrower hemby absalucsly end 1-y mlgna to Lsndar all of Borrower's r i~ht , thle and interen in and to dl procds from any imwcmcs p o k y lwhrther or not the insurance policy was required by Lander) that are due, pdd or payable whh r~apact to any damage to such property, regardless of whether the insurencr, pollcy is asrablluhml before, on or after the date of this Security Instrument. By absolutely and lrrwocsbly e~slgnlng to Lertdar all of Borrower'r rlghts to receive any end dl proceeds from any lnwranw pollcy, Rorrower b a b y waives, to the full extent allowed by low, all of Borrower's rlghts to recelve any m d all of auch insurance pro&s.

Borrowcn hersby abaolutdy Cmd InwwaMy rPrignr to LUXku dl of Borrower's right. titfe and interest in m d to (a) any and all dJm, p r m t and future, known or unknown. atwolute or ccnrlngent, (b) any and all caucurr Of action, fcl any M d dl judgments and mlements (whether through liiigalon, medlation. IIrbiWatl~n or Ottwwl~) , ) , (dl m y and all funda sought against or from any party or partlw whosoaru, and (a) any and all funds recalved or ractwvable in

03-0643-070494803-3

connaction with any damage to such propmty, resulting from m y cause or causes whatsoever, including but not limited to, land subsidence, landslide. windstorm, earthquake, fire, flood or any other cause.

Borrower agrees to exscute, ecknowladga if reqlMned, and deliver to Lender, andlor upon notice from Lender shall requwt any inauranm agency or company that has issued m y insurance pollcy to execute and ddiver to Lander, any additional instruments or documents requested by Lender from tlme to time to wldence Borrower's absolute end lrrwocabk, a88ignmanM set forth in this paragraph.

In the went of loes. Borrowa ahdl ghre prompt n 0 t h to tho insurance carrier and Lender. Lender may make proof of loss If not made promptly by Borrower. U n l m Lender and Borrower otherwise agree in writing, any insurance proweda, whether or not the undalylng insurance was requlred by Larder. shdl be epplied to remoraion or repdr of the Prop-, if the restoration or repalr is sconomicdly feaslble and Lender's wur i t y is not lwsened. During such repsir and restorstion period. Lender shell have the right to hold such insurance procads until Lender has had an opportunity to inspect such Property to emure the work has beon completed to Lender's aetlsfactlon, provided tha such inspection shdI be undaalm promptly. Lander may disburss procwda for the repairs and restoration in e single payment or in a wries of progremm payments as the work is completed. Unless ar agreement I# mado in writing or Applicable Lsw requircw interm to be pdd on such insurance proceeds. Len& ahdl not be requirod to pay Borrower any interest or earnlngs on such procasds. Fees for public edjusters, or other thlrd panles. retained by Barrowa shall not be paid out of the insurance proceeds and ehdl be the sole obligetion of Borrower. If the reatoration or repair is not economlcaliy fesslble w Lender's wcurity would be Iwsoned, the insurance proceeds shdl be applied to the wms secured by this Securlty instrument, whether or not then due. with the excms, if my, pdd to Borrower. Such insurance proceeds shdl be did in the order provided for in Sectlon 2.

If Borrower abandons the R~perty, bndsr may file, negotlafo m d settfe m y available insurance clalm end related matters. If Borrower doen not respond withln 30 daye to a notice from Lender that the Insurance carrier has offered to nettle a claim, then Lender may negotiate and settle the claim. The 30-day period will begin when the notlce Is given. In either event, or If Lender acquires the Property under Saction 22 of otherwise, Barrower hereby ssdgns to Lender (a) Borrowar's rights to sny inaurence p r o d s In an arount not to axcaed the mounts unpaid under the Note or this Security lnatrument, end (b) my other of Borrowsr's rights ( 0 t h ~ than t!w right to any refund of unearned premiums peld by Borrower) under all inauranee policies coverlng the Property, insofar ss such rights are applicable to the coverqa of the Property. Lender may use the insurence proceeds either to repdr or reatwe the Property or to pay amounts unpaid under the Note or thia Security Inwument, whether or not then due.

8. OD-. Borrowsr shdl occugy, tutmblish, and urs the RopatV ar Borrower's principal rwidmce within d a y days aftof the execution of this Security lnamment and shdl continue to occupy the Property as Borrower's principal d d m c e for st h t one war after the dste of occupancy, unless Lender otherwlss wrses in writing, whlch conesnt shall not be unressonably withhekl, or unkas extanuating c l r c u r n s t m exist whlch are beyond Borrower's control.

7 . ~...~.(lon. Munmmm and QrWalbn ol ih. -: Inumetbm. Borrower shdi not destroy, damage or impair the Ropwty. w remove Or dmnoliah any bulldlng thereon, allow the Propem, to deteriorate or wmmlt waste on the R o w . Whaha or not Bormwer is rssiding in the Prapargr, Borrowsr ahdl maintdn th. Ropucy in good wndltion and repair in order to prarant the Property from detariorating or decreadng in vdua due to it. condltlon. Unless it is determined pursuant to Sectlon 5 that repair or rsltMaion Is not oconarni~lly feasible, Borrower shall promptly repair the Property in good and workmanlike manner if damaged to avoid further

deterlormlon or damwe. Lander shall, unless OUIarwire agreed in wrltrng between Lender and Barrower, hwe the right to hold insurmw or condemndon proceeds. If insurance or condamndon proceeds me paid in ~nnoct ion wlth damage to. or the taking of, the Property, Borrower shall be rasponsibla for Wsirfng or restoring the Property only if Lander has r e l d proceeds for such purpose8. Lender m w dl8bur.e procads for the repah and restoration in a single payment or in a serlas Of progrwa Payments er the work Is completed. If the insurance or condemnstion p r o d s are not sufflciant to repslr or rwtore the Property. Borrower is not relleved of Borrower's obllgstlon fM the wmplatbn of such repair or restoration.

Lender or its agent may mfke rewonable mtrh upon and inspections of the Property. If it has rassonablo cause, Lender may inspect tho interior of ths hnprovmems on the Property. Lender shall g lw Borrower notlce at the tima Of or prlor to such an intaior lnapamion .psclfying such rewonable causn. Lends d m not mdrs any warrantv or reprmtatlon regarding, end assumes no responsibility for. the work done on the Property, and Borrower ahdl not have any right to rely in any way on any inspectionfsJ by or for Lender or its agent. Borrower shdl be solely responsible for determining that the work is done in a good. thorough, efficient and workmanfike manner in accordance with dl app)lC&b laws.

Borrower shdl la) appear in and defend any &on or proossdinp purporting to dfm the security hereof, tha Property or the rights or powem of Lander or Trustow (b) at Lsnder's option. ssstgn to Lender, to the e n m t of Lender's Intomst, m y cldms, demands, or c a m s of action of any kind, and any award, court judgement, or p r d s of settlmwent of any such clalm, demand or cwse of action of any kind which Borrowsr now has or may hereafter acquire arising out of or rdatlng to any intareat In the acquiskion or oHmershlp of the Property. Lender and Truaw shall not have m y duty to prowcute any auch d m , demand or cwse of action. Withwt limiting the foregoing. any auch clelm, demand or caun of action addng out of w relating to any Interest in the acqulsltion or ownership of the PropcmW may indude (1) m y such injury or damage to the Property including wlthout Hmit injury or dunage to my atructum or improvement slhratd thereon. (ii) or any claim or came of 6ctl0n In favor of Borrower which arises out of the transaction financed in whole or in part by the msklng of the loan secured hereby. (lii) any clalm or cause of actlon in favor of Borrower (except for bodllv inlury) which arises ae a result of any neglfgent or improper construction, iMMllatlon or rapalr of the P r o m lncludlng without llmit, any surface or subsurfecs thereof, or of m y buHdlng or ntru~tufa thoreon or (w) m y p r d e of insurance, whether or not raquired by Lender. pcryclble as a rwult of any dmsge to or otherwise relating to the Property or any interent therein. Lender may apply. use or release such monies 80 received by it in the s m manrmr eel provided In Paagrclph 5 for the proweds of Insurance.

8. Bonorwr'm L o m Appkdon. Borrowor shsll be in defsuh If, during the Loan sppllcdon process. Borrower or any persons or entlth. acting at lhe d h d o n of Borrower or with Banowerrs knowledge or conrent gwe materldly fdne, mldmdlng, or inrnxwata informslion or statement8 to Lander (or fdled to provide Lsndsr with material information) in connodon wlth the Loan. Matala1 reprwsmatlons include, but me not limited to, r-s concaning Borrower's occupancy of the Property as Borrower's principal rashlance.

B . P ~ o f L . n d . r ' s I n ~ h r ) l . R o p . r t y . n d ~ U n d r m * 8 . a r m y l ~ t ~f (a) Borrower fails to psrfarm the covenants and qrwtnonts comalned In thlr Security Inarumant. (b) there b a lwl proceding that mlght algnlflcsntIy affect Lander's interwt In the Property andlor right8 under lhls Security Inhumant (such a a proceadlng in bankruptcy, probate, for condemnadon or forfdulra, for dorwment of e h wMch msy attsln prlority over this S a d t y ~narumant or to enforce law$ or rogulaions), or (c) Borrower haa abandoned the Property, then Lender may do and p w for whatever is rIImon&le or appropriate to protect Lender's intareat in the Property and rlghta under thls Security Instrumam, including protecting

andlor mmsing the value of the Property. and sscurlng mdlor rapairing the Property. Lendw's actlona can include. but are not limited to: (a) paying any sums secured by a llen which has priority over thii Sacurity Inarument; (b) c r p ~ n g in court: and lc) paying r e m a b b attorneys' fees to protect its intereat in the Property d l o r rights under this Security Instrument, including its secured podtlon in a bankruptcy proceeding. Securing the Property Includss, but Is not limited to, enterlng the Property to make repairs. changa locks. replace or board up doors and wlndows, drain water from pips, eliminate building or other wde violations or dangerous conditions, and have utllltlw turned on or off. Although Lender may take action under this Sectlon 9, Lender does not have to do so and is not under any duty or oMigation to do so. It Is aprasd that Lender incurs no liability for not tsklng m y or all ectiona authorized under this Section 9.

Any amounts disbursed by Lender under mls Section B shdl become ddWonal debt of Borrower secured by thia Security Inarument. T h e amounm ahall bear interest at the Note rate from the date of dlsbursmant and shall ba payable, with such interest, upon notice from Lender to Borrower requesting peyment.

If this Security Instrument is on a leawhold. Borrower shall wmply with all the provisions of the laase. If Borrower acuuirea fee title to the Property, the l w 8 h d d and the f w tlde shell not merge unless Lender agrecw to the merger in wrlting.

10. Ma(g.g. I n w r m . If Lender requlnd Mortgage Ineurenca as a condition of makina tha Loan, Borrower shdl pay the premiums required to mdntain tho Mortgage Ineuranoe in effect. If, for any reason, the Mortg- Insurance coverage required by Lender cease8 to be available from the mortgage insurer that previously provided such insurance and Borrower wm, required to make sap~ately dwignaed payments towlrd the prmiurna for Mortgage Insurance, Borrower shall pay the premiums required to obtain coverage wbstontidly equivdem to the Mortgage Insuranw prwiously in effect, st a coat aubrtantially equivdent to the coat to Borrower of the Mortgage Insurance prwiously in effect. from an alternate mortgage lnaurw docred by Lender. If subatantidly equivalent Mortgage lnaurance OOvMage is not wallable, Borrower shall continue to pay to Lander the amount of rhe separatdy designated paymen- that were due when the insurance coverage ceased to be In affect. Lender wlll accept, use and retain these payments w a non-refundable lose rewrve in lieu of Mortgage Inswsnce. Such loaa reserve shall be non-refundable, notwithstanding the fact that the Loan Is ultimately paid in full, and Lander shall not be required to pay Borrower any interant or eerningn on such lors renerve. Lmdm can no longer raquire loss rawva payments If Mortga~a Insurance wverqle (In the amount and for the perlod that Lender requires) provided by an insurer selected by Lender agdn beoomw ardabte, is obtained, and Lander requires separmdy dmlgnated payments toward the prsmlurns for M o n g w insurance. If Lender required Mongage Insurance as a condition of making the Loan and Borrower was required to make separately dasignmed payments toward the premiums for Mortgwe Insurance, Borrower ahdt pay the premiums requlred to mdntaln Mortgege lnruranco In effect, or to provide a non-refundable 108s reawve. until Lander's raquiremmt for Mortga@e Inwranco ends in accordance with any written agreement betwean Borrower and bnder providing for such terminalon or until terminmion is required by Applicable Law. Nothing in this Section 10 affects Borrower's obligation to pay interm at the rate pmvlded in the Note.

Mortgage Insurance reimburses Lender (or any entity that purcham the Note) for certain l o a m it may incur if Borrower doan not rway the Loen as weed. Bcrroww is not a party to the Mortgage Insursnca.

Mortgsee inwrara weluae thdr totd rlrk on J1 wch innurmca In ~IXCO from tima to trme, and may enter into agrmenta with other partlen lhat aham or modify thdr risk, or raducs logcw. Thwe agreammta are on terrna and wndltlana that are satlafactory to the m o r t g w Insurer and the other party (or pmlas) to these qrscunants. Them aQmamentr may require the mortgage

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insurer to make payments wing any aource of funds that the mortgags inaurar may have available (which may include funds obtalned from Mortgqe Insurance premiums).

As a raault of thewr agreements, Lander, m y purch- of the Note. another ineurer, any rdnsurer, any other entity. or any affifiate of m y of the foregoing. may receive (directly or indirectly) amounts that derive from (or might bs chnracterized as) e portion of Borrow~'a payments for Mortgage Insurance, in exchange for sharing or modifying ths mortgage insurer's risk, or reducing losses. If such agreement provides that en nf'Hliae of Lender takes a shere of the Insurer's risk In exchange tor a share of the premiums paid to the inaurer, the arrangement is often tsrmed "captive rainaurmw." Further:

fm) Any mwh ommmtm wl notaffoctth* mantrthat Bonouw hr agmd topay tw Mor(8.g. Imuma. or my other hrmr of Um Lom. Such wA nol inarae thm .matnt Banewar wll ow* fa Moftgop Inumo.. md thav wlll not .ntkk B o m w r to any refund.

fb)Any#uch- w l l n o t ~ t h . r l @ m l b n o w n h r - A m y -withnrp.ctm the Mortgage I n r u r m under the Hormownrn Rot.c(ion Act of lS98 or m y olhr imr. Thue right. my indud. me right to roaalve eacdn d*daurr. m nqurn nd obtmln c a n d o n af me Martgmga Invarm. to hwe the MwCO.O. I n a w a w temlnatud wtonmUally, mdlor to r e a h n e r & m d o f n * . M ~ ~ ~ t h . t - ~ a w u n o d u ~ L h . o f ~ ~ ~ h onncdbnm or tamhuthm.

11. Adgnmant of M b o r b u ~ m Raardr, FarMhns. All Miemllansous Proceed8 are hereby assigned to and shall be paid to Lender.

if the Propsrty is damsged, such M i ~ l m w u a P r o d shall be applied to matoratlon or rapalr of the Property, If the restoration or rwair Is economicdiy faseible and Lsnder'a security is not lemsnsd. During such rapair and restoration period. Lender shall have the right to hold such Mlscallaneous Proowda until Lender hep h8d an opportunity to inspect such Property to ensure the work has b m completed to Lendsr's Salafa~tlon, provided that ouch inspection shQ be undertaken promptly. Lender may pay for the repairs and restoration in a single disbursement or in s series of progress payments M the work Is completed. Unless an agreement is made in wrRing or Appiicabla Law requires intereat to be paid on such Miscdianeoua Proceeds, Lender shall not be required to pay Borrower any intOrWt of earnlngs on such MlsceIl(rn(~~~s Pr&s. If the rmtoratlon or rapalr is not economkdly famlMe or Landor's secdty would be Iewened, the M i d l a n w u a P r d s ehall be qwlied to the sums amired by this Security Instnnnent, whether or not then due, with the exc898. if any, paid to Borrower. Such Miscellaneous Proceeds shall be applled in the order provided for in Section 2.

In the event of a total taking. dwtructlon, or losa in value of the Property, the Mlscdlane~ua Proceda ehall bs applied to the r u m secured by thls Security Innrurnent. whather or not them dw, with the exessa, if any. p&d to Borrowa.

In the event of a partial taking, dwtructfon, or loa In value of the Rapany In which the fair rnarka v d w of the Property imrnedlmsly M o r e tha p a i d taking, dsanuctlon, or low in value is equal to or greater than the amount of the sums secured by this Security Instrument immedlataiy before the partial taking, destruction, or lms in value, urWm Borrows and Lender otherwise Wree in writlng, the sums secured by thia Sscurlty lnclmrment shall ba reduced by the mount of tha Miffisllaneous Proceeds rnultlplied by the following fraction: (a) the iotd amount of the sums secured immodlatdy before the pwtlsl taking. deatructlon. or lorn in value divided by (bl the fair market value of ths Property l r n r n ~ e f y bdOra the patb l taking, dwtruetlon, or loss in value. Any bdance shell be pdd to Borrower.

In the event of a partial taking, dwtructlon, or iw8 in value of tha Property in which the fair market value of the Property immediately befora the partid taking, destruction, or loaa in value is

lers then the amount of the sums secured immediately before the partial taking, dsstruction, or loss in value, unless Borrower end Lender othwwiw 8gfw in wrltlng, the Miscelianeoua Proceeds shall be applied to the sums secured by this Seouritv Inarumart whether or not the sums ere then due.

If the Propmy is abandoned by Borrower. or if. sfter notics by bnder to Borrower that the Oppoaing Party (ea defined in the next sentence) offers to make an award to settle e claim for damagea, Borrower talk to r w o n d to Lander within 30 dsys after the date the notice ia given, Lender is authorized to calla13 end apply the M lsm l lm~~us Rocwid8 either to reatoration or repair of the Propmy or to t b sums secured by thi SB~urity Inmment. whether or not then due. "Oppoaing Pwty' moms the tblrd party that owes Barrowor Mimllaneoue Proceeds or the party against whom Borrower him a right of action in regard to MlsaeHmeous Proceeds.

Borrower ahdl be in default if any action or proCeeding, whether civil or criminal, is begun that, in Lender's judgement, could rerrult in forfeiture of the Property or other material impairment of Lender's intdre8t in the Property or rights under this Security Instrument. Borrower cnn curs such a dafarlt and, if sccderation has occurred, reinstate as provlded in Seetion 19, by causing the saMn or procwdlng to ba diamiawd with a ruling that, in Lender's judgamsnt, precludm farfdhrre of ths Property or othu materiel lmpsirment of Lender's intarest in the Propsrty or rights under thla Security Instrument. Tha proceeds of any awwd or cidm for darnageo that are mrlbutable to the impairment of Lender's interm in the Property ere hereby mmlgned end shell be psid to Lender.

All Miscellaneous Rocwds that we not app l i i to restoration or repair of the Property shall be applied In the order provided for in Section 2.

12. EOROWU MoI R.k.#d: Fmhumm By knkr Not a Wokor. This Security Inmumant cannot be changed or modlfled except as otherwire provlded herain or by a g m e n t in writing signed by Borrower, or any Successor in interest to Bwrower and Lender. Extension of the time for payment or modMcation of arnonlzation of the sums secured by thia Security lnawment granted by Lender to Borrower or any SuccSsaor in Intereat of Barrower shall not operate to release the llebllity of Borrower or any Sucae~~sor in lntaremt of Borrower. Lender shall not be required to commence proceedings agoinst any Suocesaor in Intereat of Borrowar or to refwe to extend time for payment or othemiae modlty mt~rtkstion of the sums secured by this Securitv Instrument by rewon of m y demand made by the originel Bonowar or any Succeason In In-t of Borrower. Any forbearance by Lender in exerasing any right or r a n d y including. wlthout Ifmltation, Lendar's acceptance of psymenfr from third persons, Mltitim or Sucmsscts in Interest of Borrower or in amounts lsss than the amount than due, shall not be a waiver of or preclude the exercise of m y right or remedy. No waiver by Lender of any rlght under this Sacuriw Instrument shall be affective unless in writing. Walver by Lender of any right granted to Lander under this Sscudty lnshument or of any provision of thia Sscurky Instrument aa to m y nanaacrcrion or occurrence shall not be deemed a waiver to any future tlarwactton or occurrence.

13. J d m m d 8.mJ U.bRky; Corlgmn: Z)w#wan md A.rlgn Oow~d. Bwowen covenants m d agrees that Borrower's obligations and iiabllity shall be jolnt and several. However, any Borrower who co-elgns this Security Instrument but dom not execute the Note (a "co-signer"): (a) is co-signing this Security lnafllment only to morteaga, grant and convey the co-signer'a Interwt in the Ropsrty under the terms of tMa Security Instrument; (b) is not personally obligated to pay tha sums 6ocumd by thls Sscurlty Instrummt; and fc) qraea that Lender and any other Borrower can agree to sxtsnd, modify, forbear or m&e any accornrn~d~ona with regard to tho term8 of this %curlty lnrmment or the Note wlthout the co-signer's consent.

Subject to the provlaiona Of Section 18, any Socamor in intereat of Borrower who ssaumes Borrower's obllgaions under this .Security Instrument in writing, and is spproved by

Lender, shell obtain ell of Borrower's rights and benefits under this Sscurity Inetfument. Borrower ahall not be relessed from Borrower's obllgatbns and llabllity under this Securlty instrument unlsss Lender agrws to wch release in wrltlng. The ~ v m m t s and agreements of this Securitv Instrument shall bind (except 8s provided in %dOn 20) and bensfit the succeeaors and wsigns of Lender.

14. Loan Ch-. Lender may charge Borrowar fsss for service8 performed in connectlon wlth Borrower's default, for the purpose of protecting Lender's Interest in the Property and rlghts under thle Security Instrument, including, but not limited to, attorneys' fees, propem Inspection and vduetlon fses. Borrower shdl pay such othm charges as Lender may deem rawonable for s ~ v l e e s rendered by Lender and furnished at the request of Borrower. any Successor in interest to Borrower or m y agent of Borrower. In regard to m y other fwa. the absence of axproan authoricy In this Security lnanrment to chlWg9 a specific fee to Borrowsr shall not be construed as a prohlbltion on the charging of such fee. Lander may not charge fees that are expressly prohlbltad by this Security Instrument or by Applicable law.

If the Loen is subject to a law which eets maximum loan charges, and that law is finally interpretad so that the lnterwt or otha lorn chargw collected or to be collected in connectlon with the Loan e x d ths parmirred limits, than: (a) any such loan charge shall be reduced by the amount nscwsary to reduce the charge m the perminad limit; and (bl eny sums already collected from Borrower which excsaded permitted limlts wlll be refunded to Borrower. Lender may chooae to make this refund by reducing the princlpel owed under the Note or by making a dlrect payment to Borrower. If a refund reduce8 principal, the reduction will be treated as a partial prepayment without any prepayment charge (whether or not a prepayment charge is provlded for under the Note.) Borrower's acceptace of m y such refund made by direct payment to Borrower wlll constitute e waiver of any right of m i o n Bonower might have ~ i a i n g out of such ovsrcherge.

16. Notbm. All notices given by Borrower or Lender in connection wAh this Security Instrument must be in writing. Any notice to Borrower in connection with this Security Inatrumem shall be deemed to have been given to Borrower when mailed by flrst class mail or when actually dellvued to Borrowsr's notice eddrcus If rant by 0 t h means. Notlca to any one Borrower shdl mnaitute notlce to ell BMrowsrs unless Appllcabb Law expres.ly require$ otherwise. The notlce addreae shall ba the Propsrty Addrass unlms Borrower has dmignasd a substitute notice addreas by notice to Lender. Borrower shall promptly notifv Lender of Borrower's change of addresa. If Lender spedfles a procedure for reporting Borrower's ch- of address, than Borrowa shall only report a change of address through that speclflad procedure. There may be only one designated notlce address under this Security inetrumant at any one time. Any notice to Lender shall be given by dellvaing it or mailing it by firm class mail to Lender's addreu, stated herdn unless Lender has d-nmsd another &drear by notics to Borrower. Any notice in connection with this Security lnsnumant shdl not be dscnned to hare bean g i m to b n d w untli sctually recetved by Lender. If any notice required by this Sacuriry instrument Is aim rewired under Applicable Law, the ~pptlcable Law regulrement will satlsfy the corresponding requirement under this Security Instrument.

16. Oavwning Law; Sevrrb)lly; Rufa of CaWmdon. TMs Security Instrument shall be governed by fderal law and the isw of the jurisdiction In whlch the Property is located. All rights and obliglrtbns cantehed in this Security Instrument are rubject to any rs&ementa and limitations of Applicable Lwv. Applicable Law mlght axplicly w lmplicltly Jlow the partien to agree by contract or it mlght be ribt, but such dlanca ehdl not be e o n w d w a pmhlbltlon against agreement by contract. In tha went that any provlelon or claua, of this Securlcy Instrument or the Note conflicts wlth Applicable Law, such conflict shall not affsct other provislons of this Security Instrument or the Note which can be given effect without the

conflicting provision. As used in this Security Instmmcnt: (8) words of the maculine gender shall mean and

include corresponding neuter words or words of the faninins gendar; fbl words in the singular shdt mean and include the plursl end vice versa; and (cl the word "may" gives sole discretion without any obligation to take any action.

17. Barroww's Copy. Borrower shdl ba given one wpy of the Note and of this Security Instrument.

18. Tmnafar of the Ropefly of a Bm(kld Mmt h brrowu. As used in this Section 18, "Intaren in the Property" meaa m y lagd or benaflcld lntwest in the Roperty, including. but not limited to, those bmflclal inme6tu lranafafred in a bond for dead, contract for deed. installment sdes contreet or escrow agrssment, the 1- of which is rhe transfer of title by Borrower a a future d8te to a purchawr.

If all or any part of the Property or any Intarest in the Proparty ia sold or transferred (or if Borrower is not e naturnl perron end a bsneficial intarsat in Borrower is sold or nensfermd) without Lender's prior wrlttm consent, Lender may require immediate payment In full of all sums secured by thin Seeurlty Instrument. However, thls option rhdl not be exerciwd by Lender if such exercise is prohibited by Applicable Law.

If Lsndar axerciws this option, Lodm shall give Borrower notice of &ratlon. Ths notice shdl provlde e period of not lam than 30 from t h ~ dmte the notice is given In mxordancs with Section 15 within which Borrower must pay dl sums sscurad by this Securlty Instrument. If Borrower fails to pay these sums prior to the expiration of this period. Lender may invoke any remedies permlaed by this Security Inmment without further notice or demand on Borrower.

19. Bonaww'a Rl&t te A* AcdmmUon. If Borrower meets m a i n conditions. Borrower shell have the right to have enforcamem of this Socuricy inmumant discontinued at any time prior to the earliest of: (a) five days before sale of the Propsny pursuant to any power of ado contained in thie Security Instrument; (bl such other period as Applicable Law mlght specify for the termination of Borrower's right to reinstate; or (c) entry of a judgement enforcing this Security Instrument. Thoea conditions are thet Borrowa: (el pays Lender ell sums which then would ba due under this Securlty Instrument and the Nots as it no ee&etion had occurrsd; fbl cures any default of any other covenants or agrwmenta: (c) pays dl expenass incurred in enforcing this security Instrument, Including. but not limited to, r e m o ~ b l e attorneys' fses, propony inspaotion and vsluetion fees, and other fees incurred for the purpose of protecting Lender's intersst in the Property and rlghts under this Security Instrument; and (dl takes such action aa Lender may reawnably require to assure that Lender's interest in the Ropwtv and rlghts under this Security Instrument, ard Borrower's obligmlon to pay tha sums cured by this Securhy Instrument, shall continue unchanged. Lender may require that Borrower pay svch relnststsment sums and expenam in one or more of tha following forms, an doctad by L 6 m k (8) cwh; (b) money order; (cl wrtlfisd check, bank c W , tremunr's check Or ~88hler's check, provided any such cheek is drawn upon an inrtitutlon whose depostts ars insured by e federal agency, instrumentnlity or entity: or (dl Electronic Funds Transfer. Upon reinstAment by Barrower. this Security Instrument and obligaion~ secured hereby shall remain fully effeotlve as if no awderntlon had occurred. However, this right to rainstwe shall not apply in tho cane of ~ u w l o n under Sectbn 18.

20.5.k of Noto: C-a of Lom &rubw IYatk. of @lovmm. The Nota or a partla1 intamst in the Nom (together with M a Security Instrument) can be sold one or more times wlthout prior notice to Bonowar. A sob might result In a change in the mtlty (known aa the "Loan Servlcw"1 that collect8 Perlode Peymenta due under the Note and this Security Instrument end parforms other mortgage loan servicing obligations under the Note, thie Securlty Instrument,

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m d Appllc*le Law. There also might be one or more charges of the Loan Servicer unrelated to e sale of the Note. If there is s change of the Loan %wicer, Borrower will be given written notice of the c m e whlch will date the name and addm of the naw Loan Ssnrlcer, me addreaa to which paymants should be made and my other information RESPA requires in connection with a notice of transfer of ssrvidng. If tha Note is sold and thar~ftsr the Loan is m i c a d by a Loan Ssnricsr other than the purchaeer of the Nots. tha mortgage loan servicing obligations to Borrower will remain with the Loan Servicer or be transferred to a succeesor Loan Servicer and are not assurnad by the Note purchaser uniese otherwise provlded by the Note purchamr.

Melther Borrower nor Lender may oommence, join, or be joined to any judicial action (as either an individual l i m t M the manbar of a claea) that arises from the other party's actions pursuant to this Securlty Instrument or thst ailagw ma the other party hm breachd any provision of. or any duty owad by r m n of, this Security Instrument. until such Borrower or Lander has notifled the other party (with such notice given in compliance with the requirements of Section 15) af such alleged breach and afforded the other party hereto s reenonable period after the giving of such notice to takq corrective actlon. If Applloable Law provides a time period whlch must elepee before m a l n action can be taken. thal time period will be deemed to be reaeonable for purposes of thls parsgraph. The nonce of acceleration and opportunity to curs given to Borrower purauant to Section 22 snd the notice of accderation given to Borrower pursuant to Section 18 shall be deemed to satisfy the notice end opportunity to take wrrsctlve action provisions of this Section 20.

21. naudaua Subatmaas. As used In thia Section 21: (a) "Hazardous Subatencw" ere those 8ubatencas deflned ao toxic or hazardous substances, poflutants, or west- by Environmental Law end the following subatamas: gsallne, kaowna, other flammable or toxic petrotaurn products, toxic pesticide8 and harbiddaa, volatile solvents, mataids containing esbwtos or farmddehyde, and radbactive masrids: (b) "Environmental Law" means federal laws end lews of the juridlction where the Property lo located that relate to health, sefety or environmantal protection; (c) 'Environmental CIeaup' includw any reaponaa actlon, remedial action, or removal action, as defined in Envlronmental Law: and Id1 en 'Environmental Condition" me- a condition that can cause, contribute to, or otherwise Ulg!pr en Environmental Cleanup.

Borrower ahail not c w m or permit the p r m c e . u.e, disposal, storage. or relawe of any Hazardous Substances, or threaten to release any Hazardow Substancu8, on or in the Property. Borrower shall not do, nor ellow anyone else to do, anything affecting the Ropey (a) that is in violation of any Environmentel Law, Ib) whlch Greeten an Environmental Condition, or (c) which, due to the prewncs, we, or release of a Hazerdous Substancs, creates a condition that adversdy affscta the value of the Property. The preceding two m t e n m shall not apply to ma presence, use, or atorage on the PropetW of small quaritlth of Hazardous Subotances thst are generslly recognized to be mrbpriate to normd rasidmtlal uses and to mdntenanw of the Propwty (including, but not ilmlted to. hazardous rubstance in conrumor products).

Borrower ahdi pramptty giva Lsndw written notice of (el any invemgation, claim, demand, Iawsult or other action by m y !JOVeJrnm(Ma or regulatory OQmcy or privats paRy Involving the Property and any Hazardous Substance or Environmental Law of whlch Borrower hm actual knowledge, Ib) eny Envlronmental Conditlon, indudlng but not limited to, any spilling, leeking, discharge. release or threat of r a h of m y Hazardous Subatmoo, and (c) any condition caused by the presence, urn. or rd.we of a Mazerdous Substance wMch adversdy affects the value ot the P r o m . I f Borrower hrna. or 10 n0tIfl.d by any governmeW or ragulatary authority. or my prlvsta pwty, that any removal or other rwdlat lon of m y Hazdous Substance affecting the Property Is nmxsaary. Barrower ahdl promptly taka all neces8arv remedlal actlons in accordance wlth Envlronmental Law. Nothing hereln ehall create any obllgstlon on Lender for an Envlronmental Cleenup.

03-0643-070494803-3

NON-UNIFORM COVENANTS. Borrower and Lender furtha covsnant and agree follows:

22. A c m b d o n : Ram&#. kndr .h.ll dvm notk. to Bonomr prkr to f a l l o w m a ~ a k w h o f m y ~ o r ~ t h t h * ~ l n r ( r u m r r t l b u r n o t p l o r t o . c c ~ u n d r ~ 1 8 u n h . r * p p l i w # . L a w p w f b . o t h . m b . ) . T h r ~ ~ d l s m . (el the d.fwn: (b) the d o n r a n d to eure the d.f.uk: lc) a date, not hu thm 30 d m tmm the date the notloe la ghnn to Bonomr, by whlch ths d.huh muot ba CUM: m d (d) thbt hllm to curs the dstwk on a bbfom the Me apodfhd In the noUm mny mauk In d a b n o f t h e r u m w c u n d b y t M . 8 . # r * y l n m n n n t . n d r ~ o t h h . . t h . & s h a l l f u r ( h . r h f o n n B a r a v u ~ t h a r l g M m n k r m a a l t . r ~ . n d t h . ~ M t o b C l g a court .ctlon to ....rt tha non-.lhtonca of e dohi l t a my other dsfinn of Bo- to ~ . n d o d e . I f t h . d . M t i . n o t a u d o n o r k l k . t h . ~ ~ k , t h . n o t h . , Len& at it. option may r.quln lmnwdl.1. payment In full of dl aunts secured by thh 8.curlty lnshrment without futihm dammd and msy bvoka thb powr of ad. and any othar medk. permmad by Appllabk Law. bndn shdl k .ntW to cdkct dl bxpmaaa lncunsd in punulng the ranalk. pravldad In mk W o n 22. hchdhg. kn not lmlM to, r8amon.bb mommy& f.a andc~~ofHtkbddonom. HBannvoramyruccruorhlntuattoBorromrffba(orhnfl~ qdntt B0wow.r or W mcwaMI in knrm to Bonowr) a hkruptey pdtlon und.r Tltle II or m y e w a a f f ~ o f ~ ~ S t . b r C o d . w N o h p r o v l b . f a c h . ~ g o f p . ~ d . h u k due on lhe Not.. intubst at e nt. d.t.rmlned by the Caun ahall be p.ld to L m d r an pont-pdtlon awesn.

It Lender lnvokw the powa ot ado, lrndr .h.ll u.ouh or oaaw Trwtoa to ex.ouh a w~natlcaofth.ofth.oocun-of.nd.vmtofd.fult.ndotL.nd.r' . .kc(lonto- t h e ~ t o b M l d . T N . l . . . M I ~ 1 M . n o t k . t a k r o o n l d h u c h ~ l n w M o h m y p . r t d t h . R o O . r t y b ~ . L . n d r o r T N m r a h . l m . i l ~ d i h . n d # a ~ b y Appb&le Law to Bowowor m d to thb othr PomOm pnrabnl by AppHollbk Lm. T N ~ W 0h.l m e publkr ndca of ablb to the pomotu m d k, tha rnonnw pfwa(b.d by Applleclbk Law. Aftu ma time required by Applkmble Law. Tnuh.. umhout -d on Bormwer, s M sdl tha P r ~ p . ~ y atpuMk arction tothe h lah~tb lddu~thmUmoand pl0Lmmd unduthehm#dalpn.trdhthe ~ a f a . l s A a w a m o n , p r c r l r d h m y o n k r T r ~ r t n d r r m n h . T N . h . n u y p o r ~ sob of dl o r m y p a r d o f t h o R o p r t y b y p u W o n w t stthethm.awl p h o f m y parlanly.ch.dukdrrJ..LrndroritrdrlgH.nwypurch.n~aRoptr.t.nyuh.

Trwtas ahdl d.Wva to thb purohaau T~.t..'m dud convoyha the wl(hout my commt or wrrmty, exprnaOd or ImplW. Th. mdt@b In th. T~mtn 'a d a d 8h.l k pdma fa@# .vM.na of the tmh of the mmemsnta m.d. m d n . TN.h. ah.# apply the ptucada of the u l e In fdowhg ordr: (d to dl sxpEft#W at th. #Oh. Induang. but not l lmkd to. nuroruMe Tnmm'a m d cmorruy.'fan: lb) todlrumr ucud byW 8awrlW hwbumrrt: .nd (cl m r t x m a t o t h o h . o n a p n o m k g . ~ ~ t o h .

23. kcanvayanw. Upon payment of dl w m t secured by this Sewrity Instrument, Lender shell request Trustee to reconvey the Property and clhdl8urrcmder this Securltv Instrument and all notea widencing debt recured by this Securlty Instrument to Trustee. Trustee &dl reconvey the Proparty without warranty to the perron or psrsons lagally entitled to it. Lander or the Truaw (whether or not the T r m m is nfflllatd whh Lander) may chaga su& person or peraons s reawn& fee for reconveying the Roperty, but ody if the h charged d m not excaed the fee sat by AppllcaMa Law, the fee io eanclwlvdy p m u m d to be rmwneble.

24. Bubsmuh Trultn. Lender, et its option. may from time to d m appdnt a successor trustee to any Trustee appointed hereunder by an instrument executad and acknowledged by Lender and recorded in tha office of the b o r d e r of the county In which the Property is located. The Instrument shell m a i n the n m e of the orlglnd M e t . Trustee snd Borrower, the book and p s ~ e w h w this Securtty lnstrument is rsoorded a d tha name end address of the euccsssor trustee. Without conveyance of the %party, the succescloc truatee shall succeed to all the title, powars end dutlea conferred upon the Trunw herein a d by Applicable Law. Thla procedure for rubaitution of trustee shall govern to the exclurion of all other provlsions for substitution. Truatae may destroy the Note rmd the Security ln8trument three 13) yesrs after issuance of e full reconveyance or rdeeae lunlssr directed in such r a q m to rstsln them).

28. f%mmmt of WlgMh F a . Lendsr mry cdlecl a fee not to exceed the maximum amount permitted by Applicable Law for furnlbhlng the statement of obligstion as provided by Section 2943 of the Civil Code of Calltornis.

BY SIGNING BELOW, Borrowu acwptt3 end qreeo to tha terms end covenants contained in this Security instrummt and in any Ridw exaculed by Borrower and recorded with it.

DAVID W. GATES. TRUSTEE OF THE DAW) W. GATES TRUST DATED AUGUST 5,1996

- - -. - .- - (Space Wow This Line For Admowldpmm) -- --

State of C ~ I A /D#UL~ 1 1 ss.

County of 8 ON&' *-& 1

before me, efi SSA 0 c'

-- - -- - - parsondly known to me (or proved to me on the bmls of mlsfsctory evidance) to be the personfs) whom m e l a ) islare subscribed to tho wkhln lnarument and odcnowledged to me that hslahelthsy executed the mme in hislh~lmeir author~zd capacity(ies1. and that by hisherhheir slgnmre(s) on the I r \ S h u ~ ~ t the Person(S) or the 8ntity upon behalt of which the psrson(o) acted, executed the inmumern.

Witnsss my hand 8nd offidd seal

eJ

Notary Public in and for the State of

Ordu No. 220641

EXHIBIT "ONE"

That portion of P m d 1 of Mission Ranchos, in the County of Santa Barbara, State of California, according to the map thereof fkW October 11, 1956 in Book 37, Page 5 of Records of Survey, in the office of the County Recorder of said County, described as follows:

Beginning at the Nonhwest corner of the nllct of land described in the Deed to Joseph A. Berti, recorded August 9, 1958 as lnntrument no. 15563 in Book 1395, Pnge 23 of Official Records, records of said County, being a point of the Westerly line of said Parcel 1, from which a 2 inch brass capped survey monument set at the Northwest corner of Parcel 1 bears North 0°14'20" East 377.56 feet; thence along the Northerly line of said Berti tract of land, the following courses and distances; North 7g047' East, 101.89 feet; South 83°53'30"East 50.03 feet; North 58O13' East 197.01 feet; North 60°25'20" East 158.91 feet; and South 49°06'10" East 49.1 9 feet to a 314 inch pipe on the center line of Palomino Road and a point on the Easterly l i of said Parcel 1 at the beginning of a non-tangent curve, concave to the West. having a radius of 100.23 feet, a delta of 1 30°28'30"snd whose radial center from said point bears North 49°06'10" West; thence along the Easterly, Northerly and Westerly lines of said Parcel 1, the following courses and distances; Northerly and Northwesterly along the arc of said curve, 228.25 feet to the end thereof; North 8°25'20' East 30.00 feet; North 8S034'40" West, 410.46 feet; and South O0 14'20" West 377.56 feet to the point of beginning.

The land herein described is shown with other property on a map of sunray filed in Book 38. Page 54 of Record of Surveys, in the office of the County Recorder of said County.

SECOND HOME RIDER

THIS SECOND HOME RIDER is made thls day of -, is inwrporaed Into and shdl ba deemed To emend md supplment the Mortgage, Dead of Trust, or Security Deed (the "Security Instrument") of the name dnte given by the undersigned hhe "Emrower," whether there are 01-10 or more psnona undersigned) to sucure Borrower's Note to ilaahixMton mtual W. PA (the "Lender') of the =me date ad

covering the Property described in the Sswrlty Instrumdnt ( the 'Ropsrty"1, which is locaed a:

In sddltlon to the covenants and agreemanta made in thn Sscurlty Instrument, Borrower and Lender further covenant and agree that Saction 6 and 8 Of the Security hstrumenf are dde~ed and are rsplscad by the following:

6. Oacup~oy. Borrower shall oocupy, and shall only urn, ?ha Prapertv as Bcrroww'a second home. Borrower shall keep the ProPafW wallable for Borrower's exdueive use end enjoyment st dl times, and shdl not wbjncl ?he Propem to any timesharing or other ehared ownarshlp orrangernant or to any rental pool or agrwment t h a requirw Borrower either to rent the Proparty or give a management finn or m y other p w m m y control over the occupancy or w e of the Property.

8. Bonowr's b a n AppkWiw. Bonowcw shdl be In default if. during the Loan spplicetion process, Borrower or any peroons or entttluu clcting at the directton of Bwrowar or with Borrower's knowledge or conmnt @are materially talw, misleading, or inaccurate Informaion or amamants to Cedar (or failed to provide Lander wlth rnmerld informstlon) in connection with the Loan. Materid reprsaantatlone include, but are not limitad to, rapremntmiorm oonc~lng 8orrowa'r occupancy of the Property w Borrower's second home.

BY SjGNING BELOW, Borrower acWpt6 and eltlrm to the tErm6 provisions contained in this Second Home Rider.

DAVID W. GATES. TRUSTEE OF THE D A W W. GATES TRUST DATED AUGUST 5,1996

FIXEDIAWUSTABLE RATE RIDER (1 Yoar Trsarury index - ROW Capsl

THIS FlXEDlADJUSTARE RATE RIDER is made this 20th day of septenber. 2005 , cmd is inwporstad into and shall be deemed to mend and

supplement the M o r t g ~ , beed of trust or Security bwd (the 'Ssourity lnawurnent") of the same dam given by the undersigned (the "Borrower") to secure Borrower's Fixed/Adjusteble Rae Not. (the "Note') to FA ('Lender") of the same date and covering the proparty dascribed in the Security lnstrumsnt and loomed st:

Fa ptLa5 -- -,

(Propmy Address)

THE NOTE PROVIDES FOR A CHAW€ IIY IHE BORROWER'S AXED INTEREST RATE TO AN A W U S T A W INTEREST MTE. THE NOTE LIMIT8 THE AM- BORROWER'S ADJUSTABLE INTEREST RATE CAN =WE AT ANY ONE TrmE AND THE MAXIMUM RATE BORROWER MUST PAY.

ADDITIONAL COVENANTS. In addition to the covmcmEl and agreements made in the Security Instrument, Borrower and Lender further covenant and agree aa follows:

A. AIUUSTABU RATE AND W H L V P A W CMANOEB The Note providua for en initial fixed intrest rate of 5 .SO0 %. Tho Note also provides

for a chaw6 in the initial fixed rate to en adjustable interwt ram. aa follows: 4. ADJUSTABLE INTEREST RATE Am) MONTHLY PAWENT CHANQES

(A) Charge D e t w The lnitiel fixed interest rate I will pay will change to an adiunable i n t u a fate on the f l ra

day of October, 2010 , and the adjumble interm rate I will pay may change on the day wwy 12th month theredtor. The date on wMoh my initial flxed imerest rete changee to an adjustable interest rate, and wch date on whlch my edjumtable interm rats could change, Is culled a "Change Date.'

(B) Tho lndox Beginning with the firm Change Date, my adjustablr Interm rate will be baed on an Index.

The "Index" is the weekly werage yield on Unlted States Trewun, ascurities sdjusted to a conaent maturity of one yeer, as made wdlable by the Federal Rawwe Board. The most recont

Index figure available as of the date 45 days before each Chage Date is callad the "Current Index."

If the Index is no longer avsilable, the Notu Holder will chows e new index that is based upon comparable information. The Note Holder will give me notics of this choice.

(C1 c.laulatloll of chmg- Bsfore each Chmge Date, the Note Holder will calculate my new intereet rate by addlng

TWO 6 seventy-P~M-~undrsdth~ percentage points ( 2.750 %i to the Currant Index. The Note Holder will then rwnd the m u l t of this addltion to the nearest oneeighth of one percentage point (0.1 26%). Subject to the limits meted In Ssction 4D) below, this rounded mount will be my new interest rme untll tho nsxt Change Dm.

The Noto Holdor will rhen determine me mount of tho monthly paymant that would be sufflclent to repay the unpaid principal that I am expected to owe a ttm Changa Dete in full on the Mmurhy Data at my new interest rate in lubstantlally equd paymenfs. The result of thls cslculation will be the new mount of my monthly payment.

(Dt Limb on lnHrrt R.N Ch.ngu The interest rats I am requlrsd to pay at the first Ch- Date will not be greater than lo. 500 % or ku thm 2.750 %. -, my adjustable intersst rote will nwer

be increased or decreswd on m y single Chnoa D m by more than two percentage points (2.0%) from the rate of interest I have been paylng for the prwedlng 12 months. My interest rate wlll never be greater than 10.500 %.

(Et Efhcthn D m of Chmg.. My new interest rate will become effective an each C h m p Date. I will pay the amount of

my new monthly payment beginning on the first monthly papant dote a e r the Chenga Date untll the amount of my monthly psymmt chRlWes agsin.

IF1 WW of Ch.ng.. m e Note Holder wlll ddlver or mdl to me a notice of any changes in my initlat fixad intersst

ram to en adjustable intorest n)te and of m y changes in my adlustsbla Intareat rate bstore the affective date of any change. The notiw will include tho amount of my monthly payment. and any information regulred by lew to be glvm ma and a180 the ride and telephone number of a parson who will answer m y question I may hwe regarding the notice.

cab ~.llun to MOICO ~ d m m m m If for eny reason Note Holder fails to make an adjustment to tfw intereat nte or payment

emounl as described in this Note, regardlam of any notice requlrwnent, I agree that Note Holder may, upan discovery of such failure, then make the edJumnt ua If thev had been made on time. I also sgree not to hold Note Holder responsible tor m y d m q m to me whlch may result from Note Holder's tdlun, to make the Mljustmant and to let the Nota Hold=, at its option, apply any excess monles whlch I may have paid to p d d Prwcryment of unpaid 'Rindpal."

B. TRANSFER OF THE PROPERCY OR A BENERCIAL lWE#%IT IN BORROWER 1. Undl Borrowar's initial fix& intarest rate chmgss to an adjuaabk, inter0M rate under the

terms stated in m i o n A above. section 18 of the Security Inatrumam shdl read sa follows: T&r of ik. Pmpwly a a Bww(kk( lntrrt In Bomwu. As uMd in this Saction

18. "Intersst in the Property" means m y legal or beneficial interest in the Property. including, but not llmited To, those beneficial interests tranafwed in a bond tor deed, contract for deed, inataliment selss contract or escrow agreement, the intent of which b the transfer of title bv Borrower at s future data to purchaser.

If dl or any pat of the Property or m y Intereat in the Property is sold or nen.fsnad tor if Borrower is not a natural pamn end a beneficial interest in Earrower is sold or tramfsnod) without W 8 prior wriftm axwont, Lender may require immadlate payment in full of dl sums secured by this Securlty Inatrumant. However, this option shall not be exercised by Lender if such exwciw, Is prohibited by Appllcsble Law.

If Lender exercises this option, L d e r shall glve Borrower notice of mceleration. The notice shall provide a period of not leas then 30 days from tho date the notice is given in accordmca wlth Section 16 wimin which Borrower muat pay dl sum# secured by thb Sscurlty Inarmmart. If Bwrowsr feils to pay thase sums prkrr to ths expiraion of this parlod, Lender may Invoke any rernedks pemltted by this Security Instrument without further notice or demand on Borrowar.

2. When Borrower's initial fixed ~ntumt rate champ to an eustable intorent rote under the terms stated in saction A above. Ssction 18 of the Security Inarumem described In aectlom 8 1 above shall then ceaw to be in effect. and the provisions of Section 18 of the Security lnsuument shall be amended to read aa follows:

Trnahr of the h. w Bandhid . In krarrt. A8 ueed In this Section 10, "Interest in the Property" mewa any lead or banafkicll intwost in the Propem/, including, but not iimltsd to, those ~ a f l c l a l inrawlts Ranaterred in a bond for deed, contract for deed, inotellmnt des contract or escrow mgrsanent, the intent of which is the transfer of title by Borrower at a future date to purchmr.

If dl or m y part of the Property ar any I ~ t s l O I i t in tito Propafty is 80ld or tran~fstred lor if Borrower Is not a natural paraon and a beneficial intofaat in Borrower is sold or transferred) without Lender's prior written conmt, Lender may require immadleta paymmt in full of all sums secured by this Swurity Inanrment. However, thin option shdi not be exerciwd by Lender If .uch axmcise ia prohibited by Appllcebla Law. Lander also shall not exercim thls option if: (3 Borrower cMnss to be submitted to Lender information required by Lender to cwdueta the Intended transfsrse as if a new loan were being made to the transferee: and (bl Lendu reaonaMy dasrmina that Lender's security will not be

impaired by the loan assumption and mat the rbk of a breach of m y covenant or agreement in this Security Instrument is ecceptsbla to Lender.

To the extent permitted by Applkable Law. Lender may charge a rawonable fee as a condition to Lender's consent to tho loan assumption. Lender mey dsa requlre the transferee to sign en m m p t i o n agreement that is acceptable to Lender and that obligates the trmsferea to keep all the promises and agfwments made in the Note and in this Security Inatrumant. Borrower will continue to be obligated undo? the Note and this Security Instrument unleas Lendar relaaaeis Borrower in writing.

If Lender exeroises the option to require imrnediata payment in full, Lender shall give Borrower notice of accelaration. The notice shall provide a period of not \ass than 30 days from the date the notice is given in accord- with Section 16 within which Borrower must pay dl wms recurad by this SsCurlty Instrument. If Borrower falls to pey these sums prior to the expiration of this period, Larder may invoke any remedies permitted by this Sscurlty Instrument without further notice or demand on Borrower.

BY SIGNING BELOW, Borrower accepts and agrees to the terms and covenants contained in this FixedlAdjustable Rate Rider.

ASSIGNMENT OF DEED OF TRUST Lorn NO.: Ww948033

umuod BY DAYID w GATES , Tip. i kt muid u) - C-ks %B + vhkd , 1qZb

To: Wub(ngfonMrdn.IIb& FA

KNOWN ALL MP.N BY lHPSE PWBNlS Wt tn co&dcdrn or the awn o f m md nol iaw WLLARS md OUIWWA lad n l m b ~ e - ~ a m i pid sid l o w -XI

u r n ~n mbovemed ~hc nld ~bcdol~rul( & with l h c ~ o i ar o l t n

msrnancnr he pmm, ar rhcenti~ upon bsb.IEarwhichfhcpmm pMn uu&uled¶h~a uvtwnmt

WllNESS MY t W AND OPF1CIU SEAL

This Document Prepared By and Please R u u n To:

MCC MORTGAGE, ZNC. Am: Alli.wn Mlmin. M a n a m Documcnl Crmlrol P.O. Box 2516116 Plano. Texas 75025-9933

R&d I ECFfE 17.1 Off ielr l knrrh I

County of I Bnta Barbara I

Jetrph E. HDllrnd I I

ASSIGNMENT OF DEED OF TRUST

AFN No: &a

Grantor: DB STRUCTURED PRODUCTS, PIC. 60 Wall Street. 15th Floor, New York, NY 10005

Grantee: LPP MORTGAGE LTD, A TEXI\S LlMITED PARTNERSUIP (5000 Legacy Drive, Plmo, TX 75024

Property Address: 1200 PALOMINO DR, SANTA BARBARA, CA 93105

BC: 658006

ASSIGNMENT OF DEED OF TRUST

THIS ASSIGNMENT OF DEED OF TRUST (this "Assignment'? is made by DB STRUCTURED PRODUCTS, INC. whose address is 60 Wall Street. 15th Floor. New York. NY 10005 ("Assignor"), to and in favor of LPP MORTGAGE LTD., A TEXAS LIMITED PARTNERSUIP, whose address is 6000 Legacy Drive, Plano, TX 75024 ("Assignee"), pursuant to the terms of that certain Master Loan Sale and Interim Servicing Agreement, (the "Purchase Agreement"), effective August 22, 2008, between DB STRUCTURED PRODUCTS, INC. and LOAN ACQUISITION CORPORATION.

THIS ASSIGNMENT WITNESSES THAT, in consideration of Ten Dollnrs ($10.00) and other good and valuable consideration paid by Assignee, Assignor hereby assigns, transfers, sets over and conveyx to Assignee and its successors and nssigns, without remurse and without representation or warranty, whether express, implied or creatcd by opmtion of law, except as expressly set forth in the Purchase Agreement, the following:

1 , that certain Deed of Trust from David W. Gates, Trustee of the David W. Gates Trust Dated August 5, 1996, dated September 20,2005, and recorded September 29, 2005, in Book nla, at Page nla, as Instrument No. 2005-0094620, in the Clerk's Office of the County of Santa Bnrbara, State of California, (the "Deed of TrusP'), which Deed of Trust secures that certain Promissory Note dated September 20,2005, in the original principal amount of $1,142,302.00, executed by David W. Gates and payable to the order of Washington Mutual Bank, FA. as modified or amended (the 'Tote");

2. iuch other documents, a-enls, instruments and other collateral that evidence. s&we or otherwise relate to Assignor's right, title or interest in and to the Mortgage andlor the Note andlor the loan evidenced by the Note, including without limitation the title insurance policies and hazard insurance policies relating hereto that are in effect.

RC: 658006

IN WITNESS WEJEREOF, Assignor has ca this Assignment to be xecuted and delivered by it$ Authorized Representative as of the .-day of 2009.

DB STRUCTURED PRODUCTS, INC.

By:

STATE OF NEW YORK 8 F

COUNTY OF QUEENS 5

Before me, the undersigned, a Notary Public, on this day personally appeared Richanl Della Pietra, Asst. Vice President, and Sheily Armyo, Vice President, of DB STRUCTURED PRODUCTS, INC. and the person who executed the foregoing instrument by virtue of the authority vested in hirnhq and hdshe acknowledged to me that helshe executed the same for the purposes end consideration therein expressed and in the capacities therein stated.

Given under my hand nnd seal this \ lo doy of P V C ~ , 2009.

i !

A F F 1 X NOTARY SEA1

Notary Public, State of NEW YORK My commission expires: 9-15-2012

DANIEL KIM NOTIRV PUBLlCdTAlE OF NEW YOQK

NO. 01Kl6193481 Quollfled In Oumnr Comly

r:r Commlsrlon trplrar Ssplamber I5.1011

. ."~.........U "1

Tie Court Service Recordlng RequWed By When Recorded Mall To

CaCWestern Recoaveymnce Corp. P.O. Rox 22004 525 East Mala Street El Cajon CA 92022-9004

r011-0045189 Recorded I REC FEE 21 00

O f f i c i a l Records I County af I

Santa Barbara 1 Joseph E. Holland I

County Clerk REcorderl I I EC

08:OOAM 09-~ug-2011 I page 1 of 2

Tmstn Sak No. 1336895-02 AF'N: 0 7 . 3 3 -- Soace Above This L' e For Recorder's Use Ref: GATES, DAVID W Property Addmy: 1200 PALOMINO DRIVE, SANTA BARBARA CA 93105

NOTICE OF DEFAULT

IMPORTANT NOTICE IF YOUR PROPERTY IS IN FORECLOSURE BECAUSE YOU ARE BEHIND IN YOUR PAYMENTS, IT MAY BE SOLD WITHOUT ANY COURT ACTION, and you may have legal right to bring your account in good standin b p. ' g all of your past due payments lus permitted costs and expenses within the time permitted f i r y aw r" or reinstatement of your account, w g ich 19 normally five business days prior to the date set for the sale of your property. No sale date may he set until approximately 90 days from the date this notice of default may he recorded (which date of recodntlon appcus on tbis notice). This amount is $73,351.90 as of August 08,2011, .ad will increase until your account becomes current. While your property is in foreclosure, you still must ay other obligations (such as insurance and taxes) required by your note and deed of trust or mo age. f you fail '3 P to make future payments on the loan, pay taxes on the roperty, provide insurance on t e property, or P peg other obligations as required in the note and deed o trust or mortga e, the beneflclary or mort agee may l a h t that you do so h order to reinstate your account in good s tanhg . In addition, the b a e t rinq

a ce may require w a condition to relastatement that you provide reliable written evidence that you "" "'3 a5 a ! 1 senior Hens, property taxes, and hazard insurance premiums.

&on your written request, the beneficiary or mortgagee will give ou a writtea itemization of the entire amonnt you muat pay. You may not have to pay the entire unpa 7 d portion of your account, even though full payment was demanded, but you must pay all amounts in default at the time payment i s made. However, you and your beneficiary or mortgagee may mutually agree in writing prior to the time the notice of sak is posted (which may not be earlier than three months after this notice of default is recorded) to, among other thin , (1) provide additional tlme in which to cure the default by transfer of the property or otherwise; or ( p ) establish a schedule of payments in order to cure your default; or both (1) and (2).

Followlag the expiration of the time period referred to in the first paragraph of tbis notice, unless the obli~atlon heln foreclosed upon or a separate written agreement between you and your creditor permits a longer perio$ you have on1 the legal right to stop the sale of your property by paylag the entire amount demanded by your crditor.

To flnd out the amount you must pay, or to rrr-ge for payment to stop the fomiiosnre, or if your property is in foreclosure for nay other reason, contact: LPP MORTGAGE LTD.

C/O CAL-WESTERN RECONVEYANCE CORPORATION 525 EAST MAIN STREET P.O. BOX 22004 EL CAJON 9804 CA 92022-9004 (619)590-9200

If you have any questions, you should contact a lawyer or the governmental agency which may have insured your loan.

Page 1 of 2 -

Notwithstanding the fact that your proper@ is in Yoreclosure, you may offer your ro rty for sale, ' rovlded the sale is concluded prior to the conclusion of the foreelosure. Remember, U MAY LOSE LEGAL RIGHTS IF YOU DO NOT TAKE PROMPT ACTION.

ecr NOTICE OF DEFAULT AND ELECTION TO SELL UNDER DEED OF TRUST

NOTICE IS HEREBY GIVEN:

CAL-WESTERN RECONVEYANCE CORPORATION is either the ori&al trustee, the duly appointed s a b s ( l ~ c d trustee, or actlng as agent for the trustee or beneficiary under a deed of trust dated September 2 0,2005 executed by

DAVID W. GATES, TRUSTEE OF THE DAVID W. GATES TRUST DATED AUGUST 5,1996 as trustor, to secure certain obligations in favor of WASHINGTON MUTUAL BANK, FA, A FEDERAL ASSOCIATION as beneficiary, recorded as document 2005-0094620 on September 29,2005 in book XX page XX official records in the office of County Recorder of SANTA BARBARA County, California, dencrihlnp land therein as:

COMPLETELY DESCRIBED IN SAID DEED OF TRUST,

sald obllgatlons including 8 promissory note for the priucipsl sum of Sl,l42,302.00. That r breach of, and default in, the obligations for which such Deed of Trust is security has occurred in that payment has not been made of:

Failure to pay tbe monthly pryment due December 1,2010 of principal, interest and impounds and subsequent installments due thereafter; plus late charges; together with all subsequent sums advanced by beneficiary pursuant to the terms and conditions of said deed of trust.

That by reason thereof the present beneficiary under such Deed of Trust has deposited with said trustee sach Deed of Trust and aU documents evidencing obligations secured thereby and has declared and does hereby declare all sums secured thereby immediately due and payable and has elected and does hereby elect to cause the h u s t property to be sold to satisfy the obligstions secured tbereby.

The mortgagee, beneficiary or authorized ageat for the mortgagee or beneficiary pursuant to California Civll Code 5 29235(b) declares that the mortgagee, beneficiary or the mortgagee's or heneflciary's authorbRd agent has either contacted the borrower or tried with due diligence to contact the borrower as required by California CivU Code 2923.5.

T.S. 1336895-02 Dated: August 08,2011 CAL-WESTERN RECONVEYANCE CORPORATION

Signature By Marc0 Marquez

By LSI Title Company, As Agent

9 --7 ~ I ~ ~ ~ ~ I ~ : / I i i I( , I 'XVI .:\!)lcl Order: 00000W Titlc Ollicer: 00 Comment:

Recording Requested By When Recorded Mail To

Cnl-Western Reconveyance Corp. P.O. Box 22004 525 East Main Street El Calnn CA 92022-9004

fMIIIBI~~1111BRIII11WiW88R 2011-0058657

Recorded I REC FEE 2 4 00 Offrcral Reoorda I

County of I Santa Barbara I

Joseph E Holland I county Clark Recorder1

I UL 08:OOAM 13-Oat-2011 I Page 1 of 3

Troctrc Sale No. 1336895-02 APN: 023-190-01-00 . Space Above This Line For Recorder's Use Re? GATES. DAVm W Properlv Addrew 1200 PALOMINO DRIVE. SAhTA BARBARA CA 93105

- ~~~~

~~ " - - -----, havelegal right to brink your account in good standin b pa 'ng all of your past due iayments luc permitted costs and expenses within the time permitled %y k w $r reinstatement of your account, w{iei! IS normally five business days prior to the dale set for the sale of your properly. No sale date may be set until approximately 90 d a p from the date this notice of default may be recorded (which date of recordat~on appears on this notice). This amount is S91,754.18 as of October 12,2011, and will increase until vour account becomes current. While your property is in foreclosure, you still must ay other ohlig&ons (such as insurance and taxn) requ~red by your note and deed of trust o r mort age f f vou fail to make future paymenlr nn the loan, pay taxer on the mperly, provide insurance on t i e &opkrly, or tP pay other obligations as required in the, note and deed o trust or mortga e, the beneficiary or mortgagee 8 may insist that you do so in order to relnrtate your account in good Stan Ing. In addition, the beneficiary or inort a ee may require as a condition to reinstatement that you provide rcliablc written cvidenre that you paiffa?l senior liens, property taxes, and hazard insurance premiums.

Upon your written request, the beneficiary o r mortgagee will givc you a written itemization of the entire amount you must pay. You ma not havc to pay the entire u n p a ~ d portion of your accnunt, even thoaph rull payment was demauded,Ybut you most pay all amounts in default a t the time payment is made. However, you and your beneficiary o r mortgagee may mutually agree in writing prior to the time the notice of sale is posted (which may not be earlier than three months after this notice of default is recorded) to, among other thin s, (I ) provide add~tional time in which to cure the default by transfer of the property or nthenvise; or (8 establish a schedulc of payments in order to cure your default; or both (I) indi2).

Following the expiration of the time period referred tn in the l i n t paragraph of this notice, unless the obligation hein foreclosed upon o r ascparate written agreement b e h e e n you and your creditor permits a loneer neriot, vou have only the legal right to stnp the sale of your properly by paying the entire nmo& dimaudeh by your creditor.

To find out the amount you must pay, o r to arrange for payment to stop the fnreclosure, or if your nmnertv iq in Rreclosure for any other reason, contact: ,...r. ~., .. ..~ ~-~ ~~ ~

I.PP MORTGAGE LTD.

C/O CAL-WESTERN RECONVEYANCE CORPORATION 525 EAST MAIN STREET P.O. BOX 22004 151. CAJON 9004 CA 92022-9004 (619)590-9200

If you have any questions, you should contaet a lawyer or lhc governmental agency which may havc insured your loan.

NODCA

Page 1 of 3 Printed on 11/22/2011 2:45:?6 Plv!

7

Order: 0000000 Tilie Oficer: 00 Comment: Station Id :N2LI

Nohvithstmdimg the fact that your property is in krcclosurc, you may offcr your rope* for sale, provided the sale is caneladed prior to the conclusion of the foreclosure. Remember, \OU MAY LOSE LEGAL RIGHTS IF YOU DO NOT TAKE PROMPT ACTION.

NOTICE OF DEFAULT AND ELECTlON TO SELL UNDER DEED OF TRUST

NOTICE IS HEREBY GIVEN:

CAL-WESTERN RECONVEYANCE CORPORATION is cither ihe original trustee, the duly appointed ruhstituted trustee, o r acting as agent for the trustee or beneficiary under a deed of trust dated September 20,2005 executed by

DAVID W. GATES. TRUSTEE OF THE DAVID W. GATES TRUST DATED AUGUST 5.1996 ar t rutnr , tn secure certain obligations in favor of WASHINGTON MUTUAL BANK, FA, A FEDERAL ASSOCIATION ar heneficiary, recorded as document 2005-0094620 on September 29.2005 in honk XX page XI( official records in the ofiice of County Recorder uf SAN'I'A HARRARA Countv, California, describing land therein aa:

COMPLETELY DESCRIBED IN

raid obligations including a promissory note for the principal sum of 51,142,302.00. That a hreach of, and default in, the obligations for which such Deed of Trust is security has occurred in that payment has not been made of:

Failure to pay the monthly payment due December 1,2010 of principal, interest and impounds and subsequent i"stallmrnis dnc thereafter; plus late charges; toeether with all subsequ~nt ;urns advanced by beneficiary pursuant to the terms and conditions nisaid deed ol trust.

That by reason thereof the present benelieiary undcr such Deed of Trust has deposited with said trustee such Deed of Trust and all documents evidencing obligations sccured thereby and has declared and does hereby declare all sums secured thereby immediately due and payable and has elected and does hereby elect to cause the trust property to hc sold to satisfy the ohligations secured thereby.

The martgage, beneficiary o r authorized agent lor the morigagcc nr beneficiary pursuant to Cxlifnmia Civil Code 8 2923.5(b) declares that the mortgaplee, heneficiary or the mortgagee's or beneticiary's authorized agent has cither contacted the borrower or tried with due diligence to contact the borrower as required hy California Civil Code 2923.5.

T.S. 1336895-02 Dnted: Oetoher 12,2011 CAL-WESTERN RECONVEYANCE CORPORATION

SmimUnk, a8 agent

Signature By c ,

I'

Page 2 of 3

1 , /70

Printed on 11/22/201 1 2:45:36 PM

8 s.

'7

Order: OOODOOD Tirle Officer: 00 Comment: Station Id :NZLI

ALTA Losn Polinv (10-17-921 wlForm 1 CoV. OrdW No. 220841

PsliCy No. 27-042.92 3460956

EXHIBIT "ONE"

That oortlon of Parml 1 of Mission Ranchos, in the County of Santa Barbara, Stam of C ~ I I ~ O ~ I ~ , according to the map thereef fllcd October 11, 1955 In Book 37, Page 5 of Records of Survey, in the office of the County Recorder of said County, described as follows:

Beginning a t the honhwest corner of the trsct of land described in the Deed to Joseph A. Beni. recorded August 9. 1956 as Instrument no. 15583 in Book 1395. Page 23 of Offiela, Recof6s. records of said ~ouniv. belnm a oolnt on lhe Wntsrlv line of said Parcel 1. from which a 2 inch brass canoed ----- survey monu&mtsu at theNorthwest cornerof saidPerecl 1 bears North 0°14'20' Esst 377.56 fet: thence along the NorIheriv llnc of said Berti tract of land. the tollowlng counas and d~stances: Nonh 73 O 4 7 ' East 101.89fwf: S o h 83'53'30' Ean 50.03 fseC North 56OI3' East 197.01 feet; Nonh 80°25'20" Esst 158.91 feet; and S o h 49°06'10' E m 43.19 feet lo a 314 inch pipe or the center line of Palamlno Road and a win* on the Easterlv lane of sold Parcel 1 at the bw~nnlng of a non-tanaent curve, concava to the West. having a radiw of 100.23 feet. 6 delta of 130'28'30'and whosn redid . ... center lrom sa~d point beers North 49'06' 10' West: thence along the Easterly, Nonherly and Westerly Itncs of satd Parcel 1, the tOllOw#ng coursrs and dntances; Northeh and Narthworterly along the are of saidcurvc. 228.25 feet totheand ihsrsof: North 8°25*20" Ean 30.00 fen: Nonh 8S034'40' West. 41 0.46 feat: and South 0'14'20' West 377.56 fen to the point of beginning.

The land herein described is shown wlth other propew on a map of survey filed In Book 38. Page 54 of Record of survey$, in the office of the County Recorder of said County.

Printed on I IR2IZOI 1 2:45:36 PM

M~~~MM~MIAQIIWIIIRIBIIIIIIIRY MI R m i n g ~ e q m 2011-00657 95

RECORDING REQUESTED BY: ~6fUic81ink R e c o r d e d I REG FEE 21.00 O f f x u a l Records I

AND WHEN RECORDED MAIL TO: C o u n t y of I Santa Barkmra I

Joseph E. H o l l a n d I C A I .-WESTERN RECONVEYANCE CORPORATION county Clerk R e c o r d e r 1 525 EAST MAIN STREET I P.O. BOX 22004 FL CAJON CA 92022-9004

I ML 08:OBAM 15-Nov-2011 1 P a g e 1 of 2

.~ - SPACE ABOVE TNlS LINE FOR RECORDERS USE._--

V.5931 SUBSTI~Z~TION OF TRUSTEE T.S. NO.:1336895-02

WHEREAS, DAVID W. GATES, TRUSTEE OF THE DAVID W. GATES TRUST DATED AUGUST 5.19% was the originel T m o r . CALIFORNIA RECONVEYANCE COMPANY lnas the original TIlBke, and WASHINGTON MUTUAL BANK, FA, A FEDERAL ASSOCIATION was the original Beneficiary under that certain Deed of Trust dated September 20.2005 and recorded on September 29.2005 as Insb'ument No. 2005-0094620. in honk XX, page XX of Ofiicicial Records of SANTA BARBARA County, California, a d

WIiBREAS. the tmdmigned is p?cscm Beneficiary undn said Deed of TNS, and WHEREAS. the undersigned desires to substitute a new Trustee under said Deed of Tnnl in the place and stead of present Trustee Ihmundn; in the manner in said Deed of Trust provided

NOW. THEREFORE, the undersigned berrby mbsimta. CAL-WESTERN RECONVEYANCE CORPORATION a California Corporation whose address is 525 EAST MAIN STREET, P.O. BOX 22004. EL CAJON CA 92022-9004 as Trustee under said Deed of Trust. Whenever the context hereof so require& the masculine gender includes the feminine andlor neuter, and the singular number includes the plml.

Dated:

r d o \ ~ ~ w k p \ ,do\\ ~

RIchetd6 Flke AulhorIz&R@iet- State of -r W I 'ounty n 't&) ' M . Li .r Xnrsry cb ic. penonolly appeared 7. 1 , who pmved to me on the basis ofsatisfa~fo~y eridcnce to be the whose name(s) islare subsaibcd to the within imtnunent and acbowlcdecd to me that helshehhey cxeeutsd the same in hislherltheir auth- waciMies), and that by hidhnltheir . . . .~ s&anm($on the insuument the &n(s), m the miry upon behalf of which instrument. I certify under PENALTY OF PERJURY under the laws ofthe S foregoing paragmph is m e and coma.

I CAL-WESTERN RECONVEYANCE CORPORATION

'1'.S NO. ___ \zaa%% AFFIDAVIT OF MAILING SUBSTITUTION OF TRUSTEE

PURSUANT TO CALIFORNIA CIVIL CODE 9293411

STATE OF CALIFORNIA

COUNTY OF SAN DlECU

THE UNDERSIGNED DECLARES UNDER PENALTY OF PERJURY:

A COPY OF THE SUBSTITUTION OF TRUSTEE HAS BEEN MAILED, PRIOR TO OR CONCURRENTLY WITH THE RECORDING THEREOF, IN THE MANNER PROVIDED IN SECTION 2934. OPTHE CIVIL CODE OF CALIFORNIA, TO ALL PERSONS TO WHOM A COPY OF THE NOTICE OF DEFAULT WOULD BE REQUIRED TO BE MAILED BY THE PROVISIONS OF SUCH SECTION.

I.\-&\\ - I ~ R I c ~ . - ~ -~ .... -

.Jeanne Pinman Slate or Calirornir County of Sun Dirgo

NOV 0 9 2011 o n - ~ before me. - Rosalyn Hall-, a NOID, Public, penona~ly appeared Jeanne Piitman. who proved lo me on the basis of satisfanory evidence lo be the person whose name is subscribed to the within instrument and acknowledged to me that she eKecu1ed the same in her aulhorized capacity, and lhal by her signature on the instrumrnt the person. or the entily upon behalfof which the person acted, executed the instrument. I ccnify under PENALTY OF PERJURY under the laws of the State o f California that the foregoing paragraph is me and correct.

Wln\lFSS my hand and ofFicial seal. (Seal)

COMM. a1793727

RECORDING REQUESTED BY And When Recorded Mail To:

CAL-WESTERN RECONVEYANCE CORPORATION 525 EAST MAIN STREET P.O. BOX 22004 El. CAJON CA 92022-9004

APN 023-290-01-00 Trustee S a l e N 0 ~ ~ 6 ~ ~ ~ 2 -. Space Above This Line For Recorder's Use --

NOTICE OF TRUSTEE'S SALE TRA:086012

REF: GATES, DAVID W UNVER Ropn?, Addreu: 1200 PALOMTNO DRIVE. SANTA BARBARA CA 93 105

IMPORTANT NOTICE T O PROPERTY OWNER:

YOU ARE IN DEFAULT UNDER A DEED OF TRUST, DATED September 20,2005. UNLESS YOU TAKE ACTION TO PROTECT YOUR PROPERTY, IT MAY BE SOLD AT A PUBLIC SALE. IF YOU NEED AN EXPLANATION OF THE NATURE OF THE PROCEEDING AGAINST YOU, YOU SHOULD CONTACT A LAWYER

On Febrnnry 06,2012, at 1:OOpm. CAL-WESTERN RECONVEYANCE CORPORATION, as duly appointed trustee under and pursuant to Deed of Tmst recorded September 29,2005, as Inst. No. 2005- 0094620, in book XX. page XX, of Official Records in the office of the County Recorder of SANTA BARBARA County, State of CALIFORNIA executed by:

DAVID W. GATES, TRUSTEE O F T H E DAVm W. GATES TRUST DATED AUGUST 5.1996

WILL SELL AT PUBLIC AUCTION TO HIGHEST BIDDER FOR CASH. CASHIER'S CHECK DRAWN ON A STATE OR NATIONAL BANK, A CHECK DRAWN BY A STATE OR FEDERAL CREDIT UNION. OR A CHECK DRAWN BY A STATE OR FEDERAL SAVINGS AND LOAN

~ ~

ASSOCIATION, SAVINGS ASSOCIATION. OR SAVINGS BANK SPECIFIED IN SECTION 5102 OF THE FINANCIAL CODE AND AUTHORIZED TO DO BUSINESS IN THIS STATE:

AT THE NORTH DOOR OF THE MAIN ENTRANCE TO T H E COUNTY COURTHOUSE, 1100 ANACAPA STREET SANTA BARBARA CALIFORNIA

all right, title and interest conveyed to and now held bj it under said Deed of Trust in the property situated in said County and State described as:

THAT PORTION O F PARCEL 1 OF MISSION RANCHOS, IN T H E COUNTY O F SANTA BARBARA, STATE OF CALIFORNIA, ACCORDING T O THE MAP THEREOF FILED OCTOBER 11,1955 IN BOOK 37, PAGE 5 OF RECORDS SURVEY, MORE COMPLETELY DESCRIBED IN ATTACHED EXHIBIT A.

Rev 10/011!0

1 . 9 4

NOTICE OF TRUSTEE'S SALE Trustee Sales No. 1336895-02

The street address and other common designation, if any, of the real property described above is purported to be: 1200 PALOMINO DRIVE SANTA BARBARA CA 93105

The undenigned Trustee disclaims any liability for any incorrectness of the street address and other common designation, if any. shown herein.

Said sale will be held, but without covenant or warranty, express or implied, regarding title, possession, condition, or encumbrances, including fees, charges and expenses of the Trustee and of the trusts created by said Deed of Trust, to pay the remaining principal sums of the note(s) secured by said Deed of Trust. The total amount ofthe unpaid balance of the obligation secured by the property to be sold and reasonable estimated costs, expenses and advances at the time of the initial publication of the Notice of Sale is: S1,213.690.25.

IF the Trustee is unable to convey title for any reason, the successful bidder's sole and exclusive remedy shall be the retarn of monies paid to the Trustee, and the successful bidder shall have no forther recoune

The beneficiary under said Deed of Trust heretofore executed and delivered to the undersigned a written Declaration of Default and Demand for Sale, and a written Notice of Default and Election to Sell. ne undersigned caused said Notice of Default and Election to Sell to be recorded in the county where the real property is located.

FOR SALES INFORMATION: Mon - Fri 9:OOam to 4:OOpm (619)590-1221 GALWESTERN RECONVEYANCE CORPORATION 525 EAST M A I N STREET P.O. BOX 22004 EL CAJON CA 920223004

Dated: January 17,2012 CAL-WESTERN RECONVEYANCE CORPORATION

By: Autbrimd SigmW

Borrowing Under a Securitization Structure

.

Step 2 -The Lamerrellsthe bmto the tnnr &WPF* andthe Enmwerbeg& mdringmonthkpqnmlds

i , ' I I . ar.*Prpm >,,. I _ . - - - - I Underwriter I i ~. . , - --- - I

. - a-.. - - -

Raring Agemy Issuer - ~. - - -

- - - - _ _ _ Credit Enhancement

.. .. -~

i

Ratkg Agency rates& securities wd Creda

fb~thinthePmling&

from tesfimony of Sheila Bair (FDIC Chair) to Congress 4-17-07

SECURITlZATIOhl OF MORTGAGES

After the Great Depression as a part of the New Deal the federal government of the United States

created the Federal Housina Administration (FHA) with the National Housina Act of 1934 to assist in the

construction, acquisition, andlor rehabilitation of residential properties. The FHA helped develop and

standardize the fixed rate mortaaae as an alternative to the balloon pavment mortaaae by insuring them,

and helped the mortgage design garner usage. In 1938. the government also created the governrnent-

sponsored corporation Federal National Mortaaae Association (FNMA). colloquially known as Fahnie Mae

to create a liquid secondary market in these mortgages and thereby free the loan originators to okginate

more loans, primarily by buying FHA-insured mortgages. In 1968 Fannie Mae was split into the Jurrent

Fannie Mae and the Government National Mortaaae Association (GNMA), colloquially known as Ginnie

Mae to support the FHA-insured mortgages, as well as Veterans Administration (VA) and Farmers Home

Administration (FmHA) insured mortgages, with the full faith and credit of the United States government.

In 1970, the federal government authorized Fannie Mae to purchase private mortgages, i.e. those not

insured by the FHA. VA, or FmHA, and created the Federal Home Loan Mortaaae Corporation (FHLMC),

colloquialfy known as Freddie Mac to perform a similar role to Fannie Mae. Ginnie Mae does not invest in

private mortgages. Ginnie Mae guaranteed the first mortaaae passthrouclh security of an approved

lender in 1968. In 1971 Freddie Mac issued its first mortgage passthrough. called a participation

certificate, composed primarily of private mortgages. In 1981 Fannie Mae issued its first mortgage

passthrough, called a mortqaqe-backed security. (MBS)

In 1983 Freddie Mac issued the first collateralized mortaaae obliqation (CMO). In 1960 the

government enacted the Real Estate lnvestment Trust Act of 1960 to allow the creation of the real estate

investment - trust (REIT) to encourage real estate investment. In 1977 Bank of America issued the first

private label passthrough, and in 1984 the government passed the Secondarv Mortaaae Market

Lnhan~ement Act (SMMEA) to improve the marketability of such securities.

The Tax - Reform Act of 1986 allowed the creation of the tax-free Real Estate Mortaaae Investment

Conduit (REMIC) special pumse vehicle (SPV) for the express purpose of issuing passthroughs. The

Tax Reform Act significantly contributed to the savings and loan crisis of the 1980s and 1990s that resulted

in the Financial Institutions Reform, Recoverv and Enforcement Act of 1989 (FIRREA), which dramatically

changed the savings and loan industry and its federal regulation, encouraging loan origination.

The process of securitization is complicated, and is highly dependent on the jurisdiction within which

the process is conducted. The basics are: mortgage loans (mortaaqe notes) are purchased from banks

and other lenders and assigned to a trust. The trust assembles these loans into collections, or "pools."

The trust securitizes the pools by issuing mortgage-backed securities (MBS). These securitization ~ N S ~ S

include government-sponsored enterprises and private entities which may offer credit enhancement

features to mitigate the risk of prepayment and default associated with these mortgages. Since residential

mortgages in the United States have the option to pay more than the required monthly payment

(curtailment) or to pay off the loan in its entirety (prepayment), the monthly cash flow of an MBS is not

known in advance, and therefore presents risk to MBS investors.

In the United States, the most common securitization trusts are Fannie Mae and Freddie Mac, U.S.

government-sponsored enterprises. Ginnie Mae, a U.S. government-sponsored enterprise backed by the

full faith and credit of the U.S. government, guarantees its investors receive timely payments, but buys

lirn~ted numbers of mortgage notes. Some private institutions, such as Investment Banks. Real Estate

Mortqaqe Investment Conduits (REMICs) and Real Estate Investment Trusts (REITs), also securitize

mortgages, known as "private-label" mortgage securities. (PLMS) Issuances of private-label mortaaae-

backed securities increased drarnaticallv from 2001 to 2007 and ended abN~tlV in 2008 when real estate

marketsee-~n to falter.

A REMlC is a creation of the tax law that allows the trust to be a pass-through entity which is not

subject to tax at the trust level. The MBS transaction is structured and priced based on the assumption

that it will not be subject to tax with respect to activities; therefore, compliance with REIWIC regulations is

essential. MBS has become an attractive capital source for commercial mortgage lending because the

bonds backed by a pool of loans are generally worth more than the sum of the value of the whole. The

enhanced liquidity and structure of MBS attracts a broader range of investors to the commercial mortgage

market This value creation effect allows loans intended for securitization to be aggressively priced.

benefiting Borrowers.

Once the loan is transferred to a trust and securitized, the loan is serviced in accordance with

applicable loan documents and the Poolina and Servicinu Aareement (PSA) for the trust. The PSA governs

the allocation and distribution of loan proceeds and losses to the bondholders. It also describes in detail

how the loans are to be serviced and includes guidance to ensure that the trust continues to comply

with the REMlC provisions of the tax code in order for the trust to maintain favorable tax treatment.

source: www.wikipedia.org

1. 78

CMBS INDUSTRY PARTICIPANTS

The following parties are typically involved with a loan once it has been securitized:

. Primary or Sub-Servicer Master Servicer . Special Servicer . Directing Certificateholderl Controlling Class! B-Piece Buyer Trustee Rating Agency(ies)

PRIMARY OR SUB-SERWCER: In some cases the Borrower may deal with a Primary Servicer that may also be the loan originator or Mortgage Banker who sourced the loan. The Primary Servicer maintains the direct Rorrower contact. and the Master Servicer may sub-contract certain loan administration duties to the Primary or Sub-Servicer. The Master Servicer remains responsible to the trust for the Primary Servicer's performance and actions. While Mader Sewicers maintains all of the responsibilities and duties to the trust under the PSA. a sub-servicing agreement between Master Servicer and Primary Servicer typically mirrors the servicing provisions under the PSA so that the Primary Servicer's discretion is fairly limited and subject to the same servicing standard as the Master Servicer. Given their role in the origination of the loan, the originator or Mortgage Banker's involvement as a Sub-Servicer allows for Borrower relationships to be maintained wh~le adding to the collective servicing knowledge about the loan.

MASTER SERVICER: The Master Servicer's responsibility is to service the loans in the pool through maturity unless the Borrower defaults. The Master Servicer manages the flow of payment and the information and is responsible for the ongoing interaction with the performing Borrower. The Master Servicer is responsible for collecting the payments from the Borrower, holding and making any disbursements from escrows and performing most routine loan administration functions. The Master Servicer is also responsible for collection and analyzing rent rolls, operating statements and other financial and property information from the Borrower, as well as conducting periodic physical inspections. A Primary Senricer may perform many of these responsibilities to the extent a sub-sewicing arrangement is in place.

The Master Servicer is generally required to process all Borrower requests related to consents, waivers, and modifications related to performing loans. The Master S e ~ c e r ' s ability to waive, consent or modify terms of any mortgage loan is governed by the PSA. Many material servicing requests or modifications will also require the consent or approval of the Special Servicer. In some cases those decisions are further subject to approval by the Directing Certificateholder or review by Rating Agencies as described later.

SPECIAL SERVICER: Upon the occurrence of certain specified events, primarily a default, the administration of the loan is transferred to the Special Servicer. A Borrower will receive notification from the Master or Special Servicer if its loan has been transferred to Special Servicing. Besides handling defaulted loans. the Special Servicer also has approval authority over material servicing actions, such as loan ?7;st!rnp!~ons

The ser0jcer is a specialist in dealing with defaulted mortgage loans and is usually selected the Directing Certificateholder. In many cases the Special Sewicer is a related entity to the Directing Certificateholder. Like Master Servicer, the Special Servicer has a duty to the trust and is subject to the serving standard. The standard usually mandates that the Special Server must act to maximize the .ecovery on the mortgage loan to the bandholders (as a collective whole) based on an analysis of collection abrnatives using a net present value methodolcqy. The Special Serviar dl m"sider mMiPle alternatives as part of its analysis including loan m d f i u C m , f o m u r e . dun-l ieu, negobatd myoflor F" ?' '.an- Frequently t k Dfieeina ceflfi#fehd/,jor has fh 'pRfai semicer's actions with rag^ to defaulted

novidW th e ahfly to d;rec/ the c 9 1 , 79 standard is m.;,.+-:- ,

DIRECTING CERTIFICATEHOLDER I CONTROLLING CLASS I BPIECE BUYER: The investor in the most subordinate bond classes is commonly referred to as the"EPiece Buyer." 6-Piece Buyers generally purchase the B-Rated and BBIBa-rated bond classes along with the unrated class. The most subordinate bond class outstanding at any given point is considered to be the Directing Certificatehilder, also referred io as the Controlling Class. Given that losses come out of the lowest rated bonds, the PSA provides the Directing Certificateholder the opportunity to play an active role in monitoring the performance of each loan, make decisions on key asset issues and appoint andlor terminate the Special Servicer.

TRUSTEE: The . . - .- Trustee's .- -. primary role is to hold all the loan documents and distribute myme nts -- received from the Master Servicer to the bondholders Although the Trustee IS typically given broao authority w~th respect to certain aspects of the loan under the PSA, the Trustee typically delegates its authority to either the Special Servicer or the Master Servicer. As holder of the loans, the Trustee will be named in enforcement actions related to the loans (such as lawsuits or non-judicial foreclosure actions) yet in most instances the Trustee is acting by and through either the Master Servicer of the Special Servicer. All Borrower interaction rarely, if ever, interacts with the Trustee.

RATING AGENCY(IES): There will be as few as one and as many as four Rating Agencies involved in rating a securitization. Rating agencies establish bond ratings for each bond class at the time the securitization is closed They also monitor the pool's performance and update ratings for investors based on performance, delinquency and potential loss events affecting the loans within the trust. The bond ratings assigned at the time the securitization closes assume that the credit quality of the loan pool will not change significantly over time. As such, some decisions cannot be made without respect to the loans in a securitized pool without rating agency confirmation that such actions will not cause a downgrade of any of the bond class ratings. Rating Agency confirmation is frequently required with respect to actions on the largest loan in the trust, but certain items such as approval of subordinate financing may also require Rating Agency confirmation regardless if the size of the loan. The Rating Agencies will work directly with a servicer in processing these types of requests and will not interact directly with the Borrower.

CMBS SERVICING Who to Contact Borrowers should aiways initiate their requests with the Primary or Master Servicer, as they know who the players are in the securitization, what the process is, what information is needed for the specific request and whose consent is required. Even if the request must ultimately be approved by the Special Servicer or Directing Certificateholder, there parties will still generally look to the Primary or Master Servicer for a recommendation. It is common practice for services to send an introductory letter to the Borrower at the time a loan is closed or securitized, which typically includes a contact address. In the event such correspondence is not availabk. Borrowers should review their monthly billing statement to locate the identity of the Primary or Master Servicer for their loans and obtain contact information

COMMON BORROWER REQUESTS: Just as portfolio lenders service loans to protect their interests, CMBS servicers will act to protect the interests of the certificateholders as a whole. Unlike portfolio loans, where serving decisions are guided by the leaders' own internal policies, CMBS servicers' discretion in servicing loans is governed by the PSA and, in some instances, restricted by the REMlC regime.

Complying with REMlC regulations is central to most CMBS transactions t o maintain the trust's favorable tax treatment One of the primary restrictions imposed upon the trust by the REMlC regime is the requirement that the loan constitute a "static pool." This means that substitution of collateral cannot occur nor can the loan be materially modified unless specifically provided for in the loan documents or ~~nless the loan has defaulted or default is deemed imminent. Many Borrowers offer good solutions to problems that are. however, not permissible under REMlC regulations and are frustrated when the CMBS servicer must reject their request.

Borrowing Under a Securitization Structure

A C' I Step 2 - n~ Lender sells t ? ~ bm to i& IS= &* P.4rn"

I v lnrl tlie Ejm~verhe& making md* p;r,mnts

I Invesbrs. The Undelwriterarsists inthe sah, thc Ratiq Agency Btes the r e d i e s , and Cmd3 Enhmcemsd mayt* oMained.

Step 4 - n15 Srzr~:excalltds m y p a y n d r ; h m t k B m m w r a n d d s paymds totheIrsuer. TheSeNirerandtheTtwteema~ge dehqwntlo~ accaadingb temrr set b h m the Rmling & & r ? i c i n g A ~ ~

'from ~st imony of Sheila BairlForC Chair) to Congress 4-17-07

EXECUTION VERSION

WaMu ASSET ACCEPTANCE CORP.,

as Depositor

and

WASHINGTON MUTUAL BANK,

as Servicer

and

DEUTSCHE BANK NATIONAL TRUST COMPANY,

as Trustee

and

DEUTSCHE BANK TRUST COMPANY DELAWARE,

as Delaware Trustee

POOLING AND SERVICING AGREEMENT

$3,901,265,905.06

WaMu Mortgage Pass-Through Certificates Series 2005-AR13 Trust

WaMu Asset Acceptance Corp.

WaMu Mortgage Pass-Through Certificates

Series 2005-AR13

Cut-Off Date: October 1,2005

This Pooling and Servicing Agreement, dated as of October 1.2005 (this "Amment'?, is by and among WaMu Asset Acceptance Corp., as depositor (the "Comoany'), Washington Mutual Bank, as Servicer, Deutsche Bank National Trust Company, as Trustee, and Deutsche Bank Trust Company Delaware, as Delaware Trustee. Capitalized terms used in this Agreement and not otherwise defined have the meanings ascribed to such terms in Article I hereof.

PRELIMINARY STATEMENT

The Company at the Closing Date is the owner of the Mortgage Loans and the other pmpmty being conveyed by it to the Trust. On the Closing Date, the Company will sell the Mortgage Loans and certain other assets to the Trust in return for the WMIC I Regular Interests, the Class PPP Certificates and the Class R-1 Residual Interest and will be the owner of the REMTC I Regular Interests, the Class PPP Certificates and the Class R-1 Residual hmt. Thereafter, on the Closing Date, the Company will acquire the REMIC I1 Regular Interests and the Class R-2 Residual Interest from the rust as consideration for its transfer to the Trust of the REMIC I Regular Interests and will be the owner of the REMIC U Regular Interests and the Class R-2 Residual Interest Thereafter, on the Closing Date, the Company will acquire the Certificates (other than the Class PPP Certificates) from the Trust as consideration for its transfer to the Trust of the REMlC U Regular Interests and will be the owner of the Certificates (other than the Class PPP Certificates). The Company has duly authorized the execution and delivery of this Agreement to provide for (i) the sale to the Trust of the Mortgage Loans and certain other assets, (ii) the issuance to the Company of the REMIC 1 Regular Interests and the Class R-1 Residual Interest representing in the aggregate the entire beneficial interest in REMIC I, and the Class PPP Certificates, (iii) the conveyance to the Trust of the REREMIC I Regular Interests, (iv) the issuance to the Company of the REMIC II Regular Interests and the Class R-2 Residual Interest representing in the aggregate the entire beneficial interest in REMIC II, (v) the conveyance to the Trust of the REMIC U Regular Interests and (vi) the issuance to the Company of the Certificates (other than the Class PPP Certificates). TZle Company and the Servicer are entering into this Agreement, and the Trustee and the Delaware Trustee are each accepting the h s t created hereby, for good and valuable consideration, the receipt and sufficiency of which am hereby ackmwledged.

The Certificates issued hereunder, other than the Junior Subordinate Certificates and the Class PPP Certificates, have been offered for sale pursuant to a Prospectus, dated October 21, 2005, and a Prospectus Supplement, dated October 21, 2005, of the Company (together, the %m,ectus"). The Junior Subordimate Certificates have been offered for sale pursuant to a Private Placement Memmdum, dated October 25, 2005. The Trust created hereunder is the "Trust" described in the Prospectus and the Private Placement Memorandum and the CRtificates are the "Certificates" described therein. The following tables set forth. the designation, type of intensf Certificate Interest Rate, initial Class Principal Balance and Final Maturity Date for the MMIC I Regular Interests, the REMIC II Regular Intefests the Class R Residual Interests:

REMIC I Interests

Class Designation for each REMlC I

Regular Interest and Certificate Initial Class the Class R-l Type of Iraast Principal F i d Maturih,

Rcsidwl I111cmt I n t m Rate (I) Balance Date* Class LTI Regular Variable (2) $3900,664,441116 October2045 Class LT2 R e d a r Variable (21 178.789.88 Octohrr 7MC - . . . . . . - . . - Class LT3 Re& Variable i3j 21 1:336.71 Cktober 2045 - . Class LT4 ~ e b variable (4j 21 11336.71 ~ c t o b ~ r 2045 Class R-l t Residual 4.963% 100.00 Odober2045

Thc M b u t i o n Date m the specihtd ubmlh, which is the month foIlowiOg & month in which the latest mahning Mmtgagc Law muutc% For feden1 imnnc M pupows. far each Class of REMlC I Regular and Residual Interests, (he "latest poasiblc mahuity dab" shall be the Final Mahrnly Date.

t 'lbe C h R-1 Reaidual latnrst is entitled to mciw the agpliubk Residual Dishiiution Amount and any Excess Liquidation Rmcds.

( I ) Inleresl distnhtcd lo rhc R W C I Re* lntuub (other h a tbe Class Ll3 Regular lotmest, which shall m l b e e n t i r l d t o r r n i v c a n y ~ m o f ~ ) s n d t h e c 1 . s s R - l Rcsiduallntmstoneacb Dishihution Dak will have .cmnd at ibe apphble per Pmuuo Cmfiute Interest Rate on the applicable C h RimipalB8hnce outslanding unmediatcly before such Dkhibution Date.

( 2 ) For each Dismbutiw Date, the Certificate l d r c s t Rate on the L?ass LTI and Class 1.T2 Regular Intererk shall eqnal (be Weighted Avenge Pas-Thmugh Rate fa such Distnibutioo Date.

(3) The Class L l 3 Rgular h t m s t shall w t be cntitkd to receive any disb i ions of inmest,

4 ) F a each Disbibhon Date. (be Cerbficate I~~cIuI R.tc on tbe CLrs LT4 Rrgular Tntmst shall equal two (2) tims the Weighted Avnage P r s s T b u g h Rae for such Disbiiution Date.

As provided herein, with respect to REMIC I, the Senricer will cause an election to be made on behalf of REMlC I to be treated for federal income tax purposes as a REMIC. The REME I Regular Interests will be designated regular interests in REMIC I and the Class R-1 Residual Interest will be designated the sole class of residual interest in REMIC I, for purposes of the REMIC Provisions

Class Dni@cm hr cach Class OF REMlC

I1 Regular Interests and the Class R-2 Residual Intcmt - .. . - - .-

Ciaas. A-IAI-L Class A-IAZ-L Clms A- I N - L Class A-IBI-L Class A-192-L Class A-IB3-L Class A-ICI-L Class A- lC2-L Claw A- I C3-L Class A-IC4-L Class X-L Class 9-I-L Clasv 8-2-L Class 8-3-L Class B-4-L Class 8-5-1. Class R-6-1. C l m 9-7-L Clws B-8-L Class B-9-L C l m B-IC-L Class El-l I-L Clew 8- 12-L C l w 813-L Class B-14-L Class R-2 (2 1)

Type of lntmsf

"

bgular Resular kgvlar bgo'a=

&.@= Regular Rcsular Re@ Regukr ryrh Rcgutm b@ Re* fimlar Rewlar w= Regular W a r W a r kd= R e d = Reeular Regular Regular Residual

- Rate (1) Variable (2) (2 1) Valiable (3) v d l e (4) 0 1 ) Variabk (5) (21) Variable (6) (21) Variable (7) (21) Variable (8) (2 1) Vniable (9) (21) Vuisble (10) (21) Vuiable (I I) (21) V d b k ( I 2 ) (21) Variable (14) (21) Variable(l5) (21) Variable (16) (21) Variable (17) (21) Variable (18) (21) Vmiable (19) (21) Variable (20) (21) Variablc (20) (21) Variable (20) (21) Variable (20) (21) Varisble (20) (21) Variable (20) (21) Variable (20) (21) Variable (20) (2 1)

.-...

F i i l M e h Q Date*

October 2045 October 2045 Oaobcr2045 October 2045 October 2045 October 2045 Octobcr 2045 October2045 ocmbcr 2045 Ocmkr 2045 Oaober 2045 Ocmber 2045 October 2045 Ocmber2045 0*ober 2045 Onobe~ 2045 October ZM5 Odober 2045 October 2045 O c t o b ~ 2045 October 2045 ocmber2045 October 2045 October 2045 Omber 2045 Onober 2045

t The Distribution Date in the mitied month which is the month followine he month in which the latest mmtwmg Morgage LOM ma& For fcdcral in- tax pnpasw. f a ca;h ~ l s s s of REMIC II Regular and Rendual [email protected] "laW possible malnnty dak" shall be the F W Maw Datc.

(I) ~tdistnboadtotbe~CnkgularlnlensWooclcb~~Dahvillbaveaccruedatthe amliable as amnmCerci6catc Inkrest Ran on the spdiuble Class Rincioal Balana (or. in the case of UK. dbss X-L. kegularlnmt, at the Class X-L Notional h u u t ) oulsbmd;rg5bdiateli&fore such Dism'butim Date.

12) Ibe Ce~tihate IMmst Rate on the Class A-IAI-L Rermlar InnraR for (fi each D h i t i o n Date on of ,-, ~~~. ~~~~~ - ~ - -~~ -~

befm thc CkeUp Call O p h Dale, shall ml the kast of (a) the ~djktcd Weighed Average Paps- Tlologb M e for such D i i Date, @)%OR plus 0.290% UNI (c) 10.50%; and (ii) each Disbibution Wte aflcr (he Clan-Vr, Call Option Date, Jball equal the least of(a) the Miusled Weiahtcd Average Paw- - Through Rate for socb-Dislriiiion Date, @) L M R plus 0.58(Phaha (c) IO.MO/o.

(3) 'The Cmificste Incaest Rah on the Class A-IAZ-L Regular lnLocst for cach Distribution Date shaU equal (he Icwx of (a) dm Weighted Amage Pass-Through Rate for such D i s b l i o n Date and (b) U i Index plus the

(4) 'Ilac Ccrlikatc lnmat R& on he class A-1.43-I. RcguInr Inarcst fn (i) each Distribution Dalc on or before thc Clcnn-UpCd Optioo Date. shall equal the least of (a) the Adjusted Weighted Average Pass-

Excerpts from: WaMu Mortgage Pass-Through Certificates Series 2005-AR13 Trust

This Pooling and Servicing Agreement. dated as of October 1. 2005 (this "Aareernent"), is by and among WaMu Asset Acceptance Cwp, as depositor (the "Com~anf). Wash~ngton Mutual Bank. as Servicer. ~eutsche Bank ~ational Trust C m a n y , as Trustee, and Deutsche Bank T ~ s t Company Delaware, as Delaware Trustee. Ca~ltaiized terms

~~

used in this Agreement and not otherwise defined have the meanings ascribed to such terms in ~r t i c ld I hereof.

PRELIMINARY STATEMENT

n e Company at the Closing Date is the owner of the Mortgage Loans and the other property being conveyed by it to the Trust. On the Closlng Date, the Company will sell the Mortgage Loans and certain other assets to the Trust In return for the REMlC I Regular Interests. the Class PPP Certificates and the Class R-I Residual lnterest and will be the owner of the REMlC I Regular Interests. the Class PPP Certificates and the Class R-I Residual Interest. Thereafter. on the Closing Date. the CotnDany will acquire the REMlC II Regular lnterests and the Class R-2 Residual lnterest from the Trust as consideration for its transfer to the Trust of the REMlC I Regular Interests and will be the owner of the REMlC I1 Regular lnterests and the Class R-2 Residual lnterest. Thereafter, on the Closing Date, the Company will acquire the Certificates (other than the Class PPP Certificates) from the Trust as consideration for its transfer to the Trust of the REMlC II Regular lnterests and wilt be the owner of the Certificates (other than the Class PPP Certificates).

The Company has duly authorized the exeC~ti0n and delivery of this Agreement to provide for (i) the sate to the Trust of !he Mortgage Loans and certain other assets. (ii) the issuance to the Company of the REMlC I Regular lnterests and the Class R - l Residual lnterest representing in the aggregate the entire beneficial interest in REMlC I, and the Class PPP Certificates, (iii) the conveyance to the Trust of the REMlC I Regular Interests, (iv) the issuance to the Company of the REMlC II Regular Interests and the Class R-2 Residual lnterest representing in the aggregate the entire beneficial interest in REMtC II. (v) the conveyance to the Tmst of the REMlC II Regular lnterests and (vi) the issuance to Company of the Certificates (other than the Class PPP Certiicates).The Com~any and the Sewicer are entering into this Agreement, and the Trustee and the DelawareTmstee are each accepting the trust created hereby, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged.

The Certlficales issued hereunder, other than the Junior Subordinate Certificates and the Class PPP Certificates, have been offered for sale pursuant to a Prospectus, dated October 21.2005, and a Prospectus Supplement. dated October 21,2005, of the Company (together, the "Prospectus"). The Junlor Subordinate Certificates have been offered for sale pursuant to a Private Placement Memorandum, dated October 25. 2005. The Trust created hereunder is the "Trust"described in the Prospectus and the Private Placement Memorandum and the Certificates are the "Cerfificates"described therein. The following tables set forth the designation, type of interest, Certificate lnterest Rate, initial Class Principal Balance and Final Maturity Date for the REMIC I Regular Interests, Ihe REMlC II Regular lnterests the Class R Residual Interests:

As provided herein, with respect to REMlC I, the Servicer will cause an election to be made on behalf of REMlC I to be treated for federal income lax purposes as a REMIC. The REMlC I Regular lnterests wilt be designated regular interests in REMlC I and the Class R-I Residual lnterest will be designated the sole class of residual interest in REMlC I, for purposes of the REMlC Provisions. In addition. the Trusl will issue the Class R Certificates. which will represent ownership of the Class R-I and Class R-2 Residual Interests.

In addition, the Trust will issue the Class A and Class B Certificates, each of which Class will represent ownership of (I) the Corresponding Class of REMlC II Regular Interests and (ii) with respect to the each Class of Class A Certificates (other than the Class A-1A2 Certificates) and Class B Certificates, the applicable rights specified in the second and fifth sentences of Section 4.04(a), and wilt issue the Class X Certificates, which will represent ownership of (i) the Class X-L Regular lnterest and (ii) the obligations specified in the second sentence of Section 4.04(a). In addition, the Trust will issue the Class PPP Certificates. which will not have a Class Principal Balance and will only be entitled to receive on any Distribution Date the aggregate Of all Assigned Prepayment Premiums. The Class PPP Certificates will not represent an interest in any REMIC.

ns ,,f the cut-OR Date, the Mortgage Loans have an aggregate Principal Balance of 0,901265,905.06 and, as of the clmine D a r the Certificates have an Aggregate Cerfificate Principal Balance of $3,901,265,g,J506,

/, g L D L

WHEREAS, the Trustee is a national banking association duly organized and existing under the laws of the United States of America and has full power and authority to enter into this Agreement;

WHEREAS, it is the intention of the Com~any, the Servicer, the Trustee and the Delaware Trustee that the Trust created by this Agreement constitute a statutory trust under the Statutory Trust Statute. that this Agreement constitute the governing instrument of the Trust, and that this Agreement amend and restate the Original Trust Agreement;

Authenticating Agent: Any authenticating agent appointed by the Trustee pursuant to Section 8.1 1

Beneficial Holder: A Person holding a beneficial interest In any Book-Enhy Certificate as or through a DTC Participant or an Indirect DTC Participant or a Person holding a beneficial interest in any Definitive Certificate.

Certificate: Any one of the Certificates issued pursuant to this Agreement. executed by the Trustee on behalf of the Trust and authenticated by or on behalf of the Trustee hereunder in substantially one of the forms set forth in Exhibit A and B hereto. The additional matter appearing in Exhibit H shall be deemed incorporated into Exhibit A as though set forth at the end of such Exhibit

Certificate of Trust The certificate of trust Cled with respect to the Trust with the Secretary of State in accordance with Section 381 0(a) of the Statutory Trust Statute.

X Cl,t-Off Date October 1,2005

Depositary Agreement The Letter of Representations, dated October 24. 2005 by and among DTC, the Trust and the Trustee. The Trustee is authorized to enter into the Depositary Agreement on behalf of the Trust

Inlial Custodial Agmemenf: The Custodial Agreement, dated the date hereof, among the Trustee, the Servicer and the lnltial Custodian.

'$/ Initial Custodian. Washington Mutual Bankfsb.

Insttrance Proceeds: Amounts paid or payable by the insurer under any Primary Insurance Policy or any other insurance policy (including any replacement policy permitted under this Agreement) covering any Mortgage Loan or Mortgaged Property, including, without limitation, any hazard insurance policy required pursuant to Section 3.07, any title insurance policy and any FHA insurance policy or VAguaranty, to the extent such amounts are not released to the Mortgagor in accordance with prudent mortgage loan servicing practices.

Investment Depository: JPMorgan Chase Bank, or another bank or trust company designated from time to time by the Sewicer. The Investment Depository shall at all times be an Eligible Institution.

Liquidated Mortgage Loan: A Mortgage Loan (other Man a Mortgage Loan with respect to which a Payoff has been made) for which the Servicer has determined in accordance with its customary servicing practices that it has received all amounts which it expects to recover from or on account of such Mortgage Loan, whether from Insurance Proceeds, Liquidation Proceeds or otherwise. For purposes of this definition, acquisition of a Mortgaged Property by the Trust shall not constitute final liquidation of the related Mortgage Loan.

Mortgage: The mortgage. deed of trust or other instrument securing a Mortgage Note.

Morfgage He: The following documents or instruments with respect to each Mortgage Loan. (X) with respect to each Mortgage Loan that is not a Cooperative Loan:

(i) The original Mortgage Note endorsed (A) in blank, without recourse, (B) to the Trustee, without recourse, or (C) * to the Tmn. without recourse, and all intervening endorsements eviden~i"p a complete chain of endorsemen& from the originator to the endorser last endorsing the Mortgage Note. or. In the event of any Destroyed Mortgage N o t e . a copy or a duplrcate ong~nal of the Mortgage Note (& portion thereof. as applicable). together with an original lost note

the Origfnabr of the Mortgage Loan, the applicable Seller or the Company stating that & or/gfnal

.Mortgage Note (or portion thereof, as applicable) was lost, misplaced or destroyed, together with a copy of the Mortgage Note (or portion thereof, as applicable); provided, however, that in the event that either (a) Washington Mutual Bank or Washington Mutual Bank fsb is the Seller of the Mortgage Loan or (b) Washington Mutual Mortgage Securities Cop. is the Seller of the Mortgage Loan and purchased the Mortgage Loan from Washington Mutual Bank or Washington Mutual Bank bb, then the Moilgage Note need not be endorsed in blank or to the Trustee or the Trust as provided above, but, if not so endorsed. shall be made payable to, or properly endorsed lo. Washington Mutual Bank or Washington Mutual Bank fsb. as applicable:

& MoIf9aqe Loan Purchase Agreement The Mortgage Loan Purchase and Sale Agreement, dated as of October 25 2005, among the Company, Washington Mutual Bank and Washington Mutual Bank fsb, as supplemented and amenbed by the Term Sheet. dated the Closing Date. between the Com~any and Washington Mutual Bank and relating to the Certificates and the T e n Sheet, dated the Closing Date. between the Comvany and Washington Mutual Bank fsb and relating to the Certificates.

Mortgage Note The note or other evidence of the indebtedness of a Mortgagor under a Mortgage Loan.

Mortgage Pool: All of the Mortgage Loans

Mortgage Pool Assets: (i)The Mortgage Loans (including all Substitute Mortgage Loans) aentified on the Mortgage Loan Schedule, and all rights pertaining thereto, including the related Mortgage Notes. Mortgages. Cooperative stock Certificates. Cooperative Leases. Security Agreements, Assignments of Proprietary Lease, and Recognition Agreements. and all Minimum Monthly Payments due afler the Cut-Off Date and all other payments and diitribulions collected with respect to the Mortgage Loans on or after the Cut-Off Date; (ii) the Certificate Account, the Investment Account, the Yield Maintenance Account, and all money. instruments. investment property, and other property credited thereto. carried therein, or deposited therein (except amounts constituting the Servicing Fee); (iii) the Custodial Accounts for P&i and any Buydown Fund Account (to the extent of the amounts on deposit or other property therein attributable to the Mortgage Loans). and all money, instruments, investment property, and other property credited thereto. carried therein, or deposited therein (except amounts constituting the Servicing Fee); (iv) all pmperty that secured a Mortgage Loan and that has been acquired by foreclosure or deed in lieu of foreclosure or, in the case of a Cooperative Loan, a similar fonn of conversion, after the Cut-Off Date; (v) each FHA insurance policy, Primary lnsurance Policy. VA guaranty, and other insurance policy related to any Mortgage Loan, and all amounts paid or payable thereunder and all proceeds thereof; and (vi) the Yield Maintenance Agreement.

Pass-Through Rate: For each Mortgage Loan, the Mortgage Interest Rate for such Mortgage Loan less (i) the Sewlcing Fee Rate for such Mortgage Loan and (ii) if such Mortgage Loan was covered by a Special Primary lnsurance Policy on the Closing Date (even if no l0KW so covered), the per annum rate at which the applicable Special Primary Insurance Premium for such Mortgage Loan is calculated. For each Mortgage Loan, any calculation of monthly interest at such rate shall be based upon annual interest at such rate (computed on the basis of a 360-day year of twelve 30-day months) on the unpaid Principal Balance of such Mortgage Loan divided by twelve, and any calculation of interest at such rate by reason of a Payoff shall be based upon annual interest at such rate on the outstanding Principal Balance of such Mortgage Loan multiplied by a fraction, the numerator of which is the number of days elapsed from the Due Date of the last scheduled payment of principal and interest to. but not including, the date of such Payoff, and the denominator of which is (a) for Payoffs received on a Due Date. 360. and (b) for all other Payoffs. 365.

Primary Insurance Policy Wlth respect to any Mortgage Loan, a primary policy of mortgage guaranty insurance, If any, on such Mortgage Loan (including any Special Primary lnsurance Policy).

Prospectus- The Prospectus, dated October 21. 2005, and the Prospectus Supplement, dated October 21. 2005, of Cornpan1

;v Recording Documents: With respect to each Mortgage Loan, the original recorded Mortgage relating to such Mortgage Loan and any intewening assignment thereof required to be included in the Mortgage File with evidence of recordinq thereon (or a copy of such original Mortgage o r intervening assignment certified by the applicable recording office) (which may be in electronic form).

- . . - - . - - -

REMIC: A real estate mortgage investment conduit, as such term is defined in the Code

Senricer Washington Mutual Bank, or any successor thereto appointed as provided pursuant to Section 7.02, acting to service and administer the Mortgage Loans pursuant to Section 3.01.

1 S B D*

Serviong Fee: For each Mortgage Loan, the fee payable to the Servlcer for servicing and advancing certain amounts with respect to such Mortgage Loan, equal to 1\12 of the product of (i) the Servicing Fee Rate for such Mortgage Loan and (11) the outstandlng Principal Balance Of such Mortgage Loan. In addition, the Sewicer will be paid, as addltlonal servicing compensation, any prepayment penalty received on a Mortgage Loan that i s not an Assigned Prepayment Premium, and any late charges, nonsufficient funds fees and other fees and charges collected on the Mortgage Loans.

Serv~cing Fee Rate: 0.375% per annum.

Transferee: Any Person who is acquiring by Transfer any Ownership Interest in a Residual Certificate.

Tntst- WaMu Mortgage Pass-Through Certificates Series 2005-AR13 Trust, a Delaware statutory trust, created ' pursuant to the Original Trust Agreement.

Tr~wtee: Deutsche Bank Natlonal Trust Company. or its successor-in-interest as provided in Section 8.09, or any ' successor trustee appointed as herein provided.

Undenuriters: WaMu Capital Corp. and Greenwich Capital Markets, Inc.

Section 2:01 The assets of the Twst shall remain in the custody of the Trustee or the Custodian, on behalf of the Trust, and shall be owned by the Trust. Moneys to the credit of the Trust shall be held by the Trustee and invested as provided herein. All assets received and held by the Trust will not be subject to any right, charge, security interest, lien or claim of any kind in favor of either of the institution acting as Trustee or the institution acting as Delaware Trustee in its own right, or any Person claiming Mrough either. Neither the Trustee nor the Delaware Trustee shall have the power or authority to transfer. assign, hypolhecate, pledge or otherwise dispose of any of the assets of the Trust to any Person ...

Section 2.02 Trust shall not, and none of the Trustee, Me Delaware Trustee, the Company or the Sewicer shall (except by amendment of this Agreement permitted by Section 10.01) knowingly cause the Trust to, do any of the followlng:

(vil) possess or assign the assets of the Trust for other than a Trust purpose; .----.-..- ~ .------.---..,....-. .- Section 2.03. Separateness Requirements. Notwithstanding any other provision of this Agreement and any provision of law that otherwise so empowers the Trust. so long as any Cert i i i tes are outstanding. theTrust shall perform the following:

(i) except as expressly permitted by this Agreement or the Custodial Agreement, maintain its books, records. bank accounts and files separate from those of any other Person;

(ii) except as expressly permitted by this Agreement, maintain its assets in its own separate name and in such a manner that it is not costly w difficult to segregate, identify. or ascertain such assets:

(iii] conslder the interests of the Trust's creditors in connection with its actions;

(iv) hold itself out to creditors and the public as a legal entity separate and distinct from any other Person and correct any known misunderstanding regarding its separate identity and refrain from engaging in any activity that compromises the separate legal identity of the Trust

(v) prepare and maintain separate records. accounts and financial statements in accordance with generally accepted accounting principles. consistently applied, and susceptibie to audit. To the extent it is included in consolidated financial statements or consolidated tax returns. such financial statements and tax returns will reflect the separateness of the respective entities and indicate that the assets of the Trust will not be available to satisfy the debts of any other Person;

(vi) allocate and charge fairly and reasonably any overhead shared with any other Person;

( ~ ~ 1 ) transact all business with affiliates on an arm's-length basis and pursuant to written, enforceable agreements: I I%'?

fi \'i "Z

(viii) conduct business solely in the name o f the Trust. In that regard all written and oral communications of the Trust, including, without limitation, letters, invoices, purchase orders and contracts, shall be made solely in the name of the Trust:

(ixl maintain a separate office through which its business shall be conducted, provided that such office may be an oRce of the Trustee. which office shall not be shared witht- or any affiliates of the Company;

(x) in the event that services have been or are in the future performed or paid by any Person on behalf of the Trust (other than the Trustee, the Delaware Trustee. the Servicer or the Tax Matters Person as permitted herein), reimburse such Person. as applicable, for the ~O~mercial ly reasonable value of such services or expenses provided or incurred by such Person. Accordingly. (i) the Trust shall reimburse such Person, as applicable, for the commercially reasonable value of such services or expenses provided or incurred by such Person; (ii) to the extent invoices for such sewices are not allocated and separately billed to the Trust. the amount thereof that was or is to be allocated and separately billed to the Trust was or will be reasonably related to the services provided to the Trust; and (iii) any other allocation of direct, indirect or overhead expenses for items shared between the Trust and any other Person, was or will be, to the extent practicable, allocated on the basis of actual use or value of services rendered or otherwise on a basis reasonably related to actual use or the value of services rendered:

(xi) except as expressly permitted by this Agreement. not commingle its assets or funds with those of any other Person;

(xii) except as expressly pemlitted by this Agreement, not assume. guarantee, or pay the debts or obligations of any other Person:

(xiii) except as expressly permined by this Agreement, not pledge its assets for the benefit of any other Person;

>k (xiv) not hold out its credit or assets as being available to satisfy the obligations of others; , - -- - -

(xv) pay its liabilities only out of its funds;

(xvi) pay the salaries of its own employees, if any: and

(xvii) cause the agents and other representatives of the Trust. if any, to act at all times with respect to the Trust consistently and in furtherance of the foregoing.

Seclion 2.04. Conveyance of Mortgage Pool Assets; Security Interest.

The Company does hereby i~evoCably~.e~~~s~er , Iassign,a~tto.ver~anddoth.e~~~sac~n~ey to the Trust, without recourse, all the Company's right, title and interest in and to the Mortgage Pool Assets. The Trust, as payment of the purchase pdce of the Mortgage Pool Assets, shall, on the Closing Date, issue (i) the REMlC I Regular Interests and the Class R-I Residual Interest to the Company and (ii) the Class PPP Certificates to Company or the Company's designee in Authorized Denominations. The REMlC I Regular Interests, the Class PPP Certificates and the Class R-I Residual Interest shall together be a separate series of beneficial interests in the assets of the Trust consisting of the Mortgage Pool Assets pursuant to Section 3806(b)(2) of the Statutory Trust Statute.

I! is the express intent of the parties hereto that the conveyance of the Mortgage Pool Assets to the Trust by C o m m as provided in this Section 2.04 be. and be construed as, an absolute sale of the Mortgage Pool Assets. - -.-

... the Trust shall have all of the rights and remedies of a secured party under the Uniform Commercial Code as in force in !he relevant jurisdiction.

Section 2.05. Delivery of Mortgage Files.

# 'On the Closing Date, the C o m ~ a n t shall deliver to and deposit with, or cause to be delivered to and deposited wlth, the Trustee or the IniHal Custodian the Mortgage Files, Which shall at all times be identifled in the records of the Trustee or the Initial Custodian, as applicable, as being held by or on behalf of the Trust.

Concurrently with the execution and delivery hereof, the Comoany shall cause to be filed with respect to each Cooperative Loan the llCC assionment or amendment referred to in clause (Y)(vii) Of Me definition of 'Morlgage File." In connection - . - . . .. . - - - . -- - " with its servicing of Cooperative Loans, the S e ~ c e r shall use its best efforts to file timely contimuation statements. if necessary, wilh regard to each financing statement relating to a Cooperative Loan.

. - . - the Trustee shall remain liablefor its own negligent action, its own negligent failure to act and its own willful

misconduct to the extent provided herein. Any documents delivered by the Company or the Servicer to the Custodian shall be deemed to have been delivered to the Trustee for all purposes hereunder; and any documents held by the Custodian shall be deemed to be held by the Ttustee for all purposes hereunder. There shall be a written Custodial Agreement between the Trustee and each Custodian. Each Custodial Agreement shall contain an acknowledgment by the Custodian that all Mortgage Pool Assets, Mortgage Files, and other documents and property held by it at any time are held by it for the benefit of the Trust.

Neither the TNstee nor the Tax Matters PerSon shall knowingly or intentionally take any action that would cause the of the REMlC status of REMlC

The Trustee acknowledges that all Mortgage Pool Assets, Mortgage Files and related documents and property

.k held by it at any time are held by it as Trustee of the Trust for the benefit of the holders of the REMlC 1 Regular Interests, the Class PPP Certificates and the Class R-I Residual Interest. The Trustee agrees to review (or cause the Initial Custodian to review) each Mortgage File within 45 days after the Closing Date and deliver to the Company a certification (or cause the Initial Custodian to deliver to the Company a certification, which satisfies the applicable requirements of this Agreement

If the Trustee finds any document or documents required to be included in the Mortgage File for a Mortgage Loan pursuant to the definition of "Mortgage Filemnot to have been executed and received, the Trustee shall promptly so notify the Servicer. An exception report delivered by the Custodian to the Sewicer pursuant to the Custodial Agreement shall be deemed to constitute such notice. Upon notice from the Trustee or the Custodian that any document required to be included in the Mortgage File for a Mortgage Loan has not been executed and received, the Servicer shall promplly notify the applicable Seller of such defect and take appropriate steps on behalf Of the Trust to enforce such Seller's obligation, pursuant to Section 2.4 of the Mortgage Loan Purchase Agreement, to Correct or cure such defect or repurchase or substitute for such Mortgage Loan. in accordance with and subject to the t i e limitations set forth in such Section 2.4

provided however, that the Servicer shall not require or permit a Seller to repurchase a Mortgage Loan pursuant to such Section 2.4 of the Mortgage Loan Purchase Agreement more than two years after the Closing Date unless (a) such defect would cause the Mortgage Loan to be other than a "Qualified mortgage" (as defined in the Code). (b) such Mortgage Loan is in default, or default is in the judgment of the Sewicer reasonably imminent, or (c) the Servicer. at the expense of the Seller, delivers to the Trustee an Opinion of Counsel addressed to the Trust and the Trustee to the effect that the repurchase of such Mortgage Loan will not give rise to a tax on a prohibited transaction. as defmed in Section 860F(a) of the Code

.- The representation and warranty set forth in this Section 2.08 shall survive delivery of the respective Mortgage Files to the Trustee or the Custodian, as Me case may be, and shall continue throughout the term of this Agreement. Upon discovery by any of the Company, the Servicer or the T ~ s t e e of a breach Of the foregoing representation and warranty which materially and adversely affects the value of the related Mortgage Loans or the interests of the Trust in the related Mortgage Loans, the party discovering such breach shall give prompt written notice to the others. Within 90 days of its discovery or its receipt of notice of breach. t h e y shall repurchase or substitute for the affected Mortgage Loan or Mortgage Loans or any property acquired in respect thereof by the Trust. unless it has cured such breach in all material respects. Any such substitution shall be made within the three-month period commencing on the Closing Date (or within the two-year period commencing on the Closing Date if the related Mortgage Loan is a "defective ob1igation"within the meaning of Section 86OG(a)(4)(B)(ii) of the Code and Treasury Regulation Section 1.860G-2(f)). Any such repurchase shall be made at the Repurchase Prim; provided. however, that no Mortgage Loan shall be repurchased pursuant lo this Section 2.08 unless (a) the Mortgage Loan to be repurchased is in default, or default is in the judgment of the Sewicer reasonably Imminent, or (b) the Servicer, at the expense of the Company, delivers to the Trustee an Opinion of Counsel addressed lo the Trust and the Trustee to the effect that the repurchase of such Mortgage Loan will not give rise to a tax on a prohibited transaction, as defined in Section 860F(a) of the Code. If such breach would cause the Mortgage Loan to be other than a "qualified mortgageW(as defined in Me Code). theo notwithstandinn fhr nrrvintm eantnnm +ha ---.....h-...-/. I

or. suhntitution must occur within the sooner of (i) 90 days fmm the date the defect was discovered or (ii) in the substitution. two years from the Closing Date. case of

[ Sectlon 2.11. Acknowledgment of Transfer Of Momage fool Assets. The Trustee hereby acknowledges and accepts on behalf of the Trust the tfansfer and assignment pursuant to Section 2.04 to the T ~ s t of the Mortgage Pool Assets, but wtthout having made the review required to be made within 45 days pursuant to Section 2.07, and declares that as of the Closlng Date it (Or the Custodian on behalf o f the Tmstee) holds and shall hold any documents constltutlng a part of the Mortgage Pool Assets, and the Mortgage Pool Assets, as Trustee in trust, upon the trust herein set forth, for the use and benefit of all present and future Holders of the REMlC I Regular Interests, the Class PPP Certificates and the Class R-1 Residual Interest.

( Sectlon 2.12. Conveyance of REMlC I1 Assets; Security Interest. The ComDany does hereby irrevocably sell, transfer, asslgn, set over, and otherwise convey to the Trust, without recourse, all the Comoany's right, title and interest in and to the REMIC II Assets. The Trust, as payment of the purchase price of the REMlC II Assets, shall issue the REMIC II Regular Interests and the Class R-2 Residual Interest to the Company on the Closing Date. Pursuant to Section 3818 of the Statutory Trust Statute, the REMIC I Regular Interests shall not be cancelled and shall be held as treasury interests owned by the Trust. The REMlC I1 Regular Interests and the Class R-2 Residual Interest shall together be a separate Series Of beneficial interests in the assets of the Trust Consisting of the REMIC II Assets pursuant to Section 3806(b)(2) of the Statutory Trust Statute.

The Company shall file such financing statements, and the and the Trustee acting on behalf of the Trust at the direction of the Comoany shall, to the extent consistent with this Agreement. take such other actions as may be necessary to ensure that, if this Agreement were found to create a security interest in the REMIC I1 Assets, such security interest would be a perfected security interest of tirst priority under applicable law and will be maintained as such throughout the term of this Agreement. In connection herewith, the Trust shall have all of the rights and remedies of a SWured party under the Uniform Commercial Code as in force in the relevant jurisdiction.

I Nelther the Trustee nor the Tax Matterr Person shall knowingly or intentionally take any action that would cause the terminatlon of the REMlC status of REMlC 11.

Section 2.17 Legal Title. Legal tine to all assets of the Trust shall be vested at all times in the Trust a k a separate . . . _ . .~ _ _ . _ - - .- - -

legal entity.

Section 3.04. The Certificate Account.

(a) On or prior to the Closing Date, the Trustee shall establish or cause to be established the Certificate Account. Promptly after the Closing Date. the Trustee shall communicate to the Servicer the account number and wiring instructions for the Certificate Account.

(b) ~ o t later than the Business Day prim to each Distribution Date. the Servicer shall direct the Investment Depository to withdraw from the Investment Account and deposit in the Certificate Account (or, in the event any such amounts have not been deposited in the Investment Account, the Servicer shall withdraw fmm the Custodial Accounts for P&l or the Buydown Fund Accounts. as applicable. and deposit in the Certificate Account) the following amounts (in each case, net of any amounts that the Servicer is entitled to withdraw from the Custodial Accounts for P&l pursuant to Section 3.D5(a)(i) through (v)):

0) Scheduled installments of principal and interest on the Mortgage Loans received by the Servicer which were due on or before the related Due Date;

(ii) Payoffs received by the Servicer during the related Payoff Period, with interest to the date of PayoK

(iii) Curtailments. Insurance Proceeds (except Insurance Proceeds required for the resroration or repair of the

related Mortgaged Property), Liiuidati Proceeds. Excess Liquidation Proceeds. Subsequent Recoveries and Repurchase Proceeds received by the Servicer during the Prior Period

(iv) the Assigned Prepayment Premiums for such Distribution Date;

(V) any Monthly PSI Advance required to be made by the Se~ ice r for such Distribution Date;

1.92-

(vi) amounts paid by the Servicer in connection with the exercise of its option to terminate this Agreement pursuant to Section 9.01; and

(vii) any other amounls required to be distributed from the Certificate Account on such Distribution Date pursuant lo Article IV (other than amounts to be deposited in the Certificate Account by the Trustee pursuant to clause (c) of this Section 3.04).

(c) On each Distribution Date, the Trustee shall deposit in the Certificate Account amounts withdrawn from the Yield Maintenance Account, in accordance with Section 3.16.

(d) Funds held in the Certificate Account shall be invesled at the written direction of the Servicer in (i) one or more Eligible lnvestments which shall in no event mature later than the Business Day prior to the related Distribution Date (except i f such Eligble Investments are obligatiis of the institution acting as the T ~ s t e e , such Eligible lnveslments may mature on the Distribution Date), or (ii) such other instruments as shall be required to maintain the Ratings. The Servicer shall be entitled to be paid as additional servicing compensation any gains earned on such Eligible lnvestments and shall bear any losses suffered in connection therewith. If the Trustee has not received such written investment directions from Ihe Servicer. the Trustee shall not invest funds held in the Certificate Account. The Trustee shall have no liability for any losses on investments of funds held in the Certificate Account

Section 4.01. Distributions to Holders of REMIC I Regular Interests and Class R-1 Residual Interest. On each Distribution Date, the Trustee (or any duly appointed paying agent) on behalf of the Trust (i) shall be deemed to have distributed from the Certificate Account the REMlC I Distribution Amount to the Holders of the REMIC I Regular Interests, and to have deposiled such amounts for their benefit into the Certificate Account and (ii) from the Cerlificate Account shall dislribute to the Class R Certificateholders. in accordance with the wrilten statement received from the Sewicer pursuant to Section 4.02(b), the sum of (a) the Excess Liquidation Proceeds and (b) the amounts to be distributed to the Holders of Ihe Class R-1 Residual Interest pursuant to the definition of "REMIC I Distribution Amount"for such Distribution Date. Amounts distributed punuant to clause (ii) above shall be distributed by wire transfer in immediately available funds for the account of each Class R Certificateholder, or by any other means of payment acceptable to each Class R Certificateholder of record on the immediately preceding Record Date (other than as provided in Section 9.01 respecting Ihe final distribution), as specified by each such Certificateholder and at the address of such Holder appearing in the Certificate Register. Notwithstanding any other provision Of this Agreement, no actual distributions pursuant to clause (i) of this Section 4.01 shall be made on account of the deemed distributions described in this paragraph except in the event of a liquidation of REMIC I1 and not REMlC I.

Section 6.01. Liability of the Company and the S e ~ c e r . Each of the Company and the Servicer shall be liable in accordance herewith only to the extent of the obligations specifically imposed upon and undertaken by the Company or the Servicer, as applicable, herein.

Section 7.03. Notification to Certificateholders. Upon any such termination or appointment of a successor to the Servicer, the Trustee shall give prompt written notice thereof to the Certificate holders at their respective addresses appearing in the Certificate Register.

Section 8.04. Trustees May Own Certificates. The Trustee, the Delaware Trustee or any agent or affiliate of such trustee, in its individual or any other capacity, may become the owner or pledgee of Certificates with the same rights il would have if it were not trustee.

Section 8.04. Tmstees May Own Ceftificates. The T~s tee , the Delaware Trustee or any agent or affiliate of such trustee. in its individual or any other capacity, may become the owner or pledgee of Certificates with the same rights it would have if it were not trustee.

#. Section 9.03. Trust Irrevocable. Except as expressly provided herein, the trust created hereby is irrevocabje.

Section 10.01. Amendment

(b) This Agreement may also be amended from time to time by the Servicer, the ComPany and the Trustee with the consent of the Holders of Certificates evidencing Percentage lnterests aggregating not less than 66% of REMIC II, for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, this Agreement or of modifying in any manner the rights of the Certificateholders: provided. however, that no such amendment shall, withoul the consent of the Holder of each Certificate affected thereby (i) reduce in any manner the amount of, or delay the timing

r .a2 n

-of, distributions of principal or interest required to be made hereunder or reduce the Certificateholder's Percentage Interest, the Certificate Interest Rate or the Termination Payment with respect to any of the Certificates, (ii) reduce the percentage of Percentage Interests specified in this Section 10.0g which are required to amend this Agreement, (iii) create or permit the creation of any lien against any part of REMlC I or REMlC It, or (iv) modify any provision in any way which would permit an earlier retirement of the Certificates; provided, further. that any such amendment which modifies the rights or obligations of the Delaware T ~ s t e e hereunder shall require the consent of the Delaware Trustee; provided, luffher. any such amendment which modifies the rights of the Class PPP Certificateholders to receive Assigned Prepayment Premiums. including any amendment to Section 3.20. shalt require the consent of each Class PPP Certificateholder.

Section 10.05. Governing Law. This Agreement shall be construed in accordance with the laws of the State of Delaware without giving effecl lo its conflict of laws provisions and the obligations. rights and remedies of the parties hereunder shall be determined in accordance with such laws without giving effect to conflict of laws provisions.

in the case of Deutsche Bank National Trust Comvany.

Alan Sueda Trust Administrator Deutsche Bank National Trust ComDany 1761 E. St. Andrew Place Santa Ana, CA 92705 Tele~hone: (714) 247-6315 Facsimile: (7_fi) 247-6329

Evidencing a beneficial interest in a pool of assets consisting of beneficial interests in another pool of assets consisting of beneficial interests in another pool of assets consisting of, among other things, conventional one- to four-family mortgage loans formed by

WaMu ASSET ACCEPTANCE CORP. Series 2005-AR13 Portion of the Class A-1 A1 Principal Balance as

of the Cut-Off Date Evidenced by this Certificate:

Class &?A1 Certificate Interest Variable Rate. Cut-Off Date: October 1. 2005 First Distribution Date: November 25,202 Last Scheduled Distribution Date: October 25, 2045 Class A-1 A1 Principal Balance as of $1,937,535,000.00 the Cut-Off Date:

WaMu Mortgage Pass-Through Certificates Series 2005-AR13 Trust Reutsche €lank National Trust Company, as Trustee 1761 East St. Andrew Place Santa Ana, CA 92705 Attn: Trust Administration WAOSAB

WaMu Asset Acceptance Corp. 1201 Third Avenue, WMT 1706A Seattle. WA 98101

end

The Case Against Washington Mutual Bank and California Reconveyance Company on March 10; 2011 three hlghly respected mernbers of the Wliiomia Office of the Attorney General parllcipated in a teleconference meeting wlth five members of the WAMU Chase Homeowners Action Alfianw. Please find betow the agenda and outllne of three plsssntatlons and our list af wcommendatlons to deal with the fraud perpetrated on borrowers In Callfornla was Washington Nlutual Bank, Washington Mutual Bank FA, and CalHomla Reconveyance Company. This information is baaed on official documents, personal experiences of the participants, and Information in the public domain.

AGENDA: Thursday. March 10,2011 3:30 - 430 PM

Representing theSan FrancJsco, Califamia office of AHomoy General: Kmnn Sears, Supenrlslny DepAy Attorney General. California Deoattment of Justlce. Ofh% of the Attorney General; and schedule PerInittinQ. Joseoh A. Raqano. De~utv Attornev General . -. - . . - and ~enjamh; Diehl, &pity ~ t t a m e ~ General

Representlng the WAMU Chase Homeowners Action Alliance: Brenda Reed. James Kelley, Lwanson C a y 8 Tess Schoenbarl

" 330 PM Welcame and Purpose, chairperson: Brenda Reed Introductions

335 PM WAMU's lending pradiis and impad on foreclosure in CA: Brenda Reed

345 PM Wasfilngton Mutual Bank. FA -history and issues of legal status, standing, and fraudulent foredosure practices: .lames Kplla, . ,-" . .-,.-, 2005. WAMU management shifted strategy away from or~gina'lng tradlionai fixed rale 6 conforming s~ngle family res dential loans towards riskier nontradilionai ban products and subpnme loans Purpose - to compote ~ I thCwnt ryw ids ~lnancial Corporation which in 2005 WAMWs CEO saw as'arguable the strangest competitor." B boost its bottan line. WAMU in 2006 estimated its internal p ra t margin b m subpime loam could be more than 10 times for a gov't backed loan product and more man 7 times for fid rate l ~ n produd S~b(rime Loan = 1% basis points return

WAMU FRAUD

Senate committee presented evident mat WAMU cxrartives knew about the frnud 6 knowingly failed to take adion on pmduwng offices in CA - WAMU Internal Investigation found Mat in Southern California that Subprime lendlng fraud was out of control.

WAMU failure was Mused by greed and more greed.

WAMU paid huge comrnlsslons to broken 8 ban offrcet-s - worst the terms of the loan for the borrower, the better the commissbn.

WAMU1s chief rlsk ofher (hired t o control risk) had 35% of her pay tied to growth 8 only 25% to risk Management

h ~ 5 0 0 2 N . p d f h t t p : l I e n . w i k i p e d i a . o ~ ~ a s h i n ~ Mutual

'Washington Mutual Bank. FA" ceased to exist April 4,2005, yet continued to make loans as such. Are these loans legitimate? Or are they a product of fraud7

On January 1.2005, the Company's state savings bank. me fcrmerflashington Mutual Bank merged into Washinaton Mutual Bank, FA. arid ceased tn subsequently, changed its name to Wa6hincRon Mutual Bank. FA changed its name to flashinqton Mutual 7

Bank ["WMB"]. Consequently, fhe Company no longer owns a date savings bank that is subjeU to regulation and supe~ision by the Director of Rnancial InstiMions of the State of Washington. Its nonhank finandal subsidiaries are subjed to varimus federal and state laws and rqulatlons.

From April 2005 -September 2008 tens ofthou~ands of Loans were made in the name of a nonexistent bank -Washington Mutual Bank. FA Loem lhat are bmkered ere required ta disclose the Yield Spread Premiums Making a bmkered loan in h e deedneme of the Washington Mutual Bank. FA' aflowed the Yield Spread Prem,um to be treated as a unr@orIable "Service Release Pmlum'. The fraud evades the fiduciary duty between the "Broker" by claiming the dead bank as a-loan Orlglnator. This mkes it difliculi (if not impossible) f ir the Bomacr m Inter I-r damages if Borrower sues the ilon-mistmt bank.

I

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United States Senate PERM;INENT SUBCOMMITTEE ON RVVESTZGA TIONS Committee on Homeland Security and Goverarnental Affairs

Carl Levin, Chairman Tom Coburn, Ranking .Minority Member

WALL STREET AND THE FINANCIAL CRISIS:

Anatomy of a Financial Collapse

MAJORITY AND MINORITY STAFF REPORT

PERMANENT SUBCOMMITTEE ON INVESTIGATIONS

UNITED STATES SENATE

April 13, 2011

4.

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Wall Street and The Financial Crisis: Anatomy of a Financial Collapse

April 13,201 1

In the fall of 2008, America suffered a devastating economic collapse. Once valuable securities lost most or all of their value, debt markets froze, stock markets plunged, and storied financial f ins went under. Millions of Americans lost thcir jobs; millions of families lost their homes; and good businesses shut down. These events cast the United States into an monomic recession so deep that the country has yet to funy reoovcr.

This Report is the prod~~ct of a two-year bipartisan invatigation by the U.S. Senate Pennanent Subcommittee on Investigations into the origins of the 2008 financial crisis. The goals of this investigat~on were construct a public rccord of the facts in order to deepen the underslanding of what happened; identify some of the mot causes of the crisis; and provide a factnal foundation for the ongoing effort to f d f y the colurtry against the recurrence of a similar crisis in the future.

Using internal documents, communications, and interviews, the Report attempts to provide the clearest picture yet of what took place insidc thc walls of some of the financial irlstitutions and regulatoty agencies that contributed to the crisis. 7he investigation found that the crisis was not a natural disaster, but the result of high risk, complex financial products; undisclosed conflicts of interest; and the failure of regulators, the credit rating agencies, and the market itself to rein in the excesses of Wall Street.

While this Report does not attempt to examine cvcry key moment, or analyze every important cause of the crisis, it provides new, detailed, and compelling evidence of what happened. In so doing, we hope the Report leads to solutions that prevent it from happening again. :

A. Subcommittee Investigation

ln November2008, the Pennanent Subcommittee on Investigations initiated its investigation into some of the key causes of the financial crisis. Since then, the Subcommittee has engaged in a wideranging inquiry, issuing subpoenas, conducting over 150 interviews and depositions, and consulting with dozens of government, academic, and private sector enperis. The Subcommittee has accumulated and reviewed tens of millions of pages of documents, including court pleadings, filings with the Securities and Exchange Commission, trustee reports, prospectuses for public and private offerings, corporate board and committee minutes, mortgage Bansactions and analyses, memoranda, marketing materials, correspondence, and emails. The Subcommittee has also reviewed do cum en^ prepared by or sent to or fiom banking and

securities regulators, including h n k examination reports, reviews of securities firms, enforcement actions, analyses, memoranda, correspondence, and emails.

In April 2010, the Subcommittee held four hearings examining four root causes of the financial crisis. Using case studies detailed in thousands of pages of documents released at the hearings, the Subcommittee presented and examined evidence showing how high risk lending by U.S. financial insritutions; regulabny failures; inflated credlt ratings; and high risk, poor quality financial products designed and sold by sane investment banks, contributed to the financial crisis. This Report expands on those hearings and the case studies they featured. The case studies are Washington Mutual Bank, the largest bank failure in U.S. history; the federal OKice oEThrift Supervision which oversaw Washington Mutual's demise; Moody's and Standard & Poor's, the country's two largest credit rating agencies; and Goldman Sachs and Deutsche Bank, two leaders in the design, rnmkdng, and sale of mortgage related securities. This Report devotes o cbapter to how cach of the four causative factors, as il~ustrated by the case shdies, fueled the 2008 financial crisis, providing findings of fact, analysis of the issues, and recommendations for next steps.

B. Overview

(1) High Risk Lending: Case Study of Washington Mutual Bank

Tlie first chapter focuses on how high risk mortgage lending contributed to the financial crisis, usirrg as a case study Washington Mutual Bank (WMII). At the time of its failure, WaMu was the nation's largest thrift and sixth largest bank, with $300 billion in assets, $188 billion in deposits, 2,300 branches in 15 states, and over 43,000 employees. Beginning in 2004, it embarked. upon a lending strategy to pursue higher profits by emphasizing high risk loans. By 2006, WaMu's high risk loans began incurring high rates of delinquency and default. and in 2007, its mortgage backed securities began incumeg ratings downgrades and losses. Also in 2007, the bank ibelf began incumng losses due to a portfolio that contained poor quality and iiaudulw~ loans and sccurities. Its stock price dropped as shareholders lost confidence, and depositors began withdrawing funds, evenNaUy causing a liquidity crisis at the bank. On September 25,2008, WaMu was %-zed by ib regulator, the Officc of Thrift Supervision, placed in receivership with the Federal Deposit Insurance Corporation (FDIC), and sold to JPMorgan Chase for $1.9 Billion. Had the sale not gone through, WaMu's failure might have exllausted the entire $45 billioe Deposit Ensuraace Fund.

This case study focuses on how one bank's search for increased growth aud profit led to the odgi-n and securitization of hundreds of billions of dollars in high risk, poor quality mortgages that ultimately plun~rneted in value, hurting investors, the bank, and the U.S. financial system, WaMu had heId itself out as aprudent lender, Bat in reality, the bank turned increasingly to higher risk loans. Over a four-year period, those higher risk loans grew &om 19% of WaMu's loan originations in 2003, to 55% in 2006, while its lower risk, fixed rate loans fell from 64% ta 25% Of its orightions. At the same timc, WaMu increased its securitization of

.................................................. (2) New Developments -315 (3) Recomrnmdations .................................................... 316

I . Rad Credit Rating Agencies by Accuracy ............................. 316 2 . Help Investors Hold CRAs Accountable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 316 3 . Strengthen CRA Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 316 4 . Ensure CRAs Recognize Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 316 5 . Strengthen Disclosure ............................................. 317 6 . Reduce Ratings Reliance ............................................ 317

VI . INVESTMENT BANK ABUSES: . . . . . . . . . . . . . . . . . CASE STUDY (IF GOLDMAN SACHS AND DEUTSCIiE BANK 318

A . Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 321 (I) Investment Banks to General ............................................ 321 (2) Roles and Duties of an Investment Bank: Market Maker, U~iderwriter.

Placanmt Agent, Broker-Dealer ......................................... 322 (3) Shuctured Finance Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 325

B . Running the CDO Maehine: Case Study of Deutsche Bank . . . . . . . . . . . . . . . . . . . . 330 . . . . . . . . . . . . . . . . . . . . . . . . . . . (1) Subco~n~niKee Investigation and Findings of Pact 333

............................................ (2) Deutsche Bank Backgmnd 334 ....................................... (3) Deutsche Bank's $5 Billion Short 337

................. (a) Lippmann's Negative of Mortgage Related Assets 337 . . . . . . . . . . . . . . . . . . . . . . . . . . @) Building and Cashing in the $5 Billion Short 341

(4) The "CDO Machine" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 346 (5) Gemstone ........................................................... 350

(a) Background on Gemstone .......................................... 350 .......................................... @) Gemstone Asset Seleztion 353

.............................. (c) Gemstone Risks md Poor Quality Assets 357 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (d) Gemstone Sales Effort 363

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (e) Gcmstone Losses 371 ............................................ (6) Other Deutsclx Bank CDOs 372

(7) Analysis ............................................................ 374 . . . . . . . . . . C . Failing to Manage Conflicts of Interest: Case Smdy of Coldman Sachr 376

(1) Subcommittee Investigation and Findings of Fact ........................... 376 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) Cmldmn Sachs Background 378

(3) Overview of Goldman Sachs Case Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 382 (a) Overview of How Goldman Shorted the Subprime Mortgage Market . . . . . . . . 382 (b) Overview of Goldman's CDO Activities ............................... 388

(4) How Goldman Shorted the Subprime Mortgage Market ....................... 398 (a) Starting $6 Billion Net Long ........................................ 398 (b) Going Past Home: Goldman's First Net Short . . . . . . . . . . . . . . . . . . . . . . . . . . 404 (c) Attempted Short Squeeze ........................................... 425 (d) Building the Big Short . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 430 (e) "Get Down Now" ................................................. 440

VI. INVESTMENT BANK ABUSES: CASE STUDY OF GOLDMAN SACHS AND DEUTSCHE BANK

A key factor in the recent financial crisis was the role played by complex fu~ancial instruments, often referred to as struchrred finance products, such as residential mottgage backed securities (RMBS), collateml ' i debt obligations (CDOs). and credit default swaps (CDS), including CDS contracts linked to the ABX Index. These financial products were e~lvisioned, engineered, sold, and traded by major U.S. investment banks.

From 2004 to 2008, U.S. financial institutions issued nearly $2.5 trillion in R M B S securities and over $1.4 trillion in CDOs securitizing primarily mortgage related products.1237 Investment banks charged fees ranging from $1 to $8 million to act as the underwriter of an RMBS ~ecuritization,'~~~ and from $5 to $1 0 million to act as tlie placemen1 agent for a CDO securitization.1239 Those fees contributed substantial revenues to the investme~~t banks which set up structured finance groups, and a variety of RMBS and CDO origination and trading deslcs within those groups, to bsndle mortgage related securitimtions. Investment banks placed these securities with investors around the world, and helped develop a secondary market where private RMBS and CDO securities could be bought and sold. The investment banks' trading desks participated in those secondary markets, buying and selling RMBS and CDO securities either for their customers or for themselves.

Some of these financial products allowed investors to profit, not only from the success of an RMBS or CDO securitization, but also fiom its failure. CDS contracts, for example, allowed counterparties to wager on the rise or fall in the value of a specific W B S security or on a collection of RMBS and other assets contained or referenced in a CDO. Major investment bauks also developed standardized CDS contracts that could be traded on a secondary marlcet. In

In' 314/2011 "U.S. Mortgage-Reluted Securities lrsuance" and I11/201 1 "Global CDO Issuence," charts prepared by Securitie? Industry and Financial Markets Associstion, www.sifma.orglresea~ch/~Iatisdcs.~sp~. The RMBS tctal does not include about $6.6 (rillion in RMBS securities ismed by government sponsored enterprises like Ponnie Mae and Freddie Mnc. "'"me, e.g., 21201 I charf "Goldmnn Sschs Expected ProRt from RMBS Sccuritizations," prepared by t l~e U.S. Senate Permanent Subcommittee on Investigations usinb Goldman-produced document8 for securitizatians from 2005.2007 (underlying documentsrctained in Subcommittee file): 3/21/2011 letter from Deutsche Bank counsel, PSI-Deutschc-Bank-31-0001. IU%c "Banks' Self-Dealing Super-Chargcd Financial Crisis," ProPublica (8126120 lo), ht~://m.propublica.crg/a~icIe/bank~-seIf-deaIiug-rmper~harged-finan~ial-ciis ("A iypical CDO could net the bank thnt crented it bctwecn 55 million and $10 million - about half of which usually ended up as cmployeo bonuses. Indeed, Wall Srreet awarded record bonuses in 2006, a bcRy chunk of whieb same from the CDO business."). Fee il~formation.ohtained by the Subcornmince is consistent with th i s rnnge of CDO fees. For exnmple, Deutsche Bank received nenrly 15 million in fees for Gemstone 7, and the bead of its CDO Gmup snid that Deutsche Rank received typically between $5 and I0 million in fces, while Goldmati Sachs charged s range of 95 to 030 million ill fees for Camber 7, Fort Deoisan, and the Hudson Mezzanine 1 and 2 CDOs. 12120/2006 Gemstone 7 Securltizntior Credit

Reprf , DBlPSI-00237655-71 and 311512007 Gcmltone CDO VII Ltd. Closing Memorandum, DB-PST-00133536- 4 1; Subeominirtcc interr im of Michael Lamont (9/29/2010); and Goldman Seshs rsylonre to Subco~nn~ittee QFRs at PSI-QFR-OS0249.

addition, they established the ABX M e x which allowed counterparties to wager oa the rise or fall in the value of a basket of subprime RMBS securities, and which could be used to reflect the state of tlie subprune mortgage market as a whoIe.

Investment banks solnetimes matcbed up parties who wanted to tale opposite sides in a structured fmnee transaction, and other times took one or the other side of a transaction to accommodate a client. At still other times. inveshnent banks used these financial instnunents to make their own proprietary wagers. In extreme cases, some investments banks set up structured finance transactions which enabled thein to profit at the expense of their clients.

Two case studies, invoiving Goldman Sachs and Deutsche Bank, illustrate a variety of troubling and sometimes abusive practices involving the origination or use of RMBS, CDO, CDS, and. ABX financial instruments. Those practices included at times constructing RMBS or CDOs with assets that senior employees within the investment banks knew were of poor quality; underwriting securitizations for lenders known within the indust~y for issuing high risk, poor quality mortgages or RMBS securities; selling RMBS or CDO securities without full disclosure of the investment bank's own adverse intsests; and causing investors to whom they sold the securities to incur substantial losses.

In the case of Goldman Sachs, the practices included exploiting conflicts of interest with the firm'sclients. For example, Goldman used CDS and ABX contracts to place billions of dollars of bets that specific RMBS securities, baskets of RMBS securities, or collections of assets in CDOs would fall in value, while atthe same time convincing customers to invest in new RMBS and CDO securities. In one instance, Goldman took the entire short side of a $2 billion CDO known as Hudson 1, selected assets for the CDO to transfer risk from Goldman's own holdings, allowed investors to buy the CM) securities without fully disclosing i ts own short position, and when the CDO last value, made a $1 .I billion gain at the expense ofthe clients to whom it had sold the securities. While Goldman sometimes told customers that it might take an adverse investment position to the RMBS or CDO securities it was selling than, Goldinan did not disclose that, in fact, it already had significant proprietary investments that would pay off if the particular security it was selling or if RMBS and CDO securities in general fell in value. In another instance, Goldman marketed a CDO lmown as Abacus 2007-AC1 to clients without disclosing that it had allowed the sole short party in the CDO, a hedge fund, to play a major role in selecting the assets. The Abacus securities quickly lost value, and the three long investors together lost $I billion, while the hedge fund profited by about the same amount. In still other insmces, Goldman took on the role of a collateral put pmvidn or liquidation agent in a CDO, and leveraged that role to obtain added iinancial benefits to the fiscal detriment of the clients to whom it sold the CDO securities.

In the case of Deutsche Bank, during 2006 and 2007, the bank's top CDO trader, Cheg Lippmann, repeatedly warned aid advised his Deutsche Bank colleagues and some of his clients seelune to buy short vositions about the poor quality of the W S securities underlying many - CDOs, describing some of those securit&s as "map" and "pigs." At one point, Mr. Lipprnann

was asked to buy a specifk CDO security and responded that it "rarely trades," but he "would talte it and tryto dupe someone" into buying it. He also disparaged RMBS securities tb t , at the same time, were being included in Gemstol~e 7, a CDO being assembled by the bank for sale to investors. Gemstone 7 included or referenced 1 15 RMBS securities, many of which carried BBB, BBB-, or even BB credit ratings, making them among the highest risk RMBS securities sold to the public, yet received AAA ratings for its top three tranches. Deutsche Bank sold $700 million in Gemstone securities to eight investors who saw their investments rapidly incur delinquencies, rating downgrades, andlosses. Mr. Lippmann at times refeled to the indastry's ongoing CDO inarlceting efForts as a "CDO machine" or "ponzi scheme," and predicted that tbe U.S. mortgage market as a whole Would evenmally plummet in value. Deutsche Bank's senior management disagreed with his negative views, and used the bank's own funds to make large proprietary investments in mortgage related semities that, in 2007, had a notional or face value of $128 billion and a market value of more than $25 billion. At the same time, Deutsehe Bank allowed Mr. Lippmann to develop for the bank a $5 billion proprietay sl~ort position in the RMBS market, which it later cashed in for a profit of approximately $1.5 billioi~ Despite that gain, in 2007, due to its substantial long investments, Deutpche Bank incurred an overall loss of about $4.5 billion from its mortgage related proprietary investments.

The two case studies illustrate how investment banks engaged in high intensity sales efforts to karket new C W s in 2007, even as U.S. mortgage delinquencies climbed, RMBS securities incurred losses, the U.S. mortgage market as a whole deteriorated, and investors lost confidence. They demonstsate how these investment banks benefitted from structured finance fees, and had little incentive to stop producing and selling high risk, poor quality shuctured finance pmducts. They also illusbate how the development of complex structured finance products, such as synthetic CDOs and naked credit default swaps, amplified market risk by allowing investors with no ownership interest in the "reference obligations" to place unlimited side bets on their performance. Finally, the two case histories demonstrate how proprietary trading led to dramatic losses in the case of Dmtsche Bank and to conflicts of interest in the w e of Goldman Sachs.

Investment banks were a major driving force behind the structured finance pmducts that provided a steady stream of funding for lenders to originate high risk, poor quality loans and that magnified risk throughout the U.S. financial system. The investma banks that engineered, sold, traded, and profited from mortgage related structured finance pmducts were a major cause of the financial crisis.

PREET BtlARAFU Jua6E KAPLAN

United States Attomcy for the So~&em District ofNew York Bv: BRIAN M. FELDMAN ~isistanl united States Attamey 86 Chambers Street, TlM Floor New York, New York 10M)7 TeleuhoneNo. (2 12) 637-2777 ~acsimile NO. (212j637-2717 [email protected]~

UNITED STATES DISTIUCT COURT SOUTHERN DISMCT OF NEW YORK UNITED STATES OF AMERICA,

Plaintiff, I 1 I Civ. -

DEUTSCHE BANK AG and MORTGAGEIT, Jury Trial Demanded me.,

-- Defendants.

The Utiited States of America ( the"hmmt")), by its attorney, Prcet Bharam, Unlted

States Attorney for the SouthemDis!rict ofNew York, brings Wts action against Deutschc Bank

AG CDeutsche Bwh") and Mo~tgagelT, Inc. C'MortgageST'') (coll~tively "Defendmts"),

alleging upon information and betief as follows:

1. This is a civil mortgage fraud lawsuit bmught by the United States awinst

Deutsche Bank and MortgagelT. As set forth bciow, Deutsche Bank md MortgageIT repeatedly

lied to be included in a Oovernment program to select mortgage3 for insurance by the

Government. Once iu that program, they ~ecWessly selected mortgages that violated program

mles in Matant disregard of whether borrowers could make mortgage payments. While Dewtsche

Bank and MortgagelT profited from the resale of these Oovernment-imredrn~rtg~ge~,

thousands of American homeowners have faced default md eviction, and the Government has

-- paid hundreds of millions of dollars in insurance claims, with hundreds of miltions of dollars

more expected to be paid in the fuhue. The Government brings this action seeking damages and

penalties for the past and fu tm claims that violate the False Claims Act, 3 1 U.S.C. 4 6 3729 ~t

seq., and t ie common law.

2. The ~edkral Housing Administration ("!FHA") of the Department of H a u s i ~ ~ ~ and

Urban Development ("HUD"') is the largest mortgage insurer in the world. FHA mortgage

insurance makes home ownership possible for millions of American fsmilies by protecting

lendera against defaults on mortgages, thereby cnwuraging lendas to make loans to hnowera

~ h o might not be able to meet conventional underwliting requirements. FHA accepts a fixed

level of risk set by statute andHUD ruIes. FHA relies on Ulis fixed level of risk to set

appropriate mortgage insurance premiums to offset the costs of paying FHA insurance claims.

By controlling risk and setting appropriate insurance premiums, FHA 6ss been able to operate

based solely on the income it genemtes from mortgage insurance premium proceeds. Since its

inception in 1934, FHA has insured more than 34 million homemortffages. FHA currently

insures approximately one tbird of all new residential moagages in the United States.

3. To assist as many qualified homeowners as possible, and to provide maximum

econolnic opportunities to lenders interested in obtaining FHA msurance on mortgages, FHA

opaatcs a D i t Endorsement Imder program with lenders in&e private sector. The Diect

6ndorsementLcnder program grants participating lenders the authority to endorse mortgages that.

are qualified for FHA insurance. In reviewing mortgages for eligibility for FHA insurance,

226. By virtue of the above, tho Government is entitled to indemnification of its losses

relating to FHA-insured mortgages endorsed by Modgagem.

WHEREFORE, the Oovemment respectfully requests that judgment be entered in its

favor and against Deutsche Bank and MortgageIT as follows:

a. For treble the Government's damages for past claims paid by the

Government, in an amount to be determined at trial;

b. For wmpensatory damages for past claims paid, and future claims

expected to be paid, by the Government, in an amount to be

determined at trial, and, in the alkmative, for indemnification;

c. For such civil penalties as are required by law;

d. For punitive damages;

e. For an award of costs pursuant to 3 1 U.S.C. 5 3729(a); and

f, For an award of any such further relief as is proper.

Mortgage fraud task force launched U.S. attcrrney issues subpoenas to 11 banks over MBS By Ronald D. Orol, Marketwatch

WASHHGTON (MarketWatch)- More than three years aftw the hebht of the financial crisis, federal and state regulators on Friday launched a mortgage fraud task force to investigate the pooling and securitization of

mortgage securities by big banks.

Regulators said the new task forcewill not interfere with efforts to reach a settlement with a group of five financial

institutions over questionable foreclosure practices.

Specifically, the Justice Department, along with dher state and federal regulators, announced mat the new working group

will consist of at feast 55 Justice Department attorneys from around the country. The team joins existing state attorneys-

general and federal investlgatols at Me securities and Exchange Commission already examining the conduct by big banks.

IJ. 8. Attorney General Eric Holder said that as part of the efforl the Justice Department recently issued civil subpoenas

focusing on residential mortgage-backed wurifies to 11 financial institutions, adding more will come.

~t is unclear how the tesk force will impact year-long efforts by states to reach a settlement with five big banks over

questionable foreklosure prsctices that emerged as part of the so-called "robo-signing" scandal, where banks rapidly

approved numerdus foreclosures with only cursory glances at the paperwork Read more about state. Feds discussinq

bank-settlement aoals.

lJntil recently, a settlement appeared close to completion. However, New York Attorney General Eric Schneiderman, who

will co-chair the working group, told reporters Friday he was still not ready to participate in state settlement negotiations.

Schnelderman has objected to portions OF the p10pr;ed settlement agreement for months. California Attorney General

Karnala Harris also hasn't signed onto the deal.

Despite Schneiderman's concerns, U.S. Housing and Urban Development Secretary Shaun Donovan said the introductior

of Me fraud task force doesn't interfere with the foreclosure settlement negotiations.

He said the releases from legal claims federal regulahx are considering as part of the bank settlement negotiations are

"narrow enough" to allow regulators to go forward "aggressively" with the mortgage fraud task force.

Donovan added that the focus of the task force will really be on my fraud committed in the packaging and pooling of

mortgage securities, not servicer problems.

"This announcement today makes very clear that the focus we have and the releases being contemplated are narrow

enough for us to go fo r~ard while still completing the servicing [settlement]," Donovan said. "The focus here [with the tasJ

force] really is on.oecuritization related origination conduct." 1 1 d 0 7

-.-, .-.

Regulators said !he combination of resources among federal and State regulators helps the investigation move forward.

'The jurisdictional poinl is &tical," Schneiderman sald. "flaving all of us together enables all of us to go places where

each of us individually could not go. Attorney General[Beaul Biden and 1 have jurisdiction over the trusts that are the

brioks and mortar of the ent-ke ~t~uCtUre."

Having an official from the Internal Revenue System on the team, said ~chneldbrman, opens up the possibility of looking

at tax issues wfiich "hasn't existed before."

The details released by the Justice Department comes after President Barack dbama announced the formation of the

task force in his State of the UfliOn speech on Wednesday.

Jaret Seiberg, analyst at Guggenheim Securities LLC in Wash~ngton, said that the creation of the financial-crimes task

force could derail the state settlement with banks.

"Since ~ e d n e s d a ~ , the talk in Washington has grown inaeasingly hostile toward the settlement and we now believe the

odds are against a deal," Seiberg said.

He argued that the task force that is just starting wiil likely "cover much of the same territory' as the state attorney general

settlement efforts.

However, he adds thot one of the goaB of the task f0tCeWill be to bring criminal charges against individuals, rather than

instituh'm.

He added that there is still major litigation risk for Dankseven after a selilement Is agreed to and Me task force could lead

to a coordination of all other claims into a big deal that seeks to end be litigaflon.

Geoff Greenwad, spdesman For Iowa Attorney General Tom MiLler, said he did not believe the task force will impact

settlement negotiations at all.

Miller is helping to lead the talks between Stateattorneys general and federal prosecutors and the fne big banks: Bank of

America Corp. . J.P. Morgan Chase & Co. , Citigroup Inc,, Wells Fargo 8, Co. and Ally Financial lnc. (formerly GMAC). Greenwood said that while states would release servicing and origination claims against the f i e big banks, they would nc

grant criminal immunity to bank executives. Greenwood added that banks involved would not be released from any fraud

related to securitizetions anb that the settlement does not involve other companies that originated fraudulent loans.

"so there are many other pieces of the puzzle, and this announcement dll enable states and our federal partners to

contlnue to work together to address fhose other pieces,' Greenwood commented.

Ronald 0. Om1 is a Marketwatch reporfer, based in lV~shingtofi.

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MGC MORTGAGE, I N C 05/12 /10

MACHINE DISBURSEMENT CHECK VOUCHER PAGE 12 ---------------------------------------------------------------------------------- PAYEE NAME DAVID W GATES CHECK-WBER : 143386

& ADDRESS 1200 PALOMLNO DR SANTA BARBARA CA 93105

PAYEE CODE: 1423941895 BATCH: RWN PAGE 1 OF 1

LOAN-NO SHORT-NAME DESCRIPTION TRAN DATE AMOUNT I N I T NAKE CODE DUE PROPERTY ADrjRESS ---------------------------------------------------

_-_______________-_--------------------------------------------------------------- 1423941E95 DW GATES 3ISB REQUEST 304 113,622.96

CHECK TOTAJd 1 ITEMS 113,622.96

1 CORPORATE MINE, sum SO M E ZURICH, L 80-7

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mmsbes=%w!l

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IarwhM r rlr+(urraq m*lunlfororarp,eUvot mcurmhl w esrsMMfol Uleidnl we01 $4 BdDplh~

arrplqna. J

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9.

i n . 11.

.. <. ..?, . h r i n a ~ h e p l ~ o yeardkl ~ h e e ~ ~ f e m I o I r m ~ i o l h e p l s r am p m i l r n c ~ m m * u d h h I h a V m m ~ v ~ s d h l 2 9 m

2510.3-1027

V r * m s n y a w s ~ l h e p ~ o r m e d i x o m ~ l M ~ d u e I M ~ m ~ & n e m o ~ - l a F m y e a a ~ s i l l e d ~ ~ l ~ y e a s .

u~&&u?IB-d bms secved by W- BaOMl W m e .

w r e a m u l ~ ~ b ~ h i ~ ~ h s p 1 8 n ~ a * 3 ~ h h ~ a r c e s ~ f f l a m g ~ r ~ - ~ ~

v m mw.; any rmorannl m,mcllms wllhany pmlY-bUnWeS*

Vial Ill3 DlHll v a w o d by m Mew hmd?

m $he p$n Psva n 1061. lherne, ~1 not rslmuned by MB pan3 fldefly bond. lhmwas csrnedby fnadordlaMqe%Iv?

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Metima Bank

Beal Bank has assets or more thm $2.4 billon and has"rter one" cupiral, ar networn, of aimst ~ h s F o ~ y Fathom Bank ty ~ e g ~ ~ 1 - y $500 rnlWm.,.~] This equata more man 20% ol assets, nr a p p r a n ~ t y ~ t l m e s m e FDIC standard of 5% far a welkcapltalkefl bankm

BreaMng Ihe Bank by Gary Heclor Tne nankls a member Dtme FDC and is an Equal Haus~q Lender. It m(ers mlGlrsured Em - acposit accounts mmugh cemates a w ~ t ( ~ s ) , m o w mama acc-, am omer product% n does not on4 sum retall banlBig setvices as consumer~oansancl checldng acccunts.

Beal v Doe Uuard dHnnor

Tnrougn annlales, Beat 8mkls actk In cornmercRl real eslate acqulSiUon as wl as IndMdllaI National Coupriratirs Bank loan and loan pomoilo aqulluon. It also tunds lmns and Partklpatbns h loans secured by leal I W ~ right NO FD-,

t51ate. pnlng and ~ndghj, energ% power, gas. manmerwlng.fhllber.transpolhltlm B, Criticism

dlstrlbuuon, and mertangIh& ass-s. Contemporary Lnprary cfiiclsm: Ke.;elr, .leas. .

Helm BrnlVJnod*ard

C m m p w q Lil~rar?. CNiCtSm: Rand. Ajn p~d, 330) - Hslsn aaal .v i~mrd

: Gilbreth. Frank ' ropernes and raw land as #en as

DEUTSCHE BANK

DEUTSCHE BANK AG (lilerally "German Bank"; pronounced [udgvtle Ubankj) is a global banking and

financial services company with its headquarters in Frankfurt, Germany. It employs more than 100,000 people in over 70

countries, and has a large presence in Europe, the Americas. & i Pacific and the emerglng markets. Deutgche Bank I S

the largest foreign exchange dealer in the W o r m with a market share Of 21 percent After Adolf ~ i t f & r came to power,'

instituting theThird Reich, Deutsche Bank dismissed its three Jewish board members in 1933. In subsequent years

Deutsche Bank took part in the arvanization of Jewish-owned businesses: according to its own historians, the bank was

involved in 363 such confircations by November 1938.M aurlng the war. Deutsche Bank incorporated other banks that

fell into German nands during the occupafion of Eastern Europe. Deutsche provided banking facilities for the Gestapo and loaned the funds used to build the Auschwitz camp and the nearby fG Farben facilities. Deutsche Bank revealed its )nuolvement in Auschwitz in February 1999.

In December 1999 Deutsche, along with other major German companies, contributed to a $5.2 billion compensation fund

following lawsuits brought by Holocaust survivors. The hlstory Of Oeutsche Bank during the Second World War has been

documented by independent histor(ans~~~rnissi~r!ed by the Bank ... In October 2001. Deukiche Bank was listed on the

New York Stotodc Exchange (NYSE). TWSe formed part of an Overall growth strategy that also targeted a sustainable

25% return on eauity, something the bank achleved in 2005 ... .

In May 2009 Deutsche Bank informed the public that the executive management learned about posslble violations

which occurred in past yearsof the bank's internal procedures or legal requirements in connection with activities hvoIving

Ihe bank's corporate secuiiiy department.

Deutsche ~ a n k was one of the major drivers of the collateralized debtobliqation (CDO) market during the houslng

credit bubble from 2004-2008, creatlng -$32.000,000,000 worth. The 201 1 US Senate Permanent Select Committee on

lnvestlgatlons report on Wall Street and the Financial Crisis analyzed Deutsche Bank as a 'case studv of Investment

banking Involvement in the mortgage bubble, CDO market, credit crunch, and recession. It concluded that even as the

market was collapsing In 2007, and its top global CDO trader was deridlng the COO market and betting against some of the

mortgage bondsin its CDOs, Deutsche bank continued to chum out bad CDO products to investors.

For the 2008'financial year. Deutsche Bank reported i s first annual loss in flve decades, despite

receiving billions of dollars from lts insurance arrangements with AIG, including $1 I .8bn from funds provided by US taxpayers to bail out AIG. From as late as 2001 to at

least 2007, the Bank engaged in covert espionage on its critics. The bank has admitted to episodes of spying in 2001 and

2007 directed by: its corporate security department, although characterizing them as "isolated."L231 According to the Wail

Street .iournal's pageone report, Deutsche Bank had prepared a llst of names of 20 people whO it wlshed investigated for

criticism of the bank, including Michael Bohndorf (an adiiist investor in the bank) and Leo Kirch (a former media executlve

in litigation wifh bank In May 2009 Deutsche Bank informed the public that the executlve management learned about

possible violations which occurred in past years of the bank's internal procedures or legal requlmments in connection with

activities invdving the bank's coporate security department. The report focused on one COO, GemstoneVII, made largely

of mortgages from Long Beach, F~mont , and New Century, ail notorious subprime lenders. Deutsche Bank put risky assets . ~

into the CDO, like ACE 2006-HE1 M10, which its own traders thought was a bad bond.

I + & B-K DOCS. ..,. ~ . , , ~ ~ ~ . P ~ J B ~ , o ~ I , + kmnc s 1 , DL

It also put in some mcrtgage bonds that its own mortgage department had created but couldn't sell. from the DEALT

Zoo6 series. The COO was then aggressively marketed as a good produd. with most of it being described as having A level

ratings. By 2009 the entire CDO was almost worthless and the investws (mcludlng Deutsche Bank Itsem had lost most of

their many. Gregg Lippman, head of global CDO tradlng, was betting against the CDO market, with approval of

management, even as Deutsche was continuing to churn out product. He was a large character in Michael Lewis' "m Short", which detailed his efforts to find 'shorts' to buy Credlt Default Swaps for the construction of Synthetic CDOs. He was

one of h e first traders to foresee the bubble in the CDO market as well as the tremendous potential that CDS offered in this.

As portrayed in the book "The Big Short" of Michael Lewis. Lipmann in the mid of the CDO and MBS frenzy was

orchestraling presentations to investors, demonstmting his bearish vlew of the market. offering them the idea to start buying

CDS, especially to AIG In order to profitfrom the forthcoming collapse. As regards the GemstoneVII deal, even as

Deutsche was creating and selling it to investors. LipprI?an emailed colleagues that it 'blew', and he called parts of it %rap'

and 'pigs' and advised some of his dlenb lo bet against the TIortgage ~eaIr i t le~ It was made of. Lippman called the CDO

market a 'ponzi scheme', but also tried to conceal some Of hk views from certain other parties because the bank was trying

to sell the products he was calllng 'map'. Lipprnan's group made money off of these bets, even as ~eutiche overall lost

money on the C W &a*etbW

Deutsche was also involved wth Maanetar Gaoitai In creating ls first Orion CDO. Deutsche had its ~ w n - ~ r o u ~ of bad

CDOs called START. It worked with Elliot Advisers on one of them; Elliot bet against the CDO even as Deutsche sold parts

of the CDO to investors as good investments. Deutsche also worked wlth John Paulson, of the Goldman Sachs Abacus

COO controversy, to create some START CDOs. Devtsche lost money on START, as it did on Gemstone.

source: http:llen.wiki~diaora~ki/De~tscl.1eB~nk

BiRions of American taxpayer dollars used to bailout insurance giant AfG are

flowing to some of the largest foreign banks in the world. according to new documents rebased by beleagueredcompany

Sunday. The revelation seemed sure to cause polltical cornpllmtions for President Barack Obama and his economic team,

already on the defensive Sunday over why they coukln't stop AIG from doling out $165 million in bonuses lo some of its top corporate officials - even as the crtmpany was receiving a massive infusion of taxpayer funds. The

documents AIG released account for some of the more than $180 billion in aid that AIG has received, and they detailed for the flrst time whlch fhlancia! firms are benefiiting fran the federal handout. In all, AIG disclosed

payments of $105.3 billion between September and December 2008. And some of the biggest recipients wwe European

banks. Societe Generale, based in France, was the top foreign recipient at $11.9 billion, Deutsche Bank of

Germanv aot $1 1.8 billion and Barclays, based h England, was paid $8.5 billlon. Here in the U.S.,

Goldman Sachs received $12.9 billion. Edward Liddy, the-government-installed CEO of AIG, sat on the

board of directors of Goldman Sachs until he joined AIG. He took the position whlle President George W. Bush's Treasury

Sectem Henry paulson - *0 unn joining aa adrnbktrafbn had served ~ a / d ~ ~ ~ ~ ~ h ~ ~ ~ ~ ~ aM CM -iaflgtg the ComPany'6 i n W governmant bailout ,: scownewd Amgo

1 * . 1.i3 I I

@J ~ i g l h l Produck P FI(&J7L C<hed"/. . *!51tJ91~t;coTi.~ ... @.%lhta be-bai.6 . . . . cloiaahoo$'Ma$:-;;;~:,~:I~.;8:.&pgILL . . :a: " !.C2 c J f i ~ . Fb&mu7ks ......... .- ..................... ~na~eiani.'bi&+ a-i~i^coi~cbiiieh*uth 6 s k r u i i ~ r ~ ~ e s l l n l h e ~ o l e . dl talkofa ! --"-

' PANBC~B~ llen' onne Nope Vs beside mc polnt

mxclLIa.Lerflram Oeulr.che Bank Nbllona' Tfu-t Ca. i y&uuhn&eI ~ o r m ~ r i v ~ s o k ~ ~ s ~ ~ l u r l ~ o ~ ~ a l l ~ m l a W 8Hj96 BhWm 3 P a ~ P l m 1 N?Ftm? twine CA 9261 e MaunQ: 1761 Eosj6tnndwwt'l. 2ndFLno~SamaAnaCA9270~

. h m 193 13-3317003

rEa"l&C&a 7,443 SEC ~lllngr/ 516197 -2fl4!11

3 l n k k S l e 4 2 In ~ERSONUNE.~~B reSlShl

~ Q . % I E $ O U W DBSlruohlrod PrdUllr.k Int.

~ ~ p , L A 9 9 9 0 U ~ I , . 6OwallSlhPf VYlnDo5 71 2-25n9340FakZ1:-7~7-5;6 Pman Confact E R S Oeplcla DeulscneBanl~NA

' W E R ORB IE1UUZBIY !;&lF-&!lWa!S Llppe 0rB11q1ne9+: SONICBI, Bubseni~sr, lnterlm FUnL181, IrmBSbr, QOcufnent

: custodian eFieglsl~Padcip'~nl. NU eDeIww ParUclpirnt NO

I m!ss~3ru~~Sr?eCmd i I L B ~ - ~ ~ ~ Q ~

Morgan, Lewis & Boclius 1 v

1711 Main Slrcet. Sulle 3200 Dallab, TX 75201 7347 Tel: 214.456.4000 Far: 214.466.4001 wwwmorganlnniJ.rorn

Ann Merle Painter Padnsr 214.486.r1zi annmda. [email protected]

BY HAND DELIVERY

Federal Deposit Insurnnce Cmrporalion 1 60 1 Bryan Street Dallas. Texa? 75201

Re: Dewche Bank Natioael Trust Com~aw Proof of

Dear Sir or Madam:

Enclosed please find a Proof of Claim, which is hereby submined on behalf of Deuuche Bank National Tma Company. If you have any questions, please do not hesitate to contacl me directly.

Sincerely.

Ann Marie Painter AMPIph

Enclosures

cc: Jolln Rosenthal -Morgan Lewis, San Francisco Ktistine Bailey -Morgan Lewis, San Francisco

Federal lhpoait Insurance fh?'pwation as Receiver for: .--- Wsshfngton Mutual B z k --.------- *

(Meme otOanlFlna~ia1 i w f i u ~ and c~GG~--+- PROOF OF CLAIM

1 D

The udersianed. (2) Barbara Campbell. Vice Presldent

says that the ~ r t M u t u a l & & now in llqufdetim is (Named k n M i n d I I ~ ~ n )

jv5Y indebted lo (3) -Nation in me sum of

(4) $18,1~8,398,880 ( a ~ l x m i m g a ~ $ 4 Attsohment 4 Ddbrs upon thb follawing Clalm.

hvolcp) dew 1 ClebilA Ntlmber &gun1 MClalrn --I_(

1 16.761206.446 to ---7

lhe underagned further slalas ihat helehe makas this Claimon behK of

M s

(7) ll>yI.p_ohe Bank t h t k o a l ~ n ~ ---"-

--. TMal crlm: (e)

i Approxlmawty $14.ld~,389,~0 (me httachnmnt A). i

that no p ~ r t af Said debt has been paid, that

(8) l I m k m a e n ~ t ( ; o q B n V 1 l n d i v M u d ~ I b ~ h ~ ~ g e ~ )

has given no endorsement or assignrnenl ol tlm m e w any part thereof. and ihal thera is no setaff or

countercbim, a olhw legal or q(titable debnse lo seid Claim or any pan therM.

NAME (9) Barbaw Campbell . Vice President

AOORESS (10) f76l East Sf A n d m L - - ClTYlSTATERlP Santa An*, CA927064934 - -. -

TELEPHONE NUMBER 714-2476278

The pennty 6ar kn-h, rnaki? w invmng reliance of any fake forged, or cnunk*.it statement, docvnel~t. or hi 101 the p u w of iofl~tendng in any wa) the adior of me FedeGi Deposll fnsuranca ComraOon is a fine of not m m than $ 3 M)OflnO orimflwnmsnllor nu1 mcm man chi- yon*.or balh (18 U S C Sedan ~ O D T ) .

CONFIDEMTIAI, TREATMENT REQOESTED

I . 'I'his pl.i>oT ar oluim ('"fat$ 01' Ctdi~n") is rndC by O~i~ische Un.rlk Narionnl '['rust Cniltkjany (''!#lN-TC") (a) ns mrsw ("~:IIs&~".) SOT the ~wlrritimtion trusts listed on Exliibi~ A-l autachcd bcraw (thc. 'cmW). on behall' nF ilselC the .l'nts~s and the nwncrs of certain rcsidendai rntmgapcl backed scc~irities issued rlby i1i.e 'l'txiats (the .'Sccurilios"). . ., - . - . .. -- (h) as irustw ofcrnain "nel'inlcresl margirl" LTu~ISiisfed (m Exhibi~ A-? ("?jJ,pLjlgw&''. and ci)llccli!~cly with ihc 'l'rr~ws, lire " S ~ ~ $ j j g ~ ~ i ~ ~ [ j ~ s ~ < ) )ru.rsuent ru rvl\icli IIBNTC owns. on bchelr r)S NIM Trust bmcficinrics, imcrests in callain Sccilri~ics @In- "&JI-Cr_uti ' ' ) and (c) as ci~str?diaa (the "C-) a n t b ccrtsin ci~s!oct~ u ~ c u i e n t u lisrctl on Exhibit 8-3 (tlte "Custody /\~met~raiis") by and aiireng IN1NTC7, and u ~ i c ra.li%orc of iSa.rhingior1 Mtrtunl Bank (in ~ o ~ i i c arses, ns yucccssctr- i~~-hicl.csl to l,nng Beiich Mrl~tgagc) ai~ild/or its nfliliaies (collcativ~.l~. "'W,4klll"). t~nd!or third pnrLy Icndc~s or prtrchasor.~ col'ti~~rtgage lot~ns.

3. Wilh tr.vccr to ckwl> Tnlst, LT13NTC c~nercd into one or more l'c~olinp and Servicing Agrce~iie~~ki, Sclvicir~g Ayecmccnts. lideniurrs ui. 'ktst Apeemnuts, and miwtsd alicillary ,agtcctmcnls (collcctivoly. Ihe " C ; O \ ~ C ~ I I ~ ~ P ~-D~~cilnet~&"j. 'I:hc Uovcrlling Dl?uumcnts :ire volurnitlnla BIICI arc in the pos~asioo or bod1 the Tms~ec uncl WAMII. Accordingly, it is impmainl am! waileft11 to alrnch t11rnl in thfs ProtrT crf C:lnim. Additic)na[ docu~nc~italicrn regarding h e l'nrsts is nvailable on the SET3 EDf31iJt ~.cIisitc nl h~&,/~~go~i, wd the tnoiid~ly clis~ribution roposorts nrid pnrspttet.rrs stipplcmcnln Tor t.mli T?rus\ arc ~v0il2bk on thc T~USL~F'J itlv~stoi~ rcpurcillg iwbsitc at h l @ & : ~ ~ $ & f i & ~ d ~ l . ~ Q ~ b ~ . r.lpon requwt by the FUlL. ihc 'l'naluc will furnish . .. ciixirf~nic or had copies af'aiy ('io~cminy 130~ulilcnts in its pusscssion.

4. Ptirstwnf 113 the Govcniinp Doa~menls for each Trust! WAMIJ sofb c i k r dircclly or. intli~zcll~. rnortgap loans ima the related 'Trr~sw. Ln conuction with such sales. WAMtI also matlc nomcrr\ils rcprcscnlatic>ns. wltrranties md covenalits

and W&cgg') corrcm,ing lllc IwYlgagt loans, dbch [<cp~scnir,~i~ills imd Warantics 6vc1.c ultimately assigj:r,otl to llle 'Trurirs pkcrsuwt i l ~ (io\eminp I'locumenls and &wain nr~cillary a-men~enls. 7 % ~ 'Trusts 11ave claims Ybr brcsch of such Kcpr~~~nldtiuils R R ~ U~itrrdti~i~s as hrr~hcr described herein.

5 . DRMC has also scrved as Custodian nndcr ihc C~tstody Apcnient t . I'rirsunn~ to the Cuslody Agnrmenu. DBN'I'C has held in custody moflgage loan files cndencir~g niorrgapc loarls aiigitiated, purchascd. finatlccd and/or sctvImd by WAblii. m

Case 1:09-cv-01656-RMC Document 32-1 Filed 09108110 Page 4 of 52

iD No. Transactinn Series DBMTC Rde(s) WaMu Rolets) MLPA Date PSA Date 59 WAO3A2 Washington Mutual Mortgage Securities Corp. 2003-AR2 Trustee Depslor, Service!, Seller 211103 60 WA03A3 Washington Mutual Morlgage Secuiiee Corp. ?DOMU3 Trustee, Aucfon Administrotor Daposibr, Se~cer , Seller 211103 61 , WAD3A4 Washirgton Mutual Mortoage Securities Carp. 2003-AR4 Trustee, Au&n Adminishatar Depositbr, Servicei, Seftir 3Hm3 62 WA03A5 Washington Mutual Mo&+ge Securities Gorp. 200SAR5 Trustee, Auction Administrator ' Depositor, Se~cer, Seller 411103 63 WA03A6 Washington Mutual Mortgage Secuifes Corp. 2002-AR6 Trustee Depositor, Se~icer, Seller 5H 103 64 WAWA7 Washington Mulual Morlgage Secu&s Cmp. 2002-AR7 Trustee. A u a n Administrator Depositor, Servicsr, Seller BH103 65 WAWAB Washington Mutud Marlgage Securities Corp. 200SARB Trustee Depositor, Sewicer, Seller TI1103 66 WA03A9 Washington Mutual Mortgage Securities Corp. 2003-AR9 Twslee, Audion Administrator Depositor, Senricer, Seller 811103 67 WAWM Washirgton Mutual Mortgage Securities Corp. 2005ARf0 T~ustee. Auction Administrator Deposilor, Servicer, Seller SHD3 68 WA03AB Washington Mutual Mortgage Sewribas Corp. 2003.ARli Trustee, Auction Administrator Deposbr, Senricer. Seller 1Wli03 69 WA03AC Washington Mutual Mortgage Sscurities Corp. 2003AR12 Trustee, AucSon Adminisbator Deposcor, Sewker, Seller 1211103 70 WA04A1 Washington Muluai Mortgage Securiks Corp. 2004-AR1 Trustee Depositor. Sewicer, Seller 211104 71 WA04A2 Wshingtan Mutual A4omage Securities Corp. 2004AR2 T~s tee Depositor, Sewicer, Sellar 411104 72 WAMA3 Washington Mutual Modgage SecuriUes Corp. 2004-AR3 Trustee Deposibr, Servicer. Seller 411104 73 WA04A4 Washington Mutual Mor'gage Sscurities Corp. 2W4-AR4 Trustee, 4uction AdminisIratar Depositor, Senricer, Seller 511R4 74 WA04A5 Washington Mutual Mortgage Securities Corp. 2004-AR5 Trustee, Auction Adminishalor Depositor, Se~icer, Seller 5/1/04 75 WA04A6 Washington Mutual Momage Securities Corp. 20D4-AR6 Trustee Osposhr, Sewcer, Seller 5HIW 76 WAD4A7 Washinylon Mutual Mortgage Secuifies Corp. 2004-ART Tmstee. Auction Adminishlor Depositor, Senricer, Seller 5/1/04 77 WAWAB Washington Mutual Mrtgage Securifies Corp. 2004-AR8 Trustee Oepffiitor, Servicer, Seller 6MlW 78 WA04AA Washiwn Muhlal Mordgage Securities Cop. 2004-AR10 TNstee Depositor. SeNicer, Seller 711104 79 WA04AC Washington Muhralkrtgage Securities Corp. 2004-ART2 Trustee Depositor, Custodian, Senricer, Seller 1011104 80 WAMAD Washington Mutual Mortgage Securities Corp. 20WAR13 Trustee Deposjtor, Servicer, Seller 1111104 81 WAO5A1 Washington Mulual Mortgage Securities Corp. 2005-AR1 Twlee ~Ds i t01 , Servicer, Seller llli05 82 WA05A2 Weshmgt~n Mutual Mortgage Securities Corp. 2005AR2 Trustee Depositor, %Nicer, Seller 1/1& 83 WA05A4 Washington Mutual Mortgage Securitiss Corp. 2005AR4 Trustee, Auction Administrator Dewitor, Servicer, !Seller 3/1/05 84 WA05A6 Washigton Mutual Mortgage Skutities Cop. 2005-AR6 T ~ d e e Depositor, Senricer, Sellec 411105 85 WAOSAB Washington Mutual Mortgage Sscurities Carp. 2005ARfl Trustee Depositor, Se~icer, Seller 711105 86 WAO5A9 Washington Mutual Mortgage Securities Corp. 2005-AR9 Tmslee Depositor, Senricer, Seller 711105 87 WAOSAA Washington Mutual Morlgage SearriUeti Corp. 2005-AR10 Trustee Deposlm, Se~icer. Seller 61105' 88 WA05A8 WaMu Asset Acceptance Corp. 2005-AR13 Trustee Deposita, Sewicer, Seller 10125/05 10IIM5 89 WAOSAC WaMu Asset Acceptance Corp. 2005-AR16 Trustee Depasilm. Senricer, Seller IOIW05 11/1:05 - --

Page 3 of 4

Beutarehs Bank E 1761 East St. Andrew Plstre Sonta h a . CA 9!2705-4834

T t ~ l 7 14 247 6000 Fax 714 247 €009

'I'm ALL 1IOLI)ERS OP RESIDENTIAL MORTGACX BACKED SECURITIES FOR WHICH UI-IIYPSCIjE BANK NAl'lONAl. 'IRUSTCOMPANY OR DEUTCHE BANK TRUST (:OMI'ANY AMERICAS ACTS As S l ~ c U l ~ r r ' l ~ A r ' l ~ N TRUSTEE

FROM. DEI:?'SCHI: HANK TRIJST NATIONAI, 'I'IIUST COMPANY, AS TRUSTEE AN11 l>l:,UI'SCIIE R A W TRLIYT COMPANY AMERICAS, AS TRUSTEE (the 'Trustee")

Date October 25,2010

Ite: Cc~ain Allegations Regarding I.oan Scrvicer I:ureciosure Practices

As widely rc])n~tcd in the news media, several ~najnr U.S. loan scrvicers rcportedljr have snspcndcd certain foreclosures in same or all states due lo allegations and invesiigations pertaining to allcgcd dcficic~lcies in legal docurncnts filed by them in ccrtain foreclosure proceedings ithe "Alleged Deficiencies").

:The Tmytec is aware of these repom and has con~municalcd with loan servicers rcgmding the matter. Spccificnlly, the Tiustce issued, on Octobcr8,2010, the atmebed mcniurandum to all loan selvicers for U.S. rcsidcntial mortgage bsckcd securities trusts Tor which it acts as Trustec, among other things, demanding that servicers cornply with all applicable laws rclating to fo~~eclosures. Thc 'liustec also has communicated with ccttnin loan scnlicers that have a~nouncud suspensit~ns o$ fowclosure activiiy to rutpest additional infoimaLion about the portfolios lhal ihcy service on behallof thc trusts and the extent, isany, 10 whjch such s~~spensions and the Allrgcd bficicncies may aiFcct loans hcltl hy lhc trust?..

The 'kuslee-renlinds invesbrs that the y o ~ ~ m i n g documents f i r securitization trusts typically allow holders of a requisite porcmllage in principal aanlollnl of securities to direct: the time, place and mwncr olnny renxdial aclions by the Trustee, subject to condilions s~ntrd in the yoverning documents. In that regard, any such instruclions or other corninmications eonccming these issues sl~ould bc directed to thc 'Stustee at the folInwir~g address:

Deutsche Bank National ' h s t Company, ns lrustce Ile~rtsche Bank Trust Chrnpany .4i11eri~is. as truslcc 1761 Easl St. Andrew Place, Sanb Ana, CA 92705-4934 ATI 'N: 13arid Co, Dircclor

Tel: 714-247-6000 Pax: 7 1 + t ~ w ~ u v

tRGENT AND 'F~ME-9ENSTTfVE MEMORANDUM

TO. SFXURI%ZPiPION LOAN BERVICERS f'RI)M: 1?EUTSC:tIE BAhW NATKWAI. TRUST COMPANY, As 71RUSW!2

QP,\rTSCHE BANK TRVS 1' COMPANY AMEREAS. AS TRU.mE I)A TE:. Octobw 8,2010 KE : SLloptlom Re--ling Ccrtsin ScrM'cing Forcrlnsuru Prwedure

Fach addressee ofthishfemonndurn (the "Scrvicers") services mmQit#c bans on bzhdfof one or mon sectairizat~on rrusrs @he "Trums") br which DEunche Bank National TmComp,vy or I?t1r.:lrxhe %nk TTN Company Amcricts (ur~lccrivcly, "Destscke Bank") arxc ar trls!ec (in such carac~ty, tllc "Trusac") Tkirr Mm8mndtrm cnnrerns ati argent hasue mqviring your lrnrneJlste nttenenn. A eopy afthis 3fernormdum and an artachrhpnts ?Il~ovld ba forwnrdcn i rnd ln te ly to yoor Legal Deparhneak or Genersl Counsel's nflieo

The pooling and sewic[hg q-wrnnts w ohm govaming docurnetus for the TmLP (.sollectivcly, the *Gavcn~ing Document$') provide that l h ~ Solrvkcr issalely responsibte for the p&rmoncc cif oil loan-level med.ial wllection neiirity on hehalf of thc.hcdtcisrEsll Ofthe mtstci, including, lviiho[n lirniration. dl- fmti(15~e aotivily and all mainlcnnnce ond sales of tcsuifing RE0 ~ W P G ~ ~ C S . 'rhc ~~vcnrin~~aonmncnts L ~ ~ I c P I I ? ; require the mstcc to furnish Mf S ~ r v i c a with powem of attorney && ullow the Selvicer lo ~ign documents and inrtilute legal mions, including brrclonrre pioceedings, in 1hQmml: of *o Tmree wb bchrlrof ihr Trusts in cmnection with thwe scrviclng activitiss. The Cmvming Do~unmh nlso provide h t the 'rrwstee shall nut be m n s i b l e Crn the acts ar omissions of tha Scrvicer. inc!?ldiI~g m3 or omlsslcns relarjm to the use or mix= cif such powerj O f ~ ~ ~ W .

AS l l rc 'I'rusrcr her adsised on nwethnn weoccasion, at1 Servicers and the3r~cna(includinp,any suhserviccrs, sutrconmmm and profkssionnls engaged by Servicers an&or by their agents) mu31

Memorandum to Scrviccrs Omhcr 8,2010 Pagc 2 nT 3

condcet all snvicingnt~ivilies, Including fmclosure pmeedings. in accwdance w ~ h the Cicvcming Documents andall r ~ l i u b l e law. Plcase reeview a$ata. in parttwlur, the T m w s m:tnonndj, m all Services datcd Augus13O7ZO[n and luly 28,2008 (the "Prior Mcmorondavj, cqics of which am mcloscd.

RL.CWT mcdin repons r l t s c m the hllqed Forcclo~ure neficicnn'es may include the exauiw d fililig by certain Scrvfc~tr aird:or their a- of pokmialb defcotivc documents, paaelbly mnfaining alkgcd untruc asscnbn.~ afafct in oomrectia dl41 ~ m i n forecbulre prucetldiP1gs. Thc i c y m d %ope of such 8iIcgcd ~r~ctices rnism the possibility ththd sodl dccumenismay have berm liicd in cmnMiun with forrclusum proceedings nclatlng La morlgagc bans owned by thc 'l'rrsts nnd nlmy hme heen ~cct tned u n d ~ colw Of Oirc or mre p w v s ofatmmey gnutea to Senlieen purrurn lo tbc Oovc*ng Doc~t Imt~ . Any such actions by a ~ c ~ ~ c e r or i#:agcnrs v~orild mr~stitrrh n.brc;tch ortlrRt Sc~viccrt's obli@ms unckr the Ciovming Doeumm~ii arni eppticnhk inw.

In light oithcse iccctnt hdopmc~ms. Lhc T~uSrcc dmsnds &at edch Scrc-tcor (imluding its a g ~ w ) , imm&ze&; ---

P Inform ibc 'l'rustm of: 0) nw A'llegud Pormlornre Defictenctes rclntiq to aorf~sf l fauns ncmfred by tho Sawlcer w bchaif of the Troslrr, and (ii) SIIY suspenshna by the Seruioer ~Ffureclo.vure proceedings relating to m a r m e laana a r v l o ~ d by the Senicer on bebnlf of the Trusts due to my aacb Alleged

?+- Ceaseand desist from taking any anlawfnl or lrnprapar actinn wlth respect to the servicing of Trust Rwi9, inchfling, h r ~ t no( Ihniled to, muMi~p, nny false or mi%leadin~ alaromertrs in ally filing, motice, docnment or p w r afung Idnd.

P C ~ Y C nnd desist *ow aoclltimg my dhcfime~it an b e h a oe[ the Yrwtce or on hchnlf ofnap TnM, rlndeb paver ofelfVlrn~q~otbe~fae, unless aad anfii the !4edmtand its apnfs hnm: [a) varlfied that dl sfab?mats in sncb dacurncpt are me, eomplete and correct; and @) Qdermirid ftwt lkeewntim wrl titfng Ifdsucla dnctrmrnt arc in frill rvdtplinnec 4 t h (IN applicable laws. rules and regulatiors, inclncling all applienMe rules of court.

F Cease md desist froan epea~tiig any docvnreni in a mluroc that iulliwtes or LII~CVI. thm tbe&pdury is nu ollice~ or smpbye Or the ~rustce.'

P RfquirecaEB of its SgeOts toCQmpiy with the forglolng demands and all legal ~equlrcmenrs appItoPbIe to any ~ m l e ~ 9 tbat Ulcy p~f ' fom 00 bObelfaI rltc 'b-ru~t9.

PIense he adviqcd the ifrustm ill rcqnke cacti Beniror to indcmaify and hold bnmlcm hcutschh-Ban& idivMnnlly m ~ d In tLi: cnpncitJ. P. Trustee, tlw Trastn and tbetuveators in the .- ' The qubmw.t lh4t SEfi*rrrs cyautc and 610 ~ ~ U R I C ~ @ ia a mannuti~nt pmperlyd~smibcs Uloirrcpm?mWve cnmzigr was nddrc~~cd ~ . 5 n l l y m me Prlw Mtmmmdn.

Momarandun~ 10 Servicers October 8,2010 P:go 3 of 3

Txsrs from ell li~Mlfty, loss.roJr and eqmnse of any kind @nulPdlng sitorncy# f@!s and cnsts) srbinpl direct& or %dire@@ Worn sw Alleged Pareclesarc Dcii&icaeies or h m amg otlrr &kg& acts or ornWms at the Sewicw andlor its agents diiiiag to m y s d d ~ nctivities rn bmoh ort1'0t~6an of* G-iag DocumcGW and/or applicable law, iddink witholat limihtinn, any liahilfty, loss, emf or cxpnse artsing Pram any relatod legal pmccudlng add g n ~ ernmar* or rmlstary invwti@iovs. Tho mst alany suck intlcmniflcotiod and BRY kxm~b1mclbm hy a 4ervieer in respfct of any A4kged For&lmre RePieieneim or asq ntlrcr ,servicing acrh%cs in breach or v2otnchn of fke Cdwdm Uocamfne eutY:nr ~pplfcnMe law must be p i d by the Servlcet oar o f ihr own Rand8 and should noi be rtlrrrgd sang Scrviccr amat nry Tmt. Tkc Trustee rsmes. ~ l t d be$ not vr~ive, any ufber righm or md4 881 k attd/et the T r m ~ may kave u& fllc Gwentlng Dornmcnts reprtlfnfl fiwe matters.

ALL corres@on&nm and questions regnrdlng this matrtr should b.e dircctd IQ David Co, Dirwtm, as( it+vld.-@&c~pl or by telephone at (714j 247-6272.

Thsnk you for your msper.sfim.

nF,GTSCKE. BANK WATIOffAL TRUST COMPANY, ss Trastm DE'flTSCHL BANK TRlJST COMP.4NY AMERTCAS, as Tr-

We- Bank

TU n<247BWO F* 714Pltr.WS

MEMORANDUM

TO: SEXURITIZATION LOAM SERVICERS

FROM DITUTSCXE BANK VATONAL 7RUST COMPANY, AS TFWSTEE !IEUTSGHk EANK T U S T COMPANY AMERICAS, AS TRUSTEE

RE: Complhnce W#ll. Laws, Rules and Regulations In ConnectlPn W h Forec(osure5 On SDartitired AseR ts;ltenIlvenW to Cemlm CommurrPy and Go-W Concerns; Proper DeeuiptiOn Of Lcge! G a m e s

,--= .

FA* of thc addmsees of* memoinndm servfas rnme Lnrns ao behalfafoocor matt securirWgn bnsa (+h "Trusb'1 for which Ckut9d1z Banlt N u d d 'rnut Cu~npaoy V7)MVTC'') or Dcu~lche Bank Trust Company h c i i c a s CDBTCA') st as rnx:;mc (tbe "Tlustrr").

As mu a r ~ no d a u b r m q due to m t rcaI cdah, mmksrconditiml Up number of

act vjtm s&&s-moit in er~icti&of&iming termntr, wha mry ohwise l a . l l y WCU~, rame or df of thc prmdsos Sudl wkbons me drawi l~ enen#m and policy r%mnm ifom public offlcibkr md cammnity organimttom, who areexprllssing corcdms abcut the %ignificanthai&hip king impSul on t€%~tL% iacludkg law-inwmc

In light of them dcv~lopmcna. &o Trnmw mpccdully requcsfs that sA Wims rervblnp loan$ on kelssYwf2he TIWI~:

s) Exncisp diligo,c. tcr assvn that all foreclosures andell acficmz with re- to REO prrprnies (includinn IIdboJ affrcnng tcnWtS on such pmpcttie) an mdvct td in colncli.mcc with all lidtrd. vPrC and lod mla dn~;ulations, particularly thcst

b) Cbnr8.g devdoplNg working Monships with locd hawing amtW and nmmprtato cmmnnity ~ ~ ~ M s m eddtess pubiie w e m a ~egm&g&racloaure and afleviaion pmrmedmps t*mt might &&a load ta pub% re"p6nw thd impede

thc wliel!m of vohte On the TNsrS' m3ITgRg~ iow1.5 wd R&Q pmpcni~s. Such ~Whnshipsn~ay mft Eo mn+= s~&n$@ficIudiaa *e approp~&c, wnsi&a%~>~ of roks of RE0 prora?ics to I ~ M T P O ~ I or govcmmmt sgonmred o ~ t n i m t i a s ) Uiar rrd~tlrra the @pet of ibmclW=on RBIgkborhoactr, mt~rmcing dte value ofrnwi warp;

c) TO the mtmt pci~nsnerl by appljrable sa~~~Tifi&o he, EK&~C sound c h s c ~ o u in eveharing wbbc0k.r or not wietiotl of gfiane ohrwiae law&lly 8eoupy@ Twr R E 0 pr,v81?ieP lvjll mkniztthn r&mtion of value on Tr~ist asset% if miation will rro( mhame the Mac?mkbility ai male Wlue &Trust REO pmmfim, mairming nccqxm7 mcy p r ~ . ~ a w e d nei&borbowds and tbnehy wpwr %e vrlue of RE0 pm?cr(u; and

d) .92 ell:imrv prpply ldmtW~om hprasemtre =pm1t~, as sdm, and 13BIQC1s or DIfTCA's cnpecity *as TmLe of lin4tkt nwne of telavailt kustp' hi all natices, p l r d i n ~ s , ~ ~ ) m ~ r ~ a w ~ e OX othm docummtsrelaingm the mongage toms, RE!O brotciric~ and clhcr Th.Rt gCSEt9 T& ro pm@cs sbould novm be kM, a& nmieo conternins nrwntias &odd w e r be issued. h DBXC's orDUNX'J oms witbout

nre belime thst these "gucd hoaekcuphg pdnejp1~6 an help nads m " w i ~ ~ i n " riNatIw ftn inv?mrs anend comtnunitl~s, dad p d d e a model kir h-hg corpm@e rcs~ontibr?iri with o!!rlMal dUtYtrr plWa~th~ hW*S ~ f s x u c t t i a bW&%-

.... ~ ~~~

Thi; sgp& h slw c&ismt nth the fedmi fimmial ilr$imtioos regulatory aumcim' p:pn1 18,2007, !?x?dement on Worldng r ~ % h MoQage 80-a:'

The fcdcrat fmncid imMutIms regula t t~ @mdas m ~ a r m ~ ~ fhmcial j~x$tx?ioqr to W& w n ~ t i v ~ l y mtb re61dcnrisl ~DRORZO~ nhd @ltWoi&lly unabk to make tnes wnuacrualpapd e b l i o n s on their Mmn Ianns, mdent I V & ~ mgemcnrs rhat WB c o ~ with ,& Baa mrnd l&kg m c m im pa@& h th. long-ern best intmzt of boUl &h+idd ~ t i c u t f o n w u l t h c ~ o r .

~n cram to hcp f a e i I M implon:mdon ofLbisappmsch h Tmrusta fs p m p ~ d ao; Fjcjpact with &erp in ongoing public W a p t witbpblic official$ and eondty gaups in am &@rt to ~ 4 T h s s &c hecan- thotaq bwe mbcd.

FROM DEUTSCHE RANK NAEONAL TRUST COMPAKY, AS TRUSTEE UEUTSCI@, BANK IXUST CDMRANY AMERICAS, AS TRlf%IEE

DATE: Juij, 28,2008

RE: - Exh ddresscr of ~ i ~ M e t n o m d u m services mnrtpge lwos on bebalfdma or mare sect~ritimtion Wsts (Chc 'Trusw'7 for which Deutschc Bank Natjonal Trus Company or &uWhe Bank .l',wd Conpeny Amffiuts R C ~ as trunce (the "Trwtee"). This memorandum fun~ses on c L i i n isucs dntlng to servicing pwlow dmt hewe wme to the attunlion of the Trustee sice We lssnanoe of i t8 M~nwm~~durn m Srtturifization Lone Scrviccrs d&d August 30,2007 (!hc "First S m i c n Memomod~mm'--copy ~ticIo.red). Bccausw the issues s$dTesscd iothc Firs1 Saviccr Memoradum cantinuc to bp rclevnnt in the cunmt sewicing mtimment, Ihe T ~ c r r a ~ t f i ~ l l y requcets that at1 scrv i~ers w i c w the First SmiterMemorandum and adhercto the practies thnt i r dkqcribes, m w e l l n9 Mosc d c s r k d in thirMemorandmn.

Tho wnlinued dirtrwsd .mte of rsidmtial rcoJ cstaW m~rkm has placed incrc&ed hil:de.!ia on all piirtilrs involved in ihe lass mitigation prwcgq inehrQiw scmicjns (IC,~.WLNIC~, third-pany cont?actots and prafessimals cngwed by wsnvicm, govommcnt agencies, S H X ~ bonawers. In udilitlon, the fncrOssed numbm of deliapuencics md fi~rccl~sures. ant! rwhirtg fi~rancial lasses Ilavc lcd to actimm in whichthe porbrmtmfe dsecudtiiotion pal?ties is hcinp serutlnized mmFvlly by vnioar ran.~imencia.

A.gainst illis bnckproullb, thc Trunee thercforo aaks Thar all serviccrs servicing bans on h~hnlf'oFll,e Tn~sts remain parlicula~ly inindfbl of the fellowing isrrres.

(0 ~uwlosure Prwdsr ,w Proof 08"T)wnershb" of Lnnm. As sleccd in the Fiiat Scrvica ~on~oratdi~rn. servicers must c l i c ~ i ~ c dillgencc tu assure thar they cnad~lct all rbrmQsurw and nthcr aOions with resp~c t to RBO properlieliea (including actions affecting lenom of such pmpertiei) in compliance rviih all fcdual, siate. and Jacal laws, ~ J c s , rcgpktions and omni procedures. In recent months. iL has been mported hut thc numbw n l wnts~~cd foredlowre pmedingx 1.as substamialfy increased naflonwjwle. In thc

Ssrnrilizntbn Scrvicen July 28,2058 Page 2 of 4

context of lhcse advursdal pmcecdings, same cotlrts are demanding tljal the scckihg to .Prmclosc prove "awnnship"sad other patticulars of lowns earuer in h e pmcardings. uod rvirh more exacting stsndards of pro06 Lhm has previously been customnry. Othcr courts evaluating the pmpriny of varieur olhw sawicing, foxdowrc, and rvorbut p t i w c s . Rccausc! loan servicen. have contractual obfiggxbs rn handle workoUt$$nd foml03ufcs in.conlpfiance with 147 a d in accor6anm with i~dllstly stnndmrfs, @cy Wllst Rwkc sure &atall servicing pcrwnnci and praPa@ianals handltg Fnrrclos~rc~on behalf ofthe Tmsts, including lezd cmngtl rctdncrd by serviccrs, firlly anderstsnd and comply with these changmg standards and legal requirrmem. Failure tedo 50 may m l t in servlm liability to the Trrrsts t i I(t(ims causcdhy dclays or, in somo sitmions, fodkitureof colia%nsl.

In this regard thc Trustee is comcrncd that scrvlcen make oimr w Uycir servicing prrsannct and other profe*im&, inclrtdillg icgal connsel retamed by srrvlcets, that sccurirbetbn trusts typically bee~ne the o ~ r s o f , and take title to, motlgap 1- thc tlme cllc scrnririr~Qn maat5 a r e formed. While ms use of powers of anopn6.y to ct~mplm raodd chams of title may be npprapnate in some circumsmncos, scrvicers mca take care not to canfuse the record regarding the time at which m~lritizatlon mss actually firsi obtair l ~ o l l y enforceable nght8 inIhe mongnpc loans. Scmhw+ -- rnstirc thrtt losq m&&fian personnel a i d u r n f m i 0 u Q f k ~ i n c l ~ ~ l i o ~ Rent c 3 n s J rereincd bv ~erviccrr, uodentmnd the mcchlulie ofrelevaaf ~nriW.isallt~e traarections. awl rcinkd eurrMlfal orwcices, in ruff~dcntdctoilt~ - .- - 8d.ddrcra surh oucsffom in @firnet+ a a t e manner. ID niwrbtar,serYiding ~ o f a & & mast b~~~mcmuff~cicntiv bmilnr with iha Ems o f t h a r m secur(btiqn documents for ench TNS fqr whlch Niey act to cxu(BJn sad. where -rove those terms snd the rr~nlflnr ownersbfa intcmts to courts no4

(2) P W r Dewriotion of tho Sewicer. @ Tmsreesnd their Qksim Pmceedine Sewicers for the hendl cf the Truns. and in the name cf thc Truslce. but arc no1 themselves rbe TruSa. Ser~icingprofcssonai~ nad odrcr agcnrs engagd by m'cers have @opted widdy varying approathes m identieing rhc source oftheir anthority. Some gay rhw represent "the .%mviscr," atllms say they repm.w:nt "the tnmtec" or "ihe tms~'' and some simpty ssy they yeprescnt "thc bank" or "t ic Icnder." These disparate practices havg caused aipificnnr confusion regarding the mlcs of the perties tb seouritlrarion transactim. T4c Tmtee believes that ell pepersms~od by 'the scrvi~cr should amuracely identify the speifrc role w capacity it1 which arsawing. For s~amplc. an aaomcy for a servicer krccinsing on a property rnoqagcd to s ?ccuriti7ation Tnat r*ould In? less accurate in h i s rc.qlect i f he or &a claimed to bo ~.~ ~

" p h x c ] , Anorney for mame of Trustee]." A more &wmlc stacemmt woold be "INnnl~]~ Attorney for [S~wiccr Snrm~I, AeZin~ for @lame ofTtustee] 3sTrusrcc.of the pameof Trusty. In no evcntshmld sewi~cr*relained fomlosuw p r o h l o n d ~ induding wunscl, mislead third F i e & including muns, iato believing that the Trwec di.rwtly wnvols khc forcelosum prows a r m y rclatcd liiigarion pr6cers. In addMon,rhe Tmste-2 shoutd never be dcscribcd 8s L o w who "made" or is in "h thc busims of

mkin#/securiiizin#" Imm. Such descriptions iwcuratek rcflcct ~k role ofa securitization tnrstcc and ma?: exposc 1hC TlVSU and tht TNStec to unwmr~rnted kgal iiabiliv and cxpcnse.

(3) 3)~aintcnan~e of RE0 Provcrties. The Trustee has reccivecl a number of inquiries and comphinw from governmenr officials and community gmops about the physical condition of RE0 properties. Such inquiries and wmplalnrs also are recnviny i m ~ i n g attention from the media. law afolcemmt agencks, and mum. Uhdwsfmdavrl s~carirization docurnCahit-h scryicers are exprep,lv . . rosowMs lor m~RaQ?13& ill1 asrrects d the RlEO d j n o s k t m t m n ~mccu. ioelu&hr n~nrou&e I' RE0 nrmre?Y!*r. Faifwz ta these rcsponsihil$tiex may expw- financial lose%, poantMlp dapmslny the vsluc of Trust propeny and axpasirrg the Tnra to lcgal and lin&ncial liability. Becnu?c title to RE0 propeEiei typically includes rhr name of th? T ~ s l e e inatitution these f a i l~ r c~ also cxpose the Trustee to legal dabs and icpltational h m . 'To pratect againsr such conscqucnces, whtch are l i I y to give r i ~ fn indemnidosrloncls~ qaimt services, tile Trustee urges servicess to exorcise beighlcncd diligcncc with rrspecl to RE0 n~eintcnmcc a d disposition. Tn addition, we urgc Sarvicms to in- p m p w managas who wiKrafie pwofipc saps to proen RE0 propcnics, capccinlly wllfi~ hey arr vacant fcr mendcd periods of time.

(4) m@=rlln Eaeazis~ in PrbltcPrf~-ate Irrhiatives. 'The Trusicc urges xrvicers lo stay abreast of and, whcre opproprialc. paaclpatc in. govcmmntal pol~cy dt~ussions end nrrrlc-making pmccsqes that inay &et -icing activirios. Ghen the widespread r n i ~ i ~ n d n ~ ~ l ~ d i g of how securittnationtransactiuns work, scTyieerseers lrustecs, nnd orher fiwncial instih~fims involved in rhe administration of aceurRkatiQn mnsactionv sheld seek to edizcnte othcm npproprtmly atrouc rhc rights and rc~pgn~fbilties of the parties co thee ~msections Without adequnle und~Tstanding and scnsitiviQto fhcsc issrrm. oficids rnv adopt rules or poncies lhat 8d~e:rscly ittYkct the inrerusts of sccui:limnt~on ,nvcfii(ors. Active perticipation in govcm~nnr-indushy dt.wussions ofthcse issues may h&lp avcrt such olltcomrs. Rortly eRc7 the h u a n ~ c of ihcFlrsr Smiw Mcmomndum, &dnrni and sta*e banking re~platars issued their "!%atfmcnt 4n LCss MMRitiw Straogies far swicen afResi&W~l Mo@$igfs." In addition, in DocemberaOl)7s the American Secr~rttizalion Fomm, in cornultatian with U.S Treasury Officiak pmmutptcd tile .'Stmmtined Foreclosure and Loss Avoidance Framework for Seourltizcd alubprime A$urublo Rnk Motr~~ge Loans." Rolh ol'thcsc docunlm %flea the kind ofcareful bnlnncfn2 of policy abjwhes mdcontract rigMs thnt can be achtevcd By engaging in reswn$blc subycmtivc discnss~onu vvitl~ affected comritueilcies. In oddition, C e Twtce urges .wrv~ccrs to excrcl% diligence md where appropriate, snvolvc ar wopcrsre with 19% enf~rcqcm agencies rcprding a variety of unethicsl and. in s m o cases, il-l real esmm rtaosncflvn schemes Ui~gcting diat~mrd borrowers. In partimior, serviccrs should be on fhc lookow for tl~ird pnnies who: (a) seek private data concerning bolmwrs, loans or lonn pnnFolios without pmpr aufhodzation or (b) purpon to ncl based on nn asserted ~tfilil?tion or wsmciation with the ervicer, the Trustee or Lhc Trusu. Such pmticcs may vt,biW bwrowem, servtcets, the Txsm and the Trusts to finsncll and ~purational hnml.

TI= f msnc bt.I?wes that adhemce rn the fmgoiag seummnrdotiens on a rondslent h.~ris >dl? po l only protEct The intcrcsts of invsrors, bin bemf* all cons@hcnch by rrinimianp mi~munder~tsndings that im@c timely and fkir rcsolutlon of fW~~lasun mallerr.

'Thank yau far your mopcmrion

PEWSCRE BANK NATMNAL TRUST MMPANSI, as Trustee DE~~TsC~IIE RANK TRUST EOMPAPJY AMERICAS, rur Trnatec

SUPRE.llECOURT OFTHE STATE OF NEW Y W (301!NTI'00 M?W YTORK

Index No.

v 1 COMPLAINT

lintiled Notes Page 4

S C C Z . ~ J ' J ~ E S . I W : DB muucnraeu PRCiUL!CTS INC.; ACE SEOJRIILES CORP.: ANT) DEllTSCWE ALT-I\ SECURITIES INC.

~ r r R " ~ l ~ n E M A N u

I ' l a i n ~ i ~ Uwia SAM\< Ilmia Holdings. Tnc.. FSA AswI Mnnagcmenl LLC. Dexin

C~k l i t Lws l SA (collenlvdy, "R@xh" ar "Plaintiffs"), by t l i r a m y s Bemreirr Litt>$$ik

Dcrger R Ckassmunn 1-LP, For tlluir Complaiilr lherein agailtst. Deutsshe h n k iiG: 'D~utsebe

Hnnk Scc~~ririex, LIC.. ACE Sewin'er Carp.. Deutsche AIt-A Securifieh Inc. onrl DR SIn~ctu~*('d

Privjucls, lnc. (cdlecrively, "Dettmhc Bnnlr" or 'Dcfo110a11u"J. allcgc as follows:

I. SIIbBlARI.' OFTBE AClTWN

1. 7% acrinn invidvcs s fmcld pu~l!arnlod by Datrsclle Bni~k egninrr Dexia in

crinl~ection wir l~ i.wor SI billion of resi<let~tial mongnac-bzckcd seuaities ("RlulBS-') that

l)~~tx:K1(1a h a k sdd lo hxin. Dmaclre R7nk anyimd. purchased. tinmced, ~ n d sm~~itized

rxmplionally hi@-ri$k los~ls into L e e RRMBS, all rvl>ila internally dispreging the poor qoalify

of Ithe% loal~s and the REV1I)S t lq backed us " .p;~" rllcl 'emp.'. Deutshe Hnnk's sinlJuln~iy

nighve vi&v oof Ilrc lnrns and RMRS il ,wid lo Dexin led it, uerIi119 na early na 2005. ra bet

mpninnt the l1.S. I~o~tring mnrkcl. ~rllimntelv cluvelopign SIO lri1h11 ':vhnn",p~~rici~~~r that pnid

off dten the snntr loansbacking theRktBS i~ sdd to Dexia atd o1hci-s failed.

2 M~w*vnn? thal Detllsche Dank recretly viewed tile llh.IRS i t sold or "generally

limdble'' i ~ ~ d war bclling- wid1 ia mvn crpirnl thal lllcy wnutd WI. Dmla im:cs)cd in ?hose-

De{lschc RII~I~ RhlNB in reliance im the cellmil nllc lllnl DeutscheHbnk plnye~l ill n.eitlirt$ h e

RblBS. nnd on llle re]~renenlntions Detrtschr Bank (~lavided in rel)iSnaion stmerncnlr, fclni

sllccrs, prurpeclures, dnR paspea18 supplcmms. p.crpmfur nlp~lfmenls and athermnaterj;llr

und cu~~llnunicotirms (the "OL r i l ~g Maw~ials'l ~Wsting lllnl the loans backing the W H S had

bmt p~udently rmrlcrwrivriben nnrl r a d by ildcqunk c~dlllalcml in necardance with the

nI~JErrvitiny gtidolieas at' Ibr companies that oliei~innd fllvsr ittorpaycs, and Uta1 Daraclie

Baal; tlad Twit id ~ h c qaalig ivf tllc lnans. Dwtsche Rtutk's due di l ip lse purportedly

confinedUtrt the srcudtica il solB Dcsia wnrmnled thc slcrlutg clpdit nrlinys tllcy carried when

scild.

Untiled Notes Page 8

3. Deutsche Bmk i r l ay~d r l~biqititous mle in the nlortguge nrigioation nnd

securitiaation p w r . lntleed. the n~njvrily~. -or nppraxian~elp $3.9 billion in hee n n ~ m ~ ~ l r - - . ~ f '

tlrr lota~s hacking lhc Dcutsche finllk, RhmS the1 Dcxia pitrcl~osed were originated by DeuDeire

Hntrt;'s otvl) snblxime 1norCnye a.i&i~iamr sub~idillrics nnd utXlintes, M~j~~gugclT. DU Home

l.endi118 1.I.C 1"116 H a m i ) and TIB SlntcturK( PnlCluclk Inf T'DUSP") ln Lhe OH>riny

Dn ia 's Derttvchc Rank RMB%-when pmlesing loasr tlltmty\i 11s cmwpondnfi TI%-ASAP

lmr l i t~u proyrnm. mnly ocqttiml INII~. firnn -t~pprc,ved loan rollers that lnev I)RSP'$ miaimium

rcquire~nrnts ntld tbnl '.mil of the Mortgtige Lo~rtis" Ihat wve~,r i~tcluded ill lltr sccitritization were

vntcd by 138SP m~derw~ilcrs m enutre rhey tnctlmmtb DRSP'n nod chc loen Ilellets' uttdcrurritinp

guidclincr! Wowver. Oe~nnche Rant c l l i nml la hare regularly conduclcd a 'Yrtll 1.e-

astl~mnrlfin~ of a nmtlorn selecrh!r ofrnor7$&se loans to nwl?re nslet qlmlily" to cnntirm "tlflrc

F~,~SIPIJ~C nnll ~ r c t ~ r i ~ c j * of 11,qfI 1111~.unfinf,~, c ~ d t I/I%IIIIH(I~~~~O~, apprnisnl RNN/J~F;.V 11nd

rrerlmvvin'~~,~ dw;d<~n." and 9 t a t d that rhe f indi l ls of rllis mview were "salt moslhly to

[l30sP] tnansyeme~t rrr rcspnnse.' Ueulsc"(~@ Bank nlso nn~lcnvrnte and snldRhfRS moidnin,y

loans isued by other ori@nUors-iocludithg indyhiac Etrck FSB (aIndyhMc"). Fretnor

Invexmiesr irnd l..rmn ("FEIIIOII~"). Alnericnn llome h.lrufyngc (".41lleticas Home") anrl

C.mt~~[rywdc Finnncinl ("Counifpide")--and staled i ~ t t i ~ c Ofiring Molcrinls that theac ln;\riu

met tl lr crrigltmatm' staled 1111demi611s guidcli~~as, were wpy41r4 by adequatnale collnterzl and

were atl l ic ial t to wnrranl B e AAA ratL~gasig led to the RMRS purchnsed by Dexin. D e ~ t m l n

Bank taprrscrtred, mion# orl~cr Illtngs, tllal lbe lontls cantalnetl in tlw Dwtrcche Bnnk RMBS

\\ere t~oc scriwsly delintptcnt at the t in~c tiley scc~trilimd.

11. 'rhosc $epresestnliottr vier? h l s r I n r&~lily. t11e CHl'eriug Mutetials nud credit

mlitrs lnoteriaily mirrcprcsntcd the quality and prrportcrlly consmarivc na(urc of die

kMRS-and D m c l l e Bank, thmujh its cxrenshe involuctr~ent k rha seeluitixniion pmecrs,

b t v v this was the caw. Indeed. L e due diligr~ice Dsr rsd~r Rarlk clain~cd i t hacl performed LIII

Unfiled Notes Page 9

these lcnder~ and llie lonns tluy m'ginaral trveeltd, in crplicil c h i b i l . their t n r C quality. Tile

~~cccun~a$e of rieliciunc IVBIIS identified rlirwgli llint c l ~ ~ e d i l i ~ n c e prortns - which Deutnchc

Rnrrk genereliy or~tsourcect 10 aid-party maitgap cnnsuluns Clayton Ho[diw%, 4nc.

c"rlnyton-.j and Lylifin Qnta Smiccr I"Lyd~an") .- dernonsrmles tlrnt DWsche BHnk kncr rl~ar

dr 01 iki.in;rhin rrrufinely djfiregurded did< OH-11 rslclenwifin@ jx~illelines. twi~inarerf loans beretl

an inflatel ~pprnisnl v~lncs, and manip~llntctl tlre undenuriliog pmcss to ivsun loans to

bannvers ,vlin had no plnwiblc moans w repity rhm. According to ovidmcc rc lmed by lho

congressinnal rinarrcial Crisis ioquirv Coniniirrion ("FCIC"). IXutSel~c Bar& pt~rcl~;aed and

wcuritirrd ororlg half af LC sampled Ihn r rlayton lirjected for failing to coniply d t h I11e

~ri~inotnrz' ultdclwciting gr~ideliner For lonns Ilia1 Dw~uchs Bnuk itself originntc.d through

Mnrtyr~gclT. Dl3 Umiic nnd DESP. sud~ due diligcocc uniy ctrtbmmed whet llc~flsclic Rnek

nbrit&y blew: thnr 11tc loan pods iv .wuuitirerl ueia riddled with ddccrivc lonnn tho% were

innprolmly unkknvrjnen i n dim1 wntrasr l o Dm~gelre Bank'n reprcaenmtimr i n tilt OJkrin$

hlalcrialr.

5. l k i~ l zc l~c BRnk'3 clr~ss ~rlatio~~slhps sit11 i l ~ c mrhprifi~e lcm~lers tliol oopinaird t l t r

loony bickirrg the RMBS in M c h Uerin invested fnve tilml urliplre in4ight inlv the qctslity of

tliote lnnns. 'Ibese relaliar~~iups i~~clr~cled Deunchc Ilnnk's role ar. one of Uie lmg-I mreb t~se

icndars to I I~~~P I IS subprimo Iendcrs, areriding l i~les of credit rvtnling billions oFddlatx tn

several oftlic ot i~nnmm whm tcwa hacked tbe Deuwhe Bank ~hdFl~.sLld In Dtxia, bci!rdi;q

NETY C'cnluly. I'alrrltyr.idc. American Hnn~e. Option One n~ id AIIIC~~QIOBI. A9 n ~q1111 fff i t s

clo5c reliltiaiiahipn will^ laan wipsamrs - as *I rtTilrrle. ,nultibilliln~ mrllor lender. arid

muiribiILiun dtdlnr secmitizatiat pnrlncr - Dunvclic Uolik knew in smnukm dar i l r l ~ oriyionrin~r

p*~ctises. ttc~derwriting ylriddinn. an11 i l ~ e qk'nlily ofthe oliginnsd lmlts. As Da~~gche Ralik

knrw - brr euenm lib Dmin ww~ld only !.la discwer - these oriEikxarS a~nong the

r m s l nf th. suhpnme inun!~uiage lmdcn. wilii~lg to-just giv[cj nlnyoac q loan who wants "II~.'

sccl.lre in ,lie i;no\rlcdye thnr llteir U'oII Streel pnnnrlr like DcuLrrlle ~ e l l k iw,l,rlrl llcm fnislihc

loanr on ~8%9u~lr~cli f iy invmlon. like nmia.

6. Par thost! loalrr DBSP p~~rclasefl for sr'alritizrtion througll its rorrespo~tdem

Iendiog prilsrnlo, Dwtxhe Rank advancud the Ib11di11g neceswry lo urigirmte tilose loan* ewll

lhchrc thcy Ltld hem Issued 2nd kc~>l nn tnnardinarlly dose eye an their pcrihrmance HI~CI .

Ihc) r c r r r purchnscd. To riiis OII~. DRSP had n slnlcd policy o f rcquirins nny l~rnn scllpr in i ts

corr~posdart Imrlbg pr~lgnllll i o repi~rcbasc a lwll ' i f rlny nf llle tirst Illme 0) paynlene due

after thc purcl~asc h t c a n thirty 09) days dcl~lrquent." wllrch was nmenllcd ill hfaralcl~ 2006 to

rcqorrc an). sellcr lo rcpurcltnsc o lm if rhc Rmr hvo pnynicnls had not hem made. Ilndor this

prwmm. ~ ~ B S P clorcly lmclted Yell early pnrrnent tlefmla FEPDs") and rvas keenly nwsrc dl81

lotins is,~led by its conrspondr~rt ler~dem---i~rcludin~ fy-hyaiglrt ru~bprirnc lenders Mnribcllu

nlortpylr 1.t.C ("Maihclln"), Canlrron Finercia1 Group. Inc.. dWa I" Clloiec Mnngr~e

("Cameron.'), anrl Pmjna (imp. lnc.. dhlo 1-ibeny hlortgapc FunGng ("Libeq")--weie

defnulli~iprvili~in !he Rni several ntoiub nftcr is?anocc at nlnrniiny nw. Such mdy deFa111ts

aliowcd thnr 1.11~ loans ucver shauld have bem issued in the tirat p!acc. Moreova. D~IISC~L'

Bnnk \va$ ow:i~r thec these lelldcrs rverc co~lrin@ and- ilrcleerlng W~landal s i rw :I, other

it~vesllnent bank lenri bilyan hegun dmmdinp rcp~lrchare o f such lonns. I~lstead olcul ta i l is~ its

busi~less r~lat indr ips uilb lhcsc lcndcrs, or men enlacing iLn rigllrs under ia EI'D program,

nGr~tscltr Bank-raced with hoviy l o suYl'cr iht lorr on tlia Ion11 irself if llic lender \vaw to

d ~ l o l o s bbsnkmptcy--ehme to sec~~ritize lhoa loans a d sell them as Rh'M to Dwia even dler

tiiey wcl.c.nlready deliaquenl.

7. lndcerl. ns rdlccrcd En eouo fi1itib.s i s n~trsqt~cnf rcpurchast liligntitwl bmr~pltl hv

w S P . scorn nf such BPD loans w r e nee~ritiawl and snld ns Oeatcche Bonk RMRS. Ench of

tlrcre loans--identitied by DBSP ill coun f i l inp ns having dcfmited under the lenns of its o w

Et'l) p l r ,~~ im~ rvirllil~ 111e lirsr scvrrni ntonlhr of Iiavirty heen isruert--rm iacludcd i n Dc t~~xhe

[)s!ik ItMBS prrchnwd by Percia. despilc the rnplicil repwscslations In fie Offcrlng Muerials

that the loons hnd heen vndenvrinen in ncmdawe will1 lX5SP.s own eadenwitiug ~ilidclincs,

indcpe~~dently rcvicwed by DBSP's nxvn undet~witea, and in tlnt ~nntradicticn lllB none of lhc

Ionnz t\wc in serious delinqnang *tams at fflc timc ~Fsr iwr i t~mt io~~. " hrcredalaaly. DBSP, ill

its cmil-t 0lin:l.l. alleged il1.1l. it tu;ci hnnd becnr~rc il wnr "unable lo include cernin af the Earl?;

I ' ;~yn~en~ DcFntrII Lwns i n senltttiznrions," despilc A* lilcl that it almndy ltarl dalr so. rrld sold

sccuritiss bnched by d ~ w e loans I:<, Dcx i~ .

8 %wlsclie Rank also h d t~~tiquc insiyht inlo tile prnclices aFllte oriyi~rnrotv d i rmr

loans i t se~~r i r j zcd through icy rple os l ru~tcc of lilt fil$t? that backcd the 11MnS i t securitized.

Elwployeer at Dnllhdlc Rnak's hlatec arms. De~mcl~e Bank Nationnl Troa Cnmptip rlnd

Oeuaclie R i r~k Tnmi Canpa~ly . 4 n l c n c ~ ~ (collectively. "Deuwhc Bank Tn~<r")--wl~rch wms tl!c

sgpshnd n ~ m r g n g ariginntioil praCllCc3 rhnt wcrc p~ew le~ i t i n lhc Dfulsclle Bunk RhZBS

pltrchsd hy Deria. For m~mple. n sene$ of Dcutsche Rank Tmut memo~andn 10 RMBS

Grr-iccrs be$Iing in Augtst 2007 details incrrasirxr eel>cerlls tllm 'Boot1 ht~mrkecpin~"

measures wcre nut being follo~ved to estnblish thc KMRS Inla's m v t ~ e d ~ i p of the mortgngc

iannu A+. nqdmur u~rmvered in fomclasl~re lili9niion acroa t l ~ r w11111ry IT$$ since rct~cnlui, the

mortpye lone6 hackin# Deutsclic bank RMBS-incliding loans bncloing thr Deumcitr Uatk

RMBS ~nrrtl~nsed 1% Dexia--.were ncvcr properly t rn l fernd la Nre mlcvnet fnw. in dinw

cinlrndictin~~ lo Deulsclic Bmili'r r1nle111unls in the ORcri~ly kiaterials.' Thrnt~gh <hex

j~crivities. 8'1d Cnr nrey scc~rrilization in which Du~lwclrc Bonk sold ccrtifica1r.s hi Rcxia.

~ c u r ~ l l c ~ a n k had in-depth knowledge of rhe m~dcrwririog practices of each lvnnwiilyinaior: the

d~ l i two r t l i i n cs~ o r llrc loans il was kecurilizing nnd x l l i n ~ as RMRS. nlld the vnlidify of the

-- :'For exn~til)lc, D a ~ n c l ~ c Rmk rcpluscnred ill the Offcr i~ly Materials for rlie ACE 20M-ASPI RMBS in rultich Durin illvested met $12 ndllion Lot "IVrr Mn17ga#e Lnnn #rill hc ~ r o ~ - i I u t n .to rfws deJi~yncnr 61.5 @Ute C ~ F v ~ l > n m . " !

: As discursad bdou,, Deunche Rank's lnerlce ant1 is c t~mnl ly the subject d invesr i~nl in , r Ihy 130th ihc 1 1 5. Dcnnmnent of Jbslice and thr .tlumr.vs Geticral o f New York and Delawnx llls ............. nrc la,kiny into ?rnll~l, f 0 ~ 4 r y bnd nllier ~sircenducl ctmcertiing the xcuci l i ra t io~~ pmccss alld

trl~st sssa recovery i n Piiwciusure litipnrion.


9, Rather than disclosc the t n~e nnnlre and qualily nf the N B S Deutdc Bank so:d

to nerin. zmior fnckrr. a! Dcuaclte Brink cvpbitell thisinsigl~t lo dwine a 3-tw 10 ,prof,\ off

trf tlrir cvsnn~al default. h~dced, as detailed by Scn~le &maomit Sutromini~hu on

Investisntinns ("Scnnrc Stbeommiltte") ill its April 101 1 rcpon .'Wnll Stnei und the Pinatlc:sl

C'l.irir: Analonly nT a Wnancial Collapse" llhc "Smate Repon"). O n r ~ s J t e Hnnk s&nr rrnrlcrs

itj*enliy and secretly belittled IIle Det:l.pclte Rank RMBS y~nchnrcd by Dwin nvd f ie

mitjnntors who iscud the underlying lonns a "cnp.' "'pip.' and ''gcnemlll; Iruwihi~:' l"u

lr,nfit OR a? r l r m sccurin'c~' wpeclcd Dilure, trmdc~s nt De~~ lsc l~e Bank &vn'opCrl anrl sok

pasirimls in ~dJ .~e f3 l i z r t l det.t ollligntinns ("CCN)fl und crulit dP;lult swaps C'CDSs") ro bct

un ~ I C vahlcs of(and in mnte cascr, aninim~zc irc own crpwsute io)RhiBS sctcb as t l ~me ir Dad

wcrd cdal~d mld ir tn!.wmn alclr iu Dmia. In Fnct, U r t ~ r ~ h c R R I I ~ rvns one 17 ITVO lreclcrs o f R

ccnsotri~mm ofbankg that devclgul an index lhar tmckud HIC pcrtiinnce of o grmtp of RlLDS

tharwlablccl IleuIsr.Ilc sank rmders m plvop such buts in the t in t place.

10 Ow XICL mrler. Grey 1.ipyrnm11, who p layd n cerlral role in lalping Deiibche

.Bmk excnlre rbiu smc-, :epeatadly &tided lRe \,try RhlmS Illat Dcuuclic Balk i tse l fh~d

ncnect, marketed and $old. In 3(Na. hlr. Lippna1111 cn~n ikd ltis colleaya almu atc l>cueclze

Hack RhInS <led in d ~ i c l r I h i n had i n vend ovcrf:3 millinn. Wkinliing "DO1TWr TFtR Dk?r\l,

o~.QM'['.'~ to wh;cb il,e mder rr(~1ird "u.e.q ir hlorvs I ntl! seeing 20405% writdou.~rr."

j ~ c ~ ~ t s ~ l r c B ~ n k wcnf tcr gnmt lengths tn kc)? ia tmden' views of drc subprima RnmS tllar i

O o ~ m i e Bank sold to itwulors like Dcrin - wrd Dn~ isc l r Bank% strategy lo profit off oftltri i

cg iaps .. a secl.el, As ratlmcd in the Scnale rep in^, i t wvas d e a r $hat DButsdae Bank a?!waaled

tlrut stmlegy bcfitvsr i t \\,as iroe:illiny tc sacrllicc illr pwfirs i f v a s mnl;Snp From its "new issue

ntxl cufiionkt Snchise* husine.%q-i.r!.. tlic ~ i ~ o ~ i c y it was mak i *~ hy ssori l iang alld selling

One of Mr. Lip~mano's top tritderu. Rwky Kurin, put i t &in way ill niid-2005. "(li'.7e htnv 11, IWNK'C ltrancy. Cir.rbr*er Irr~)?]~inc.s b

n *nnnrlm, goal bM rra cmnnol h w xighi oftbe tra.?f#g de~kl'/v nthrr rob flf.wppoHtn~ selv isslle rtnd the ~ ~ , ~ I I h ? m ~ r h i ~ r c . " 111 a 2007 email to a client Mr. Lipprnann wore: "'\plIelllic ple~rsc do nof.fmrvad Acw cmailq nrrlsirlr ~jwur , l i rnr ... I (10 IlM rrstrr b lic Cbmcrl h.r rhq rrclrf hue pm,l,tfiw dmmyi~rx fltcir h~rsinm.q."

I I. So col~lidcnr wire I.ipp111ium and Deuthclre Bnrrk bt rlrc suntcgy to profir act-nl'd,o

call~rpre of RhlRS like thuseit sold lo l'kuia Ihat ;~laagpnl in rr, mail twa Ilrdge 011rrJ iinvewr

in N o ~ m h c r 201)s Lbnt "he was short I billion dell,m af this snrff nr~d was going to make

ass a l i t t l e scat?." 1% the elrd of ?(107. Ocutahe Bank's ''shorf' p o s i l i ~ l ~ lrnd 9r0ll.1~ to sf0

lhitlio~t. cor l in~ L>et~t.pclw Bank .ap)rmuin~obly S I GI) strillion pcrycnrto wininrain

12. While DczltrchcBnnL wnn huildlng iu $10 hillion bu agnitra [la RMBS it sns

~ e l l i r r ~ end lhe U.S. b r i n g nlorka io pcnornl. Dmin. i t , relianee upon the smrrn~mrn in tltc

{,XT.rirzg hlal~~iairdlr nnd 1.k1rladn Ban)k'.r 1rlxtla5ar, illve.51cd over PI billiar in Dculsshc DnnL

RblBS ie 32 offering bmmn 2005 ond 2007 (rhr "Crrtiflcates") -- all of .rshiclr were ratsd

AA.4 hy pnr)ronedlg irrdrpe~rdenr rnlinj agaicie6 at tlre time of im~aiice. As Deurwbr Bank

eSyect4. ho\'C'eLw. Iheae RbiDS ewIlhlally plum-wtl In va;llac mhl in2 Uallschc Bank m renp

ono~i~moa prolira on chc "dtor:" bets ir lwd llncrd ~gi r r ias t tllcsc #n~rilies-&scribed by

I.ippinnan ;~r [he " ~ h c la@ew profir obtaincd horn r ~ i l t ~ l e position ill Dcrrcsche Bank histow:

I(llfoflon;ltcly, tiir iffvc$tors lib 1)cxik llonleor~lem irrrd lhc yiobal ewnonry, Deolsclrr t l n c k s

rniscondad Im bee11 devasmlin~.

1.3. Oeufscho .bnkh minaonrlucl hns nsd tn l in astoundina rum d c I & u l ~ on the

loans iinderlying tlicDeunche Rank RHkS and mnrrive downp.rnde$ oftlie Cmlticnbs. which

are dl narv caisMcred "junk." As of'hfay 20 1 I, OII awra5e. alnlaw 35% of (Be 111mqnp loans

underlyin_n tlie Ceniticnws w r e nvcr bO d m deliequrnr. in hreclosule, bunkn~prcy. or

raposminn as rcflcacd by tlw chert belorv This figure dn(s not include tlrs sulmantiel loves

suffwed by Dcxia since B c KMRS' issunuce clue u? foreclon~~rcr a~rd deFoulD. nnclllrc ret~i<~val or

tl!os. !'ailed storrcp$ loans fioni l l ~ e otrrrln iiwr lwl nod arrrcnr delisqumcy fiptorep, ir~deecl.


.. . . &WB&:;.'' ,,!pp@*, .. . , . . . . . . . rid' d*.. L...

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

DEUTSCHE BANK NATIONAL TRUST COMPANY 300 South Grand Avenue Suite 3950 Lor Angeles, California, 90071-3175,

Plaintiff,

v.

Civil Action No.

- 550 17th strdet, N.W. Washington, DC 20429

FEDERAL DEPOSIT INSURANCE CORPORATION, in its capacity as Receiver of WashinHon Mutual Bank.

COMPLAINT

JURY TRIAL DEMANDED

Plaintiff Deulsche Bank National Trust Company ("DBNTC"), by its undersigned

counsel, alleges as follows:

PARTIES

1. Plaintiff DBNTC is a national banking association organized under the laws of the

United States of America to carry on the business of a limited purpose hust company. DBNTC's

main office and principal place of business is located at 300 South Grand Avenue, Suile 3950,

Los Angeles, California, 9007 1-3 175, and a site of its trust administration is located at 176 1 Bast

St. Andrew Plaffi, Santa h a , California, 92705.

2. DBNTC serves as trustee, document custodian, and in certain other trust-rclated

capacities (collectively, sometimes reti:rred to bereinafter as the 'Trustee") under the governing

ngeements, custody agrehncnts, and various subsidiary or related fiducisry arrangements

(collectively, the "Governing Agreements") for over 159 Trusts created, sponsored, andlor

serviced by Washington Mutual Bank, its predecessorsin-interest, andfor their affiliates under

their contml (collectively, "WMB'') betwen, 2000 and 2007, described more fully herein as the

"Trusts."

3. The T m t s currently hold, as bust assets or collateral, mortgage loans that WMB

originated or acquired, serviced, a d o r sold into the T ~ s i s .

4. The Trustee brings this aetion for and on behalf of the Trusts, investors in the

Tmsts and itself as Trustee.

5. The Trusts at issue are "express trusts" created by written instruments manifesting

the express intention LO create a trust and setting forth the subject, purpose, and beneficiaries of

thc Trusts. The Trustee therefore brings this action pursuant to Federd Rule of Civil Procedure

1 ')(o)(I)(E) as the t m e e of an express trust for the benefit of the Trusts and the Trusts'

investors.

6 . Defendant Federal Deposit Insurance Company C'FDIC") is an agency of the

United States aeated by the Federal Deposit Insurance Act, 12 U.S.C. 5 18 1 1 and related

laws and regulations. The FDIC acts, from time-to-time and among other things, as a receiver

andtor conservator of banking institutions.

7. This Complaint asserts claims against the FDIC in its capacily as receiver of

WMB. The term "FDIC" includes the FDIC in such capacity.

JURISDICTION ANI) VENUE

8. Tl~is actioa arises under the laws o f the United Stales and is a suit on a claim

submitted to the FDIC pursuant to 12 U.S.C. 5 1821 (d). TBls Coun has subject matter

jurisdiction over this action pursuant to, inter alia, 28 U.S.C. 8 1331, 12 U.S.C, 55 1819[a),

1819@)(2)(A) md 1821(d)(6), and 2R U.S.C. 8 1367. Jurisdiction also exists in this Court

pursuant to 28 U.S.C. 8 1349 because the FDIC is a corporation incorporated by an A a or

Congress and the United Slates owns morc than one halfofits capital stock.

9. Venue is proper in this Court pursuant to L2 U.S.C. 5 1821(d)(6), which

authorizes suit on a claim submined to the FDIC to be brought in this district.

BACKGROUND

A. Proof of Claim

lo. On December 30,2008, the Tmtee timety filed with thc FDIC as receiver for

WMB a proof of claim on behalfof theTrusts and the 'rmstee pursuant to 12 U.S.C. 5 1821(d)

(together with all cxhibits thereto, the "Proofof claim'?, outlining various c~aims against the

FDIC u~lder or related to the Governing Agreements. A copy of the Pmof of Claim is attached

hereto as Exhibit 1. Exhibits A-l, A-2, and A-3 to the Proof of Claim identify the'rmsts at issue

in this case and on whose behalf this action is brought.

I I . The Trustee hereby i~~wrporntcs by reference as if set forth herein Wl the

entirety of its Pmof of tIaim, along with the exhibits thereto and materials refaaced therein

~ n d hereby as&s all claims, causes of action or rigllls lo niicf'that are included in or arise from

the Proof of Claim or the facts referenced therein.

12. On inromation and belief, other partics with interests in or obligations to the

Trusts filed proofs of claim with the FDIC, including securities underwriters, depositors, Ionn

servicers, insurers and investors. The ciaims asserted in these other proofs of claim may be

related or ~upplemental lo the claims asserted by the Trustee and the Trusts in this action. The

T~ustee hereby incorporates by refcrenee my such proofs of claims, along with theexhibits

hereto and any materials referenced lbercin a !he exten1 appopriate andlor necessary.

Cgaeel DQEBwO0666BaWt4EC tff3oomsehQO-3 Filed OB/~@I'~JB Page 356Q37

Federal Deposit Insurance Corpration as Rsceiver for: - W s h h t a n Mutual Bank

[~snuot B e n W h i e n d d l G ~ ~ -

PFU3W OF CLAW

c O N F I D E N T ~ ~ A T M E N T REQUESTED AMnchrnenfA EoncehtswnffdMtlal, ncfkpubllo tinancblhfimmilah C ~ ~ D e ~ e ~ n k N a l I 0 1 U I TWrt Campany mquoebp that Vlc EMIT, Urn infannatan wnWned In AtkhMittB, md U)o nmpuPJIc daeumrnU

oUmhad k t . a be ~ J d w M and beW B wntkImnr*l

SStVTax ID f [I) 33-084341$

The undersigned, (2) B a M Campbdl, VleePresldent

says that the W n Mulusl sank now h ilquldath is Mme olSanlJF~m~l Im~Uonl

juat\y indobtsd to (3) b u t w h o Bank Netlad Trust Corn- in the sum ot O r d r l d u ~ U J o R W A m a r d b n R ~ ~ ~ ~ - ' -

(4) $10,1~.~am,m (apprmimately, see A t t a c h m e n t . ~ ~ c s upon the fallowing CWm:

I - Tml CMnX (8) A W r m b

$10,146,399,)99,QO Attaehtrtent A). ( 3 ~

The undersigned further 6tatB t b l heishe makes lhbs Ciwim om behaK of

Dssafihcn of Onvuloa) cl8bn:

tM m part of mid debt hss been pdd, hat

LiaYW Wmbar C L A I

(B)p_eubchs Bank W a n d Trust Cocn~anv ( ~ i Y u a K J ~ m a m Q n P a ~ ~ A e e n ~ )

has @'wen no endoraemnnt or assl@nment uf the same ar anyoErt ther&- and that thorn is no aal-off or

Ambunt n fmim $6.764,2i34W t0 4 rre,rease.aso WWOXX. I. (see AUachmt A). I

(5):Sea Exhibit A

countercldim, ar olher kqa) a equitable d&nse to saidCla\m or any part thereof.

NAME (9) Barbera Campbell . Vice Presldsnl

ADDRESS (10) =East% ARdm PI

CIWISTAERIP Senta Ana. GA 927bUP34

TELEPHClNE NUMBER 714-247-fMB - .-- The pe?alty for knawiogL medng orbrvlln: relante ot any false, lori~ed, or ~ountefiell statemnl, document or IF,ing b- he purposs d lnfluznctng h eny wny the bcfbn 01 he Federal Depoen Insbrnrm CaporsUon Is a nfba ol nit fh7? S1.000.003 wlmDllsonmenl f o ~ not mwe man mmy yeam, or b o h (W U 6 .C Sam1 1007).

~ m e l . 1 3 0 ~ ~ 0 b 6 6 ~ lZon11m~hP6-3 Fiied OBl2BlO0 Page 5ibbQ37 - 3 -

>~dilition, porsc~nnt lo ccrlilin Cuslvtly Ayrccmcnls, lltc Custodian held :md disbursed linils with rrspcct lo the luntfing untilor linancing ol' such nlortgngc It~ilns in accnrd>lncc with inslructions furnisllcd to (hc Custodien by WAMII, loall purcliasers 01.

Icndcrs. 'l'hc ('ustody Ag~vcmcnls arc voluminous il~icl BIU i n tlic pusse~sion oj'both the 'I'rtrs~cc and WAMlJ. Accordingly. i t is impractical and unocccssary to k~ttach theni to this I'r(~ol'ot'(Ilaim. IJpon requcsl by thc FDIC. tlie 'I'rustcc will (iirnish elc~trunic or Ihitrtl copies of' any Custody Agrccnicn~s in its posscsuion.

6 , IIHWI'C is awan. Ihat ccrlain inhcr panics to tlic 'l'rusa, includiny, without limilation. secnritics underwritcis, depositors. loon scrviccrs, insurers and investors, intend to file protrli <>I' clailii in dtcse praccctiiogs rclaiing to thc (iovuming Documents and ancillary agrccmcnls which lnay be duplicative of. or snpplemcntal to. thc claims skulcd Iicrci~~ (the '"rliird I'artv 'I"ru~t Related Claims"). '1'0 tlie extent thut such 'I'hird l'orty Trust Kclatcd CI:linis relate to or arc propcrly o r tlic ' h s t s . I>UNl'C incorporatcs such 'lkird Party 'l'rusl Kelatcd Clainiv hcrcin by rererencc.

Claims. Arising from Breach of Kenrcsentrttions and Warrfintica (Estimated Rancc: $6.764 billion to $10.146 biBion)

7. I'ursclant to thc Governing Ducumcnts, WAMU. as scller and lmavteil scrvicer, made certain Rcprcscntations and Wawdnlics in connection with the salc ol' the mortgage llnns lo the Trusts. WAMlJ has hrenchcd certain of these Representations and Wa~~antics. Pursuant to thc Governing Documents, WAMlJ has express contractual obligations ( i ) lo notify ccrtzin parties to the Governing Documenls, including the 'frustee, whcn WAMU becomcs aware of breaches of Representations and Warranties, (ii) tu ~nakc ccrtain curc pay~ncnk will1 respect to ccrlain such breaches or (iii) to repurchasc tlic morlgagc loans aficclcd hy WAMU's breaches, at the repurchase price (thc "j7epurchnse Price") spccificd in the Governing Documents (typically equal to the unfiid principal balance of such mortgage loans, plus accrucd inlerest thereon through thc dale of repurchasc) (the "Reourchase Obligations"). Further, as described below, WAMIJ is liable to lhc l'rustce and the 'Crusts for all liability, loss, cost and expense arising from breaches of Keprcsentations and Wananties, including all costs and cxpcnscs of cnforcemcnt of these obligations.

8. Rased on the pubfic statcmenls of the FDIC, it is unclear lo the Trustee which obligations rmdcr ihe Govcniing Documents the FDIC purports to have assumed and assigned to JPMorgan Chase Rank, National Association ("IPMC"). Moreover, thc FDIC has not notified the Trustee whether it intends to repudiate any obligations of WAMU under the Governing Documents, many of which obligations are execulory in nature. The Trustee asserts that the FDIC does not have the power, with respect lo the Govcrning Documents for any parlicular Trust, lo "cherry pick" valuable contractual rights bf WAMU, such as servicing rights, while repudiating potentially burdensome obligations of WAMU, such as Repurchase Obligations under those same contracts. Rather, ic the FDIC wishes lo reap the benefits of these contracts (by receiving the purchave price paid by JPMC for WAMU'S assets), it must also accepl thcir burdens. Accordingly, to the extent that the FDrC purports to have assumed and assigned to JPMC any rights and benefits of WAMU to service Mortgage Loans under thc

Case 1:09-cv-01656-RMC Document 32 Filed 09/08/10 Page 1 of 44

IN TEE UNITED STATES DLSTRICT COURT FOR TECE DISTRICT OF COLUMBIA

DEUTSCHE BANK NATIONAL TRUST COMPANY, as Tmstee for the Tmsts listed in Exhibits 1-A and 1 -B,

Plaintiff,

v.

WASHING TO^^ MUTUAI. MORTGAGE SECUTUTIES CORPORATION, I

Case No.: 09-CV-1656-RMC Hon. Rosemary M. Collyer

FEDERAL DEPOSXT INSURANCE CORPORATION, as receiver for Washington Mutual Bank; JPMORGAN

Defendants. J

JURY TRIAL DEMANDED

AMENDED CO1MPLAINT

Plaintiff Deuische Bank National Tmst Company, as trustee for the Trusts li&d in

Exhibits 1-A and I -B ("DRNTC" or the 'Trustee"), for its Amended Complaint ("ComplainC')

against the Federal Deposit Insurance Corporalon, as receiver for Washington Mutual Bank;

JPMorgan Chase Bank, National Association; and Washington Mutual Mortgage Securities

Corporation (collectively the "Defendants"), upon information and belief, alleges as follows:

PARTIES

1. DBNTC is a national banking association organized under the laws of the United

states of America to cany on the business of a limited purpose imst company. DBNTC's main

office and principal place of business is located at 300 South Grand Avenue, Snite 3950,T.o~

Angeles, California 90071, and the principal site of i$ trust administration is located at 1761

&st St. Andrew Place, Santa Ana, California 97025.

CHASE BANK. National Association: and

2. DBNTC serves as trustee and in various other relatcd capacities for 99 trusts (the

"Primaty Trusts") created, sponsored, and/or serviced by Washington Mutual Bank, its


subsidiaries, their predecesm~-in-interest and their affiliates, including Washington Mutual

Mortgage Securities Corporation (%'bB"). See Exhibit 1-A. The Primary Trusts provide for

the issunnce of residential mortgage-backed securities and ceTtain other mortgage-related

securities. The himary Tmsts curiently hold, as trust %iseta or collateral, mortgage loans

originated or acquired by WMB and sold into the Primary Trusts.

3 . DBNTC also serves as inde~~ture trustee or in other capacities for 28 secondary

trusts or entities through which WMB issued mortgage-backed or derivative securities whose

pfonnance is dependent, in whok or in part, on the perfomance of the Primary Trusts or of

other residential mortgage-backed securities issued by WMB (the "Secondary Trusts'?. See

Exhibit I-B. The Secondary Trusts ase express or implied third-party bmeficiaries of the

P r i r n a ~ Trusts and, ns such, have standing to enforce the terms and conditions thereof, See, c . ~ ,

Poaling and Servicing Agreement for Long Beach Mwtgage Loan Trust, Series 2005-3, passinr

(Issue ID No. LB0503) (voting, consent, payment and other rights of NIM Insurer, Other NIM

Notes and. Holders of Class C and Class P Certificates); Indenture Agreement for Long Beach

Asset Holding COT. CI 2005-03 ussue ID No. LB05N5) (Granting Clause conveying LB2005-3

Class C and Class P cUnderlying Certificates" as Trust Estate; 5 1.01, definition of 'TJnderlying

Ageement" and "Underlying Certificates"; Article 6, "Administration of the Trust Estate"; 4

9.1 1 , "Certain Representations Regarding the Trust Estate"). The Primary Trusts, and the

Secondary Trusts, as appropriate, are referred to herein collectively as the ''Trusts."

4. The Primary Tmsts' original principal balance olltstanding was appmximately

$165 billion. As of September 25,2008, the Rimary Trusts' current principal balance

outstanding was approximately $45 billion. As of September 2,2010, the Primary Trusts'

current principal balance outstanding was approximately $34 billion.


5. The Trustee brings this action on behalf of the Tmsts and the investors in the

Trusts.

6. The Trusfs are "express trusts" created by wfittcn instruments manifesting the

express intention to create a trust and setting fonh the subject, purpose and beneficiaries of the

Trusts. The Tmstee therefore brings this action pursuant to Federal Rule of Civil Procedure

17(a)(l)(E) as the bustoe ofan express trust for the benefit of the Trusts and the investors in the

Trusts.

7. The Federal Deposit Insurance Coqomtion ('FDIC") is au independent agency of

the United States created by the Federal Deposit Insurance Act (the6TDI Act"), 12 U.S.C. 6

i 81 1 SIJJ., and related laws and regulations. The FDIC acts, t?om time-to-time and among

otl~er tliings, a3 a receiver for andlor conservator of banking institutions. The Trustee brings this

action against the FDIC solely in its capacity as receiver for WMB.

8. JPMorgan Chase Bank, National Association (collectively, with it8 affiliates,

including but not limited to Washington Mutual Moagage Securities Corporation, "JPMC'') is a

national banking association under the provisions of federal law, pursuant to the National Bank

Act, 12 U.S.C. 4 2 1 e t a . , with its principal place of business in Columbus, Ohio. JPMC

maintains an office at 800 Connecticut Avenue NW, Washington, DC 20006. JPMC is a wholly-

owned subsidiary of JPMorgan Chase & Co., a corporation organized under tb laws of the statc

of Delaware.

9. Washington Mutual Mortgage Securities Corporation C'WMMSC") is a Delaware

corporation. W M S C was a wholly-owned subsidiary of WMB, and is currently a wl~olly-

owned subsidiary of JPMC.

Case 1:OQ-cv-01656-RMC Document 32 Filed 09108110 Page 4 of 44

1'0. WMB was the United States' largest savings and loan association with total assets

of over $300 billion as of June 30,2008. On September 25,2008, the Director of the Office of

Thrift Supelvision COTS"), by Order Number 2008-36, shut down WMB and appointed the

FDIC as receiver for WMB.

1 I . On September 25,2008, JPMC entered into a hrchase and Assumption

Agreement datcd as ofthe same day (the 'QAA") with the FDIC, under which JPMC agreed to

purchase substantially all of WMB's assets and assume substantially all of its liabilities

(including WMMSC). The FAA was facilitated by the FDIC and the FDIC was a party to the

FA4 in botb its corporate capacity and as receiver for WMB. The PAA is incorgorated herein

by reference and attached hereto as M i b i t 2.

12. In connection with JPMC's purchase of WMB, JPMC conducted a due diligence

review of WMB, including a review oPWMB's loan tapes and data and discussions with WMB

employees.

13. The Tiustee originally bmught this action againd the FDIC, as receiver for W B .

The FDIC now merts that all of the liabilities with respect to the claims asserted by the Trustee

on behalf of the Trus.ts have been assumed by PMC. JPMC denies that it has assu~ned these

liabilities. The Tmtee thus brings this action against WbfB and its successors or successors-in-

interest, whoever they are adjudicated to be (collectively, "WaMul').

THE PROOF OF CLAIM AND OIUGNAL COWLAINT

14. On December 30,2008, the Trustee timely filed with the FDIC a Proof of Claim

on behalf of the Trusts and ihe Trustee piusuant to 12 U.S.C. 5 1821(d). The Proof of Claim.

which is incorporated herein by reference and attached hereto as Fxhibit 3, sets forth various

claims again& the FDIC relating to the Tmsts.

Case 1 :09-cv-01656-RMC Document 32 Filed 09108/10 Page 5 of 44

15. Pursuant to 12 U.S.C. 5 1821(d)(5)(A)(i), the FDIC should have determined

whether to allow or disallow the Ttusree's PNuf of Claim within 180 days of Deccmber 30,

2008.

16. Pursuant to 12 U.S.C. 6 182 1 (d)(fi)(A)(iv), the FDIC was hrther required to give

the TruW notice of disallowance of its claims, which notice was required to contain "a

statement:of each reason for the disallowance7' and "the procedures available for obtaining

agency review of the determination to disallow the claim orjudicial determination of the claim."

17. The FDIC failed b respond to the Proof of Claim and failad to issue any notice of

disallowance to the Trustee.

18. Pursuant to 12 U.S.C. 5 182I(d)(B)(A#i), the FDIC's failure to respond timely to

the Proof of Claim triggered the T m W s right to "We suit on such claim in the distiict or

territorial court of the Uniled States for the district within which the depository institution's

principal place of business is located or thc United States District Court for the District of

Columbia. (and such court shall have jurisdiction to hear such claim)" within 60 days thereafter.

19. On August 26,2009, the Trustee timely filed this action against the FDIC as

receiver for WMB.

JURJSDICTION .W VENUE

20. This action arises under the FDI Act, 12 U.S.C. 8 181 1 am., as amended. The

claims r a i d hereill include, without limitation, an appeal from the FDIC's rejection, pursuant to

12 u.S.C. 5 1821(d)(6), of the Pmof of Claim by virtue of the FDIC's failure to respond to the

proof of claim, The staktorily-prescribed proper € o m for jurisdictionand venue for such an

appeal expressly includes the United States District Court for the District of Columbia. 12

* 1 -*.' 7 - Case 1 :09-cv-01656-RMC Document 32 Filed 09/08/10 Page 6 of 44

U.S.C. 5 1821(d)(6). This Court has jurisdiction over the subject matter of this action pursuant

to 12 U.S.C. 55 1819@)(2)(A), 182 l(d)(6) and 28 U.S.C. 5 1331.

21. The FDIC takes the position in its motion to dismiss the initial complaint (docket

entry 20) that pursuant to the PAA, the FDIC transferred to JPMC, and JPMC expressly agreed

to assume, all of WaMu's "Trust-related" liabilities and obligations, including "liability for all

Trust-related claims" ass& in this action by the Trustee. The PAA was entered into pursuant

to and in furtherance of the federal statutory provisions governing the FDIC's administration of

the receivership of WMB. Determination of the relahve rights and responsibilities of the FDIC

and JPMC under the PAA is therefore a federal question pursuant to 12 U.S.C. 55 1819@)(2)(A),

1821(d)(6) and 28U.S.C. 5 1331.

22. This Court also bas jurisdiction over the subject matter of this action pursuant to

2s U S.C. 8 1332.

23. This Coue also hasjmisdiction over the state law claims in this action pursuant to

28 U.S.C. Ej 1367.

24. Venue is proper in this Court pursuant to 12 U.S.C. 5 182l(d)(6) and 28 U.S.C.

9 1391(e).

BACKGROUND

A.

25. WaMu sponsored mldlor otherwise participated in the isauance of mongage-

backed securities pursuant to which WaMu sold investors interests in residential mortgage loans

originated by WaMu or by thud party loan originators from whom WaMu had acquired loans.

These securities ale commonly refened to as "Residential Mortgage-Backed Securities" or

"RMBS."

Case 1:09-cv-O1656-RMC Document 32 Filed 09/08/10 page 7 of 44

26. Many RMBS, inctuding most of the securities issued by athe TmStS, are

established under a provision of the Tax Code allowing for the creation of a Real hbte

Mortgage Investment Conduit (aUREMIC") which allows the issuance of multiple classes of

securities in [rust certificate form, with rnonthlypayments and no residual equity, that are treated

as debt for tax purposes (plus an equity-like clas called the "residual interest"). Internal

Revenue Code $8 860A-860G.

27. Securitization is acommon financing tool used to pool and convert fmancial

assets such as residential mortgages into financial instruments that can be sold UI the capital

markets. Between 2000 and 2007, WaMu securitizedapproximtcly $77 billion in principal

amnunt of subprime home mortgage loans.

28. Al(hough the exact Sbuctures of RMBS transactions are varied and can be fairly

complex: the structure of the Primary Trusts, as well as most RMBS transactions, involves the

following paTties:

a Depositor and Seller: The depositor is the entity that acquires the pool of

mortgage loans and deposits theloans in a hust formed by the depositor pursuant to the

governing documents for the transaction. The depositor assigns the legal and beneficial

interest in the mortgage loans, including related coJ.l~teml, to lhe trust. In many RMBS

transactions, the depositor purchases the mortgage loans Ikom another entity, referred to

as the seller, and deposits the pool of loans into the trust. As set fonh in Exhibit 1-A,

with respect to the Primary TNsts, WaMu served as the Depositor andtor Seller for 97 of

the 99 Primmy Trusts. Thmugh a series of assignments and other agreements, WaMu

indirectly undertook responsibilities substantially similar to those of a Depositor or Seller

for the remai~i~ig two Primary T~usts. Exhibit I -A, n.1.

,=-=-= 1 ' *:-' J \.

Case l:09-cv-01656-RMC Document 32 Filed 09/08/70 Page 8 of 44

b. The Trust: The trust purchases the mortgage loans Born the depositor

and issues RIVIBS, which represent specific interests in and entitlements to the cash flows

derived from the trust's assets (k the mortgage loans). The governing docun~ent~

forming the trust typically appoint an independent trustee and specify the mtee ' s rights,

responsibilities and powers in respect ofthe FMBS transaction.

c. Jnvestors: By purchasing RMBS, investors acquire the right to receive

monies ftom the cash flows of the underlying mortgage loans held as trust assets or

collateral hy the trust (in the form of borrower payments of principal and interest and

proceeds fmm the liquidation of loan collateral). Those cash flows are applied to

payment of the RMBS pursuant to a contmctually specified distribution plan and

schedule.

d. Servicer: The service1 is the day-to-day admillistrator of the mortgage

loan assets held by the trust. Under the governing documents forming the trust, the

servicer is required to administer the mortgage loans in the best interest8 of RMBS

investors. The senicer's responsibilities include collecting payments due from the

borrowers, remitting those payments to the trust for uItimate payment to the mvestors,

and Eurnishing the trustee or a securities administrator #tb perfonname data regarding

the mortgage loans in the pool. Thc servicer-generated data is used to calculate the

distribution of funds and report pool performance to investors. The servicer also

conducts all remedial activity on behalf of the tmst when l~ortowers default on their

loans. Sucl~ remedial servicing activity requires the senricer to review relevant loan files,

act as the trust's sole source of contact with the borrower, and inquire into the status of

thc borrower and the mortgage loan collateral. As set forth in Exhibit I -A, WaMu is the


Servicer or Masm Servicer for the mortgage loans included in the Primary Trusts, in

addition to serving as the Depositor and Selleras set forth above.

B. WaMo's C o n t r a c @ l

(1) The Governin~Doeuments for the Trusts

29. The dutias and responsibilities ofthe various parties to fin RMBS transaction are

set forth in the governing securitization documents. These documents generally include a

mortgageloan purchase agreement (''MLPA'') md a pooling and servicing agreement ("PSA'?.

The MLPA and PSA provide for the sale of the mortgage loans and containrepresentations,

warranties and covmlvlts made by the seller andtor depositor concerning the nature,

characteristics, history and quality of the mortgage loans nnd mortgage Ioan files soId to, and

deposited in, the ttusts. These documents also provide for the establishment and administration

ofthe Wst, includikg setting forth the responsibilities and duties of the depositor, hstee, seller,

and sewicer wiih respect to the trust.

30. The PSAs and MLPA8 for the Primary T~usls are listed in Exhibit 1-A. The

relevant agreements for the Secondary Trusts are listed in Exhibit I-B. Bectronic copies of the

documents referenced in Exhibits I-A and 1-B are G n g submitted to tlte Court and the padies as

Exhibit 4 and are i~zcorporated herein by reference. The PSAs and MLPAs for the Primary

Tmts aml the relevant agreemetlts for the Secondary Trusts (each a ''Governing Document" and

collectivetly, with ail related ancillary documents and agreements for the Trusts, the "Governing

Documents") contain representations, warranties and covenants made by WaMu, as Seller andlor

Depositor, concerning the nature, characteristics, history and quality of the mortgage loans and

mortgage-Ioan mes sold to, and deposited in, the Trusts (the "Representations and Warranties'')).

Case 1 :09-cv-01656-RMC Document 32 Filed 09/08/10 Page 10 of 44

The Governing Documents assign to the Trustee the right to enforce the Representations and

Warranties for the benefit of the Trusts' beneficiaries.

3 1. The Governing Documents represent an integrated set of contractual undertakings

on behalf of WaMu with respect to the formation of the Trusts and the servicing by WaMu of the

loans sold to, and deposited in, the Trusts.

32. Each Governing Document is a u n i t a ~ ~ contmct that is not divisible.

33. The Governing Documentq are executory contracts that involve obligations that

are ongomng, mutual, and interrelated.

34. l'lie Governing Documents are fully integrated "Qualified Financial Co~hcts ' '

under 12 U.S.C. 4 1821(e)(8)@) and, as such, they must be t r a n s f e d or retained in whole by

the FDIC as receiver for WMB. 12 U.S.C. Q 1821(eX9)(i)-(ii).

35. 12 U.S.C. 5 1821(e)(2) reqrnres the FDIC to make any determination to repud~ate

or dissafirm a conttact of a failed institution for which it acts as receiver 'Within a reasonable

time" following its appointment as receiver.

36. The FDIC has not within a reasonable time made a determination to exercise any

nght, as receiver for WMB, to repudiate or disaffm any Governing Document pursuant to 12

U.S.C. 5 lRZl(e)(l).

37. Given the passage of two years since the FDIC was appointed as receiver for

WMB, the FDIC can no longer make such detaination to repudiate or dissafm "within a

reaso~~able time" following its appointment and is now barred from repudiating or disaffirming

any Coveming Document.

38. The PAA expressly provides that JPMC "specifically assumes all mortgage

servicing rights and obligations of [WMB]." PAA (Exhibit 2), 5 2.1.


39. The FDIC assigned to JPMC, and JPMC has assumed, all mortgage senicing

rigllts and obligatjons of WaMu to the extent provided in the PAA.

40. The mottgage servichtg rights and obligations of WaMu with respect to the Tnists

arose under the Governing Documa~ts.

4 1. To assign to JPMC any rights and obligations under the Governing Documents,

the FDIC, as receiver for WMB, was required first to assume, and not repudiate or disaffirm,

sucl~ Goveming Documents.

42. The Govenling Docunients:

a. are all in writing;

b. were all executed by WaMu and DBNTC, as Trustee, at the time the associated

property interests were transferred;

c. were executed on behalf of WaMu by individuals duly authorized by the

applicable WaMu entity's Board of Directors;

d. have been continuously in existence, since the lime of execution, and constitute

ofiicial books and records of WaMu; and

e. constituted official books and records of WMB at the time ofWMB's closing on

September 25,2008.

43. WaMu's obligations under the Governing Documents include both the

Representations and Warranties as well as continuh~lg obligations that require WaMu to, among

other things: (i) give ptompt written notice to the Trustee and other parties of any breach of the

Representations and Warranties that has amateria1 and adverse effect on the value of the

mortgageloans in the Tmsts or the interests of the Trusts therein; (ii) cure the breach of the

Rep~ese11talions and Warranties in all material reqects, repurchase the mortgage loans at a


specified repurchase price, or substitute for the affectsd mortgage loans; (iii) provide the Trustee

and other parties with access to all records maintained by WaMu as Servicer in respect of

WaMu's rights and obligahons under the Governing Documents and access to officers of WaMu

responsible for such obligations; and (iv) to indemnify the Trustee for any losses or expenses

incurred by the Tmstee in, among other things, enforcing the rights of the Trusts and their

beneficiaries.

44. As Seller, Depositor and/or Servicer, WaMu has possession of documents and

other information concerning the mortgage loans in the Trusts that are not in the possession of

the Tmstee or other parties acting on behalf of the Trusts, which documents may wnfirm

whether a particular mortgage loau in the Trusta is inbreacli of any of the Representations and

Warranties. Such doculnents and other information includcs origination and underwriting files,

servicing records, borrower statements both recorded on tapc and transcribed into servicing

notes, borrower statements made during the or~gination of the loan, payment histories, and

borrower correspondence.

(2) WaMu's Representutions and Warranties

45. h connection with each of the Prima~y Trusts, WaMu, in its various capacities,

made Representations and Warranties in the Governing Documents for each of the Primary

Trusts. Whilc thc specific Representations and Wananties made by WaMu, as Seller andlor

Depositor or in various other capacities, are not identical for each of the Primaiy Trusts: they

gonerally include Representations and Warranties I y WaMu regarding the undmriting of the

morlgage loans, the loan to value ratios for the mortgage loans, and compliance of the loans with

local, state and federal laws.

-'? .-- -7


62. Attached as Exhibit 7 is a chart indicating some of the ~OntracNal provisions in

Ute Governing Documents setting forth the Access Rights and the Indemnification Rights with

respect to each Primary Trust.

(6) WaMu's Servicinrt Obli~ations

63.. The Governing Documents for each Primary Trust further provide that WaMu

must m i c e and administer the mortgage loansin ihe TNsts on behalf of ihe Tmstcc, and in the

best interests of, and for the benefit of, the Trusts' beneficiaries, in a particular manner (the

"Servicing Obligations"). These Servicing Obligations are set forth in the Governing Documents

for each Primary Trust. By way of example, these Servicing Obligations are set fcath in Section

3.01 of the %A for the Long Beach Morlgage Loan Tmst, Series 2006-4 (Issue ID No. LB0604),

in petinent part, as follows:

The Master Sewiccr shall service and administer the Mortgage Lomis on behalf of

the Trustee and in the best interests of and for the benefit of the Certificateholders

(as determined by the Master Servicer in its reasonable judgment) in accordance

with the terms of this Agreement and the respective Mortgage Loans and, to the

extent consistent with such terms, in the satnc manner in which it services and

administers similnr mortgage loans for its own portfolio, giving due consideration

to custolnary and usual standards of practice o f mortgage lenders and loan

servicem administering similar morlgage loans in the local areas where the related

Mortgaged Property is located but witkotlt regard to: (i] any relationship that the

Master Servicer, any Sub-Servicm or any Affiliate of the Master Servicer or any

Sub-Servicer may have with the related Mortgagor; (ii) the ownership or non-

ownership ofany Ceaifieah by the Master SRvicer or any Afifiliate of the mast^

Case 2:09-cv-01656-RMC Document 32 Flled 09/08/10 Page 25 of 44

Servicer; (iii) the Master Servicer's obligation to make Advances or Servicing

Advar~ces; or (iv) the Master Servicer's or any SubServicer's right to receive

compensation for its services hereunder or with respect to any particular

transaction.

64. Under many of the PSAs for the Primary Tmsts, the Servicer is obligated to

enforce the Repurchase Obligations on behalf of the Trust to the extent that it is not the Seller.

See, u, $5 2.03(a), 3.02(b) of tile PSA for the LBO602 Tmst. --

C. WaMu Breached the Re~resentatlons and Warranties

65. In April 2010, the United States Senate Subcommittee on Investigations (the

"Senate Subcommittee") held hearings about WaMu's originalion and securitization of mortgage

loans. Rased on the Senate Subcommittee's findings, as well as the reports of other

governmen agencies, the Trustee has reason to believe that many of the morigage loans in ththc

Trusts do not comply with fl~c Representations and Warranties and that WaMu breached the

Representations and Wartanties, which breaches had a material and adverse effect on the value

of the loans or the interests of the Trusts therein.

66. Because WaMu has denied the Trustee access to records maintained by WaMu, as

Servicer, and has repeatedly refused to honor the Trustee's contractual Access Rights, the

Trustee is unable to specifically identify particuiar morrgage kmns with respect to which there

]lave been such breaches of particular Representations and Warranties. Notwithstanding, there is

a reasonnfile basis to conclude that many of the mortgage loans included in the Trusts do not

comply with the Representations and Warranties, and thar WaMu brcciched the Representations

and Warranties, which breaches had a material and adverae effecton the value of the loans or the

interests of the TNSU therein.

Case 1 :09-cv-01656-RMC Document 32 Filed 09108110 Page 26 of 44

67. The Senate Subcommittee investigation covered both WaMu's Wholesale

Special$ Lending division ("Specialty Lending") and WaMu's Mutual Mortgage Securities

division ("Mutual Mortgage"). The Senate Subcommittee found that between 2000 and 2007,

WaMu's Specialty Lending, &, subprime lending, sponsored 46 securitizations with a total

original collateral balance of approximately $77 billion. These securitizations were primarily by

WaMu's Long Beach Momage Company (Tang Beach") affiliate. The Primary Trusts include

43 of the 46 subprime securitizations referenced in the Senate Committee report, with a total

original collateral balance of approximately $73 billion - or over 95 percent of all of WaMu's

subprime securitiTations during the time period. pg

before the Pemnent Subcomm. On Inves!i~at@, April 13,2010, ('Subcommittee Hearing'?,

Hearing Ex. #45. Exhibit 1-A (Trusts 1-43).

68. The remaining Pn'mary Trusts, with a total original collateral balance of

apptoximately $92 billion, account for nearly half of the securitizations of WaMu's Mutual

Mortgage division between 2000 and 2007 that were analyzed by the Senate Subcomn~ittee. Id.,

Hearing Ex. #46.

69. The Senak Subcommittee found that WaMu selected and secmifized loans that

it had identified as likely to go delinquent, withwf disclosing its analysis to investors who

bought the securities. " The Senate Subcommittee also found that WaMu "securitized loans

tainted by fraudulent information, without notifingpurchasers o f thefiaud that wos

di,~eovered." kJ., Hearing Ex. #la, atp. 6 (emphasis added).

70. The Senate Subcommittee report, associated hearings, and documents released

related tothose l~earings (collectively, the "Senate Record") provide multiple examples of

WnMu's breaches of Representations and Warranties. For example, the Senate Record indicates

Case 1:09-cv-01656-RMC Document 32 Filed 09108110 Page 27 of 44

that WaMu lacked effective internal controls, uaed shoddy lending practices, perfomd

inadequate underwriting, failed to follow procedures, and committed critical errors. m1ese

practices by WaMu breached the Governing Documents, including, but not limited to, Sections

6(vi), (ix); (xvij), (xxii), (xxxii), (xxxvii), (xlviii), and (Iviii) of the MLPA, which, in turn,

triggered WaMu's Repurchase and Notice Obligations with respect to the mortgage loans in the

Tmsol. See. u, Exhibits 47.

(1) The Senate SubcomitteeFindines

71. In addition to the extensive evidence that WaMu's securitized loans breached the

Represen@tions and Wmnties, the Senate Subcommittee also found evidence that WnMu

discovered and/or had notice of these breaches, which. in turn, triggered its Repurchase and

Notice Obligations, and that WaMu failed to notify RMRS investors and others who purchased

the loans of these breaches. & Subcommittee Hearing, Hearing Ex. #la, at p. 6; 7 69 w.

72. The Senate Subcommittee made the following "hdings of fact related to

Washington Mutual B e and its parent holding company, Washington Mutual Inc."

a. 6LShoddy Lending Pmetkes. WaMu and its affiliate Long Beach Mortgage

Company ("Long Beach"), used shoddy lending practices riddled with credit,

compliance, and operation deficiencies to make tens of thousands of high risk

home loans that too often contained excessive risk, fraudulent information, or

errors."

b. "Securitizing Delinquency-Prone and Fraudulent hms. At times, WaMu

selected and securitized loans that it had identified as likely to go delinquent,

disclosing its analysis b investors who bought the securities, and also

Case 1 :09-cv-01656-RMC Document 32 Flled 09/08/10 Page 28 of 44

securitized loans tainted by hudulent information, without 11oti-g purchasers

of the fraud that was discovered.'' Id.

73. These practices by WaMu breached the Governing Documents, including, but not

limited to, Sections 6(xxii), (xxxii), (mvii), (xlviii), and (lviii) of the MLPA, which, in m,

triggered WaMu's Repurchase and Notice Obligations withrcspect to the mortgage loans in tl~e

Trusts See, s, Exhibits 6, 7.

74. Based upon: (a) the pervasiveness of such practices by WaMu, as found by the

Senate Subcommittee; and (b) the high proportion of W a u ' s mcuri t id mortgage loans that

were sold to, or deposited in, the Trusts during tbe relevant time period, the Trustee has reason to

believe that such practices affected mortgage loans sold to, or deposited in, the Trusts by WaMu

and that, accordingly, many of the mortgage loans in the Trusts do not comply with the

Representations and Warranties. Thus, WaMu breached the Representations and Warranties,

which breaches bad a material and adverse effect on the value of the moltgage loans in the Trusts

or the interests of the Trusts therein, which, in turn, eiggered WaMu's Repurchase and Notice

Obligations with respect to the mortgage loans in the Trusts.

75. The extent of such pract~ces by WaMu and WaMu's discovery andlor notice of

the breaches of the Representations and Warranties is further evidenced by the following excerpt

from the Senate Subcommittee's report:

Over the years, both Long Beach and Washington Mutual were the subject of

rcpeated criticisms by the bank's internal auditors and wiewers, as well as its

regulators, OTS and the FDIC, for deficient lending and securimation practices. I

Long Reach loans repeatedly suffered from early payment defaults, poor

unde~ i t ing , fraud, and high delinquency rates. Its mortgage hcked securities

Federal Depoeit Insurance Corporation as Receiver for: -- Wmhimgton Mum1 Bank

mama dBenlilFlhanoial bsiM5tlMd to&!~)

PROOF OF CLAIM

~-..-.- . -~ . ~

srniiei laref0 IO oomldsnd and o e n l e d a c ~ t

SsN/Taa M # (1) 3a-ogwi8 - The undersigned. (2) Barbam Campbell, Vlce Presldent

says that the -NILdual.Banlc now in IlquldaUon is (wme d ~ W F h m w h & n )

justly lndabted to (3) - . - In the sum of -nev)

(4) -399,880 (~~rmndmatelY, see AItwhment 41 DCAars upon me loilwlng Clalm:

me undersigned further states that helshe makes this Claim on behalf d

that no &of said debt has been paid. that

(8) akutechrB--tC-mY ~ d i v i d r a l l J o l w C ~ ~ ~ W F m ~ u n ~ )

has given no endorsement w asaignmsnt of the m e or any p r t thereof, and that h r e is no seb-cff or

cwntarcklm. or ollrer legal or equitable defame to said Clalm or any part thereof.

N W E (9) Barb- Campbelt . VIce President

- . . G W i )

FIRM . p - (~rppaa*)

ADORESS (19) 1751 East St WC.W PI ..- CITYISTATWFLIP Sants Ana, CA 92'705-4934 - TELEPHONE NUMBER 714-247+278

The panally lor knowingly making or hvBw~wlienw af ary hhw, Wed, orcountartell sllement, aawmant ormlng lor tne purpose olinfiuendng h eny way the aCIbn ol ha Fehc3l klrsl lMumncs&~ratlon is a flne d nol marc rnm %r,oon.o~M orimpmomnent fix not nxae than M i pars, ar Po#l (18 U.8.C. Section IW7).


IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

DEUTSCHE BANK NATIONAL TRUST COMPANY, as Trustee of the Tmsts listed in Exbihits I-A and I-B.

Plaintiff,

v. Case No.: 1:09-CV-1656-RMC

FEDERAL DEPOSIT INSURANCE CORPORATION, Hon. Rosemary M. Collyer as receiver for Wa,himton Mutual Bank: JPMORGAN CHASE BANK, ~ational Association; and WASHINGTON MUTUAL MORTGAGE SECURITIES CORPORATION,

Defendants.

PLAlNTKFF DEUTSCHE RANK NATIONAL TRUST COMPANY'S MEMOWDUM OF LAW IN OPPOSITION TO:

(I) FDIC RECEIVER'S MOTION TO DISMXSS;

(11) JPMORGAN CEASE BANK, N-A. AND WASEINGTON MUTUAL MORTGAGE SECURITIES CORPORATION'S MOTION TO DWMfSS; Am

(III) JPMORGAN CHASE BANK, N.A. AND WASHINGTON MUTUAL MORTGAGE SECUWTIES CORPORATION'S MOTION FOR PARTIAL SUMMARY JUDChSA'T

DOIES, SCHILLER & FLEXNER LLP TALCOTT FRANKLM P.C.

333 Mnin Street Armonk, NY 10504 Phone: (9 14) 749-8200 Fax: (914) 749-8300

208 North Market Street, Suite 200 Dallav, Texas 75202 Phone: (2 14) 736-8730 Fax: (877) 577-1356

Case 1 :D9-cv-01656-RMC Document 56 Filed D1/14/11 Page 10 of 54

Plaintiff Deutsche BankNationd Ttust Company, as Trustee for thc Trwts listed i*1.

Exhibits 1-A and 1-B of the Amended Complaint ("DRNTC" or the "Twtee") respectfully

submits this memorandum of law in opposition to: (i) FDIC Receiver's Motion to Dismiss dated

November 22,2010: (ii) Phiorgan Chase Banlc,Nationd Association (".lPMC") and

Wsshington Mutual Mortgage Securities Corporation's ("WMMSC"') motion to dismiss dated

November 22,2010; and (iii) JPMC and WMMSC's motion fox partial summary judgment dated

November 22,2010.

PRELLIMZIYARY STATEMENT'

A number of core facts are undisputed:

. Thc FDIC became receiver for Washington Mutual Bank on September 25,2008.

Pursuant to a Whole Bank Purchase and Assumption Agreement ("PAA" or "P&A") of

that same date between J P K and the FDIC, JPMC assumed all of Washington Mutual

Bank's "mortgage servicing rights and obligations." PAA 55 2.1,3.1.

The Trustee timely filed with the FDIC, as receiver for Washington Mutual Bank, a proof

ofclaim, a copy of which is set forth as Exhibit 3 to the Amended Complaint, and the

FDIC failed to make any determination to allow or disallow the claims asserted therein

within the 180-day period mandated by 12 U.S.C. 8 1821(d)(5)(A)(i).

0 JPMC, as Servicer for the Trusts, is in sole possession of the over half million loan files

owned by the T1I1StS.

' For eane of reference, all undefined terms follow the abbreviations in the Amended Complaint ("AC"). Citations to exhibits are to the Declaration of Jason S. Cohen dated November 22,2010, submitted by the FDIC with its Motion ("Cohen Dec. Ex."), the Declaration of Brent J. Mclntosh dated November 22,2010, submitted by JPMC with its Motion ("Mclntosh Dec. Ex.") or to the Declaration of Motty S h u l m dated January 14,2011, submitted by UBN'CC with this Memorandum of Law f'Shulman Dec. Ex.").

Case 1 :09-cv-01656-RMC Document 56 Filed 01M4J11 Page 1 1 of 54

Pursuant to its contractual rights under thc Governing Documents, the Trustee Ims made a

writte~i request to JPMC for access to, and review of, all the loan files and JPMC has to

date refused that request.

Nonc of WaMu, JPMC, or the FDIC has provided DBNTC with contractually required

notice of breaches of the Representations and Warranties set folth in fie Governing

Documents.

Against thase facts, the present motlons present three fundrunciital legal issues: (i) do the

breach of contmt claims brought by the Trustee adequately state a claim on which relief could

be granted; (ii) arc the claims brought by the Trustee barred by the governing statute of

limitations; and (iii) is it the FDIC or JPMC (or some combination of the two) that is responnihle

for any liability on the claims alleged? JPMC alone raises the pleading and statute of Timitations

issues (the FDIC moved against the original compIaint on pleading grounds, but has not renewed

that motion against the Amended Complaint). Each of the FDJC and JPMC contend that the

PAA -which governs who is liable on rhe claims alleged- is unambiguous and directs that the

other is liable.

As detailed below, PMC's pleading and statute of litnitations arguments are entirely

baseless. For tbe reasons set f& below, as well as in tbe Memorandum of Law accompanying

the FDIC's motloll to dis~~liss the claims against it, it is apparent that JPMC i~ t l~c responsible

par& and that the litigation should proceed against it without delay. In addition, until and unless

this Court determines that JPMC has assumed all of the liabilities under the Governing

Doc~iments, the Trustee's claims agaiast the FDIC, as receiver of Washington Mutual Bank,

shollld not be dismissed because the proof of claim clearly asserts all ~Iainls set rorth in

Case 1:09-cv-01656-RMC Document 55-t Filed 11/22/10 Page 1 of39

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

DEUTSCHE BANK NATIONAL TRUST I COMPANY, as Tmstee for the Trusts listed in Exhibits I-A and I-R,

Plaintiff,

v. 1 Case No. 1:09-cv-1656 (RMC)

FEDERAL DEPOSIT INSURANCE CORPORATION, as receiver for Piashington Mutual Bank; .TPMORGAN CHASE BANK. National Association; and WASllMGTON MIJ'I.UA12 MORTOI\GD SECURITIES COIZPOMTION, i

Defendants. I MEMORAM)UM OF POINTS AND AUTHORITIES LN SUPPORT

OF JPMORGAN CHASE BANK, N.A. AND WASHINGTON MUTUAL MORTGAGE SECURITIES CORPORATION'S MOTION TO DISMISS

AND MOTION FOR PARTIAL SUMMARY JUDGMENT

Robert A. Saclts (admitted pro hnc nce) Brent J. Mclntosh (D.C. Bar No. 99 1470) Stacey R. Friedman (admitted pro hac vice) Henry C. Quillen (D.C. Bax No. 986686) SULLIVAN & CROMWELL LLP SULLIVAU & CROMWELL LLP 125 Broad Street 1701 Pennsylvania Avenue, N.W. New York, New York 10004 Washington, D.C. 20006 Telephone: (212) 558-4000 Telephone: (202) 956-7500 Facsimile: (212) 558-3588 Facsimile: (2U2) 293-6330

Counselfor Defe~idonfs JPMo~gan Chase Bank, N.A. and Washington Mutual Mongage Securities Co~oration

November 22,20 10

I . r k s

Case 1:09-cv-01656-RMC Document 55-1 Filed 11122110 Page 7 of 39

Defendants JPMorgan Chase Bank, N.A. ("JPMC') and Washington

Mutual Mortgage Securities Corporation ('WMMSC") respectfully submit this

men~orandum of points and authorities in support of their motion to dismiss the Aznended

Complaint of Deutsche Bank Nationel Trust Company C?)eutsche Bank") and motion for

~artial summary judgment.

PRELTMINARY STATEMENT

Det~tsche Bank purports to be bustee for trusts that own or have owned

over half a million individual mortgage loans, each with its own history of origination

and performance. The loans were. sold into the trusts without recaurse, meaning that the

loan sales were final and not to be unwound except in specified circumstances. One

circumstance the parties expressly contemplated in the sale agreements was that some of

the loans did not fulfill representations and warranties the sellers made regarding each

loan. Tne agreements governing the loan sales expressly provide that if a loan breaches a

representation or warranty and the breach Imd a material and adverse effect 011 the value

of the loan and the breach c m o t be cured, there is a " d e and exclusive" specific

performance remedy--the loan itself must be bought out of the trust, or "repurchased,"

by the entity that deposited or sold it into the rn~st. Absent these showings, there is no

iepurchase and the sale stands.

Rather than follow this oontractually agreed-upon process or limit itself to

the sole remedy provided under the Agreements, Deutsche Bank seeks a monetary award

equal to repurchase of countless unspecified loans without regard for these contractual

limitations. Deutsche Bank's Amended Complaint purportedly pleads breach of contract

Case 1 :09-cv-01656-RMC Document 55-1 Filed 11/22/10 Page 8 of 39

by alluding to 1,03 1 loan-specific representations and warranties and 394 obligations (for

a total of 1,425 provisions) that are contained in 179 different agreements that govern 99

"primary trusts" and 28 "secondary trusts"' that own or have owned over half a million

loans originated over the past 15 years that may (or may not) have k e n ''mate~ially and

adversely" affected by breaches that may (or may not) have occurred, and therefore

concludes that Defendants-the Federal Deposit Insurance Corporation ("FDIC"), Jm,

WP&ISC or some combition thereof--are liable to the trusts for damages of $6 to $10

billion.

While Deutsche Bank uses very large numbers, the most important

number here is actually zwo. zero is the number of contractual provisions that Deubhe

Bank actually identifies as having been breached with regard to a specific loan. Zero is

the number of breaches Deutsche Bank even tries to show had a material and adverse

effect on n specified loan so as to give rise to the contractual right to bring the notice and

repurchase claims it seeks to pursue. And 2x1 is the amount of damages Deutsche Bank

can iu any event seek to recover on the back of such putported claims, given that the

"sole and exclusive" remedy contained in each of the 179 different contracts at issue is

loan-by-loan repurchase.

These omissions are not mere pleading defects-though they are certainly

that. These omissions are contractual impediments to Deutsche Bank's claims: 'Ihe

Deutsche Bank agreements all feature prnvisio~~s strictly limiting the remedy available

I As explained at footnote 6, the trusts that Deutsche Bank refers to es the "primary trusts" are the trusts at i m e here. The number of agreements that govern the trusts is not known f51 certain, but Deutsehe Bank filed with the Coua 179 agreements that purpoa to govern the trusts.

Case 1 :09-cv-01656-RMC Document 55-1 Filed 11122M0 Page 9 of 39

for breaches of representations and warranties about mortgage loans in three critical

ways. First, breaches of representations and warranties are not actionable in the

aggregate, hut only as to individual loam Second, as to repurchase of individual loans,

breaches are not actionable absent a demonstrable material and adverse effect on the

value of the particular loaa in question. And hird, even in the event of a breach that has

a material and adverse effect on the value of a particular loan, the breach is not actionable

in a damages action. Deutsche Bank's exclusive remedy is repurchase of any offendrng

loan, a contractnal limitation that courts in New York and Delaware routinely enforcc.

Deutsche Bank's impermissible attempt to end-run these and o & e ~

contractunl and legal limitations should lead to dismissal of the Amended Complaint for

four reasons: (1) Deutsche Bank, by its own admission, has not identified even one

mortgage loan as to which any Defendant has breached any provision, let alone a breach

that had a material and adverse effect on the value of that loan; (2) the remedy being

sought, moiiey damages, is contractually impermissible; (3) the separate claim arising

from the assertion that Deutsche Bank was denied access to 61 loan files does not give

rise to any liability or provide any legal basis for a breach of contrnct claim on the more

than half a million loans at issue in this litigation; and (4) Deutsche Bank has pleaded no

facts to suggest its claims comply with the applicable statutes of limitations that hat

claims by trusts, some ofwhich were establiihed as early as 1992.

Moreover, not only are these claim impropmly pleaded, but any liability

for failure to repurchase loans remains with the FDIC. In the Purchase and Assumption

Agreement between the JPMC and the FDIC (the "P&A Agreement"), by which JPMC

-red uninte~pted banking sewice kn the milIions of customers of Washington

Case 1:09-cv-01656-RMC Document 55-1 Filed 11/22/10 Page 10 of 39

Mutual Bank ("WMB"), JPMC assumed only those liabilities that had a "Book Value" on

1 WMB's "Books and Records" when WMB was closed. In doing so, IPMC took on I

1 billions of dollars in potential liabilities, with no govement assistance. Tl~rougli this

action, Deutsche Bank and the FDIC seek to dramatically increase the scope of the

liabilities JPMC assumed, in direct contravention of the explicit terms of the P&A

Agreement. But under welI-sstabIished law, an unliquidated claim for damages, such as

Deutsche Bank's, had no Book Value and was not reflected on WMB's Books and

Records. Thus, .PMC never assumed any liability for Deutsche Bank's claims from the

FDIC under the P&A Agreement. And if for some reason IPMC were deemed to have

assumed such liability by some means other than express assumption under the P&A

Agreement, then under dserent provisions of the same agreement the FDIC must

indemnify WMC in full. For these reasons, which are evident from the plain language of

h e p&A Agreement, partial summary judgment should be granted on Deutsche Bank's

declaratory judgment claim, finding that the FDIC bears all liabilily to Deutsche Bad-

either directly or through an obligation to indemnify IPMC.

BACKGROUND

This case involves a business in which WMB and its subsidiaries and

Deutsche Bank a11 participated: securitizing and servicing mortgage loans. Although

every mortgage-backed securitization substantively differs from every other, most share

the same general structure. The following example shows how WMB, its subsidiaries,

and Deutsche Balk worked together to create the mortgage-backed securities at issue

here.

Case 7:09-cv-01656-RMC Document 55-1 Rled 11/22/10 Page 1 1 of 39

The fmt step in the muritization process is the origination of a mortgage

loan. In this example, WMJ3 issues a mmtgage to a honower. WMB now owns the

mortgage loan and thus is entitled to the borrower's future payments of principal and

interest. WMB then agrees to sell the loan, and others like it, to its affiliate, WMMSC,

In some msactions, this agreement is known as a Mortgage Loan Purchase Agreement

("MLPA"). Under an MLPA, the company selling the loans is the "Seller," and the

company purchasing the loans is the "Pucchaser." And the Seller @ere WMB) makes

representations and warranties to the buyer @ere WMMSC) regarding various aspects of

the loans being sold.

Next, WMMSC and Deutsche Bank enter into a Pooling and Servicing

Agreement ("PSA"). (See, e.g., WAOSAI? PSA (Docket Item 43-1 4)) Under tbe PSA,

\VMMSC sells the mortgage loans to a trust for which Deutsche Bank is the Trustee. (Id.

g 2.04.) In this capacity, WMMSC is known as the Depositor. As Depositor, WMMSC

similarly makes a variety of representations and warranties specific to each loan it is

selling. For example, "[a]s of the Closing Date, there is no late assessment for delinquent

taxes outstanding against any Mattgaged Property." (Id. .(j 2.08(v).)~ To protect a variety

of accounting and tax benefits in connection with the .sale, the loa11s are sold "without

recourse." (Id, 4 2.04.) Because the sale is non-recourse, the Depositor cannot at its

2 Abbreviations such as "WAOSAI" refer to individual trusts as listed in Exhibil 1A to the Amended Complaint and in Deutsche Bank's filings of the ~elevant agreements with the Courf. (Docket Items 34-44.)

3 In some transactions. including the ''Long Beach" bansactions Iisted in Exhibit 1A to the Amended Complaint, these representations and warranties are made in the MLPA by the Seller. For consistency, JPMC will refer to these representations and wananties as the Seller's, although who has the ultimate obligation varies among the agreements.

. Case 1 :09-cv-01656-RMC Document 55-1 Filed 1 1/22/10 Page 12 of 39

discretion remove the loans from the trust, even if it would be profitable to do so.

Reciprocally, investors carnot demand that loans be repurchased, except in specified

circumstances.

The terms of the PSAs contemplate the possibility that some of the

mortgage loans sold to the kust may be found to breach the Seller's representations and

warranties, and that some of these breaches may materially md adversely affect the value

of a particular mortgage loan or the interests of the trust in that loan. (Id. 3 2.08.) in

general, a party that discovers such a breach must notify the otherparties. (Id.) Once

such a material and adverse breach is discovered and any necessary notice is given, the

PSA provides for a veIy specific-and very loan-specific-process for remedying the

breach. (Id.) As to any particular mortgage loan that breaches a representation or

warranty in a manner that has a material and adverse e e c t on the value of the loan, all of

the PSAs provide for t h r u d only three--remedies: The Seller can (1) cure the

breach, (2) substitute another mortgage loan into the trust in place of the breaching loan,

or (3) repurchase the breaching loan from the trust. (Id.)

All of the PSAs are explicit that t b m are the sole and exclusive remedies

fw breaches of representations and warranties. At some point in time-usually two years

after closing of the securitization-Lhe option of substituting a different mortgage is m

longer available, again to abide by certain accounting rules and benefit from certain tax

&=went. (Id. J 2.07.) Thus, in instances in which the Seller is unable to cure the defect

in the loan (often by providing missing documentation), it is correct to say that, after the

wbstitution period has passed, repurchase is the lone remaining remedy for breaches of

representations and warranties. (Id. 5 2.08.)

Case 1 :09-cv-01656-RMC Document 55-1 Filed 11/22/10 Page 13 of 39

While this struclure is consistent from PSA to PSA, other terms of the

PSAs differ. For example, in some PSAs, the obligation to repurchase a loan arises when

any party notifies the Seller (or Depositor) of a breach that has a material and adverse

effect on the value of the underlying loan. (E.g., id.) In other PSAs, only notice by the

Trustee will trigger the repurchase obligation. (E.g., LB0602, PSA 4 2.03(a) (Docket

It& 39-25).)

In 2007 and 2008, a nationwide collapse in the housing market, especially

for subprilne mortgages (which were included in many of the securitization8 at issue

here), led to losses for the trusts as b m w e r s became anable to repay their moItgage

loans. On September 25,2008, WMB was closed by federal regulators and placed into

receivership with the FDIC. On the same day, the FDIC sold virtually all of WMB's

assets and certain of its liabilities to JPMC pursuant to the P&A Agreement. (Amended

Complaint Ex. 2 (P&A Agreement) 54 2.1,3.1.) This transaction allowed WhAB's

bry~ches to continue serving the public, including its millions of depositon, without any

interruption from WMB's failure.

On December 30,2008, Deutsche Bank filed a proof of claim with the

FDIC as receiver for WMB, claiming that WMB and ils affiliates breached PSAs by,

among other things, failing to notify Deutsche Bank of breaches of the Seller's

representations and wananties and to repurchase breaching mortgage loans. (Amended

Complaint Ex. 3.) The FDIC implicitly denied Deutsche Bank's proof of claim by

declining to act oz it, and Deutsche Bank &xi a Complaint against the FDIC, making

argrime~~ts similar to those in its proof of claim. (Docket Item 1 .) After the FDIC moved

to dismiss the Complaint on the grounds that JPMC lud assumed liability for these claim.

Case 1~09-cv-01658-RMC Document 55-1 Filed 11/22/10 Page 16 of 39

must have been a breach of contract-notwithstanding its Lilure to supports its guess

wit11 factual sllegations-is not entitled to the presumption of truth. See Ashcrojt v.

Iqbol, 129 S. Ct. 1937, 1950 (2009). Deutschc Bmk is speculating, not pleading-a

tactic that cannot survive a motion to dismiss. See .Twombly, 550 U.S. at 555.

Secod, with regard to the repurchase claim, Deutsche Bank seeks money

dafnages of $6 to $10 billion. (Amended Complaint 7 85.) The Agreements, l~owever,

all contain a provision stating that repurchase of individual mortgage loans on a loan-by-

loan basis is the sole and exclusive remedy for breaches of ~epresentations and

warranties. Because Deutsche Bank seeks aremedy to which it is not entitled, it has

failed to state a claim upon which relief can be granted.

?'%id, Deutsche Bank asserts a separate claim for breach of contract

arising from the allegation thal it was denied access to loan files for 61 loa~is. (Amended

Co~nplaint fl El -85.) Notably. these 61 loans are contained in only three of the 99 trusts

Deutsche Bank lists, and so this claim is not even raised as to the tens of thousands of

othm loans in those t h m trusts, or as to mry loan in the 96 other trusis. And while

Deutsche Bank posits that, because of his limited access claim, it should be excused

from its failure to plead a valid repurchase claim with regard to any of the more than half

a 1niIIion other loans potentially unplicated by its Complaint, there is no legal hasis for

this request. Indeed, the access claim cannot be the basis for separate recovery because

the denial of access does not give rise to independent harm to the trusts.

Fourth, dl claims based on mortgage loans in 74 of the 99 trusts should be

dismjssed as time barred. Most of the repmentations and warranties that Deutsche Bank

claims to have been breached were made as of a date well outside the applicable statute

7 , i . l

T -

b' -2

Case 1 :09-CV-01 656-RMC Document 32-1 Filed 0910811 0 Page 9 0f 52

PURCHASE AND ASSUMPTION AGREEMENT

AMONG

FEDERAL DEPOSIT INSURANCE CORPORATION, RECEIVER OF WASHINGTON MUTUAL BANI(,

HENDERSON, NEVADA

PEDERAL DEPOSIT INSURANCE COWORATION

JPMORGAN CHASE BANK. NATIONAL ASSOCIATION

DATED AS OF

SEPTEMBER 25,2008

-' - Case 1:09-cv-01656-RMC Document 32-1 Filed 09/08110 Page 48 of 52

SCHEDULE 3.2 - Purchase Price of Assets

(a) cash and receivables from depository institutions, including cash items in the pmcess of collation, plus .interest thereon:

Book Value

(b) securities (exelusive ofthe capital stock of Market Value Acquired Subsidiaries), plusinWest thereon:

(c) federal funds sold and repurehaae Book Value agiwments, if any, includmgintemt rhaeos

Loans: Book Value

Other Real Estate; Book Value

credit curd business, ifany, including all B60k Value outstanding exlensions of credit:

Safe Deposit Boxes and related business, safekeeping business and trust business, if any:

Rceords and other documenfs:

capital stock of any Acquired Subsidisries:

amounts owed to the Failed Bank by any Acquired Subsidiary:

ass- sacuring Depwits of public money, to L c extent nor otherwise pllrcbased Imumdcr:

Overdrafts of custom^^:

Book Value

Bwk Value

Book Value

Book Value

Book Value

Baok Value

w v Case 1 :OS-cv-01656-RMC Document 32-1 Filed 09/08/10 Page 49 of 52

(m) rights, if any, with respect to Qualified Markel Value Financial Contracts.

(n) rights of Ule Failed Bank to provide Bodr Valuc mortgage servicing for ahcrs aod &I have martgaga servicing provided m thc Failed Bank by 0th- and n1& contracts.

(0) Bank Premises: Book Value

(p) Furniture and Equipment: Book Value

(q) Fmhlres: Book Value

V ' U'

Case I:09-cv-O165&RMC Document 32-1 Filed 09/08/$0 Page 15 of 52

"Book Valae" means, with respect to any Asset and any Liability Assumed, ihe dollar amount thereof stated on the Accounting Records of the Failed Bank. The Book Value of any item shall be determined as of Bank Closing after adjustments made by the Assuming Bank for normal operational and timing differences in accounts, suspense items, unposted debiffi and credils, and other similar adjustments or mections and for setoffs, whether voluntary or involuntary. The Book Value ofa Subsidiaty of the Failed Bpnk acquired by the Assuming Bank shall be d e m i n e d From the investmm in subsidiary and mlatad accounts on the "bank only" (unconsolidated) balance sheet of the Failed Bank based on the cquity method of accounting. Without limiting the generality of the foregoing, (i) the BOok Value of a Liability Assumed shall include all accrued and unpaid interest thcleon as of Bank Closing, and (ii) the Book Value of a loan shall reflect adjustments for epmed interest, oruntamsd interest {as it relates to the "rule of 78s" or adddn-interest loans, as apvlicable), if any, as of Bank Closing. adjustments for the portion of earned or a n d ban-related credit lifeandlor disability inwrancc premiums, if any, attributable to the Failed Bank as ofBank Closing, and adjustmenw fix Failed Bank Advances, if any, in each case as determined for financial reporting purposes. The Book Value of an Asset shall not include any adjusnent for loan premiums, discounts or any relatcd deferred incame or fees, or general or spscific resaves on the Accounting Records ofthe Failed Bank.

"Bnsiness Day" means a day other than a Saturday, Sunday, Federal legal holiday or legal holiday under the laws ofthe State where ihe Failed Bank is loc~ted, or a day on which the principal office of the Corporation is closed.

"Charterinn Authority" means (i) with respdct co a national bank, the Ofice of the Comptroller of the Cunency. (ii) with respm to a Federal swings association or savings bank, the Ofice of Thrift Superv~sion, (iii) with respect to a bank or savings instihttion chartered by a State, the agency o f such Steta charged with primary responsibility for ~egulating andtor closing banks or savings institutions, as the FW may be, (iv) the Corporation in acc&rdnnce with I2 U.S.C. Section 182 1(c), with regard to self appointment, or (v) the appropriate Federal banking agency in accordance with 12 U.S.C. 1821 (cX9).

rfCamm&ma~7 means the unfunded m i o n of a line of e d i t or other commjtmcnt reflected on the books mdreeords ofthe Failed Bank to make an extension ofcredit (or additional advances with respect to a Loan) that was legally binding on the Failed Bank as of B a d Closing, other than extensions o f d i t pursuant to the credit card business and overdraft protection plans of the Failed Bank, if any.

"Credit Dncumends" mean the agmmenfs, instruments, certificates or other documents at any timc'widacing or otherwise relating to, governing or executed in connection with or as security for, a Loan, includingwithout Sitation notes, bonds, loan agmmenta, letter of credil applications, lcasc financing contracts, banker's acceptances, dm&, interest protection agreements, currency cxchange agteements, repurchase agreements, reverse repulchsae agreements, guarantees, deeds of trust, mortgages, assi&nments, recurity agreements, pledges, subordination or priority agreements, Iien priority ngrcemenls, undertakings, security inslnarnents, catiticatcs, documents, legal opinions. psrticipation agreements and intmcditor agreements, and all amendments, modfications, renewals, exleneions, reanangements, and rubnitutions with reppcct to any of the Foregoing

. , V

Case 1:09cv-01656-RMC Document 32-1 FIled 09/08/10 Page 51 of 52

EXHIBIT 3.2(~) - VALUATION OF CERTAIN QUALIFIED FINANCIAL CONTRACTS

Interest Rate Contracts - All interest rate swap. forward rate agreements, interest rate futures, caps, collars and floors, whether purchased or written

Option Cantracts - All pm and call option mnuaet5, whether purchased w written, on marketable securities, fmancial f u m , f b r e i ~ unrmies, foreign exchange or foreign exchange futures contracts.

Fareign Exchange Contracts - All contracts for future purchase or sale of foreign currencies, foreign c w m y or cross cumncyswap cowacts, or foreign exchange futures colm'acts.

All financial contracts used to hedge assas and liabilities that arr acquired by the Assuming Bank but arr aot subject to adjustment from Book Value.

C Adjustment

The difference between the Book Value and markct value as of Bank Closing.

I . The price at which the Assuming Bank sells or disposes o f Qualifted binancia1 Contracfs will be deemed to be the fair market value of such or disposition occm a: prevailing market rates within a p e d upon by the Assuming Bank and the Receiver.

'2. In valuing all other Qualified Financial Contracts, the following apply:

i ) All known cash flows under swps or f5rward exchange cont is shall be pment valued to the swap zero mupan interest rate curve. I-

(ii) All valuations shall employ pri- and interest rate based on frequency of rate reset or payment.

(iii) Each tranche af amortizing umtmrs shall be separately valued. he t'otal.: value of such amoniaing cantract shall be rhe sum of ihe values of ib ' component tranchcs.

UNITED STATES BANKRUPTCY COURT DISTRICT OF DELAWARE

In ~e Chapter 11

WASHINGTON MUTUAL, NC. , gd., Case No. 08-12229 (MFW)

Debton. (Jointly Administered)

-----------+--------------------.---.------ X

WASHINGTON MUTUAL, INC., and WMI INVESTMMT CORP.,

Plaintiffs,

-against- Adversary Proceeding No.: 1 0 - (Mmy

ALL CLAIMANTS NAMED IN PROOFS OF : CLAIM NOS. 552.1025,1556,2024,Z298,2307, : 2319,2398,2421,2480,2549,3246,3249,3251, : 3252,3254,3256,3257,3258,3710, and 3777, :

Defendants. ---------------------------------.--------*x

CORapLATNT

Washington Mutual, Inc. CWMI'') and WMI Investment Corp. CWMI Investment"), as

debtors md debtors in possession (collectively, the "Debtors"), by and through their undersigned

counsel, hereby bring this Complaint for a declaratory judgment that the above-captiol~ed claims,

filed by ecnain holders of debt securities issued by Washington M u d Bank O, must be

subordinated pursmnt to section 51 0(b) of title 1 1 of the United Sates Code ("the Bbnlcruptcy

Code"). '

I T k c relief sought by i h Debtms is expressly subjectm and contingent on the terms and coaditions oithe Sirth AmendedJoht Plan ofAflNaled Deb* P w w t lo Chpt8)' 11 of the UniI~dSrate~ Banhupfcy Code, dated October 6,2010, Dl& 5548 (the "Plan"),the DisclosaaeSmren~enr for the Serb AmendedJolnr Plnn ofAfliliated Deblara P~rrsuant M Cbpter I I @the U n W Stares Banbwplcy Code, dared October 6.201 0, Dkt. 5549 ("Disclosure StatcmenP') and tlle C o w s contirmatlon o f the Plan and Disclosure Statwment.

L PRELIMINARY STATEMENT

1. In late 2005, WMB, a federally chartered savings association, established a

Globnl Note P~vgrm that provided for the issuanceof up ta $22 billion in debt securities

through Seniar Global Notes and Subordinated GIobd Notes (collectively, the "WMB Notes").

Certain holders of WMB Notes (the "WMB ~oteholders")? the Marathon Credit claimants3

(collectively, the "Bondholders"), and other holders of WMB Senior Notes (the "Other

~oteholders")~, md collectively with the WMB Noteholders and Marathon Credit Claimants (the

"Senior Noteholders"), have filed proofs of claims against the Debtors asserting claims arising

from purchases of the WMB Notes (callectively, the "Claims"). The Claims inckde, among

others, requests for damages under state and federal securities laws, rescission of the purchase of

the WMB Notes, and payments allegedly due under the W M B Notes. The Debtors believe that

the Senior Noteholders' Claims are meritless! Regardless, because the Claims arise from the

purchase or sale of senaitics+mmely, the WMB Notes-the Debtors file this adversary

proceediug for n declaratory judgment that the Claims must be subordinated pursuant to

section 51 0(b) of the Banlvuptcy Code.

2, Section 510@) of the Banhptcy Code mandates subordination of all claims

"arising from rescission of a purchase or sale of a security. . . [or] for damages arising from the

purchase or sale of such a security." 1 I U.S.C. 5 510(b). The WMB Notes at issue herc are

clearly securities. Under the Bdrmptcy Code, "[t]he term 'security' - (A) includes - (i) note . . - 1 'The W M B Nohholdn am* Pr~ofofCIaim NO. 2480.

'The Marsfhdn Cmdit Claimants sseettcd Proofof Claim Nos. 3710 and 371 I.

',fie OtherNotohoIdcra ~osetted PrtrofofClaimNos. 552,1025,I556,2024,2298,2307,2319,2398,2421,2480, 2549,3246,3249,3291,3252,3l54,3256,3257,3258,3710. and 3777.

' ~ h c Debton.ptxyiously tiled an objection to the WMB Noteholdem' and Marathan Credit Clalmanta' claims on p u n d s incluaing laokofstandlngand fail- to sate a claim, while expressly reswing the right to assert additional obJbctions, including subordination. E B D e b s ' Corrcetfd Twenticth (20th) Omnibus (Substantive) Objection to Claims 122. Dkt. 2326.

"Mtllatbon Credit ~laimnnts."~ Collectively, these Bondholders claim approxinlately $3.7

billion in outstanding Senior Notes and Subordinated Notes issued by WMB during the Global

Note Program that was established in 2005.

10. Defendant Bondholders also incluk all of the claimants asserting Proofs of Claim

Nos. 552,1025,1556,2024,2298,2307,2319,2398,2421,2480,2549,3246,3249,3251,3252,

3254, 3256, 3257, 3258,3710, and 3777. A chartlisting each clajmant alongside i ts

corresponding claim number, the debtor against whom the claim is asserted, and the mount of

the claim, is anached as Exhibii A.

m J U R I S D I ~ O N AND VEWUE

11. The Court has subject maner jurisdiction over this proceeding under 28 U.S.C.

$5 157 and 1334. This is a core proccedingunder28 U.S.C. 9 157(b).

12. Venue is proper under 28 U.S.C. $5 157(a), 1408, and 1409.

7 3. . The statutory prerequisites for the reliefrequested herein are 11 U.S.C. 8 105(a),

RS amended; 28 U.S.C. $2201, andFederal Rule of Bankruptcy Procedure 7001.

111 haofs of Claim Nos. 3710 md 371 1 , t& claiams identified ~ e m s e l w s a Altma Fund Sioav P.L.C. In Remccf Of Russcll Sub-Pun4 Anohorngc Cnpitol Meater Gffsharc. IM.; Bmk of Scntlmd vlc: CCNS Caoitnl. LLC: ~o&rate Deb1 Opporlunitiw Fund. ~ t d ; PU Tree Capital Opponunity M W Fund, L.P.; f i r 'Tree on&& nnnnrl~tnitv Msstcr Pund. L.P.: Fir'Trec \'aluc Manter Pund. L.P.: HPR LD Select Pund W Master Tntrt. - T r - ~ ~ . ~ ~ ~ , ~ ~, . ~ . ~~~ ~ ....- ~ ..--.. Juggernaut Fund, 1,.P.; LyxorlYork Fund Limited; ~ t r f l t h & ~ r & t &pol~nlly Maslw Rind, Ltd.: P m a l York Ltd: Quintessence Fund L.P.: QVT FundLP; Silver Point Capital Fund, L.P.; Silver Point Capital OFEshoreFund, I,td.; 'The Oovcrnor md Company of the Bank of Ireland: ' h e Vlrde Fund. L.P.; me Vllrde Pund VI-A, L.P.; Ths Vade Rnd VII-B, L.P.; The Vfltde Fund Vlll, LP.; The Vnrde Fund I X L.P.; The V&de Fund IX-.b. L.P.; Varde lnvesnent p m e r s (Offshore). Ltd.; Vllrde Investment Pannen. L.P.; Windmill Mesle~Fund. L.P.: Yo& Caoital MmugemeK LP.; ~ o r k credit Opporamitior Fund, L.P.; ?'ark ~redkOpporhmities W n ~ m 4 it; ~ o r k Investment Masm Fund L.P.: Ynrk SelW. L.P.; and YorkSeled Master Fund. L.P. ClaicM 7710.371 1 1 n. I. In the Bank Bondholders' Re~minary Response TO The Lep! lsslres Set Forth 1n.Uebtars' ~wenlieth (20th j'omnlbus (Substantive) Objection To Claim ("Marathon ~asponse") DM. 2469,tile claimann assated that therrsbonse was nlso frl-d on behalfof additional, ellened hn!dcrs v i WMB Senior Notw who retained eolmnel subscment lo the filing of Proofs of Claim Nos. 3710 G d 371 1. Marnthon Response at I n.1.

5

rY. BACKC;ROUM,

A. Introdaclion

14. WMJ's predecessor was formed in 1889 and eventually becrune a capital stoclc

s~vings bank after decades of growth and diversification. In 1994, WMI was formed as a

savings and loan holding company under the law of the State of Washington. W I was the

rllt~~nate parent of WMB. WMI also indirectly owned ArMB's subsidiaries, including

Warhington Mutual Bank fsb ("WMBfsb").

15. Like allsavings and loan holding companies, WMT was subject to regulation by

the Office of Thrift Supervision ("OTS"). Like all depository institutions with federal thrift

cl~arters. WMB and WMBfsb were subject to regulation and examination by the OTS. Also,

valiouq fede~al and state authorities, including the F e d d Deposit Insurance Corporation

("FDIC"), wcrsaw W ' s banking and non-banking subsidiaries.

16. On September 25,2008, the Director of the OTS, by order number 2008-36,

appointed the FDIC as receiver for WMB (the "Receivership") m e FDIC ~mmediatcly sold

substmtialiy al) of the assetsof WMB to JPMorgan Chase Bank, N.A. ("JPMC"), pursuant to

that cenain Purchase end Assumption Agreement, Whole Bank, dated September 25,2008 (as

amended, modified, or supplemented, the "P&A Agreement").

17. On Septernlrer 26.2008 (the "Commencement Date''), each of the Debtors

commenced with this Couft a voluntary case pursuaut to chapter 1 1 of the BsnkrvptEy Code On

October 3,2008, the Court entaed an order, pursuant to Bankruptcy Rule 1015@), authorizillg

the joint administration ofthe Debtors' chapter 11 cases.

18. The Debtors are authorized to Operate their businesses and manage their

pmpel&s as debtors in possession pursuant to sections 1107(a) and 1 108 of the Bankruptcy

B. The Senior Noteholdem' Purckaae of Debt Sccuritim from WMB

19. On December 21,2005, WMB established the Global Note Program that provided

for tho issuance o f up to $22 billion of Senior Global Notes and Subordinated Global Notes, or

both. from time to time. &g Washington Mutual Bank Dm. 21,2005 Offeling Circular (the

"Offering Circular").

20. Section 101(49) of the Badmptcy Code provides as follows: "the tam LsecuritY'

- (A) includes - (i) note . . . [and] (iv) bond." I 1 U.S.C. 4 1 Ol(49).

2 1. The Offering Circular stated hat the WMB Notes are "[dlue 270 Days or Morc

.hm Date of Issue." Sea Offering Circular, Cover Page. As a result, the WMB Notes were not

excluded fiom the definition of s e d t y under the Securities Exchange Act, 8 3(a)(10), I5 U.S.C.

8 78c(a)(lO), which is "virtually identical" to fie definition of security under t l ~ e Saurities Act

of 1933, &e Reves v. Emst & Young, 494 U.S. 56,61 n. 1 (1990) (internal quotation marks

omitted); see J~arvi, Hr'g Tr. 99: 5-17, 106:2-5 (arguing that '?nore than 270 days out, this

is a security for the prnposes of federal securities laws" and that the time period makes "quite

clear that the inlent was thal these bonds are intanded to be securities within the meaning of the

federal securities laws").

22. Thc WMB Notes were oflered "only to institutional investors that are 'accredited

investors' ('Institutional Accredited Investon') within the meaning of Rule 501(a) under the

lJnited states Securities Act of 1933." Offering Circular at 1. Undcr Rule 501(a), an

"Accredited investor" includes, among others, the following: backs, savings and loall

3s.sociations, brokers or dealers registered under =tion 15 of tbe Securities Exchange Act of

1934, insurance companies, and investment companies.

21. The WMB Notes were offered though diambutionagents, inzluding Barclays

Capital, Citigroup, Credit Suisse First Boston, Deutsche Bank Secmrities, JPMC, Goldrnd,

,Sachs & Co., Lebman Br~tfien, Morgan Stanley, Merrill Lyoch & Co., Ad UBS Invwtment

Bank. S ~ a t 1 .

24. The Senior Noteholders did not all provjde documentation of their allesed

purcl1ascs of the WMB Notes it eppearr; that the U'MB Noteholders and Marathon-Credit

Claimlults, for examplc, claim that they acquired the PiMB Notes upon the isvuauce of thc \VMB

Notes by WMB beginning in the first quarter of 2006 andthe Brst hnlf of 2007, or thereafter on

Ule secondary markel. & Claims 371 0,371 1 7 10; EIr'g Tr. 85: 5-6.

C. The WMB Noteholders and Matrcthan Credit Claimants Proofs of Claim '. Proceeding

25. On March 31,2009, the Marathon Credit Ctaimants filed two proofs of claim in

t h i s Cola, which they amended on June 1;2009. Claims 371 0,371 1. Claim 371 0 was filed

against Investment; Claim 371 1 was :led agaimt WMI. Claims 3710 and 371 1 are

essentially identical and assert claims for (1) orate veil-piercing, alter ego, and similar

principles, (2) substantive consolidation, (7) improper claim to purported deposits, (4)

m~dercapitalization of, failure to support, and looting of the beck, (5) misrepresentation and

omissions under federal and state securities laws, (6) mnditional exchange of RElT trust

peferred securities, (7) tax rcfimds and losses, (8) mismanagement and breach of fiduciary and

other duties: (9) claim for gaodwiU litigation award, and (10) fraudulent transfer. On March 27,

7009, the WMB Noteholders filed their pmof of claim against WEvlI in this Court. Claim

2380. Claim 2480 asserts substantially the same claims as the Marathon Credit Cltrimants, but

does not assert clauna for corporate veil-piercing and substant've consolidation.

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

WASHINGTON MUTUAL, INC., 1301 Second Avenue ' Seattle, Washington 981 01,

and

WMI INVESTMEEJT CORP., 1301 Smond Avenue Seattle, Wa5hington 98101,

Plaintiffs.

F E D E W DEPOSIT INSURANCE CORPORATION. 550.1 7th Stxe&,m Washinaton. DC 20429. .. ~ . - ~ . ~ ~ ? ~ - -- .... >

in its capacity as receiver for Washington Mutual Rank, and in its corporate capacity,

Case No.

JURY TRIAL DEMANDED

Plaintiffs Washington MutuaI, Tnc. (''W') an4 arMI Investment Carp. ("m Investmen$' and together with the "~iahtiffp."), by thejr undersigned cornsel alleges as

PARTIES

1. Wash;ngton Mutual Bank, -Henderson, Wevda rmn) was a federal '

savings bank charted pursuant to the Home Owners' Loen Act, I2 U.S.C. $4 1461 -70.

2. Defendant Federal Deposit Insurance Corporation p m ) is the agency

charged by: law with, among oaet duties, ndministerins the Federal Deposit Insurance Act and

the federal bank deposit ~~~WRIW system Thd EPIC is sued in its corporate capacity ("m

BACKC;ROIMD

7. On September 25, 2008 (the 'Receivershiv Date-"), the Director of the

Office of Thrift Supetvision (TB"), by order number 2008-36, appointed FDIGReceiver as

receiver for WMB wd advised that FDIC-Receiyx was immediately taking posseasion of WMB.

8. Immediately after its appointment as receiva, FDIC-Receiver, together

with FDIC-Colporate, sold substantially all the assets of WMB, including the stock of WMBfsb,

to JPMorgan Chase Bank, National Association ("v) pursuant to that certain

Pul-chase and Assumption Agreement, Whole Bank, daEd as of Septemba 25, 2008 (the

I<-ment").

9. 011 September 26, 2008 ithe '-otcv Petition Date"), the Plaintiffs

each commenced a voluntary case {the "WMI Banluavtcv Proceeding") pursuant to chapter 1 1

of title 1 I of the United States Code (the " ~ ~ u t c v Code'') in fie United States Benkruptcy

Court for the Diatrict of Delaware (the "Bankruvtw Court"J The automatic stay in the

Plai~~tiffs' chapter I I cases prohibits any entity, including &e FDIC and JPMorgan Chase, from,

among othet things, taking any action to obtain possessioii of propaty ofthe Plaintiffs' estates or

to exercise control over such property.

THE PROOF OF CLAIM

lo. Pmnmt to section 1 l(d) of rhe FDI Act, 12 U.S.C. § I82l(d), FDIC-

Receiver set December 30, 2008, %. the last day to file claims against the Receivership. As

desc~ibed in detail below, PlainWs asserted claims against the Recavership (each a "w) by

filing a proof of claim on December 30,2008 (the "Proof of Claiq")

1 1 . Plaintiffs reserved all rights to amend andlor supplement thc Proof of

CIaim at any time and ju any respect imd to assert any and all otl~er clairns of whatever kind or

54R of the Bankruptcy Code in an amount up to $6.5 billion, and fir a1 other claims or c a m of

action, Under any theory, applicable to @e Chpital Contributions.

E. Tmst Preferred SeeorMes Claims

29. In February 2006, Washington Mutual RFfed Fundiq LU3 ("WMpF'),

a Delaware. limited liability company, was formed to facilitate capital-raising transactions

through the issuance of preferred securities to invest4 (such preferred securities me refemed to

herein collectively as 'Trust Preferred Securities") by certain special purpose entities (the

''SJ$$'). These securities were offered solely Lo "qualified institutional buyers" or "qualified

purcllasers.'' The Trust preferred Ssurities have an aggreggste liquidation preference of $4

billion.

30. W F ' s apseis were limited to d i q or indirect interests in mortgages or

mortgage-related assets, cash and other p d t r e a assets. l k s e assets were held in certain

Delaware statutory tnrst; (the ''Asset Trusts"). WMPF imed preferred securities (the "Km Preferred Securities"), which were held by and were the sole asset of the SPEs and wbich were

senior in priority to W W ' s indirect common equity interem in WMPF. Thus, the Tmsi

preferred Securities issued by the SPEs (wbich had no material creditors) represented interest

in the WMPF Preferred Secwiries and, in turn, an indirect interest in the assets held by the Asset

Trusts, Immediately before the Receivership Date, WMPF was an indirect subsidiary of WMB

and as s re&, WMB held sn indirect interest in the assets held in the Asset T-, subordinate

to the liquidation preference of the Tmt P i e f e d Securities.

3 1. The Trust Preferred Securities were sold to investors subkt to a ' I .'

"conditioni exchange" feature. f-e provided that if B e OTS so directed, upon (i)

WMJ3 becarnhg uncfacspitalizcd, (ii) WMB being placed into mmivezxhip or wnservato~ship

or (iii) the OTS anticipating, in its sole discretion, Wh.IB becoming undercapitalized in the near

D C I U ~ S ~ I ~ M Z I I I . ~ R D I . ~ 10

term or taking a supervisory action that limited the payment of dividends by WMB, then the

Tma Pmfcircd Securities were reqniied to be exchanged into shares of preferred stock of W M

(or depositary shares repteenling an interest in prefmd stock of WMI). The UTS notified

WMI on &e Receivashii Date that an "exchange went" occumd, as sucb term is defined in the

documentation governing the Trust Prekrrd Securitiw. Accordiag to the tams of the Trust

Preferred Securities, the exchange of the Trust Preferred Securities for preferred stock of WMI , , .

(or depositary shares mrcprescnting an interest in preferred stock of WM) is deemed to occur

automatically following the isuance by WMl of a press ele ease announcing the excbange eveor.

WMI issued such a press release and the conditional exchange became effedve at 800 a.m. ET

on September 26,2008.

32. In addition, rKMI pqortedly executed an assignment as of September 25,

2008, in whfch it purpo~M to assign to WMB all itn ria\ title, and interest in and to any and all

of the Trust Preferred Securities or preferred securitiw issued by WMPF, as the case may be, in

its possession or coming into its possession (the "Assimuncnt Ameement"). Assuming

arguendo that the terms of the Trust h f e d Securities (and the documents and adments

related to the issuance of such securitic8) , . and the A$signment Agreement are legally effective

nncl euforccable, and thatthere are no defnzses to the enforceability o f . w h agreements undw the

Ba&uptcy Code or other applicable law, all of which defenses and claims WMI expressly

reserves and henby asserts, the effect of these trausactions was to cause the Ttvst Preferred

Securities to be owned by WMI md then purportwlly transfer~ed to WMB immediately before

ti= Mmmericement of WMI's chapter 1 1 bmkn~ptcy ccase on September 26,2008.

33. On info~tltion and belief, the T M Preferred Securities have a value of

as much ss $4 billion. WMI may not have received any value for the purported transfer of the

Trust Preferred Securities to WMB bemuse, atthe.&e of such purported transfer, WMB may

have been insolvent, may have had urnemonably small capital. andfor may have been unable to

pay its own debt obligations as they matured. With respect to the purported transfer of the

Trust Preferred Securities, WMI ass- fraudulent tmnsfix claims gaiwt' %'ME3 pursuant to

sections 544 and 548 of the Bmluuptcy. Code in connation with the traosfer of the Trust

Preferred SBcurities.

34. Furthermore. if WMI was insolvent at the time of &ch purported traosfu

and the T w t Preferred Securities were t r a m f e d to WMB on mount of an antecedent debt

owed to W E , WMI also ass& a claim lo.recover such secraities as a voidablc preferme

pursuant to sections 544 and 547 of the Banhptcy Code.

35. In additioa if the TI& ~&kned. Securities were wrongfully transferred to

WMn, WMI asserts a claim for such wrongfUl trrmsfer and the retum of 'such mets. In the

alternative, WMI asserts that the purported transfer of the Trust Preferred Securities was not

pmperly executed, and, therefore, ineffectual. Accordingly, WMI assens that it is the owner of

the Tmt ~kferred Securities. ina all^, as a result of the FDIC's actions purporting to wansfer

the Trust Vefened 3ecuriGes &om W I to WMB. and then to PMorgan Chase or any other

party, Ww has been deprived of the use of the Trust Prcfmd Shrities and their proceeds

h m the Receivership Date onward and asserts a claim with respect thee0 against WMB.

WMI reserves all other claims or causes of action, Mder any theory, with respect to the Trust

Prafererred Securities, as set forth in pmgmphs 24-3Qof'the Proof of Claim. , . . . '. . .

F. Preference Clams . .

36. On or before the Receivership Date, on numerous occasions, WMl

transferred property to, or caused its property (or an interest in its ptopeaty) to be transferred to,

WMB or to eertain third parties for the benefit of WMB (the "Transfers") on account of

I-'

Case ~:o~-cv-o??~~-GMs Document 23 Filed 01/25/10 Page 1 of 25

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRtCT OF DELAWARE

: Chapter 11 WASHINGTON MUTUAL, Pic., et RL, ,

Debtors. . Case NO. 08-12229 (MFW)

3PMORGAN C l M E BANK, N.A.,

Appellant, : NO. 1:09-cv-O73CGMS

Y. . BK Adv. Proc. No. 09-5055 1

WASHiNGTON MUTUAL., INC.. et al.. : . BK AP NO. 09-0072

Appellees.

X

.P L T p

Adam G. Landis (I.D. 3407) Matthew B. ~cGuire (ID. 4366) LANDIS RATH & COBB LtP 9 19 Market Street. Suite 1 800 - . - - . -- - - , - -. - - - - - - Wilmingion, Delaware 19899 Tel: 13021 467-4400

(Additional counsel listed on signature page)

Dated: January 25,2010 Wilmington, Delaware

Counse1,forAppelbnt JPMorgan Chcrse Bank N.A.

\ '3 d -

Case 1:09-cv-00734-GMS Document 23 Filed 01/25/10 Page 6 of 25

IS OF m- Appellant JPMorgan Chase Bank, N.A. ("w')appeals from the September 14,

2009 order (the "Counterclaims Order") of the United States Bankruptcy Court for the District of

Delaware (the "Bankruotcv COU~'? determining that it has subject matter jurisdiction to hear

claims by Washington Mutual, lnc. ;md ks subsidiary, Washington Mutual Investment Corp.,

(collectively, " a r ' o r the "Debtors") notwithstanding the jurisdictional bar contained in Section

L821(d)(lf)(D) of the Financial Institutions Reform, Refovery and Enforcement Act of 1989

("FIRREP) and a pending a p p d before this Court This Coua has jdadiction to hear this

appeal pursuant 10 the collateral order doctrine and 28 U.S.C. 5 158(a)(1). @.L 2.)

STATEMeNT OF THE lSSUPS PRESENTED

1. Did the Bankruptcy Court incorrectly hold that FlRREA's jurisdictional bar

does not preclude it from exerching subject matter jurisdiction over claims against a purchaser of

failed bunk aqsets from the Federal Deposit Insurance Corporation ("FDX) as receiver for the

failed depository institution (TDIC-Receiver"), even where the jurisdictional bar would apply had

the same claim been asserted agamst the FDIC?

2. Did the Bankuptcy Court inmnectly hold that FIRREA does not bar Debtors,

who have nvaild themselves of FIRREA's exclusive claims process, whose claims were

disallowed by the FDIC-Receiver, and whose appeal of that disallowance is currently pending

before the United States District Court for the District of Columbia rD.C. District Court") from

using the Bankruptcy Court to d l a t d l y attack the disallowance of their claims by asserting The

same claims againqt the purchaser of the failed bank's assets from the FDIC-Receiver?

3. Did rhe Bankruptcy Court lack subject matter jurisdiclion to enter the

Counterclaims Order because JPMC's and the FDIC's prior pending appeals fmm the Bankruptcy

Court's July 6, 2009 orders divested the Bankruptcy Court of jurisdiction to further consider

L. ..d Case 1:09-cv-00734-GMS Document 23 Filed 01 12511 0 Page 7 of 25

(naaers, such as the jurisdictional issum decided in the Counterclaims Order, that are encompassed

by the July 6,2009 orders and, therefore, exclusively withii this Coutt's jurisdiction to decide?

STANDARD OF REVIEW

"When reviewing a case on appeal, the couri reviews the bankruptcy court's legal

determinations de nuvo, its factual findings for clear error, and its exelrise of discretion for abuse

thereof." rn re Gkrden Ridze Cnrp., 399 B.R. 135,139 @. Del. 2008). "The issue of whether the

[lower] court correctly interpreted 4 1821(d)(3) and (d)(13)(D) of FIRREA concerning subject

mRtter ,jurisdiction is n legd question over which we exercise plenary review." Nat'l Union Fire

In.1. Co. v. City Sm., ESB., 28 F.3d 376, 383 (3d Cir. 1994). 'Ihe issue of whether the

Bankruptcy Corn was divested of jmisdiction to entertain a mutter that is within the scope of a

pending appeal is similarly a legd question over which the Bankruptcy Court's determinution is

given no deference. Venen v. Swrer, 756 F.2d 117,120 (3d Cir. 1985).

mATEMENT OF TEE CASE

This is an appeal of the? BYlknrptcy Court's most recent determination that it has

subject matter jurisdiction over claims asserting rights to the assets of a failed bank-Wachington

Mutual Bank ("-)--that the FDIC sold to JPMC. The Bankruptcy Court's exercise of

jurisdiction over h s e claims is contrary to law. As explained in the FDIC's and JPMC's pendii

appeals from the Bankruptcy Court's Jdy 6,2009 jurisdictional onlets (the ''July A ~ ~ e d s " ) and

below, the Bnnluuptcy Court's exercise of subject matter jurisdiction violates the plain language

of the jurisdictional bar imposod by FIRREA, by which Congress vested exclusive jurisdiction in

the D.C. District Court over sudi daims relating to the assets of n failed bank or the ncts of the

FDIC as receiver for such failed bank. I2 U.S.C. Q L621(d)(1.3)@). The B-ptcp Court's

determination that FIRRFb4.s jurisdictional bar dues not apply to daims against a purchaser from

the FDIC-Receiver, no matter what the nature of those claims, is inconsistent not just with

UNITED STAT'' DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

JPMORG,AN CHASE & CO.; JPMORGAN CHASE BANK, N.A.; .T.P. MORGAN MORTGAGE ACQUISITION CORPORATION; J.P. MORGAN SECURITIES LU: (Wa J.P. MORGAN SECURlllES IPJC.); J.P. MORGAN ACCEPTANCE CORPORATION I; EMC MORTGAGE LLC (Wa EMC MORTGAGE CORPORATTON); BEAR STEARNS & CO., WC.; STRUCTURED ASSET MORTGAGE ROVESTMENTS n wc.; BEAR STEARNS ASSET BACKED SECURITIES I LLC; WAMU ASSET ACCEPTANCE CORPORATION; WAMU CAPITAL CORPORATION; WASHINGTON MUTUAL MORTGAGE SECURITIES CORPORATION; LONG BEACH SECURITIES CORPORATION; CITIGROUP GLOBAL MAKKETS, D'C.; CREDIT SUISSE SBCIIRITIES (USA) LLC; GOLDMAN, SACHS & CO.; RBS SECURITIES, INC.; DAVID M. DUZYK, LOUIS SCHIOPPO, JR.; CHRISTINE E. COLE; EDWIN E. MCMICHAEL; WlLLlAM A. KING, BRIAN BERNARD, MATTFEW E. P?XUNS; JOSEPH T. JURKOWSW, JR.; SAMUEL L. MOLINARO, .lR.; THOMAS F. MARANO; KIM LUTTHANS; KATHERINE GARNIEWSKT; JEFFREY MAYER; JEPWI? L. VEXSCXILEISER; MICHAFFTI B. NIERENEIERG; R1CKARD CAREAGA; DAVID BECK; DIANE NOVAK; THOMAS

--

L&A docs

FEDERAL HOUSING FJNANCE AGENCY, AS CONSERVATOR FOR THE FEDERAL NATIONAL MORTGAGE ASSOClATION AND TI% FEDERAL HOME LOAN MORTGAGE CORPORATION,

- cn7. -(

C O W L A N

Plaintiff Federal Housing Finance Agency ("FHFA"), as conservator of The Federal

National Mortgage Association ('Tamlie Mae'') and The Federal Home Loa1 Mortgage

Corporati011 (Treddie Mac"), by its attorneys, Quinn Emanuel Urqul~art & Sullivan, LLp, f~ i$

Complaint herein against TPMorgan Chase & Co. ("JPMorgan Chase''); JPMorgan Chase Bank,

N.A. ("PMorgan Bank"); J.P. Morgan Mortgage Acquisition Corporatio~~ ("J.P. Morgan

Acquisition"); J.P. Morgan Securities LLC (UUa J.P. ~Morgan Securities hlc.) ('7.P. Morgm

Securities7'); J.P. Morgan ~ c c e p t k c e Corporation I ("J.P. Morgan Accepta~~ce") (collectively,

the ".IJ!Morgan Defendants"); Bear Steams & Co. Inc. ('BSC"'); EMC Mortgage LLC ( W a

EMC Mortgage Corporation) ("EMC"); Structured Asset Mortgage Investments 11 [nc.

("SAM"); Bear Stearns Asset Backed Securiiies LLC ("BSABS") (collectively, the "Bear

Stearns Defendants"); WaMu Asset Acceptance Corporation ("WaMu Accepta~~ce"); WaMu

Capital Corporation ("WaMu Capital"'); Washington Mutual Mortgage Securities Corporation

("WaMu Securities") (coUectively, the "WaMu Defendants"); Long Beach Securities

Corporation flong Beach Securities"); Citigroup Global Markets, Inc. ("Citigroup"), Credit

Suisse Securities (USA) LLC ("Credit Suisse"), Goldman, Sachs & Co. (Woldman Sachs"), and

RBS Securities, Inc. m a Greenwich Capital Markets, Inc. ("RBS Greenwich") (collectively, the

"Other Undmriter Defendants"); David M. Duzyk, Louis Schioppo, Jr., Christine E. Cole,

Ed& F. McMichaet William A. King, Brian Bernard, Matthew E. Perkins, Joseph T.

Jurkowski, Jr., Samuel L. Molinaro, Jr., Thomas F. &no, Kim ~utthans, Katherine

Garniewski, Jefiey Mayer, Jeffrey L. Verschlciser, Michael B. Nierenberg, Richard Careaga,

David Beck, Diane N o d , Thomas Green, Rolland Jurgens, Thomas G. Lehmam, Stephen

Fortunato, Donald Wilhelm, Michael J. Kula, Craig S. Davis, Marc K. Malone, Michael L.

Parker, Megan M, Davidson, David H. Zieke, Thomas W. Casey, John F. Robinson, ~eit11

165. Further, WaMu Bank employed its wholly-owned subsidiaries, WaMu Securities,

WaMu Acceptance, and WaMu Capital in key steps of the securitization process. Unlike typical

arms' length securitiwtions, man): of the WaMu Securitizations involved various WaMu

subsidiaries and affilia~s at vkhdly eaeh step in the chain. With respect to 20 of the 26 WaMu

Securitizations, the sponsor was WaMu Bank or WaMu Securities, the depositor was WaMu

Securities or WsMu Acceptance, and the lead unde-ter was WaMu Capital.

166. As the sole owner of WaMu Securities, WaMu Acceptance, and Wahfu Capital,

WaMu Bink had the practical ability to direct and control the actions of WaMu Securities,

WaMu Acceptance, and WaMu Capital related to tbe Securilizations, and in fact exercised such

direction and control over the activities of WaMu Securities, Wahfu Acceptance, nnd WaMu

Capital related to the issuance and sale of the Catiiicates.

167. WaMu Bank expanded its share of the residential mortgage-backed securitization

market tn increase revenue and profits. The push to securitize large volumes of mortgage loans

contributed to the inclusion of untrue statements of material facts and omissions of mahial facts

in the Registr~tion StatmIetIt4.

2. WaMu Securities

168. WaMu Securities hasbeen involved in the securitization of a variely of assets

since its iacorponttion. During the 2003,2004,2005 and 2006 fiscal years, WaMu Securities

purcbed approximately $26.1 billion, $10.8 billion, $1 1.3 billion, and $24.9 billion of

residenh'al mofigage loans, Tespectively, and securitized approximately $8.5 billion, $1.0 billion,

$7.1 billion, and $1 7.1 billion of ~~idenl ia l mortgage loans, reqectively.

169. Defendant U'aMu Securities was the spomor or co-sponsor of 1.5 of t he 103

SWuritizations. In that capacity, WaMu Securities detcmil~ed the structure of the

Secutitizahons, kitiated the Secrtritimtions, purchased h e mor$age loans to be securitized,

62

determined distribution ofprincipal and interest, aud p~ovided data to the credit rating agencies

to secure investment grade ratings for the GSE Certificates. WaMu Securities also selected the

depositor that would be used ed lotransfa the mortgage loans ftom WaMu Securities to the trusts,

and selected the underwriter fur h c S~ecuritizations. In its role as spoasor, WaMu Securities

knew and intended that the mortgage loans it purchased would be sold in connection with the

securitization process, and that certificates representing such loans would be issued by the

lelevant t$usts.

170. For the 15 Securitizations that it sponsored or co-sponsored, WaMu Securities

also conveyed the mortgage loans to the depositor for each Securitization pursuant to a Mortgage

Loan Purchase Agreement or Mortgage Loan Sale Agreement. In these agreements, WaMu

Securities made certain representations and waxantics to the depositors regarding the gmups of

loans collateralizing tlle Certificates. These representations and wananties were assigned by the

depositor to the hustee for the benefit of the Certificateholders.

171. Defendant WaMu Securities also acted as its own depositor &om 1979 until 2005.

In this role, it engaged in purchasing mortgage loans, filing registration statements with the SEC,

forming issuing trusts, assigning mortgage loans and all of its rights and interests in such

mortgage loans to the -tee for the bencfit of the oertifimteholden, and depositing tlx

undmlying m w g e loans into the issuing t ~ u s t s .

172. WaMu Securities was the depositor for two of the 103 Securitizations. In its

capacity as depositor, WaMu Securities sold. transferred, or otherwise wnveyed !he mortgage

loam fo be securitized to the trusts. WaMu Seourities, together with the other WaMu

Defendants, was also renponsible for preparing and filing the Registration Statements pursuant to

which the.Certifi~ates were offered for sale. The trustF in turn held the mortgage loans for the

benefit of the Certificnteholders, and issued the Certificates in public offerings for sale to

investors such as Fannic? Mae and Freddie Mac.

3. WaMa Acceptance

173. Defendant WaMu Acceptance has been engaged in the securitization of mortgage

loans as a depodlor since its incorporation. It is a special purpose entity famed solely for the

purpose of purchasing mortgage loans, filing registration statements with the SEC, fonning

issuing husts, assigning mortgage loans and all of its rights and interests in such mortgage loans

to the trustee h r the benefit of the certificatehoIders, and depositing the underlying mortgage

loans into the issuing trusts.

174. Defendant WaMu Acceptance was the depositor for 18 of the 103 Securitizations.

In its capacity as depositor, WaMu Acceptance purchased the moagagc loans from the sponsor

pursuant toa Mortgage L m Purchase Agreement or Mortgage Loan Sale Agreement, as

applicable. WaMu Acceptance then sold, traasferred, or otherwise conveyed the mortgage 1oa11s

to be securitized to the busts. WaMu Acceptance, together with the other WaMu Defendants,

was also responxihle for prepacing and filing the Registration Statements pursuant to ~ h i c h the

Certificates were offered for sale. The tlnsts in turn held the mortgage loans for the benefit of

the Cdficateholdexs, and iswed tlie Certificates in public offerings for sale to investors such as

Fannie Mae and Freddie Mac.

4. WaMuCapital

5 . Defendant WaMu Capital was the lead underwriter for 31 of the Securitizations.

In that role, it was responsible for underwriting and managing the offer and sale of Certificates to

Fannie Mae and Freddie Mac and other investors. WaMu Capital was also obligated to conduct

meaningfa1 due diligence to ensure that the Registration Statements did not contain any material

237. Documents released in April 201 0 by the PSI show that, in April 2006, the

President of WaMu Bank's Home L m s Rivision gave a presenblion to the WaMu ~ o a r d of

Directors entitled "Shift to Higher Margin Products." The presentation showed that the [east

profitable loans were goveamient-backed and fixed loans; the most profitable were Option

ARM, Home Equity, f~nd Subprime Loens. Subprime loa~ls, at 150 basis points, were eight times

more profitable than a fixed loan at 19 basis points.

238. In its push to generate more risky loan products, WaMu Rank pressed its sales

agents to pump out a greater volume of loans with loose adherence to its own underwriting

guidelines. WaMu Bank gave mortgage brokers bandsome commissions for selling We riskkt

loans, which c a m 4 higher fees, holsttxing profits and, ultimately, the compensation of the

bwk's executives. In a New York Times article published December 27,2008, Steven M.

Knobel, the founder of an appraisal company, Mitchell, Maxwell &Jackson, that did businas

with WaMu Bank until 2007, stated that "[ill was thc Wild West . . . If you were alive, they

would give you a loan. Actually, I think if you were dead, they would still give you a loan."

239. WaMu Bank pushed its Option ARM loam on borrowers regardless of their

sophistication, income level, or financial stability. An Option ARM loan is typically a 30-year

Adjustable Rate Mortgage rAFW') that initially offers the borrower four monthly payment

options: (i) a specifid minimum payment (which was typically lower than the interest payment

and therefire caused the lorn to grow, referred to as negative amortization), (ii) an interest-only

payment, (iii) a 15-year fony amortizing payment, and (iv) a 30-year fully amortizing payment.

The rate 6f an ARM loan also adjusts monthly and if the loan rate was higher than the required

interest in the payment, the balance of the loan would increase (calbd negativc amot?izcltion).

Pay Chapman, WaMu Bank's former Chief Legal Officer, cmdidly admitted to the Seaale Times

in an article published on October 26,2009, that rrn]ortgage broken put people into the product

who shouldn't have been." In 2003, WaMu originated $32.3 billion of Option ARM loms. By

2005, that number almost had doubled to $64.1 bidlion

240. WaMu Bank's emplow compensation structure favored these types of high-risk

home loans In a document entitled '2007 Product Strategy," WaMu Bank noted Ulat it must

''maintain a compensation shwture that supports the high margin product stratqy." A

compensation grid from 2007 shows the company paid the highest commissians on Option

ARMS, subprime bans and home-equity loans: A $300,000 Option ARM, for example, would

earn a $1,~00 commission, v e m $960 for a k d - r a t e loan of the same amount. The rates

increased as a consultant made more loans; some regularly pulled down six-figure incomes.

Likewise,a WaMu Bank "Retail Loan Consultant 2007 Incentive Plan" explained that

"[ilncentive tiers reward high margin products . . . such as the Option ARM, Non-prime referrals

and Home Equity Loans . . . WaMu also provides a 15 bps 'kicker' for selling 3 year prepayment

penalties."

241. WaMu Bank could originate so many high-risk loans because its tulderwriting

guidelines had become so loose that they were rendcred meaningless. In a recently-surfaced

internal newsletter dated October 31,2005, riskma~iagers were told they needed to "shift (their)

ways of thinking" away from acting as a "regulatory burden" on the company's lending

operations and toward beinga "customer service" that supported WaMu's five-year growth plan.

242. On Septernbet 28,2007, WaMu Bank's Carporale Credit Review C'CCR") Team

circulaid an infernal report on first payment defaults in Wholesale Specialty Lending. The

report determined that "[clredit weakness and underwriting deficiencies is a repeat finding with

CCR." ItadditionsI~concloded that fraud detection tools "are not being utilized effectively by

where line managers particularly in tbc mortgage area not only authdzed but encouraged policy

exceptions." Similarly, Fay Chapman, WaMu's Chief Legal Officer fbm 1997 to 2007, relayed

that, on one occasion, "[s]omeone in Florida made a second-mortgage loan to O.J. Simpson, and

I just about blew my top, because there was this huge judgment against hiin h m his wife's

parents." When she asked how they could possibly close it, "they said there was a letter in fie

file from O.J. Simpson saying 'the judgment is no good, because I didn't do it"

247. WaMu Bank's appetite for volume kept it from diligently investigating the

rampant disregard of undemiting guidelines that infected its origination business. Perhaps the

must com@elling evidence involves two top loan prod~icers at two different WaMu Bank

origination offices, called Montebe110 and Downey, in Southern California. Each of those loan

officers made hundreds of millions of dollars in home loans each year and col~sistently won

recognition for their efforts. Recently disclosed docutnmts revealed that a 2005 internal WaMu

Bank review found that loam from those two oftices had "an extremely high incidence of

confmned fraud (58% for [Downey], 83% for [Montebello])." The review found that "an

extensivelevel of loan fraud exists in the Mmerging Markets CFCs [Customer Fulfillment

Centers], vimally ail of ii steinming from employees in these areas circumventing bank policy

surrounding loan verification and review." Thereview went on: "Based on the consistent and

pervasive pattern of activity among these employees, we are recommending fmn action be taken

to address these particular willful behaviors on the part of the employees named." But virtually

none of the proposed recommendations were implemened.

248. Recently published WaMu internal documents sllow that, toward the end of 2006

and the beginning of 2007, WaMu Bank started to see rising delinquency and default rates in its

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(a) The remedias pravldedi bb We Unifam Canmrcial Code1 must be liberaQy administered to me end that h e aa~rtsved dartyrri'ay be put in as.good a posllion as if the other& . . had fully performed lnrt neHhirc&quenIial [email protected] DeWi damages hay beipd ericept as spe~ificall~ provided in

. . [the unit om^ Commercial &elor by ower rule of I+. Lastmodilied: January 15,2011 . . . . . . (b) Any @M or obligation deklared by [the Uniform ~wnrne!'ciil Code] is enforceable by* unless the piokidn declaiing.ils~ebifli3s aditfere'nt and limited '.

. , " . . . . . . . . . . , . . effecl. . ! I ,~ . . . . . . , . . .

. . . , , . . . . . . . 6 '1,307 Prima ~ddie kvidence by Third-Party Docurr&s: . . . . . . - . . . . . . . . . . . . . - . . . . . . . . : I. . ., . .., - . . .

&documenrlndrie iorm p$$@tlng to a bill pf ladin4. policy orcertlfica6 . . bf insuianw.bf~cial.~fgher3 or Insp~torr~~eri%frcatd. . . . ms?l~r i r Ivo i~e, orany, ,

' ;her dbcument'iuth~bed dr re&red.b; t h e e - be issued by a third party is prima fadik &@&ti . o!Ils.omi . . . . atlminlfoityand ., . . . . . . . ger;uln&+sand'bf the ., . ., . . . . . . fat$ stat& in &e d&p?ebjby ,m,thirrl pm. ~ a s t rnodif l~ 2aiuiry 15, 1 . . . . ... . ' ~ , . . . . . . .

. . . . . . . . . . ~

of rights . . . perf?- or p~kis:perlormante o ~ a s s e l i t s ~ ~ i r f o r i n a ~ ~ i ~ . a m a ~ ~ e r : d e & ~ d e d *;offered . . by, . the~ther , ), party doe* nottherkFy metiehts resewed. ~ ~ ~ h , ~ ~ s ~ " ~ m a u l p t e j u d l o e , " "under pm+est. i k i i r n . . siffictent. . . . . . :. . ..

'T (b) 4ubseclfon (a) iF$< aind sa~$ce&tlpn. . p~ t r n~b* t l : . . ~anuky 15; 201, . : .. c. . . , . ' . : . . . . , . , . . . . ,

. .. . . , . * ., @ 3-103. DEFINITIONS . ~ . r -:

>

(a) in ths RRlde: . . . . , . . .

(1) "Accepfw" means a@- who has a&ptad apraft. (2) 'Drawee" means a person ordered in a dhft to make payment. (3) 'Drawer" means a person Ivho signs w b1denUfle.d h a m a s a pewon onlehng wwnent

'

(41 "God fai(h"meam honestv in fadand the &mance Of reasonzble rnmmercial standards offair &alhg. ~ ~, .. .. .. ~ - - ~ , . - 15) 'Makef means a ~ I S O ~ d m ~ s l ~ s or k ldenlcd h 0 note as a persa* undutaklrg lo pay (R) 'Order- means a wmhm msl~cllonJo pay m e y siped by the pecson plvlng the instruction. The insWdoo may be acMressed m any pPmon.

indtdrm IJW nccscn ~ivlm he hs(rum, ~f to one or morc pnansjoinlly ur In me =JternatN.e but nGi n SdCCeSSDn. &l aulholhauon 10 pay Is not - - - dnordor unless the mrsan zuthorized to Day is also instruded bpay. " , . -, - . . - , - ~~ ~~ . .

171 s~l~tn..,. r.ra88 fh. M - P ~ ~ "-on ennaoed in ausmessmeans observance of reasonebte.mmmw4al standards. OWvalllnUln llle area in which -,-,., ",, " ... - ---.--.--.- ~.. ~~ . . ~ ~

m9 cc=on 3 loca$d.vdilh r e s w to 0.e businesln which:ha personlsergagw,W Lhe ca&o'a bank lhattakesan b&urn& for Drowslrg for ~~,le:llon M naymen1 byautomated rrsano, resonable comrnncial sboollards da not require the bank lo Psanine Re insllumnl If the b:lure lo &amlne doe's k t vid& the bank's ~msalbed pmcedures and the ban!& proocdllies do not VWY unreasonably fmm general bankin0 usage not - . - . . .. - -

r(is=nnroved bv thk kkie ar m'cle 4 - - - w r . - - - - , ~-

(a) "Party: m a m a p a r ~ b an &%?eat . (9) "Pmmlseq means a written underiakingto pay money signed by the p e m undertaking to pay. An adtn&edgmentof en obllpalion by b e obligor k

'no1 a.pomlJa unbss the obnQor also undehkes to pay the abllgatlon. .. .

(1 0 ) "PrOw" Wiffi re~pect to a fact means to me& the burden of mtobltshiw me lad (Sectbn 1-2010). (I 7 ) ',Remlner means a dErson who purchases an @.-M from its wr Rthe insbument is payable to an identifled person other than the purchase;.

(h) othw d~finluons applylng b mls Amcle and W sectbns a M I 'hey appear are: "Acceplance" - Seclion "kcanrnaiatd party" - Section "Acmmrnulation oarK -- Semen 33%

"Blank indmsemmt" -- Section 37;nS csshers check' - - Section 3 i @ - ~ 'uernl~cate of depos;tS - - Scclior 3-r34 'CcrUfea check' .. Seclion 3-402 -- 'Check" - SecLh "Conslderailon* - Scetion &!g "Drafl" -- Secum 3-E 'Holder in due MUlae* - Sadlon a *lncornplele lnswumenr -- Sectlon 93% "lndorsemenl" -- Secllm 3-244 "Indoner" -- Section "instrument"-- Secllan 3524 "Issue" -- Sffitlon &&5 "lssuef -section 2795 "Nego#abte insbument" -- Sectlon 33% "NcgMiet1on'-- %&on %&%I "Mote" -Section 3104- "Payebleat a ddnite:time"-Section 3 ! 8 "Payable on demand" -- Semn XOI "Payable to bearer" - Section 3 ? 9 "Pavableto ordeP -Section &LC9 - -~

"~Gmenl" --Sebticm . "Person enUUnd lo e n M m -Section 32Q.l "Presenhenf - SecUon 3&C!! "ReacquhlUm'- SectiM1 3-207 "Speclal inoorsemsnc -- SecUon 31.06 "Teller's chedt" -- Section .a@ 'Transfer of instrumenr - Sactlon L.2!22 "Traveiefs check - sedlon X,kl "Value" - Section 3-303 (c) The btlming dMnlUms in other M d e S 811s &We: "Bank" - S&m -5 "Banklng day" -SecUbn 4 a "Clearing house" - Section 'collectrng banr -secbon &tg1 "Deposllaw bad" - S d o n &LO3 'Dacumentarydrall' - Sectlon a "InwmediaIy bank.-- SeCUCr &3@ "Itwn" -Section k,m "Payor mnk" - Sectian +-PI "Suspends pawnenis' -- Saclion &W id) In addition, Artlcle 1 contains general definitions and principles of construction and lnterp.ebtlon applicable ~hrougho~t tlris Anic,e. -

5 3-1 04. NEGOTIABLE INSTRUMENT

(a) kcept as prodded In sub~ccmns (c) and (d). "negotiable lnstrumenr means an uncondfional rmni?~ Or g?&l to pay a fixed amount of money, ~ l m orwithout Interest arother charges described in Ule promise Ororder. i f i t

(1) fi payable lo bearer or Lo)@ at the #me fi is iss@ or first comes into posaesslon of a holder: 121 is navable on demand or at a definlte Hme: and ,-, - , -. r n ,ions not slate anv other undertaklm or insbudon bv the oermn oranmaor orderlna oavment to do anv act In addilioo to the oavrnent of .-, -..- ~~~~, -. - ~ . ~ - , . money, bot the 2m~pi33 or pr&r may &nlrlln (ij an undertaking m p&r b g h , m a ~ ~ l l a ~ i 'orbrobcl callole&l to snwm payment. ilii'an aumorlraUon or pover to the hd&v to rnnlfss ludgment or realize o l or dispC8C d Callateral, or (ii) a waiver ofthe bencfll of any law lnlenaed for the advantaae or ~mt&'ion d a n oMiaor.

(b) 'l&mmenf 8n&&blemm. (c) ~ r \ gdsr that meets a0 d the requirements of srbsec(ioh (a), W p l par;rgaph (1 ), aM onelwise LLls wihin the aehndon d'eheck" on s~bsecbn ifils aGQbb le instiumnt and a @&%. (d) A g(rm;g or dher than a Is not an~strumeqt if at the time it i s m orfhst comes into possessIan of a holder, it contalns a C~S~ ICUOUS slalement, however expressed. to the etfactthatthe pmmise o r d e r IS not negoRable or Is not an instrument governed by this Artde. (e! An imtrutnant k a "note" if it Is a ~ O g $ z and is a -draft* I it is an -1. Ifan i~Sl#7Iment falls within lhe definition of both "note" and "drafl," a g e m &e&@ e n b tho lnetrumenl may tmatit w ellher. {F)'Cheokq' means (I) a other UMn a docxlmentary draft payable on demand and drarm on a b& w (11) a (;~Shi0?5 check or telief3 =her&. An instrument may be a s even thou@ it is desdbed M its tace by awlher lem, s u b asmmmey order." (9) "Carhim's cheeJCr means a &@I with respecttowhtch t h e w ard g@!@ are Ule same bank or brandtes of the same bank. Lh "Teller's check? Feana a & @ d m by a bank (I) m anather bank, or C) payable at or Mraugh a bank. (i) "Traveler's Check" means an instrument that (il Is payable a, demand, (11) is dfmn on or payable at or through s bank, (Ill) is designated by the tern "lravekf's check" w by a subslantlally sirnllarterm.and (iv) Wlres, as a condition to payment, a cwntetsignature by a person whose specimen slanature aooears on.the inslrurnent. L: ' . ~o r t iG le &depostr Aano an instrumnt containing an ackndedgrnent by a b a ~ k that a sum of money has been rewt,eo by w oanr ana a ppnX9 by (he bmk ib repay thesum ofmney. A certiAea~ol deposit 6 a g& elhe banu.

. . .~-___I__._..- --*-.,,- ---..- ..--..-. -̂-"-.-."-- ------.....- _ - - . . . - - - _.̂ .,l..li ,--..- ^-.

5 3-105. ISSUE OF INSTRUMENT

( a ) ,'issue" means the flrst deliver/ of a n a i u m by i h e m w o r @=I. whether to a holdel or nonholder. for the purpose of giving rights on the instrument to any person. (h) An unlsrled QI anudsslled ilcOn19lete m s l r n : that IS cmpleted. is binding on the ~ k ~ o r @?&a[. but nonizs~ance is s defense Ah instrument thet is undlIbnally Issued a is Issued fa e S~ecia) W s e 1s btndlnu on the maker or drawer, but bilure of ths condit on or specla1 nurnme tn be blllled is a rMense. .- .. ~~ . ~ -. (c) ISU~I. apdles U, issuedandunissued inslnments and means a e r n - of an bfmfrumem.

. ... ". ... . . -.<- ... _ . . , _ .. ,

5 3-109. PAYABLE TO BEARER OR TO ORDER

m) A ~!zix ordis payable to bearer if I: (1) stales bat It Is payable to bearer or to the order of bearer or otherwise lndlcates that the person In possesion of the or order is enbliled lo payment: i (2) does not state a payel: or (3) sbtes @at It k p a m e to o r b m e a d oash or otherwise indicates that It is not payable to an i d e n l i person.

(b) A mm@ or- lhat Is not payable to bearer is payable to oder if it i9 payable (i) 10 the Onferdfan identified person or (li) to an identified person or order. A promise or order Mat is payable to order b payable to the idendfied person. (c) An hpt,ru_rny payable ID bearer mqy become payable to an Mentifled persun If it 1s specially indwsed pursuant to Section 3-20:jial. An instrument payable to an IdenUfied person may become payable EO bearer if it Is fndorsed in blank pursuant to Senion +&a.

, , , ~~. ., ~.~ ,-. .....-u-,..-... - " - ~ -.-----. " -.--" " ....

5 3-1 10. IDENTIFICATION OF PERSON TO WHOM lNSTRUMENT IS PAYABLE I

(a) m e persm n, & an h m Is ini6aily va~aWe kdetennined 9 the intsnt of the person, wheftler or nM aumorlzed, signing as, or in the name or behalf of, Me issuer of the insbument. The inrt~ment Is payable to the person intended by the signer even if lhat penon k ldenlkied in the tnstrurnenl by a narneor other IdentiflcaUon that b notthat oithe intended Person. If more than one person signs in the name or beheif d the issuer of an instrumentand all the slgners do not ln@nd the same Person as payee, h e insbument is payable (o any pemn intPndedby one or more of the C1""C"C

(g If (he signalue of h e sign of an InSlIUmenl is made by aulornatcd means, such 8s a check4ling machille ths payoe o( the lhstrument b determined by he inlent d ihn peaon who supplied Ke name orldentificaUm of ole payee, wheher a no1 authorlred to doso (T.J A pemn towhom an hsf-~mg k payable may be idenbed m any vav, fnduding by nane. wen^ number. offlce, or acm~lnt numher For IIIE purpase of dcbnnlnlng the holoer of an butnmsnl, tne folwdw rules m y :

9 3-1 13. DATE OF INSTRUMENT

(a) AD & . I m y oe anled-d lcd p€&aed. T)le date Sli,tEd d ~ r n i ~ lhc h l e 0' payment if me insmmm is pamble ala fie3 partd afiw ddc r;xrml an nrovlocd in Setdon 4JOl(c). an!nsWJmWlt payablcon h a n d is no1 pyabe h d a e Vle datc of!ha i n&mn t . r.-.7 ~ ~ -~ ~~ - (9) ~f an ~ ~ 3 t ~ m ~ n t 1s undated, its dote is me dale of;& &=or, in h case of an rmi~sued instument h e date it 6nt m e s in6 possession of a holder.

,,... . _ ^ ,, - . __ _,.__.__YI.NT".^.X" .-I,-.....-. -11.1- -- - - - - ~ ^~._ ." ..

§ 3-1 14. CONTRADICTORY TERMS OF INSTRUMENT

I f an i n s t n r r n e ~ c n n f a i n s , ~ ~ buns, typewriftffl terms prenll O W primed I w ~ ~ S , handwritlen terms v a n m r both. and words prevail over nwnbers

(1) (fan &s&~m_ent kpayble to an accounl and the acml nt isldentifed on14 by number. the instr~nnenl is payable to the persan to whom the account is payabe if an insfnment is payable to an account idenUfieo by nvnber anc by the name of a persoil, the Insnmenx e payzt!o to 1r.e naned perscn, wether or not lhat penon IS lhe owner cf :he x m l n l KlenU'wl hy ilunbar.

( ) a bust. an estate, or a person described as bustee or repmscn~vc ofa or estate, me -I b payable b lhe astee, tk rcpresenlative, or a sucwsm ofeilher, wheMer or not iiw benefldary or esste is also naned;

(li) a pe.son describer) as a p t w sirn;)ir reolrsentehvc of a n m c d or icemiled person, the mtrwnent b payable to me rer,resetited oprson. the - - ---- - . -- --.., representative, cr a successor of the r~preSnta*%

(I) a fuld or cqnnlzaton that is n>t a lopal enrtv, the ingtlc& 1s payatle to a repremiawe 3f 6 e membws of the hind ac organ~zallon, or ( w ) an off CE? Or to a rerson descibec as holding an olfim. me &tr~~mCtl!iS payable tothe named person. the lnctrmbent of h e off,ce, or a

succes.wr to lhe hambent. (dl If an -I. IS payable to h o r more pmons alkma2vely, it is payable to any dlhem and may be mgolbted, discharged. or enforced by any or all of Ulem h possesdm af the l~strument If an Ins l rmt is payabb to Nn M more perxlns not alternatively. It Is payable to al ot mem and m2y be n~otlated, dbcharged, or mwced Only by all d them. {fan hstrumentpayable b (wo or more penoh- is ambiBuous as lo wheUler 11 is payable to me p- alkmetlveiy, the instrumenlis payable to lhe persons ailerna~jvely.

(a) "Ncgab'atlon" meins a t r a n s ~ o f possession, whe~er Wunlawor involuntav. d an ~nstrurnenf by a person olher lhan tm i_qM: to a person who lhereby becomes I$ holder. (I)) Except for neqotia'tbn by a millel, if an M-WgQ is payable loan IdenMIed Person, neOdlation requires lransfet of pmession of the Instrument and its imjnmernq! by the holder. Ifan instmment b payable to bearer, it may be negotiated by lransferof possesim alone.

. . . ... . .- - L.-......,LIC"- -I-----..---- ~ --..,...--,-.- -,-- -----*--" -,.-.-~-,-,.-.,,--.-., ~" ,",...,,,

§ 3-203. TRANSFER OF INSTRUMENT; RIGHTS ACQUIRED BY TRANSFER

(a) An -1s transfermd & e n it is-d by a person other than l* i&2U tor h e plrpose of giving to h e person receiving &lively the r!ght In enforre the Insth~mmnL

~~

(91 Tmnsfer of an w h e m or not the ~ o s t e r is a p w . $%?32 aQ Ifhe ~ ~ A Q W ~ i h _ e . e a ~ lo enforce thc nsndrnent. lnclucina any rbnt as a holdel.l~ds~co9L3.%, but the tans& e cannot acqulre nghta ofa hdder in due course by a transfer. airecitv a irulrerriv. h3m -- a hoidenn due cause if the lrans+xee engaped +n fraud a ~ilega(ihl affecting me bwment. (2) Unless oiherwlse Greed. if an instiwnent is tansferred lorialieand (hett~nsferee does not bemrne a holder becauseof lack of by the transferor. the bansieree has a spedrixlly enforceable flght tolhe unqualified indanement of b e bansfemr. but nk?g-,of ihe inshurnent does not owur unHl the lndnsement is made. (a) n a tmstemr p u w t s ta hansfer W thav the emin: inskurent. neaotlaboll Of Ule instrmnidoes not occur. The trsnsferee obtains no Gghts under this ArUcle andhe3 only the rime of a padial assignee.

-204. INDORSEMENT

(a) "IndorsemenP means a signahre, olher Wan m t of a signer as %.&e~, &E%K. Or ?!@Z&X. that alone or acwmpanled by other m d s Is made on an fistrumant for ihe purpose of (I) negoihtinQ lhe lnsbument, (ii) restricting paYment of the in5trumen1, or fit!) imumng ~I@L$@ liability on the instrum-egard!ess of L e htent ofthe signet, a s igmre and ib acampanylng wrds is an indorsement unless (he accanpanylng words. terms of the lnsbumenf place of the signature. or o h a clrcumslanw unambiguously intflcate that the signatWe W made for a purpose other than IndorsemenL For Me purpose oidemrmining whether a s l w b r e )s made on an hshumenl a paper affined to the lnsmment is a part d the inshmenL (h) "IndorsBr" meawa person who makes an $dormepl. (c) For the purpose of determlning whether che transferee ofan in$hment is a hofder, an indorsement that transfers a security interest in the inskumcnl is effective as an uIIquallfiW indorsement of the inslnaoent (dl If an inz&rreat is.payable to a holder under a name mat is not the name of the holder, indowment may be made by the holder in the rime stated In me instnnnenl ar in the mldefs name or both, but signature in both names may be requtred by a person paying cr taking the hshnent for value or coliedon. I

-205 SPECIAL INDORSEMENT; BLANK INDORSEMENT; ANOMALOUS INDORSEMENT

( R I 11 an ~ o ~ p z m ; is made by me holder of an ino:ruma, *ether payable to an idenlified persor or payable to bearer, aqd the inoorsernent iden:,np-% a person LO whom It makes the iwbument payaole. il is a "special indorsemen1:When speualy lndoned. an lnshurnent mas payaD.e to VIB ldenllfid person and may be negoueted e d y by the indxsemwt of that Wrsm The prlntiples staled in SecOon 3-11.0 apply tospecial ...-- ""...-..- (b) I: an lndgrmm lsmade by the Maer of an ~mg and it is not a special indmsernml~ ~t is a +-$yrn;nL' Wen indorsed in 'Jiank an instment becomes payable fo bearer and may be nego6ated by transfer of ps€srron alone un spea y t wse ic' Tne node? may convert a blank indorsement tha! ca7SiSfS only ofa signature into a special hdonement by-, above !he siana~ure or the -- indorser, wrds identiMna me persm to whom me ~StrUmBXt is made payable. . - . ,(I) 'Anorn~~sl!1.d6~ernenV means an i_n&zamnj made by a penon who IS nor the holder of thc n~~swrr,e~~. An - ~ O J S ~ndorserrsnt doe5 nol%%i%e manner lr the insmment may be negoralad.

[a) An & & ~ m t limiting payment to a particular person or oUlerwise prnhibiflng further transfer or- oi the IS not effecfive to prevent further lransfer or negallallon of Lhe instrument. (b) An &!spq& slallng a condlllon to the right of the indorsee to remive P'dMnenl does not affect the right of Me indorsee to enforce the irrstri!m.nt. A person paylng ihe instrument Or bklng n for value or coilec6on may disreoard the Mndition. and the rights and ibbllities of that person ... are not affected by whether Me condition has been fulMW. (c) If an invtrument bears anhdorsament (I) desatbed in Section 92ULQ. or Oi) In Msnk or to aparuudar bank ~ m g the words "for deposit." "for wllectlan,'~ oVRr Ards indl!Sing a purpose of havm the insburnent collected by a bank for b e m E r or for a paIUcular account, the Mlowfng rulss aodv: -, , ,

(1) A pmon, other man a bank, vho pmchaw Me mlement "en so indorsed w n w the Instrumen! ttwess the amount pad lor the inshmenl 15 recelved by rhe @Ar.wor applied wnsistenUywith the @Qr.sAEe_nl. (2)A &oosilam bank that purchases the Wmmt or takas it for COUectiOn when 30 indorsed converls the lhstrument unless the amwnt ~.~ ~ ~

pa~d 2y h a bank v~ th respect b the msaument is received by tne ~ d - 3 or applled consistenly ,vith the ,yorsem>- (3) A rayorbank ma1 Is also the ae>oSltaW bank or that takes Le IlsmCnt for lmmedl* payment wer h e M u n c frm a perSon other @en a wilecting bank wnverk me instnnwn! un~ess the proceeb d the instn~mmt are received bv h e moner or aooled wrsistentl\ . ,, wth lhe indorsement. 141 Ek~ent as omeriise urov&d in naraoraGh (31. a D ~ W bankor intermadlarv bank mav disrward he indorsement and is not 1i.h~ if the

~~ . ~ . ~. . ~, .- - ~ - ~

proceeds d the imhument are not r&ei&l'~y Be J&-! or applied ~miSh?jlIIy Wh the ln&e?t. cd) Except for ar &daefn-mes covered by J u b d o n (c), if an &+%mat bears an Indorsemen1 using words to t?e dfect that payment $10 w maos lo the ,odorsee as awn1 trustee, or other Ldgclay for lhe benett of the i139ls.e~ of another prsnn. the lollowlng rules apply.

(1) ~nles'there is n o t i i of Breach duty as provided in section w. a person who purchases the a- from the indorsec or takas ihe instrument from the lndorsee far collection or payment m y Pay the proceeds of paymentor the value given for the Instrument to me Indo- &wl reaard to Mhether Lba indcwsee vlubles a Rduoisw duty lo the indomsr. ..~ .~~ ~ - . . -. (2) A subsepucnl transferee d the W n c n t or person who pays the insbunent is Wlthet given notic8 nor o lhewe affected by the restncnm n me ~.nd_m.mW u n b the transferee or payor k n m m t the luLla~ h i 1 w~th L a tnsmvnent or itn pmoends in breach of fdueinv d~tv.

(e) The presenceon an inSnument Of an indorsemenl to Which this seEIlDn applies does na Prevent a purhasr of the Instrument horn booming a tm dm in due m e of me insrmment Unless the purd7aSer IS a m under s u b s e c t i o ~ o r has nolice or knowledge of breach of m a % duty &'slated in s~%actich la). -- ~ -~ .~ ------ ,-,- (I) In an aclton rn enurce the obl1g0llOn of a 19ny lo pay (he ~nslr~rn~~nl. he obmf has a defense if payment would viola:e en mdwsemeQ 13 W.ch this secbon ap~ilcq and the payment is not penlfled by We secnon

Cj 3-301. PERSON ENTITLED TO ENFORCE INSTRUMENT

"Person entitled to cnlorce. an ~ L R I ~ J ~ means (I) the hdder of the inshvmen(, (ii) a nonhdder in pwsession d lhe instrument who has the righls of a holdcr. or (111) a person not in possession of thc Instrunml who !s~.&~..tp e W . . * e Instrument pursuant to .&dim ~ . & & U & e r s o n may be a person en'n!ed toenforce tnc instrument oven though the prson is not the m e r Of the instrumenl or Is in wmngful possession of the inslnrmant.

§ 3-302. HOLDER IN DUE COURSE

Ial Subiectto subsecllon fc) and Seth HQL61dl. "holder in due coume"means the holder of an instrument It ~. ~ ,~ - ( I ) the imqgmtt when <&&or neJoaated to the hdder does nol bear such apparent evidenca of bgery or @r&on or is rot olhnuvisc so

incgulnr or Wunpiete as to call Into queslim iis auVlenHdty; and ji) the holder w the jnstrumwt (I) for value, (11) in soad (iii) without notice that the instrumen1 is overdue or has been dishonored or mat

there is an uncured default wlh respec! to payment of another iffitmen1 &E! as part of the same serks. (lv) wlthwt notice that the instrument contains an unauthorized signature or has been altered, (v) wiihout nonce of any clalm to the instrument described in Section ?a, and (vi) without notice that any has a defense or claim In remupment desfflbed In SeCtlffl m. (b) Notice of discharge ofa m, other Ulan dischame in an insolvency proceeding, is notnotfce of a defense under subsection (a), but discharge is effec&e against a person who became a holder in due course &th noUce of lhe heiarge. Public fillng or remrdlng of a document does not of itself mnstiMe noUce of a defense, clalm in remupment Or clam to the imtrumeni (c) Except to the extent a bans(eror or predecessor $0 Interest has rights as a h m i a w o n does not acquire rights of a holder in due course of an imUnmJ taken (I) by legal process or by purchase in an execulion, bankruptcy, or creditoh sale or slmliar proceedlng, (n) by purchase as part of a bulk transactbn not in mlinary murse of buslness of the transferor, or (lii) as the successor In Interest to an aptate or other organization. (d) !f, under Section 5303(a)(1), the emnls~ of performance that is the consideration fw an instlument has been paritally performed, the holder may assert righis as a holder in due murse of the instrument Only tothe fractfon af the amount payab(a under the instrument equal tothe value of the parilai perkrmance divided by the value of the pmmised performance. (e) If (I) the Parson entiladto e n f m an inslrumen! has only a security interest in the tnsbument and (1) the person obllged to pay the instrument has a defense. claim in r e m u m n t or dalm to the instrument that may be asserted against the person m o granted the secuiitv interest h e oerson entitled loenforce the inshment may assert rlghh as a holdewwe Only to an amount payable under the rnstrumentu+?ich.'al thb time of enfoment d the inslnment does r d excaed the amcunl of the unpaid W a l i o n SeoJred. (0 To be effnrive, ndice must oe received a1 a time end in a manner that gives a reasonable opportunity to act on 't. (g) This secuon is sublect to any law itmilin9 Status as a .h_rIer in due course In particular dasses of transaclions

- . . . . ... -. . ..--. -..-* -,-, .---.-- --,---.-- - .--.7.-------,.v.-.,

§ 3-305. DEFENSES AND CLAIMS IN RECOUPMENT

(a) Except as stated In subsecnon (b), the dght to enforoe the obligafion of a pay. to pay an i&me@ is subject to the following: 11 \ a defense bf the oblioor based on 0) infsnni of the cb l i i r to theeXtenlBiS a defense to asim~le contract, III)duress. lack of boa1

'capad& or illegality i f thetransactjon nhicli. under othir law. nullthes the obligation of the obligor, (iii) baJd tkat induced the obigor lo s,gn Ule &grne_n! Mlh nmiiher knowledge nor reasonawe oppatonilyto lcam of its character or I& essenua' tenns, or (iv) dlscharge of h e nhllmr In lnullvenm omcsminas: 7~ ---- ~ .."~.

(2) a defense bfthe obllgor stated in another section of thls Arncle or a defense of ihe obligor that would be available if the person entitled io enforce the.- were enforcing a right to payment mder a slmple contract; and

(3) a d a b In remupment of ifw obiigw against the wlginal w e e dthe kl%&m!3 if h e claim a r e fmm the transactbn that gave r!se lo the InsIrumenSjbut t'm claim d the obligor may be asserted against a trensferee ofthe lnsbument only to reduce Ux? amarnt wing on the Instrument at the time the action is bmught.

(b) The rQht of a -Un due course to enforce the obligation of a to pay the instrument is sublect to defenses of the obilgor stated in subsection (aJ(1), but:ls not subject to defenses of tha obligor stated in subsection (a)(2) or claims in recoupment stated in subsection (a)(3) against a aerson other ihan the holdsr. - - ~ ~-

(c) Except as stated in subsectton (d), m an aclim to erfon;s Iha oblQaSon Of a @BY to Pay Ule b s h h ~ n ! , the obligor may not assen against the persogs~~le~o-.&_r~ the instrument a defense, clam m emupmen4 a chlm to (he lnsfnrnent (SecUon 3%) of anotherpenm. bul the other oes0n.s daim to the lnsbumenl mny be asserted by the obllgor if Iha other pemn k ioined in the action and oersonallv asserls he daim aoainst the person enbUed lo enforce the Instrument. An 0MiQOr k not obibed to Pay ihe imbumenl #the person seeking enforcement of ihe instrume~does not have rlohis of a iiolder in due course and the obllaw proves that the inshument Is a lost or stolen instrument. - - - . - . - - . . - -- (dl .n an fiction 10 enlwce the obllgalon of an accommodation p a y lo pay an mum%!. Vle accommodaSon party may aswt ags,nst the p g - ~ gg!,[email protected].!p&nka !he instrument ary defense or clalrn In recoupment under subsection (a) thzt the acmmmcdaled party could assert aga:nst the person erUded to enforce the instrument, except the defenses of dlscharge in insolvency proceedings, infancy, and lack of lcgat capacity.

- . --" .- ---- - -.----- ------- -"- ----"..--".--" ---- 5 3-306. CLAIMS TO AN INSTRUMENT

A person taklng an inslnlment, &r ihan a person havlng righis of a holder in due course, IS s U W toa clalm of a pmperiy or pcssessory rignt in ttle inshumenl or Its pmeds, Including a dalm ID resdnd a neuotietion and m recover me Instrument or its pmceeds. A person having righis of a holder in due course takes free of the claim to the Inslrument.

5 3-307. NOTICE OF BREACH Ob ilDUClARY DUW

(a) In thls section: (1) "Fiduciary^ means an agent bustee, parher, mmorate olficeror director, or other representative owing a flduciary duty wth respect to an instrum8u. (2) "Represenled person" m y the prlmipal, b-Wary, ParblershiP, Wrparaiim, or other person to whom ihe duty stated in paragraph I f \ la owed. \ , .-

(b) i f [I) an m m t is iaken fmm a fiduciary for payment or cdlection or for value. (li) the taker has howledge of the fiduciary status of the fiduclary, and (ill) the represented person makes a claim to the Insbumenlorlls proceedson the basis that the transadon of the fidudaly is a bream of nduclary duty, the following rules apply:

(1) Notice of breach of flduciary duty by the fiduciary is notice ofthe dalm of the representedperson. (21 in the case of an instrument payable b the represented person or the fiduciary as sum, the taker has notice of the breach of fiduciary

duty If the instrument is (i) taken In payment of or as seGurltyf0ra debt known by the taker to be the personal debt of the fiduciary. (ii) taken in a transaflbn hnown by the taker to be for the personill b e M t of the fldudary, a (3) depositad lo an amount other than an account of the Rdudary, as such, a an account of ftm represented perm.

(3) If an lnxtri~ment is by the represented person or the flduciary as such, and made payable tothe flduciary persanaify, the aker does not have notice of the breach of fiduclaw duty unless the taker k m ofthe breach of fid~lclarv dub. - ~ , - ~ ~ , ~

(4) If an Is . z zee~ by the represented p~rson-or the ikiuclary as sLch, to the taker as payee, the taker has notm of Vie Dreach of fio~clary auly if the lnsrnment Is (I) !anen ln payment d or as security for a deb: k n m by Lhe taker to be the personal debt of the fddclary. (ii) $ken in a rransacYon Known by the taker m be for the persoral benefit of the fldudaw, or (Ill) deposited to an account other than an acmunt of the Rduoiarv as - .-. such, or an acmunt of the represented p e m .

- "--..- - ---- - 5 3-308 PROOF OF SIGNATURES AND STATUS AS HOLDER IN DClE COURSE *

(a) In an adlan 4th @spect to an inspment, the authenticity of, and authorlk to make, each signature on the Instrument Is admitted unless spedlicaiiy denied in the pleadlnas. Bthe valMityof a signature is denied in the pleadings, the b~rrlen~Of~d?MAh~p--~_atig~+ ,O~epemdaimlng.-.

a t y , b u m g n a b r e is presumed to be autheniic and auih&!atniess the acllon is to en- Ule liability of the purported signeiand Me signer IS dead or inwmpetent at the Ume of trial of the issue of valldity of the SiQWature. If an actlon to enforce the imminent is brought against a person as

, the undisdosed prlndpal of a person M o signed the insbument as a W tothe instrument the plaintiff has the burden of eslablishing that the defendant is liable on:W inbument as a ~uresented mnon under Secllm&Bk'k3l. (h) If the validity of slgnatures Is admlited or omvsL[ and there is compliance wlth subsectlon (a), a plalntlff producing the -is entitled to payment If ihe plalntlfl proves entitlement to enforce the iffilrument under Section % unless the defendant proves a defense or clalm in remupmenl. If a defense or claim in recoupment is proved. right to payment ofthe plaintiff Is subject to the defense or claim, except to the extent

, the plalntlff proves that the plalnttff has rlghls ofa holder In due course which are not sllblect to the defense or mim.

-"---- -.---- "."---- < ~ - ~ . . , .. ..-.-.,.-.,-- ---....-- ---.---r-__.m""" .hi-"

5 3-309. ENFORCEMENT OF LOST, DESTROYED, OR STOLEN INSTRUMENT /

.nj A person not in possession ol an &5m!3 Is entled lo enforce the IIIslrIlment If (i) the person was In possession of the insirdment and enUUed . j to enforce ir when loss of msvlsslon ocmrred. (ill the loss of Possession was not :he result Of a trannfef bv Ule person or a l a h l semre. and I i I tne - , ' . , oi(Son cannot reasonabl; obtain oossession uf the instrument bsca~se the lnsbument was destroved. Its whereabouts cannot be determfnedl dr i is r.,.-,..- ~. ~ ~-~

In the urrnnoff~l anssessiin of an "nknown oerson 0r.a oarson hat cannot be found or is not amenable to se~ lce oforocess ..,-,--7-.z- -._._i - -~ - ~~ ~ - -

fb) A person seeklng enlorcement or an @s&m.& under subsedon (a) must prove the ferms d the lnshufrenl a n d 7 G e j n s ri&t.N enlace h. Instrument. If that prmf $ made, Sectlon 3-3008. applles b tho case as If the person swking entorcament had produced the inshumen1 i T c e m a y

-men1 In favor of the persm seaking enforcement unless i t Ands that he penon required b pay the lnslrument is adequately protected c -

. / agatnstrms thxtiii@iocwr by reasan ofa claim by anornerpersan ta enfnoe me instrument Adequaie piotectlon maybe provid&l byany ,\i~Y%. -- . , , . . ~ ~

. . reasonable m m . , . I , , - -.. , . . ~ ~ .

.-".,.".. ,. * ,.,-.. ~ ..--.-.- < ~ w - " ~ ~ . - , " - - - - m ~ - ~ m m - m * s - - . " = - - ~ -..-"---m,-m---, "" ,..--m.ae-..

, Cj 3-310. EFFECT OF INSTRUMENT ON OBLIGATION FOR WHICH TAKEN

(a] Unless medse agreed. If a e t J d & . Whiefs check, or telleh check k takol for an obligation, me obrmation is discharged to tho same extent dlschawo -Id esull If en amount of money equal to the amount of the ikc4rument ware taken In payment of lhe obllga6on. Olschar6e of tte obllaatlon does no1 affect anv l a W UIal tthe obrww may have as anjm@rSss of the Instrument. (b j'Gnless otherw!se agmedand ex+ as provided in s u b s e a (a), if a @ oran u n m e d && is taken for an ObliQatlOn, the oblQatian Is suspended to the same exlent the obligation would be dmmarged if an amcunt of money equal to tM amount of the ~~~ were taken, and the fol hang rules apply:

(1) In the case of an unoerllfled -heck, suspension of the obligabon mnUnues until dlshonor of the check or until '1 Is pala or cemfisd Pamen, or cetlfication of the chgk resulk in discharge of 'he obllgatlon to the oxtent of tho amount of the chock.

(2) In the case ofa suspension of the obligation con~nues untli dishonor of Ule note or unCl it is paid. Payment of the note results in discharge of the obligatlon to the extent of the payment

(3) Except 6s provided In paragraph (4). if me $&&a 4s dishonored and the obligee of the obllgatlon for whlch the instnimenl was taken Is the nolr enfitled to enfarce UM insfnnnent the obligee may enform ellher the insbument or Me obligalion. in the case of an instrument of a thlrd & whim is negoWd to the obligee by Ib cblklor. discharge of Um obligor on Ule instrument also discharges the obligation.

(4) ~f the eerson entitled to enforce me i&maeet taken for an obligation is a person other lhan the obligee, the obligee may not enforce the obligation to tho extent the obllgatimn is suspended. If the obligee Is me person entitled to enforce h e instrument but rw longer has possession of it because It was lost, stolen, or destroyed, the obligation may not be enforced to the extent of the amount payable on the Instrument, and to that extent the obligee's, righh against the obligor are llmited lo enfoment of the in~ i~ment .

(c) if an instrlrment other Vlan one descmed in subsection (a) or (b) is taken for an &ligation, the effect is (i) lhat stated in subsection (a) if the instrument Is a on which a bank is liable as & or- a fii) that sfatad in subsection (b) in any olher me.

I, -

California Civil Code $2872 A llen is a charge imposed In some mode olher than by a transfer in trrstupon spedtic pmperty by whlch It is made securitytor the performance of an act

California Civll Code .§ 2909 A lien is to be deemed acocssory a the act b r the performance of Mich i~ is a secuw. M e r any person b bwnd b & performance w not, and is extinguishable in like manner with any olfieracmssory obligation.

California Civil Code 3 2922 A mortgage can be created, renewed, or exbnded, only by uniting. Wecuted with me formallties required b the m e of a grant of real pmperiy,

California Civil Code § 3440

ia: Except ns oihnruAw pmvldod in hls chapter, e v w trader of Personal ;Impwry lllrde by a person having at Re time me pogsosslor of the propew, and not acmnpanieo by an immediate dellvery fnl lotd oY an actual an0 mnlinued change of pussession of the property, b vo.d as against the transferors cmol!ors (secured or ~nsecured) at tne Ume M L e transfer aml thme who bccmne nwfilors Wle the banstemr mmans in possessIan and the s~cessors in interest of those m m r s , arrl as sgatnsl buyers (rcm the tramforor hr d u e h good faih sunsequent lo M banster.

(bl As used in lhls chapter 'crediw mans a p m n who has a clam, as defined In Section 3439.01, and ilcludes an asslonee of a genera ~ssignrnent for the benem of credltars, as ddned in Secikm493.010 of h e Code d C M P d u r e , ofa deMnr. Creditor" also inclUdes any p e r m to d m m h e bsnsferor3 estate devolves In bust b h e benefit of persons otnerman the tmnsferor. Any such assignee or truslee may exercise any and an the rlghts and remedies specified in lhis chapter, I1 t h q are mailable to any one or rnm mditors of the asslgna mnsfemr who are bsneficlaries 01 the assignment or trust, and, in that event (1) Only to the extent the rights or rernedles are so available and (2) only for me beneft of those creditors whose rlghb a r i asserted by the assignee or trustee. Lad modlied: January 75,2071

CALIFORNIA COMMERCIAL CODE 1 9313

(a) Excepl as otherwise &d in subdlvls(on PI, a secured party may wfecla securily Interest h tangble negotiable dmments. g m h . insbumenb. money, or tang'ble ehaW paam by taking po.%zc&on of me mllahral. A secured party may perfect a socurlv interest in cerlifcated securltles oy Wing delivery of Ihc CarKcatw secxltles u7der SectJon 8301.

(b) ~ ~ t h respect to goods covered by a certificate of U H ~ Issued by this s ~ t e , a secured party may perfect a security interest In the goods by $king p-ssion of the goods only in the clrcums?ancss described In suWIviSilan (d) of SBction 9316.

(0) With respect to mllateral other than cerwicated securities and goods covered by a dmumenl, a secured party takes possession ofcollateral In fie pomssbm cb a pesyan o~herman the deW, the secured party, or a lessee of the &lateral fmm the debtff in the ordinav course of the debtof* business. when ellher of tt;e following mntilllons is satbiid: (1) The person In possesdm au(henUeak5 a r e a d admmledgiW that It holds possession of the cdlateral for the secured paw's beneflt. (2) The person takes possession of the mllateral alter hsvlng auUm6cated a record acknnowledh 'hat it wS1 hold possessm of rxlltateral far.the seured

patty's benefft. (d) If periwtlon of a sewrltylnterest depends upon pOSseSdOn Of the ColiaW by a secured Party, perfection occurs no earlier than the time the secured

parly takes pposesslon and continues only whlle the secured party retains possession. (e) A securlly interest In a certlftcated security in registered form is perfected by delivery when dellvely of h e cerfiflcated security omrs under Section 8301

and remains perfected by del@ryunUl the debtorobtains pmse~s i~n of the security oertlffcaie. (f) A person in possession d mllabml Is no1 required to acknowledge bat it holds possession for a secured paws benei7t (g) If a ~ r s a n aclmoluledges bat A holds pc~esslon for thesecured paws beneflt, both of La b W n g apby: (I) The ackn&dgment Is e m under wbdivislon (cj n undersubdiision (a) of Secgon 8301, even If me acklw&dgmenl violales the rights of a debtor. (2) Llnless be person othenvlse agrees mlaw Other man lhiS divlSbn otherwise ~WJkks. lhe Person does nol owe any duly to the secured pady and Is not

requlred to conflrrn the Bcknowladgment to another person. (h) A secured party having po&ession of colateral does not relinquish pcssessbn by dellverlng the collateral to a pervon olher than the debtor ar a lessee of

me collateral from the debtor in 'p ordinary course of the debtor's business if h e person was hstmcted before lhe delivery or Is instructed mntemporamusly with the dellvev to doelther d the following:

(11 To hold possession of the Wlateral for the secured paws benefit (2) To redeliver Re oallatem lo the secured party. (I) A sea^ d&s not&lnquish pmsesslon. even if a di3ke1~ under subdivision (h) violates lhe ilghts of a debtor. A person to which collateral is

delivered undersubdlv)sion (h) does not o v l ~ any duly to &e secured party and is not reprlred to amfirin the delivery to another person unless the person othelwlse agrees or 1hW other

than thls dlvlslon otheiwlse pmvldes. Lastmdkd: January 15, 2011

California Commercial Code 5 9314

(a\ A securitv interest in lnvesbrient prweriy, deposit acmunts, letter-ofuedit rlghk, electmnlc chaw paper, or eleelronic documents may be perlected by control of th i colbteral under Section 7106: 9104,9105,9108, or91078

(b] A securlly interest h deposit aoxunls, elecbonic chaUal paper, leller-ofuedlt rlghts. a elecbonic documens is perfected by conlrol under SecUon 7106. 9104,9105, or 9107 *en the searled party obca'ms mntrol and remains perfected by mnml manly while the searred party retains conlrol.

fc ) A securllv lntcreat in inun&nt woasm, B ~orfected by mnbol under S~c I im 9106 Wom me time ihe sewed party obtalns control and remains pmected >.,. ~, , ~. . by mnlrol untll boUl of the foftowing mnd/tlc& a& satisfied:

(1) The secured paitfdoes not have control. ,-, ... .- -. .. ." .= --- -. (A) If Me colbleral Is a certllkaled securlly. me debtor has rn acquires p-m of (he scwdty cRmtcak. (R) If Ihe iollateral is an unc€rWmled ~ u r l l y , the issJer has registered or registers gr dobbr as tno rcglstered ower. (C) I f (he colLqRral lr, a secudly onmlemom the debm 1s M becomes the emitlemont holder. Lesl modified: January 7 % 201 7

15 USC 5 7001 GENERAL RULE OFVALlDlN (a) In sensral

Nolwilhslandingany salute. regulation, or other rule Oflaw (other than thissubchapter and subchapter I1 olthis chapler), wlM respect toany trarwction in or

afiecllng InlersMe or forelon mrnmerce--

(I) a nbnature, mbd, or other remid relahg m wdh bansaction may not be denled legal erect vafidii, or enforcoabllity solely because It is In electronic

form: and

(2) a mnmct relating to such transaction may not be denied legal effect, valldlty, orenfwceablBl~ sdely because an el&onlc sigrature or electronic record

was used in its formation.

(b) Presewatlon of righls andobligations

This ylbchapte- dDes no&

(1) Ilmlt. alter, a o l h e ~ s e affect my requiremenl imposed by a stam, rsgulaHon. or m!e of law relating to ihe righa and obllgation6 of persons under such

statute, regufatbn, or rule af law oWr th;n a rwlrement hat oontraets w omer reoords bewMtcn, signed, or in nonelectronic form; or

(2) require any person to agree lo use or accept elecmlc remds or elemonlc signatures, Mwr lhan a gsvernrnental agency vvifh respsct to a record other

than a contract lo which it is a pary.

Ic) Consumer dlsd~sures

(1) Conaent to etuctronlc r e w r d s

Moldthstandlrg sub5ecflon (a) of th~s sectlan. if a sw te , regulation, or other mle of law requires that lnmnnathm relating to a trensach ar transadbns in or

abciing interstate or forelgn oommerce be provlded or made wailable la a mmurner in writing, ihc use dart dectroeic remd to provide or mae available

(wtlichever is required) such infmaHon saUsfles the requirement mat such informam be in writing If-

(A) the consumer has affhmatl~lynnsentea msuch use and ha3 not withdrawn such cowanr,

(8) the consumer, pr in lo amsenting. Is provided Mth a dmr and ampicuous statement-

(1) iniormlng the mourner cd

(I) any dght or optlan dtha conSumwto have the record provided or made available on pa$m ar in nonekctronk nmn, arm (11) the right of the mnsumer ta Wlthdraw the consent b3 have the record Provided or made available In anelecbunicform and or any condimns, consequences

(whlch may indude termination bf me parlies' relatimshlp). or lees In me went of such wllhdrawal;

(ti) intormlng !he mnsurner ofnbther the consent appRes

(I) only to the particular transaclh whkh gave rise to h e obllgatim to pmvlde ih? herd, n (11) lo idenUfied categwtes ofreCwds lhat may be provided w made available during the course of the parties' relationship:

%I) describing the procedures Lhe mwmw must use to withdraw mnssnt as pmvided In dausetl) and lo update infmmabm needed to conte me consumer

alectrcmically, and

(lv) informin$ the consumer

(I) how, afterlhe mnsent, the mnsumer may, upon requW, obtain a papcr copy of an elactronlc record, and

01) wkhe r any fee WM be chaged for such copy:

(C) the consumer-

(I) prlor to wnscnting. is pmvlddmith a statement of ihe hard- and sOffWare requirements for access band retenlion of the elecuonb recows: and

(11) consentseleclronically, or wntirms his or hercOnsentelectonicafly. ina rnannerfhatreasonably demonstrates mat um consumer can acDsss ilfomation in

the electronlcform IhatMil be used lo provide the ihforrnation that is (he subject of lne mwenl; and

(D) alter the consent of a mnsdner in accordance With subparagraph (A), if a change in Re hardware cu software wulremenb needed lo access or retain

electronic records creates a material risw Vlat the consumer will not be able io a w w or retain a 9ubsequent elactranlc remrd Aat was the subjectof the

mnsenl. Hre person pmvldlng Re clecbwtk recMb

(f) pmvldes the ~msumer w.lth 6 statement of

((1 the revlsed hardware and solhvare reqolrernenls tor access to and retention of Ae electronic remrds, and

(Ill the rlght b Mthdraw consent wlthout the imposllon ofany rees for such withdrawal and without the irnpwitlon of any mndifion w mnsequence that wag not

dlsciased unaer subparagraph@)(i); and

(B) again cwnplles wllh subparagraph (c).

(21 Other rlghts

(n) Preservation of cansumer pmecuons

NoUllng in thlssuhchap(eraRecb me mntent a Ihning of any d'sClosUre or O m u record required to be pmvided or mdeavailabk to any nnrswer under any

slatute, regulaUm, or other rule of k-nv.

(8) Veriflcatian or acknowledgmem

if a law that was enacted prlor to mls &ap:er expressJy requires a record to be pmvided or made available by a specified method lnal requires verification or

acknowledgment ai recefpt. the record may be provided or made avai lableele~lcaly only if fhe method used provides VeriREaUon or acknowledgmenl of

receipt (whichever is required).

(3) Effect of failure to ablqln ekmonlc carsent or Connd0n of COUsent

The Isga! effectiveness, valldty, a enforceabifityof any mIract erecutW by a wnsumershall n O l Se denied solely because of the hilure to obtaln electranlo

conwnl or ~nfirmailrm d cmsent by thsl consumer in accorchnce wlm paragraph ('l){C)(Il).

(4) Prospeclive eflect

Withdrawal of m e n t by a cmsumer shall not aReCtthe legal effeclivenes, validity, a ' e n f o m a b ~ of electronic records provided or made available lo hat

consumer h~ accordance wilh paragraph (1) prior to ImplementaIiGn of the mnsumr's wimdrawl of consent A consumer's d thdraal of consentshall be

effective withln a reasonable perlw of U r n *receipt O! the Hdrawal by Me Provider of the recnd. Failure to comply WUI pgragraph (I)(D) may, st ihe eledlon of the consumer, be treated as swithdnwal of mnssnt for PlvpDseS of this paragraph.

(5) Prior consent

Thls sukectlon does not apply fa any records that are pmvMee or madeavailable to a consumerwho has cornentea prior to iheeffedve dele of this

subchapter lo receive such reoti* In elecmlc fonn as uemltted by any stable, regulation, or oQmr rule of law.

{ B t Oral commun ldom

An oral comrnunicalion or a -dig ofan oral ~CmmunlcdUon shell notqualm as an eleclmnlc rscord fw purposes of mls sunsecton except os othernise

provlded under applicable Iw.

(d) Retention of contracts and records

(1) Accuracy and acce9siblllty

If a stawte, regulatkn. or Mher rule of lanr requires that a CUn!mGtorOther remrd relating to a transaclion in or afbcUng interstate or foreign commerce he

retained, that requlremant 16 met by rel2lnjng an efectmnic re& of Me informalon A1 the contract or omw r ~ m d mal-

(A) armraaly rdects Information set falh in the cantract or other IEC&; and

(B) remalrs aeFessible b 311 peisons w'la are entined to acmss by staute, reguiaum, or rule of law. for me period required by such Gtatute, r&gylatim, or rule

of law, ln 2 fm~ ma1 Iscapable d being accuralely reproduced for later reference, Melher by lransmisslon, prlntlng, or otherwise.

(2) Exceptlon

A requirement to reMn a contract or athm record in accordance wim FQraph (1) does not apph, I0 any InfonnaNm whose mle purpose is b enable the

contract or omer rocord to be rent, mmrnunic;rIed, or rmxbd

(3) Orlglnals

l fa statute, regulation, or aher rule of law rsqulres a ambact or Olher record relating to El bansactlon In or alfeGting interstam or foreign commerce to be

provided, available, or refalned in lb orlginal form, or p~v ldes COnSeqU5nCeS if me WnbaCt or dtlerrecDrd is n d pmvided, available, or retalned in I$ origlnal

iorm, that staluta, regulalbn, or rub of law is satisfied by an electronic recnd that COmplies with paragraph (1).

(4) Cheeks

( fa s t m , mguhhn. or other ~ l e of lawrequkes the refentlm da check. mat requirement is sa~sflal by retentton of an electronic ward of the information on

Me hunt and back of me &I& In amdanee vvlth paragraph (1).

(el Accuracy and ability to relbln contract6 and other records

No~thalandlng sr~bsection (a) of thlS SeCflOn, if a Statute, regulation, orothar rule of law requlres lhal a contract or other record relating ta a transaction in or

affoctlng interstale o r fomn mmrnem be in wrlUng, gle legal &ct, validity, or enforceability d an elenronic record of euch contract or other recmd may be

denlad if such eleclronic record is not in a form Mat is cspaMe of being retained and a&tely repmduced for lleter reference by all parlies or Oersans MM are

ontlhd to retah Le con!ractor@her remrd.

M Pmxhnlhl Nathhg in this subchapte~a~ects the pmximify required by any statute, reoutatlon, or ather rule of lawwith respectto any warning, notice, dlselosure, or other

record required to be pmfed, dl?,piayed, or publicly affxed.

12 USC 5 2605 QUALIFIED WRITTEN REQUEST (QWR)

(el Duty of loan senrlcer to respond to borrower inqulris

[I) Notlce of recelpt of lnqulry

(A) In general

If any sorvioer of a fsderallyrelafed morlgage loan receives a qu&& Written nquesllmm bMnrwer (oran agent of ihe fKumw!r) for informason retalng to

the sewlclng of such loan, the selvlcsr shall provide a writian response acknowledging receipt OoltheEorrespondence Mthln 20 days (exdudlng legal publlc

halldays, Saturdays, and Sundays) unless the action requested is taken wlthin such period.

(B) Qualifkd wrltten request

For purposes of this subsemon, aglaMed ledluen request shall be a duen mrrespondanm, other than notice on a payment coupon or olher payment medium

supp4led by h e senrlcer, that-

(I) includes, or otherwise enables the sewicer to identify, the name and accounl of the bonanrec and

(11) ~ncludes a statement of 7le reasons for be bellef of the borrwder, to Ihe extent applicable, that the account is in ermr or provldes sumcient delall to the

servlcer regardlng other inforrnatlon sought by the borrower.

(2) Actlan wlth respect toinquiry

No1 later than 60 days (emding legal pubUc holidays. SahiVhYS, and Sundays) afler the m l p t from any bomrwer of any quailfled mitten request under

paragraph (1) and, if appllcable, More Wring any action wlth respect m the Inquiry of the bwmwer, the sewleer shal!-

(A) make appmprlate cortectiom in the account of the borrower, includtng the crediting of any late charges or penalt l~, and transmit to the bornower a ~ r ~ t k n

noUAcaUon of such correction (which shal Include the name and t e l ~ ~ h w r e number of a represenmFve of me servicw who can proviUe assistance m the

borrower):

(8) after conduchng an invcstlgaIhm, pmvlde the borrourer~'4th a explanation or clarilication that Indud*

(Q rn me extent applicable, a statement dthe reasons for whfch me senmr beUevas Me m n t of the D C H m e r IS mmcl as determined ~y Ule semcer; and

(il) the name and telephone number of an hdividual employed by, or the office or aepament of, lfle semicer who can pmvide assisiance tn me borrower; or

(C) after conducUng an lnvestigatlan, provlde the borrowerwith a written explanatlm or ctanticatlon that lndudes-

(I) informallon requesled by the CmOWer or an eXplanation Of Why the infOrrnatl0n requested is unavailableor cannot be oMained by the servicer, and

(11) the name and telephone number of an individual employed by, or Me Office or aepamnent of, Me SeMCer wile can provide asslslance lo the bcrmer.

(3) Protecllon of credlt raHng

During the GO-day perlod beginning on Ule date of the S d i r ' 5 receipt from any borrower 01 a quallRed mlften request relaling to a dispute regarding the

bormwefs paymenfs, a m i c e i may not pmvlde infamation regarding any overdue payment m m ~ by such h w e r and relating to such perlod or qualified

wltten request, to any consumer reporting agency (as such term Is defmea under section 1681s of ntle 15).

(9 Damages and ca t s

Whoever falls to comply !Mt? any pmvtston of fils sectian Shall be liable to the bonower fw each wch iallure in the fdiowing amounk

(1) lndlvlduals

In rno cwe d any act~an by an individual, an amount equal m the sum of-

(A) any a w l damages to the burrower as a rasul ofthe failure; and

(6) any addlNonai damages, as:the counmay allOW. in the caw Ma Pattern or practice of noncomplisnce with the raqulremenh; ofthis section, in an amount not

to exceed $1,000.

Civil Code 9 1185

(a) The ackndedgnentof an lnshnnn?shan not be taken unless he ofhcer Bkhgi l has SaWctoryevldence that Ihe person m a w ths acknowledgment is tlie nalv dual who 1s described in and who erecukd the Instrument.

(b) For lhe pwposes of t h l ~ section "sahsfactory evidence' means the absence of any infomation, evidence, or Mher circu~~~sbnutls t~a t WUIO lead a reasonabln person to selieve lnat tys perJon mahlng lhe acknawledgmenl is n01 h e individual he or she clahns lo beand any one of the folbwicg.

(I I (A) The oah or al?hnatlcn d a credlbk wlhess peiXrnaW known to the officar, whme I d m W b prcven to the officer upon presentanon oc any dncdmnl sausfvlrm the rermlremenfs of paragraph (3) or (4). hat the person making the ackmedgment LS persanally lodown :o the witne~s and mar each of

(i) 'The personmaklng the ackndedgment is ihe pecson nameu In Ule dacument

(il) The person making the acknowledgment is personally lorown tu lhe wimess.

(lli)That it Is the masonable belief of Ule wlQtess ths4 the drwmlanoes oftbe person maklng the acknowledgment aie such that It would be very diiRcull or lmposslble for that person to obWn anoiher fam of IdenUFicaHon.

flv) The person maldng the acknowkdgment does nc4 FuSsess any of ihe MenMlcalim daxrments named in pwagraphs (3) end (4).

(v) The Lwtness does not have a financial interest in the dcCument Lleing acknowledged and is not named In the document

(0) A notary publk whovlolales this sectlon By failimg todtaln the satishctory e ~ l d e n ~ e requlred by subparagaph (A) shall be subject to a dvll penalty not exceeding $n mausand dollars ($IO.W(I). An adon K! imp= thi5 cfvil penally m y be bmught by me Secretary of Stale in an adminktrativs proceeding or any public prosedue in supeflw ccurt. and shall be enforced as a civil Judgment A public prosecutor shaU inform the secretary of any civil panally Imposed under Ulls subparagraph.

(2) The oam or affirmaflon tjnder penally af perjury oFtm credlhb witnesses, whnse Identities are proven to h e oficer upon the presentation of any document saUsfying the requirements of paragraw (3) or (41, that each statement in paragraph (1)of this SuMivision is kue.

(3) Reasonable reliance cn the presenhtion to the officer Many one of lhe loll ow in^, if (he document (3 mrrenl or has been issued within five yeas:

(A) An (denUAcaUm canl or ddver's BC?nSe issued by the C a l i i i a Deparbnent of Mobn Vetddes.

(B) A passport Issued by the DepBrbnent of State of the UniIed Slates

(4) Reasonable relianc&n the pmsenlaUon ofany one ofthe following, pmvlded that a dacumenl spebfled insubpafagraphs @)to (F), inclusive, shall elmer be current or have been l w e d ntthln five Yearsand shall Contain a photograph and description of ttm person named on It. ?hall be signed, by the person, shall bear a serial or ofher Identitylng numbor, and, In the event hat the document Is a pawort, shan lrave been stamped by the United States tmmiwaflon and Naturalization Sarvlce:

(A)A passport laued by a foreign government

(B) A drler's licenseksued by a state other than Callfornla or by a Canadian or Mexican publlc agency authorized to issue drivers' licenses,

(C) An identificallon a r d issued by a state ~ the rhan Calilornia

(D) An idenUWon card issued by any branch nf me Armed F o r m of the Unlted Sbtes

(E) An inmate identiflation card issued on or after January 1,1988, by the D e p a h n t of Cwrec t i~s and RetlabllMan. A the Inmate is in twbdy .

(F) An employee identification cam issued by an agency w office of the State of Callfania, or by an agenoy or M c e of a city, county, or city and county In this state.

(G) An inmate identification card issued prior to January 1.1988, by the Department of Corredlonsand RehabllltaUon, if h e inmate is In custody

(c) A" officer who rn taken an acbwuledgmenf &want to Vlis secfion shaaR be presumed fa have operam4 in aomrdance wah fhe pmvlsions of law

(d) Any party m o Rtes an aotio" b r damages based on the (ailwe of o f f l a lo establtshthe pope, identity of the perscn maldng thsacknowledgment shall have the butrlen of prmi h establishing the negligence or misconduct of the omcer.

(e ) Any person convicted of pejury uner this Ssction shall hifeit any financial Interest in me document.

~,al(

Penal Code 5 11 5 'a1 Every person who mowing& procum or offers any Mse or forged Inmment lo be tiled. regstwed, of recorded tn any public office Mmln fins stale, with nslrlment. If gen~lne, might be filed, registered, or remrded under any ikw of thk stab or ol the United SlirEs, Is wil(y of a fclony.

(b) ~ a d l irrslrument whlch Is pmcurea or offered to be filed, mgistered, ar recorded in violation of suhdivlsbn (a) shall consmte a separate violation of this section.

(c) Except h unusual cases where the 8Ieresb OflustlGe would best be sawed I f pmbalion is granted. pmbalion shalt not be granted to, nor shall the exacution or impasition of sentence be suspended for. any of the following p e m .

(1) Any person wlth a prlor conviclbm undor W sedlon who Is again comrCcted of a violation of thb Section in a separate pwceedlng.

(2) Any person who is oonvl~ledd more I M ~ one viaanon of mk s e c h a angk proc&ng. wm intent to dchaud anomer, and where the violations resui'ed n a c~m~lailva finaqelai lass exceeding one hundred thousand dollars (L100.W).

(d) For purposes of pmsecubn under (hls sedion. each aot of pmcurement orof offering a Yse a brged insbument to be filed, registered, or recorded snail he considered a separately punishaMe dense.

Penal Code 5 132 Even! person wna hpon any tda proceeding. hqu~ry, of invesUgahM whatever, atfhorlled Of permilled by law, offers h ev~dence, as genuine or uue, any mot, paper. document, record. or dher inslrunent in HliUng. knovdlng the same to have been forged M fraudulent y atbred or ante-datcd. Is grllly of felony.

Penal Code § 133 Ever! person M o pracllcos any mud or decelt, or knowingly makes or exhlbits any false statement, representation, token, w wifing. to any wlmess or penon about to bo called s a witness upan any trial, pmeedin8, inquiry. or lnvesiiwuon whatever. aulMrized by law, with Intent b affect tim knlhnony of such wilness. Is gullly of a misdemeanor.

Penal Code 5 134 Every person guilty of prepadng any false or antedated edbook,paper. remrd, insbument in writing. or &er matter or thing, w~ih intent to produce it or allow it to be produced lor any fraudulent ordeceltkli purpose, as genuine or b e , upon any bid. pmceedii,or nquiry matever, authorized by iw. is gullly of felmy.

Penal Code 5 135 Everv oerson who knowlno that any book, paper. record instriAent h ~ ~ ~ t l n ~ , or ot&r ma& or thing, is about to be produed In evldence upon anylrlal. inquiry, or l n ~ ~ t l g a f o n whatever, au'holized by law, vrlllhr~~y deshoys or conceals the same, with intent thereby to prevent it from being produced, is auiily of

Company Complaints ' \ Page 1 of l

LSI TITLE COMPANY 5 PETERS CANON ROAD, SUITE 200

IRVINE, CA 92606

Company Performance

In compliance wi th i~ornia hurance Code $1292 1.1, the California Department of Insurance conducted a Consumer CompIa&t Study o f d admitted insarauce carriers. The company performance table provides the - - - complaints det&ned by the department to require that corrective action be taken against the i&urer, or leading to insurer compromise, or other remedy for the complainant, those that are found to be without merit, those with other ouEames, and justified complaints. Justified complaints often require additional review, as violations of California insurance laws may exist.

Violation Study

If compiaipt data does not amear forthis comDanv. tfiis link will mvide yon with an explanation, To view the California Insurance Code (CIC), Click here

To view the California Code of Regulations (CCR), Click here -- - ---------- --

The foIlowing tabl~represents number and type of violations found, by reference to the line of insurance and law allegedly violated.

Comparison Data

The information below is for complaints closed during the study period for this insurance company. The table provides the Justified Comnlaint Ratio, Market Share, C o m ~ k n t Share, and Index for this company, grouped by the line of coverage the company was authorized to sell in this study period.

# of Alleged Vialations

1

1f complaint:,&ta does not a p m for this compmv, this link will provide you with an explanation.

Year

201 0 *

For calendar year 2006;the D c p M Comumd Senices Division bad received 276,419 consumer telephone cdls, handled 33,054 mitten casa,'aud r m v e d $31,526,079 for consumers and policyholdus. 1

LineofC+erage

Misc Lmes

- - I_I__C____ Last &vised -June 12,2009 0221 PM

Copyright O California Deparnnent of Insurance

Summnri~ed Description of Law

FaUed m respond or did notprovide a complele rcspouse

1 201 0

Law

CCR Misc Lines '

Sectian

2694a5 1 Failwe of h u m to use own name CIC 880

Joseph.- Roberts, State Bar No. 156180 LAW OFFICE OF J. ARTHUR ROBERTS 3345 Newport Blvd., Suite 213 Newport Beach, CA 92663 Telephone: (949) 675-9900 Facsimile: (888) 989-9309 Email: ~o&arL.eeal.com

Attorney for Plaintiffs, ERNEST MICHAEL BAKENIE, individually, and all o&en similarly situated

. UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALTFORNIA

ERNEST MICHAEL; BAKENIE, ASE NO. SACVl2 - OggO JVS m x ) on behalf of bmeIf and all others simiIadY situw, signed to the Honorable:

I1 Plaintiffs, vs. :

S ACTION COMPLAINT

JPMORGAN CHASE BANK, N.A.; 1. UnlawfuyCrnfair Acts § I7200 and DOES 1 through 10, inclusive,

Defendants.

1 ERNEST MICHAEL BAKENIE (referred to as "Bakenie "), by and

of record, brings this action against defendants JPMORGAN

1

CLASSACnO COMPLAINT P J BAHGWE'v M O B G A N ~ ~ ~ S E B A N K , .A.

I

their authority as agents, servants, representatives, fiunily members andlor employees,

and with the permission and consent of their co-defendants.

9. Additionally, plaintiffs are informed and believe, and allege tbaeon, that

each defendant assisted, aided and abetted, adopted, ratified, approved, or condoned

the actions of every other def&t and that each corporate defendant, if any, was

acting as the a b ego of the other in the acts alleged herein.

m. E

10. Plaintiff is informed and believes and alleges thereon that defendant

CHASE is engaged in the business practice of deceiving bankruptcy judges, Chapter 7

trustees, Chapter 11 trustees, Chapter 13 Trustees, the Oflice of the United States

I'mstee, creditors, creditor attorneys, debtors in possession, debtors and debtors

attorneys ('%-tcy players") as to CHASE'S status a secured creditor in tens of

h o d s of bankruptcy cases filed nationwide

1 I. Through the use of fabricated assignments, endorsements and affidavits

that putport to transfa Deeds of Trust, notes and the ri&ts to all monies due under

the t m of tens of thomaads of non-negotiabIe promissory notes (the "MLNsn);

CHASE has demonstrated a pattern and practjce of playing "hide-and-seek" with

debtors, judges and other b- players.

'LASS ACTION C0MPLAm"r

UKENIE v JPMORGANC&ISEBLAN& NA

12. CHASE intentionally conceals the identity of the me parties in interest

entitled to enforce the terms of tens of thousands of residential non-negotiable

promissory notes (the "MLNs") for its own ikancial benefit, at the expense of the

class and to the detniment of the integrity of the bankruptcy system.

13. That CHASE is in the business of owning mdbr servicing tens of

thousands of residential home loans. Many of which have been pledged to Mortgage

backed security trusts.

14. That CHASE acquired the assets of WASHINGTON MUTUAL BANK,

N.A. ("Hereinafter, "WAMU") from the FDIC after WAMU failed and was placed

into &ivership.

5 . These assets included portfolio loans owned by WAMU and servicing

rights of loans that were originated by WAMU and its subsidiaries but pledged or

transferred to mortgage backed security trusts before WAMU's failure.

16. That these MLNs are each non-negotiable instruments.

17. That after a defaulted borrower files for relief under a chapter of the U.S.

B-y Code; CHASE retains 104 attorneys ("network attorneys*) and appears

in thousands of bankruptcy matters as a creditor.

18. Within each case, the network attorneys are charged with various

functions depmbg on the chapter filed and the facts of eacb case- That in each

33. That said practice is utiIized for all mortgage loans originated by CHASE,

and other loan originators, including insolvent WASHIGTON MUTUAL BANK,

whose &sets were p u r c W by CHASE.

34. That said manufactured documents are fabrications intended to create the

illusion of a valid transfers MLNs and support the assertion of standing in tens of

thousands of bankruptcy cases

35. That CHASE does not transfer MLNs &om a given MBST to itself for

administrative convenience as contemplated in 15 USC 8 1641.

36. That the aforementioned fabricated evidence is "'photo-shopped" and i s

HZGHLY PERSUASIVE and authentic in appearance so as to ensure legal victory in

the bankruptcy courts.

37. That said manufactured evidence is systemicalIy utilized to deceive

bankruptcy players and increase the profits of CHASE, its agents and its principals

thmugh massive cost savings and the imposition of attorney fees upon class

borrontets.

38. As a direct result of this practice, over 95% of CHASE'S Motions for

Relief of Stay and Proofs of Claim are granted without objection.

39. That the use of the hbricated evidence has a chilling effect on class

debtors and their attorneys. Said business practice discourages bankruptcy players

&om offering objections or from questioning the validity of CHASE'S false claims

basedonstand@.

40. In addition to cost savings of its practice, CHASE unjustifiably receives

trustee payouts f'rom wnthned plans based on submitted Proof% of Claim supported

by fabricated evidence. Said payouts are at the expense of unsecured creditors and

debtors alike.

4:l. That said practice creates the illusion that MLNs were properly

transfebd to MBSTs, thereby "dumping" the loss of a defitulted loan into a trust

years after the loan was originally pledged to a tmst.

42. 'I%& said practice allows CHASE to dump defaulted loans that were

never properly securitized by WAMU and other originators acquired by CHASE into

private mortgage backed security trusts by creating the illusion of a valid transfer.

43. Said practice shifts the liability of defaulted loans not properly securitized

by W W , from CHASE to private mortgage backed security trusts. The practice

a l l o w s ; ? ~ ~ ~ ~ ~ to etlktively mitigate the millions of dollars in liability of the

WAMU acquisition, where WAMU failed to transkr MLNs of its portfolio before its

denis;. Said practice shifts losses from WAMU to MBST bond investors.

9. That a h anon-judicial foreclosure sale, class members remain indebted

to the pjtue benefi~iary for the unsecured note but without credit for the loss of the

collateral to CHASE'S designated assignee. 10

WSS ACTION WMPLAINT

IWEW16 v JPMORGAN QUSB BANg, MA.

Nancy Dm M c C m n , C8N 164780 Law Ofice of Nancy D u e McCarron 950 Roble Lane nancyduf@[email protected] Santa Barbara, CA 931 03 805-450-0450 fax 805-965-3492

Has not been coaared orith original SANTA BARBARA CIXJMTY RECORDER

FILED SUPERIOR COU Tot A IFORNlA couw ot SA%~ ~ A ~ B A R A

FEB 0 2 2012

SUPERIOR COURT OF THE STATE OF CALLFORNIA FOR THE COUNTY OF SANTA BARBARA (ANACAPA DIVISION)

I I DAVID W. GATES, b s t e e for the DAVID W. GATES ) -NO: 1384851 Trust dated August 5,1996 Plaintiff, )

I I YS.

MGC Mot$age, Inc., Texas Coqnmtk j ) NOTICE OF LIS PGNDENS ON

LPP Morteaee LM.. LP. Toras Comoration >

I I Loan ~cq&'aion dorpbation, ~ e & Corpoiation j 1200 Palomino Road, Santa Barbara, CA Csl-Westem Rec011vwanee Camomtian. Texas C-on 1

I I DB ~ c w e d ~rod~ucir, he., &laware &pami& Deutsche Bank National Tmt Company, as lmstee

j )

~ u t u a l ~anlg ad& br;nidng association j wamn Asset Acceptrusce Corporation, SPV vehicle bank ) Washiagtm ~ u t u a l ~ o r t ~ a g e Securities Corpa'ation, bank ) .

JP Morgan Chase Bank., National Association, a bmk DOES 1 through 50, inclusive, Defendants. ) DEPT: 5 Honorable Colleen Steme

Notice is hereby given that an action concerning d prop* or afbcting the title or right to possession of

real property was filed on F e r n 1,2012 between the above named parties. The property affected in the above

case is wmmonly known as 1200 Palomino Road, Santa Barbara.,CA. APN No. 023-290-01

CERTIFICATION: The undemigned d ~ e s , under penalty of pexjury, that this Notice was served on the owners of record far this parcel by certified mail, return receipt requested, on February 2,2012 at this address: a

David W. Gates, trustee of the David~W. Gates Tiust dated August 5,1996 1200 Palomino Road pants Barbara, CA 93 103

- 1 - NOTICE OF LIS PENDENS

Nancy Duffy McCarron, CBN 164780 Law Oftice of Nancy Duffy McCarron 950 Roble Lane Santa Barbara, CA 93 103 1 805-4iO-0450 fax 805-965-3492

Attorney for Plaintiff P T I - P.I 1 -

SUPERIOR COURT OF THE STATE OF CALIFORNIA a-

FOR THE COUNTY OF SANTA BARBARA (ANACAPA DIVISION) s1 -

4

5

I I DAVID W. GATES, Trustee for the DAVID W. GATES ) case N ~ : Trust dated August 5,1996 Plaintiff, )

1384851

nancy [email protected] k eal Estate Broker Lic. 853086 otary Public Lic. 1791117

Certified Arbitrator for EBB 30329

VS.

MGC Mortgage, Inc., Texas Corporation i )

NOTICE of Plaintitfs

LPP Mortgage Ltd., LP, Texas Corporation ) VERIFIED EX PARTE APPLICATION

Loan Acquisition Corporation, Texas Corporation ) FOR ORDER TO SHOW CAUSE AND Cal-Western Reconvevance Cornoration. Texas Cornoration TEMPORARY RESTRAINING ORDER DB Structured P ~ o ~ u & , Inc., ela aware ~orporatioi j To Restrain a Foreclosure and Trustee Sale Deutsche Bank National Trust Company, as trustee 1 set for Feb. 6,2012 at 1:00 p.m. Washington Mutual Bank, a national banking association ) a t Santa Barbara Superior Court Warnu Asset Acceptance Corporation, SPV vehicle bank ) Washington Mutual Mortgage Securities Corporation, bank ) ~ ~ ~ l ~ ~ ~ t i ~ ~ of N~~~ ~ , , f f y re: service JP Morgan Chase Bank., National Association, a bank ) DOES^ through 50, inclusive, Defendants' ) DATE: February 3,2012 TIME: 9:00 a.m.

II DEPT: 5 Honorable Colleen Sterue

I TO: All DEFENDANTS

II PLEASE TAKE NOTICE THAT on February 3,2012 at 9:00 a.m. in Santa Barbara Superior Court. at 1100

1 1 Anacapa Street, Santa Barbara, CA the court will hear plaintiff's verified ex parte application for a Temporary

I I Restraining Order to restrain the foreclosure set for monday, Feb. 6,2012 of 1200 Palomino Rd., Santa Barbara,

the trust property owned by plaintiff which is the subject of this action.

- 1 - -------------------------------------------------------.---------------------------------

NOTICE OF Application for 'orderto Show Cau e and Temporary Restraining Order 2 33.4

DECLARATION OF NANCY DUFFY MCCARRON IN SUPPORT OF APPLICATION FOR TERMPORARY RESTRAINING ORDER

, Nancy Duffy McCmon , declare based on personal knowledge:

. The defendant trustee who recorded the NODS and the NOS (Cal-Westem Reconveyance Corporation) has

nown about our intent to bring this application for TRO since January 12,2012. (see Exhibit A1 to the NDM

eclaration filed with the verified application) at which time copies of the verified complaint+exhibits were sent.

. On 1-12-2012 I sent notice by fax, by email and by US mail of my intent to bring this action unless the

ustee would cancel the sale and work on a resolution and the issue of standing. I called to speak to the trustee c

ttomey. Desiree would not give me an email address or phone for either one. Neither ever called me back.

. Despite the warning in Exh. A1 to my declaration in support of the application, and personal notice through

)esiree in their office, the trustee= recorded aNotice of Sale setting the date for 2-6-2012. 1 sent another

laming, including a second copy of the first warning, about failure to record substitution of trustee before NOD

'hey continued to ignore me and no one would call me. They will not take my calls nor return my messages.

. This past Monday (1- 30 -2012 I emailed copies of the verified complaint with all exhibits to CWRC, DB,

tamulChase, MGCfLLP. A third time, I notified them I would apply for a TRO and would send email and

:lephone notice of hearing and OSC if issued. I am sending a THIRD copy by email of all pleadings today, wit

mail notice of hearing at 10:OO am. The Notice of Hearing and called (800-546-153 1 #6) (CWRC) and talke:'

rst to Christine and thenNicole in Legal Dept. before 10:00 a.m. to give time, date, of hearing & address. I

xed to 619-590-9299 (trustee's fax no.) notice of hearing and papers, and emailed them to info @CWRC.com

he only email I have as they would not give me an email for anyone else)

declare these statements to be true under penalty of pe jury and CA law.

xecuted in Santa Barbara on 2-2-2012. r

and Temporary Restralnlng Order NOTICE 01 Appllcatlon for Order t

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i TRANSMISSION VERIFICATION REPORT (

riancy Duffy McCarron, CBN 164780 ,aw Ofice of Nancy Duffy McCarron 150 Rohle Lane ianta Barbara, CA 93 103 105-450-0450 fax 805-965-3492 [email protected]

Real Estate Broker Lic. 853086 Notary Public Lic. 1791117 Certified Arbitrator for BBB 30329

ittorney for Plaintiff

SUPERIOR COURT OF THE STATE OF CALIFORNIA

FOR THE COUNTY OF SANTA BARBARA (ANACAPA DIVISION)

)AVID W. GATES, Trustee for the DAVID W. GATES ) case N ~ : 'rust dated August 5, I996 Plaintiff, )

1384851 VS .

ilGC Mortgage, Inc., Texas Corporation .PP Mortgage Ltd., LP, Texas Corporation .oan Acquisition Corporation, Texas Corporation :al-Western Reconveyance Corporation, Texas Corporation )B Structured Products, Inc., Delaware Corporation Ieutsche BankNational Trust Company, as hustee Vashington Mutual Bank, a national banking association

VERIFIED EX PARTE APPLICATION FOR ORDER TO SHOW CAUSE AND TEMPORARY RESTRAINING ORDER

To Restrain a Foreclosure and Trustee Sale set for Feb. 6,2012 a t 1:00 p.m.

a t Santa Barbara Superior Court with Declarations of David Gates & Nancy Duffy

Vamu Asset Acceptance Corporation, SPV iehicle bank ) Vashington Mutual Mortgage Securities Corporation, bank ) DATE: February 3,2012 TIME: 9:00 a.m. P Morgan Chase Bank., National Association, a bank ) )OES 1 through 50, inclusive, Defendants. ) DEPT: 5 Honorable Colleen Sterne

INTRODUCTION

Plaintiff GATES applies for an emergency order to restrain a foreclosure sale on February 6,2012,l p.m.

'laintiff is disabled and a senior as defined in Civil Code §1761(f)(g). CRC 1.100 requires acco~nmodations

ihich may include making reasonable modifications in policies, practices, and procedures. CRC 1.100 (a)3.

;ATE$ is facing eviction and loss of a home he has owned since 1977. His wife died of anorexia on 11-19-08.

'hen his home of 30 years burned down in the Jesusita fire in Santa Barbara on 5-6-09. The stress of losing his

fife and then his home took its toll on his health resulting in the need for heart surgery. Friends and volunteers

elped GATES to rebuild his home in the past 3 years which is 80% finished and ongoing. GATES is currently

:placing palm trees which burned in the Jesusita fire as part of the overall landscape restoration.

Application for Order to Show C s* nd emporary Restraining Order 3, $27

POINTS & AUTHOIUTIES

L. Plaintiff has no adequate remedy; hardship will occur if a sale is not enjoined; balance tips in his favor

The court may grant a restraining order under CCP $527. Plaintiff must show there is an inadequate

cmedy at law, meaning that compensation would be insufficient; a serious risk of irreparable harm absent

junctive relief; a likelihood that plaintiff will prevail on the merits of the underlying controversy; and a

omparison of the harm to defendant in issuing an injunction versus the harm to plaintiff in withholding it,

rhich on balance favors the plaintiff in this case.

It is conclusively presumed the loss of real property which is a single family residence can not be

ompensated with pecuniary damages. Civil Code $3387. Demarist v. Quickloan Funding, Inc. 2009 WL

40377 at 9 (C.C.Ca1.2009). Plaintiff will lose his home if defendant trustee conducts the sale on Monday.

iATES would be homeless creating a hardship on a 69 year old disabled man withno family in town.

'he stress of losing his home and having to move his personal belongings could cause him to have a heart attack.

In contrast, defendants will suffer no hardship if the application is granted. They will retain whatever

ccurity interest is recorded and will be able to liquidate the asset if they prevail. Secondly, the property is not

ven marketable at this time as it is only 80% finished and can not be sold without an occupancy permit issued.

'he market being down coupled with the construction unfinished, and no permit issued, makes it hard to sell.

jefendants would not want a vacant property as it would be subjected to vandalism. Defendants can only gain

y delaying the foreclosure until the market picks back up, the construction is finished and landscape conlpleted.

The haidship tips heavily in plaintiffs favor; thus plaintiff need only establish a serious question going

3 the merits upon which plaintiff has a better than fair chance of prevailing. Miller v. Ca Pad. Med. Ctr., Inc.

9 F.3d. 449,456 (9th. Cir. 1994). The plaintiff does not need to prove he will win. Here, plaintiff has alleged

nd can establish prima facie violations of law and at the very least have a fair chance of prevailing on the merits.

L. Plaintiff will prevail on the merits; he raises serious questions going to the merit.

Defendants failed to comply with Civ. Code $2923.5 & $2924. $2923.5 absolutely precludes a mortgagee,

ustee, beneficiary, or authorized agent from filing a notice of default pursuant to Civil Code 82924 until 30 days

fter contactkg the borrower which satisfies the detailed requirements of $2923.5(a)(2) or until 30 days after

atisfylng due diligence fquirements of $2923,6(g). $2923.5(2) requires the mortgagee, beneficiary, or

uthorized agent to cont borrower in person or by telephone to assess his fmancial situation and explore

ptions for the avoid foreclosure, to advise the borrower of his right to request a subsequent meeting,

days of the borrowers request, and to provide the toll-free number made available by

IUD to find a ~ ~ ~ - c e d i f i e d housing codseling agency.

The Notice of Trustee's Sale (NOS) must contain "A description of the security instrument and an

identification of the parties to the instrument. (Civll S2924f (b)(l). The notice must also include an accurate

statement of thc total ainounl o l unpaid balance of the obligation secured by the real property to be sold as well a!

I statement of the costs, expenses, and advances incurred at the time of thc initial publication of the notice of sale

Ziv. Code 82924f(b)(I); Miller & Star California Real Estate (3rd. Ed.);. Deeds of Trust and Mortgages,

Ehapter 10 8198

Under Civ. Code $2924 a lender must properly senre and record a notice of default setting for the borrower

,reach in order to affect a foreclosure. After 90 days, tluec months, have elapsed. The lender must therefore

xoperly serve and record a Notice of Trustee Sale at least 20 days prior to the actual sale date.

California non-judicial foreclosure law was intended to reflect the fair balance of the respective parties, i.e

:he trusters, trustee and beneficiaries. While beneficiaries want an inexpensive and speedy remedy for defaults,

mstor needs prntection against the loss of his property rights, The harshness of non-judicial foreclosure has been

-ecognized. The exercise of the power of sale is a particularly harsh method of terminating and foreclosing the

~ g h t s of the trustor.

The statutory requirements are intended to protect the trustor from a wrongful or unfair loss of property and

i valid foreclosure by the private power of sale rcquires strict compliance with the requirements of the statute.

Miller & Starr, CA RealEstate (3"'. Ed.) Deeds of Trust & Nort. Ch. 10, $10.1 79 Miller v. Cote, 127 C.C.3d.

388, 894 (1982). It has been the cornerstone of foreclosure law that the statutory requirements, intending to

xotect the trustor kom a wrongful or unfair loss of property must be complied with strictly. Id, 810.18.

"Pursuing - that policv (of judicial iilterpretationl. the courts have fashioned rules to orotect the debtor-

,f them beinp that the noticeof default will be strict^ .equired to cure the default." Sweatt v. The Foreclosure Co., Inc., 166 C.A.3d 273, 278 (1985).

These statutes create an absolute duty on behalf of the Defendants which must be satisfied before a notice

)f default is issue. Howcver, as established by the declaration of Plaintiff and the complaint herein, Defendants

~ndeniably failed to perform any of the steps required by $2923.5 before they recorded the Notice of Default and

ssued aNotice of Trustee's Sale. Defendants also failed to comply with Section 2924, in that they recorded a

Votice of Default without complying with the pre-NOD requirements of 82923.5 Defendants' failure constitutes

~e~l igcnce per se. Thus, Defendants should not be allowed to proceed with any foreclosure-much less the

rmstee's sale presently set for February 6, 2012. Plaintiffs application for TRO should be

The same reasoning applies to a notice of trustee sale. In Anderson v. Heart Federal Savings, 208 C.A.3d.

!02 (1989) Heart initiated foreclosure against Anderson. Heart noticed the amount due plus interest. Heart later

-aised it to $40,000. Heart tried to tender $25,000 which Heart refused to accept. The appellate court set it aside.

rhe court was deeply disturbed about the gross improprieties of the beneficiary.

- 3 - ...__......__._... ^ - ....~....~~~...-~..~~~...~~.~...--...~~-....-...-.-....----...-..---

Application for order to show Cause and Temporary Restraining Order 3.211'

The Anderson court held:

The statutory requirements must be strictly complied with, and a trustee's sale based on statutorily deficient notice of default is invalid. Anderson at 21 1. The provisions of section 2924 of the Civil Code.. .must be strictly followed. [citations]. The person relying upon the notice is bound by its provisions, and cannot insist upon any grounds of default other than those stated in that notice. Id. A trustor is entitled to an accurate determination of the amounts actually and legally owed.

Here, in addition to failing to abide by the mandates of $2923.5, defendant CWRC also failed to abide by

le mandate of $2924, thus rendering the NOD fatally defective. Because the NOD is defective, the Notice of

'mstee's Sale which relies upon it is also defective. Thus both are legally unenforceable and the Trustee Sale

lust be restrained and enjoined.

WHY THE FORECLOSURE IS WRONGFUL AND INVALID IN THIS CASE

[OTE: AU References are to the Exhibits filed with the verified complaint

Foreclosures are governed by CCP $2924 et seq. which requires that a non-judicial foreclosure sale shall

ot take place unless it is done on behalf of the berzeficialy of the note secured by the trust deed. Therefore, only

beneficiary has standing to foreclose. The Notice of Default fails to identify any beneficiary. (Exh. B-5)

merely lists "LPP Mortgage LTD" as the contact to find out how much must be paid to avoid foreclosure.

.t no time has LPP Mortgage LTD ever held any beneficial interest in the NOTE, nor could LPP have acquired

ny beneficial interest in the NOTE because the NOTE was assigned to DB Structured Products Inc. on

eptember 25,2005. (Exh. A-10)

There is a stamp under GATES signature which reads, "Pay to the order of DB Structured Products, Inc

Without Recourse Washineton Mutual Bank, FA By Cynthia Riley Vice President." DB was the trustee on the

P&S agreement which securitized GATES note. (Exh. D2). The offering on the pool of loans including GATES

loan closed on October 1,2005. (Exh. D2). Once the note was assigned to DB on 9-25-05 the note became an

met of the trust. Pursuant to the governing documents of the P&S and IRS code, all loans had to be added 90

iays after closing. Therefore, GATES loan became a tmst asset : .: no later than December 29,2005 (90 days

?ost closing). Accordinglv. there could be no further assignment to anyone. It would defeat the trust.

Application for Order to Show Cause and Temporary Restraining Order

3.232

Once in the trust, the trustee could not split the trust deed from the NOTE. The trustee was required to hol,

the original note and tmst deed. (Exh. D7) Additionally the trustee must hold originals of all assignments on

the note as part of the mortgage file @-7). The P&S defines the "beneficial holder" as a person holding a

beneficial interest in a certificate. @-7) The trust deed is a voluntary encumbrance executed by the propep

owner trustor. The power of sale is voluntarily given by the homeowner; thus the trustee may only foreclosure

as set forth in the power granted by the trustor (GATES) to the trustee, and cannot act beyond its scope.

The GATES note states in paragraph 7 (Exh. A-7) "If I am in default, the Note Holder may send me a

written notice telling me that if I do not pay the overdue amount by a certain date, the Note Holder may require

me to pay immediately the full amount of Principal that has not been paid and all the interdst that I owe on that

amount." The Note Holder is defined in the P&S as any person holding a certificate. LPP is not a note

holder. Only the trustee (DB) could foreclose on behalf of the certificate holders who have a fractional

interest in GATES note.

Exhibit K contains an appendix of relevant UCC codes governing negotiable instruments for court review

A loan servicer is not a Note Holder or a lender and lacks the power or authority to foreclose a note. Even if a

kervicer could foreclose on the property it would not be LLP because it is not the loan servicer. The GATES

mst deed, at paragraph 24 authorizes only a lender to substitute a trustee. (Exh. A-26) The Substitution of

rrustee recorded against GATES' property on 11-15-1 1 is executed by LPP. (Exh. B10) LPP is not, and never

las been a lender. A lender is the person(s) who funded GATES loan; i.e. certificate holders who purchased the

WBS's in the WAMUDeutsche AR-13 offering. IBP is not one of them. LPP is nothing more than a

wetend lender. LPP will not be able to produce the original note with proper endorsements per UCC mandates.

Defendants are trying to confiscate his property without a lawful claim. Plaintiff seeks to clear his title and

.ecover damages for the malicious and intentional acts of fraud against plaintiff. Defendant LPP Mortgage Ltd.,

:LPP) does not have standing to foreclose because LPP is not the owner of plaintiffs Note, LPP is not a holder of

:he Note, and LPP is not a beneficiary under the Nbte. LPP does not claim, nor has it ever claimed to be the owne

~r holder of the Note, nor can LPP claim to be a b 1, eficiary. LPP is merely named as a contact in the Notice of

L Default. Even if LPP could prove that it is a loan emcer, LPP still could not foreclose on plaintiffs property

without authorization from the Lender under ParaLaph 22 of plaintiffs Deed of Trust.(see Exh. A-25) LPP has I

10 standing to foreclose and had no power to-substitute a trustee.

5 - ................................... I.-: ..............................................

Application for Order to Sh Restraining Order

Paragraph 24 of the deed of trust recites that only the lender may substitute. CWRC has no power to foreclosl

as its agency power is derived and thus limited by it's principal's power. Furthermore defendant CWRC failed tc

comply with the provisions of CCP $2924 governing foreclosure. Plaintiffs loan was originated on Sept 25,200:

1 No foreclosure could be prosecuted without first contacting the borrower to try to work out a loan modification.

1 CCP 52923.5 No defendant ever complied. Secondly, the trustee was required to wait until the substitution of

trustee was recorded before recording a notice of default. The mstee failed to follow the strict requirements of th'

code; accordingly the court must restrain this illegal foreclosure. Defendants failed to identify the beneficiary

as mandated by 15 USC 51641g. The notice recites the trustee is "either the original trustee, the duly appointed

substituted trustee, or acting as agent for the trustee or beneficiary under a deed of trust." This nebulous

recitation woefully fails to comply. Since the trustee failed to comply with basic requirements under CCP

$2924 et seq. and substantive mandate of 15 USC $1641 the foreclosure is void ab initio.

Thesestate and federal statutes were enacted as protections to the trustor debtor. They can not be

dispensed with as trivia. They are important constitutional rights and the debtor's only defense to the harshness

of the power of sale. Since the power of sale was a voluntary grant defendants cannot ignore its limitations.

Notwithstanding the procedural deficiencies of the trustee and substantive deficiencies in that LPP has no

standing to foreclose because it has no legal or beneficial interest in the Note obligation, the foreclosure is

void ab initib as it is based on fraudulently manufactured instruments which were likely forged. (see Exh. M).

The questioned instruments must be examined for validitv and should not be automaticallv acceuted as valid.

LPP (the pretend lender) med to convert GATES' fire insurance heeds which forms the basis for the

fraud claim and the financial elder abuse claim. Now , after stealing the proceeds from his fire insurance ~ol icy

they are trying to steal his home.

C. Equity Supports Issuance of An Injunction

The principles of equity apply to foreclosure sales. Equity does not allow one to take adbantage of his own

wrong nor will it assist in perpetration of fraud on another or the public. Courts can set aside ? foreclosure sale

when there has been fraud, when the sale has been improperly, unfairly, or unlawfully conductkd, or when there

has been such a mistake that it would be inequitable to let it stand. Bank ofAmerica Nut. Trust & Savings h s n v.

Reidy, 15 Cal.2d. 243,248 (1940). Whitman 11. Transtate Title Co. (1985) 165 C. A.3d. 312, 322-323.

- 6 - .........................................................................................

Appl ica t ion f o r O r d e r t o Show Restraining Order

With these equitable concepts in mind, it is cldar from the verified complaint, declarations and other

iocumentaty evidence that Defendants failed to codply with the strict requirements of Civil Code $8 2923.5 and

2924. These defendants should not be allowed to benefit from the harsh and severe consequences that power of

sale allows-- given this fatal failure to comply. Defghdants should not benefit from their own negligence.

Defendants should not be able to benefit from their fraudulent creation of assignments of trust deeds.

Plaintiff should be given the opportunity to conduct discovery and prove to the court that the recorded assignmen-

~f trust deed if fraudulent, invalid, and void ab initid. The questioned instruments must be tested for validity

These violations of the law and failures to coniply mandate a declaration that the foreclosure process does

lot meet the requirements of California's non-judicial foreclosure law. These violations justify the granting of

his exparte order restraining the sale. Exhibit M tothe verified complaint shows a class action was just filed

igainst WaMuIChase alleging fabrication of thousands of assignments of trust deeds. This is one of them.

f i e controller found so many fabricated assignments that Chase (as successor to WaMu) is now bound by a

:onsent order. # AA-EC-11-15 issued by the US Treasury (Controller) . The assignment herein is fabricated.

D. The relative Hardships Favor Plaintiff

In this matter, the relative hardship to plaintiff-losing his home-represents irreparable injury and harm,

liminishing plaintiffs requirement of showing probability of success on the merits. The loss of one's property

lue to foreclosure constitutes an irreparable injury. Demurest v. Quick Loan Fund, In. (2009) West Law 940377

CD. Cal. Wrobel v. S1. Pope & Assoc., 2007 WL 2345036 at 1 (S.C. Cal. 2007).

Numerous courts have found this injury enough by itself to mandate preliminary injunctive relief.

Vichols v. Deutsche Bank Natl. Trust 2007 WL 4181 11, at 2 (S.D. Cal. 2007). United Church of Med. Ctr. v.

vled Ct. Com. 689 F.2d. 693,701 (71h. Cir. 1982. If defendants are allowed to foreclose, plaintiff will lose his

lome of 30 years, while disabled at 69. A harsher outcome could scarecely be imagined. The balance of harm

:learly weighs in favor of plaintiff, both as a matter of law and common decency.

In contrast, defendants suffer nothing by preserving the status quo and allowing plaintiff to remain in his

lome until this matter is determined on the merits. The home will be occupied instead of vacant-subjecting it to

~andalism. Plaintiff can c ntinue with his project of driving to Point Mugu to pick up the palm trees in his truck

md installing them onto t I , e property with his backhoe. Plaintiff is buying palm trees (from $1 1 to $100) from

Nest Flower Growers in oint Mugu. They have been growing palm trees for years to sell to commercial and

.esidential contractors for "r andscape remodels and new construction. The trees have not been selling in the past

hree years due to the market drymg up because of the recession. Accordingly, they are selling the expensive

rees at a very low price, Ad GATES is taking advantage of the opporhmity to complete his landscape renovation

Accordingly, defen d ants suffer no harm in the delay as their security interest remains. GATES cannot sell I

he property because the assignment of trust deed is a cloud on the title and they can only benefit by the delay. I

- 7 -

Application f o r O r d e r t o Show Restraining Order

I The court may dispense with the filing of a bond when it concludes there is no realistic likelihood of harm to the )

2

I defendant fkom enjoining his or h a conduct. Jorgemen v. Casrridy 320 F.2d 906,919 (9" Cir. 2003) I

E. No Bond Should be Required

Courts have broad discretion in determining the amount of bond, or can waive the bond where it is equitable.

Connecticut Gen. Life Ins. Co. v. New Images ofBeverly Hills, 321 F.3d. 878, 882 (9". Cir. 2003).

//warranted Phleger u Countrywide HomeLoam, Inc. 2007 WL 405672 at 6. (ND. Cal.2007. 1

6

lo I i In thls case the court should accommodate GATES not only because it is the equitable thing to do but also

Here, there is no realistic harm to defendants from a restraint of the foreclosure proceedings and trustee's sale.

If the Defendants position that the loans were valid is correct, then the loans are adequately secured by the very

property In question, which is worth more than a mill~on. Add~tional security is nelther appropriate nor

16 and order to show cause, and set the matter for a hearing for a preliminary injunction pending tnal in this case.

By: ,

l1

12

13

14

15

Nancy Duffy McCarron

VERlFICATION

because the court has a duty to make special accommodations for an elderly, disabled person. RC 1: 100. (a) (3).

CONCLUSION

For the foregoing reasons, as well as those set forth in the papers and supporting documents submitted

herewith and1in plaintiffs complaint, plaintiff prays this court grant the requested temporary restraining order,

20 1 1 I, DAVID GATES, as trustee for the David W. Gates Trust dated August 5, 1996 declare: I

23 1i perjury and the laws of this state, the allegations set forth therein are based on personal knowledge, except as to

2 1

2 2

24 II those allegations made on information and belief and as to those allegations I believe them to be true. I

I am plaintiff in the within action. I have read the its entirety and declare, under penalty of

- 8 - ........................................................................................

Application for Order t o Show Cause nd Temp rary Restraining Order 4 1 238

25

2 6

2 7

Executed on February 1, 2012.

IL/ E S ~ S trustee for the David W. Gates Tmst

dated August 5, 1996

DECLARATION OF DAVID W. GATES IN SUPPORT OF APPLICATION FOR TRO

I, DAVLD W. GATES, trustee make the following statements based on personal knowledge.

1. I completely read the entire contents and every page of the vetified complaint filed in this action.

2. Although I do not understand the complexities of securitization and legalese I understood the facts.

3. I hereby authenticate the documents at Exh. F of the complaint. On 11-19-08 my wife died and less

than 6 months later our home which I have owned since 1977 burned in the Jesusita fire on 5-6-09.

Within months my health deteriorated from the stress resulting in the need for heart surgery. I am 69.

4. I submitted a claim to Farmers Firs Exchange who approved my claim, but said I had to rebuild before

they would issue a pay-out. I lost all rental income from tny tenants because there were no rooms to rent

5. I was forced to use high interest crel t cards to buy materials to rebuild so I would have a place to live.

I stayed with fricnds. Some friends helped me rebuild. Materials were very expensive so I ran up over

$100,000 in credit card debts. I spent appi-oxirnalely $50,000 in cash on materials where vendors would

not take credit cards because my credit was destroyed after I was unable to make mortgage payments.

I was stuck between a rock and a hard place because Farmers would not pay out my fire claim benefit

until I rebuilt and I had very little cash as my tenants had to relocate to other places until I could rcbuild.

6. Farmers said I had to complete 80%. When I did Farmers sent an agent to certify it was 80% finished.

7. Farmers sent 3 checks for a total of $202,548.64. (Exh. Fl) I was shocked when I saw the checks were

made payable to MGC Mortgage, Inc. and myself. I never asked for that. I never told Farmers about it.

However, I had called MGC to tell them about the fire and that I would not be able to make payments.

What I believed happened is that MGC called Farmers and convinced them to put its name on the check.

This was not fair because I paid the premiums and was the beneficiary under that policy of fire insurance

8. I called MGC. Their staff told me to mail them the checks, they would sign off and return them to me.

I relied on that representation and mailed them to MGC. They did not keep their promise. I kept callmg.

I wrote to them several times pleamng to release my funds. My letters and numerous calls were ignored.

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Application f o r O r d e r t o Show Cause and Tern orarv Restraining Order . %37

15. I now suspect that MGC may have put in a claim to their own ALTA insurer and collected in full.

Application fo r Order t o Show Cause and Temporcry Restraining Order

3 '13%

9. I continued to go further into debt having to use all of my social security funds to buy materials and eat.

Eventually my credit cards were cancelled by the vendors for non-payment and filed claims, lawsuits.

10. I was at the point of a nervous breakdown in April when five months had passed and MGC was still

ignoring my phone calls, letters and threats. I went to my friend Nancy Quffy McC on for help, iyhorr P my wife and I had known for 15 years as she used to attend our annual Christmas parties. I was broken.

I was at times suicidal. Nancy Duffy McCarron saved my life. She immediately contact MGC and

threatened to sue them for a racketeering enterprise. In 2 weeks she got half of my money from MGC.

They released $1 13,622.96 (about half the money) to my attorney and I could continue to rebuild and eat

11. I used a large amount of those funds to settle the $100,000 in claims against me by the creditors. The

remainder was used to continue buying materials to rebuild the home. MGC kept $88,925.68 as they

insist I must finish the home 100% before they will release the rest of Farmers proceeds they hold (F2,F:

12. I was again caught between a rock and a hard place because I had no funds to buy materials and I am

required to replace the landscaping by Farmers before they will release funds for those improvements.

Fortunately I discovered that West Flower Growers in Point Magu was suffering from the recession and

had a surplus of palm trees they can not sell. Due to my hardship they agreed to sell them to me at

various prices between $1 1 - $100). These trees are worth thousands as they are full grown. I am using ;

backhoe to install them.

13. Now MGC is trying to foreclose and take my home while keeping $88,925.68. I came to my attorney

when I returned from Idaho and discovered the notices posted on my door. My attorney researched my

entire case and discovered the assignment to MGC and the prior assignment were void and invalid She

said she had a lot of experience with fraudulent real estate documents and "knows it when she sees it."

14. At the end of the 2010 year I received the 1099 form shown at Exhibit F4 of my verified complaint.

Because I do not know tax law I brought it to my attorney. She said this' meant the purported "lender"

had charged-off the loan as a vehicle to get a tax break against significant income during the tax year.

Although I do not understand tax law I could see the form recited that my debt was cancelled.

16. If MGC collected in full from an insurer who had issued an insurance policy they have been paid already

Taking my home worth a million + would be unjust enrichment and a fraud upon me and the insurer. I MGC would be unjustly enriched if they now confiscate my home, as they kept my insurance proceeds

while I accrued $100,000 in credit card debt, and used more than $50,000 of my cash on materials.

MGC would get at least $300,000 in improvements Ipaid for plus all the funds they wrongfully converted.

17. We decided to file the within action to seek justice for all of the frauds and torts committed against me.

The last three years of my life have been devastating and have caused me severe stress and anxiety.

Had it not been for my attorney who saved my life I would probably not be here today.

18. My attorney intends to do vlgorous discovery in this case and bring to justice the persons who fabricated

the assignments of hust deed and who have defrauded me throughout the past 3 years.

19. Defendants never contacted my attorney to effect a workout agreement whereby the payments could be ( suspended, or at least reduced until I can finish my home, get an occupancy permit by issued, and collect

the final pay-off from Farmers Insurance. I was not aware that I had the right to meet with MGC and my

attorney to explore options to avoid foreclosure, and that they had to meet w t h me if we requested it.

I was never given the toll-free number for HUD or told that I could seek HUD intervention & counseling.

I just discovered today that Civil Code 62923.5 requ~red MGC to contact us before filing a Notice of I Default. I never received any counseling as required. My attorney told me MGC never contacted her.

20. If it is determined that MGC's claim is valid I can tender payments when Farmers pays off the final 20%

which should be happening in the very near future.

21. I declare the above statements to he hue under penalty of pejwy. Executed on February 1, 2012.

DAVID GATES, as trustee for the David W. Gates Trust -

dated August 5, 1996

- 11 -

Application for Order to Show Cause and

11 that he had received I checks from Farmers Insurance the last week OI Ianualy 2010 for $201,14864 (Exh Fl ) I

1

2

3

5

DECLARATION OF NANCY DUFFY MCCARRON IN SUPPORT OF APPLICATION FOR TERMPORARY RESTRAINING ORDER

I, NANCY DUFFY MCCARRON, make these statements based on personal knowledge.

1. During the last week of April, 2010 David Gates arrived at my home nearly hysterical. He was crying.

I had known David Gates and his wife for 15 years and never seen him is such a state of anxiety. David explained

8

had made hundreds of phone calls, and scnt varlous demands. I Immediately contacted MGC and threatened to I

after hc completed 80& of the rebuilding of his home after it burned in the Jesusita fire. David said Farmers made

the checks payable jointly to MGC and himself. David was desperate for money as he had been living on credit 9

10

11

12

sue them for racketeering if they did not send the proceeds. They agreed only to send about half ofthe proceeds,

claiming that David owed hack payments, interest, and various "late fees, penalties, and assessments."

Rather than sue we agreed to take half the proceeds. MGC still retains the remainder of David's proceeds.

2. The UPS label shows the shipping information to my office. (Exh. F2) The return address shows it was

shipped from "Dovenmuehle Mortgage Inc., 1 Corporate Drive, Lake Zurich, IL. 60047 which is noteworthy

since the maker of the check was MGC Mortgage, although both corporations shared the same address. (Exh. F3)

cards for the past and run up $100,000 buying materials to rebuild as ~armeis would not pay his claim unless he

rebuilt David said MGC told him to sign the checks, mail them to him and MGC would sign them and mail them

hack. David said he had been trylng for 5 months to get them to release his insurance proceeds. David said he

Thls evidence proves these two corporations are related. The check was made on 5-12-2010 which is noteworthy. 2 1

The next year (201 1) David returned to me office to bnng me a copy of a 1099 form he received. (Exh. F4) 22 I 2 3 I1 This was quite interesting since as it shows Dovenmuele Mortgage Inc., recites the same form was sent to JTR.

Amazingly it recites that David's loan (same loan no. as on all Lhe correspondcncc from MGC) was cancelled.

A colporation is requircd to notify the IRS, with a copy to the debtor, if it cancels the debt. This could only

happened in one of two ways; either the debt was paid off, or the debt was "charged-off' by the lender. (see F4).

If a lender submits a claim for the amount of its loan (which was insured) and a house burns down, it can submit

claim to its insurer for the full amount due on the home. I believe this is what happened in this case. (see F4).

- 12 - __..._._...._..... ^..~.~~.....~..~..................................... .-...

~pplicatian for order to show cause and Temporary Restraining Order A - n n

3. There was an entry under creditor's federal identification number. It was 36-2435132. I googled it. (Exh F5

Low and behold a document popped up showing that ID number belonging to Dovenmuele Mortgage,lnc. (Ex.F!

Savings and Retirement Plan, with the beneficiaries being the employees of Dovenmuehle. This was interesting.

Why would this retirement fund be sending David Gates an IRS 1099 form? David had not paid the debt.

Yet, the implications of this formbeing filed with the IRS is that such "foregiveness" or "cancellation" of a debt

is a taxable event for the taxpayer. David would then owe TAX as if he had received $1.2 milhon as income----

the outstanding amount of the debt when cancelled. Since we know that David did not pay the debt (or MGC

would not be foreclosing). The only feasible explanation is Dovenmuele received $1.2 m~llion kom someone?

f i e only conce~vable somcone would be an insurer who paid out on the cla~m. MGC could not make a deposit

Jn its books because if they were audited they would have to explain where they got that money. Accordingly

,hey laundered the $1.2 over into their own employee retirerncnt h d . These banksters are very creative!

[had a hunch that although the Dovenmuehle entity was in Zurich Illinois they were probably registered in Texaz

The reason I had this hunch is I had traced all 3 companies listed on the fabricated assignment of trust deed

:MGC Mortgage, Loan Acquisition Corporation, andLPP Mortgage Ltd.) to Plano Texas to the same address.

[ was right! I also suspected that Cal-Western Reconveyance Corporation (the foreclosing "trustee") although it

s registered in California at El Cajon, CA, that it would somehow be tied to this same incestuous trio. I was righ

%gain! Sure enough Cal-Western was traced back to Plano Texas. The "Cal-Western'' was given to that entity to

xick the courts into thinking it is a California entity. NOT TRUE!! It is a Texas entity traced right back to the tri~

3. I h e w there must be a common thread to this incestuous group all tracing back to the same address in Texas.

Sure enough I discovered the link. They are all controlled by Andrew Beal, a BILLIONAIRE from Plano, TX.

3ne must wonder if this is how BEAL became a BILLIONAIRE, by cutting secret deals with the other banksters

>n \Wall Street who securitized thousands of risky loans into "pools of loans" and sold them to investors as bond:

Some investor whose bond didn't pay off would get paid by government insurance on those bonds so he got paid.

lo the trustee DB just split the hust deeds from the notes which was illegal and breach of duty to the certificate

on the notes as it rendered their minutely fractional beneficial interest on the notes unsecured and defeatel

he tax-free status of the REMIC tlust in which the investors invested, on reliance that it would be kept tax-free.

- 13 - Application far Order to Show Cause and Temporary Restraining Order

3,%4 1

5. This splitting of the trust deeds from the notes was as illegal violation of securities regulations, just like the

illegal splitting of "options to purchase" from the stock itself. I believe that Andrew Beal, the billionaire, cut a

secret deal with DB Structured Products. Inc. (the Wall Street banksters running that entity) to buy hundreds, or

even thousands of these illegal, fabricated "assignments of trust deed." Keep in mind they were worthless to

DB as trustee because they knew the original notes had to be kept with them as the "custodian of the notes''

pursuant to the Pooling & Servicing Agreements" to they could grab millions by selling them to other banksters,

who would then simply foreclose on all the loans in default and confiscate the properties. If MGC acquired any

anything legally it would only have been the right to service the loan, not foreclose on it. Only the lender can

foreclose who in this case is the thousands of "certificate holders" who hold a minutely fractional share of the

beneficial interest in the note. It is the NOTE which is the negotiable instrument and the obligation. (Exh. C)

(See UCC sections at Exh. K which clearly explain the rules on notes as negotiable instruments and note holders.

I believe MGC already received insurance proceeds which fully paid the outstanding balance on the loan.

They also converted $88,925.68

6. It is interesting to note that the first Notice of Default recites that Dva~d owes $73,351.90 to cure. (Exh. B5)

and a few weeks later a new Not~ce of Default was recorded showing he owed 91,754.18 -- $18,000 more. (B6)

This significant discrepancy is suspect at best. How could he owe $18,000 more from one month to the next?

7. Under 52924 et seq. the trustee was required to record a substitution of trustee BEFORE filing the Notice of

Default. In this case the trustee filed the NOD and then filed the substitution of trustee. Accordingly, the first

NOD was invalid because the trustee had no authorization to issue an NOD until the beneficiary granted it to him

Because the NOD was fatally defective, the subsequent power of sale was defective.

No one from MGC or CWRC ever called me to discuss David's account, even though they had a signed

authorization from Gates and they knew I represented him. I was as sulprised as David when they filed NOD.

This was a blatant failure to comply with 52923.5 which mandates that the trustee absolutely may not foreclose

without first contacting the debtor (or the debtor's attorney if there is one) to try to work out a repayment plan to

avoid foreclosure. MGC knew I represented Davld as I adv~sed them o f t hat in 2010. The fallure to comply wa:

intentional. MGC did not want to work out a repayment plan. They just want to steal this $1,000,000 home.

- 14 - ._...... ^ _ ...........................................................................

Application for Order to Show Restraining Order

8. I mvest~gated Cynth~a Riley, the purported VP of Wamu bank. whose stamp appeared on the assignment

from WaMu to DB Structured Producsts, Inc. purportedly on 813012006 "assigned" the trust deed to DB.

There are several websites on the internet which arose after milhons of Americans were made homeless

since 2008 to help other who are trying to discover if their assignments were fabricated or forged.

11 The website has a list of h o w "robosigners" and sure enough Cynthia Riley's name appeared on the list.

II It was reported that she bas been hiding out andno lawyer has been able to find her for a deposition.

The wehsite also posted a notice that if the questioned document was executed in certain counties it was

highly likely the document was fabricated with "cut and paste" rohosigner signature stamps" as well as

"cut and paste" notary "stamped signatures." There are only about 10 counties nationwide on the list.

Duval County Florida was on the list. This is where the fabricated assignment of trust deed was

purportedly executed and notarized. I am 100% sure the assignment of trust deed which is being used a

the purported authority to foreclose is a fabricated instrument. I am 100% sure that defendants will not

be able to v r o d u ~ o r i g i n a l note, hut will file yet another periured document claiming it was "lost."

Theyhave been put on warning in the complaint that offering any false document into a proceeding

NOTICE OF THIS HEARING.

The defendant trustee who recorded the NODS and the NOS (Cal-Western Reconveyance Corporation) has

hown about our intent to bring this application for TRO since January 12,2012. (see Exhibit A1 to my decl.)

On 1-12-2012 I I sent the notice by fax, by email and by 17s mail. I called to speak to the trustee or attorney.

Desiree would not give me an email address or phone for either one. Neither ever called. They ignored me.

Despite the warning in Exh. A1 to my declaration, they recorded a Notice of Sale setting the date for 2-6-2012.

I sent another warning, including another copy of the first warning, about failure to record substitution of trustee

before the NOD. They continued to ignore me. They will not tale my calls nor return any of my messages.

On Monday I emailed copies of the complaint with all exhibits to CWRC, DB, WamuIChase, MGC/LLP.

Again, I notified them I would move for a TRO and would send email and telephone notice if OSC is issued.

Intend to email these pleadings today. I declare these statements to be true under penalty of perjury and CA law.

I I Executed in Santa Barbara on 21-1-2012. /Vancy Vu$$y /tlcCa#mn

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- 15 -

Applicatio for Order t o Show C a n e and Tern orary Restraining O r d e r

..._.._.__.._.__.__~.~..-......~.......-............-...-.........-...-......-....

;5.3 44-

NANCY DUFFY MCCARRON, CBN 164780 950 ROBLEJANE SANTA BARBARA, CA 93103

telephone: 805-450-0450 facsimile: 805-965-3492 [email protected]

January 12,2012

NOTICE OF POTENTIAL LIABILITY - PARTY TO FRAUDULENT FORECLOSURE DEMAND TO CEASE ALL ACTIONS TO FORECLOSE 1200 PALOMINO DRIVE

transrnltled vla emall to InfotBProm~ss com and vla fax to 619-590-9299 and vla US mall to the address below

TO: Legal Dept. of Cal Western Conveyance Corporation Tel. 800-546-1531 Subsidiary of Promiss ~olutions'(West Coast Operations) 525 East Main Street El Cajon, GA 92020 ~ef:1336895-02 Client ID: CWR CE 1200 Palomino Dr. Santa Barbara CA 93105 (David Gates)

I represent David Gates in the above-captioned matter. You will receive a fax today directly from David Gates authorizing me to represent him. I have practiced real estate since 1983 (Broker #853086) and as an attorney since 1993. I have extensive experience in real estate law, foreclosures, fraud, etc. I researched this matter extensively.

As you know, our legislature enacted consumer protection statutes after discovering lenders engaged in predatory practices in real estate securities. Our District Attorney created a new wing to prosecute fraudulent foreclosure practices. WamulChase engaged in predatory lender practices resulting in nationwide and statewide class actions. My research disclosed predatory practices not only by WamulChase but also by debt collection agents hired to foreclose properties. Allied International closed their collection file and convinced Chase to close its file, admitting there was no standing. (Exh 1) Before and during the transmutation from Wamu to Chase various "securities" were sold, resold, assigned and reassigned. When your company commenced foreclosure on 1200 Palomino via Notice of Default on 10-18-201 1 David Gates sewed various demands bv certified mail to all agents involved in the history of his alleged $1,142,302 loan and related trust deed. Gates demanded to review the alleged ORIGINAL NOTE purportedly secured by an alleged recorded TRUST DEED. As you know, since the note is a negotiable instrument any person or entity has standing (assuming the note is valid) to collect the alleged debt by way of court proceedings or foreclosure (assuming they have standing). NO OTHER PERSON OR ENTITY HAS LEGAL STANDING TO FORECLOSE. No person or entity Gates Sewed with Gates' demand produced even a scintilla of evidence to show standing entitling such person or entity to foreclose on 1200 Palomino.

PLEASE CONSIDER THIS A FORMAL DEMAND TO IMMEIDATELY CEASE AND DESIST FROM PROCESSING A NOTICE OF SALE! You must cancel any pending foreclosure proceedings until the clients you represent respond to Gates' demand with evidence that they have standing to foreclose. If you ignore this WARNING, NOTICE OF POTENTIAL LIABILITY, and DEMAND TO CEASE 8 DESIST, you will be liable as a party to the fraudulent foreclosure without standing. If you proceed I will immediately file a cause of action in Santa Barbara Superior Court to obtain a restraining order against further foreclosure proceedings. YOUR COMPANY AND AGENTS INVOLVED IN THE FRAUDULENT FORECLOSURE WILL BE NAMED AS DEFENDANTS. My client will avail himself of all legal remedies (civil and criminal) to protect himself. My client's wife died of anorexia a few years ago. Within months of her death their home on 1200 Palomino burned down in the Santa Barbara Jesusita fire. The stress of her death and the immediate loss of their home in a fire resulted in severe health issues including heart problems and bypass surgery. This is a genuine hardship case. Please advise your clients to produce evidence that they have standing to foreclose, i.e. an ORIGINAL NOTE and ORIGINAL TRUST DEED. As soon as you have the evidence I will arrange a mutually convenient time to review the evidence. A judge will restrain foreclosure and will not lift the restraining order until the foreclosing party proves they have legal standing to foreclose. Please advise your clients of potential litigation costs. I trust you will prudently decide to cancel this foreclosure until standing is resolved. Please notify me immediately of what you intend to do.

Sincerely yours,

Nancy Durn McCarron. Attorney for David Gates A

r r m -? 7 Page 1 of 1

Subject: Fw. Dav~d W Gates Author~zation re 1200 Palom~no Rd Santa Barbara CA 93105

From: nancy duffy (nancyduffysb@yahoo corn)

To: [email protected].

Date: Thursday, January 26.2012 4:17 PM

Fowarded Message ----- From: nancy duffy <[email protected] To: Cal Western Corporation <[email protected]> Sent: Monday, January 16,2012 2:21 PM Subject: David W. Gates Authorization re. 1200 Palomino Rd Santa Barbara CA 93105

Attached is David W. Gates' authorization for me to represent him and waiver of confidentiality on his records.

Attached is another copy of the Demand to Cease and Desist from foreclosure on 1200 Palomino with notice of liability.

Please be advised that you did not record a NOTICE of SUBSTITUTION of TRUSTEE BEFORE you recorded NOD.

As you know, you MUST record a substitution of trustee BEFORE NOD (not after!) I trust you will rescind the invalid NOD.

The NOD you recorded is VOID AB INITIO because you failed to FIRST record the substitution of trustee.

Recording it after the NOD does not cure the deficiency! Please advise IMMEDIATELY what you intend to do. If I have to file an action in superior court for a TRO I will seek attorney fees as a sanction for your failure to cure the defect upon NOTICE of it.

Secondly, even if you had properly filed the substitution before the NOD you provided no evidence of STANDING to pursue foreclosure.

We hereby DEMAND to see the ORIGINAL NOTE and ALL ASSIGNMENT DOCUMENTS upon which you allege STANDING to foreclose.

I await your IMMEDIATE response by email. Thank you. 805-450-0450

DECLARATION OF NANCY DUFFY MCCARRON IN SUPPORT OF APPLICATION FOR TERMPORARY RF,Sl'RADVMG OI<DPK

, Nancy Duffy McCarron , declare based on personal knowledge:

. The defendant trustee who recorded the NODS and the NOS (Cal-Western Reconveyance Corporation) has

n o w about our intent to bring this application for TRO since January 12,2012. (see Exhibit A1 to the NDM

leclaration filed with the verified application) at which time copies of the verified complaint+exhibits were sent

. On 1-12-2012 I sent notice by fax, by email and by US mail of my intent to bring this action unless the 4 rustee would cancel the sale and work on a resolution and the issue of standing. I called to sp ak to the trustee or

ttorney Desiree would not give me an email address or phone.for either one. Neither ever called me back.

. Despite the warning in Exh. A1 to my declaration in support of the application, and personal notice through

)esiree in their office, the trustee= recorded aNotice of Sale setting the date for 2-6-2012. I sent another

,aming, including a second copy of the first warning, about failure to record substitution of trustee before NOD.

'hey continued to ignore me and no one would call me. They will not take my calls nor return my messages.

. This past Monday (1- 30 -2012 I emailed copies of the verified complaint with all exhibits to CWRC, DB,

VamuIChase, MGCLLP. A third time, I notified them I would apply for a TRO and would send email and

:lephone notice of hearing and OSC if issued. I am sending a THIRD copy by email of all pleadings today, wit!

mail notice of hearing at 10:OO am. The Notice of Fbaring and called (800-546-153 1 #6) (CWRC) and talke:'

rst to Christine and then Nicole in L e ~ a l Dept, before .l.O:00 a.m. to give time, date, of hearing & address. I

:he only email I have as they would not give me an email for anyone else)

declare these statements to be true under penalty of perjury and CA law.

xecuted in Santa Barbara on 2-2-2012. flancy au$dy /tiECanwn

- 2 - -------------------------------------------------------------------------------.-------

NOTICE O F Application for Order t 0 ,Show Cause and Temporary Rastraininq Order

~ ~-

TRANSMISSION VERIFICATION REPORT

I I TIME : 02/02/2012 12: 38 NAME : MERENBACH AND YOUNG FAX : 8059667548 TEL : 8059667548 SER.# : BROA8J771098

DATE, TIME FAX NO. /NAME DURATION PAGE(S) RESULT MODE

Nancy Duffy McCarron, CBN 164780 Law Office of Nancy Duffy McCarron 950 Roble Lane [email protected] Santa Barbara, CA 93 103 805-450-0450 fax 805-965-3492

Real Estate Broker Lic. 853086 Notary Public Lic. 1791117 Certified Arbitrator for BBB 30329

Attorney for David W. Gates

SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF SANTA BARBARA (ANACAPA DIVISION)

DAVID W. GATES, Trustee for the DAVID W. GATES ) CaseNo: 1384851 Trust dated August 5, 1996 Plaintiff, )

VS.

MGC Mortgage, Inc., Texas Corpor 1 ion LPP Mortgage Ltd., LP, Texas Corporation

1 ) Notice of Entry of Restraining Order on 2-3-2012

Loan Acquisition Corporation, Texas Corporation Cal-Western Reconveyance Corporation, Texas Corporation ) DB Structured Products, Inc., Delaware Corporation ) Deutsche Bank National Trust Company, astrustee Washington Mutual Bank, a national banking association ) Wamu Asset Acceptance Corporation, SPV vehicle bank ) DEPT: Honorable Colleen K. Steme Washington ~ u t u a l Mortgage Securities Corporation, bank ) JP Morgan Chase Bank., National Association, a bank ) DOES 1 through 50, inclusive, Defendants. )

NOTICE is given that on 2-3-2012 plaintiffs application for a restraining order was heard at 9:OOam in Dept. f

Plaintiffwas present and represented by Nancy Duffy McCarron. Defendants did not make an appearance.

The court granted plaintiffs motion for a temporary restraining order against foreclosure of 1200 Palomino Road

Santa Barbara.,CA. APN No. 023-290-01. Attached is a copy of the order entered after the hearing. Exh A.

CERTIFICATION: The undersigned certifies, under penalty of perjury, that the ORDER, with copies of the

summons, verified complaint, ADR pk, Lis Pendens and TRO papers was sewed by personal delivery to:

Cal-Western Reconveyance Corporation at its registered agent for process: National Registered Agents. Inc

2875 Michelle Dr, St. 100, Irvine, CA 92696 at 2:OOpm on 2-3-2012. Proof of Service will be filed Monday.

Undersigned certifies that a copy ofthe TRO ORDER was served by email to: [email protected] and was

faxed to 619-590-9299 at 5 pm on 2-3-2012. Executed in Santa Barbara, CA 2-3-2012.

M a n c y Durn Mc&arron, Attorney for plaintiff

I

NOTICE - 1 -

OF PERSONAL SERVICE OF RESTRAINING ORDER ON CWRC ON 2-3-2012

Nancy Duffy McCarmn, CBN 164780 Law Office of Nancy Duffy McCarron 950 Roble Lane Santa Barbara, CA 93 103 805-450-0450 fax 805-965-3492 nancyduf@[email protected]

Real Estate Broker Lic. 853086 Notary Public Lie. 1791117 Certified Arbitrator for BBB 30329

ii Attorney for Plaintiff

- @ARyijBL+&~&wtc,,~ - BY -- - TERRI CHAVEZ, Oap tv cle,t

I I SUPERIOR COURT OF THE STATE OF CALIFORNIA

11 FOR THE COUNTY OF SANTA BARBARA (ANACAPA DTVISION)

DAVID W. GATES, Trustee for the DAVID W. GATES ) case NO: 1384851 l1 . - / / Trust dated August 5,1996 Plaintiff. )

VS. ) (&q@&j ORDER TO SHOW CAUSE MGC Mortgage, Inc., Texas Corporation

l3 1 1 LPP Mortgage Lid., LP, Texas Corporation ) AND TEMPORARY RESTRAINING ORDER

Good cause appearing in the verified complaint, plaintiffs application, supporting declarations, and memorandum; and

it appearing that this is a proper case for the issuance of an order to show cause and a temporary restraining order; and that,

unless a temporary restraining order issucs, plaintiff will suffer irreparable injury before the matter can be heard on notice;

l4

l5

l7

18

17 1 1 IT IS HEREBY ORDERED that, defendants appear on 3-12- 13 at 9:&a@in ~epartment 5 of the

- - Loan Acq~~isition Corporation, Texas Corpomtion j To Restrain a Foreclosure and Trustee Sale Cal-Western Reconveyance Corporation, Texas Corporation ) DB Structured Products, Inc., Delaware Corporation ) seb for Feb. 6,201 2 at 1 :00 p.m. Deutsche Bank National Trust Company, as trustee ) at Santa Barbara Superior Coun Washington Mulal Bank, a national banking association ) Wamu Asset Acceptance Corporation, SPV vehicle bank ) DATE: February 3, 2012 TME: 9:OO am Washington Mutual Mortgage Securities Corporation, bank ) JP Morgan Chase Bank., Nationa! Association, a bank DEPT: 5 Honorable Colleen Sterne DOES 1 through 50, inclusive, Dcfcndants. )

23 1 ) above-titled court, located at I100 Anacapa Street, Santn Barbara to show cause why a preliminilly injunction should not

be issued enjoining defendants fiom selling or attempting to sell: or causing to be sold, the trust property in the within action

1200 Palomino Road, Santa Barbara, California either under a Power of Sale in the Deed of Trust or by a foreclosure action.

26 I1 IT IS FURTHER ORDERED that, pending the hearing on the ordcr to show cause, ddendants, and their agents,

- 1 -

O r d e r to Show Cause and TnrLpordiy Restraining Order

2 7 officers, employees, partners, successors. and representatives; all persons acting in concert or participating with them; and

each of them are hereby restrained and enjoined fiom selling, attempting to sell, or causing to be sold the trust property in

thiq action, 1200 Palomino Road, Santa Barbara eitl~er under the Power of Sale ~n the deed of trust or by a foreclosure action

IT IS FURTHER ORDERED THAT a bond is not necessary in this case because defendants are adequately

,ecured by the value of the real property itself. Honover v. Hall (1974) 11 Cal.3d. 842, 114 CR642; CRC 1: 100 (a) 3.

ntemational Controls Corporation v. Vesco (2"*.~ir. 1974) 490 F2d. 1334

IT IS FURTHER ORDERED THAT ANY VIOLATION OF THIS ORDER SHALL BE SUBJECT TO AN

IRDER TO SHOW CAUSE FOR CONTMEMPT OF COURT WITH THE POSSIBILITY OF COURT SANCTIONS.

IT IS FURTHER ORDERED THAT 1

Plaintiff shall serve copies of this order, the verified complaint, the

~ , , " ~ ~ /?A ri

ad supporting declarations of David W. Gates and Nancy Duffy McCarron

~f any pleadings, exhibits or supporting documents may be requested by sending such request to ~iancvduffvsb~vahoo.com

(--2f & c + L . c - ~ ~ f+.< J i.* 2 2 1 - 1 2 ,

3-4- /A. 't - ' - - 3 - n ; d C 7 (9

Judge of the Superior Court, Santa Barbara County

-" K. STERNE

Order t o Show Cause and Temporary Restraining O r d e r s, aJ-0

TRANSMISSION VERIFICATION REPORT

TIME 01/13/2012 23: 24 NAME NANCV B WFFY ESQ FAX : 8859653492 TEL : 8059653592

D&TE ,!TIME 91/i'5 23:91 FW ?ai. / t .!&ME $1 ?59e;.?aq(3 rL!aTf hu co:.81r 9: . - (5) I:r ~ " . '~ i

I RZSULT aM CHECK ~EADASILITY UF TRANSMITTE.) F3GECT;: 82. MODE SlAPiilAi7D

i I i

Nancy Duffy McCarron, CBN 164780 Law Office of Nancy D u e McCarron 950 Roble Lane Santa Barbara, CA 93 103 805-450-0450 fax 805-965-3492 [email protected]

Real Estate Broker Lie. 853086 Notary Public Lie. 1791117 Certified Arbitrator for BBB 30329

F I L E D SUP C&~STYY#AANT~ RI R & ~ B A R A A WoRNlA

FEB 0 6 2012

Attorney for Plaintiff

SUPERIOR COURT OF THE STATE OF CALIFORNIA I

FOR THE COUNTY OF SANTA BARBARA (ANACAPA DIVISION)

DAVID W. GATES, T ~ s t e e for the DAVID W. GATES ) cast N ~ : 1384851 Rust dated August 5, 1996 Plaintiff, )

vs. ) NOTICE ofland OWEK T O SHOW CAUSE LIGC Mortgage, Inc., Texas Corporation ) why PRELIMINARY INJUNCTION should not issue >PP Mortgage Ltd., LP, Texas Corporation ) and application for Preliminary Injunction >oan Acquisition Corporation, Texas Corporation ) Declarations of David Gates &Nancy D. McCarron Jal-Western Reconveyance Corporation, Texas Corporation ) JB Structured Products, Inc., Delaware Corporation ) Filed concurrently with Request for Judicial Notice

3eutsche Bank National T ~ s t Company, astrustee gashington Mutual Bank, a national banking association case tiled: 2-1-2012 CMC: nd yet set MSC: not set Trial : not set

Wamu Asset Acceptance Corporation, SPV vehicle bank ) DATE: March i2, 2012 TIME: 9:30 a.m. Washington Mutual Mortgage Securities Corporation, bank ) rP Morgan Chase Bank., National Association, a bank 30ES 1 through 50, inclusive, DEPT: 5 Defendants. ) Honorable Colleen K. Sterne

- CCP $5 527,187

r0: DEFENDANTS AND ATTORNEY(S) OF RECORU

PLEASE NOTE that on March 12,2012 at 9:30 a.m. ia Dept. 5 of the Santa Barbara Superior Court, at 110

4nacapa St., Santa Barbara plaintiff will move the court on his verified application for preliminary injunction.

The motion is based on CCP $5527, 187, P&A, affidavits, file, Judicial Notice request, any evidence presented.

The court ordered moving papers filed 2-6-2012; responsive papers filed 2-21-2012; reply, if any filed 3-5-2012.

'laintiff has served this notice on defendants as shown on the attached proof of service, although no defendant hi

nade an appearance. All named defendants have been served with snmmons, verified complaint, ADR packel

rotice of lis pendens, and Notice of E n t q of TRO with setting oTPreliminary Injunction Hearing by personal

lelivery (process server) as of 2-6-2012. (wefendants on 2-3-2012) and (9 defendants on 2-6-2012).

N o t ~ € and Order to Show Cause - P r e l i m i n a r y In junc t i on

5 453

1 1 SUMMARY OF ARGUMENTS: I I POINTS & AUTHORITIES IN SUPPORT OF MOTION FOR PRELIMINARY INJUNCTION

3

4

The theme of the case which the court should apply is: NO TICKEE ... NO LAUNDRY!!!

No ORIGINAL note & TD--no relief! This rule must be applied under UCC Art. 3

7

All Exhibits cited below are to the verified complaint on file, unless identified as being attached herein.

(see Reauest for Judicial Notice filed concurrently. --- Exh. K to verified complaint). Plaintiff asks the court to

8 ~ 9

14 I I Watkins v. Biyant (1 891) 91 C 492; Nagle r M a q (1818) 9 C 426 [on the need for an underlying obligation]. I

re-read his 8-page application for TRO which contains arguments on balancing the hardships and equities.

1 0

l1

1 2

1 3

~ I. UCC Article 3 GOVERNS BECAUSE A NOTE IS A NEGOTIABLE INSTRUMENT

The beneficiaq of a note must be an oblige of the secured obligation (usually the payee on the note)

because otherwise the deed of trust in its favor has no purpose. UCC 3-104 (e) (Exh. K -page 2) see also

I 1 5

16

2 1 1 I Attached to this motion is Exh.1 - a few samples from other loans with Riley's name (cut & pasted thereon) I

A deed of trust is merely an incident ofthe debt, Id.

The COPY OF A NOTE produced by defendants in its response to plaintiif s QWR indicates that Gates'

1 7

1 8

19

2 0

debt is payable to "DB Structured Products, Inc." (Exh. A-10). The NOTE wasn't endorsed by any human signor.

It is stamped with the name Cynthia Riley, purported VP of Washinaon Mutual Bank. NA (&eadv defunct bank)

purportedly notarized by CF Carney. Riley has already been identified as a known "robosigner" as noted in

Obama's Task Force on Fraud (see Exh. E-12) and a class action filed this month on robosigners. (see Exh. M)

NOtCe and Order ta Show C us P ellminary In junc t i on 3. 2-f4

. 2 2

2 3

2 4

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2 6

1 27

I 28 !

Cynthia Riley's name is on every published list on the internet (re: fraudulent foreclosures) of known robosigners

Plaintiffs note and recorded trust deed recited that Washington Mutual Bank. FA is the lender and

Title is the "Trustee." on 9-25-05 (see Exh A-valid chain of title - A6 et seq). The promissory note was made

payable to DB Structured Products, Inc. (DBSPI) . There is no recorded document (nor has one been produced)

which suggests the note was ever endorsed to MGC or any other bankster. The Deed of Trust (DOT) recites that

Washinaon Mutual Bank. FA is the beneficiary. No valid instrument was ever recorded or produced which

indicates that DB Structured Products. Inc. ever transferred the beneficial interest on the NOTE to MGC.

11 a either event, to perfect the transfer, the transferor must physically deliver theNOTE to the transferee. Without I a physical transfer, a sale ofthe NOTE could be invalidated as a fraudulent conveyance under Civil Code 93440.

A transfer in pledge could be invalidated as an unperfected transfer under Com Code 5 93 13-93 14. Calfornza

Mortgages and Deeds of Trust, andForeclosure Litigation, by Roger Bernhardt, Fourth Edition, section 1.26.

11 One without a pecuniary interest in the Mortgage Loan (NOTE) is not an oblige under the debt and, thus, I 11 has no legal standing to foreclose ub initio. Watkinr r B W ( 1 9 8 1 ) 91 C 492. 27 P 77 this is hornbook law) I Gates' note is not a bearer instrument, but is an instnunent made payable to a specifically identified person;

to wit: DB Structured Products, Inc.UCC 83-109. A promissory note which is payable to a specifically identified

person is not transferred merely by possession; instead, transfer requires a transferor to endorse it UCC $3-201,

II "'Negotiation' means a transfer of possession ... if an instrument is payable to an identified person, negotiation

11 requires transfer of possession of the instrument and its endorsement by the holder. It an mst~ument is payable to I I I bearer, it may be negotiated by transfer of possession alone." An endorsement is not made by merely purchasing a I note or a debt, or by an assignment; instead an endorsement is made by the signature of the specifically identified

person to whom the NOTE is owed. The relevant section of UCC 53-204 recites as follows:

"Endorsement" means the signature, other than that of a signer as maker, drawer, or acceptor, that alone or accompanied by other words is made on an instrument for purpose of ( I ) negotiating the instrumen4 (2) restricting payment of the instrument, or (3) incurring endorser's liability on the instrument. .. UCC 53-204 [emphasis added]

11 If one bought a NOTE and intends to enforce it, but the NOTE does not carry the endorsement ofthe payee'

21 I / that pcrson's remedy is to bring an action in court to compel the transferor to endorse the note to the transferee.

22 11 Once that is done, thc transferee creditor can enforce the NOTE against its maker (debtor/trustor). 53-203 states:

I! "(a) An instrument is transferred when it is delivered by a person other than its issuer for 2 4 the purpose of giving to the person receiving delivery the right to enforcc the instrument.

(b) Transfer of an instrument, whether or not the transfer is a negotiation, vests in the transferee any right ofthe transferor to enforce the instrument, including any right as a holder in due course, but the transferee cannot acquire rights of a holder in due course bv a transfer, directlv o r indirectlv. from n holder% due course if the transferee engaged in fraud o r illegalitv affecting the instrument.

3 - .......................................... L ..............................................

Notce and O ~ d e r t o S h m liminary I l j u n c t i o n

(c) Unless otherwise agreed, if an instrument is transferred for value and the transferee does i / I not become a holder because of lack of endorsement by the transferor, the transferee has a ~pecifically enforceable right to the unqualified endorsement of the transferor,

3 11 negotiation of the instrument does not occur until the endorsement is made.

I 1 ) An action must be prosecuted by the real party in interest. This standing doctrine involves constitutional

4

5

/ / and prudential limitations. Kowabki r Tenner 143 US 121, 128-129, (2004) (quoting Warth v. Seldin, 422 US

(d) If a transferor purports to transfer less than the entire instrument, negotiation of tlie instrument does not occur. The transferee obtains no rights under this Article and has only the rights of a partial assignee. UCC 53-203 [emphasis added]

1 / 490, 498. Constitutional standing under Article 111 requires, at a minimum, that a party must have suffered some

l1 I Ifor Separatiov ofChurch andState, 454 U S 464,472. Beyond the Article 111 requirements of injury in fact,

9

10

actual or threatened injury as a result of the other party's conduct, that thc injury be traced Lo the challenged

action, and that it is likely to be redressed by a favorable decision. l'alley Forge Christian College v. Am. United

l4 I I As a prudential matter, a party must assert, "bis own legal interest as the real party in interest?

12

13

l5 I I Dunmore v 358 F.3d 1107, 11 12 (9" Cir. 2004.) Neither CWRC or LPP bas standing to foreclose.

causation, and rcdressibility, the credilor must also have prudential standing, which is a judicially-carved set of

principles that places limits on the class of persons who may invoke the court's powers. Warth, Id. @ 499.

In the bankruptcy of In re MitcheN, BK-S-07- 16226-LBR (Bankr.Nev. 3-3 1-09, p. 10) the Court found I

18 I I MERS did not have standing merely because it allegedthat it was the beneficiary under a deed of trust. It was '

I 19 ( 1 insufficient to enforce the obligation. Only an oblige under a note has a beneficial interest in the promise to pay.

I ZU I I "Where the mortgagee has 'transferred' only the mortgage, and not the underlying note, the transaction is a nullity

I 21

22

2 3

2 4

1 1 recites LLP Mortgage Limited. LP is the beneficiary (84). I

and his "assignee" having received no interest in the underlying debt or obligation, has a worthless piece of paper. I

(4 Richard R Powell, on Real Property §37.27[2] (2000)." In re Mitchell, supra @ page 12. In re Foreclosure I

Cases, 521 F . Supp. 2D 650, (S.D. Oh. 2007). No documents were recorded in Santa Barbara County Recorder's I

Office relating to the promissoty note, which debtor has not seen since it was executed. A review of the recorded I

25

2 6

2 7

2 8

I I ~ o t c e and order to Show C A U S ~ - i r l i m i n a r y Injunction

s; a 4 I

I

documents (Exh.A-valid chain of title; A6) recites that Washinaon Mutual Bank FN is the beneficiary of Gates' I

NOTE. A second recorded document (Exb B-fraudulent recorded documents, B1) recites that DB Structured I

Products. Inc. is the beneficiary. A third recorded document recites that LLP Mortmae Limited. LP is the I

heneticiary (R2). A fourth document recites that Loan Acauisition Corporation (B3) is the beneficiary, and then I

Additionally, some other person or entity who actually HOLDS the original note could claim it is the beneficiary.

If the court were to order any one of the above banksters to be a holder in due course, entitled to payment on the

underlying obligation, based upon only a COPY of a purported assignment of trust deed, the actual HOLDER

could produce the NOTE and then sue Gates' on the underlying obligation and prevail under governing UCC.

THIS HAS HAF'PENED IN OTHER CASES. IN AN EASTERN COURT A JUDGE REPORTED THAT

THREE DIFFERENT ENTITIES FILED CASES CLAIMING TO BE LENDER ON THE SAME PARCEL!

1 A court may not speculate under A~ticle 3 of the UCC as to which one of the four bananbters could be a

I l3 1 1 to speculate as to who the holder might be and could possibly guess wmng This would be completely inequitable,

10

11

17

I holder in due course. The only way to identify the true bcncficia~y (HOLDER in dua course of NOTE) is to

I make the foreclosing trustee produce the ORIGINAL NOTE to ascertain who the beneficiary actually is.

I This is what a court is required to do in California under UCC, Art.3. Absent applying UCC the court would have

1' / / NO TICKEE ... NO LAUNDRY!!! NO ORIGINAL NOTElTD - no relief!!! I

14

15

1 to Gates as it exposes him to subsequent liability if the actual beneficiary sued him to collect on the original note.

The court must apply UCC here and order that defendants must produce ORIGINAL NOTE and TRUST DEED. I

II The court can expect defendants to produce a conveniently drafted "affidavit of lost note and trust deed" I

18

1 9 That is the bottom line!!! That is what is required to be applied under UCC Art. 3

2 3 1 1 Even if they did there would be no endorsements in the chain of title. An original ''assignrne~~t" is impossible as I 21

22

because this is exactly what the banbters are doing across the nation. This is why the class action was filed.

(Exh. M) Defendants can not risk prosecution under Penal Codes $8 11 5,132-135 by offering the original note.

trust deed has been lost." Defendants across the nation are ingenious in creating an array of reasons why they can 2 I

24

2 5

I I not produce the original note or trust deed, usually blaming it on some one else in the purported chain of title, and 2 8

the recorded one is a cut &paste fabrication using a rohosigner and photoshop software. In 50 states, district and

bankruptcy courts the banksters are filing in most cases are perjured affidavits reciting that the "original note and

ii gambling that the court will be nabe enough to believe these concoctions just because they are signed under oath.

NOtCe and order t o Shcw Cause - Prel~mlnary I n l u n c t m n

51 acS7

PLAINTIFF PRAYS THE COURT NOT TO ACCEPT ANY CONCOCTED STORY ABOUT A LOST NOTE!

NO TICKEE ... NO LAUNDRY!!! If trustee can't produce an endorsed original note he can't foreclose.

That is the bottom line! That is required under UCC Art. 3, Negotiable Instruments

In Carpenter v. Longan, 16 Wall. 271, 83 US 271,274 (1872) the USSC held "the note and mortgage

are inseparable; the former as essential, the latter as an incidental. An assignment of the note carries the mortgag

with it, while and assignment ofthe latter alone is a nullity. An obligation can exist with or without security.

With no security, the obligation is unsecured but still valid. A security interest, however, cannot exist without an

underlying existing obligation. Hensley v. Hotaling (1871) 41 C 22. Turner v. Gosden (1932) 121CA 20, 8 P.2d

505. Lee v. Joseph (1968) 267 CA2d 30, 72 CR 471. (no note, no standing) Civil Codes $2872,2909,2920.

California Mortages and Deeds of Trust, and Foreclosure Litigation, by Roger Bernhardt, Fourth Edition, 5 1.1 1

The obligation and the security are commonly drafted as separate documents - typically a promissory

note and a deed of trust. If the creditor transfers the note but not the deed of trust, the transferee receives a

secured note; the security follows the note, legally if not physically. Civ. $2936. ScideN v. Ttnedo Land Co.

(1932) 216 C 165, 13 P2d 686. Lewis v. Booth (1935) 3 C.2d.345 If the transferee is given the deed of trust

without the note accom~anving it. the transferee has no meaningful rights except the possibilitv of leg

action to com~el the transferor to transfer the note as weU, f such was the agreement. Kelley v. Upshaw

(1952) 39 Cal. 2d. 179. Polhemus v. Trainer (1866) 30 C. 685. The holdings are codified at UCC, Art. 3.

Consequently, when one transferee receives the note and another receives the deed of trust, the one holdin1

the note prevails, regardless of who first received a transfer. Adler v. Sargent (1895) 109 C. 42,41. CA

Mortgages and Deeds of Trust, andForeclosure Litigation, by Roger Bernhardt, Fourth Ed., $5 1.25. Where the

mortgagee has 'transferred' only the mortgage, and not the underlying note, the transaction is a nullity and his

"assignee" having received no interest in the underlying debt or obligation, has a worthless piece of paper. (4

Richard R. Powell, on Real Property $37.27[2] (2000).; In re Mitchell, supra @ p. 12. In re Foreclosure Cases,

521 F. Supp. 2D 650. see Landmark National Bank v Kesler, 216 P.3d.158 O(S, 2009). The Kansas Supreme

;ourt held the foreclosing entity had no standing to bring the foreclosure action a debtor. MERSv. Southwest

Homes ofArkansas, 08-1299 (Ark. 3- 19-2009). Gates can tender amount due---but to the lender--not banksters!

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NOtce and Order t o Show Cause - P eliminary I n j u n c t i o n

i gd

11. PRELIMINARY INJUNCTION ANALYSIS (Civil Code $527)

Plaintiff is disabled and a senior as defined in Civil Code 5 1761(f)(g). CRC 1.100 requires accommodation

which may include making reasonable modifications in policies, practices, and procedures. CRC 1.100 (a)3.

?ate& a widower faces losing his home of 30 years Exh. $is a chart showing the incestuous relationships of tbt

~anksters who created the oretext o f mz .'arms length sale." The train is driven by Six-Billionaire Andrew Beal

who owns and controls all 3 entities recited in the purportedly "arms length" "assignment" at Exh. B-3.

indrew Beal is worth over $6 billion dollars. Perhaps converting homes nationwide is how he got so rich!

i. Plaintiff has no adequate remedy: hardship will occur if a sale is not enioined: balance tips in his favor

The court may grant a preliminaly injunction under CCP $527. Plaintiff must show 1) inadequate remedy

rt law, i.e. compensation would be insufficient; 2) a serious risk of irreparable harm absent injunctive relief; 3)

. likelihood plaintiff will prevail on the merits of the underlying controversy, 4) comparison of harm to defendan

n issuing an injunction versus the harm to plaintiff in withholding it. The balance tips in plaintiffs favor herein.

t is conclusively presumed the loss of real property which is a single family residence can not be compensated

vith pecuniary damages. Civ. $3387. Demarist v. Quickloan Funding, Inc. 2009 WI, 940377 at 9 (Ca1.2009).

'laintiff will lose his home if trustee conducts the sale. GATES would be homeless after 30 years in his home.

'he stress of losing his home and having to move his personal belongings could cause him to have a heart attack.

In contrast, defendants will suffer no hardship if granted. They will retain a security interest as recorded

an liquidate the asset if they prevail. The property is not marketable as it is only 80% finished and can not be

old without an occupancy permit. A down market, coupled with unfinished construction makes it hard to sell.

i vacant property would be subject to vandalism. Defendants can only gain by delaying the foreclosure until the

~arket picks back up, the construction is finished and the ongoing landscape repairs are completed.

Since hardship tips heavily to plaintiff he need only establish a serious question going to the merits upon

~hich he has a better than fair chance of prevailing. Miller v. Ca Pad. Med. 19 F.3d. 449, 456 (9". Cir. 1994).

'laintiff does not need to prove he will win. GATES alleged, and can establish primafacie violations of the law,

nd at the very least has a fair chance of prevailing on the merits.

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Notce and order t o Show Cause - Prrllminary I n lunc t i on

B. Plaintiff will prevail on the merits; he raises serious questions going to the merit.

Foreclosures are governed by CCP $2924 et seq. which requires that non-judicial foreclosure sale shall not

take place unless it is done on behalf of the beneficiavy of the note secured by the trust deed. Therefore, only a

beneficiary has standing to foreclose. The Notice of Default fails to identify any beneficiary. (Exh. R5)

[t merely lists "LPP Mortgage LTD, LP" as the contact to find out how much must be paid to avoid foreclosure.

At no time has LPP ever held any beneficial interest in the note, nor could LPP have acquired any beneficial

nterest in the NOTE because the NOTE was assigned to DB Structured Products Inc. on September 25,2005.

:Exh. A-10) Defendants failed to identify the beneficiary as mandated by 15 USC 51641g.

The statutory requirements are intended to protect the trustor from a wrongful or unfair loss of properly

~ n d a valid foreclosure by the private power of salr: requires strict compliance with the requirements of the statute

Miller & Starr, CA Real Estate (3'4 Ed) Deeds of Trust & Nort. Ch. 10. $1 0.179. Miller v. Cote, 127 C.C.3d.

188, 894 (1982). It has been the cornerstone of foreclosure law that the statutory requiremenls, intending to

~rotect the trustor from a wrongful or unfair loss of property must be complied with strictly. Id, 510.18.

"Pursuing that policv [of iudicial interpretationL the courts have fashioned rules to protect the debtor. onc

)f them being that the notice of default will be stricth conshued and must correctlv set forth the amounts

s i r e d to cure the default." h e a t t v. The Foreclosure Co., Inc., 166 C.A.3d 273, 278 (1985). The Notice of

mrustee's Sale (NOS) must contain "A description of the security instrument and an identification of the parties to

he instrument. Civil $2924f (b)(l) The notice must also include an accurate statement of the total amount of

~npaid balance oftbe obligation secured by the real property to be sold as well as a statement of the costs,

:xpenses, and advances incurred at the time of the initial publication of the notice of sale. Civ. Code §2924f(b)(I)

Wller & Stm California Real Estate (3rd. Ed.);. Deeds of Trust and Mortgages, Chapter 10 $198

4s shown by the declaration of Plaintiff and his verified complaint Defendants undeniably failed to perform any

)f the steps required by $2923.5 before they recorded the Notice of Default and issued a Notice of Trustee's Sale.

There is a stamp under Gates signature which recites, "Pay to the order of DB Structured Products. Inc

Without Rccourse Washington Mutual Bank. FA By Cynthia Kiley Vice President." DB was the trustee on the

NOLCe and O r d e r t o Show Cause - P el i rninary Injunction

57 f~

P&S agreement which securitized the note. (Exh. D2). The offering including Gates' loan closed Oct. 1,2005.

(Exh. D2). Once the note was assigned to DB on 9-25-05 it became an assct of the DB/WaMu sponsored trust.

Pursuant to governing documents of the P&S and IRS code, all loans had to be added 90 days after closing.

Thus, Gates' loan became a trust asset no later than Dec. 29,2005 (90 days after the securities offering closed).

Accordingly, there could be no further assignment to anvone. It would defeat the REMIC trust

Oncc in the trust, the trustee could not split the trust deed from the NOTE. The trustee was required to hol

the original note and trust deed. (Exh. D-7) Additionally the trustee must hold originals of all assignments on

the note as part of the mortgage file (D-7). The P&S defines the "beneficial holder" as a person holding a

beneficial interest in a certificate. (D-7) Power of Sale is voluntarily granted by the trusstor; a trustee may

only foreclose as set forth in the power granted. The trustee may not exceed its limited scope of the grant.

The GATES note recites in par. 7 (Exh. A-7) "If I am in dcfault, the Note Holder may send me a written

otice telling me that if1 do not pay the overdue amount by a certain date, the Note Holder may require me to

ay immediately the full amount of Principal that has not been paid and all the interest that I owe on that amount.

'he Note Holder is defined in the P&S as any person holding a certificate. LPP is notlwas not a note holder.

L loan sewicer is not a Note Holder or a ler~der and lacks the power or authority to foreclose. Even if a servicer

ould foreclose on the property it would not be LPP because LPP it is not the loan sewicer. MGC is the servicer.

he Gates' trust deed, at par. 24 authorizes only a lender to substitute the trustee. (Exh. A-26) The Substitution

f Trustee recorded against Gates' property on I 1-15-1 1 was executed by LPP. (Exh. B-10) LPP is notlwas not ;

:rider. A lender is the person($ who funded Gates' escrowlloan; i.e. certificate holders who purchased RMBS'

I the WaMuIDB AR-13 offering. LPP is not one of them. LPP is nothing more than a fraudulentpretendlendev

:. Equity Supports Issuance of An Injunction The principles of equity apply to foreclosure sales. Equity does not allow one to take advantage of his own

irong nor will it assist in perpetration of fraud on another or the public. Courts can set aside a foreclosure sale

{hen there has been fraud, when the sale has been improperly, unfairly, or unlawfully conducted, or when there

as been such a mistake that it would be inequitable to let it stand. Bank ofAmerica Nat. Trust & Savings A.wn v

leidy, 15 Cal.2d. 243,248 (1940). Whitman v. Transtate Title Co. (1985) 165 C. A.3d. 3 12, 322-323.

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D. The Relative Hardships Favor Plaintiff

In this matter, the relative hardship to plaintiff-losing his home-represents irreparable injury and harm,

diminishing plaintiffs requirement of showing probability of success on the merits. The loss of one's property

due to foreclosure constitutes an irreparable injury. Demarest v. QuickLoan Fund In. (2009) West Law 940375

[CD. Cal. Wrobel v. S1. Pope & Assoc., 2007 WL 2345036 at 1 (S.C. Cal. 2007).

Numerous couds have found this injury enough by itself to mandate preliminary injunctive relief.

Vichols v. Deutsche Bank Natl. Trust 2007 U'L 4181 11, at 2 (S.D. Cal. 2007). United Church of Med. Ctr. v.

\.led Ct. Com. 689 F.2d. 693,701 (7". Cir. 1982. If defendants are allowed to foreclose, plaintiff will lose his

lome of 30 years, while disabled at 69. A harsher outcome could scarcely be imagined. The balance of harm

:learly weighs in favor of plaintiff, both as a matter of law and common decency.

E. No Bond Should be Required Courts have broad discretion in determining the amount of bond, or can waive the bond where it is equitable.

7onnecticut Gvn LLifp Ins. CO. V. New Images of Beverly IIills, 321 F.3d. 878, 882 (9'". Cir. 2003). CRC 1: 100

rhe court may dispense with the filing of a bond when it coiicludes there is no realistic likelihood of harm to the

lefendant from enjoining his or her conduct. Jorgensen v. Cassidy, 320 F.2d. 906,919 (9" Cir. 2003)

Here, there is no realistic harm to drfendants from a restraint of the foreclosure proceedings and trustee's sale

f the Defendants position that the loans were valid is correct, then the loans are adequately secured by the very

roperty in question, which is worth more than a million. Additional security is neither appropriate nor

~arranted. Phleger v. Countrywide Home Loans, Inc. 2007 WL 4105672 at 6. (N.D. Cal. 2007. Moreover, MG(

;till holds $88,925 of GATES insurance proceeds which exceeds the $71,000 default listed on the NOD. Exh. B

In this case the court should accommodate GATES not only because it is the equitable thing to do but also

Iecause the court has a duty to make special accommodations for an elderly, disabled person. CRC 1:100. (a) (3).

CONCLUSION

Defendants should not benefit from fabricating assignments and recording them in violation of Pen. 51 15.

'laintiff should permitted to conduct discovery and prove to recorded "assignments of trust deed" are fraudulent,

nvalid, and void ab inilio. The court should require production of the OKIGlNAL NOTE and TRUST DEED.

NUtCe and order to Show Cause - P r e l i m i n a r y Injunction

s, 2-b 2-

late: February 6,2012 By:

VERIFICATION

I, DAVID GAI'ES, as trustee for the David W. Gates Trust dated August 5, 1996 declare:

I am plaintiff. I have read this application for preliminary injunction in its entirety and declare, under

malty of perjury and the laws of California, the allegations set forth herein are based on personal knowledge,

xcept as to allegations made on and as to those allegations I believe them to be hue.

<xecoted Feb 6, 2012 in S.B. . - W. Gates Trust dated August 5, 1996

- DECLARATION OF DAVID W. GATES

IN SUPPORT OF APPLICATION FOR PRELIMINARY INNCTLON

I, DAVD W. GATES, trustee make the following statements based on personal knowledge.

1. I completely read the entire contents and every page of the verified complaint filed in this action.

2. Although I do not understand the complexities of securitization and legalese I understoodthe facts.

3. 1 herehy authenticate the documents at Exh. F of the complaint. On 11-19-08 my wife died and less

than 6 months later our home which I have owned since 1977 burned in the Jesusita fme on 5-6-09.

Within months my health deteriorated from the stress resulting in the need for heart surgery. I am 69.

4. I submitted n claim to Farmers Fire Exchange who approved my claim, but said I had to rebuild before

they would issue a pay-out. I lost all rental income from my tenanls because there were no rooms to rent

5. 1 was forced to use high interest credit cards to buy materials to rebuild so I would have a place to live.

I stayed with friends. Some friends helped me rebuild. Materials were very expensive so I ran up over

$100,000 in credit card debts. I spent approximately $50,000 in cash on materials where vendors would

not take credit cards because my credit was destroyed afier I was unable to make mortgage payments.

I was stuck between a rock and a hard place because Farmers would not pay out my fire claim benefit

until I rebuilt and I had very little cash as my tenants had to relocate to other places until I could rebuild.

Notce and ordsr to Show Cause - Pceliminary In junc t ion

6. Farmers said I had to complete 80%. When I did Fanners sent an agent to certify it was 80% finished.

7. Farmers sent 3 checks for a total of $202,548.64. (Exh. F1) 1 was shocked when I saw the checks were

made payable to MGC Mortgage, IIIC. and myself. I never asked for that. I never told Farmers about it.

However, I had called MGC to tell them about the fire and that I would not be able to make payments.

What I believed happened is that MGC called Farmers and convinced them to put its name on the check.

This was not fair because I paid the premiums and was the beneficiary under that policy of fire insurance

8 I called MGC. Their staff told me to mail them the checks, they would sign off and rehim them to me.

I relied on that representation and mailed them to MGC. They did not keep their promise. I kept calling

I wrote to them several times pleading to release my funds. My letters and numerous calls were ignored.

9. I continued to go further into debt having to use all of my social security funds to buy materials and eat.

Eventually my credit cards were cancelled by the vendors for non-payment and filed claims and lawsuits

10. 1 was at the point of a nervous breakdown in April when five months had passed and MGC was still

ignoring my phone calls, letters and threats. I went to my friend Nancy Duffy McCarron for help, whom

my wife and I had known for 15 years as she used to attend our annual Christmas parties. I was broken.

I was at times suicidal. Nancy Duffy McCarron saved my life. She immediately contacted MGC and

threatened to sue them for a racketeering enterprise. In 2 weeks she got half of my money from MGC.

They released $1 13,622.96 (about half the money) to my attorney and I could continue to rebuild and ea

1 I . I used a large amount of those funds to settle the $100,000 in claims against me by the creditors. The

remainder was used to continue buying materials to rebuild the home. MGC kept $88,925.68 as they

insist I must finish the home 100% before they will release the rest of Farmers proceeds they hold (F2,F3

12. I was again caught between a rock and a hard place because I had no funds to buy materials and I am

required to replace the landscaping by Fanners before they will release funds for those improvements.

Fortunately I discovered that West Flower Growers in Point Magu was suffering from the recession and

had a surplus of palm trees they can not sell. Due to my hardship they agreed to sell them to me at

various prices between $1 1 - $100. These trees are worth thousands as they are full grown. I am using a

backhoe to install them.

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Notce and Order to Show Cause - P r e l i m i n ry Injunction

s, 2-4

13. Now MGC is trying to foreclose and take my home while keeping $88,925.68. I came to my attorney

when I returned from Idaho and discovered the notices posted on my door. My attorney researched my

entire case and discovered the assignment to MGC and the prior assignment were void and invalid. She

said she had a lot of experience with fraudulent real estate documents and "knows it when she sees it."

14. At the end of the 2010 year I received the 1099 form shown at Exhibit F4 of my verified complaint.

Because I do not know tax law I brought it to my attorney. She said this meant the purported "lender"

had charged-off the loan as a vehicle to get a tax break against significant income during the tax year.

Although I do not understand tax law I could see the form recited that my debt was cancelled.

15. I now suspect that MGC may have put in a claim to their own ALTA insurer and collected in full.

16. If MGC collected in full from an insurer who had issued an insurance policy they have been paid alread)

Taking my home worth a million + would be unjust enrichment and a fraud upon me and the insurer.

MGC would be unjustly enriched if they now confiscate my home, as they kept my insurance proceeds

while I accrued $100,000 in credit card debt, and used more than $50,000 of my cash on materials.

MGC would get at least $300,000 in improvements I paid for plus all the funds they wrongfully converted.

17. We decided to file the within action to seek justice for all of the frauds and torts committed against me.

The last three years of my life have been devastating and have caused me severe stress and anxiety.

Had it not been for my attorney who saved my life I would probably not he here today.

18. My attorney intends to do vigorous discovery in this case and bring to justice the persons who fabricated

the assignments of trust deed and who have defrauded me throughout the past 3 years.

19. Defendants never contacted my attorney to effect a workout agreement whereby the payments could be

suspended, or at least reduced until I can finish my home, get an occupancy permit issued, and collect

the final pay-off from Farmers Insurance. 1 was not aware that I had the right to meet with MGC and mq

attorney to explore options to avoid foreclosure, and that they had to meet with me if we requested it.

I was never given the toll-free number for HUD or told that I could seek HUD intervention & counseling.

I just discovered today that Civil Code 52923.5 required MGC to contact us before filing aNotice of

Default. I never received any counseling as required. My attorney told me MGC never contacted her.

- 13 -

Notce and Order t o Show Cause - Preli 'nary Injunction

3, ~ 3 "

20. If it is determined that MGC's claim is valid I can tender payments when Farmers pays off the final 20%

which should be happening in the very near future.

21. I declare the above statements to be true under penalty of perjury. Executed on February 6,2012.

DECLARATION OF NANCY DUFFY MCCARRON IN SUPPORT OF APPLICATION FOR PRELIMINARY INJUNCTION

I, NANCY DUFFY MCCARRON, make these statements based on personal knowledge.

. During the 1mt week of April, 2010 David Gates arrived at my home nearly hysterical. He was crying.

had known David Gates and his wife for 15 years and had never seen him with such anxiety. David explained

hat he had received 3 checks from Farmers Insurance the last week of January 2010 for $202,548.64 (Exh. F1)

rfter he completed 80& of the rebuilding of his home after it burned in the Jesusita fue. David said Farmers mad

he checks payable jointly to MGC and himself. David was desperate for money a3 he had been living on credit

ards in the past and ran up $100,000 buying materials to rebuild as Farmers would not pay his claim until he

ebuilt. David said MGC told him to siga the checks, mail them to him and MGC would sign them and mail them

lack. David said he had been W.ng for 5 months to get them to release his insurance proceeds. David said he

ad made hundreds of phone calls, and sent various demands. I immediately contacted MGC and threatened to

ue them for racketeering if they did not send the proceeds. They agreed only to send about haIf of the proceeds,

laiming that David owed back payments, interest, and various "late fees, penalties, and assessments."

Lather than sue we agreed to take halfthe proceeds. MGC still retains the remainder of David's proceeds.

. The UPS label shows the shipping information to my office. (Exh. F2) The return address shows it was

hipped 6om 'Tlovenmuehle Mortgage Inc., 1 Corporate Drive, Lake Zurich, IL. 60047 which is noteworthy

ince the maker of the check was MGC Mortgage, although both corporations shared the same address. (Exh. F3)

'his evidence proves these two corporations are related. The check was made on 5-12-2010 which is noteworthy

- 14 - ......................................................................................... NOtce and Order to show cause - Preliminary In junct lan

The next year (201 1) David returned to my office to bring me a copy of a 1099 form he received. (Exh. F4)

rhis was quite interesting since as it shows Dovenmuele Mortgage Inc., recites the same form was sent to ITR.

4mazingly it recites that David's loan (same loan no. as on all the correspondence from MGC) was cancelled.

9 corporation is required to notify the IRS, with a copy to the debtor, if it cancels the debt. This could only

iappened in one of two ways; either the debt was paid off, or the debt was "charged-off' by the lender. (see F4).

f a lender submits a claim for the amount of its loan (which was insured) and a house bums down, it can submit

I claim to its insurer for the full amount due on the home. 1 believe this is what happened in this case. (see F4).

I . There was an entry under creditor's federal identification number. It was 36-2435132. I googled it. (Exh F5

,ow and behold a document popped up showing that ID number belonging to Dovenmuele MortgageJnc. (Ex.F!

savings and Retirement Plan, with the beneficiaries being the employees of Dovenmuehle. This was interesting.

Why would this retirement fund be sending David Gates an IRS 1099 form? David had not paid the debt.

let, the implications of this form being filed with the IRS is that such "foregiveness" or "cancellation" of a debt

s a taxable event for the taxpayer. David would then owe TAX as if be had received $1.2 million as income----

he outstanding amount of the debt when cancelled. Since we know that David did not pay the debt (or MGC

vould not be foreclosing). the only feasible explanation is Dovenmuele received $1.2 million from someone?

'he only conceivable someone would be an insurer who paid out on the claim. MGC could not make a deposit

)n its books because if they were audited they would have to explain where they got that money. Accordingly

hey laundered the $1.2 million over into their own employee retirement fund. These banksters are very creative

had a hunch that although the Dovenmuehle entity was in Zurich Illinois they were probably registered in Texa!

The reason 1 had this hunch is I had traced all 3 companies listed on the fabricated assignment of trust deed

MGC Mortgage, Loan Acquisition Corporation, and LPP Mortgage Ltd.) to Plano Texas to the same address.

was right! 1 also suspected that Cal-Westem Reconveyance Corporation (the foreclosing "trustee") although it

s registered in California at El Cajon, CA, that it would somehow be tied to this same incestuous trio. I was righ

gain! Sure enough Cal-Western was traced back to Plano Texas. The "Cal-Western" was given to that entity to

rick the courts into thinking it is a California entity. NOT TRUE!! It is a Texas entity traced right back to the tri

Notce and Order to Show Cause - Prelimina r Injunction

5, d-

I . I h ~ e w there must be a common thread to this incestuous group all tracing back to the same address in Texar

Sure enough I discovered the link. They are all controlled by Andrew Beal, a BILLIONAIRE from Plano, TX.

3ne must wonder if this is how BEAL became a BILLIONAIRE, by cutting secret deals with the other batzkster:

211 Wall Street who securitized thousands of risky loans into "pools of loans" and sold them to investors as bond:

Some investor whose bond didn't pay off would get paid by government insurance on those bonds so he got paid

So the trustee DB just split the trust deeds from the notes which was illegal and breach of duty to the certificate

lolders on the notes as it rendered their minutely fractional beneficial interest on the notes unsecured and defeat€

:he tax-free status of the REMIC trust in which the investors invested, on reliance that it would be kept tax-free.

5. This splitting of the trust deeds from the notes was as illegal violation of securities regulations, just like the

illegal splitting of "options to purchase" from the stock itself. I believe that Andrew Beal, the billionaire, cut a

secret deal with DB Structured Products, Inc. (the Wall Street banksters running that entity) to buy hundreds, or

wen thousands of these illegal, fabricated "assignments of trust deed." Keep in mind they were worthless to

3B as trustee because they knew the original notes had to be kept with them as the "custodian of the notes"

~ursuant to the Pooling & Servicing Agreements" to they could grab millions by selling them to other banksters,

~ h o would then simply foreclose on all the loans in default and confiscate the properties. If MGC acquired

inything legally it would only have been the right to service the loan, not foreclose on it. Only the lender can

'oreclose who in this case is the thousands of "certificate holders" who hold a minutely fractional share of the

3eneficial interest in the note. It is the NOTE which is the negotiable instrument and the obligation. (Exh. C)

:See UCC sections at Exh. K which clearly explain the rules on notes as negotiable instruments and note holders.

believe MGC already received insurance proceeds which fully paid the outstanding balance on the loan.

rhey also converted $88,925.68

i. It is interesting to note that the first Notice of Default recites that Dvaid owes $73, 351.90 to cure. (Exh. B5)

md a few weeks later a new Notice of Default was recorded showing be owed 91,754.18 -- $18, 000 more. (B6)

rhis significant discrepa~icy is suspect at best. How could he owe $18,000 more from one month to the next?

NOtce a n d o r d e r t o Show Cause - Preli inary I n j u n c t i o n

$, &.$

7. Under 52924 et seq. the trustee was required to record a substitution of trustee BEFORE filing the Notice of

Default. In this case the trustee filed the NOD and then filed the substitution oftru*. Accordingly, the first

VOD was invalid because the trustee had no authorization to issue an NOD until the beneficiary granted it to hirr

3ecause the NOD was fatally defective, the subsequent power of sale was defective.

3. No one from MGC or CVvRC ever called me to discuss David's account, even though they had a signed

iuthorization from Gates and they knew I represented him. I was as surprised as David when they filed NOD.

rhis was a blatant failure to comply with $2923.5 which mandates that the trustee absolutely may not foreclose

without first contacting the debtor (or the debtor's attorney if there is one) to try to work out a repayment plan to

lvoid foreclosure. MGC knew 1 represented David as I advised them of that in 2010. The failure to comply was

ntentional. MGC did not want to work out a repayment plan. They just wanted to steal the $1,000,000 home.

. I investigated Cynthia Riley, the purported VP of Wamu bank, whose stamp appeared on the assignment

tom WaMu to DB Structured Products, Inc. purportedly on 813012006 "assigned" the hust deed to DB. There ar

;everal wehsites on the internet which arose after millions of Americans were made homeless since 2008 to help

)ther who are trying to discover if their assignments were fabricated or forged. The website has a list of knov

'robosigners" and sure enough Cynthia Riley's name appeared on the list. It was reported that she has been

riding out and no lawyer has been able to find her for a deposition. The website also posted a notice that if the

luestioned document was executed in certain counties it was highly likely the document was fabricated with "cut

md paste" robosigner signature stamps" as well as "cut and paste" notary "stamped signatures." There are on11

lbout 10 counties nationwide on the list. Duval County Florida was on the list. This is where the fabricated

.ssignnent ortrust deed was purportedly executed and notarized. I am 100% sure the assignrnenr of hwt deed

vhich is being used as the purported authority to foreclose is a fabricated instrument. I am 100% sure that

lefeudants will not be able to produce an oriqinal note. but will file ymer veriured document claiming it

vas "lost." They wcre warned in the complaint that offering any false document into a proceeding if a felony.

declare the above statements to be true under penalty of perjury. Executed on February 6,2012.

Notce and Order tc Show Cause - Preliminary Injunczion

s1 uq

to the Note Holder a Loan Document Identical in form and content which will have the effect of the original for all purposes.

'13. DOCUMENTARY TAX The state documentary tax due on this Note has been paid on the mortgage securing this

indebtedness.

WITNESS THE HANDIS) AND SEAL(S) OF THE UNDERSIGNED.

- - = - - x- MICHAEL L MASLAX

Pay to the orde~ ,$

Wittrout Recoura WASHINGTON MUTUAL RP dK, FA ..

//2&@ BY- - G ~ W ~ E Y

Page 6 of 6

13. DOCUMENTARY TAX 3010649196 Tne state documentaly tax due on this Note has been paid an the mottgaoe securing this

indebtedness.

WITNESS THE HAND (S) AND SEAL (S) OF THE UNDERSIGNED.

/ -.---

MICHAEL MASLAK

Page 6 of 6 LNTGOFLF (VERSION 1.D)

to the Note Holder a Loan Document identical in form and content which will have the effect of the original for all purposes.

13. DOCUMENTARY TAX The state documentary tax due on this Note has been paid on the mortgage securing this

indebtedness.

WITNESS THE HAND(S) AND SEAL(S) OF THE UNDERSIGNED.'

X -.

MICHAEL MASLAX

Page 6 of 6

David W. Gates v. MGC Mortaaqe Inc. et at SBSC 1384851

DEFENDANT OR ENTITY ADDRESS OF ENnM Slate b m m o r m d SOSwktfat im OFFICERS ELarED A I I e n i L r P m e ~ ~ S e w SERVED

MGC Mmtgwe. Ino, Texa. Corporat ion 6000 Lesav Dr T ~ S TX I l l 7 m a&. M mny CUII maw m.1 CT Cemaetion z m 1 2 44pm

uled 7195 MI- PW ~ l l n o r ~ 7 1 W cn CAW nlhl ~ h w ~ x 7 m 2 4 MRleXB03824887 kYsZ034506033 JkxhChem~. 818 w 7 m . s ~

. ~~ .4:., :-:,,.t .c .: . , . . . . C3112026 I . . . . . . . . . . . . CA 1MlSKISacWe . . . . . . . . . "'.<...'.'.I ';:>;",.'',.::'~ 2.;

n 6wO L W ~ C Y or R I Q ~ ~xmao187ac6ve '

LPP Inwlhnsnm, LLC C* 200815810273 66-OB setlw Plmo Tx 7WM lX le110247M10 taxt3m3830B362

3802 E Mandayllb PI. Ormge. CAP2887 .=,, ;. ,..,*., .;...., ,:;, :r.::t, ,.(,t,~ *.,... CM0217100017 CAm7Foz a m . . . . . . . . . . .. ... . . . . . . . . . ,.p ..?.. :.%,.;> .................... ... .*.~ .? - 6 ' : , , . . . . . . . . . . . . . . . .. , , . -, .. ,, . . , . ,

Lan ~&ub)(lon ~ o r s l f o n , Texas Corporutlon BOOOLqaey Or Rm T X Y l $ , v 7 ~ v e mdmr~nl *ndn\*&. LVN (C0Ik)D ansmislld P h o h 7 W lXUIeXBw788BU) Le~mR028154014 MbNlm CahEn3plU

- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Q, : . . . .......;..... . . c'.. ............. , ......... , , . . . : ......... 4 .., . . . . . . . . . . 4 .1.

CaIW~torn Rsmnwyance 'kqmtdbn, p m n Colporatiin 400 N ~ d d g e R d S 740 Cslfmb Cal.Wel(sm Sewdues Co.. Box ttU1 Hausloo, TX 7 r l l Manu GAamO TX BOLl616810 TX2.2246 noqaob 2875 MldleUe or. Ste I W

2533 N C m GC

DB Sbudllmd Productb, bc. DBIBWBW Corponlion 60 WI Shes Delsnare 1.1102 Wva h Y 0 r k . W lOW5 NY.chrr m@smm Smja am 816 W m . Sl.

CZS81278 CAlOnMl arhn LACAQWl7 : : " . . , : , , . . . : il...rr.r . . .,Ti 11,,1.3; ................... . . . . . . l ! , u r . ....... :...,.. . . . . Zi. .. ::,.. . . . . . . . . . ..I .... ,:>.,a:. r:I:.;r .... i.. .... :;;j;iir . . . . . . ..... . . . . . . ...................................... ...... Deuhlche BenkNwUonal TwBt Company, a6 trustee 1781 E. 6t. ~ m r e PI. Dcawrc Nan sumdm M

-dl* FJ& ~ s t ~ o m p ~ , 1011 centre ~d WSAJIS. ~ 0 ~ 0 6 714-247.8315 fax71U41-3328

. , SURRENDERED 1~1111998 .

: ! ....... . : .......... : 2 . . .,:>,~i;;=i .. ~ralim.bBnK SURRENDEREO ~ -

273.9 Wm-afoeka Orst l@n . . . , . , . . ! . . . : . . : . < ................ [ p ~ ~ v , , . ~ ; r ~ E ~ L : 5 ; , ~ ~ ; ; ~ i : , f > ~ z ~ 3 ~ 4 3 ; i ri:z$L+i,>~ .. ....%.*.. : . . . . . . . . . " . . . . . . . : . . . . . . . . : # - : > ~ * 2 < + : : < 7 : p y : : ~ ~ ~ : . . ; , < ~ ~ ; : ; , L ~ ~ ~ , , [ $ ~ ~ ~ : p g ~ , m ; : G w ~ ., , :, ., . ,.

.JP MomanChBse ~ a n u . , N B U ~ B I A m d ~ U m , e k s k m pal* AVO NawVolX 1nz11875 CTCarporstio~ N w Y a N Y 100i7 818W7UI. 81

Promlss Homeownemhip Sdut lons , bc. 404 NonhrldBsRdBt700 h g l a Nelmal RapApenO.lne. CWRC 8 MERS are wholly-awned subsidiaries Auanta cn30aw 2815 MicMlsDr. 6m '100

YOTICE OF THIS HEARING:

The defendant trustee who recorded the NODS and the NOS (Cal-Westcrn Reconveyance Corporation) has

mown about our intent to bring an application for TRO with OSC for Preliminary Injunction since Jan 12,2012.

In 11-2-2012 I sent the notice by fax, by email and by US mail. I called to speak to thc trustee or attorney.

3esiree (CWRC) would not give me an email address or phone for them. Neither ever called. They ignored me.

lespite the warnings and demand to cease foreclosure, they recorded a Notice of Sale to occur on 2-6-2012.

sent another warning including a second copy of the first demand, about procedural and substantive deficiencie:

rhey will not take my calls nor return any voicemails left there. On Jan. 30; 2012 I eniailed copies of verified

:omplaint with all exhibits to CWRC, DB, Wamu/Chase, MGCLLP defendants For a third time, I notified them

would move for a TRO and preliminary injunction and would send email and telephone notice if OSC is issued.

1 process server has now served all 11 named defendants with: Summons, Verified Complaint, ADR packet, Lis

'endens Notice, Notice of Entry of TRO Order, TRO Order, TRO papers. Proofs of service will bc filcd today.

declare these statements to be true under penalty of perjury and CA law. Executed in Santa Barbara on 2-6-12.

, ~ u n c v V X ~ ~ C /I~LCUWI / ?$q PROOF OF SERVICE

I am over 18 and not a party to tlie action. My address is 950 Roble Lane, Santa Barbara, CA 93 103.

In February 6,2012 I served a copy of this Notice of and Application for a Preliminary Iniunction as follows:

:mail: CWRC:mCWRC.com (Desiree) DB defendants:&ansueda@,db.com and alexpaezk2.db.com

WaMuIChase defendants: [email protected] (Shelle)

'mud to: CWRC: 619-590-9299 I deposited a copy in the US mail, with postage thereon, addressed as follows:

Cal-Western Reconveyance Corporation, Trustee PO Box 22004,525 Main St. El Cajon, CA 92022-9004

declare these statements to he true under penalty of perjury and CA law. Executed in Santa Barbara on 2-6-12.

f l u n c ~ Du$& p c C u r ~ n

- 18 - --------------------------------------------.--------------------------------------------

N o t c y d Order to Show Cause - Preliminary I n v n c t i o n

c: %?A

Nancy Duffy McCarron, CBN 164780 Law Office of Nancy Dufi McCanon 950 Roble Lane Santa Barbara, CA 93 103 805-450-0450 fax 805-965-3492 [email protected]

Real Estate Broker Lie. 853086 Notary Public Lic. 1791117 Certified Arbitrator for BBB 30329

Attorney for Plaintiff

! FEB 0 6 2012

I I SUPERIOR COURT OF STATE OF CALIFORNIA

I I FOR THE COUNTY OF SANTA ARBARA (ANACAPA DIVISION)

DAVID W. GATES, Trustee for the DAVID W. GATES Trust dated August 5, 1996 Plaintiff,

VS.

MGC Mortgage, Inc., Texas Corporation LPP Mortgage Ltd., LP, Texas Corporation Loan Acquisition Corporation, Texas Corporation Cal-Western Reconveyance Corporation, Texas Corporation DB Structured Products, Inc., Delaware Corporation Deutsche Bank National Trust Company, as trustee Washington Mutual Bank, a national banking association Wamu Asset Acceptance Corporation, SPV vehicle bank Washington Mutual Mortgage Securities Corporation, bank JP Morgan Chase Bank., National Association, a bank DOES 1 thmugh 50, inclusive, Defendants.

Case No: 1384851

REQUEST FOR JUDICIAL NOTICE Filed coucurre~~tly with Notice and Application for Preliminary Injunction

case filed: 2-1-2012 CMC: not yet set MSC: notset Trial : not set

DATE: March 12,2012 TIME: 9:30 a.m.

DEPT: 5 Honorable Colleen K. Sterne

Evidence Code 55450,451 and other evidence codes

Plaintiff asks the court to of Exhibit K to

plaintiffs verified complaint. Exh. These apply to

the current application before the

Codes $412 (inference re: party's

I I Service: On February 6,2012 I served this Notice of an Application for a Preliminaw Iniunction as follows:

email: and alexpaez@,dh.com

faxed: CWRC: 619-590-9299

I deposited a copy in the US mail, with postage thereon, addressed as follows:

Cal-Western Reconveyance Corporation, Trustee PO Box 22004,525 Main St. El Cajon, CA 92022-9004

I declare this true under penalty of perjury. Executed in Santa Barbara 2-6-12. f larcy V&y /tr&r.o,

Request for Judicial Notice filed with Notce and Order to Show Cause - Preliminary Injunction

1 OATE,!i'IME .. ..~':gmJ 31/23 S l ' : 2 0 FAX M../NAME ,,i t:," "

iWRL:tTSN ,, ,:a: . E ! : ;,. t I

1 p@Ji (SJ @.I

i BSLJL!' r.7~ CQcCV ?E:~,?, rBILf TV GF "rRAN%41iTF: !',.!Z::. < ? GI,

I ?<Gp?, 5 TiiiJi)!3!?D

legina J. McClendon (SBN: 184669) mcclendon@,lockelord.com >aniel A. Solitro (SBN: 243908) Isolitro@,lockelord.com ,OCKE LORD LLP 100 South Grand Avenue, Suite 2600 ,os Angeles, California 90071 ielephone: 213.485.1500 :acsimile: 213.485.1200

ittomeys for Defendants dGC MORTGAGE, INC.; LPP MORTGAGE LTD. md LOAN ACQUISITION CORPORATION

SUPERIOR COURT OF THE STATE OF CALIFORNIA

ANACAPA D~VISION I

1 ; OPPOS~TION TO PLAINTIFF'S MOTlON OR PRELIMINARY INTUNCTION

David K Gatds, Truxtee v. MGC M ~ r r ~ & ~ e , Inc, et ai., Case No. 138485 1 ! 7 2'77

I

)AVID W. GATES, Trustee for the DAVID W. 3ATES Trust dated August 5,1996,

Plaintiff,

VS. j ) DEFENDANTS MGC MORTGAGE,

) CASE NO. 1384851 ) ) Honorable Colleen K. Steme )

viGC Mortgage, Inc., Texas Corporation ,PP Mortgage Ltd., LP, Texas Corporation

) INC., LPP MORTGAGE LTD. AND ) LOAN ACQUISITION ) CORPORATION'S OPPOSITION TO

MOTION FOR INJUNCTION

March 12,2012 9:30 am. Dept. 5

concurrently with: (1) Request for Notice, (2) Declaration of Bret ) Maloney]

Defendants. ) )

I ) Complaint Filed: February 1,2012

TABLE OF CONTENTS

Pag

4EMORANDUM OF POINTS AND AUTHORITIES .......................................................................

I. INTRODUCTION .........................................................................................................

ELEVANT FACTUAL BACKGROUND .........................................................................................

I. PLAINTIFF'S LOAN, DEFAULT ON LOAN AND SUBSEQUENT FORECLOSURE PROCEEDINGS. .............................................................................

IRGUMENT.. .......................................................................................................................................

I. STANDARD FOR ISSUANCE OF A PRELIMINARY INJUNCTION. ....................

11. PLAINTIFF IS NOT ENTITLED TO INJUNCTIVE RELIEF BECAUSE HE HAS NOT TENDERED THE LOAN PROCEEDS ADMITTEDLY BORROWED. ...............................................................................................................

111. PLAINTIFF FAILS TO ESTABLISH A LIKELIHOOD OF SUCCESS ON THE MERITS OF ANY OF HIS "CLAIMS." .............................................................

A. Under California Law, Production of the Original Promissory Note is Not Required Prior to Foreclosure. ....................................................................

B. Plaintiffs Challenge To The "Chain of Title" Also Fails. ..............................

C. Plaintiffs "Securitization Voids the Security Interest" Theory Also ................................................................................ ........................ Fails. .....

D. Plaintiff Fails To Allege Any Violation Of Any CalifomiaNon- Judicial Foreclosure Statute ............................................................................. 1

1. The flotice of Default Is Not Invalid. .................................................. 1 I

2. he dotice of ~rustee's Sale Js Not Invalid ........................................ 1

c a l i f h a civil Code 6 2923.5 Does Not Apply .............................. 1 3. - I

1V. PLAMTIP12'S VARIOIJS OTHER AI.LliGA'TIONS OF WRONGDOING DO NOT SUPPORT GRAUTING A PRELIMNARY INJLNCTION .................... 1

V: THE OTHER FAC~ORS ALSO WEIGH; AGAINST GRANTING A PRELIMINARY I N ~ C T I O N . ............................................................................... 1

vI. P m F r MusT'PosT SUBSTANTIAL BOND T o COVER DEFENDANTS' E 4 TIMATED LOSSES ................................................................... 1

i :ONCLUSION ............................ 2 ..................................................................................................... 1

i OPPOSITION TO PLATNTIFF'S MOTION FOR PRELIMINARY INJUNCTION

David W. Gales, Trustee v. MGC Mortgage, Inc., et aL, Case No. 1384851

7.378

TABLE OF AUTHORITIES

Page(s)

tascos v. Federal Home Loan Mortg. Corp. (C.D. Cal. 2011) 2011 WL 3157063 ............................................................................................... 9

tenham v. Aurora Loan Services LLC, 2009 WL 2880232 (N.D. Cal. 2009) .......................................................................................... 9

- :have2 v. Recontrust Co. (E.D. Cal. Dec. 11, 2008) No. 08-1864, 2008 WL 5210893 ........................................................... 5

:hilton v. Federal Nut, Mortgage Assn. (E.D. Cal. 2009) .................. .. ........................................................................................................ 7

:lark v. Counhywide Home Loans, Inc. (E.D. Cal. 2010) ............................................................................................................................... 6

loyotzi v. Countrywide Fin'[ Corp., 2009 WL 2985497 (E.D. Cal. 2009) ........................................................................................... 9

Gnuliar v. BAC Home Loans Servicing, L.P. (N.D. Cal. Sept. 21, 2011) No. C-11-02629, 2011 WL 4405659 .................................................. 13

?amboa v. Trustee Corps (N.D. Cal. 2009) 2009 WL 656285 ................................................................................................. 7

;em v. Wachovia Mortg. Corp. (N.D. Cal. May 12, 2010)No. CV10-01073 JF, 2010 WL 1924777 ............................................ 12

Tajz v. Greenpoint Mortg. Funding, Inc., 652 F.Supp.2d 1039 (N.D. Cal. 2009) ............................................................................................. S

Camp v. Aurora Loan Serv. (C.D. Cal. Oct. 1, 2009) No. SACV09-00844-CJC, 2009 WL 3177636 ........................................ 5

CimbaN v. BAC Home Loans Servicing, LP (N.D. Cal. Feb. 9, 2011) No. 10-CV-05670-LHK, 2011 WL 577418 ................................... . 1 C

;ane v. Vitek Real Estate Industries Group (E.D. Cal. 2010)713 F. Supp. 2d 1092 ............................................................................................ S

;ehner v. United States (9th Cir. 1982) 685 F.2d 1187 ...................................................................................................... 12

.ogvinov v. Wells Fargo Bank (N.D. Cal. 201 1) 2011 WL 6140995 ............................................................................................... 9

I1

PRELIMINARY INJUNCTION lnc , el a1 , Case No. 138485 1

TABLE OF AUTHORITIES (cant.)

Mulato v. WMC Mortgage Corp., 2010 WL 1532276(N.D. Cal. 2010) ......................................................................................... 9, 10

Pantoja v. Counhywide Home Loans, Inc. (N.D. Cal. 2009) 640 F.Supp.2d 1 177 ....................................................................................... 7, 12

Parcay v. Shea Mortg Inc. (E.D. Cal. April 23, 2010) 2010 WL 1659369 ...................... .. ..................................................... 8

power &Irrigation Co. v. Capay Dirch Co. (9th Cir. 1915) 226 F. 634 ............................................................................................................... 5

Putkkuri v. ReconTrust Co. (S.D. Cal. 2009) 2009 WL 32567 .................................................................................................... 7

Reynoso v. Paul Financial, LLC (N.D. Cal. Nov. 16, 2009) No. 09-3225 SC, 2009 WL 3833298 .......................... .. ................ 12

Rodriguez v. Litton Loan Servicing LP . 2009 WL 1326339 (E.D. Cal., May 12, 2009, No. 09-00029) ...................................................... 7

Rogue v. Suntrust Mortg., Inc. (N.D. Cal. Feb. 9, 2010)No. C-09-00040 RMW, 2010U.S. Dist. LEXIS 11546 .......................... 8

Selby v. Bank ofAmerica, Inc. (S.D. Cal. Oct. 27, 2010) No. 09-cv-2079, 2010 WL 4347629 ....................................................... 8

Sitanggang v. Indymac Bank F. S. B. < (E.D. Cal. May 6, 2009) ...................................................................................................................

Solid Host, NL v. Namecheap, Inc. (C.D. Cal. 2009) 652 F.Supp.2d 1092 ........................................................................................... 1C

Tanner Motor Livery. Ltd. v. Avis, Inc. (9th Cir. 1963) 3 16 F.2d 804 ........................................................................................................... f

Winter v. Natural Res. Def Council, Inc. (2008) 129 S.Ct ........................................................................................................................... 15

dbdalla v. United Sav. Bank (1996) 43 Cal.App.4th 1101 A

4ncora-Citronelle Corp, v. Green (1974) 41 Cal. App. 3d 146 ............................................................................................................. 4

- iii OPPOSITION TO PLAINTTFF'S MOTION FOR PRELIMINARY TNRMCTION

David K Gates. Trustee 11. MGC Mortgage, Inc., et aL, Case No. 138485 1 r7~XQ

12 8

13 & ,3 F- 5 ; : 14

0 4 6 A m - " % $ 16 % w < 0

L;ld$ 2 -1 17 VI

TABLE OF AUTHORITIES (cont.)

Arnolds Management Corp. v. Eischen .............................................................................................................. (1984)158 Cal.App.3d 575 6

Calvo v. HSBC Bank USA, MA. (Cal.App. 2nd Dist. 201 1) 199 Cal.App.4th 11 8 ............................................................................. 7

Dawson v. East Side Union High School Dist. ............................................................................................................ (1994) 28 Cal. App. 4th 998 4

Fleishman v. Superior Court .......................................................................................................... (2002) 102 Cal. App. 4th 350 4

Games v. Countrywide Home Loans, Inc. ........................................................................................................ (2011) 192 Cal.App.4th 1149 10

Gray v. Superior Court (2005) 125 Cal. App. 4th 629 .......................................................................................................... 4

Homestead Sav. v. Darmiento (1991) 230 CaI. App. 3d 424 ......................................................................................................... 11

Jones v. Aema Casualty & Sur. Co. (1994) 26 Cal.App.4th 1717 .......................................................................................................... 10

Karlsen v. Am. Savings & Loan Assoc. (1971) 15 Cal. App. 3d 112 ............................................................................................................. 5

.................................................................................................................... King v. Meese

(1987) 43 Ca1. 3d 1217 4

Knapp v. Doherty ............................................................................................................ (2004) 123 Cal.App.4th 76 12

Korean Philadelphia Presbyterian Church v. Cal$ornia Presbyter)! (2000) 77 Cal. App. 1069 ................................................................................................................ 4

Langford \,. Superior Court (1987) 43 Cal. 3d 21 ................... ... ................................... .. ................................................. 4

Mabry v. Superior Court (2010) 185 Cal.App.4th 208 .......................................................................................................... 13

I Moeller v. Lien, 25 Cal. App. 4th 822 .................. .. .......................................................................................... 1 1

Nguyen v. Calhoun (2003) 105 Cal. App. 4th 428 ..........................,v............................................................................. 5

OPPOSITION TO PLAINTIFF'S MOTION FOR PRELIMINARY INJUNCTION David K Gates, Trustee v. MGC Inc,, et al., Case No. 138485 1

TABLE OF AUTHORITIES (cont.)

Page(s)

Pesidential Capital v. Cal- Western Reconveyance Corp. (2003) 108 Cal. App. 4th 807 ..................................................................................... . .............. 11

7'hayer Plymouth Center, Inc. v. Chrysler Motors Corp. (1967) 255 Cal. App. 2d 300 4, 5

Nlley v. Arnpro Mortgage (Jan. 6 , 2012) 2012 WL 33033 5

rop Cat Prod., Inc. v. MichaelS Los Feliz (2002) 102 Cal.App.4th 474 . .. .... .... .... ... .... .. . .. .. . .... ..... . , . . . . . . . . . . . . . . . . . ......... . . . . . . . . . . . 1 5

Vnited States Code Storage v. Great W. Sav. d; Loan Ass'n (1985) 165 Cal.App.3d 1214 ..................................................................................... . ................ C

STATE STATUTES

Cal. Civ. Code 8 2923.5 ............................................................................................................ 3, 11, 12

Zal. Civ. Code § 2923,5(a)(2) .............................................................................................. 1:

Gal. Civ. Code 5 2923.5(b) .............................................................................................................. 1:

Eal. Civ. Code 8 2923.5(i) ................................................................................................... 1:

Cal. Civ. Code 5 2924(a) .................................... .,. .................................................................. . ..... . .......

Cal. Civ. Code 5 2924(a)(1) ......................................................................................................... 7, 1 I

Cal. Civ. Code 5 2934a .................... .. ....... ..... ........................................................................................ 4

Cal. Code Civ. Proc. 5 526(a) ................................................................................................... ..... ........ 1

Cal. Code Civ. Proc. 9 529 ............................................................................................................. 1 !

Cal. Code Civ. proc. 5 995.710 ........................................................................................................ 1:

- -. - "- OPPOSITION TO ~ . A I N T I F F ' S MOTION FOR PKELIMGAKY INJUNC'I'ION

David HI Gores. Tvzislee v. rr 0 1 , Casc 1\10 138485 1

MEMORANDUM OF POINTS AND AUTHORITIES

Defendants MGC Mortgage, Inc. ("MGC"), LPP Mortgage Ltd. ("LPP"), and Loan

lcquisition Corporation (collectively, "Defendants"), submit this response to the Court's Order to

;how Cause and Temporary Restraining Order entered on February 3,2012 and in opposition to

'laintiff David W. Gates' ("Plaintiff') Motion for Preliminary Injunction. ("Motion").

INTRODUCTION

This lawsuit relates to real property located at 1200 Palomino Drive, Santa Barbara,

Xifornia 93105 (the "Subject Property") and the $1,142,302.00 loan Plaintiff admits he received

elating to the Subject Property. Plaintiff acknowledges in his declaration that he failed to make the

equisite payments under the loan. Defendants, therefore, properly proceeded with foreclosure

jroceedings.

Plaintiffs Complaint and Motion, therefore, does not challenge that Plaintiff failed to meet

his obligationsrelating to his loan. Instead, Plaintiff merely raises legal theories that have been

epeatedly and consistently raised by delinquent borrowers and rejected by California Courts.

'laintiff's primary contention in support of a preliminary injunction is that Defendants cannot

oreclose on the Subject Property because they do not possess the original promissory note executed

)y Plaintiff. This so called "produce the note" theory has been rejected by countless courts in

hlifomia explaining that the theory is a "wholly discredited legal theory serially advanced in

nortgage cases." Even if there were such a requirement-there is not-Defendants do possess the

~riginal note.

Plaintiff's othm legal theories in his motion are also meritless and are similarly raised by

jther delinquent borrowers. here is no viable cause of action based on challenges to the alleged

'securitization" of Plaintiff J loan. As with PlaintifPs "produce the note" theory, the improper

iecuritization theory has bee uniformly rejected by courts in Califomia. 1 Plaintiffs a1legations;relating to the notice of default, notice of bustee's sale and general

tllegations of violation of Cyfornia non-judicial foreclosure statutes also fail to raise a viable cause

,faction, let alone a likclihodd of success on the merits. In fact, Plainties motion simply misstates

he requirements under the stbutes. All statutory non-judicial foreclosure requirements were

1 OPPOSITION TO PLAINTIFFS MOTION FOK PRELIMINARY INJUNCTION

David W. Gates, Trustee v. MGCMortgage, Inc., er al., Case No. 1384851

I

complied with, which is clear from the face of the recorded documents relating to the foreclosure.

Finally, Plaintiffs various wild and baseless accusations ranging from tax fraud, insurance

fraud, personal attacks to Plaintiffs counsel's personal opinions on the banking industry are

irrelevant to the issues of the foreclosure of the Subject Property and certainly do not provide proper

grounds to grant a preliminary injunction.

For the foregoing reasons, and those discussed in detail below, the Court should deny the

Motion for Preliminary Injunction.

RELEVANT FACTUAL BACKGROUND

I. PLAINTIFF'S LOAN, DEFAULT ON LOAN AND SUBSEQUENT FORECLOSURE

PROCEEDINGS.

This lawsuit arises &om a mortgage loan on certain real property purportedly owned by

Plaintiff located at 1200 Palomino Drive, Santa Barbara, California 93 105 (the "Subject Property").

On or about September 20,2005, Plaintiff refinanced the Subject Property with a $1,142,302.00

mortgage loan (the ''Note") originated by Washington Mutual Bank, FA ("Washington Mutual").

(Declaration of Bret Maloney ("Maloney Decl."), Ex. 1). Plaintiff does not dispute that he executed

the Note or that he received the $1,142,302.00 loan. The Note provided: "The Lender is

Washington Mutual Bank, FA. [Plaintiff] will make all payments under this Note in the form of

cash, check or money order. [Plaintiq understand[s] that the Lender mav transfer this Note."

(Id. 7 1) (emphasis added) The Note also provided that the note holder would be protected by a

Deed of Trust executed on the same date as the Note that protected the note holder from "possible

losses that might result if [Plaintiff does] not keep the promises which [Plaintiff makes] in this

Note." (Id. 7 11)

As stated in the Note, a Deed of Trust was also executed on or about September 20,2005

relating to the Subject Property and the Note. (Request for Judicial Notice (WJIT), Ex. A) The

Deed of Tmst was properly recorded with the Official Records of Santa Barbara County on

September 29,2005. (Id. at p. 1). 171e Deed of Trust identified Plaintiff as the borrower and

Washington Mutual as the Lender. (Id.) It provided that it secured to the Lender the repayment of

the Loan and performance under the Note by Plaintiff (id. at p. 2) and that Plaintiff granted to the 2

OPPOSITION TO PLAINTIFF'S MOTION FOR PRELIMNARY NJ!JNCTION David W. Cafes, Trustee v. MGC Mortgage, Inc., et a[., Case No. 1384851

q. 284

named trustee the power of sale of the Subject Property if such conditions were not satisfied. (Id. at

pp. 2-3) The Deed of Trust also expressly stated that "the Note or a partial interest in the Note

(together with the [Deed of Trust]) can be sold one or more times without prior notice to

rPlainliffl." (Id. 7 20) (emphasis added) The Deed of Trust also expressly states that

PlaintiffJ hereby absolutely and irrevocably assigns to Lender all of Borrower's right, title and interest in and to all proceeds from any insurance policy.. .that are due, paid or payable with respect to any damage to such property, regardless of whether the insurance policy is established before, on or after the date of this Security Instrument. By absolutely and irrevocably assigning to Lender all of Borrower's right to receive any and all proceeds from any insurance policy, Borrower hereby waives, to the full extent allowed by law, all of Borrower's right to receive any and all of such insurance proceeds.

(Id. 7 5). The Deed of Trust also included a "Second Home Rider" stating that the Subject Property

was not Plaintiffs primary residence but instead a second home. (Id. at p. 19) -

An Assignment of Deed of Trust, as permitted by the loan documents, was recorded in the

Official Records of Santa Barbara County whereby Washington Mutual transferred the beneficial

interest in the Deed of Trust to DB Structured Products, Inc. ("DB Structured") as of August 30,

2006. (Id. Ex. B) Another Assignment of Deed of Trust was also recorded in the Official Records of

Santa Barbara County whereby DB Structured transferred its beneficial interest in the Deed of Trust

to defendant LPP Mortgage Ltd. (Id., Ex. C)

After Plaintiff defaulted on his mortgage payments, a fact which he does not dispute in-his

declaration, a Notice of Default and Election to Sell Under Deed of Trust was recorded in the

Official Records of Santa Barbara on August 9,201 1 ('.'First Notice of Default"). (RJN, Ex. D).

This First Notice of Default was rescinded by a Notice of Rescission. (Id., Ex. E) On October 13,

201 1, another Notice of Default and Election to Sell Under Deed of Trust ("Second Notice of

Default") was recorded in the Official Records of Santa Barbara County by Cal-Western

Reconveyance Corporation ("Cal-Westernn), the foreclosure trustee retained by LPP Mortgage Ltd.,

the beneficiary under the Deed of Trust, noting that Plaintiff was in default on his loan in the amount

of $91,754.18. (Id., Ex. F) The Second Notice of Default expressly declared that the obligations

under California Civil Code 3 2923.5 were complied with. (Id. at p. 2)

On November 15,201 1, a Substitution of Trustee was recorded whereby LPP Mortgage Ltd. 3

OPPOSITION TO PLAINTIFF'S MOTION FOR PRELIMINARY INJUNCTION David W. Gates, Trustee v. MGC el al., Case No. 138485 1

directed the substitution of Cal-Westem as the new trustee under the Deed of Trust, as expressly

permitted by the terms of the Deed of Trust. (Id. Ex. G). The Substitution of Trustee included an

Affidavit of Mailing pursuant to California Civil Code 4 2934a since it was recorded after the Notic~

of Default. (Id. at p. 2) A Notice of Trustee's Sale was recorded on January 17,2012 in the Official

Records of Santa Barbara County by Cal-Western setting the trustee sale date of the Subject

Property for February 6,2012. (Id., Ex. H). The Subject Property was not sold on this date as a

result of the Court's issuance of a Temporary Restraining Order in the pending case. As of the date

of this filing, the Subject Property has not yet been sold.

ARGUMENT

I. STANDARD FOR ISSUANCE OF A PRELIMINARY INJUNCTION.

The power to grant a preliminary injunction is "extraordinary" and should be "exercised

always with great caution." Dawson v. East Side Union High School Dist. (1994) 28 Cal. App. 4th

998, 1040. "[Rlarely, if ever, should [it] be exercised in a doubtm case." Ancora-Ciponelle Corp.

v. Green (1974) 41 Cal. App. 3d 146, 148. "An injunction properly issues only where the right to bt

protected is clear, injury is impending and so immediately likely as only to be avoided by issuance c

the injunction." Korean Philadelphia Presbyterian Church v. California Presbytery (2000) 77 Cal.

App. 1069,1084.

To obtain a temporary restraining order or preliminary injunction, a plaintiff must

demonstrate that (1) he is likely to prevail on the merits of his claims and (2) the interim harm to the

plaintiff in the absence of injunctive relief outweighs the harm the defendants is likely to suffer if thl

court issues an injunction. C.C.P. $526(a); Landord v. Superior Court (1987) 43 Cal. 3d 21,28;

King v. Meese (1987) 43 Cal. 3d 1217, 1226. To satisfy these requirements, the plaintiff has the

burden of presenting sufficient evidence of both elements. Gray v. Superior Court (2005) 125 Cal.

App. 4th 629, 640; Fleishman v. Superior Courr (2002) 102 Cal. App. 4th 350, 356. A preliminary

injunction is not appropriate, as Plaintiff claim in his papers, simply by making a prima facie case oi

by a showing of "a fair chance of prevailing on the me~its" Indeed, a preliminary injunction will no

issue if it is doubiful that the party seeking the injunction will ultimately prevail in the lawsuit, or if

monetary damages afford adequate relief. See Thayer Plymouth Center, Inc. v. Chrysler Motors

--- 4 OPPOSITION TO PLAINTIFF'S MOTION FOR PRELIMINARY INJUNCTION

David W. Gates. Trustee v. MGC Mortgage, Inc., et al., Case No. 138485 1

7, a-g L

d

Corp. (1967) 255 Cal. App. 2d 300,305.

As discussed below, Plaintiff fails to show that the foregoing requirements are satisfied.

Plaintiff's request for a preliminary injunction must, therefore, be denied.

11. PLAINTIFF IS NOT ENTITLED TO INJUNCTIVE RELIEF BECAUSE HE HAS

NOT TENDERED THE LOAN PROCEEDS ADMITTEDLY BORROWED.

Plaintiff seeks a preliminary injunction from the Court based on Defendants' purported

"wrongful foreclosure" of the Subject Property. Plaintiff does not dispute that he borrowed over a

million dollars and that he is in severe default on his loan. Nor does Plaintiff make an unconditional

offer to tender the loan proceeds. (Maloney Decl. 7 10) This alone defeats his motion for injunctive

relief.

An injunction is a form of equitable relief. Tanner Motor Livery, Ltd. v. Avis, Znc. (9th Cir.

1963) 316 F.2d 804,8f9. It is well settled that one who seeks equity must do equity. Power & I

Irrigalion Co. v. Capay Ditch Co. (9th Cir. 1915) 226 F. 634, 640. In the context of a loan

transaction, to obtain equitable relief, the borrower must first act equitably himself by tendering the

principal loan balance to the lender. See Chavez v. Reconhusl Co. (E.D. Cal. Dec. 11,2008) No. 08-

1864,2008 WL 5210893, at *6 ("The law is long established that a lparty] must tender the

obligation in full as a prerequisite to challenge a foreclosure sale."); Karlsen v. Am. Savings & Loan

Assoc. (1971) 15 Cal. App. 3d 112, 117 ("[Aln action to set aside [a] sale, unaccompanied by an

offer to redeem, [does] not state a cause of action."). Furthermore, a tender offer must be made in

good faith, the party making the offer must have the ability to perform, and the offer must be

uncondirional. Sitanggang v. Indymac Bank F.S.B. (E.D. Cal. May 6,2009) No. 09-0367 LJO SMS,

2009 WL 1286484, *2 (dismissing claims challenging nonjudicial foreclosure sale because

"Plaintiffs inability to make monthly promissory note payments reflects inability to tender amounts

owed to bar her claims and requested relief [for wrongful foreclosure]"). The tender rule is strictly

applied in California. See Nguyen v. Calhoun (2003) 105 Cal. App. 4th 428,439; Kamp v. Aurora

Loan Serv. (C.D. Cal. Oct. 1,2009) No. SACV09-00844-CJC (RNBx), 2009 WL 3 177636, *5

(cause of action for rescission in equity fails because plaintiffs do not allege that they will tender).

California courts have made clear that the tender rule applies to "any cause of action" that is based

5 OPPOSlTION TO PLAINTIFF'S MOTION FOR PRELIMMARY INJLJNCTION

David W. Gates. Trustee v. MGCMorlgage, Inc., et al., CaseNo. 1384851

3 ihn

upon allegations of wrongful foreclosure or claims that seek redress fiom foreclosure, as Plaintiff

does here. Abdalla v. United Sav. Bank (1996) 43 Cal.App.4th 1101, 1109; United States Code

Storage v. Great W. Sav. & Loan Ass 'n (1 985) 165 Cal.App.3d 12 14,1225; Arnolds Management

Corp. v, Eischen (1984)158 Cal.App.3d 575,578 ("It is settled that an action to set aside a trustee's

sale for irregularities in sale notice or procedure should be accompanied by an offer to pay the full

amount of the debt for which the property was security.").

To date, however, Plaintiff has neither tendered nor offered to tender the loan proceeds

admittedly borrowed. As such, Plaintiff is not entitled to any form of equitable relief, including an

injunction. Plaintiffs request for a preliminary injunction should, therefore, be denied.

III. PLAINTIFF FAILS T O ESTABLISH A LIKELIHOOD O F SUCCESS ON THE

MERITS OF ANY OF HIS "CLAIMS."

Even if Plaintiff had properly tendered the loan amount owed, his motion still fails because

he cannot demonstrate the likelihood of success on the merits of any of his causes of action. In fact,

Plaintiffs Complaint fails to even assert a single viable cause of action. Instead, Plaintiff asserts

various legal theories all of which have been repeatedly and consistently rejected by courts

throughout California based on nearly identical allegations brought by other delinquent borrowers.'

This Court should join the countless other Courts that have rejected Plaintiffs meritless theories of

liability.

A. Under California Law, Production of the Original Promissory Note is Not

Required Prior to Foreclosure.

Plaintiffs primary argument in support of his Motion for P r e l i i a r y Injunction is that

Defendants cannot properly foreclose on the Subject Property because they do not hold the original

copy of the Note. This so-called "produce the note" theory has long since been rejected by Courts i~

California. As one court explained, the "produce-the-note" theory "is a wholly discredited legal

theory serially advanced in mortgage h u d cases." Clark v. Countrywide Home Loans, Inc. (E.D.

' Plaintiffs motion, for some unknown reason, relies on purported violations of the Uniform Commercial Code ("UCC"). Of course, the UCC 1s not itself the law in California, or anywhere else. Instead it is one of a number of uniform acts promulgated in ao attempt to hasmonize the law in various states relating to sales aod commercial transactions @ut not real properly).

6 OPPOSlTlON TO PLAINTIFF'S MOTION FOR PRELIMINARY WJUNCTION

David W Gates, Trustee v. MGC aL, Case No 138485 1

Cal. 2010) 732 F.Supp.2d 1038, 1043. The court explained that "[ilt is well established that there is

no requirement under California law that the party initiating foreclosure be in possession of the

original note." Id.; see also Chilroi~v .D. Cal. 2009) 2009 WL

5197869, *I (describing the "produc y rejected."); Pantoja v,

Countrywide Home Loans, Inc. (N. 1 186 ("'No requirement exists

under the statutory framework to n-judicial foreclosure.");

Gamboa v. Trustee Corps (N.D.

governing non-judicial foreclos duce the original note

to initiate the foreclosure proce 9) 2009 WL 32567,

*2 ("Pursuant to section 2924( Deed of Trust has

the right to initiate the foreclo

note is not required to procee ton Loan Sewicing

LP , 2009 WL 1326339, at * under the statutory framewo

To the extent Plainti

have long since rejected thi

loans in California. Regardless, LPP , so the issue is moot. (Maloney

Decl. 7 6)

B. Plaintiff's Challenge To The "Chain o b ~ i t l e ' ~ Also Fails.

Plaintiff's next theory of liability challenging th authority of Defendants to foreclose bascd !- on the "chain of title" of their interest in the Deed of T st also fails. This theory of liability has also + been consistently rejected by courts in California. I

Initially, the California Court of Appeal has ma e clear that when a loan is secured by a deed 4 of trust, and not a mortgage, there is no requirement assignment of an interest be recorded

before exercising a power to sell real property under of trust. CaIvo v. HSBC Bank

.MA. (Cal.App. 2nd Dist. 201 1) 199 Cal.App.4th 11 any claim based on Defendants'

purported failure to record such assignments fails as a atter of law. I In addition, Plaintiffs "produce the chain of title"

7 OPPOSITION TO PLAINTIFF'S MOTION FO

David K Gates, Trustee v. MGC Mortgage.

a.

argument and iterations of this argument

1 PRELIMINARY INJUNCTION Inc., er al., Case No. 138485 1

a - f l

19 assignmentr. The Deed of Trust identified the Lender, Washington Mutual, as the "beneficiary I I

1

2

3

4

5

6

7

8

9

10

11

12 8 '0

; 13 & % C

14 :: a c , +

> u 15 2;s ru ,ct $ 6 2 16

4 5 P $ a 17 m D

% 18

20 under this Security Instrument." (RJN, Ex. A) An Assignment of Deed of Trust was later recorded II

have been repeatedly rejected by California courts. "Uniformly among courts, production of the

note is not required to proceed in foreclosure and similarly no production of any chain of ownership

is required." Roque v. Suntrust Mortg., Inc. (N.D. Cal. Feb. 9,2010) No. C-09-00040 RMW, 2010

U.S. Dist. LEXIS 11546, at **8-9 (emphasis added) (citing Putkkuri, 2009 U.S. Dist. LEXlS 32 at

*2 (California's nonjudicial foreclosure statutes do not require written proof of the foreclosing

party's right to proceed with the foreclosure)). In Selby v. Bank ofAmerica, Inc. the plaintiff argued

that "because no assignment of the note was ever recorded," the entity identifying itself as the

present beneficiary under the deed of hwt "had no power of sale to exercise." Selby v. Bank of

America, Inc. (S.D. Cal. Oct. 27,2010) No. 09-cv-2079,2010 WL 4347629, at *3. The Court stated

that "courts have rejected claims that defendants lack the right to foreclose where there is no

recorded assignment evidencing the transfer of the underlying loan." Id (citing Roque, 2010 WL

546896, at *3 (rejecting argument that power of sale in the deed of trust was no longer valid because

the chain of ownership was unrecorded)) and Parcay v. Shea Mortg. Inc. (E.D. Cal. April 23, 2010)

2010 WL 1659369, at * 11 (finding no merit to plaintifs argument that the foreclosure sale was void

because it was not initiated by originally lender and there was no recorded assignment evidencing

the transfer of the loan from original lender).

Finally, even if there was a requirement to record assignment-there is not-Plaintiff s

argument still fails because the judicially noticeable documents make clear that there were proper

21 in the Official Records of Santa Barbara County whereby Washington Mutual transferred its II 22 1 I beneficial interest in the Deed of Trust to DB Structured. (Id. Ex. B) Another Assignment of Deed

23 of Trust was later recorded whereby DB Structured transferred its beneficial interest in the Deed of I1 24 1 1 Trust to LPP Mortgage Ltd. (Id., Ex. 6 ) LPP Mortgage Ltd. is the party that directed the

25 substitution of Cal-Western as the new trustee, as permitted under the Deed of Trust. (Id., Ex. A and I I 26 Ex. G ) Cal-Western in its role as trustee then proceeded to record the Notice of Trustee's Sale. (Id., I I 27 Ex. H) This is the exact process outlined by the California non-judicial foreclosure statutes and any I I 28 1 ( challenges by Plaintiff are utterly meritless and are refuted on the face of the judicially noticeable

8 OPPOSITION TO PLAINTIFF'S MOTION FOR PRELIMINARY INJUNCTION

David W. Gates, Trustee v. A4GC Mortgage. lnc , et al., Case N o 138485 1

7, A3 0

ecorded documents.

C. Plaintiffs "Securitization Voids the Security Interest" Theory Also Fails.

It is equally untenable for Plaintiff to contend that the securitization of Plaintiffs loan voided

he security interest in the Subject Property. California courts have expressly rejected "[t]he

rgument that parties lose their interest in a loan when it is assigned to a trust pool." Lane v. Virek

:ealEstate Industries Group (E.D. Cal. 2010)713 F. Supp. 2d 1092, 1099 (dismissing claims based

in plaintiffs allegation "that none of the defendants have the authority to foreclose because their

g an was . .. securitized") (collecting authority); see also Logvinov v. Wells Fargo Bank (N.D. Cal.

:011) 201 1 WL 6140995, at *3; Hafiz v. Greenpoint Mortg. Funding, Znc., 652 F.Supp.2d 1039,

043 (N.D. Cal. 2009); Benhm v. Aurora Loan Services LLC, 2009 WL 2880232 * 3 (N.D. Cal.

:009); Mularo v. WMC Mortgage Corp., 2010 WL 1532276, at *2 (N.D. Cal. 2010); Coyotzi v.

:ounttywide Fin7 Corp., 2009 WL 2985497, at ** 19-20 (E.D. Cal.2009). In fact, they have found

hat any such claim is "frivolous, has no supporl in the law and should be dismissed with prejudice."

darfy, 201 1 WL 1 103405 at *7 (dismissing claim "that thc 'securitization' of the note was an

rnproper conversion and alteration of the note and deed of trust, undertaken without [the plaintiffs]

:onsent and rendering the mortgage and Deed of Trust unenforceable against him."). Moreover,

'laintiff's Deed of Trust expressly states that the Note and Deed of Trust may be sold one or more

imes without notice to Plaintiff. (RJN, Ex. A). That the loan was securitized is irrelevant. It does

lot excuse Plaintiffs default or otherwise affect Defendants' ability to foreclose upon that admitted

lefault.

Nor can Plaintiff assert challenges to the timing of his loan's deposit into the securitized

rust, specifically claims premised on a supposed violation of "Defendants' own securitization

equirements," because Plaintiffwas not aparty to any such agreement(s). He alleges that because

hc assignment of the deed of trust was executed and recorded after the cut-off date to be included in

he securitized trust, the securitization violates the terms of the Pooling and Servicing Agreement

"PSA") and foreclosure may not proceed. This claim fails too, because "[tlo the extent Plaintiff

ihallenges the securitization of Fis] loan because [Defendants] failed to comply with the terms of

heir securitization agreement, Plaintiff has no standing.. . as b e is] not . . . investor of the loan trust.:

9 OPPOSITION TO PLAINTIF= MOTION FOR PRELIMINARY INJUNCTION

David X Gates, Trustee v MGC Inc., el a1 , Case No. 138485 1

Bascos v. ~edern l Home Loan Mortg. Corp. (C.D. Cal. 201 1) 201 1 WL 3157063, *6; accord: Tilley

v. Ampro Modtgage (Jan. 6,2012) 2012 WL 33033, *3. Under California law, a non-party to a

:ontract cannot bring suit on a contract unless the contract terms expressly evidence an intent to

benefit the nokparty. SolidHosr, NL v. Namecheap, Znc. (C.D. Cal. 2009) 652 F.Supp.2d 1092,

l 117; see also Jones v. Aetna Casualry & Sur. Co. (1 994) 26 Cal.App.4th 171 7, 1724 (stating that

"someone who is not a party to the contract has no standing to enforce it or to recover extra-

~ontractual damages for the wrongful withholding of benefits to the contracting party"). Here,

Plaintiff has not pled and cannot plead that he was a party to the PSA. Nor does Plaintiff allege that

my party to the assignment contested its validity.

Ln all, Plaintiff's "securitization" theory is just an equally baseless iteration of the "produce

the note" theory. Kimball v. BAC Home Loans Servicing, LP (N.D. Cal. Feb. 9,201 1) No. 10-CV-

35670-LHK, 201 1 WL 57741 8, *2 (where a plaintiff's "causes of action are all premised on vague

dlegations that Plaintiffs loan was pooled with other loans in a 'securitization scheme,"' "[tlhe

Court gathers that Plaintiff challenges the foreclosure sale because the trustee noticing the sale does

not have possession of the Note," but "under California law, there is no requirement [of] . . .

possession of the physical note before initiating foreclosure"). Thus any claim based on that theory

does not demonstrate the necessary likelihood of success on the merits necessary to grant a

preliminary injunction. See Mulato v. WMC Mortg. Corp. (N.D. Cal. Apr. 16,2010) No. C 09-

03443 CW, 2010 WZ, 1532276, *2 (dismissing with prejudice claim that "[defendants] lacked

standing to foreclose because of the alleged securitization of [the] mortgage note" as there is no

requirement to produce the note)). At bottom, Plaintiff seeks to do exactly what California law

forbids. His lawsuit seeks to compel Defendants to prove that they havc the right to foreclose (i.e.,

that the securitization was proper) before they can do so. That is exactly what Gomes v.

Counhywide Home Loans, Inc. (201 1) 192 Cal.App.4th 1149 prohibits. "Nowhere does the statute

provide for a judicial action to determine whether the person initiating the foreclosure process is

indeed authorized, and we see no ground for implying such an action." Gomes, 192 Cal.App.4th at

1155. A borrower may not "bring a court action to determine whether the owner of the Note has

authorized its nomince to initiate the foreclosure process." Id. at 1 154.

10 OPPOSITION '1'0 PLAINTIFFS MOTION FOR PRELIMINARY INJUNCTION

David lK Gates, Trustee v. MGC Morfgage, Inc., et a!., Case No. 138485 1

T -a!!&

D. Plaintiff Fails To Allege Any Violation Of Any California Nou-Judicial

Foreclosure Statute.

Plaintiffs Motion for Preliminary Injunction next alleges in conclusory fashion various

iolations of California's non-judicial foreclosure statutes. Specifically, Plaintiff challenges the

nopriety of the Notice of Default, Notice of Trustee's Sale and alleges a violation of California

3vil Code 5 2923.5. Each of these allegations is meritless and fails to demonstrate a likelihood of

uccess on the merits of any such claim. Indeed, the Motion is fraught with misstatements about the

oreclosure requirements under California law.

1. The Notice of Default Is Not Invalid.

Plaintiff contends that the Notice of Default is "void" because it was recorded by Cal-

Western. The Motion badly misstates the requirements for foreclosure under California law,

ncluding who may properly record a Notice of Default. The recording was proper, as is the

oreclosure proceeding as a whole.

Sections 2924 to 29241 of the California Civil Code set forth a "comprehensive statutory

iamework established to govern nonjudicial foreclosure sales," which is "intended to be

:xhaustive." Moeller v. Lien, 25 Cal. App. 4th 822, 834; see also Residential Capital v. Cal- Western

?econveyunce Corp. (2003) 108 Cal. App. 4th 807, 826 (recognizing that "the Supreme Court has

aid that the Legislature intended to cover the entire subject area of nonjudicial foreclosures by

tatute and leave nothing for the courts."). This statutory framework includes a multitude of rules

elating to standing, notice, and the right to cure. See (1 991) 230 Cal.

ipp. 3d 424,432-33. The statutory scheme regulating mstee sales inconsistent with the judicial

ncorporation of other, unrelated provisions into the foreclosure Moeller, 25 Cal. App.

Ith at 834. The California statutory scheme allows the be conducted by the

'mstee, mortgagee or beneficiary or anv of their authorized aqentd,." Cal. Civ. Code 5 2924(a)(1) 1,

emphasis added). Nothing in Sections 2924 to 29241 requires a foreo(losing party to provide I

:onfirmation to a borrower regarding the validity of any assignments before proceeding with I

lonjudicial foreclosure or any other written proof of its authority to cdnduct the foreclosure.

The Notice of Default relating to the Subject Propcrty was exdcuted and recorded by Cal-

11 OPPOSITION TO PLAINTIFFS MOTION FOR PREL~MINA~Y MJLTNCTIOK

David W Gores. Trustee v. inc., et al., casd No. 1384851

I I

Western "acting as agent for the trustee or beneficiary under deed of trust." (RJN, Ex. F) There are

no allegations and no evidence to demonstrate that the Notice of Default was recorded without the

permission of the beneficiary, LPP Mortgage Ltd. In fact, the Notice of Default was recorded at

LPP Mortgage Ltd's direction. (Maloney Decl. 7 8) Therefore, Plaintiffs allegations are frivolous

and do not provide grounds for a viable cause of action, let alone demonstrate a Likelihood of succesr

on the merits.

Moreover, even if there were irregularities in the Notice of Default-there were not-it does

not void the Notice of Default or otherwise affect the foreclosure proceedings. Courts have "rejectec

claims of deficient notice where no prejudice was suffered as the result of a procedural irregularity."

Reynoso v. Paul Financial, LLC (N.D. Cal. Nov. 16,2009) No. 09-3225 SC, 2009 WL 3833298, at

*4 (quoting Pantoja v. Countrywide Home Loans, Inc. (N.D. Cal. 2009) 640 F.Supp.2d 1 177); see

also Lehner v. Unitedstates (9th Cir. 1982) 685 F.2d 1187, 1190-91 (rejecting due proccss claim

based on failure to provide written notice of foreclosure sale where plaintiff had actual notice); Gens

v. Wachovia Mortg. C o p (N.D. Cal. May 12,2010) No. CV10-01073 JF, 2010 WL 1924777, at *6.

The California Court of Appeals has rejected claims based on deviation fkom foreclosure notice

requirements where "[tlhere was no prejudicial procedural irregularity" Knapp v. Doherty (2004)

123 Cal.App.4th 76,93-94). Plaintiff does not, nor could he, allege prejudice based on his

allegations that Cal-Western recorded the Notice of Default. Clearly he was aware of the foreclosure

proceedings as demonstrated by bringing his motion and there is no claim that any irregularity with

the Notice of Default in any way caused him to not reinstate his loan.

2. The Notice of Trustee's Sale Is Not Invalid.

Plaintiff similarly challenges the Notice of Trustee's Sale and states in conclusory fashion

that it is invalid. (Motion at p. 8) The Motion, however, does nothing more than recite the general

requirements of the information that must be included in the Notice of Trustee's Sale, including a

description of the security instrument and the parties to the instrument, as well as the amount of the

unpaid balance. (Id.) On the face of the document, it is clear that the Notice of Trustee's Sale meets

all statutory requirements. (RJN, Ex. H) There is no basis to invahdate the notice and none is

identified in Plaintiffs Motion. 12

OPPOSITION TO PLAINTIFF'S MOTION FOR PRELIMINARY MJLNCTION David K Gates, Trustee v. lnc, el a!., Case No. 1384851

3. California Civil Code 4 2923.5 Does Not Apply.

Plaintiff also alleges the foreclosure of the Subject Property is improper because Defendants

riolated California Civil Code $ 2923.5. These allegations are meritless since the statute is

napplicahle to Plaintiffs loan.

California Civil Code $2923.5 only requires a lender, prior to filing a notice of default,

:ontact the borrower to "assess the borrower's financial situation and explore options for the

)orrower to avoid foreclosure." Cal. Civ. Code. fj 2923,5(a)(2). The statute requires a statement in

he notice of default declaring that the mortgagee, beneficiary, or authorized agent has contacted the

,orrower or has tried to contract the borrower. Id , $2923.5(b). Ln sum, the only obligation under

kction 2923.5 is limited to telling the borrower the traditional ways that foreclosure can be avoided

md not a requirement that a lender rewrite or modify the loan. Mabry v. Superior Court (2010) 185

:al.App.4th 208,204,218. Section 2923.5(i), however, expressly provides that:

(i) This section shall apply only to mortgages or deeds of trust recorded from January 1, 2003, to December 3 1,2007, inclusive, that are secured by owner-occupied residential real property containing no more than four dwelling units. For purposes of this subdivision, "owner-occupied" means that the residence is the principal residence of the borrower as indicated to the lender in loan documents.

:al. Civ. Code. $ 2923.5(i) (emphasis added).

The Deed of Trust relating to the Subject Property includes a "Second Home Rider" that

mambiguously states that the Subject Property is not Plaintiffs primary residence but his second

iome. (RJN, Ex. A) The statute clearly states that the information in the loan documents as to

~hether the property is owner-occupied is controlling as to the applicability of Section 2923.5.

herefore, Plaintiff cannot assert a viable cause of action under Section 2923.5, let alone

lemonstrate the likelihood of success on the merits of such a claim. See Finuliar v. BAC Home

5oans Servicing, L.P. (N.D. Cal. Sept. 21,201 1) No. C-11-02629,2011 WL 4405659, at * 12

dismissing Section 2923.5 claim where property at issue was not borrower's principal residence).

W. PLAINTIFF'S VARIOUS OTHER ALLEGATIONS OF WRONGDOING DO NOT

SUPPORT GRANTING A PRELIMINARY INJUNCTION.

Plaintiffs Motion for Preliminary Injunction is replete with wild, baseless accusations

,anging fiom tax fraud, insurance fraud, improper conduct by Farmers Fire Exchange, personal 13

OPPOSITION TO PLAINTIFF'S MOTION FOR PRELIMINARY INJUNCTION David W1 Gates, Trustee v. et al., Case No. 1384851

lttacks on Andrew Beal, Plaintiffs counsel's personal feelings on all of these claims and the

)anking industry in general, and countless other accusations. The allegations arc all frivolous and

:ompletely irrelevant to the issue of whether foreclosure of the Subject Property is proper. None of

he baseless allegations provide the Court grounds to grant the pending Motion.

Indeed, Plaintiffs motion spends numerous paragraphs alleging impropriety by Defendants

n the handling of Plaintiffs insurance payments. Plaintiff, however, acknowledged that he did not

nake his mortgage payments. (Declaration of David W. Gates 7 5) Moreover, the Motion simply

gnores the unambiguous language in the Deed of Trust which provides:

[Plaintiff] hereby absolutely and irrevocably assigns to Lender all of Borrower's right, title and interest in and to all proceeds Gom any insurance policy.. .that are due, paid or payable with respect to any damage to such property, regardless of whether the insurance policy is established before, on or after the date of this Security Instrument. By absolutely and inevocably assigning to Lender dl of Borrower's right to receive any and all proceeds from any insurance policy, Borrower hereby waives, to the full extent allowed by law, all of Borrower's right to receive any and all of such insurance proceeds"

:Id. ld, 5). This provision in Plaintiff's Deed of Trust explains in detail how the beneficiary under the

3eed of Trust is to handle such insurance proceeds. (Id.) Plaintiff's motion does not, nor could it,

dentify any improper conduct under this provision of the Deed of Trust by Defendants. Therefore,

?laintiff simply relies on making wild and serious accusations of criminal conduct with no basis for

;uch iiivolous claims.

Plaintiffs allegations relating to securitization, as discussed above, do not provide Plaintiff a

riable cause of action. Plaintiffs counsel's personal views regarding the banking system and her

:onspiracy theories relating thereto does not change this fact and provide a cause of action.2 Nor

ioes Plaintiff's self-professed expertise in any area of law provide a viable claim for Plaintiff.

V. THE OTHER FACTORS ALSO WEIGH AGAINST GRANTING A PRELIMINARY

While Plaintiffs failure to tender and to demonstrate a likelihood of success on the merits of

my of his claims is alone sufficient grounds to deny aprelimiiary injunction, the other factors also

! Defendants' counsel i s unawarc of the term "bdnkslers", which appears to have been created by Plaintiffs counsel, and io not believe they are under any obligation to determine what is meant by such term.

1-

OPPOSITION TO PLANTIFF'S MOTION FOR PRELIMINARY INJUNCTION David W. Gates, Trustee u. Inc., et ul., Case No. 1384851

veigh against granting such relief. The harm alleged by Plaint iffAe foreclosure and sale of the

iubject Property-is not legally cognizable because Plaintiff has no legal or equitable right to

ndefinitely possess and occupy a house without paying for it. Plaintiff concedes that he has failed tc

nake the payments required by the mortgage loan for several years now. (Gates Decl. 7 5) Even if E

egitimate hardship prompted his inability to pay his debt, Plaintiff has no legal right to a free house.

Injunclions are issued to protect legal rights, not to give a party a mechanism to gain

:omething the party is not entitled to. To allow an abuse of this judicial mechanism is not in the

jublic interest. See Winter v. Nat. Res. DeJ Council, Inc. (2008) 129 S.Ct. 365,376-77 (courts "pay

)articular regard for the public consequences in employing the extraordinary remedy of injunction.")

I . PLAINTIFF MUST POST A SUBSTANTIAL BOND TO COVER DEFENDANTS'

ESTIMATED LOSSES.

If the Court takes the extraordinary measure and grants the preliminary injunction it must

.equire an undertaking or allow a cash deposit in lieu thereof. See C.C.P. $ 5 529,995.710. The

~ o n d must be sufficient to cover any damages to Defendants caused by issuance of the injunction.

'd.; see also Top Cat Prod, Inc. v Michael's Los Feliz (2002) 102 Cal.App.4th 474,478. Here, the

:our1 should order Plaintiff to pay back all of his acknowledged past due arrears (over $12 1,977.56)

md pay on a going forward basis until this lawsuit is completed the monthly payments owed under

he Note of $7,746.37. (Maloney Decl. 7 9) Again, nowhere in the Complaint does Plaintiff contest

he validity of the loan or that the loan is in default.

CONCLUSION

In sum, this is a straight forward case of a borrower receiving over a million dollar loan to

?$inance real property. There is no dispute that he failed to make the requisite payments under the

loan, and therefore foreclosure proceedings were initiated against the Subject Property, which acted

s collateral for the loan. While Plaintiff may not be personally at fault for his inability to make the

loan payments and may suffer from anxiety and inconvenience from the foreclosur+assertions

which are disputed by Defendants-this does not make the foreclosure improper and does not

provide the Court grounds to grant a preliminary injunction. The Motion should be denied.

ill 15

OPPOSITION TO PLAINTIFF'S MOTION FOR PRELIMINARY INJUNCTION David W. Gates, Trustee v. MGC ~Vort age, Inc, et al., Case No. 138485 I

9: $97

ted: February 21,2012 Respectfully submitted,

LOCKE LORD LLP

T

,,: .:

By: Regina J. McClendon Daniel A. Solitro

Attorneys for Defendants MGC MORTGAGE, INC.; LPP MORTGAGE LTD.; and, LOAN ACQUISITION CORPORATMlN

16 OPPOSITION TOPLAINTIFF'S MOTION FOR PRELIMINARY MJUNCTION

Dmrd W. Gates, Trustee v. MGC Morrgage, Inc., era/ . , Case No. 138485 1

47.27 5f

STATE OF CALIFORNIA 1 PROOF OF SERVlCE COUNTY O F LOS ANGELES ) ss.

1 am employed in the County of Los Angeles, State of California. I am over the age of 18 and not a party to the within action. My business address is: 300 South Grand Avenue, Suite 2600, Los Angeles, CA 90071. On February 21,2012, I served the foregoing document described as:

DEFENDANTS MGC MORTGAGE, INC., LPP MORTGAGE LTD. AND LOAN ACQUISITION CORPORATION'S OPPOSITION TO PLAINTIFF'S MOTION FOR PRELIMINARY

INJUNCTION

on the panies or anorneys for parties in this action who are identified on the attached service list, using the following means of service. (If more than one means of service is checked, the means of service used for each patty is indicated on the attached service list).

BY PERSONAL SERVICE. I placed - the original or - a m e copy of the foregoing document in sealed envelopes individually addressed to each of the parties on the attached service list, and caused such envelope to be delivered by hand to the offices of each addressee.

17 BY FACSIMnE TRANSMISSION. I caused - the original or - a m e copy of the foregoing document to be transmitted to each ofthe parties on the attached service list at the facsimile machine telephone number as last given by that person on any document which he or she has filed in this action and sewed upon this office.

0 BY MAIL. 1 placed - the original or - a true copy of the foregoing document in a sealed enveloped individually addressed to each of the parties on the attached service list, and caused each such envelope to be deposited in the mail at 300 South Grand Avenue, Suite 2600, Los Angeles, CA 90071. Each envelope was mailed with postage thereon fully prepaid. I am readily familiar with this fm's practice of collection and processing of correspondeoce for mailig. Under that practice, mail is deposited with the United States Postal Service the same day that it is collected in the ordinary course of business. BY E-MAIL. 1 caused the foregoing document(s) to be transmitted by e-mail electronic transmission to the e-mail address on the attached service list as last given by that person on any document which he or she has filed in this action and served upon this ofticc. BY EXPRESS MAIL. I placed - the original or - a true copy of the foregoing document in a sealed enveloped individually addressed to each of the parties on the attached service list, and caused each such envelope to be deposited in the mail at 300 South Grand Avenue, Suite 2600, Los Angeles, CA 90071 Each envelope was mailed with Express Mail postage thereon fully prepaid. I am readily familiar with this firm's practice of collection and processing of correspondence for mailing. Under that practice, mail is deposited with the United States Postal Service the same day that it is collected in the ordinary course of business.

rn BY FEDERAL EXPRESS. 1 placed -the original or - a true iopy of the foregoing document in a sealed enveloped or package designated by Federal Express with delivery fees paid or provided for, individually addressed to each of the panics on the attached senrice list, and caused such envelope or package to be delivered at 300 South Grand Avenue, Suite 2600, Los Angeles CA 90071, to an authorized courier or driver authorized by Federal Express to receive doclrments. (State) I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct. (Federal) I declare that I am employed in the office of a member of the bar of this court, at whose direction the service was made.

Executed on February 21,2012, at Los Angeles, California.

SERVICE LIST

David Gates, Trusteefor the David W: Gates Trust datedAugwt 5, 1996 v

MGC Mortgage. Inc., et al..

Santa Barbara Superior Court Case No. 1384851

Nancy Duffy McCarron, Esq. Attorney for Plaintiff: DAVID W. GATES, LAW OFFICE OF NANCY DUFFY McCARRON TRUSTEE FOR THE DAVID W. GATES 950 Roble Lane TRUST DATED AUGUST 5,1996 Santa Barbara, California 931 03 Telephone: 805.965.3492 Facsimile: 760.345.0019 Email: [email protected]

Appendix Vol I (NXPL)

Documents

Transcript of Appendix Vol I (NXPL)