Ok they didn’t mean to screw you but they screwed you anyway !!

CC 1573
Constructive fraud consists:
1. In any breach of duty which, without an actually fraudulent intent, gains an advantage to the person in fault, or any one claiming under him, by misleading another to his prejudice, or to the
prejudice of any one claiming under him; or,
2. In any such act or omission as the law specially declares to be fraudulent, without respect to actual fraud.

Use the law enacted in 1872 to stop the Foreclosure


84. Plaintiff reallege and incorporates by reference the above paragraphs as though set forth fully herein.
85. The misrepresentations by Defendants’ and/or Defendants’ predecessors, failures to disclose, and failure to investigate as described above were made with the intent to induce Plaintiff to obligate himself on the Loan in reliance on the integrity of Defendants and/or Defendants’ predecessors.
86. Plaintiff is an unsophisticated customer whose reliance upon Defendants and/or Defendants’ predecessors was reasonable and consistent with the Congressional intent and purpose of California Civil Code § 1572 enacted in 1872 and designed to assist and protect consumers similarly situated as Plaintiff in this action.
87. As an unsophisticated customer, Plaintiff could not have discovered the true nature of the material facts on their own.
88. The accuracy by Defendants and/or Defendants’ predecessors of representation is important in enabling consumers such as Plaintiff to compare market lenders in order to make informed decisions regarding lending transactions such as a loan.
89. Plaintiff was ignorant of the facts which Defendants and/or Defendants’ predecessors misrepresented and failed to disclose.
90. Plaintiffs reliance on Defendants and/or Defendants’ predecessors was a substantial factor in causing their harm.
91. Had the terms of the Loan been accurately represented and disclosed by Defendants and/or Defendants’ predecessors, Plaintiff would not have accepted the Loan nor been harmed.
92. Had Defendants and/or Defendants’ predecessors investigated Plaintiff’s financial capabilities, they would have been forced to deny Plaintiff on this particular loan.
93. Defendants and/or Defendants’ predecessors conspired and agreed to commit the above mentioned fraud.
94. As a proximate result of Defendants and or Defendants’ predecessors fraud, Plaintiff has suffered damage in an amount to be determined at trial.
95. The conduct of Defendants and/or Defendants’ predecessors as mentioned above was fraudulent within the meaning of California Civil Code § 3294(c)(3), and by virtue thereof Plaintiff is entitled to an award of punitive damages in an amount sufficient to punish and make an example of the Defendants.

Prevent the Foreclosure by using the California Fair Debt Collection Practices Act


77. Plaintiff reallege and incorporates by reference the above paragraphs as though set forth fully herein.
78. California Civil Code §1788.17 requires that Defendants comply with the provisions of 15 U.S.C. § 1692, through their acts including but not limited to, the following:
(a) The Defendants violated California Civil Code § 1788.17 by engaging in conduct, the natural consequence of which is to harass, oppress, and abuse persons in connection with the collection of the alleged debt, a violations of 15 U.S.C. § 1692(d);

(b) The Defendants violated California Civil Code § 1788.17 by misrepresenting the status of the debt, a violations of 15 U.S.C. § 1692(e)(s)(A);

(c) The Defendants violated California Civil Code § 1788.17 by using unfair or unconscionable means to collect or attempt to collect a debt, a violation 15 U.S.C. § 1692(f); and

(d) The Defendants violated California Civil Code § 1788.17 by using deceptive means to collect or attempt to collect a debt from the Plaintiff, a violation of 15 U.S.C. § 1692e(10).

80. The foregoing violations of 15 U.S.C. § 1692 by Defendants result in separate
violations of California Civil Code § 1788.17.
81. The forgoing acts by Defendants were willful and knowing violations of Title
1.6C of the California Civil Code (FRDCPA), are sole and separate violations under California Civil Code § 1788.30(b), and trigger multiple $1,000.00 penalties.
82. California Civil Code § 1788.17provides that Defendants are subject to the remedies of 15 U.S.C. § 1692(k), for failing to comply with the provisions of 15 U.S.C. § 1692(b)(6) and § 1692(c)c.
83. The foregoing acts by Defendants were intentional persistent, frequent, and devious violations of 15 U.S.C. § 1692, which trigger additional damages of $1,000.00 under 15 U.S.C. § 1692(k)(a)(2)(A).

Buy your own house from your lender at todays Value


64. Plaintiff reallege and incorporate by reference the above paragraphs as though set forth fully herein.
65. Defendants’ Pooling and Servicing Agreement (hereinafter “PSA”) contains a duty to maximize net present value to its investors and related parties.
66. California Civil Code 2823.6 broadens and extends this PSA duty by requiring servicers to accept loan modifications with borrowers.
67. Pursuant to California Civil Code 2823.6(a), a servicer acts in the best interest of all parties if it agrees to or implements a loan modification where the (1) loan is in payment default, and (2) anticipated recovery under the loan modification or workout plan exceeds the anticipated recovery through foreclosure on a net present value basis.
68. California Civil Code 2823.6(b) now provides that the mortgagee, beneficiary, or authorized agent offer the borrower a loan modification or workout plan if such a modification or plan is consistent with its contractual or other authority.
69. Plaintiffs’ loan is presently in default.
70. Plaintiffs are willing, able, and ready to execute a modification of their loan on the following terms:
(a) New Loan Amount: insert amount
(b) New Interest Rate: insert amount
(c) New Loan Length: insert amount
(d) New Payment: insert amount

71. The present fair market value of the property is insert value.
72. The Joint Economic Committee of Congress estimated in June, 2007, that the average foreclosure results in $77, 935.00 in costs to the homeowner, lender, local government, and neighbors.
73. Of the $77,935.00 in foreclosure costs, the Joint Economic Committee of Congress estimates that the lender will suffer $50,000.00 in costs in conducting a non-judicial foreclosure on the property, maintaining, rehabilitating, insuring, and reselling the property to a third party. Freddie Mac places this loss higher at $58,759.00.
74. The anticipated recovery through foreclosure on a net present value basis is $525,000.00 or less.
75. The recovery under the proposed loan modification at $insert amount exceeds the net present recovery through foreclosure of $insert amount by over $5,000.00.
76. Pursuant to California Civil Code §2823.6, Defendants are now contractually bound to accept the loan modification as provided above.

Forcelclosure non-enforcable California Commercial Code 3301

Defendants’ Lack of Standing to Enforce A Non-Judicial Foreclosure Pursuant To California Commercial Code § 3301

46. A promissory note is person property and the deed of trust securing a note is a mere incident of the debt it secures, with no separable ascertainable market value. California Civil Code §§ 657, 663. Kirby v. Palos Verdes Escrow Co., 183 Cal. App. 3d 57, 62.
47. Any transfers of the notice and mortgage fundamentally flow back to the note:
“The assignment of a mortgage without a transfer of the Indebtedness confers no right, since debt and security are inseparable and the mortgage alone is not a subject of transfer, ” Hyde v. Mangan (1891) 88 Cal. 319, 26 P 180, 1891 Cal LEXIS 693; Johnson v, Razy (1919)181 Cal 342, 184 P 657; 1919 Cal LEXIS 358; Bowman v. Sears (1923, Cal App) 63 Cal App 235, 218 P 489, 1923 Cal App LEXIS 199; Treat v. Burns (1932) 216 Cal 216, 13 P2d,724, 1932 Cal LEXIS 554.
48. ”A mortgagee’s purported assignment of the mortgage without an assignment of the debt which is secured is a legal nullity.” Kelley V. Upshaw (1952) 39 Cal 2d 179, 246 P2d 23, 1952 Cal. LEXIS 248.

49. ”A trust deed has no assignable quality independent of the debt; it may not be assigned or transferred apart from the debt; and an attempt to assign the trust deed without a transfer of the debt is without effect.” Domarad v. Fisher & Burke, Inc. (1969 Cal. App. 1st Dist) 270 Cal. App. 2d 543, 76 Cal. Rptr. 529, 1969 Cal. App. LEXIS 1556.
50. The Promissory Note is a negotiable instrument.
51. Transferring a Deed of Trust by itself does not allow enforcement of the instrument unless the Promissory Note is properly negotiated.
52. Where an instrument has been transferred, enforceability is determined based upon possession.
53. California Commercial Code § 3301 limits a negotiable instrument’s enforcement to the following:
“Person entitled. to enforce” an Instrument means (a) the holder of the instrument, (b) a nonholder in possession of the instrument who has the rights of a holder, or (c) a person not in possession of the instrument who is entitled to enforce the instrument pursuant to
Section 3309 or subdivision (d) of Section 3418. A person may be a person entitled to enforce the instrument even though the person is not the owner of the instrument or is in wrongful possession of the instrument.
54. None of the Defendants are present holders of the instrument.
55. None of the Defendants are nonholders in possession of the instrument who has
rights of the holder.
56. None of the Defendants are entitled to enforce the instrument pursuant to section 3309 or subdivision (d) of Section 3418.
57. Defendants have no enforceable rights under California Commercial Code 3301(a) to enforce the negotiable instrument.
58. Since there is no right to enforce the negotiable instrument, the Notice of Default provisions of California Civil Code § 2924 and Notice of Sale provisions of California Civil Code § 2924(f) were likewise never complied with, and there is no subsequent incidental right to enforce any deed of trust and conduct a non-judicial foreclosure.
Plaintiff Suffered Damages As A Result of Defendants’ Conduct:

59. As a direct result of Defendants’ acts, Plaintiff has incurred actual damages consisting of mental and emotional distress, nervousness, grief, embarrassment, loss of sleep, anxiety, worry, mortification, shock, humiliation, indignity, pain and suffering, and other injuries.
60. Plaintiff incurred out of pocket monetary damages.
61. Plaintiff continues to incur monetary damages.
62. Plaintiff will incur the loss of their personal residence if a non-judicial foreclosure is allowed to proceed.
63. Each of Defendants harassing acts were so willful, vexatious, outrageous, oppressive, and maliciously calculated enough, so as to warrant statutory penalties and punitive damages.

No assignment no foreclosure 2932.5

Defendants’ Lack Standing To Conduct A Non-Judicial Foreclosure Pursuant To California Civil Code 2932.5

35. Defendants have no standing to enforce a non-judicial foreclosure.
36. Defendants are strangers to this transaction, and have no authority to go forward with the foreclosure and Trustee’s Sale.
37. Plaintiff executed a Promissory Note (hereinafter the “Note”) and a Deed of Trust to insert defendant.
38. Insert defendant is the Lender and only party entitled to enforce the Note and any security interest with it.
39. Insert defendant is not listed anywhere in the Deed of Trust or Promissory Note.
40. In California, California Civil Code § 2932.5 governs the Power of sale under an assigned mortgage, and provides that the power of sale can only vest in a person entitled to money payments: “Where a power to sell real property is given to a mortgagee, or other encumbrancer, in an instrument intended to secure the payment of money, the power is part of the security and vests in any person who by assignment becomes entitled to payment of the money secured by the instrument. The power of sale may be exercised by the assignee if the assignment is duly acknowledged and recorded.”
41. The Insert County County Recorder’s Office does not contain any evidence
of a recorded assignment from insert defendants, to insert defendant,
42. Insert defendant has never assigned their rights under the Note.
43. The power of sale may not be exercised by any of the Defendants since there was never an’ acknowledged and recorded assignment pursuant to California Civil Code § 2932.5.
44. Since the Defendants did not comply with California Civil Code
§2932.5, the Notice of Default provisions of California Civil Code § 2924 and Notice of Sale provisions of California Civil Code §2924(f) were likewise never complied with.
45. Insert defendant never complied with the Notice of Default provisions of California Civil Code §2924 and Notice of Sale provisions of California Civil Code §2924(f).

They can’t foreclose if they did not get it endorsed and the party they purchase from could not endorse they where out of business!

Defendants Are Not Holders In Due Course Since Plaintiff Was Duped Into An Improper Loan And There Is No Effective Endorsement:

21. Plaintiff incurred a “debt” as that term is defined by California Civil 17 Code §1788(d) and 15 U.S.C. § 1692a(5), when he obtained a Loan on their Personal Residence.
22. The loan is memorialized via a Deed of Trust and Promissory Note, each of which contain an attorney fees provision for the lender should they prevail in the enforcement of their contractual rights.
23. Plaintiff has no experience beyond basic financial matters.
24. Plaintiff was never explained the full terms of their loan, including but not limited to the rate of interest how the interest rate would be calculated, what the payment schedule should be, the risks and disadvantages of the loan, the prepay penalties, the maximum amount the loan payment could arise to.
25. Certain fees in obtaining the loan, were also not explained to the Plaintiff, including but not limited to “underwriting fees,” “MERS registration fee,” “appraisal fees,” “broker fees”, “loan tie in fees,” etc.
26. A determination of whether Plaintiff would be able to make the payments as specified in the loan was never truly made.
27. Plaintiff’s income was never truly verified.
28. Plaintiff was rushed when signing the documents, the closing process provided no time for review and took minutes to accomplish.
29. Plaintiff could not understand any of the documents and signed them based on representations and the trust and confidence the Plaintiff placed in Defendants’ predecessors.
30. Plaintiff is informed and believe that Defendants and/or Defendants’ predecessors established and implemented the policy of failing to disclose material facts about the Loan, failing to verify Plaintiff’s income, falsifying Plaintiff’s income, agreeing to accept a Yield Spread Premium, and causing Plaintiff’s Loan to include a penalty for early payment.
31. Plaintiff is informed and believes that Defendants and/or Defendants’ predecessors established such policy so as to profit, knowing that Plaintiff would be unable to perform future terms of the Loan.
32. Plaintiff was a victim of Fraud in the Factum since the forgoing misrepresentations caused them to obtain the home loan without accurately realizing, the risks, duties, or obligations incurred.
33. The Promissory Note contains sufficient space on the note itself for endorsement whereby any assignment by allonge is ineffective pursuant to Pribus v. Bush, 118 Cal. App. 3d 1003 (May 12, 1981).
34. Defendants are not holders in due course due to Fraud in Factum and ineffective endorsement.

California help for homeowners in forclosure Civil Code 2923.6


3. Recently, the California Legislature found and declared the following in enacting California Civil Code 2923.6 on July 8, 2008:

(a) California is facing an unprecedented threat to its state economy because of skyrocketing residential property foreclosure rates in California. Residential property foreclosures increased sevenfold from 2006 to 2007, in 2007, more than 84,375 properties were lost to foreclosure in California, and 254,824 loans went into default, the first step in the foreclosure process.

(b) High foreclosure rates have adversely affected property values in California, and will have even greater adverse consequences as foreclosure rates continue to rise. According to statistics released by the HOPE NOW Alliance the number of completed California foreclosure sales in 20’07 increased almost threefold from 1902 in the first quarter to 5574 in the fourth quarter of that year. Those same statistics report that 10,556 foreclosure sales, almost double the number for the prior quarter, were completed just in the month of January 2008. More foreclosures means less money for schools, public safety, and other key services.

(c) Under specified circumstances, mortgage lenders and servicers are authorized under their pooling and servicing agreements to modify mortgage loans when the modification is in the best interest of investors. Generally, that modification may be deemed to be in the best interest of investors when the net present value of the income stream of the modified loan is greater than the amount that would be recovered through the disposition of the real property security through a foreclosure sale.

(d) It is essential to the economic health of California for the state to ameliorate the deleterious effects on the state economy and local economies and the California housing market that will result from the continued foreclosures of residential properties in unprecedented numbers by modifying the foreclosure process to require mortgagees, beneficiaries, or authorized agents to contact borrowers and explore options that could avoid foreclosure. These Changes in accessing the state’s foreclosure process are essential to ensure that the process does not exacerbate the current crisis by adding more foreclosures to the glut of foreclosed properties already on the market when a foreclosure could have been avoided. Those additional foreclosures will further destabilize the housing market with significant, corresponding deleterious effects on the local and state economy.

(e) According to a survey released by the Federal Home Loan Mortgage Corporation (Freddie Mac) on January 31, 2008, 57 percent of the nation’s late-paying borrowers do not know their lenders may offer alternative to help them avoid foreclosure.

(f) As reflected in recent government and industry-led efforts to help troubled borrowers, the mortgage foreclosure crisis impacts borrowers not only in nontraditional loans, but also many borrowers in conventional loans.

(g) This act is necessary to avoid unnecessary foreclosures of residential properties and thereby provide stability to California’s statewide and regional economies and housing market by requiring early contact and communications between mortgagees, beneficiaries, or authorized agents and specified borrowers to explore options that could avoid foreclosure and by facilitating the modification or restructuring of loans in appropriate circumstances.

4. “Operation Malicious Mortgage’ is a nationwide operation coordinated by the U.S. Department of Justice and the FBI to identify, arrest, and prosecute mortgage fraud violators.” San Diego Union Tribune, June 19, 2008. As shown below, Plaintiffs were victims of such mortgage fraud.
5. “Home ownership is the foundation of the American Dream. Dangerous mortgages have put millions of families in jeopardy of losing their homes.” CNN Money, December 24, 2007. The Loan which is the subject of this action to Plaintiff is of such character.
6. “Finding ways to avoid preventable foreclosures is a legitimate and important concern of public policy. High rates of delinquency and foreclosure can have substantial spillover effects on the housing market, the financial markets and the broader economy. Therefore, doing what we, can to avoid preventable foreclosures is not just in the interest of the lenders and borrowers. It’s in everybody’s best interest.” Ben Bernanke, Federal Reserve Chairman, May 9, 2008. Plaintiff alleges that Defendants had the duty to prevent such foreclosure, but failed to so act.
7. “Most of these homeowners could avoid foreclosure if present loan holders would modify the existing loans by lowering the interest rate and making it fixed, capitalizing the arrearages, and forgiving a portion of the loan. The result would benefit lenders, homeowners, and their communities.” CNN Money, id.
8. On behalf of President Bush, Secretary Paulson has encouraged lenders to voluntarily freeze interest rates on adjustable-rate mortgages. Mark Zandl, chief economist for Mood’s commented, “There is no stick in the plan. There are a significant number of investors who would rather see homeowners default and go into foreclosure.” San Diego Union Tribune, id.
9. “Fewer than l%• of homeowners have experienced any help “from the Bush-Paulson plan.” San Diego Union Tribune, id. Plaintiffs’ are not of that sliver that have obtained help.
10. The Gravamen of Plaintiff’s complaint is that Defendants violated State and Federal laws which were specifically enacted to protect such abusive, deceptive, and unfair conduct by Defendants, and that Defendants cannot legally enforce a non-judicial foreclosure.

California and everybody else V Countrywide


Plaintiffs, insert Plaintiff, by and through their attorney of record, Timothy McCandless,
allege the following, on information and belief:
1. At all relevant times, Defendant Countrywide Financial Corporation (hereinafter “CFC”), a Delaware corporation, has transacted and continues to transact business throughout the State of California, including in insert county.
2. At all relevant times, Defendant Countrywide Home Loans, Inc. (hereinafter “CHL”), a New York corporation, has transacted and continues to transact business throughout the State of California, including in insert county. CHL is a subsidiary of CFC.
3. At all relevant times, until on or about December 15, 2004, Full Spectrum
Lending, Inc. (hereinafter “Full Spectrum”), was a California corporation that transacted business throughout the State of California, including in insert county, and was a subsidiary of CFC. On or about December 15, 2004, Full Spectrum was merged into and became a division of CHL. For all conduct that occurred on or after December 15, 2004, any reference in this complaint to CHL includes reference to its Full Spectrum division.
4. Defendants CFC, CHL, and Full Spectrum are referred to collectively herein as
“Countrywide” or “the Countrywide Defendants.”
5. At all times pertinent hereto, Defendant Angelo Mozilo (hereinafter “Mozilo”) was Chairman and Chief Executive Officer of CFC. Defendant Mozilo directed, authorized, and ratified the conduct of the Countrywide Defendants set forth herein.
6. At all times pertinent hereto, Defendant David Sambol (hereinafter “Sambol”) is and was the President of CHL and, since approximately September, 2006, has served as the President andChief Operating Officer of CFC. Sambol directed, authorized and ratified the conduct of CHL, and after, September, 2006, the Countrywide Defendants, as set forth herein. Defendant Sambol is a resident of Los Angeles County.
7. Plaintiff is not aware of the true names and capacities of the Defendants sued as Does 1 through 100, inclusive, and therefore sues these Defendants by such fictitious names. Each of these fictitiously named Defendants is responsible in some manner for the activities alleged in this Complaint. Plaintiff will amend this Complaint to add the true names of the fictitiously named Defendants once they are discovered.
8. The Defendants identified in paragraphs 1 through 7, above, shall be referred to collectively as “Defendants.”
9. Whenever reference is made in this Complaint to any act of any Defendant(s), that
allegation shall mean that each Defendant acted individually and jointly with the other Defendants.
10. Any allegation about acts of any corporate or other business Defendant means that
the corporation or other business did the acts alleged through its officers, directors, employees, agents and/or representatives while they were acting within the actual or ostensible scope of their
11. At all relevant times, each Defendant committed the acts, caused or directed others to commit the acts, or permitted others to commit the acts alleged in this Complaint. Additionally, some or all of the Defendants acted as the agent of the other Defendants, and all of
the Defendants acted within the scope of their agency if acting as an agent of another.
12. At all relevant times, each Defendant knew or realized that the other Defendants were engaging in or planned to engage in the violations of law alleged in this Complaint. Knowing or realizing that other Defendants were engaging in or planning to engage in unlawful conduct, each Defendant nevertheless facilitated the commission of those unlawful acts. Each Defendant intended to and did encourage, facilitate, or assist in the commission of the unlawful acts, and thereby aided and abetted the other Defendants in the unlawful conduct.
13. At all relevant times, Defendants have engaged in a conspiracy, common enterprise, and common course of conduct, the purpose of which is and was to engage in the violations of law alleged in this Complaint. This conspiracy, common enterprise, and common course of conduct continues to the present.
14. The violations of law alleged in this Complaint occurred in insert county and elsewhere throughout California and the United States.



15. This action is brought against Defendants, who engaged in false advertising and unfair competition in the origination of residential mortgage loans and home equity lines of credit (hereinafter “HELOCs”).
16. Countrywide originated mortgage loans and HELOCs through several channels, including a wholesale origination channel and a retail origination channel. The Countrywide employees who marketed, sold or negotiated the terms of mortgage loans and HELOCs in any of
its origination channels, either directly to consumers or indirectly by working with mortgage brokers, are referred to herein as “loan officers.”
17. In Countrywide’s wholesale channel, loan officers in its Wholesale Lending Division (hereinafter “WLD”) and Specialty Lending Group (hereinafter “SLG”) (now merged into the WLD) worked closely with a nationwide network of mortgage brokers to originate loans. In its wholesale channel, Countrywide often did business as “America’s Wholesale Lender,” a fictitious business named owned by CHL. In Countrywide’s retail channel, loan officers employed by Countrywide in its Consumer Markets Division (“CMD”) sold loans directly to consumers. In addition, loan officers employed by Full Spectrum up until December 14, 2004, and thereafter by Countrywide’s Full Spectrum Lending Division (hereinafter “FSLD”), sold loans directly to consumers as part of Countrywide’s retail channel.
18. Countrywide maintained sophisticated electronic databases by means of which corporate management, including but not limited to Defendants Mozilo and Sambol, could obtain information regarding Countrywide’s loan production status, including the types of loan products, the number and dollar volume of loans, the underwriting analysis for individual loans, and the number of loans which were approved via underwriting exceptions. Defendants used this
information, together with data they received regarding secondary market trends, to develop and
modify the loan products that Countrywide offered and the underwriting standards that Countrywide applied.
19. The mortgage market changed in recent years from one in which lenders originated mortgages for retention in their own portfolios to one in which lenders attempted to generate as many mortgage loans as possible for resale on the secondary mortgage market. The goal for lenders such as Countrywide was not only to originate high mortgage loan volumes but
also to originate loans with above-market interest rates and other terms which would attract premium prices on the secondary market.
20. In 2004, in an effort to maximize Countrywide’s profits, Defendants set out to double Countrywide’s share of the national mortgage market to 30% through a deceptive scheme
to mass produce loans for sale on the secondary market. Defendants viewed borrowers as nothing more than the means for producing more loans, originating loans with little or no regard to borrowers’ long-term ability to afford them and to sustain homeownership. This scheme was created and maintained with the knowledge, approval and ratification of Defendants Mozilo and
21. Defendants implemented this deceptive scheme through misleading marketing practices designed to sell risky and costly loans to homeowners, the terms and dangers of which they did not understand, including by (a) advertising that it was the nation’s largest lender and could be trusted by consumers; (b) encouraging borrowers to refinance or obtain purchase money financing with complicated mortgage instruments like hybrid adjustable rate mortgages or payment option adjustable rate mortgages that were difficult for consumers to understand; (c) marketing these complex loan products to consumers by emphasizing the very low initial “teaser” or “fixed” rates while obfuscating or misrepresenting the later steep monthly payments and interest rate increases or risk of negative amortization; and (d) routinely soliciting borrowers to refinance only a few months after Countywide or the loan brokers with whom it had “business
partnerships” had sold them loans.
22. Defendants also employed various lending policies to further their deceptive scheme and to sell ever-increasing numbers of loans, including (a) the dramatic easing of Countrywide’s underwriting standards; (b) the increased use of low- or no-documentation loans which allowed for no verification of stated income or stated assets or both, or no request for income or asset information at all; (c) urging borrowers to encumber their homes up to 100% (or more) of the assessed value; and (d) placing borrowers in “piggyback” second mortgages in the form of higher interest rate HELOCs while obscuring their total monthly payment obligations.
23. Also to further the deceptive scheme, Defendants created a high-pressure sales environment that propelled its branch managers and loan officers to meet high production goals and close as many loans as they could without regard to borrower ability to repay. Defendants’ high-pressure sales environment also propelled loan officers to sell the riskiest types of loans, such as payment option and hybrid adjustable rate mortgages, because loan officers could easily sell them by deceptively focusing borrowers’ attention on the low initial monthly payments or interest rates. Defendants also made arrangements with a large network of mortgage brokers to procure loans for Countrywide and, through its loan pricing structure, encouraged these brokers to place homeowners in loans with interest rates higher than those for which they qualified, as well as prepayment penalty obligations. This system of compensation aided and abetted brokers in breaching their fiduciary duties to borrowers by inducing borrowers to accept unfavorable loan terms without full disclosure of the borrowers’ options and also compensated brokers beyond the reasonable value of the brokerage services they rendered.
24. Countrywide received numerous complaints from borrowers claiming that they did not understand their loan terms. Despite these complaints, Defendants turned a blind eye to the ongoing deceptive practices engaged in by Countrywide’s loan officers and loan broker “business partners,” as well as to the hardships created for borrowers by its loose underwriting practices. Defendants cared only about selling increasing numbers of loans at any cost, in order to maximize Countrywide’s profits on the secondary market.


25. Defendants’ deceptive scheme had one primary goal – to supply the secondary market with as many loans as possible, ideally loans that would earn the highest premiums. Over
a period of several years, Defendants constantly expanded Countrywide’s share of the consumer market for mortgage loans through a wide variety of deceptive practices, undertaken with the direction, authorization, and ratification of Defendants Sambol and Mozilo, in order to maximize its profits from the sale of those loans to the secondary market.
26. While Countrywide retained ownership of some of the loans it originated, it sold the vast majority of its loans on the secondary market, either as mortgage-backed securities or as pools of whole loans.
27. In the typical securitization transaction involving mortgage-backed securities, loans were “pooled” together and transferred to a trust controlled by the securitizer, such as Countrywide. The trust then created and sold securities backed by the loans in the pool. Holders of the securities received the right to a portion of the monthly payment stream from the pooled loans, although they were not typically entitled to the entire payment stream. Rather, the holders received some portion of the monthly payments. The securitizer or the trust it controlled often retained an interest in any remaining payment streams not sold to security holders. These securitizations could involve the pooling of hundreds or thousands of loans, and the sale of many
thousands of shares.
28. Countrywide generated massive revenues through these loan securitizations. Its reported securities trading volume grew from 647 billion dollars in 2000, to 2.9 trillion dollars in 2003, 3.1 trillion dollars in 2004, 3.6 trillion dollars in 2005, and 3.8 trillion dollars in 2006. (These figures relate to the ostensible values given to the securities by Countrywide or investors, and include securities backed by loans made by other lenders and purchased by Countrywide.)
29. For the sale of whole (i.e., unsecuritized) loans, Countrywide pooled loans and sold them in bulk to third-party investors, often (but not exclusively) Wall Street firms. The sale of whole loans generated additional revenues for Countrywide. Countrywide often sold the whole loans at a premium, meaning that the purchaser paid Countrywide a price in excess of 100% of the total principal amount of the loans included in the loan pool.
30. The price paid by purchasers of securities or pools of whole loans varied based on the demand for the particular types of loans included in the securitization or sale of whole loans. The characteristics of the loans, such as whether the loans are prime or subprime, whether the loans have an adjustable or fixed interest rate, or whether the loans include a prepayment penalty, all influenced the price.
31. Various types of loans and loan terms earned greater prices, or “premiums,” in the secondary market. For example, investors in mortgages and mortgage backed securities have been willing to pay higher premiums for loans with prepayment penalties. Because the prepayment penalty deters borrowers from refinancing early in the life of the loan, it essentially ensures that the income stream from the loan will continue while the prepayment penalty is in effect. Lenders, such as Countrywide, typically sought to market loans that earned it higher premiums, including loans with prepayment penalties.
32. In order to maximize the profits earned by the sale of its loans to the secondary market, Countrywide’s business model increasingly focused on finding ways to generate an ever larger volume of the types of loans most demanded by investors. For example, Countrywide developed and modified loan products by discussing with investors the prices they would be willing to pay for loans with particular characteristics (or for securities backed by loans with particular characteristics), and this enabled Countrywide to determine which loans were most likely to be sold on the secondary market for the highest premiums.
33. Further, rather than waiting to sell loans until after they were made, Countrywide would sell loans “forward” before loans were funded. In order to determine what loans it could sell forward, Countrywide would both examine loans in various stages of production and examine its projected volume of production over the next several months.
34. Loans that were sold forward were sold subject to a set of stipulations between Countrywide and the purchaser. For example, in a sale of whole loans, Countrywide might agree on October 1 that on December 1 it would deliver 2000 adjustable rate mortgage loans with anaverage interest rate of 6.0%, half of which would be subject to a prepayment penalty, among other characteristics. (None of these loans would have been made as of October 1.) Based on these stipulations regarding the characteristics of the loans to be included in the pool, an investor might agree to pay a price totaling 102.25% of the total face value of the loans. In other words, the purchaser agreed in advance to pay a premium of 2.25%. Then, if the loans actually delivered on December 1 had a slightly higher or lower average interest rate, the terms of the stipulation would specify how much the final price would be adjusted.
35. The information regarding the premiums that particular loan products and terms could earn on the secondary market was forwarded to Countrywide’s production department, [Redacted description of production department’s responsibilities.]
36. Countrywide originated as many loans as possible not only to maximize its profits on the secondary market, but to earn greater profits from servicing the mortgages it sold. Countrywide often retained the right to service the loans it securitized and sold as pools of whole
loans. The terms of the securitizations and sales agreements for pools of whole loans authorized Countrywide to charge the purchasers a monthly fee for servicing the loans, typically a percentage of the payment stream on the loan.
37. Tantalized by the huge profits earned by selling loans to the secondary market, Defendants constantly sought to increase Countrywide’s market share: the greater the number and percentage of loans it originated, the greater the revenue it could earn on the secondary market. Countrywide executives, including Defendant Mozilo, publicly stated that they sought to
increase Countrywide’s market share to 30% of all mortgage loans made and HELOCs extended
in the country.
38. In its 2006 annual report, Countrywide trumpeted the fact that “[w]hile the overall residential loan production market in the United States has tripled in size since 2000, from $1.0 trillion to $2.9 trillion at the end of 2006, Countrywide has grown nearly three times faster, going from $62 billion in loan originations in 2000 to $463 billion in 2006.”
39. In addition, Countrywide directly and indirectly motivated its branch managers, loan officers and brokers to market the loans that would earn the highest premiums on the secondary market without regard to borrower ability to repay. For example, the value on the secondary market of the loans generated by a Countrywide branch was an important factor in determining the branch’s profitability and, in turn, branch manager compensation. Managers were highly motivated to pressure their loan officers to sell loans that would earn Countrywide the highest premium on the secondary market, which resulted in aggressive marketing of such loans to consumers.
40. The secondary market affected Countrywide’s pricing of products and, in order to
sell more loans on the secondary market, Countrywide relaxed its underwriting standards and liberally granted exceptions to those standards. Countrywide managers and executives, including but not limited to Defendants Mozilo and Sambol, had access to information that provided transparency and a seamless connection between secondary market transactions, the loan production process, and managerial and sales incentives.


41. Countrywide offered a variety of loan products that were both financially risky and difficult for borrowers to understand, including in particular payment option and hybrid adjustable rate mortgages and second loans in the form of home equity lines of credit.
A. The Pay Option ARM
42. Particularly after 2003, Countrywide aggressively marketed its payment option adjustable rate mortgage (“Pay Option ARM”) under the direction, authorization and ratification of Defendants Mozilo and Sambol. The Pay Option ARM, which Countrywide classified as a “prime” product, is a complicated mortgage product which entices consumers by offering a very low “teaser” rate – often as low as 1% – for an introductory period of one or three months. At the end of the introductory period, the interest rate increases dramatically. Despite the short duration of the low initial interest rate, Countrywide’s Pay Option ARMs often include a one, two or three-year prepayment penalty.
43. When the teaser rate on a Pay Option ARM expires, the loan immediately becomes an adjustable rate loan. Unlike most adjustable rate loans, where the rate can only change once every year or every six months, the interest rate on a Pay Option ARM can change every month (if there is a change in the index used to compute the rate).
44. Countrywide’s Pay Option ARMs were typically tied to either the “MTA,” “LIBOR” or “COFI” index. The MTA index is the 12-month average of the annual yields on actively traded United States Treasury Securities adjusted to a constant maturity of one year as published by the Federal Reserve Board. The LIBOR (London Interbank Offered Rate) index is based on rates that contributor banks in London offer each other for inter-bank deposits. Separate LIBOR indices are kept for one month, six-month, and one-year periods, based on the duration of the deposit. For example, the one-year LIBOR index reported for June 2008 is the rate for a twelve-month deposit in U.S. dollars as of the last business day of the previous month. The COFI (11th District Cost of Funds Index) is the monthly weighted average of the interest rates paid on checking and savings accounts offered by financial institutions operating in the states of Arizona, California and Nevada.
45. Although the interest rate increases immediately after the expiration of the short period of time during which the teaser rate is in effect, a borrower with a Pay Option ARM has the option of making monthly payments as though the interest rate had not changed. Borrowers with Pay Option ARMs typically have four different payment options during the first five years of the loan. The first option is a “minimum” payment that is based on the introductory interest rate. The minimum payment, which Countrywide marketed as the “payment rate,” is the lowest of the payment options presented to the borrower. Most of Countrywide’s borrowers choose to make the minimum payment.
46. The minimum payment on a Pay Option ARM usually is less than the interest accruing on the loan. The unpaid interest is added to the principal amount of the loan, resulting in negative amortization. The minimum payment remains the same for one year and then increases by 7.5% each year for the next four years. At the fifth year, the payment will be “recast” to be fully amortizing, causing a substantial jump in the payment amount often called “payment shock.”
47. However, the loan balance on a Pay Option ARM also has a negative amortization cap, typically 115% of the original principal of the loan. If the balance hits the cap, the monthly payment is immediately raised to the fully amortizing level (i.e., all payments after the date the cap is reached must be sufficient to pay off the new balance over the remaining life of the loan). When that happens, the borrower experiences significant payment shock. A borrower with a Countrywide Pay Option ARM with a 1% teaser rate, who is making the minimum payment, is very likely to hit the negative amortization cap and suffer payment shock well before the standard 5-year recast date.
48. Instead of making the minimum payment, the borrower has the option of making an interest-only payment for five years. The borrower then experiences payment shock when the payment recasts to cover both principal and interest for the remaining term of the loan. Alternatively, the borrower can choose to make a fully amortizing principal and interest payment based on either a 15-year or a 30-year term.
49. The ever-increasing monthly payments and payment shock characteristic of Pay Option ARMs are illustrated by the following example of a Countrywide loan. The loan had an initial principal balance of $460,000.00, a teaser rate of 1%, and a margin of 2.9% (such that after the one-month teaser rate expired, the interest would be the 1-month LIBOR index plus 2.9%, rounded to the nearest 1/8th percent). After the teaser rate expired, based on the 1-month LIBOR rate as of the date the borrower obtained the loan, the interest rate would increase to 7.00%. Assuming the 7.00% interest rate remained in place, and the borrower chose to make the minimum payment for as long as possible, the payment schedule would be approximately as follows:
a. $1,479.54 per month for the first year;
b. $1,590.51 per month for the second year;
c. $1,709.80 per month for the third year;
d. $1,838.04 per month for the fourth year;
e. $1,975.89 per month for the first nine months of the fifth year; and
f. approximately $3747.83 per month for the remaining twenty-five years
and three months on the loan.
50. Once the payments reach $3747.83, this Pay Option ARM will have negatively amortized such that the balance of the loan will have increased to approximately $523,792.33. At that point, the borrower will be faced with a payment more than two-and-a-half times greater than the initial payment and likely will be unable to refinance unless his or her home has increased in value at least commensurately with the increased loan balance. In addition, increases in the LIBOR rate could cause the borrower to hit the negative amortization cap earlier, and also could result in even higher payments. If the interest rate reached 8%, just 1% higher, the negative amortization cap would be reached sooner and payments could reach $4,000.00 per month, or higher.
51. During the underwriting process, Countrywide did not consider whether borrowers would be able to afford such payment shock. Further, depending on the state of the his or her finances, even the interim increases in the minimum payment may well have caused dramatic hardship for the borrower.
52. Even if the borrower elects to make interest-only payments, he or she still will experience payment shock. Again assuming the interest rate stays constant at 7.00% over the life of the loan, the borrower’s initial payments would be approximately $2,683.33 for five years. Thereafter, the payment will increase to approximately $3,251.18 per month, an increase of over 20%.
53. Nearly all Countrywide’s Pay Option ARM borrowers will experience payment shock such as that illustrated in paragraphs 49 through 52 above. As of December 31, 2006, almost 88% of the Pay Option ARM portfolio held by Defendants consisted of loans that had experienced some negative amortization. This percentage increased to 91% as of December 31, 2007.
54. Countrywide sold thousands of Pay Option ARMs, either through its branches or through brokers. For example, on a national basis, approximately 19% of the loans originated by Countrywide in 2005 were Pay Option ARMs. Countrywide made many of these loans in California.
55. These loans were highly profitable. Countrywide had a gross profit margin of approximately 4% on Pay Option ARMs, compared to 2% on mortgages guaranteed by the Federal Housing Administration.
56. Countrywide retained ownership of a number of loans for investment purposes, including thousands of Pay Option ARMs. Countrywide reported the negative amortization amounts on these Pay Option ARMs (i.e., the amount by which the balances on those loans increased) as income on its financial statements. The negative amortization “income” earned by Countrywide totaled 1.2 billion dollars by the end of 2007.
57. Moreover, Pay Option ARMs with higher margins could be sold for a higher premium on the secondary market, because the higher margins would produce a greater interest rate and therefore a larger income stream. To insure an abundant stream of such loans, Countrywide pushed its loan officers to sell Pay Option ARMs and paid loan brokers greater compensation for selling a Pay Option ARM with a higher margin, or above-par rate, thus encouraging them to put consumers into higher cost loans. Countrywide also used a variety of deceptive marketing techniques to sell its Pay Option ARMs to consumers.
58. Countrywide deceptively marketed the Pay Option ARM by aggressively promoting the teaser rate. Television commercials emphasized that the payment rate could be as low as 1% and print advertisements lauded the extra cash available to borrowers because of the low minimum payment on the loan. Television advertisements did not effectively distinguish between the “payment rate” and the interest rate on the loans, and any warnings about potential negative amortization in Countrywide’s print advertisements were buried in densely written small type.
59. Borrowers, enticed by the low teaser rate, were easily distracted from the fine print in the loan documents and did not fully understand the terms or the financial implications of Countrywide’s Pay Option ARMs.
60. When a borrower obtained a Pay Option ARM from Countrywide, the only initial monthly payment amount that appeared anywhere in his or her loan documents was the minimum payment amount. In other words, documents provided to the borrower assumed he or she would make only the minimum payment. Thus, a borrower would not know the monthly payment necessary to make a payment that would, for example, cover accruing interest, until he or she received the first statement after the expiration of the teaser rate, well after all loan documents were signed.
61. Countrywide and the brokers it accepted as its “business partners” misrepresented or obfuscated the true terms of the Pay Option ARMs offered by Countrywide, including but not limited to misrepresenting or obfuscating the amount of time that the interest rate would be fixed for the loan, misrepresenting or obfuscating the risk of negative amortization and the fact that the
payment rate was not the interest rate, and misrepresenting or obfuscating that the minimum payment would not apply for the life of the loan.
62. Countrywide and its business partner brokers also misrepresented or obfuscated how difficult it might be for borrowers to refinance a Pay Option ARM loan. In fact, after making only the minimum payment, because of negative amortization the borrower likely would not be able to refinance a Pay Option ARM loan unless the home serving as security for the mortgage had increased in value. This is particularly true in cases for borrowers whose loans have a very high loan-to-value ratio.
63. Countrywide and its business partner brokers often misrepresented or obfuscated the fact that a particular Pay Option ARM included a prepayment penalty and failed to explain the effect that making only the minimum payment would have on the amount of the prepayment penalty. If a borrower seeks to refinance after having made the minimum payment for an extended period, but while a prepayment penalty is still in effect, the negative amortization can cause the amount of the prepayment penalty to increase. Prepayment penalties typically equal six
months worth of accrued interest. As negative amortization causes the loan principal to increase, it also causes an increase in the amount of interest that accrues that each month, thereby increasing the prepayment penalty.
64. Countrywide and its business partner brokers also represented that the prepayment penalty could be waived if the borrower refinanced with Countrywide. However, Countrywide sells most of the loans it originates, and Countrywide has at most limited authority to waive prepayment penalties on loans it does not own, even when it controls the servicing (and is often required to pay the prepayment penalties on loans it does not own in the instances where it is not able to collect the penalty from the borrower).
B. Hybrid ARM Loans
65. In addition to the Pay Option ARMs, Countrywide offered “Hybrid” ARM loans. Hybrid ARMs have a fixed interest rate for a period of 2, 3, 5, 7, or 10 years, and then an adjustable interest rate for the remaining loan term. The products described below were offered with the approval, direction and ratification of Defendants Sambol and Mozilo.
(1) 2/28 and 3/27 ARMs
6. Countrywide typically offered “2/28” Hybrid ARMs through its Full Spectrum Lending Division. These 2/28 ARM loans have low, fixed interest rates for the first two years (the “2” in “2/28”). The loans often only required interest-only payments during the period the initial rate was in effect, or sometimes for the first five years of the loan.
67. After the initial rate expires, the interest rate can adjust once every six months for the next 28 years (the “28” in “2/28”). During this period, the interest rate typically is determined by adding a margin to the one-year LIBOR index, except that the amount the interest rate can increase at one time may be limited to 1.5%. Because the initial rate is set independent of the index, the payment increase can be dramatic, particularly if the loan called for interest-only payments for the first two or five years.
68. Countrywide also offered “3/27” ARMs, which operate similarly to 2/28 ARMs, except that the low initial rate is fixed for three rather than two years, and the interest rate then adjusts for 27 rather than 28 years.
69. Countrywide underwrote 2/28 and 3/27 ARMs based on the payment required while the initial rate was in effect, without regard to whether the borrower could afford the loan thereafter. And, like Pay Option ARMs, Countrywide’s 2/28 and 3/27 ARMs typically contain prepayment penalties.
70. A borrower with a 2/28 ARM, like a borrower with a Pay Option ARM, is subjected to steadily increasing monthly payments as well as payment shock. For example, a Countrywide borrower obtained a 2/28 ARM for $570,000, with an initial rate of 8.95% for the first two years. Thereafter, the interest rate was to be calculated by adding a margin of 7.95% to the six-month LIBOR index. The promissory note for this 2/28 ARM provides that the interest rate can never be lower 8.95% and can go as high as 15.95%. Based on the LIBOR rate that applied at the time the borrower received the loan and the terms of the note governing interest rate (and therefore payment) increases, the anticipated payment schedule was:
a. $4,565.86 per month for two years;
b. $5,141.98 per month for six months;
c. $5,765.48 per month for six months; and
d. payments of $6,403.01 per month or more thereafter.
71. This borrower’s monthly payments on this 2/28 ARM will thus increase by approximately 40% just during the 12 months between the end of the second year and beginning of the fourth year of the loan.
(2) 5/1, 7/1, and 10/1 ARMs
72. Countrywide also offered 5/1, 7/1, and 10/1 “interest-only” loans. Marketed as having “fixed” or “fixed period” interest rates, these loans carried a fixed interest rate for the first
5, 7, or 10 years respectively. These loans were underwritten based on the initial fixed, interest only payment until at least the end of 2005. However, when the fixed rate period expires, the interest rate adjusts once per year and is determined by adding a margin to an index. The monthly payments dramatically increase after the interest-only period, because payments over the remaining 25, 23, or 20 years are fully amortized to cover both principal and interest.
73. For example, if a borrower had a 5/1 loan for $500,000 that remained constant at 7.5% for the life of the loan, the monthly payments during the five year interest-only period would be $3,125.00. The monthly payment would increase to approximately $3,694.96 for the remaining 25 years of the loan. If the interest rate increased to 8% over the remaining 25 years, the payment would jump to $3,859.08 per month.
74. Collectively, 2/28, 3/27, 5/1, 7/1, and 10/1 ARMs will be referred to herein as “Hybrid ARMs.”
(3) Countrywide’s Deceptive Marketing of its Hybrid ARMs
75. Countrywide marketed Hybrid ARMs by emphasizing the low monthly payment and low “fixed” initial interest rate. Countrywide and its business partner brokers misrepresented or obfuscated the true terms of these loans, including but not limited to misrepresenting or obfuscating the amount of time that the fixed rate would be in effect, misrepresenting or obfuscating the fact that the interest rates on the loans are adjustable rather than fixed, and obfuscating or misrepresenting the amount by which payments could increase once the initial fixed rate expired.
76. Countrywide and its business partner brokers also often misrepresented or obfuscated the fact that Hybrid ARMs, particularly 2/28 and 3/27 ARMs, included prepayment penalties, or represented that the prepayment penalties could be waived when the borrowers refinanced with Countrywide. However, most loans originated by Countrywide are sold on the secondary market and, as described in paragraph 64, above, Countrywide generally cannot waive the terms of loans it does not own, even when it controls the servicing.
77. Countrywide and its brokers also misrepresented or obfuscated how difficult it might be for borrowers to refinance Hybrid ARMs. Although borrowers often were assured that they would be able to refinance, those seeking to refinance Hybrid ARMs after the expiration of the initial interest-only period likely would be able to do so unless the home serving as security for the mortgage had maintained or increased its value. This was particularly true for borrowers whose loans have very high loan-to-value ratios, as there would be no new equity in the borrowers’ homes to help them pay fees and costs associated with the refinances (as well as any prepayment penalties that may still apply).
C. Home Equity Lines of Credit
78. Countrywide also aggressively marketed HELOCs, particularly to borrowers who had previously obtained or were in the process of obtaining a first mortgage loan from Countrywide. Defendants referred to such HELOCs as “piggies” or “piggyback loans,” and referred to simultaneously funded first loans and HELOCs as “combo loans.” The first loan typically covered 80% of the appraised value of the home securing the mortgage, while the HELOC covered any of the home’s remaining value up to (and sometimes exceeding) 20%. Thus, the HELOC and the first loan together often encumbered 100% or more of a home’s appraised value.
79. Under the terms of the piggyback HELOCs, borrowers received monthly bills for interest-only payments for the first five years of the loan term (which could be extended to ten years at Countrywide’s option), during which time they could also tap any unused amount of the equity line. This was called the “draw period.”
80. Because Countrywide offered HELOCs as piggybacks to Pay Option and Hybrid ARMs, 100% or more of a property’s appraised value could be encumbered with loans that required interest-only payments or allowed for negative amortization.
81. Countrywide typically urged borrowers to draw down the full line of credit when HELOCs initially funded. This allowed Countrywide to earn as much interest as possible on the HELOCs it kept in its portfolio, and helped generate the promised payment streams for HELOCs sold on the secondary market. For the borrower, however, drawing down the full line of credit at funding meant that there effectively was no “equity line” available during the draw period, as the borrower would be making interest-only payments for five years.
82. Upon the end of the draw period, the HELOC notes generally require borrowers to repay the principal and interest in fully amortizing payments over a fifteen year period. A fully drawn HELOC was therefore functionally a 20- or 25-year closed-end mortgage. However, Countrywide did not provide borrowers with any documents or other materials to help them calculate the principal and interest payments that would be due after the draw, or interest-only, period.
83. Countrywide HELOCs were underwritten not to the fully amortizing payment, but to the interest-only payments due during the draw period. Countrywide typically charged an early termination fee for HELOCs closed before three years, and sometimes would charge a monthly fee for HELOCs where the balance fell below a specified amount.
84. A borrower with an interest-only or a negatively amortizing loan faces even greater payment shock if he or she also has a fully drawn HELOC. For example, a borrower with fully drawn $100,000 HELOC at a 7.00% interest rate will have monthly interest-only payments of approximately $583.33. At the end of the draw period, the payment will increase to $898.83. This payment increase is in addition to whatever payment increase the borrower is experiencing on his or her first mortgage. This potential dual payment shock is typically obfuscated from or not explained to borrowers. Moreover, a borrower with a piggyback HELOC, particularly a borrower whose first mortgage negatively amortized or allowed interest-only payments, is even less likely to be able to refinance at the time of his or her payment shock unless his or her home has increased in value.

85. Driven by its push for market share, Countrywide did whatever it took to sell more loans, faster – including by easing its underwriting criteria and disregarding the minimal underwriting criteria it claimed to require. By easing and disregarding its underwriting criteria, Countrywide increased the risk that borrowers would lose their homes. Defendants Mozilo and Sambol actively pushed for easing Countrywide’s underwriting standards and documentation requirements, allowed the liberal granting of exceptions to those already eased standards and requirements, and received reports detailing the actual underwriting characteristics and performance of the loans Countrywide funded.
A. Countrywide’s Low- and No-Documentation Loans
86. Traditionally, lenders required borrowers seeking mortgage loans to document their income, for example by providing W-2s or tax returns, as well as assets. Countrywide, however, disregarded such documentation requirements with respect to its riskiest loan products and introduced a variety of reduced or no documentation loan programs that eased and quickened the loan origination process. The vast majority of the Hybrid ARMs and nearly all of the Pay Option ARMs originated by Countrywide were reduced or no documentation loans.
87. As an example of one of its widespread no documentation programs, Countrywide made Pay Option ARMs, Hybrid ARMs, and piggyback HELOCs, among other loans, pursuant to its “Stated Income Stated Assets,” or “SISA,” program. The borrower’s income and assets were stated but not verified. Employment was verbally confirmed and income was supposed to be roughly consistent with incomes earned in the type of job in which the borrower was employed. Reduced documentation loans, in turn, allowed borrowers to document their income through the provision of W-2 tax forms, bank statements, or verbal verification of employment.
88. These low- and no-documentation programs, such as SISA, enabled Countrywide to process loans more quickly and therefore to make more loans. Stated income loans also encouraged the overstating of income – loan brokers and officers either overstated the borrower’s income without his or her knowledge, or led the borrower into overstating his or her income without explaining the risk of default that the borrower would face with a loan he or she would not actually afford. According to a former Countrywide loan officer, for example, a loan officer might say, “with your credit score of X, for this house, and to make X payment, X is the income you need to make.” Many borrowers responded by agreeing that they made X amount in income.
89. For stated income loans, it became standard practice for loan processors and underwriters to check http://www.salary.com to see if a stated income was within a reasonable range, with more tolerance on the upside for California salaries. Because loan officers knew about this practice, they too would look at salary.com to figure out the parameters ahead of time and know by how much they could overstate (or fabricate) income.
B. Countrywide’s Easing of Underwriting Standards
90. Countrywide also relaxed, and often disregarded, the traditional underwriting standards used to separate acceptable from unacceptable risk in order to produce more loans for the secondary market. Initially, for example, a borrower had to have a credit score of for a stated income loan. As the secondary market’s appetite for loans increased, Countrywide relaxed its guidelines so that a borrower with a credit score of could get a stated income loan with 100% financing.
91. Underwriting standards which Countrywide relaxed included qualifying interest rates (the rate used to determine whether borrowers can afford loans), loan-to-value ratios (the amount of the loan(s) compared to lower of the appraised value or sale price of the property), and debt-to-income ratios (the amount of borrowers’ monthly income compared to their monthly indebtedness).
92. With respect to qualifying rates, while Countrywide offered loans with initial low payments that would increase, loans were underwritten without regard to borrowers’ long-term financial circumstances. Until at least the end of 2005, Countrywide underwrote and approved its Hybrid ARMs based on the fixed interest rate applicable during the initial period of the loan, without taking into account whether the borrowers would be able to afford the dramatically higher payments that would inevitably be required during the remaining term of the loan.
93. In addition, Countrywide’s approach to underwriting and marketing Pay Option ARMs diverged. Countrywide underwrote Pay Option ARMs based on the assumption that borrowers would not make the minimum payment and therefore not experience negative amortization. In contrast, Countrywide marketed Pay Option ARMs by emphasizing the minimum payments. Countrywide continued this underwriting practice even though it knew that many of its Pay Option ARM borrowers would choose to make only the minimum monthly payment and that a high percentage of such borrowers had experienced negative amortization on their homes, as described in paragraph 53, above.
94. Countrywide also underwrote and approved HELOCs based on the borrower’s ability to afford the interest-only payments during the initial period of the loan, not based on the borrower’s ability to afford the subsequent, fully amortized principal and interest payments.
95. Countrywide eased other basic underwriting standards. Starting in 2003, as Defendants pushed to expand market share, underwriting standards and verification requirements became more flexible to enable underwriters to approve loans faster. Countrywide, for example, allowed higher and higher loan-to-value (“LTV”) and combined loan-to-value (“CLTV”) ratios –the higher the ratio, the greater the risk that a borrower will default and will be unable to refinance in order to avoid default. Similarly, Countrywide approved loans with higher and higher debt-to-income (“DTI”) ratios – the higher ratio, the greater the risk the borrower will have cash-flow problems and miss mortgage payments.
C. Countrywide’s “Exception” Underwriting Compromised Standards
96. Countrywide approved loans that it knew to be high risk, and therefore highly likely to end up in default, by ignoring its own minimal underwriting guidelines. Based on the proposed loan terms and the borrower’s financial and credit information, Countrywide’s computerized underwriting system (“CLUES”) issued a loan analysis report that rated the consumer’s credit and ability to repay the loan, and also indicated whether a proposed loan was in compliance with Countrywide’s underwriting guidelines. Based on this analysis, the CLUES report would recommend that the loan be approved, the loan be declined, or that the loan be “referred” to manual underwriting. CLUES, for example, might flag a “rule violation” if the borrower’s LTV, CLTV or credit score fell outside the guidelines for a given loan product. In such instances, CLUES would make a recommendation to “refer” the loan for further analysis by
a Countrywide underwriter.
97. The CLUES result was only a recommendation, not a final decision. The role of the underwriter was basically to verify information and ultimately decide whether to approve a loan based on Countrywide’s underwriting criteria. Underwriters could overcome potential rule violations or other underwriting issues flagged by CLUES by adding on “compensating factors,” such as letters from the borrower that addressed a low FICO score or provided explanations regarding a bankruptcy, judgment lien, or other issues affecting credit status.
98. Underwriters were under intense pressure to process and fund as many loans as possible. They were expected to process 60 to 70 loans per day, making careful consideration of borrowers’ financial circumstances and the suitability of the loan product for them nearly impossible.
99. As the pressure to produce loans increased, underwriters, their superiors, branch managers, and regional vice presidents were given the authority to grant exceptions to Countrywide’s minimal underwriting standards and to change the terms of a loan suggested by CLUES. Even if CLUES had recommended denying a loan, the underwriter could override that denial if he or she obtained approval from his or her supervisor.
100. Because of the intense pressure to produce loans, underwriters increasingly had to justify why they were not approving a loan or granting an exception for unmet underwriting criteria to their supervisors, as well as to dissatisfied loan officers and branch managers who earned commissions based on loan volume. Any number of Countrywide managerial employees could override an underwriter’s decision to decline a loan and request an exception to an underwriting standard. Countrywide employees also could submit a request for an exception to Countrywide’s Structured Loan Desk in Plano, Texas, a department specifically set up by Countrywide, at the direction of Defendants Mozilo and Sambol, to grant underwriting exceptions. According to a former employee, in 2006, 15,000 to 20,000 loans a month were processed through the Structured Loan Desk.
101. Countrywide granted exceptions liberally, further diluting its already minimal underwriting standards for making loans. Countrywide granted exception requests in a variety of circumstances where one or more basic underwriting criteria of the borrower did not meet loan product guidelines, including, for example, LTV or CLTV, loan amount and credit score. Countrywide placed borrowers in risky loans such as Hybrid and Pay Option ARMs, based on stated but not verified income and assets, and then overlooked its few remaining underwriting indicia of risk.
102. To attract more business Countrywide promoted its relaxed underwriting standards and ready grant of exceptions to brokers. For example, Countrywide promoted “Unsurpassed Product Choices and Flexible Guidelines,” including (a) “100% financing for purchase or refinancing” loans; (b) “80/20 combo loans for stated Self-Employed and Non Self- Employed;” (c) “Stated Self-Employed and Non Self-Employed loan programs with as low as a 500 credit score.” Countrywide stated that its “Specialty Lending Group’s experienced and knowledgeable loan experts are empowered to review all loan packages, make sound credit decisions and provide quality lending solutions – yes, even for ‘hard to close’ loans.”
D. Countrywide’s Risk-Layering and Pressure to Sell “Piggyback” Loans
Further Loosened Underwriting Practices

103. Countrywide compromised its underwriting standards even further by risk layering, i.e., combining high risk loans with one or more relaxed underwriting standards. Countrywide was well aware that layered risk created a greater likelihood that borrowers would lose their homes.
104. As early as January 2005, Countrywide identified the following borrower/loan characteristics as having a negative impact on the underwriting evaluation process: [Redacted description of risk factors identified by Countrywide.]
105. Nonetheless, Countrywide combined these very risk factors in the loans it promoted to borrowers. Countrywide introduced, for example, loan programs that allowed for higher LTVs/CLTVs, less documentation and lower credit scores. A high risk loan such as a Pay Option ARM could be sold to borrowers with increasingly lower credit scores. In addition, by accepting higher DTI ratios and combining Pay Option ARMs with second mortgages that allowed borrowers to finance a down payment, Countrywide would qualify borrowers with fewer financial resources, and hence a higher likelihood of default.
106. With a second or “piggyback” mortgage, the borrower could get a first loan for 80% of the purchase price (i.e., an 80% LTV) and a second loan for 20% of the purchase price (a 20% LTV), for a combined loan-to-value ratio of 100%. This allowed the borrower to finance a down payment and also avoid paying mortgage insurance (which typically is required if the LTV
on a first loan exceeds 80%). Such loans obviously were risky as the borrower had contributed no funds whatsoever to the loan and, if the loan required no documentation, had only stated his or her income and assets.
107. The following examples describe risk layering and underwriting exceptions granted to several California borrowers to whom Countrywide sold Hybrid or Pay Option ARMs. These examples represent only a small percentage of the large number of California residents who are likely facing foreclosure due to Countrywide’s widespread practice of risk-layering.
a. Countrywide loan officer convinced a borrower to take a Pay Option ARM with a 1-month teaser rate and a 3-year prepayment penalty, plus a full-draw piggyback HELOC, based on the loan officer’s representation that the value of the borrower’s home would continue to rise and he would have no problem refinancing. The borrower’s DTI was % and FICO was . An exception was granted for . The loan closed in January 2006, and a Notice of Default issued in June 2007. [Redacted example of underwriting exception approved by Countrywide.]
b. The CLUES report issued for a loan applicant in February 2005 stated that [Redacted example of underwriting exception approved by Countrywide.]
c. [Redacted example of underwriting exception approved by Countrywide.]

108. Driven by its push for market share, Countrywide did whatever it took to sell more loans, faster – including by engaging in a number of deceptive marketing practices under the direction and with the ratification of Defendants Mozilo and Sambol.
A. Countrywide Deceptively Lulled Borrowers Into Believing That it Was a
“Trusted Advisor” Looking Out for the Borrowers’ Best Interests

109. Countrywide sought to induce borrowers into believing that it was looking out for their best interest through various types of solicitations. Countrywide published television, radio, and print advertisements, for example, touting itself as “the company you can trust” and urging consumers to “join the millions of homeowners who have trusted Countrywide.” Countrywide capitalized on its status as the “number one mortgage lender” and claimed that it was a mortgage loan expert capable of advising customers. For example, Countrywide claimed that it “had years to perfect [its] craft” and offered “industry leading expertise” and that “[w]ith over 35 years of service and one of the widest selections of loan programs, [it] is an expert at finding solutions for all kinds of situations.” As another example, Countrywide offered “consultation[s] with our home loan experts” and claimed it “would go the distance with you to help secure a loan program to fit your financial needs and goals.”
110. Countrywide also engaged in extensive solicitation campaigns aimed at those borrowers it was easiest for it to find — existing Countrywide customers. Countrywide targeted existing customers with tailored letters and e-mail solicitations, creating the impression that it was a mortgage expert that advised its borrowers, at no cost, regarding the financial mortgage options that were in their best interest. For example, Countrywide took advantage of Pay Option ARM customers’ worries regarding potential future “steep payment adjustments,” by sending them a “special invitation” to talk with “specially-trained consultants” regarding “your current financial situation, at no charge, to see if refinancing may help put you in a better financial position.”
111. Countrywide also created an annual “anniversary” campaign, by sending letters and e-mails to existing customers offering a “free Anniversary Loan Review,” which it touted as a “home loan analysis” with an “experienced Loan Consultant.” Countrywide advertised itself in
these solicitations as, for example, an “expert at finding solutions” and “smart financial options” that would best suit borrowers’ financial needs.
112. Countrywide operated an extensive telemarketing operation, aimed both at new potential customers and existing Countrywide customers, in which it touted its expertise and claimed to find the best financial options for its customers. For example, Countrywide instructed its Full Spectrum loan officers to memorize a script that instructed them to “build rapport” and “gain trust” in conversations with potential customers, and to do so with existing customers by “positioning” telephone calls, the true purpose of which was to sell refinance loans, as a Customer Service loan check-up[s].” On these calls, loan officers were instructed to . [Redacted description of marketing training for loan officers.] Countrywide instructed FSLD loan officers to state, for example, “I’m an experienced mortgage lending professional specializing in helping people improve their financial situation.” Countrywide even instructed loan officers to offer to provide advice on other lender’s mortgage loans and to tell potential customers, that “even if you’re working with someone else and just want a second opinion – mortgages can be very complicated. I’m here for that.”
113. In addition, when handling initial calls from prospective customers, for example, Countrywide instructed its FSLD loan officers to . [Redacted description of marketing training for loan officers.] Contrary to the kinds of representations described in this paragraph and paragraphs 109 through 112, above, Countrywide often did not sell borrowers loans that were in their best interest.
B. Countrywide Encouraged Serial Refinancing
114. In order to constantly produce more loans for sale to the secondary market, Countrywide aggressively marketed refinance loans to those homeowners it had no trouble finding — Countrywide customers. Countrywide misled these borrowers regarding the benefits of
refinancing, including by using the deceptive marketing practices described in paragraphs 119 through 128 below. In addition, Countrywide created a perpetual market for its refinance loans by selling Pay Option and Hybrid ARMs that borrowers would have to refinance in order to avoid payment shock. Countrywide knew that borrowers who could not afford the inevitable payment increase on such loans and who were unable to refinance would be at great risk of losing their homes.
115. Countrywide provided lists of existing customers to its loan officers responsible for outbound marketing. Defendants’ loan officers hounded Countrywide customers by phone, mail, and electronic mail with refinance loan offers. For example, [Redacted description of Countrywide’s marketing plans for soliciting existing Countrywide customers to refinance.] FSLD “leads” – telephone numbers for existing, eligible customers – were uploaded into a telemarketing database on a weekly basis.
116. Countrywide even solicited customers who were having trouble making payments or facing foreclosure, without regard to the risk that the customer would default on Pay Option and Hybrid ARM refinance loans. FSLD solicited existing prime customers who had “recurring” missed payments. Countrywide required its customer service representatives to market refinance loans to borrowers who called with questions, including borrowers who were behind on their monthly payments or facing foreclosure.
117. Countrywide also solicited existing customers on other occasions, including on their annual loan “anniversaries” (see paragraph 111, above) and shortly before a rate or payment was to reset on Pay Option or Hybrid ARMs, without regard to whether the loan had a prepayment penalty period that had not yet expired. In doing so, the Countrywide Defendants refinanced borrowers while the prepayment penalty on their prior Countrywide loan was still in effect, often concealing the existence of the prepayment penalty.
118. Countrywide claims that approximately 60% of FSLD’s business has been comprised of refinancing Countrywide loans.
C. Countrywide Misled Borrowers About the True Terms of Pay Option and Hybrid ARM Loans by Focusing the Borrowers’ Attention on Low Beginning Payments and Teaser Rates

119. Because Pay Option ARM and Hybrid ARMs start with lower monthly payments and interest rates than most other types of loan products, and given their complex nature, Countrywide was able to easily sell such loans to borrowers by focusing on the initial low monthly payments and/or rates and by obscuring or misrepresenting the true risks of such loans.
120. With respect to Pay Option ARMs, the crux of Countrywide’s sales approach was to “sell the payment.” When presenting a borrower with various loan options, for example, Countrywide would “sell the payment” by showing the borrower the minimum monthly payments for the Pay Option ARM in comparison to other loan products with larger payments. Then, Countrywide would ask which payment the borrower preferred without discussing other differences between the loan products. Naturally, in this situation, most borrowers chose the option with the lowest payment, the Pay Option ARM, without realizing that the payment would
last for only a short time before it would begin to increase.
121. If, instead, Countrywide presented the Pay Option ARM as the only option, it would “sell the payment” by emphasizing the low minimum payment and how much the borrower would “save” every month by making such a low payment, without discussing the payment shock and negative amortization that inevitably result when borrowers make minimum payments. Given the complexity of Pay Option ARMs, such a presentation easily misled borrowers regarding the long-term affordability of their loans.
122. Countrywide also represented that the initial monthly payment would last for the entire term of the loan, or for some period longer than that provided for by the loan’s terms.
123. Countrywide engaged in similar deceptive representations with respect to Hybrid
ARMs. For example, Countrywide focused its sales presentation on the interest-only payments during the initial fixed-rate period, i.e. the 2-year period on a 2/28 ARM or the 3-year period on a 3/27 ARM, not on how the payment would adjust to include both principal and interest after the initial fixed-rate period. It also represented that the payments would last for the entire term of the loan, or for some period longer than that provided for by the loan’s terms.
124. When selling Pay Option and Hybrid ARMs, Countrywide engaged in another deceptive practice – rather than selling the payment, it would sell the rate. Countrywide either focused exclusively on the initial one-month, two-year, or three-year “fixed” interest rate, for example, without discussing that the rate would reset after the initial period to a potentially much higher rate, or it represented that the initial interest rate would last for a much longer period than it actually did or for the entire term of the loan.
125. Countrywide’s letter and e-mail solicitations, as well as telemarketing calls, also focused borrowers’ attention on short-term low monthly payments. FSLD loan officers, for example, were required to memorize scripts that marketed low monthly payments by focusing (a) on the potential customer’s dissatisfaction with his or her current monthly payments under his or her current mortgage loan and/or (b) on so-called “savings” that result from minimum monthly payments. As just one of many potential examples, to overcome a borrower’s claim that he or she already has a loan with a low interest rate, Countrywide required FSLD loan officers to memorize the following response: “I certainly understand how important that is to you. But let me ask you something . . . . Which would you rather have, a long-term fixed payment, or a short term one that may allow you to realize several hundred dollars a month in savings? I am able to help many of my clients lower their monthly payments and it only takes a few minutes over the phone to get started.” What the FSLD loan officer did not state was that the borrowers would, in
fact, not save money because the payment on the new loan would ultimately exceed the payment on the borrower’s current loan.
126. Borrowers subjected to any of the deceptive marketing practices described above would not understand the true risks and likely unaffordability of their Pay Option or Hybrid ARMs. Many borrowers did not read their loan documents and disclosures before signing. Countrywide often made borrowers sign a large stack of documents without providing the borrower with time to read them. Other borrowers were unable to read English. And, given the
complexity of Pay Option and Hybrid ARMs, many borrowers who managed to read their loan documents did not understand the terms of the loans they were being sold.
127. As a result, many borrowers who obtained Pay Option and Hybrid ARMs did not understand that their initial monthly payment would at some point “explode,” that their initial interest rate would increase and become adjustable, or that the principal amount of their loans could actually increase. Countrywide received numerous complaints regarding these practices from consumers, including over complaints per year handled by the alone between approximately January 2005 and August 2007. Many borrowers complainted that they did not understand the terms of their Pay Option and Hybrid ARMs, including the potential magnitude of changes to their monthly payments, interest rates, or loan balances. Many borrowers also complained that Countrywide’s loan officers either did not tell them about the payment or rate increases on such loans or promised that they would have fixed-rate, fixed payment loans, rather than adjustable rate mortgage loans with increasing payments.
128. Despite these complaints, Defendants did not alter their deceptive marketing practices and did not address the hardship created by their practice of making Pay Option and Hybrid ARMs with little or no regard to affordability. Defendants cared only about doing whatever it took to sell increasing numbers of loans.
D. Countrywide Misled Borrowers About their Ability to Refinance Before The
Rates or Payments on Their Pay Option and Hybrid ARMs Increased

129. If a borrower was able to figure out that he or she had obtained a Pay Option or Hybrid ARM before signing the loan documents, he or she may still have been misled by Countrywide in another way – Countrywide’s loan officers often overcame borrower concerns about exploding monthly payments or increasing interest rates by promising that they would be able to refinance with Countrywide into a loan with more affordable terms before the payments or rate reset.
130. Countrywide often represented that the value of a borrower’s home would increase, thus creating enough equity to obtain a loan with better terms. However, borrowers with interest-only or negatively amortizing loans that encumbered as much as, if not more than, 100% of their home’s appraised value, were highly unlikely to be able to refinance into another loan if their home did not increase in value. Additionally, any consumers who sought to refinance a Countrywide mortgage would likely incur a substantial prepayment penalty, thus limiting their ability to obtain a more favorable loan.
131. Countrywide loan officers often misrepresented or obfuscated the fact that a borrower’s loan had a prepayment penalty or misrepresented that a prepayment penalty could be waived. Countrywide also promised borrowers that they would have no problem refinancing their Pay Option or Hybrid ARMs, when in fact they might have difficulty refinancing due to the existence of prepayment penalties. Prepayment penalties on Pay Option and Hybrid ARMs essentially prevent many borrowers from refinancing such unaffordable loans before their payments explode or rates reset.
132. Countrywide received numerous complaints from borrowers who claimed that they had not been told about the prepayment penalty or that the loan officer promised they would not have one. Again, despite receiving such complaints, Defendants turned a blind eye to deceptive marketing practices regarding prepayment penalties and the resulting adverse financial consequences to borrowers.

E. Countrywide Misled Borrowers About the Cost of Reduced and No Document Loans

133. Countrywide touted its low documentation requirements, urging borrowers to get “fastrack” loans so that they could get cash more quickly. However, many borrowers who obtained these loans possessed sufficient documentation to qualify for full document mortgages, and some submitted that documentation to their loan officer or to one of Countrywide’s business partner brokers. In emphasizing the ease, speed and availability of reduced or no document loans, Countrywide and its brokers concealed the fact that borrowers could qualify for a lower rate or reduced fees if they elected to apply for a mortgage by fully documenting their income and assets.
F. Countrywide Misled Borrowers Regarding the Terms of HELOCs
134. Countrywide misrepresented the terms of HELOCs, including without limitation by failing to inform the borrower that he or she would not have access to additional credit because he or she was receiving a full draw or that the monthly payment on the HELOC was interest-only and the borrower therefore would not be able to draw additional funds on the HELOC at a later date.
135. Countrywide also misrepresented or obfuscated the payment shock that borrowers would experience after the interest-only payment period on the HELOCs ended. Countrywide’s Call Center received large numbers of calls from borrowers complaining that they did not understand that the payments on their full-draw HELOCs would only cover interest, or that the interest rates on their HELOCs would adjust and increase.


136. Despite touting itself as a lender that cared about its borrowers, Countrywide was, in essence, a mass production loan factory set up to produce an ever-increasing stream of loans without regard to borrowers’ ability to repay their loans and sustain homeownership. In order to provide an endless supply of loans for sale to the secondary market, Defendants pressured Countywide employees involved in the sale and processing of loans to produce as many loans as possible, as quickly as possible, and at the highest prices.
137. Defendants created this pressure through a compensation system, which predictably led employees to disregard Countrywide’s minimal underwriting guidelines and to originate loans without regard to their sustainability. Countrywide’s compensation system also motivated its loan officers to engage in the deceptive marketing practices described in the preceding sections.
138. Defendants incentivized managers to place intense pressure on the employees they supervised to sell as many loans as possible, as quickly as possible, at the highest prices possible. Branch managers received commissions or bonuses based on the net profits and loan volume generated by their branches. In most circumstances, however, branch managers were eligible for such commissions or bonuses only if . [Redacted descriptions regarding minimum requirements for commission or bonus eligibility.] Branch managers were also rewarded for meeting production goals set by corporate management, – or penalized for failing to do so. [Redacted description of the criteria Countrywide used to adjust branch managers’ commissions or bonuses.]
139. Countrywide provided branch managers with access to computer applications and databases that allowed them to monitor loan sales on a daily basis and pressure employees to “sell, sell, sell.” A branch manager could input the type of loan (such as a Pay Option ARM), and determine what price a borrower would pay for that loan, as well as the amount of profit the loan would likely generate for the branch. Branch managers could also monitor their branches’ loan sales performance by tracking loans that were in the process of being underwritten and the prices and characteristics of loans sold by the branch and by particular loan officers, during any specified time period.
140. With such tools available, Countrywide’s branch managers were able to constantly pressure loan officers, loan processors, and underwriters to do their part in increasing loan production – by hunting down more borrowers, selling more loans, and processing loans as quickly as possible, thereby boosting loan production, branch profits, and branch manager commissions and bonuses. This high-pressure sales environment invited deceptive sales practices and created incentives for retail branch managers, other managers, loan officers, loan specialists, and underwriters to jam loans through underwriting without regard to borrower ability to repay.
141. Countrywide created additional pressure to engage in deceptive marketing practices and sell loans without regard to their sustainability by paying its loan officers and managers a modest base salary that could be supplemented by commissions or bonuses. In most circumstances, the employees were eligible to receive these commissions or bonuses only if they, or the employees they supervised, sold a minimum number or dollar volume of loans.
142. Not only did this compensation system create incentives for employees to sell as many loans as possible, as quickly as possible, it also created incentives for retail employees to steer borrowers into riskier loans. For example, Countrywide paid greater commissions and bonuses to CMD managers and loan officers for selling . [Redacted description of loan products.] Countrywide also paid greater commissions and bonuses to FSLD managers and loan officers for [Redacted description of loan products.]
143. Countrywide’s compensation system also created incentives for wholesale loan officers to steer brokers and their clients into riskier loans. Countrywide’s wholesale loan officers worked one-on-one with “business partner” brokers approved by Countrywide. The loan officers cultivated relationships with brokers in order to persuade them to bring their business to Countrywide and, in particular, to work with a particular loan officer so that he or she, and his or her managers, could earn greater commissions. [Redacted description of compensation paid by Countrywide for the sale of particular loan products.]
144. Countrywide’s compensation system also rewarded employees for selling . [Redacted description of compensation paid by Countrywide for the sale of particular loan products.]
145. Countrywide’s high-pressure sales environment and compensation system encouraged serial refinancing of Countrywide loans. The retail compensation systems created incentives for loan officers to churn the loans of borrowers to whom they had previously sold loans, without regard to a borrower’s ability to repay, and with the consequence of draining equity from borrowers’ homes. Although Countrywide maintained a policy that discouraged loan officers from refinancing Countrywide loans within a short time period after the original loan funded (Countrywide often changed this time period, which was as low as months for some loan products), loan officers boosted their loan sales by targeting the easiest group of potential borrowers to locate – Countrywide borrowers – as soon as that period expired.
146. Countrywide management at all levels pressured the employees below them to sell and approve more loans, at the highest prices, as quickly as possible, in order to maximize Countrywide’s profits on the secondary market. Defendant Sambol, for example, monitored Countrywide’s loan production numbers and pressured employees involved in selling loans or supervising them to produce an ever-increasing numbers of loans, faster. Regional vice presidents pressured branch managers to increase their branches’ loan numbers. Branch managers pressured loan officers to produce more loans, faster, and often set their own branch level production quotas.
147. Underwriters were also pressured to approve greater numbers of loans quickly and to overlook underwriting guidelines while doing so. Defendant Sambol pressured underwriters to increase their loan production and to increase approval rates by relaxing underwriting criteria. Regional operations vice presidents, branch operations managers, branch managers, and loan officers all pressured underwriters to rush loan approvals. Countrywide required underwriters to meet loan processing quotas and paid bonuses to underwriters who exceeded them.
148. Customer service representatives at Countrywide’s Call Center also were expected to achieve quotas and received bonuses for exceeding them. Countrywide required service representatives to complete calls in three minutes or less, and to complete as many as sixty-five to eighty-five calls per day. Although three minutes is not sufficient time to assist the confused or distressed borrowers who contacted them, Countrywide required service representatives to market refinance loans or piggyback HELOCs to borrowers who called with questions — including borrowers who were behind on their monthly payments or facing foreclosure. Using a script, the service representatives were required to pitch the loan and transfer the caller to the appropriate Countrywide division. Service representatives also received bonuses for loans that were so referred and funded.
149. Countrywide employees from senior management down to branch managers pressured the employees below them to sell certain kinds of products. Regional vice presidents, area managers, and branch managers pushed loan officers to sell Pay Option ARMs, piggyback HELOCs, and loans with prepayment penalties, primarily because such loans boosted branch profits, manager commissions, and Countrywide’s profits on the secondary market.
150. If any of these employees, including branch managers, loan officers, loan processors, underwriters, and customer service representatives, failed to produce the numbers expected, Countrywide terminated their employment.

151. In California, a mortgage broker owes his or her client a fiduciary duty. A mortgage broker is customarily retained by a borrower to act as the borrower’s agent in negotiating an acceptable loan. All persons engaged in this business in California are required to obtain real estate licenses and to comply with statutory requirements. Among other things, the mortgage broker has an obligation to make a full and accurate disclosure of the terms of a loan to borrowers, particularly those that might affect the borrower’s decision, and to act always in the utmost good faith toward the borrower and to refrain from obtaining any advantage over the borrower.
152. Countrywide paid brokers compensation in the form of yield spread premiums or rebates to induce brokers to place borrowers in loans that would earn Countrywide the greatest profit on the secondary market, regardless of whether the loans were in the best interest of, or appropriate for, the borrowers. In fact, the mortgages that earned Countrywide the highest profit, and therefore would pay the highest rebates or yield spread premiums to brokers, often were not in the best interest of the borrower.
153. For example, Countrywide paid a yield spread premium to brokers if a loan was made at a higher interest rate than the rate for which the borrower qualified and without regard for the services actually provided by the broker. Countrywide paid a rebate to a broker if he or she originated or negotiated a loan that included a prepayment penalty. A three-year prepayment penalty resulted in a higher rebate to the broker than a one-year prepayment penalty. Countrywide would pay this higher rebate even in instances where the loan did not include a provision, such as a more favorable origination fee or interest rate, to counterbalance the prepayment penalty, and where brokers did not perform any additional services in connection with the loan.
154. Countrywide also would pay rebates in exchange for a broker providing an adjustable rate loan with a high margin (the amount added to the index to determine the interest rate). Countrywide would provide an additional rebate to brokers if they were able to induce a borrower to obtain a line of credit.
155. Countrywide accepted loans from brokers in which the broker earned up to points (i.e., percent of the amount of the loan), whether in origination fees, rebates, or yield spread premiums. This high level of compensation was well in excess of the industry norm and encouraged brokers to sell Countrywide loans without regard to whether the loans were in their clients’ best interest. In addition, the compensation paid by Countrywide to brokers was well in excess of, and not reasonably related to, the value of the brokerage services performed by Countrywide’s business partner brokers.
156. In order to maximize their compensation from Countrywide, brokers misled borrowers about the true terms of Pay Option and Hybrid ARMs, misled borrowers about their ability to refinance before the rates or payments on their loans increased, misled borrowers about the cost of reduced and no document loans, and misled borrowers regarding the terms of HELOCs by engaging in the same kinds of deceptive practices alleged at paragraphs 58 through 64, 75 through 77, 108 through 117, and 119 through 135 above.
157. Borrowers often did not realize that their loans contained terms that were unfavorable to them and provided greater compensation to their brokers specifically as payment for those unfavorable terms. An origination fee or other charges imposed by a broker are either

paid by the borrower or financed as part of the loan. In contrast, rebates and yield spread premiums are not part of the principal of the loan and instead are paid separately by Countrywide to the broker. Documentation provided to the borrower might indicate, at most, that a yield spread premium or rebate was paid outside of closing (often delineated as “p.o.c.” or “ysp poc”), with no indication that the payment constituted compensation from Countrywide to the broker for placing the borrower in a loan with terms that were not in the borrower’s best interest, such as a higher interest rate or lengthier prepayment penalty.
158. Countrywide closely monitored and controlled the brokers with whom it worked. Countrywide required brokers it accepted as “business partners” to cooperate and provide all information, documents and reports it requested so that Countrywide could conduct a review of the broker and its operations. In addition, Countrywide required the broker to warrant and represent that all loans were closed using documents either prepared or expressly approved by Countrywide.

159. Due to Countrywide’s lack of meaningful underwriting guidelines and risk layering, Countrywide’s deceptive sales tactics, Countrywide’s high-pressure sales environment, and the complex nature of its Pay Option and Hybrid ARMs, a large number of Countrywide loans have ended in default and foreclosure, or are headed in that direction. Many of its borrowers have lost their homes, or are facing foreclosure, because they cannot afford the payment shock and their properties are too heavily encumbered for them to be able to refinance and pay prepayment penalties.
160. The national pace of foreclosures is skyrocketing. In the month of May 2008, approximately 20,000 Californians lost their homes to foreclosure, and approximately 72,000 California homes (roughly 1 out of 183 homes) were in default. This represented an 81% increase from May 2007, at which point the rate was roughly 1 out of every 308 households, while the May 2007 rate represented a 350% increase from May 2006.
161. Countrywide mortgages account for a large percentage of these delinquencies and foreclosures. Countrywide’s 10-K filed in February, 2008, estimated that as of December 31, 2007, a staggering 27.29% of its non-prime mortgages were delinquent. As of that date, approximately 26% of Countrywide’s loans were secured by properties located in California.
162. These numbers have only worsened. As of April, 2008, % of the mortgages owned by Countrywide Home Loans were in some stage of delinquency or foreclosure, including % of originated non-prime loans, and % of Pay Option ARMs.
163. In January and March, 2008, Countrywide recorded notices of default in Alameda, Fresno, Riverside, and San Diego counties alone. Those notices of default represented an aggregate total of delinquent principal and interest of more than dollars. An October 2007 report prepared by Credit Suisse estimated that Countrywide’s delinquency and foreclosure rates are likely to double over the next two years.
164. This may well understate the extent of the crisis facing California homeowners with Countrywide mortgages, as more and more Pay Option ARMs go into delinquency. Approximately 60% of all Pay Option ARMs (made by any lender) were made in California, and many of these were made by Countrywide. Once the thousands of Pay Option ARMs sold by Countrywide to California borrowers reach their negative amortization cap or otherwise reset to require fully indexed principal and interest payments, which will occur over the next two years for many such loans made between 2003 and 2006, the number of such loans in default is likely to skyrocket even above their current high delinquency rate.
165. The People reallege and incorporate by reference all paragraphs above, as though fully set forth in this cause of action.
166. Defendants have violated and continue to violate Business and Professions Code section 17500 by making or disseminating untrue or misleading statements, or by causing untrue or misleading statements to be made or disseminated, in or from California, with the intent to induce members of the public to enter into mortgage loan or home equity line of credit transactions secured by their primary residences. These untrue and misleading statements include but are not necessarily limited to:
a. Statements that Countrywide was a mortgage loan expert that could be
trusted to help borrowers obtain mortgage loans that were appropriate to their financial circumstances, as described in paragraphs 109 through 113, above;
b. Statements regarding the terms and payment obligations of Pay Option
ARMs offered by Countrywide, including statements that the initial payment rate was the interest rate, statements regarding the duration of the initial payment, statements regarding the duration of the initial interest rate, and statements obfuscating the risks associated with such mortgage loans, as described in paragraphs 58 through 64, 119 through 122, and 124 through 128, above;
c. Statements regarding the terms and payment obligations of Hybrid ARMs
offered by Countrywide, including statements regarding the duration of the initial interest-only payment, statements regarding the duration of the initial interest rate, and statements obfuscating the risks associated with such mortgage loans, as described in paragraphs 75 through 77, 119, and 123 through 128, above;
d. Statements regarding the terms and payment obligations of HELOCs, as described in paragraphs 134 through 135, above; and
e. Statements that borrowers with Pay Option and Hybrid ARMs offered by Countrywide would be able to refinance the mortgage loans before the interest rates reset, when in fact they most likely could not, as described in paragraphs 62, 76, 77, and 129 through 132, above;
f. Statements regarding prepayment penalties on Pay Option and Hybrid ARMs offered by Countrywide, including statements that the mortgage loans did not have prepayment penalties, when in fact they did, and statements that prepayment penalties could be waived, when in fact they could not, as described in paragraphs 63, 64, 76, and 131 through 132, above;
g. Statements regarding the costs of reduced or no documentation mortgage loans, as described in paragraph 133, above;
h. Statements regarding the benefits or advisability of refinancing mortgage loans with Pay Option and Hybrid ARMs offered by Countrywide, as described in paragraphs 110 through 118, above; and
i. Statements regarding the existence of prepayment penalties on mortgage loans being refinanced with Countrywide mortgage loans, as described in paragraph 117, above.
167. Defendants knew, or by the exercise of reasonable care should have known, that these statements were untrue or misleading at the time they were made.


168. The People reallege and incorporate by reference all paragraphs above, as through fully set forth in this cause of action.
169. Defendants have engaged in, and continue to engage in, acts or practices that constitute unfair competition, as that term is defined in Section 17200 of the Business and Professions Code. Such acts or practices include, but are not limited to, the following:
a. Creating and maintaining a deceptive scheme to mass produce loans for sale on the secondary market, as described in paragraphs 15 through 164, above;
b. Making untrue or misleading representations that Countrywide could be trusted to sell borrowers mortgage loans that were appropriate to their financial circumstances, as described in paragraphs 109 through 113, above;
c. Making untrue or misleading representations regarding the terms and payment obligations of Countrywide’s Pay Option and Hybrid ARMs, including representations regarding the payment rate, the duration of initial interest rates, the duration of initial monthly payments, the inclusion of prepayment penalties, the waivability of prepayment penalties, the payment shock that borrowers were likely to experience, and the risks associated with such mortgage loans, as described in paragraphs 58 through 64, 75 through 77, and 119 through 132, above;
d. Making untrue or misleading representations regarding the terms and payment obligations of Countrywide’s HELOCs, as described in paragraphs 134 through 135, above;
e. Making untrue or misleading representations regarding the costs of reduced or no documentation mortgage loans, as described in paragraph 133, above;
f. Making untrue or misleading representations regarding the true likelihood or circumstances under which borrowers would be able to refinance Pay Option or Hybrid ARMs offered by Countrywide, as described in paragraphs 62, 76, 77, and 129 through 132, above;
g. Soliciting borrowers to refinance mortgage loans by misrepresenting the benefits of doing so or by misrepresnting or obfuscating the fact that in doing so the borrowers will incur a prepayment penalty, as described in paragraphs 110 through 118, above;
h. Making mortgage loans and extending HELOCs without regard to whether
borrowers would be able to afford monthly payments on those loans or HELOCs after the expiration of the initial interest rates on the mortgage loans, or the draw periods on the HELOCs, as described in paragraphs 85 through 107, above;
i. Aiding and abetting the breach of the fiduciary duty owed by mortgage brokers to California borrowers, as described in paragraphs 151 through 158, above;
j. Failing to provide borrowers with documents sufficient to inform them of their payment obligations with respect to fully drawn HELOCs, as described in paragraphs 81 through 84, above;
k. Paying compensation to mortgage brokers that was not reasonably related to the value of the brokerage services they performed, as described in paragraphs 152 through 155, above; and
l. Violating Section 17500 of the Business and Professions Code, as described in the First Cause of Action, above.
WHEREFORE, Plaintiff prays for judgment as follows:
1. Pursuant to Business and Professions Code section 17535, that all Defendants, their employees, agents, representatives, successors, assigns, and all persons who act in concert with them be permanently enjoined from making any untrue or misleading statements in violation of Business and Professions Codes section 17500, including the untrue or misleading statements alleged in the First Cause of Action.
2. Pursuant to Business and Professions Code section 17203, that all Defendants, their employees, agents, representatives, successors, assigns, and all persons who act in concert with them be permanently enjoined from committing any acts of unfair competition, including the violations alleged in the Second Cause of Action.
3. Pursuant to Business and Professions Code sections 17535, that the Court make such orders or judgments as may be necessary to prevent the use or employment by any Defendant of any practices which violate section 17500 of the Business and Professions Code, or which may be necessary to restore to any person in interest any money or property, real or personal, which may have been acquired by means of any such practice.
4. Pursuant to Business and Professions Code section 17203, that this court make such orders or judgments as may be necessary to prevent the use or employment by any Defendant of any practice which constitutes unfair competition or as may be necessary to restore
to any person in interest any money or property, real or personal, which may have been acquired
by means of such unfair competition.
5. Pursuant to Business and Professions Code section 17536, that Defendants, and each of them, be ordered to pay a civil penalty in the amount of two thousand five hundred dollars ($2,500) for each violation of Business and Professions Code section 17500 by Defendants, in an amount according to proof.
6. Pursuant to Business and Professions Code section 17206, that Defendants, and each of them, be ordered to pay a civil penalty in the amount of two thousand five hundred dollars ($2,500) for each violation of Business and Professions Code section 17200 by Defendants, in an amount according to proof.
7. That Plaintiff recover its costs of suit, including costs of investigation.
8. For such other and further relief that the Court deems just, proper, and equitable.

Dated: December 30, 2008 THE LAW OFFICES OF

By _____________________________
Timothy McCandless, Attorney for Plaintiffs

Information needed for a filing

1. Documents to be examined:
1. Promotional literature, correspondence and borrowers notes from initial contact with mortgage broker of “lender.”
2. Any document purporting to give the terms of a proposed loan including but not limited to Good Faith Estimate
3. The Good Faith Estimate and documents supporting affordability and benefits
4. The settlement statement
5. The name and contact information and appraisal report including the actual person and license number of the appraiser, the amount of the previous sale, any prior appraisals available to borrower, and the borrower’s estimate of current value decreased by 12% for broker’s fees (6%) and current average discount from asking price (6%).
6. The name and address of the mortgage broker, and the specific person the borrower dealt with, whether the mortgage broker is still in business.
7. Identification of the loan originator
8. Determination if FNMA or Freddie MAC were actually involved or if the standard forms were used from those or any other (HUD) GSE. (Government Sponsored Entity)
9. Identification of title agent with name and address
10. Identification of title insurance company with name and address
11. Identification of the escrow agent with name and address
12. Identification of the closing agent with name and address
13. Identification of the Trustee with name and address
14. The set of closing documents given to the borrower: the ones provided before closing, the ones provided after closing and any documents that were transmitted appointing servicer or substitution of Trustee or assignment etc.
15. SEC reports and annual reports of any of these entities or affiliates
16. If available, Sampling investigation to determine if Pooling and Services Agreement, Assignment and Assumption Agreement, Insurance, Credit Default Swaps, Cross Collateralizing, Over-collateralizing, reserves, and bailouts from Federal Reserve or U.S. Treasury can be produced for examination.
17. Documents, if available, showing authority of any party alleging rights to enforce, collect or perform modifications, issue notices of delinquency, default, sale or file foreclosure actions, unlawful detainer (eviction) actions etc.
2. Basic Required Services — For expediency and cost purposes, the initial “analysis is presumed to be using a “sampling technique” that identifies probably information that is applicable but does not guarantee accuracy or completeness)
1. Retainer Agreement in Writing for analysis, collection etc., that allows for attorney tot ake over relationship on certain conditions.
2. Written authroization form Borrower executed in triplicate and notarized (each copy)
3. Analysis of disclosures and promotional literature to determine the nature of the deal the borrower thought he/she/they were getting and comparison with the actual result.
4. Analysis of GFE etc. and comparison with actual deal, disclosures of third party funding, table funding, surprise fees, undisclosed fees, undisclosed parties, etc.
5. Analysis of settlement statement to determine the representation of the parties at closing to the borrower and comparison with actual deal.
6. Appraisal Sampling analysis to determine negnligence or fraud based upon comparables of time, geography and whether developer asking prices were used to inflate the appraisal. Calculation of potential claim for inflated appraisal. Determination of the expected life of the loan based upon adjustments, expected market conditions etc. Calculation of probable effect on APR over the expected life of the loan.
7. Analysis of whether the closing conformed to GSE guidelines as industry standards
8. Analysis of conduct of the mortgage broker to determine potential claim for negligence or fraud
9. Analysis of conduct of the title agent to determine potential claim for cloud on title, negligence or fraud
10. Analysis of conduct of the title insurance company to determine potential claim for cloud on title, negligence or fraud
11. Analysis of conduct of the escrow agent to determine potential claim for negligence or fraud
12. Analysis of conduct of the closing agent to determine potential claim for negligence or fraud
13. Analysis of results of investigation for compliance with TILA, RESPA, HOEPA, RICO, Deceptive Business, Deceptive Lending, usury etc.
14. Analysis of conduct of the Trustee or successor Trustee on Deed of Trust, if applicable to determine potential claim for negligence or fraud
15. Sampling analysis to identify potential successor trustees (Pool, SIV, SPV etc.)
16. Sampling analysis to determine where the borrowers payments have been sent and how they have been applied, if available.
17. Sampling analysis to determine if the the named entity as Payee on the Promissory note has been paid in full by a third party — and preliminary abalysis as to whether the note became non-negotiable, whether the borrower owes anyone any amount, and if so who that might be and how much it might be, if it is possible to make such determinations in the preliminary investigations.
18. Issuance of Preliminary Findings Report to be sent to servicer or whoever the borrower is sending payments to or otherwise in communication with.
19. Challenge letter to each party seeking to enforce, whether lawyer or party, raising defensive positions concerning their authority to act.
20. Extensive Qualified Written Request with suggestions for resolutions, coupled with Notice and contract for appointment of Borrower or Borrower’s designee as attorney in fact for reconveyance as per RESPA.
21. Demand letter and notice if Lender fails to comply.
22. Challenge letter if Lender denies claims or requires additional written authorization
23. If available, counsel’s recommendation of next steps
3. Extended Services:
1. Appointment of agent for reconveyance
2. Recording reconveyance
3. Recording other instruments in property records
4. Expert Affidavit
5. Expert testimony
6. Exhibits prepared for court
7. Form complaints, motions and affidavits
8. Legal ghost Writing
9. Consultation with Borrower’s attorney
10. Appearances in Court
11. Forensic Review
1. Basic, non sampling
2. Full audit including examination of servicer’s ledgers etc.

Lost note they can’t legally foreclose


This is how the Big Boys evict you from your house


You should never be evicted


No License No loan Indymac bought it


Opossing the giant in the federal court


Countrywide and truth in predatory lending


California v Countrywide


Litigate truth in lending or be evicted


Lets go to federal court


They agree but foreclose anyway


Get the injuction and stop the sale


Sample class action

Some textfraudulent-omissions-form-finalfraudulent-omissions-form-final1

13 things you can do to stop the foreclosure


Unlawful detainer delays and getting to superior court

Unlawful Detainer Delays
In some of my eviction defense cases having to do with an illegal foreclosure it is important to avoid trial at all costs.
California Judges favor the lenders and once the lender tender the Trustees deed the Judge will not consider any defense the former homeowner has. I have suggested to the narrow minded that they should dispense with the trial and allow the lender to file the trustees deed with the marshal and have people kicked without a trial. The learned Judge was not amused by my backhanded slap at the court not giving my client any due prosess protection afforded by the constitution.
The purpose then is to delay till the case can be consolidated with the Lender fraud trial without a bond or get an injunction in place. These are some of the methods. I thought it would be a good idea to cover of the more common delay procedures.

1. Motion to Quash Summons. California Code of Civil Procedure §418.10. This motion is intended to test the validity of the service of the complaint, the sufficiency of the summons. That is, whether the plaintiff has the basis to use the 5 day summons. The Code (Code of Civil Procedure §1167.4) requires that the motion to quash be set for hearing no earlier than three (3) days and no later than seven (7) days after the tenant’s last date to file their response to the complaint. Until the motion is heard and decided on, the tenant does not have to file an answer to the complaint. It would appear that after the filing of a Motion to Quash, when the tenant is required to file its response, the tenant can still file other delay motions. Regardless of the merits, if a tenant files a motion to quash, assuming the hearing date is properly set, such a motion will delay the tenant having to file an answer for over one week.

2. Demurrer. California Code of Civil Procedure §430.10. This procedure generally allows a tenant to object to the pleading based on defects apparent on the face of the pleading or object because the pleading is vague or ambiguous. This procedure may also be used in responding to the unlawful detainer Code of Civil Procedure §1170 allows a tenant to answer or demurrer to the complaint on or before the time needed to respond. Unlike the limitations on when a motion to quash can be set for hearing, there are no similar limitations on setting a hearing on the demurrer. The typical time for setting a hearing on a demurrer is not more than 35 days after the filing of the demurrer or earlier or later as the court may order.

A demurrer is really a “so what” objection. What the demurrer does is admit all of the pleadings for the purposes of the objection. Assuming all of the allegations are true, so what? Landlord, you still haven’t alleged a proper basis for the eviction. Or, the allegations are so confused or ambiguous as to make it impossible to respond to the pleading. In this case, the tenant, if not pushed can delay having to file an answer to the complaint for over a month! For some reason the legislature in its infinite wisdom put a limit of seven days on how far away the tenant can set a hearing on the motion to quash but then allows for a hearing on a demurrer over a month away.

Except for some rare jurisdictions, if the tenant sets a demurrer for a hearing a month away, the landlord’s recourse is to either wait for the thirty days and then after the hearing the tenant gets another five days after the hearing to file their answer. The landlord can alternatively go to the court and ask the court to reset the hearing on a shorter notice. The experience in Fresno is that the courts are willing to set the hearing on a very short notice. It would be better, however, if the legislature formally put a limit on the time of the hearing similar to the time for a motion to quash.
Somewhat similar to a demurrer is a motion to strike a portion of or all of a pleading (CCP§435). The timing for the hearing is that the motion shall be set no earlier than 21 days after filing of the motion, adding another five days if mailed. Thus delaying setting the matter for trial over twenty six days. It should be noted that in the unlawful detainer section of the code, the statutes provide that the tenant can file a motion to quash, a demurrer or file an answer. It does not reference motions to strike

3. Claims of Right to Possession. It seems that more often than owners would like, strangers are making claims of right to possession, asserting, under oath, that the person had been living in the rental unit at the time the landlord had filed its complaint. And , in most cases the landlord had no idea that there was anyone else in the unit. This surprise “subtenant” matter is all the more complicated if the reason for the eviction is non payment of a notice to pay rent or quit. Code of Civil Procedure §1161.2 requires that when one is serving a tenant for non payment, one must also serve any subtenants in actual possession of the premises. This can present a problem for a landlord. If the “subtenant” person can establish having lived in the premises at the time of the complaint being filed, then the person will assert that they should have been served with the notice to pay rent or quit. However, if the person living in the unit was unauthorized or unknown, the landlord wouldn’t want to serve this unauthorized person with the notice to pay rent or quit in fear of validating the person’s right to possession. It has been held that serving a fired employee with a notice to pay rent, even if the ex employee did not pay the demanded rent, transforms the ex employee’s status as a tenant at sufferance into a month to month tenant.

Whether the claim of right to possession has merit or not, simply filing the claim, the tenant gets another five to seven days delay in the lock out. There needs to be some clarification in the statute to establish that a person living with an authorized tenant cannot be considered a subtenant unless the person can establish that not only did the landlord know of the alleged subtenant but that the person’s sublease had been approved by the landlord before the landlord is required to serve the claimant with the notice to pay.

4. Lastly a Summary judgment motion that the lender has not “duly perfected” a proper Foreclosure under 2924. If we lose we appeal and since there has not been a trial therefor no eviction.

Banks gone

307. LIME Financial Svcs. – Wholesale
306. Mortgage Network Inc. – Wholesale
305. Fortes Financial – Wholesale
304. HSBC Mortgage Corp. – Wholesale
303. CBRE Realty Finance
302. Franklin Bank, SSB
301. Mortgage Lion, Inc. – Wholesale
300. HMS Capital, Inc.
299. American Sterling Bank – Wholesale
298. CTX Mortgage Co. – Retail
297. Equity One Commercial
296. Coldstream Financial Svcs.
295. Banco Popular North America – Wholesale
294. Ace Mortgage Funding, LLC
293. E-Loan
292. Gateway Bank, F.S.B. – Wholesale
291. First Call Mortgage Co.
290. Downey Savings and Loan – Wholesale
289. Prospect’s Metrocities Mortgage – Wholesale
288. ComCor Mortgage – Wholesale
287. Chevy Chase Bank – Wholesale
286. Washington Mutual – Retail and Warehouse
285. Hometown Commercial Capital
284. Mid Atlantic Capital LLC
283. Kemper Mortgage, Inc.
282. Liberty Mortgage Funding Co.
281. Freddie Mac
280. Fannie Mae
279. Pacific Community Mortgage, Inc. – Gold Reverse, Inc.
278. Homecomings Financial, LLC
277. Thornburg Mortgage
276. CSB Mortgage
275. Carteret Mortgage Corporation
274. Accredited Home Lenders, Lone Star Funds – Wholesale
273. Western Residential Mortgage
272. Liberty Home Lending – Wholesale
271. Equipoint Financial Network, Inc.
270. Ideal Mortgage Bankers, Ltd. – Wholesale
269. Silver State Bank – Wholesale
268. Irwin Union Bank & Trust Co. – Wholesale
267. SunTrust Bank Equity Wholesale
266. Wachovia Mortgage, FSB – Wholesale
265. Lehman Brothers SBF
264. IndyMac Bancorp
263. Mortgages Ltd.
262. Wilmington Finance – Wholesale
261. Accredited Home Lenders, Home Funds Direct
260. Assured Lending Corp. – Wholesale
259. Homewide Lending Corporation
258. Vanguard Mortgage & Title, Inc.
257. Chase Home Equity – Wholesale
256. Chase Subprime – Wholesale
255. Evergreen Investment & Carnation Banc
254. Casa Blanca Mortgage/Shearson – Wholesale
253. Guaranty Bank – Correspondent
252. Citi Residential Lending
251. Montgomery Mortgage Capital Company
250. E*Trade Wholesale Lending
249. Shearson Financial Network, Inc.
248. American Bank Mortgage Group – Wholesale
247. AmeriBanc Corp.
246. Washington Mutual – Wholesale
245. Century Bank, F.S.B. – Wholesale
244. Diversified Mortgage, Inc.
243. National Wholesale Funding
242. Centennial Mortgage and Funding, Inc./Award Mortgage
241. Fidelity Home Mortgage Corp. – Wholesale
240. LMI Funding, Inc.
239. Millennium Mortgage – Wholesale
238. Origen Financial, Inc. (Correspondent)
237. CitiMortgage – Home Equity Wholesale
236. Bear Stearns Residential Mortgage
235. East West Mortgage Co. of VA
234. New Vision Residential Lending
233. Washington Savings Bank, F.S.B. – Wholesale
232. Macquarie Mortgages USA Inc.
231. Global Mortgage, Inc.
230. Unique Mortgage Solutions (UMS, LLC)
229. First Franklin – Merrill Lynch
228. First National Mortgage Sources
227. Resource Mortgage (Wholesale)
226. KH Financial
225. Lydian Mortgage
224. OMG Wholesale Lending
223. Saxon Mortgage (Wholesale)
222. Beazer Mortgage Corp.
221. Allpointe Mortgage (Broker Program)
220. Popular Warehouse Lending
219. Allied Lending Corp. (Wholesale)
218. BF Saul Wholesale Lending
217. Community Resource Mortgage
216. Lehman/Aurora Loan Services
215. Residential Mortgage Capital
214. Maverick Residential Mortgage
213. Countrywide Financial Corp.
212. First NLC Financial Services
211. First American Bank (Wholesale)
210. Soma Financial
209. National City Corp. (Wholesale)
208. Heartland Wholesale Funding
207. Homefront Mortgage Inc.
206. PNC Bank H.E.
205. Family First Mortgage Corp.
204. First Fidelity Financial
203. BSM Financial
202. 1st Choice Mortgage
201. Wescom Credit Union
200. Coast Financial Holdings/Coast Bank
199. WaMu (Subprime)
198. First Madison Mortgage
197. Southern Star Mortgage
196. TransLand Financial
195. Secured Bankers Mortgage Company (SBMC)
194. ComUnity Lending
193. Delta Financial Corp
192. BayRock Mortgage
191. Empire Bancorp
190. Option One – H&R Block
189. Citigroup – FCS Warehouse
188. Charter One (Wholesale)
187. Wells Fargo – Home Equity
186. Paul Financial, LLC
185. Webster Bank (Wholesale)
184. Fieldstone Mortgage Company
183. Tribeca Lending Corp. (Wholesale)
182. WAMU Comm. Correspondent
181. Marlin Mortgage Company
180. Countrywide Specialty Lending
179. UBS Home Finance
178. MortgageIT-DB (Retail)
177. Edgewater Lending Group
176. ResMAE Mortgage Corp.
175. Citimortgage Correspondent (2nds)
174. AMC Lending
173. Liberty American Mortgage
172. Exchange Financial (Wholesale)
171. FirstBank Mortgage
170. Bank of America (Wholesale)
169. Diablo Funding Group Inc.
168. Honor State Bank
167. Spectrum Financial Group
166. Priority Funding Mortgage Bankers
165. BrooksAmerica Mortgage Corp.
164. Valley Vista Mortgage
163. New State Mortgage Company
162. Summit Mortgage Company
161. WMC
160. Paragon Home Lending
159. First Mariner Wholesale
158. The Lending Connection
157. Foxtons, Inc.
156. SCME Mortage Bankers
155. Aapex Mortgage (Apex Financial Group)
154. Wells Fargo (various Correspondent and Non-prime divisions)
153. Nationstar Mortgage
152. Decision One (HSBC)
151. Impac Lending Group
150. Long Beach (WaMu Warehouse/Correspondent)
149. Expanded Mortgage Credit Wholesale
148. The Mortgage Store Financial
147. C & G Financial
146. CFIC Home Mortgage
145. All Fund Mortgage
144. LownHome Financial
143. Sea Breeze Financial Services
142. Castle Point Mortgage
141. Premium Funding Corp
140. Group One Lending
139. Allstate Home Loans / Allstate Funding
138. Home Loan Specialists (HLS)
137. Transnational Finance Wholesale
136. CIT Home Lending
135. Capital Six Funding
134. Mortgage Investors Group (MIG) – Wholesale
133. Amstar Mortgage Corp
132. Quality Home Loans
131. BNC Mortgage (Lehman)
130. First National Bank of Arizona
129. Chevy Chase Bank Correspondent
128. GreenPoint Mortgage – Capital One Wholesale
127. NovaStar, Homeview Lending
126. Quick Loan Funding
125. Calusa Investments
124. Mercantile Mortgage
123. First Magnus
122. First Indiana Wholesale
121. GEM Loans / Pacific American Mortgage (PAMCO)
120. Kirkwood Financial Corporation
119. Lexington Lending
118. Express Capital Lending
117. Deutsche Bank Correspondent Lending Group (CLG)
116. MLSG
115. Trump Mortgage
114. HomeBanc Mortgage Corporation
113. Mylor Financial
112. Aegis
111. Alternative Financing Corp (AFC) Wholesale
110. Winstar Mortgage
109. American Home Mortgage / American Brokers Conduit
108. Optima Funding
107. Equity Funding Group
106. Sunset Mortgage
105. Nations Home Lending
104. Entrust Mortgage
103. Alera Financial (Wholesale)
102. Flick Mortgage/Mortgage Simple
101. Dollar Mortgage Corporation
100. Alliance Bancorp
99. Choice Capital Funding
98. Premier Mortgage Funding
97. Stone Creek Funding
96. FlexPoint Funding (Wholesale & Retail)
95. Starpointe Mortgage
94. Unlimited Loan Resources (ULR)
93. Freestand Financial
92. Steward Financial
91. Bridge Capital Corporation
90. Altivus Financial
89. ACT Mortgage
88. Alliance Mortgage Banking Corp (AMBC)
87. Concord Mortgage Wholesale
86. Heartwell Mortgage
85. Oak Street Mortgage
84. The Mortgage Warehouse
83. First Street Financial
82. Right-Away Mortgage
81. Heritage Plaza Mortgage
80. Horizon Bank Wholesale Lending Group
79. Lancaster Mortgage Bank (LMB)
78. Bryco (Wholesale)
77. No Red Tape Mortgage
76. The Lending Group (TLG)
75. Pro 30 Funding
74. NetBank Funding, Market Street Mortgage
73. Columbia Home Loans, LLC
72. Mortgage Tree Lending
71. Homeland Capital Group
70. Nation One Mortgage
69. Dana Capital Group
68. Millenium Funding Group
67. MILA
66. Home Equity of America
65. Opteum (Wholesale, Conduit)
64. Innovative Mortgage Capital
63. Home Capital, Inc.
62. Home 123 Mortgage
61. Homefield Financial
60. First Horizon Subprime, Equity Lending
59. Platinum Capital Group (Wholesale)
58. First Source Funding Group (FSFG)
57. Alterna Mortgage
56. Solutions Funding
55. People’s Mortgage
54. LowerMyPayment.com
53. Zone Funding
52. First Consolidated (Subprime Wholesale)
51. EquiFirst
50. SouthStar Funding
49. Warehouse USA
48. H&R Block Mortgage
47. Madison Equity Loans
46. HSBC Mortgage Services (correspondent div.)
45. Sunset Direct Lending
44. Kellner Mortgage Investments
43. LoanCity
42. CoreStar Financial Group
41. Ameriquest, ACC Wholesale
40. Investaid Corp.
39. People’s Choice Financial Corp.
38. Master Financial
37. Maribella Mortgage
36. FMF Capital LLC
35. New Century Financial Corp.
34. Wachovia Mortgage (Correspondent div.)
33. Ameritrust Mortgage Company (Subprime Wholesale)
32. Trojan Lending (Wholesale)
31. Fremont General Corporation
30. DomesticBank (Wholesale Lending Division)
29. Ivanhoe Mortgage/Central Pacific Mortgage
28. Eagle First Mortgage
27. Coastal Capital
26. Silver State Mortgage
25. ECC Capital/Encore Credit
24. Lender’s Direct Capital Corporation (wholesale division)
23. Concorde Acceptance
22. DeepGreen Financial
21. American Freedom Mortgage, Inc.
20. Millenium Bankshares (Mortgage Subsidiaries)
19. Summit Mortgage
18. Mandalay Mortgage
17. Rose Mortgage
16. EquiBanc
15. FundingAmerica
14. Popular Financial Holdings
13. Clear Choice Financial/Bay Capital
12. Origen Wholesale Lending
11. SecuredFunding
10. Preferred Advantage
9. MLN
8. Sovereign Bancorp (Wholesale Ops)
7. Harbourton Mortgage Investment Corporation
6. OwnIt Mortgage
5. Sebring Capital Partners
4. Axis Mortgage & Investments
3. Meritage Mortgage
2. Acoustic Home Loans
1. Merit Financial

%d bloggers like this: