GOODIN,MACBRIDE, SQUERI,DAY & LAMPREY, LLP

ROBERTA. GOODIN,StateBar No. 061302

rgoodin@goodinmacbride. com
FRANCINET. RADFORD,StateBarNo. 168269
fradford@goodinmacbride.com
ANNE H. HARTMAN, StateBarNo. 184556 r: v.vllVll-' rv ruuvLt/

ahartman@goo dinmacbride.com F I L E D
SanFrandiscoCountySuperlorCourt
505Sansome Street,Suite900
5 SanFrancisco,Califomia 94lll HAR1 5 2010
Telephone: (415)392-7900
6 Facsimile: (415)398-4321 CLERKOFTH
7 GRAIS& ELLSWORTHLLP
DAVID J. GRAIS (pro hac application submittedherewith)
KATHRYN C. ELLSWORTH Qtro hac app. submittedherewith)
OWEN L. CYRULNIK(pro hac application submittedherewith)
70 East55th Street
New York, New York 10022
Telephone: (212)755-0100 CASE
MANAGEMENT
CONFERENCE
SET
Facsimile: (212)755-0052
13Z01llgruAM
AUG
Attomeysfor Plaintiff urrAlilMLNT212
FederalHomeLoanBank of SanFrancisco

IN THE SUPERIORCOURTOF THE STATE OF CALIFORNIA

IN AND FOR THE CITY AND COLTNTYOF SAN FRANCISCO

FEDERAL HOME LOAN BANK OF SAN 10 , Ag7 819

No.cGC.
FRANCISCO,
COMPLAINT FOR RESCISSIONAND
18 Plaintiff. DAMAGES FOR:

T9 V. (1) VTOLATTONSOF S$2s40r AND

25501OF THE CALIFORNIA
20 DEUTSCHEBANK SECURITIESINC.; CORPORATESECURITIESACT;
DEUTSCHEALT-A SECUzuTIES, INC.;
2l DB STRUCTUREDPRODUCTS,INC.;
J.P.MORGANSECUzuTIES, [NC.,F/IVA (2) VTOLATTONSOF $Slt AND ls OF
22 BEAR, STEARNS& CO.INC.; THE SECURITIESACT OF 1933;
STRUCTUREDASSETMORTGAGE
23 INVESTMENTS II,INC.; (3) VIOLATIONS oF SSr2(a)(2)ANI)
THE BEAR STEARNSCOMPANIES,LLC, 15 OF THE SECURITIESACT OF
24 F/K/A THE BEAR STEARNS 1933;
COMPANIES,INC.;
25 COUNTRYWIDESECURITIES (4) VTOLATTONSOF $$ 1s72AND 1710
CORPORATION;
26 CREDITSUISSESECURITIES(USA)LLC, OF THE CALIFORNIA CIVIL
F/K/A CREDITSUISSEFIRSTBOSTON CODE (NEGLIGENT
27 LLC; MISREPRESENTATION);and
RBS SECURITIES, [NC., FIKIN
28 GREENWICHCAPITAL MARKETS

COMPLAINT
 1 RBSACCEPTANCE,INC.,FIWA (s) RESCTSSTON OF CONTRACTS
GREENWICHCAPITAL ACCEPTANCE. UNDER $ 1689ET SEQ.OF THE
) INC.;
RBSHOLDINGSUSA,INC., F/IVA CALIFORNIA CIVL CODE
J GREENWICHCAPITAL HOLDINGS.
INC.;
4 MORGAN STANLEY & CO.
INCORPORATED;
5 UBS SECURITIES,
LLC;
MORTGAGEASSETSECURITIZATION
6 TRANSACTIONS,INC.;
MERRILL LYNCH, PIERCE,FENNER&
7 SMITH,INC.;AND,
DOES1-50,
8
Defendants.
9
10
11 Plaintiff, FEDERAL HOME LOAN BANK OF SAN FRANCISCO (refened to in this

I2 complaint as the Bank), alleges,basedupon its continuing investigation, including the continuing

l3 investigation of its counsel,that the following allegationsand other factual contentionshave

t4 evidentiary support or, where specifically identified as being pled oooninformation and belief" are

15 likely to have evidentiary support after areasonableopportunity for further investigation or

t6 discovery.

t7 NATURE OF THIS ACTION

18 1. This is an action for rescissionand damagesas a result of the violation by the

19 Defendantsof the California CorporateSecuritiesAct, the federal SecuritiesAct of 1933,the

20 California Civil Code, and the common law. As alleged in detail below, the Defendantssold or

2l issuedto the Bank 36 certificates in 33 securitizationtrusts backedby residential mortgageloans.

22 The Bank paid more than $5.4 billion for those certificates.When they offered and then sold

23 thesecertificatesto the Bank, the Defendantsmade numerousstatementsto the Bank about the

24 certificatesand the credit quality of the mortgage loans that backedthem. On information and

25 belief, many of those statementswere untrue. Moreover, on information and beliel the

26 Defendantsomitted to statemany material facts that were necessaryin order to make their

27 statementsnot misleading. For example,the Defendantsmade untrue statements,or omitted

28 important information, about such material facts as the percentageof equity that borrowers had in
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COMPLAINT
 I their homes,the number of borrowers who actually lived in the housesthat securedtheir loans,

2 the credit scoresof the borrowers, and the businesspracticesof the lendersthat made the loans.

3 The Bank reasonablyandjustifiably relied on theseuntrue statementsand omissionsof important

4 information in deciding to purchasethe certificates.The certificates are'osecurities"within the

5 meaning of the Califomia CorporateSecuritiesAct and the SecuritiesAct of 1933.Under those

6 Acts, the California Civil Code, and the common law, the Bank is entitled to rescind its purchase

7 of the certificatesor to be paid damagesfor its losseson the certificates.

8 2. Eight securitiesdealerssold thesecertificatesto the Bank. The eight dealersare

9 DefendantsDeutscheBank SecuritiesInc. (which sold to the Bank certificates in four

10 securitizationtrusts, which are referred to in this complaint as SecuritizationsNos. 1 through 4),

11 Bear Steams& Co. Inc. (four securitizations,Nos. 5 through 8), Countrywide Securities

t2 Corporation (one securitization,No. 9), Credit SuisseSecurities(USA) LLC (seven

l3 securitizations,Nos. 10 through 16), Greenwich Capital Markets, Inc. (three securitizations,Nos.

I4 17 through l9), Morgan Stanley& Co. Inc. (two securitizations,Nos. 20 and2l), UBS Securities,

15 LLC (seven securitizations,Nos. 22 through 28), and Menill Lynch, Pierce,Fenner & Smith, Inc.

t6 (five securitizations,Nos. 29 through 33). The other Defendantsnamed in this complaint are

l7 liable to the Bank becausethey were the issuersof some of those certificates or becausethey

l8 controlled one of those issuers.

I9 PARTIES

20 3. Plaintiff is a bank createdby the FederalHome Loan Bank Act. The headquarters

2l of the Bank are in the City and County of San Francisco.Under its Organization Certificate, the

22 Bank is to operatein FederalHome Loan Bank District I l, which comprisesthe Statesof

23 Arizona, Califomia, and Nevada. The Bank does operatein each of those three States.

24 4. Defendant DeutscheBank SecuritiesInc. (refened to as Deutsche) is a corporation

25 organizedunder the laws of Delaware. Deutschesold the Bank four of the certificates.

26 5. Defendant DeutscheAlt-A Securities,Inc. (referred to as Deutsche Alt-A) is a

27 corporation organizedunder the laws of Delaware. DeutscheAlt-A was the issuerof one of the

28 certificatesthat Deutschesold to the Bank.

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COMPLAINT
 I 6. Defendant DB Structured Products,Inc. is a corporation organizedunder the

2 laws of Delaware. DB StructuredProducts,Inc. controls or controlled DeutscheAlt-A. Under

J Section15 of the SecuritiesAct of 1933,15 U.S.C. $ 77o, DB StructuredProducts,Inc. therefore

4 is liable to the Bank jointly and severally with, and to the sameextent as, DeutscheAlt-A.

) 7. Defendant J.P. Morgan Securities,Inc. (formerly known as Bear, Stearns& Co.

6 Inc. and referred to as Bear Stearns) is a corporation organizedunder the laws of Delaware. Bear

7 Stearnssold the Bank four of the certificates.

8 8. Defendant StructuredAsset Mortgage InvestmentsII, Inc. (referred to as SAMI II)

9 is a corporation organizedunder the laws of Delaware. SAMI II was the issuer of three of the

l0 certificatesthat Bear Stearnssold to the Bank.

11 9. Defendant The Bear StearnsCompanies,LLC (formerly known as and referred to

T2 as The Bear Stearns Companiesrlnc.) is a limited liability companyorganizedunderthe laws

l3 of Delaware. The Bear SteamsCompanies,Inc. controls or controlled SAMI II. Under Section 15

I4 of the SecuritiesAct of 1933 The Bear SteamsCompanies,Inc. therefore is liable to the Bank

l5 jointly and severally with, and to the sameextent as, SAMI II.

T6 10. Defendant Countrywide SecuritiesCorporation (referred to as Countrywide) is a

T7 corporation organizedunder the laws of California. Countrywide sold the Bank two of the

l8 certificates.

19 1l. Defendant Credit SuisseSecurities(USA) LLC (formerly known as Credit Suisse

20 First Boston LLC and referred to as Credit Suisse)is a limited liability company organizedunder

2l the laws of Delaware. Credit Suissesold the Bank eight of the certificates.

22 12. Defendant RBS Securities,Inc. (formerly known as Greenwich Capital Markets,

23 Inc. and referred to as Greenwich Capital) is a corporation organizedunder the laws of

24 Delaware. Greenwich Capital sold the Bank three of the certificates.

25 13. Defendant RBS Acceptance,Inc. (formerly known as Greenwich Capital

26 Acceptance,Inc. and referred to as Greenwich Capital Acceptance) is a corporation organized

27 under the laws of Delaware. Greenwich Capital Acceptancewas the issuer of the three certificates

28 that Greenwich Capital sold to the Bank.

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COMPLAINT
 I 14. DefendantRBS Holdings USA, Inc. (formerly known as and referred to as

2 Greenwich Capital Holdingsr lnc.) is a corporation organizedunder the laws of Delaware.

J Greenwich Capital Holdings, Inc. controls or controlled Greenwich Capital Acceptance.Under

4 Section15 of the SecuritiesAct of 1933,GreenwichCapital Holdings,Inc. thereforeis liable to

5 the Bank jointly and severally with, and to the sameextent as, Greenwich Capital Acceptance.

6 15. Defendant Morgan Stanley & Co. Incorporated(referred to as Morgan Stanley) is

7 a corporation organizedunder the laws of Delaware. Morgan Stanley sold the Bank two of the

8 certificates.

9 16. DefendantUBS Securities,LLC (referredto as UBS) is a limited liability company

10 organizedunder the laws of Delaware. UBS sold the Bank sevenof the certificates.

11 17. DefendantMortgageAssetSecuritizationTransactions,
Inc. (referredto asMAS
t2 is a corporationorganizedunderthe lawsof Delaware.MAST wasthe issuerof threeof the
13 certificatesthat UBS soldto the Bank.
I4 18. DefendantMenill Lynch,Pierce,Fenner& Smith,Inc. (referredto asMerrill
l5 Lynch) is a corporationorganizedunderthe lawsof Delaware.Merrill Lynch soldthe Banksix
l6 of the certificates.
I7 19. Plaintiff is ignorant of the true namesand capacitiesof Defendantssuedherein as

18 Does l-50, inclusive, and therefore suestheseDefendantsby such fictitious rurmes.Plaintiff will

t9 amendthis complaint to allege the true namesand capacitiesof theseDefendantswhen

20 ascertained.Plaintiff is informed and believesthat each of the fictitiously named Defendants

2l is responsiblein some manner for the occurrencesalleged herein and proximately caused

22 Plaintiffs damages.

23 JURISDICTION AND VENUE

24 20. This Court has subject-matterjurisdiction of this action. The Superior Court is a

25 court of generaljurisdiction. The Bank seeksrescissionunder Sections25401and 25501 of the

26 California CorporateSecuritiesAct, damagesfor negligent misrepresentation,and rescissionof

27 its contractsto purchasethe certificates,all of which relief this Court hasjurisdiction to grant.

28 Under Section22(a) of the SecuritiesAct of 1933,l5 U.S.C. $ 77v(a),this Court also has
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COMPLAINT
 I jurisdictionovertheBank'scauses
of actionfor violationof Sections11, l2(a)(2),and l5 of that
2 Act, 15U.S.C.$ 771.
a
J 2I. UnderSection22(a)of the SecuritiesAct of 1933,"no casearisingunderthis title
4 jurisdictionshallbe removedto any courtof the
andbroughtin any Statecourtof competent
5 UnitedStates."Becauseits activitiesarenot localizedin onestate,the Bank is not a citizenof any
6 stateunder28 U.S.C.$ 1332(c),sotheFederalcourtshavenojurisdictionof this actionunder28
7 U.S.C.$ 1332(a).
This actionis not removable
to Federalcourt.
8 22. This CourthaspersonaljurisdictionoverDeutscheo
DB StructuredProducts,Inc.,
9 BearStearns,Countrywide,CreditSuisse,GreenwichCapital,MorganStanley,UBS, andMenill
l0 Lynch becauseeachof themis registeredto do businessin Califomia.This Courthaspersonal
11 jurisdictionoverall of the Defendants
becausethey offeredandsoldthe certificatesto the Bank
l2 "in California"within the meaningof Section25008of the CaliforniaCorporateSecuritiesAct.
t3 23. Venueis properin this Countybecause
the Defendantsofferedandsoldthe
t4 certificatesto the Bank in this County,andbecausethe violationsof law allegedin this
15 complaint,includingthe makingof materiallyuntrueor misleadingstatements,
occurredin this
t6 County.
t7 SECURITIZATION OF MORTGAGE LOANS
l8 24. The securitiesthatthe Defendantssoldthe Bankareso-calledasset-backed
t9 securities,or ABS, createdin a processknownassecuritization.Securitizationbeginswith loans
20 (for example,loanssecuredby mortgageson residentialproperties,creditcardloans,etc.)on
2I which the borrowersareto makepayments,usuallymonthly.The entitythat makesthe loansis
22 knownasthe originator of the loans.Theprocessby whichthe originatordecideswhetherto
23 makeparticularloansis knownasthe underrvriting of loans.In the loanunderwritingprocess,
24 the originatorappliesvariouscriteriato try to ensurethatthe loanwill be repaid.Until the loans
25 aresecuritized,the borrowerson the loansmaketheir loanpaymentsto the originator.
26 Collectively,the paymentson the loansareknownasthe cashflow from the loans.
27 25. In a securitization,
a largenumberof loans,usuallyof a similartype,aregrouped
28 into a collateral pool. The originatorof thoseloanssellsthem(and,with them,the right to
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COMPLAINT
 I receivethe cash flow from them) to a trust. The trust pays the originator cash for the loans. The
) trust raisesthe cashto pay for the loans by selling bonds, usually called certificates, to investors

J such as the Bank. Each certificate entitles its holder to an agreedpart of the cashflow from the

4 loans in the collateral pool.

5 26. Thus, schematically,there are six stepsin a securitization.

6
1. Investorspay money to the trust.
7
2. The trust issuescertificatesto the investors.
8 The trust pays money to the originator.
9 4. The originator sells to the trust the loans in the collateral pool, including
the right to receive the cashflow from those loans.
l0 5. The trust collects cash flow from paymentson the loans in the
collateralpool.
ll
6. The trust pays each certificateholderits agreedpart of the cashflow that
T2 the trust receivesfrom paymentson loans in the collateral pool.

t3 *

t4 27. A few other aspectsof securitizationare significant to the allegationsof this

15 complaint. Each securitizationhas a sponsor,the prime mover of the securitization. Sometimes

l6 the sponsoris the originator or an affiliate. In originator-sponsoredsecuritizations,the collateral

I7 pool usually containsloans made by the originator that is sponsoringthe securitization.Other

l8 times, the sponsormay be an investmentbank, which purchasesloans from one or more

l9 originators, aggregatesthem into a collateral pool, sells them to a trust, and securitizesthem. The

20 sponsorarrangesfor title to the loans to be transferredto an entity known as the depositor, which

2l then transferstitle to the loans to the trust.

22 28. The obligor of the certificatesin a securitization is the trust that purchasesthe

23 loans in the collateral pool. Becausea trust has no assetsother than the loans that it purchased,it

24 may not be able to satisff the liabilities of an issuerof securities(the certificates).The law

25 therefore treatsthe depositor as the issuer ofan asset-backedcertificate.

26 ,1.

27 29. Securities dealers, like the eight that sold the certificatesto the Bank, play a

28 critical role in the processof securitization.They underwrite the sale of the certificates,that is,

COMPLAINT
 I they purchasethe certificates from the trust and then sell them to investors.Equally important,

2 securitiesunderwriters provide to potential investorsthe information that they needto decide

a
J whether to purchasecertificates.

4 30. Becausethe cashflow from the loans in the collateral pool of a securitizationis the

5 sourceof funds to pay the holders of the certificatesissuedby the trust, the credit quality of those

6 certificates is dependentupon the credit quality of the loans in the collateral pool. The most

7 important information about the credit quality of those loans is containedin the files that the

8 originator developswhile making the loans,the so-calledloan files. For residential mortgage

9 loans, each loan file normally containsthe information in such important documentsas the

10 borrower's application for the loan, credit reports on the borrower, and an appraisalof the

11 property that will securethe loan.

t2 3l . Collateral pools usually include thousandsof loans. Insteadof potential investors

13 reviewing thousandsof loan files, the securitiesfirms that will underwrite the sale of the

t4 certificates in a securitization are responsiblefor gathering,verifying, and presentingto potential

l5 investorsthe information about the credit quality of the loans that will be depositedinto the trust.

t6 As will be alleged in detail below, the information that the Defendantspresentedto the Bank

l7 about the credit quality of the loans in the collateral pools of the 33 trusts containedmany

18 statementsthat were material to the credit quality of those loans, but, on information and belief,

t9 were untrue or misleading. Moreover, on information and belief the Defendantswere negligent

20 in making those untrue or misleading statementsto the Bank.

2l TOLLING OF THE STATUTE OF LIMITATIONS

22 32. The Bank is a member of the proposedclassesin New Jersey Carpenters Vacation

23 Fund v. The Royal Bank of Scotland Group, PLC, United StatesDistrict Court for the Southern

24 District of New York No. 08-cv-05093,filed on May 14, 2008,Massachusetts

Bricklayers&
25 Masons Trust Funds v. DeutscheAlt-A Securities,Inc.,United StatesDistrict Court for the

26 EasternDistrict of New York No. 08-cv-3178,filed on June27,2008, New JerseyCarpenters

27 Health Fund v. Bear StearnsMortgage Funding Trust 2006-AR1,United StatesDistrict Court for

28 the SouthemDistrict of New York No. 08-cv-08093,filed on August 20,2008, andIn Re

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COMPLAINT
 I IndyMac Mortgage Backed SecuritiesLitigation,United StatesDistrict Court for the Southern

2 Dishict of New York No. 09-cv-04583,filed on May 14,2009,the pendencyof which actionshas
a
J tolled the running of the statuteof limitations on causesof action alleged in this complaint.

4 THE SALES OF THE CERTIFICATES

f 33. The Defendantssold to the Bank 36 certificates in SecuritizationsNos. I through

6 33. Details of eachtrust and each certificate arestatedin Item 33 of Schedules1 through 33 of

7 this complaint, which correspondto SecuritizationsNos. 1 through 33. The Bank incorporates

8 into this paragraph33, and allegesas though fully set forth in this paragraph,the contentsof Item

9 33 ofthe schedules.

10 MATERIAL UNTRUE OR MISLEADING STATEMENTS

11 ABOUT THE CERTIFICATES

12 34. In connectionwith their offers and salesof the certificatesto the Bank, each of the

l3 eight dealerssent numerousdocumentsto the Bank at its offrce in San FranciscoCounty. In each

t4 case,thesedocumentsincluded a term sheet,the prospectussupplementfor the certificatesthat

l5 was filed with the SEC, drafts of someof the statisticaltables to be included in the prospectus

t6 supplement,and a computer model of the financial structureof the securitization.In each of these

t7 documents,eachdealer made statementsof material fact about the certificate that it offered and

18 sold to the Bank.l A true copy of the prospectussupplementfor each securitization is available

t9 from the SecuritiesExchangeCommission website.2

20 35. On information and belief, many of the statementsof material fact that each dealer

2l made in thesedocumentswere untrue or misleading. Theseuntrue or misleading statements

22 included the following.

23
24 I Two of the certificates
thatthe Bankpurchased werecertificatesin re-securitizations
of existing
25 certificatesof mortgage-backed securities.In connectionwith the saleof thosetwo certificates,the dealeis
sentto the Banka privateplacementmemorandum for the re-securitization
andprospectus supplements
26 filed with the SECfor the underlyingsecuritizations. Detailsof the re-securitizationiareincludedin their
respectiveschedules.
27 2A
uniform resourcelocator for eachprospectussupplementis included in Item 33 of
each schedule.
28
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COMPLAINT
 I A. Untrue or Misleading Statementsabout the Loan-to-Value Ratios (LTVs) and
Combined Loan-to-Value Ratios (CLTVs) of the Mortgage Loans in the Collateral
2 Pools of these Securitizations
a
J l. The materiality of LTVs and CLTVs

4 36. The loan-to-valueratio of a mortgageloan, or LTV, is the ratio of the amount of

5 the mortgage loan to the value of the mortgagedproperty when the loan is made. For example,a

6 loan of $300,000securedby propertyvalued at $500,000has an LTY of 600/o;a loan of $450,000

7 on the sameproperty has an LTV of 90%o.LTV is one of the most important measuresof the risk

8 of a mortgage loan, and the LTVs of the mortgage loans in the collateral pool of a securitization

9 are likewise one of the most important measuresof the risk of certificates sold in that

l0 securitization.LTV predicts the likelihood of default (the lower the LTV, the less likely that a

1l decline in the value of the property will wipe out the owner's equity, and thereby give the owner

T2 an incentive to stop making mortgagepaymentsand abandonthe propeny). LTV also predicts the

l3 severity of loss in the event of default (the lower the LTV, the greaterthe "cushion," so the

t4 greaterthe likelihood that the proceedsof foreclosurewill cover the unpaid balanceof the

15 mortgage loan).

t6 37. The denominatorin LTV (value of the mortgagedproperty) is determinedby

l7 either an appraisalor by the purchaseprice of the property. In a refinancing or home-equity loan,

18 there is no purchaseprice to use as the denominator.For a purchase,the agreedprice may be

t9 higher than the value of the property, and an appraisalshould ensurethat the LTV is calculated

20 using the actual value as the denominator.Sometimesin a purchase,the denominatoris the lower

2l ofthe purchaseprice or the appraisedvalue.

22 38. Thus, an accurateappraisalis essentialto an accurateLTV. In particular, a too-

23 high appraisalwill understate,sometimesgreatly, the risk of a loan. To return to the example

24 above, if the property whose actual value is $500,000is appraisedinsteadat $550,000,then the

25 LTV of the $300,000loan falls from 60% to 54.5Yo,and the LTV of the $450,000loanfalls from

26 90Yoto 8I.8%.In either case,the LTV basedon the incorrect appraisalunderstatesthe risk of the

27 loan. It is also important to note that, the higher the correct LTV, the more the risk is understated

28 by an incorrect appraisalof any given magnitude.In the example above,there is little difference
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COMPLAINT
 I in the risk of a loan with an LTV of 60Yoand one with an LTV of 54.5o/o;both are safe loans with

2 large equity cushions.But there is a very large difference in the risk of a loan with an LTV of

J 90% and one with an LTV of 81.8%. In the latter case,there is an equity cushion of l8.2Yoof the

4 value of the property, in the former, only l}Yo,just over half as much. Thus, an appraisalthat

5 overvaluesa property by just l0% producesan overstatementof more than 80% in the

6 homeowner'sequity.

7 39. LTV is an important measureof the risk of a mortgage loan, and the LTVs of the

8 mortgageloans in the collateral pool of a securitizationare likewise an important measureof the

9 risk of certificates sold in that securitization.LTV helps to predict both the likelihood of default

10 and the severity of loss in caseof default. A reasonableinvestor considersLTV important to the

11 decision whether to purchasea certificate in a securitization of mortgage loans. Even small

t2 differencesin the weighted averz;geLTV of the mortgage loans in the collateral pool of a

l3 securitizationhave a significant effect on the risk of each certificate sold in that securitization,

t4 and thus, are important to the decision of a reasonableinvestor whether to purchaseany such

l5 certificate.
,1.
t6
t7 40. Residentialpropertiescan securemore than one mortgage loan, a senior (or first)

18 and one or more junior mortgageloans. The combined loan-to-valueratio (CLTV) is the ratio of

19 the total outstandingprincipal balanceof all loans (mortgagesor home equity lines of credit) that

20 the property securesto the appraisedvalue of mortgagedproperty. To return to the example in

2l paragraph36, if a propertyvalued at $500,000securesa first mortgageloan of $300,000and a

22 secondmortgageloan of $50,000,then it hasa CLTV of 70%.If the first mortgageloan on the

23 samepropertyis $450,000and the secondis $50,000,then the CLTV is 100%.

24 41. Like LTV, CLTV is an important measureof the risk of a mortgage loan, and the

25 CLTVs of the mortgage loans in the collateral pool of a securitization are likewise an important

26 measnreof the risk of certificates sold in that securitization.CLTV helps to predict the likelihood

27 of default of a mortgage loan. A reasonableinvestor considersCLTV important to the decision

28 whether to purchasea certificate in a securitizationof mortgageloans. Even small differencesin

-l l-
COMPLAINT
 I the weighted averageCLTV of the mortgageloans in the collateral pool of a securitizationhave a

2 significant effect on the risk of each certificate sold in that securitization,and thus, are important

J to the decision of a reasonableinvestor whether to purchaseany such certificate.

4 2. Untrue or misleadingstatementsaboutthe LTVs and CLTVs of the mortgage

loansin the collateralpoolsof thesesecuritizations
5
6 42. In the prospectussupplementand other documentsthey sent to the Bank, the

7 Defendantsmade statementsabout the LTVs and CLTVs of the mortgage loans in the collateral

8 pools of thesesecuritizations.Some of thesestatementswere in so-calledcollateral stratification

9 tables.Those tables divided the mortgageloans into severalcategoriesof LTV and CLTV and

10 presentedquantitative information about the loans in each category.All of the statementsin each

ll prospectussupplementabout the LTVs and CLTVs of the mortgage loans in the collateral pools

t2 of SecuritizationNos. I through 33 are incorporatedherein by reference.

13 43. On information and belief, thesestatementswere materially untrue or misleading

t4 because(i) the statedLTVs and CLTVs of a significant number of those mortgage loans were

15 lower than the actual LTVs or CLTVs; (ii) the Defendantsomitted to statethat the appraisalsof a

t6 significant number of the propertiesthat securedthe mortgage loans in the collateral pools were

t7 biasedupward, so that statedLTVs and CLTVs basedon those appraisalswere lower than the

18 true LTVs and CLTVs of those mortgage loans; or (iii) the statedCLTVs did not reflect second

t9 mortgageson a significant number of the propertiesthat securedthe mortgage loans in the

20 collateralpools.

2l 44. Since the datesof SecuritizationsNos. I through 33, loans in the collateral pools

22 of each securitizationhave been foreclosedupon. In nearly all of the pools, the propertiesthat

23 securedthose foreclosedloans were sold for much less than the value ascribedto those same

24 propertiesin the LTV and CLTV data reported in the prospectussupplementsand other

25 documentsthat the Defendantssentto the Bank. The large difference cannot be explained by the

26 declinesin houseprices in the areasin which thosepropertieswere located, even after taking

27 account of the fact that propertiesin foreclosuresometimessell for less than their fair market

28 value. Analysis of data in an industry-standarddatabaseof securitizedmortgage loans shows,for

COMPLAINT
 I almostall of Securitizations
Nos. I through33,that the differencesbetweenthe valuesascribed
2 thesepropertiesandthepricesat whichthe propertiesweresoldin foreclosurearesignificantly
J greaterthanthe declinesin housepricesin the samegeographical
areasoverthe sameperiods
4 (that is, betweenthe making of each mortgageloan and the correspondingforeclosuresale).This

) unexplaineddifference is evidencethat the values ascribedto those properties,and to all

6 propertiesin the collateral pools, in the LTV and CLTV data reported in the prospectus

7 supplementsand other documentsthat the Defendantssent to the Bank were too high, the

8 resulting LTVs and CLTVs were too low, and thus that the statementsin the prospectus

9 supplementsand other documentssentto the Bank about the LTVs and CLTVS were untrue or

10 misleading. The results of this analysisfor nearly all of SecuritizationsNos. I through 33 arc

ll statedin Item 44 of SchedulesI through 33 of this complaint. The Bank incorporatesinto this

t2 paragraph44, and allegesas though fully set forth in this paragraph,the contentsof Item 44 of the

13 schedules.

l4 45. On information and belief, by theseuntrue and misleading statements,the

15 Defendantsmaterially understatedthe risk of every certificate that any of them sold to the Bank,

I6 B. Untrue or Misleading Statementsabout the Occupancy Status of the Properties That

Securedthe Mortgage Loans in the Collateral Pools of these Securitizations
t7
1. The materiality of occupancy status
18
t9 46. Residentialreal estateis usually divided into primary residences,secondhomes,

20 and investmentproperties.Mortgageson primary residencesare less risky than mortgageson

2T secondhomes and investmentproperties.

22 47. Occupancystatus(that is, whether the property that securesa mortgage is to be the

23 primary residenceof the bonower, a secondhome, or an investmentproperty) is an important

24 measureof the risk of a mortgage loan, and the percentageof loans in the collateral pool of a

25 securitizationthat are securedby mortgageson primary residencesrather than on secondhomes

26 or investmentproperties is an important measureof the risk of certificates sold in that

27 securitization.Other things being equal, the higher the percentageof loans securedby primary

28 residences,the lower the risk of the certificates.A reasonableinvestor considersoccupancystatus

-13-
COMPLAINT
 I important to the decision whether to purchasea certificate in a securitization of mortgage loans.

2 Differences in the percentageof the mortgageloans in the collateral pool of a securitizationthat

a
J are securedby mortgageson primary residenceshave a significant effect on the risk of each

4 certificate sold in that securitization and thus are important to the decision of a reasonable

5 investor whether to purchaseany such certificate.

6 48. Becausethey are less risky than other mortgage loans, mortgage loans on primary

7 residencesusually have more favorable terms, including lower interest rates,than mortgage loans

8 on secondhomes and investmentproperties.Applicants for loans on secondhomes and

9 investmentpropertiestherefore have an incentive to statethat the property will be their primary

10 residenceeven when it will not.

ll 2. Untrue or misleading statementsabout the occupancy status of the properties

that securedthe mortgage loans in the collateral pools of thesesecuiitizations
t2
t3 49. In the prospectussupplementsand other documentsthat they sent to the Bank, the

t4 Defendantsmade statementsabout the occupancystatusof the propertiesthat securedthe

l5 mortgage loans in the collateral pool of this securitization.Some of thesestatementswere in so-

16 called collateral stratification tables. Those tables divided the mortgage loans into several

l7 categoriesof occupancystatusand presentedquantitative information about the loans in each

18 category.All of the statementsin the prospectussupplementand other documentsabout the

t9 occupancystatusof the mortgage loans in the collateral pool of this securitizationaf,e

20 incorporatedherein by reference.

2l 50. On information and belief, thesestatementswere materially untrue or misleading

22 because(i) the statednumber of mortgage loans that were securedby primary residenceswas

23 higher than the actual number of loans in that category; (ii) the statednumber of mortgage loans

24 that were securedby secondhomes was lower than the actual number of loans in that category;

25 (iii) the statednumber of mortgage loans that were securedby investmentpropertieswas lower

26 than the actual number of loans in that category; or (iv) the Defendantsomitted to statethat the

27 occupancystatusof a significant number of the propertiesthat securedthe mortgage loans in the

28 collateral pool was misstatedbecauseof fraud.

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COMPLAINT
 I 51. On information and belief, by theseuntrue and misleading statements,the
,)
Defendantsmaterially understatedthe risk of every certificate that any of them sold to the Bank.

J C. Failure to Disclosethe Substantial Deterioration of LTV and Credit Score as

Predictors of the Performance of Mortgage Loans Securitized by the Defendant
4 Dealers
) 52. Investors in mortgage-backedsecurities,including the Bank, rely extensively on

6 certain characteristicsof the mortgageloans in the collateral pool of a securitizationto predict the

7 performanceof those loans and thereby to determinethe risk both of those loans and of the

8 certificates sold in that securitization.Reasonableinvestors consider information about these

9 characteristicsimportant to the decision whether to purchasea certificate in a securitizationof

10 mortgage loans. Among the most important of thesecharacteristicsare LTV, describedabove,

ll and the credit scoreof the borrower.

12 53. In the prospectussupplementsand other documentsthey sent to the Bank, the

l3 Defendantsmade statementsabout the LTVs and credit scoresof the mortgage loans in the

I4 collateral pools of each of SecuritizationsNos. I through 35. All of those statementsare

l5 incorporatedherein by reference.

16 54. During the time before eachof SecuritizationsNos: I through 35, the power of

t7 LTV and credit scoreto predict the performanceof otherwise similar mortgage loans deteriorated,

18 even after taking account of declinesin houseprices and other macroeconomicfactors. Put

t9 somewhatdifferently, loans that were very similar in thesecharacteristicsperformed worse if the

20 loans were made in2007 than if they were made in2006,worse if made in 2006 than if made in

2l 2005,etc.

22 55. On information and belief, all statementsthat the Defendantsmade about the

23 LTVs and credit scoresof the mortgageloans in the collateral pools of thesesecuritizationswere

24 misleading becausethe Defendantsomitted to statethat, in tlre time before thesesecuritizations,

25 loans that they or their affiliates securitizedwere nearly constantin reportedweighted-average

26 LTV and weighted-averagecredit score,yet performed worse if the loans were made in 2007 than

27 if they were made in2006, worse if made in 2006 than if made in 2005, etc.

28
-l 5-
COMPLAINT
 I 56. On information and beliel by thesemisleading statements,the Defendants

2 materially understatedthe risk of every certificate that any of them offered and sold to the Bank.

D. Untrue or Misleading Statementsabout the Underwriting Guidelines of the

Originators of the Mortgage Loans in the Collateral Pooli of these Securitizations
4
1. The materiality of underwriting guidelines and the extent of compliance with
5 them
6 57. Most or all originators of mortgage loans had written guidelines by which they

7 evaluatedapplicationsfor loans. An originator's guidelines,and the extent to which the originator

8 complies with them, are important indicators of the risk of mortgage loans made by that

9 originator and of certificates sold in a securitizationin which mortgage loans made by that

l0 originator are a substantialpart of the collateral pool. A reasonableinvestor considersthe

11 underwriting guidelines of each originator of a substantialpart of the mortgage loans in the

t2 collateral pool of a securitization,and the extent to which the originator complied with its

t3 guidelines,important to the decision whether to purchase acertifrcate in that securitization.

T4 Differences in those guidelines or in the extent to which an originator complied with them have a

l5 significant effect on the risk of each certificate sold in that securitization and thus are important to

t6 the decision of a reasonableinvestor whether to purchaseany such certificate.

T7 2. Untrue or mlsleading statementsby the Defendants about the underwriting

grridelinesof the originators of the mortgage loans in the collateral pools of
18 thesesecuritizations and about the extent of their compliance with those
guidelines
l9
20 58. In the prospectussupplements,the Defendantsmade statementsabout the

2l underwriting guidelines of the originators of the mortgageloans in the collateral pools of

22 SecuritizationsNos. I through 33. Those statementsare describedin Item 58 of Schedules1

23 through 33 of this complaint. The Bank incorporatesinto this paragraph58, and allegesas though

24 fully set forth in this paragraph,the contentsof Item 58 of the schedules.

25 59. On information and belief, thesestatementswere materially untrue or misleading

26 becausethe Defendantsomitted to statethat (a) the originators were making frequent, and

27 increasingly frequent, exceptionsto those underwriting guidelines; (b) the originators were

28 making frequent, and increasingly frequent, exceptionsto those underwriting guidelines when no
-16-
COMPLAINT
 I compensatingfactor was present;and (c) the originators were failing frequently, and increasingly

2 frequently, to follow quality-assurancepracticesintendedto detect and prevent fraud.

a
J 60. On information and belief, by theseuntrue and misleading statements,the

4 Defendantsmaterially understatedthe risk of every certificate that any of them offered and sold to

5 the Bank.
FIRST CAUSE OF ACTION
6
UNTRUE OR MISLEADING STATEMENTS IN THE SALE OF SECURITIES
7 (Cal.CorporationsCodeSS25401,25501)
8 Against Defendant: In connection with Securitizations :
9 Deutsche SecuritizationsNos. I throush 4
Bear Stearns SecuritizationsNos.5.7.and 8
10
Credit Suisse SecuritizationsNos.11 throueh 16
ll Greenwich Canital SecuritizationsNos.18 and 19
Morsan Stanlev SecuritizationsNos.20 and2l
t2 UBS SecuritizationsNos.22 throash2T
Merrill Lvnch SecuritizationsNos.29throueh 33
13
t4 61. The Bank hereby incorporatesby reference,as though fully set forth, paragraphsI

15 through 60.

T6 62. In doing the acts alleged, the Defendantsnamed above violated Sections25401

t7 and 25501 of the California CorporationsCode in the saleto the Bank of the certificatesin the

18 securitizationsreferred to above.

t9 63. This action is brought within two years after the discovery of the untrue and

20 misleading statementsin the prospectussupplementsand other documentsthat the Defendants

2l sentto the Bank, and within five years of the Bank's purchaseof thesecertificates,or within any

22 applicable period as tolled by the pendencyof the classactions referred to above or others.

Despite having exercisedreasonablediligence, the Bank did not and could not reasonablyhave
23
24 discoveredearlier the untrue and misleading statementsin the prospectussupplementsand other

25 documents.

26 64. Under Cal. Corp. Code $$ 25401and25501,the Bank is entitledto recoverthe

27 considerationthat it paid for each ofthese certificates,plus interest at the legal rate from the date

of purchaseto the date on which it recoversthe purchaseprice, minus the amount of income it has
28

COMPLAINT
 I receivedon the certificate.Pursuantto $ 25501,the Bankwill tendereachcertificatebeforeentry
2 ofjudgment.
SECONDCAUSEOF ACTION
J

UNTRUE OR MISLEADING STATEMENTS

4 IN REGISTRATION STATEMENTS
(Section11 of the SecuritiesAct of 1933)
5
Against Defendant: In connectionwith Securitizations:
6
Deutsche Securitization No. 4
7 DeutscheAtt-A Securitization No. 4
Bear Stearns Securitizations Nos. 7 and 8
8 SAMI II SecuritizationsNos. 7 and 8
9 Credit Suisse Securitizations
Nos.11 throueh 16
Greenwich Capital SecuritizationsNos. 18 and 19
10 Greenwich Canital Accentance SecuritizationsNos. 18 and 19
Morgan Stanlev SecuritizationNo.21
ll Merrill Lvnch SecuritizationsNos.32 and 33

t2 65. The Bank hereby incorporatesby reference,as though fully set forth, paragraphsI
l3 through 64.
t4 66. In doing the acts alleged,the Defendantsnamed above violated Section 11 of the
15 SecuritiesAct of 1933 in the saleto the Bank of the certificates in the securitizationsreferred to
I6 above.
t7 67. The certificates in thesesecuritizationswere issuedpursuantor traceableto
18 registration statements.Details of eachregistration statementand each certificate are statedin
I9 Item 33 of SchedulesI through 33.
20 68. DeutscheAlt-A, SAMI II, and Greenwich Capital Acceptanceare depositorsof the
2T securitizationslisted above and therefore are the issuersofthe certificates in those securitizations.
22 Deutsche,Bear Stearns,Credit Suisse,Greenwich Capital, Morgan Stanley, and Menill Lynch
23 acted as underwriters of the certificates listed above.
24 69. This action is brought within one year after the discovery of the untrue and
25 misleading statementsin the registration statements,as amendedby the prospecfussupplements,
26 and within three years of thesecertificateshaving been sold to the public, or within any
27 applicable period as tolled by the pendencyof the class actions referred to above or others.
28
-18-
COMPLAINT
 1 Despite having exercisedreasonablediligence, the Bank did not and could not reasonablyhave

2 discoveredearlier the untrue and misleading statementsin the prospectussupplements.

a
J 70. The prospectussupplementscontaineduntrue statementsof material fact and

4 omitted to statematerial facts necessaryin order to make the statements,in the light of the

5 circumstancesunder which they were made, not misleading. Theseuntrue and misleading

6 statementsincluded all of the untrue and misleading statementsdescribedin paragraphs34

7 through 60.

8 71. The Bank expresslyexcludesfrom this causeof action any allegation that could be

9 construedas alleging fraud or intentional or recklessconduct. This causeof action is basedsolely

l0 on claims of strict liability or negligenceunderthe SecuritiesAct of 1933.

11 72. Basedupon the truth of the statementsmade in the prospectussupplements,the

t2 Bank purchasedthesecertificates.

l3 73. The Bank did not know when it purchasedthesecertificatesthat the statementsin

t4 the prospectussupplementswere untrue or misleading.

15 74. The Bank has suffered a loss on eachof thesecertificates.

t6 75. The Bank is entitledto recoverdamagesas describedin 15 u.S.C. g 77k(e).

t7
18
T9
20
2l
22
23
24
25
26
27
28

COMPLAINT
 1 THIRD CAUSE OF ACTION
2 UNTRUE OR MISLEADING STATEMENTSIN THE SALE OF SECURITIES
(Sectionl2(a)Q) of the SecuritiesAct of 1933)
a
J

Against Defendant: In connectionwith Securitizations:

4
Deutsche Securitization No.4
5 DeutscheAIt-A SecuritizationNo. 4
Bear Stearns SecuritizationsNos. 7 and 8
6 SAMI II SecuritizationsNos. 7 and 8
Credit Suisse SecuritizationsNos. 11 throueh 16
7 Greenwich Capital Securitizations
Nos.18 and 19
Greenwich Capital Acceptance SecuritizationsNos. 18 and 19
8 Morsan Stanlev Securitization No.21
Merrill Lvnch SecuritizationsNos.32 and 33
9
l0 76. The Bank hereby incorporatesby reference,as though fully set forth, paragraphsI
11 through 75.
t2 77. In doing the acts alleged, the Defendantsnamed above violated Section l2(a)(2)
t3 the SecuritiesAct of 1933 in the saleto the Bank of the certificatesin the securitizationsreferred
T4 to above.
l5 78. This action is brought within one year after the discovery of the untrue and
I6 misleading statementsin the prospectussupplements,and within three years of thesecertificates
I7 having been sold to the public, or within any applicableperiod as tolled by the pendencyof the
l8 class actions referred to above or others.Despite having exercisedreasonablediligence, the Bank
t9 did not and could not reasonablyhave discoveredearlier the untrue and misleading statementsin
20 the prospectussupplements.
2l 79. DeutscheAlt-A, SAMI II, and Greenwich Capital Acceptanceare depositorsof the
22 securitizationslisted above and therefore are the issuersof the certificates in those securitizations.
23 In connectionwith the offer and sale of thesecertificatesto the Bank, the issuersalso made all of
24 the statementsof material fact about thesecertificatesthat were in the prospectussupplementand
25 other documentsthat the dealerssentto the Bank.
26
27
28
-20-
COMPLAINT
 I 80. The Bank expresslyexcludesfrom this causeof action any allegation that could be

2 construedas alleging fraud or intentional or recklessconduct. This causeof action is basedsolely

J on claims of strict liability or negligenceunderthe securitiesAct of 1933.

4 81. The Defendantsnamed above, for their own financial gain, solicited the Bank to

5 purchasethesecertificates,and sold the certificatesto the Bank, by meansof the prospectus

6 supplements.

7 82. Basedupon the truth of the statementsmade in the prospectussupplements,the

8 Bank purchasedthesecertificates.

9 83. The prospectussupplementscontaineduntrue statementsof material fact and

l0 omified to statematerial facts necessaryin order to make the statements,in the light of the

11 circumstancesunder which they were made, not misleading.

t2 84. The Bank did not know when it purchasedthesecertificatesthat the statementsin

l3 the prospectussupplementswere untrue or misleading.

I4 85. The Bank has suffered a loss on eachof thesecertificates.

15 86. The Bank is entitled to recover the considerationthat it paid for each of these

T6 certificates,plus interest at the legal rate from the date of purchaseto the date on which it

t7 recoversthe purchaseprice, minus the amount of income it has received on each certificate. The

18 Bank will tender each certificate before entry ofjudgment.

l9 FOURTH CAUSEOF ACTION

20
LIABILITY OF CONTROLLING PERSON
2l (Section15 of the SecuritiesAct of 1933)

22 Against Defendant: In connection with Securitizations :

23 DB Structured Products. Inc. SecuritizationNo.4

The Bear StearnsCompanies.Inc. SecuritizationsNos. 7 and 8
24 Greenwich Capital Holdinss. Inc. Securitizations Nos. 18 and l9

25
87. The Bank hereby incorporatesby reference,as though fully set forth, paragraphsI
26 through 86.
27
28

COMPLAINT
 I 88. The Defendantsnamed above are liable because,in doing the acts alleged,persons

2 they controlled violated Sections11 and l2(a)(2) of the SecuritiesAct of 1933 in the saleto the
a
J Bank of the certificates in the securitizationsreferred to above.

4 89. DB StructuredProducts,Inc. by or through stock ownership, agency,or otherwise,

5 controlled DeutscheAlt-A within the meaning of Section I 5 of the SecuritiesAct of 1933 .

6 90. The Bear StearnsCompanies,Inc. by or through stock ownership, agency,or

7 otherwise, controlled SAMI II within the meaning of Section I 5 of the SecuritiesAct of 1933.

8 91. Greenwich Capital Holdings, Inc. by or through stock ownership, agency,or

9 otherwise,controlled Greenwich Capital Acceptancewithin the meaning of Section 15 of the

l0 SecuritiesAct of 1933.

ll 92. In doing the acts alleged, each controlled personnamed in paragraphs89 through

t2 9l is liable under Sections11 and I2(a)(2) of the SecuritiesAct of 1933for the reasonsallegedin

13 paragraphsI through 86.

l4 93. Each Defendantnamed above is thereforejointly and severally liable with and to

15 the sameextent as the person it controlled.

16 FIFTH CAUSEOF'ACTION
t7
NEGLIGENT MISREPRESENTATION
18 (Cal. Civil Code$S1572et seq.and 1709et seq.,and CommonLaw)

l9 Against Det?ndant: In connection with Securitizations :

20 Deutsche SecuritizationsNos. I throueh 4

DeutscheAlt-A SecuritizationNo. 4
2I Bear Stearns securttrzattonsNos. 5 throush u
SAMI II SecuritizationsNos. 5. 7. and 8
22 Uountrywide Securitizations No. 9
Credit Suisse SecuritizationsNos. 10 throueh 16
23 Greenwich Canital SecuritizationsNos. l7 throush l9
Greenwich Capital Acceptance SecuritizationsNos. 17 throueh 19
24 Morsan Stanlev SecuritizationsNos. 20 and?l
UBS SecuritizationsNos. 22 throush2S
25 MAST SecuritizationsNos. 22 throuuh24
Merrill Lvnch SecuritizationsNos.29 throueh 33
26
27 94. The Bank hereby incorporatesby reference,as though fully set forth, paragraphsI
28 through93.

COMPLAINT
 I 95. As alleged above,the Defendantsnamed above made untrue or misleading

2 representationsregarding the LTVs and CLTVs of the mortgage loans in the collateral pools of

J thesesecuritizations,the occupancystatusof propertiesthat securedthe mortgage loans in these

4 securitizations,underwriting guidelines of the originators, and related matters.

5 96. In making the representationsreferredto above,the Defendantsintendedto induce

6 the Bank to rely on those representationsin making its decision to purchasethesecertificatesin

7 thesesecuritizations.The Defendantsexpectedthat the Bank would rely on those representations

8 in deciding whether to purchasethesecertificates.

9 97. When the Defendantsmade theserepresentations,they had no reasonableground

10 for believing them to be true. Upon information and belief, the Defendantshad accessto the files

l1 on the mortgage loans in the collateral pools for thesesecuritizations,and, had the Defendants

t2 inspectedthose files, they would have leamed that the information they gave the Bank contained

13 unkue or misleading statements.In addition, upon information and beliei the Defendantshired

I4 one or more "due-diligence contractors"to ascertainwhether the mortgage loans in the collateral

l5 pools complied with the representationsand wananties made about those loans, and these

t6 contractorsreportedto the Defendantsthat a material number of the loans in the collateral pools

l7 were materially different from the descriptionsof those loans in the prospectussupplements.

18 Thus, on information and belief, the Defendantshad accessto information that either did make

t9 the Defendantsaware, or would or could have made them aware had they heededthat

20 information, that the representationsthey made to the Bank contained materially untrue or

2l misleading statementsabout the mortgageloans in the collateral pools.

22 98. The Bank reasonablyand justifiably relied on the representationsdescribedabove

23 in analyzing and deciding to purchasethesecertificates.Had the Defendantsnot made thesefalse

24 and misleading representations,the Bank would not have purchasedthesecertificates.

25 99. When it purchasedthesecertificates,the Bank did not know about the untrue and

26 misleading statementsalleged herein.

27 100. As a direct and proximate result of the negligent misrepresentationsby the

28 Defendants,the Bank was damagedin an amount to be proved at trial.

COMPLAINT
 I SIXTH CAUSEOF ACTION
2 RESCISSIONOF CONTRACT
(CaliforniaCivil CodeSS1689and 1710,and CommonLaw)
J

4 Against Defendant: In connection with Securitizations :

5 Deutsche Securitizations
Nos.I throueh 4
Bear Stearns SecuritizationsNos. 5 throush 8
6 Countrywide Securitization No. 9
Credit Suisse SecuritizationsNos. l0 throush 16
7 Greenwich Canital SecuritizationsNos. 17 throush 19
Morsan Stanlev SecuritizationsNos. 20 and2l
8 UBS Securitizations Nos. 22 throus.h 28
Merrill Lvnch SecuritizationsNos.29 throush 33
9
10 101. The Bank hereby incorporatesby reference,as though fully set forth, paragraphs1

l1 through 100.

t2 I02. The Bank purchasedeach certificate pursuantto a contract in writing betweenthe

13 Bank and the dealer from which it purchasedthat certificate. Each contract statedthe

t4 considerationthat the Bank paid eachdealer for each certificate.

15 103. In making eachcontract to purchasethe certificates,the Bank relied on the truth of

l6 the statementsthat the Defendantsnamed above made in the prospectussupplements.Because

t7 those statementswere untrue or misleading,the Bank was mistaken about its basic assumptions

18 underlying its purchaseof each certificate, and this mistake had a material adverseeffect on the

t9 agreed-uponexchangerepresentedby the Bank's purchaseof each certificate. Becausethe

20 Defendantsnamed above were responsibleto provide accurateinformation in the prospectus

2I supplements,the Bank did not assume,nor does it bear,the risk of the fundamentalmistake

22 underlying its decision to purchasethesecertificates.

23 104. The Defendantsnamed above obtainedthe consentof the Bank to the contractsto

24 purchasethe certificates by meansof their assertion,as facts, of that which was not true, when

25 those Defendantshad no reasonableground for believing those assertionsto be true.

26 105. Pursuantto Cal. Civil Code.$ 1689et seq.,the Bank is entitledto rescind,and

27 doeshereby demandthe rescissionof, each contract for the sale and purchaseof thesecertificates.

28
-24-
COMPLAINT
 I The Bank offers to restoreall benefits that it has received under those contractsand is entitled to

2 recover all considerationthat it paid under them.

J PRAYER FOR RELIEF

4 WHEREFORE, the Bank respectfully demandsjudgment as follows:

5 On the first causeof action, the considerationthat the Bank paid for each certificate with

6 interestthereon,less the amount of any income that the Bank has received thereon,upon the

7 Bank's tender of each certificate;

8 On the secondcauseof action, damagesin an amount to be determinedat trial;

9 On the third causeof action, the considerationthat the Bank paid for each certificate with

10 interestthereon,less the amount of any income that the Bank has received thereon,upon the

1l Bank's tender of each certificate;

t2 On the fourth causeof action, the considerationthat the Bank paid for each certificate

l3 with interest thereon,less the amount of any income that the Bank has received thereon,upon the

T4 Bank's tender of each certificate;

15 On the fifth causeof action, damagesin an amount to be determinedat trial;

t6 On the sixth causeof action, the considerationthat the Bank paid for each certificate with

t7 interestthereon,less the amount of any income that the Bank has received thereon,upon the

l8 Bank's tender of each certificate;

19 All togetherwith the costs of this action, the reasonablefees of the Bank's attornevsin

20 this action, and such other and further relief as the court may deemjust.

2I lt/
22
23
24
25
26
27
28
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COMPLAINT
 I JURY DEMAND

2 THE BANK DEMANDS TRIAL BY ruRY OF ALL ISSUESSOTRIABLE.

a
J M a rch1 5 ,2 0 1 0 GOODIN,MACBzuDE,
SQUERI,
DAY & LAMPREY. LLP
4
5
6
By
7
Attomeys for Plaintiff
8 FederalHome Loan Bank of San Francisco
9
10
l1
T2
13
t4
t5
t6
t7
l8
t9
20
2l
22
23
24
25
26
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-26-
COMPLAINT