Professional Documents
Culture Documents
ROBERTA. GOODIN,StateBarNo.061302
2 rgoodin@goodinmacbride. com
FRANCINET. RADFORD,StateBarNo. 168269
fradford(@eoodinmacbride.com
"4"*&*r#,-P
J
t6
FEDERALHOME LOAN BANK OF SAN
cGC.10 .497840
No.
t7 FRANCISCO,
COMPLAINT FOR RESCISSIONAND
l8 Plaintiff. DAMAGES FOR:
t9 v. (1) VTOLATTONSOF $$ 2s40rAND
2550TOF THE CALIF'ORNIA
20 CREDITSUISSESECURITIES(USA) LLC,
F/KIA CREDITSUISSEFIRSTBOSTON CORPORATESECURITIESACT;
2T LLC;
CREDITSUISSEFIRSTBOSTON (2) VTOLATTONSOF $S11 AND ls OF
22 MORTGAGESECURITIESCORP.: THE SECURITIESACT OF 1933;
DEUTSCHEBANK SECURITIES. iNC.:
23 DEUTSCHEALT-A SECURITIBS. TWC.: (3) vIoLATIoNS oF $$ rz(a)Q) AND
J.P.MORGANSECURITIES, TNC; FIW'A 15 OF THE SECURITIESACT OF
24 BEAR STEARNS& CO.,INC.;
STRUCTUREDASSETMORTGAGE 1933;
25 INVESTMENTSII. INC.:
THE BEAR STEARNSCbITIPENIES.LLC. (4) VTOLATTONSOF $$ 1s72AND 1710
26 FlKlA THE BEAR STEARNSCOMPANIES. OF THE CALIFORNIA CIVI
INC.; CODE (NEGLIGENT
27 RBSSECURITIES, fNC., FlWA MISREPRESENTATION); and
GREENWICHCAPITAL MARKETS,INC.;
28 RBSACCEPT INC. F/K/A
COMPLAINT
I GREENWICHCAPITAL ACCEPTANCE. (s) RESCTSSTON OF CONTRACTS
INC.; UNDER S 1689ET SEQ.OF THE
2 MORGANSTANLEY& CO.
INCORPORATED; CALIFORNIA CIVL CODE
J UBS SECURITIES,
LLC;
MORTGAGEASSETSECURITIZATION
4 TRANSACTIONS,INC.;
BANC OF AMERICA SECUzuTIES
LLC:
) BANC OF AMERICA FUNDING
CORPORATION;
6 BANC OF AMEzuCA MORTGAGE
SECUzuTIES,INC.;
7 COUNTRYWIDESECURITIES
CORPORATION;
8 CWALT,INC.;
COUNTRYWIDEFINANCIAL
9 CORPORATION;AND,
DOESt-50.
l0
Defendants.
11
t2
13 Plaintiff, FEDERALHOME LOAN BANK oF SAN FRANCISCo (referredto in
t4 this complaint as the Bank), alleges,basedupon its continuing investigation, including the
t6 have evidentiary support or, where specifically identified as being pled "on information and
t7 belief," are likely to have evidentiary support after a reasonableopportunity for further
18 investigation or discovery.
22 California Civil Code, and the common law. As alleged in detail below, the Defendantssold or
24 The Bank paid more than $13.7 billion for those certificates.When they offered and then sold
25 thesecertificatesto the Bank, the Defendantsmade numerousstatementsto the Bank about the
26 certificates and the credit quality of the mortgage loans that backedthem. On information and
27 belief many of those statementswere untrue. Moreover, on information and belief the
28 Defendantsomitted to statemany material facts that were necessaryin order to make their
-2-
COMPLAINT
I statementsnot misleading. For example,the Defendantsmade untrue statements,or omitted
2 important information, about such material facts as the percentageof equity that borrowers had in
J their homes,the number of borrowers who actually lived in the housesthat securedtheir loans,
4 the credit scoresof the borrowers, and the businesspracticesof the lendersthat made the loans.
8 Acts, the California Civil Code, and the common law, the Bank is entitled to rescind its purchase
T4 (10 securitizations,Nos. 32 through 41), Greenwich Capital Markets, Inc. (three securitizations,
l5 Nos. 42 through 44), Morgan Stanley & Co. Inc. (three securitizations,Nos. 45 through 47), UBS
18 Nos. 75 through 80). The other Defendantsnamed in this complaint are liable to the Bank
t9 becausethey were the issuersof some of those certificatesor becausethey controlled one of those
20 issuers.
2l PARTIES
22 3. Plaintiff is a bank createdby the FederalHome Loan Bank Act. The headquarters
23 of the Bank are in the City and County of San Francisco.Under its Organization Certificate, the
24 Bank is to operatein FederalHome Loan Bank District 11, which comprisesthe Statesof
25 Arizona, Califomia, and Nevada.The Bank does operatein each of those three States.
27 First Boston LLC and referred to as Credit Suisse)is a limited liability company organizedunder
COMPLAINT
I 5. Defendant Credit SuisseFirst Boston Mortgage SecuritiesCorp. (referred to as
J Mortgage Securitieswas the issuer of five of the certificatesthat Credit Suissesold to the Bank.
5 corporation organizedunder the laws of Delaware. Deutschesold the Bank 2l of the certificates.
7 corporation organizedunder the laws of Delaware. DeutscheAlt-A was the issuerof five of the
10 Inc. and referred to as Bear Stearns) is a corporation organizedunder the laws of Delaware. Bear
13 is a corporation organizedunder the laws of Delaware. SAMI II was the issuer of six of the
I7 of Delaware. The Bear StearnsCompanies,Inc. controls or controlled SAMI II. Under Section l5
l9 liable to the Bank jointly and severally with, and to the sameextent as, SAMI II.
25 under the laws of Delaware. Greenwich Capital Acceptancewas the issuer of one of the
27
28
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COMPLAINT
I l3' DefendantMorganStanley& Co. Incorporated(refenedto asMorgan Stanley)is
2 a corporationorganizedunderthe lawsof Delaware.MorganStanleysoldthe Bankthreeof the
3 certificates.
4 14. DefendantUBS Securities,LLC (referredto asUBS) is a limited liability company
5 organizedunderthe lawsof Delaware.UBS soldthe Bank l2 of the certificates.
6 15. Defendant Mortgage Asset SecuritizationTransactions,Inc. (referredto as MAS
7 is a corporation organizedunder the laws of Delaware.MAST was the issuerof six of the
10 limited liability company organizedunder the laws of Delaware. Banc of America sold the Bank
il l5 of the certificates.
13 Funding) is a corporation organizedunder the laws of Delaware. Banc of America Funding was
t4 the issuer of sevenof the certificatesthat Banc of America sold to the Bank.
I7 America Mortgage Securitieswas the issuer of sevenof the certificates that Banc of America sold
18 to the Bank.
20 corporation organizedunder the laws of Califomia. Countrywide sold the Bank six of the
2l certificates.
23 under the laws of Delaware. CWALT was the issuerof three of the certificatesthat Credit Suisse
24 sold to the Bank, I 5 of the certificatesthat Deutschesold to the Bank, one of the certificatesthat
25 Bear Steamssold to the Bank, two of the certificatesthat Greenwich Capital Markets sold to the
26 Bank, three of the certificatesthat Morgan Stanley sold to the Bank, six of the certificatesthat
27 UBS sold to the Bank, one of the certificatesthat Banc of America sold to the Bank. and five of
COMPLAINT
I 21. Defendant Countrywide Financial Corporation is a corporation organizedunder
2 the laws of Delaware. Countrywide Financial Corporation controls or controlled CWALT. Under
a
J Section 15 of the SecuritiesAct Countrywide Financial Corporation therefore is liable to the
4 Bank jointly and severally with, and to the sameextent as, CWALT.
6 Does l-50, inclusive, and therefore suestheseDefendantsby such fictitious names.Plaintiff will
9 is responsiblein some manner for the occurrencesalleged herein and proximately caused
l0 Plaintiffs damages.
t2 23. This Court has subject-matterjurisdiction of this action. The Superior Court is a
15 its contractsto purchasethe certificates,all of which relief this Court hasjurisdiction to grant.
I7 jurisdiction over the Bank's causesof action for violation of SectionsI l, l2(a)(2), and 15 of that
t9 24. Under Section 22(a) of the SecuritiesAct of 1933, "no casearising under this title
20 and brought in any Statecourt of competentjurisdiction shall be removed to any court of the
2l United States."Becauseits activities are not localized in one state,the Bank is not a citizen of any
25 Greenwich Capital, Morgan Stanley, UBS, Banc of America, Countrywide, and CWALT because
26 each of them is registeredto do businessin California. This Court has personaljurisdiction over
27 all of the Defendantsbecausethey offered and sold the certificatesto the Bank "in California"
2 certificatesto the Bank in this County, and becausethe violations of law alleged in this
4 County.
6 27. The securitiesthat the Defendantssold the Bank are so-called asset-backed
9 which the borrowers are to make payments,usually monthly. The entity that makesthe loans is
l0 known as the originator of the loans. The processby which the originator decideswhether to
l1 make particular loans is known as the undenvriting of loans. In the loan underwriting process,
t2 the originator applies various criteria to try to ensurethat the loan will be repaid. Until the loans
l3 are securitized,the borrowers on the loans make their loan paymentsto the originator.
t4 CollectivelY, the paymentson the loans are known as the cash flow from the loans.
I6 into a collateral pool. The originator of those loans sells them (and, with them, the right to
COMPLAINT
1
2 30. A few other aspectsof securitizationare significant to the allegationsof this
5 pool usually contains loans made by the originator that is sponsoringthe securiti zation.Other
7 originators, aggregatesthem into a collateral pool, sells them to a trust, and securitizesthem. The
8 sponsorarrangesfor title to the loans to be transferredto an entity known as the depositor, which
11 loans in the collateral pool. Becausea trust has no assetsother than the loans that it purchased,it
t2 may not be able to satisff the liabilities of an issuerof securities(the certificates).The law
T4 rl.
2 reviewing thousandsof loan files, the securitiesfirms that will underwrite the sale of the
4 investorsthe information about the credit quality of the loans that will be depositedinto the trust.
) As will be alleged in detail below, the information that the Defendantspresentedto the Bank
6 about the credit quality of the loans in the collateral pools of the 80 trusts containedmany
7 statementsthat were material to the credit quality of those loans, but, on information and belief,
8 were untrue or misleading. Moreover, on information and belief, the Defendantswere negligent
I2 Corporation, Superior Court for the Stateof California County of Los Angeles No. BC 380698,
13 filed on November 11,2007, New Jersey CarpentersHealth Fund v. Residential Capital LLC,
t4 United StatesDistrict Court for the SouthemDistrict of New York No. 08-cv-8781,filed on
t6 Trust 2006-AR1,United StatesDistrict Court for the SouthernDistrict of New York No. 08-cv-
t7 08093, filed on August 20,2008, the pendencyof which actions has tolled the running of the
2l 80. Details of eachtrust and eachcertificate are statedin Item 36 of SchedulesI through 80 of
22 this complaint, which correspondto SecuritizationsNos. I through 80. The Bank incorporates
23 into this paragraph36, and allegesas though fully set forth in this paragraph,the contentsof Item
24 36 ofthe schedules.
27 37. In connectionwith their offers and salesof the certificatesto the Bank, each of the
2 that was filed with the SEC, drafts of some of the statistical tables to be included in the prospectus
3 supplement,and a computer model of the financial structureof the securitization.In each of these
4 documents,each dealer made statementsof material fact about the certificate that it offered and
5 sold to the Bank.I A true copy of the prospectussupplementfor each securitization is available
7 38. On information and belief, many of the statementsof material fact that each dealer
I4 the mortgage loan to the value of the mortgagedproperty when the loan is made. For example,a
t6 on the sameproperty has an LTV of 90o/o.LTV is one of the most important measuresof the risk
t7 of a mortgage loan, and the LTVs of the mortgage loans in the collateral pool of a securitization
l8 are likewise one of the most important measuresof the risk of certificates sold in that
19 securitization.LTV predicts the likelihood of default (the lower the LTV, the less likely that a
20 decline in the value of the property will wipe out the owner's equity, and thereby give the owner
2I an incentive to stop making mortgagepaymentsand abandonthe property). LTV also predicts the
22 severity of loss in the event of default (the lower the LTV, the greaterthe "cushion," so the
23
24 ' Three of the
certificatesthat the Bank purchasedwere certificates in re-securitizationsof existing
25 certificates of mortgage-backedsecurities.In connectionwith the sale of those three certificates,the
dealerssent to the Bank a private placementmemorandumfor the re-securitizationand prospectus
26 supplementsfiled with the SEC for the underlying securitizations.Details of the re-securitizationsare
included in their respectiveschedules.
27 2
A uniform resourcelocator for eachprospectussupplementis included in Item 36 of each
schedule.
28
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COMPLAINT
I greaterthe likelihood that the proceedsof foreclosurewill cover the unpaid balanceof the
2 mortgage loan).
6 higher than the value of the property, and an appraisalshould ensurethat the LTV is calculated
7 using the actual value as the denominator.Sometimesin a purchase,the denominatoris the lower
ll above, if the property whose actual value is $500,000is appraisedinsteadat $550,000,then the
t2 LTV of the $300,000loanfalls from 60% to 54.5Yo,andthe LTV of the $450,0001oanfalls from
13 90Yoto 81.8%. In either case,the LTV basedon the incorrect appraisalunderstatesthe risk of the
t4 loan. It is also important to note that, the higher the correct LTV, the more the risk is understated
l5 by an incorrect appraisalof any given magnitude.In the example above, there is liule difference
T6 in the risk of a loan with an LTV of 60% and one with an LTV of 54.5%;both are safe loans with
I7 large equity cushions.But there is a very large difference in the risk of a loan with an LTV of
l8 90%oand one with an LTV of 8 I .8%. In the latter case,there is an equity cushion of 18.2%;o
of the
t9 value of the property, in the former, only llo/o,just over half as much. Thus, an appraisalthat
20 overvaluesa property by just l0% producesan overstatementof more than 80% in the
2l homeowner'sequity.
22 42. LTV is an important measureof the risk of a mortgage loan, and the LTVs of the
23 mortgage loans in the collateral pool of a securitizationare likewise an important measureof the
24 risk of certificates sold in that securitization.LTV helps to predict both the likelihood of default
25 and the severity of loss in caseof default. A reasonableinvestor considersLTV important to the
27 differencesin the weighted averageLTV of the mortgage loans in the collateral pool of a
28 securitizationhave a significant effect on the risk of each certificate sold in that securitization,
COMPLAINT
I and thus, are important to the decision of a reasonableinvestor whether to purchaseany such
2 certificate.
a
J
4 43. Residentialpropertiescan securemore than one mortgage loan, a senior (or first)
5 and one or more junior mortgage loans. The combined loan-to-valueratio (CLTV) is the ratio of
6 the total outstandingprincipal balanceof all loans (mortgagesor home equity lines of credit) that
11 44. Like LTV, CLTV is an important measureof the risk of a mortgage loan, and the
t2 CLTVs of the mortgage loans in the collateral pool of a securitizationare likewise an important
l3 measureof the risk of certificates sold in that securitization.CLTV helps to predict the likelihood
t6 the weighted averageCLTV of the mortgage loans in the collateral pool of a securitizationhave a
t7 significant effect on the risk of each certificate sold in that securitization,and thus, are important
22 Defendantsmade statementsabout the LTVs and CLTVs of the mortgage loans in the collateral
24 tables.Those tables divided the mortgageloans into severalcategoriesof LTV and CLTV and
25 presentedquantitative information about the loans in each category.All of the statementsin each
26 prospectussupplementabout the LTVs and CLTVs of the mortgage loans in the collateral pools
28
-t2-
COMPLAINT
1 46. On information and belief, thesestatementswere materially untrue or misleading
2 because(i) the statedLTVs and CLTVs of a significant number of those mortgage loans were
a
J lower than the actual LTVs or CLTVs; (ii) the Defendantsomitted to statethat the appraisalsof a
4 significant number of the propertiesthat securedthe mortgage loans in the collateral pools were
5 biasedupward, so that statedLTVs and CLTVs basedon those appraisalswere lower than the
6 true LTVs and CLTVs of those mortgageloans; or (iii) the statedCLTVs did not reflect second
8 collateral pools.
9 47. Since the datesof SecuritizationsNos. I through 80, loans in the collateral pools
l0 of each securitization have been foreclosedupon. In nearly all of the pools, the propertiesthat
ll securedthose foreclosedloans were sold for much less than the value ascribedto those same
I2 propertiesin the LTV and CLTV data reportedin the prospectussupplementsand other
22 propertiesin the collateral pools, in the LTV and CLTV data reported in the prospectus
23 supplementsand other documentsthat the Defendantssent to the Bank were too high, the
24 resulting LTVs and CLTVs were too low, and thus that the statementsin the prospectus
25 supplementsand other documentssent to the Bank about the LTVs and CLTVs were untrue or
26 misleading. The results of this analysisfor nearly all of SecuritizationsNos. I through 80 are
27 statedin Item 47 of SchedulesI through 80 of this complaint. The Bank incorporatesinto this
28
COMPLAINT
I para$aph 47, and allegesas though fully set forth in this paragraph,the contents
of Item 47 of the
2 schedules.
a
J 48. On information and belief, by theseuntrue and misleading statements,the
4 Defendantsmaterially understatedthe risk of every certificate that any of them sold to the Bank.
COMPLAINT
I 2. Untrue or mis-leading
statements.about the occu_pancystatusof the properties
that securedthe mortgageloansin the collateral^poolsoi th"r;;;;il.itizations
2
J 52. In the prospectussupplementsand other documentsthat they sentto the Bank, the
5 mortgage loans in the collateral pool of this securitization. Someof thesestatementswere in so-
6 called collateral stratification tables.Those tables divided the mortgage loans into several
9 occupancystatusof the mortgage loans in the collateral pool of this securitization are
l0 incorporatedherein by reference.
l3 higher than the actual number of loans in that category; (ii) the statednumber of mortgage loans
l4 that were securedby secondhomes was lower than the actual number of loans in that category;
l6 than the actual number of loans in that category;or (iv) the Defendantsomitted to statethat the
20 Defendantsmaterially understatedthe risk of every certificate that any of them sold to the Bank.
24 certain characteristicsof the mortgage loans in the collateral pool of a securitizationto predict the
25 performanceof those loans and thereby to determinethe risk both of those loans and of the
28
COMPLAINT
I mortgage loans. Among the most important of thesecharacteristicsare LTV, described
above.
2 and the credit scoreof the borrower.
a
J 56. In the prospectussupplementsand other documentsthey sent to the Bank, the
4 Defendantsmade statementsabout the LTVs and credit scoresof the mortgage loans in the
6 incorporatedherein by reference.
7 57. During the time before each of SecuritizationsNos. I through 80, the power of
8 LTV and credit scoreto predict the performanceof otherwise similar mortgage loans deteriorated,
9 even after taking account of declinesin houseprices and other macroeconomicfactors. put
ll loans were made in2007 than if they were made in2006,worse if made in2006 than if made in
t2 2005,etc.
l3 58. On information and belief all statementsthat the Defendantsmade about the
I4 LTVs and credit scoresof the mortgage loans in the collateral pools of thesesecuritizationswere
t6 loans that they or their affiliates securitizedwere nearly constantin reported weighted-average
l7 LTV and weighted-averagecredit score,yet performed worse if the loans were made in}007 thart
18 if they were made in 2006, worse if made in2006 than if made in 2005, etc.
20 materially understatedthe risk of every certificate that any of them offered and sold to the Bank.
25 evaluatedapplications for loans. An originator's guidelines,and the extent to which the originator
26 complies with them, are important indicators of the risk of mortgage loans made by that
27 originator and of certificates sold in a securitizationin which mortgage loans made by that
2 collateral pool of a securitization,and the extent to which the originator complied with its
4 Differences in those guidelines or in the extent to which an originator complied with them have a
5 significant effect on the risk of each certificate sold in that securitizationand thus are important to
l1 underwriting guidelines of the originators of the mortgage loans in the collateral pools of
l3 through 80 of this complaint. The Bank incorporatesinto this paragraph61, and allegesas though
t6 becausethe Defendantsomitted to statethat (a) the originators were making frequent, and
l7 increasingly frequent, exceptionsto those underwriting guidelines; (b) the originators were
19 compensatingfactor was present;and (c) the originators were failing frequently, and increasingly
22 Defendantsmaterially understatedthe risk of every certificate that any of them offered and sold to
23 the Bank.
24
25
26
27
28
COMPLAINT
I FIRST CAUSE OF ACTION
UNTRUE OR MISLEADING STATEMENTS IN TTTNS.q.LEOF SECURITIES
2 (Cal.CorporationsCodeSg25401,25501)
a
J
Against Defendanr In connectionwith SeCuW
4 Credit Suisse Securitizations
Nos.l@
5 lhrough 10
Deutsche SecuritizationsNos. 11 through 16, and 18
through 31
6 Bear Stearns SecuritizationsNos.32 through 35r 40, and
7 4l
Greenwich Canital SecuritizationsNos.42 aid44
8 Morqan Stanlev SecuritizationsNos.45 throush 47
UBS SecuritizationsNos.48through 51, and 53
9 through 59
Banc of America SecuritizationsNos.60 throueh 70
l0 Countrvwide SecuritizationsNos. 75 throueh 80
64. The Bankherebyincorporates
by reference,asthoughfully setforth, paragraphsI
1l
through63.
t2
65. In doingthe actsalleged,the Defendants
namedaboveviolatedSections25401
13
and25501of the CaliforniaCorporationsCodein the saleto the Bank of the certificatesin the
I4
securitizations
referredto above.
t5
66. This actionis broughtwithin two yearsafterthe discoveryof the untrueand
t6
misleadingstatements
in the prospectus
supplements
andotherdocumentsthatthe Defendants
t7
sentto the Bank,andwithin five yearsof the Bank'spurchaseof thesecertificates,or within any
l8
applicableperiodastolled by the pendencyof the classactionsreferredto aboveor others.
t9
Despitehavingexercisedreasonable
diligence,the Bankdid not andcouldnot reasonably
have
20
discoveredearlierthe untrueandmisleadingstatements
in theprospectussupplements
andother
2l
documents.
22
67. UnderCal.Corp.Code$$ 25401and25501,,the
Bankis entitledto recoverthe
23
considerationthat it paid for each of thesecertificates,plus interest at the legal rate from the date
24
of purchaseto the date on which it recoversthe purchaseprice, minus the amount of income it
25
received on the certificate. Pursuantto $ 25501, the Bank will tender each certificate before entry
26
ofjudgment.
27
28
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COMPLAINT
I SECONDCAUSEOF ACTION
2 UNTRUE OR MISLEADING STATEMENTS
IN REGISTRATION STATEMENTS
J (Section11 of the SecuritiesAct of 1933)
4 Against Defendant: In connectionwithSecifrlzatm
5 Credit Suisse Securitizations
Nos.7 throush 10
Deutsche Securitizations
Nos.18 thiouEE3l
6 Bear Stearns SecuritizationsNos. 40 anil4l
SAMI II Securitization No.40
7 Greenwich Canital Securitization No. 44
Morgan Stanley SecuritizationsNos. 45 throueh 47
8 UBS SeculitizationsNos.54 throush 59
Countnwide SecuritizationsNos.76 throueh 80
9
CWALT SecuritizationsNos.7, 9, 10, l&lhroug[3l;
l0 4l,44through 47,54through 59,76
through 80
11
68. The Bank hereby incorporatesby reference,as though fully set forth, paragraphs1
I2
through 67.
13
69. In doing the acts alleged,the Defendantsnamed above violated Section 11 of the
l4
SecuritiesAct of 1933 in the saleto the Bank of the certificatesin the securitizationsreferred to
l5
above.
l6
70. The cenificates in thesesecuritizationswere issuedpursuantor traceableto
t7
registration statements.Details of eachregistration statementand each certificate are statedin
l8
Item 36 ofSchedules 1 through 80.
19
71. SAMI II and CWALT are depositorsof the securitizationslisted above and
20
therefore are the issuersof the certificates in those securitizations.Credit Suisse,Deutsche,Bear
2I
Stearns,Greenwich Capital, Morgan Stanley,UBS and Countrywide actedas underwriters of the
22
certifi cateslisted above.
23
72. This action is brought within one year after the discovery of the untrue and
24
misleading statementsin the registration statements,as amendedby the prospectussupplements,
25
and within three years of thesecertificateshaving been sold to the public, or within any
26
applicable period as tolled by the pendencyof the classactions referred to above or others.
27
28
-19-
COMPLAINT
I Despite having exercisedreasonablediligence, the Bank did not and could not reasonably
have
2 discoveredearlier the untrue and misleading statementsin the prospectussupplements.
a
J 73. 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
7 through 63.
8 74. The Bank expresslyexcludesfrom this causeof action any allegation that could be
I2 Bank purchasedthesecertificates.
13 76. The Bank did not know when it purchasedthesecertificatesthat the statementsin
28 through78.
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COMPLAINT
I 80. In doing the acts alleged,the Defendantsnamed above violated Section l2(a)(2)
2 the SecuritiesAct of 1933in the saleto the Bankof the certificatesin the securitizations
referred
J to above.
4 81. This action is brought within one year after the discovery of the untrue and
6 having been sold to the public, or within any applicableperiod as tolled by the pendencyof the
8 did not and could not reasonablyhave discoveredearlier the untrue and misleading statementsin
9 the prospectussupplements.
l1 therefore are the issuersof the certificatesin those securitizations.In connectionwith the offer
I2 and sale of thesecertificatesto the Bank, the issuersalso made all of the statementsof material
15 83. The Bank expresslyexcludesfrom this causeof action any allegation that could be
l8 84. The Defendantsnamed above, for their own financial gain, solicited the Bank to
20 supplements.
22 Bank purchasedthesecertificates.
24 omitted to statematerial facts necessaryin order to make the statements,in the light of the
26 87. The Bank did not know when it purchasedthesecertificatesthat the statementsin
COMPLAINT
I 89. The Bank is entitled to recover the considerationthat it paid for each of these
2 certificates,plus interest at the legal rate from the date of purchaseto the date on which it
a
recoversthe purchaseprice, minus the amount of income it has received on each certificate. The
COMPLAINT
1 FIFTH CAUSE OF ACTION
NEGLIGENT MISREPRESENTATION
2
(cat. civil code gS1572et seq.and 1709et seq.,andcommon Law)
a
J
T6 96. The Bank hereby incorporatesby reference,as though fully set forth, paragraphsI
t7 through 95.
I9 representationsregarding the LTVs and CLTVs of the mortgage loans in the collateral pools of
27 for believing them to be true. Upon information and belief, the Defendantshad accessto the files
28 on the mortgage loans in the collateral pools for thesesecuritizations,and, had the Defendants
COMPLAINT
I inspectedthose files, they would have learnedthat the information they gave the Bank
contained
2 untrue or misleading statements.In addition, upon information and beliel the Defendantshired
a
J one or more "due'diligence contractors" to ascertainwhether the mortgage loans in the collateral
4 pools complied with the representationsand warrantiesmade about those loans, and these
5 contractorsreportedto the Defendantsthat amaterial number of the loans in the collateral pools
6 were materially different from the descriptionsof those loans in the prospectussupplements.
7 Thus, on information and belief, the Defendantshad accessto information that either did make
8 the Defendantsaware, or would or could have made them aware had they heededthat
t4 l0l. When it purchasedthesecertificates,the Bank did not know about the untrue and
2 through 102.
4 Bank and the dealer from which it purchasedthat certificate. Each contract statedthe
6 105' In making each contract to purchasethe certificates,the Bank relied on the truth of
8 those statementswere untrue or misleading, the Bank was mistaken about its basic assumptions
9 underlying its purchaseof eachcertificate, and this mistake had a material adverseeffect on the
t2 supplements,the Bank did not assume,nor does it bear,the risk of the fundamentalmistake
I4 106. The Defendantsnamed above obtainedthe consentof the Bank to the contractsto
l5 purchasethe certificates by meansof their assertion,as facts, of that which was not true, when
t7 107. Pursuantto Cal. Civil Code. $ 1639 et seq.,the Bank is entitled to rescind, and
l8 doeshereby demandthe rescissionof, eachcontract for the sale and purchaseof thesecertificates.
19 The Bank offers to restoreall benefits that it has receivedunder those contractsand is entitled to
23 On the first causeof action, the considerationthat the Bank paid for each certificate with
24 interestthereon,less the amount of any income that the Bank has received thereon,upon the
27
28
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COMPLAINT
I On the third causeof action, the considerationthat the Bank paid for each certificate
with
2 interest thereon,less the amount of any income that the Bank has receivedthereon,upon
the
a
J Bank's tender of each certificate;
4 On the fourth causeof action, the considerationthat the Bank paid for each certificate
5 with interestthereon,less the amount of any income that the Bank has received thereon,upon the
8 On the sixth causeof action, the considerationthat the Bank paid for each certificate with
9 interestthereon,less the amount of any income that the Bank has received thereon,upon the
11 All togetherwith the costs of this action, the reasonablefees of the Bank's attomevs in
t2 this action, and such other and further relief as the court may deemjust.
l3 JURY DEMAND
I4 THE BANK DEMANDS TRIAL BY ruRY OF ALL ISSUESSO TRIABLE.
15 Ma rch1 5 ,2 0 1 0 GOODIN,MACBRIDE, SQUERI,
DAY & LAMPREY. LLP
t6
GRAIS & H LLP
t7
18
By
t9
Attomeys for Plaintiff
20 FederalHome Loan Bank of San Francisco
2l 3428/0OllXl17M3.vl
22
23
24
25
26
27
28
-26-
COMPLAINT