BANK OF AMERICA FORECLOSURE, ANSWER, AFFIRMATIVE DEFENSES, COUNTERCLAIM

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BANK OF AMERICA FORECLOSURE

BANK OF AMERICA FORECLOSURE

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  • 1. IN THE CIRCUIT COURT OF THE ___ JUDICIAL CIRCUIT _____ COUNTY, _________,_________BAC HOME LOANS SERVICING, LP F/K/A )COUNTRYWIDE HOME LOANS SERVICING )LP ) ) Plaintiff, ) Case No. 2010 ) v. ) ) ) ) Defendants. ) AMENDED ANSWER, AFFIRMATIVE DEFENSES AND COUNTERCLAIM Defendants and Counterclaimants, _________________individually “Owner” andcollectively “Owners”), proceeding pro se hereby answer the Complaint to Foreclose Mortgagebrought by BAC Home Loans Servicing, LP (hereinafter “BAC”) f/k/a Countrywide HomeLoans Servicing LP (hereinafter “CHLS”) and set forth their affirmative defenses andcounterclaim as follows: AMENDED ANSWER 1. Plaintiff files this complaint pursuant to 735 ILCS 5/15/-1101 et. seq., to foreclosethe mortgage, trust deed or other conveyance in the nature of a mortgage (hereinafter called“Mortgage”) hereinafter described and joins the following persons as defendants:_________________ ANSWER: Owners admit that BAC brings this action to foreclose on a Mortgage, butdenies that BAC has the right to bring an action under the Mortgage. Page 1 of 62
  • 2. 2. Plaintiff has heretofore elected to declare the whole of the principal sumremaining unpaid together with interest thereon to become immediately due and payable and bythe filing of this complaint Plaintiff has confirmed said election. ANSWER: Owners admit that BAC claims that it has made an election with regard tothe Mortgage signed by Owners, but denies that BAC has the right to bring an action under theMortgage. 3. Attached as “EXHIBIT A” is a true copy of the Mortgage. Attached as”EXHIBIT B” is a true copy of the Note secured thereby. ANSWER: Owners lack information sufficient to form a belief as to the truth of theallegations contained in paragraph 3 of the Complaint especially as the Mortgage is labeledunofficial copy and therefore, Owners deny the allegations. Owners admit that the documentsattached as Exhibit A and Exhibit B to the Complaint purport to be the Mortgage and the Noteand demand that originals of the Mortgage and Note be produced. 4. Information concerning said mortgage: a) Nature of the Instrument: Mortgage ANSWER: Owners admit. b) Date of the Mortgage: ________________ ANSWER: Owners admit. c) Name or Names of the Mortgagors: _____________________________. ANSWER: Owners admit, but affirmatively state that ownership by Owners inthe Mortgage is not stated as stated on record title for the Mortgaged Premises. d) Names of the mortgagee, trustee or grantee in the Mortgage: Mortgage Electronic Registration Systems, Inc., as Nominee for Countrywide Bank, FSB. Page 2 of 62
  • 3. ANSWER: Owners deny that the mortgagee is the Mortgage Electronic RegistrationSystems, Inc. as nominee for Countrywide Bank, FSB. e) Date and place of recording: Mortgage Date and Place of recording:_________________ _________ County Recorder‟s Office. ANSWER: Owners admit, and affirmatively state that there were subsequent recordingsassigning the Mortgage so that BAC does not have the right to proceed against Owners. f) Identification of recording: Mortgage: Document No. R_____________. ANSWER: Owners admit that the document identified in Section 4e) was recorded asdated. g) Interest subject to the mortgage: Fee simple ANSWER: Owners admit that they are fee simple owners of the mortgaged premises anddeny that BAC has the right to proceed against them. h) Amount of original Indebtedness, including subsequent advances made under themortgage: $_________. ANSWER: Owners admit. i) Legal description of Mortgaged premises and common address (hereinafter“Mortgaged Premises”): __________________________________________________________ Commonly known as ________________________________________ Permanent Index No.: ________________________ ANSWER: Owners admit. Mortgaged Premises shall also be referred to herein as“Property”. Page 3 of 62
  • 4. j) Statement as to defaults: The Mortgage is in default due to the failure of themortgagor to pay the monthly installments of principal, interest, taxes and insurance, and anyother escrow items that may apply, for the period _______________ through the present. Thereremains an outstanding principal balance of $___________ with interest accruing at $_________per diem plus attorney‟s fees, foreclosure costs, late charges, advances and expenses incurred bythe Plaintiff as a result of the default. ANSWER: Owners deny that they owe BAC under the Mortgage. k) Name of present owner(s) of the real estate: ______________________________, as Joint Tenants ANSWER: Owners admit. l) Names of other persons who are joined as defendants and whose interest in or lienon the mortgaged real estate is sought to be terminated:____________________________________ Unknown Owners and Non-Record Claimants,upon information and belief, may have an interest in the said property. (1) That in addition to person(s) designated by name herein, there are other person(s) who have or claim to have an interest in the mortgaged real estate which is not disclosed of record by recorded notice or proceeding which would give constructive notice and who are more fully defined in 735 ILCS 5/15-1210, and whose interest falls in any of the following categories: (1) right of homestead, (2) judgment creditor, (3) beneficiary interest under any trust other than the beneficial interest of a beneficiary of a trust in actual possession of all or part of the real estate, (4)unrecorded mechanics lien claimant, or (5)any other entity or person who claims an interest in the Mortgaged Premises. That the name or names of these claimants and all such other persons are made party defendants to this action by the name and description of "UNKNOWN OWNERS AND/OR NON-RECORD CLAIMANTS". ANSWER: Owners admit that there are other persons with recorded interests withrecordings with regard to the Mortgaged Property. Page 4 of 62
  • 5. m) Names of defendants claimed to be personally liable for deficiency, if any:________________ unless any of such defendants have been discharged in Bankruptcy, in whichcase no such deficiency is sought. ANSWER: Owners admit that BAC is claiming that ______________ is personallyliable for deficiency, but deny that ______________________ is liable to BAC. n) Capacity in which Plaintiff brings this foreclosure: Plaintiff is the legal holder ofthe indebtedness and owner of the mortgage given as security therefore. ANSWER: Owners deny the allegations of Section 4n). o) Facts in support of redemption period, shorter than the longer of:(i) 7 months from the date the mortgagor or, if more than one, all the mortgagors (I)have been served with summons or by publication or (II) have otherwise submittedto the jurisdiction of the Court, if residential real estate; (ii) 6 months from the datethe mortgagor or, if more than one, all the mortgagors (I) have been served withsummons or by publication or (II) have otherwise submitted to the jurisdiction ofthe Court, if commercial real estate; or (iii) 3 months from the entry of thejudgment of foreclosure, whichever is later. That pursuant to the terms of the 735ILCS 5/15-1603, the Court determine the length of the redemption period uponmaking a finding based on the facts and circumstances available to the Court at thetime of judgment that the property is either residential, non-residential orabandoned. ANSWER: Owners admit that Section 4o) attempts to state the provisionsof Illinois law and states that the Illinois statute speaks for itself. p) Facts in support of request for attorneys fees and of costs and expenses: Thatpursuant to the terms of the Note and Mortgage, the mortgagee is entitled to recover attorneysfees, court costs, title costs, and other expenses which plaintiff has been and will be required toexpend in the prosecution of this foreclosure. Page 5 of 62
  • 6. ANSWER: Owners deny the allegations of Section 4p) and affirmatively states that BACis not entitled to relief in this action. q) Determination as to residential real estate: (1) That pursuant to the terms of 735 ILCS 5/15-1219, Plaintiff requests that the courtmake a finding based upon facts and circumstances available to the court at the time of Judgmentthat the subject real estate is either “residential real estate” occupied as a principal residenceeither (i) if a mortgagor is an individual, by that mortgagor, that mortgagor‟s descendants, or (ii)if a mortgagor is a trustee of a trust or an executor or administrator of an estate, by a beneficiaryof that trust or estate or by such beneficiarys spouse or descendants or (iii) if a mortgagor is acorporation, by persons owning collectively at least 50 percent of the shares of voting stock ofsuch corporation or by a spouse or descendants of such persons and subject to a 7 monthredemption period. (2) In the event that the court finds that either: (1) the real estate is residential, thenthe real estate shall be subject to a seven month redemption period, or (2) The real estate is non-residential, then the real estate is subject to a six (6) month redemption period. ANSWER: Owners deny the allegations of Section 4q) and affirmatively state that BACis not entitled to relief in this action. r) Facts in support of a requested for appointment of mortgagee in possession or forappointment of a receiver, and identity of such receiver, if sought: None at this time; Plaintiffreserves the right to file a separate Petition for Appointment of Mortgagee in Possession orReceiver if applicable. ANSWER: No answer is required to the provisions of Section 4r). Page 6 of 62
  • 7. s) Name or names of defendants whose right to possess the mortgaged real estate,after the confirmation of the foreclosure sale, is sought to be terminated and, if not elsewherestated, the facts in support thereof: ____________________________________ and UnknownOwners and Non-Record Claimants. ANSWER: Owners admit that BAC is seeking to take away their rights to possess theMortgaged Premises. AFFIRMATIVE DEFENSES Further answering the Complaint, and for their affirmative defenses, Owners state asfollows: FIRST AFFIRMATIVE DEFENSE (LACK OF STANDING) 1. On _________________________________, Owners signed loan documents infavor of Countrywide Bank, FSB (“Countrywide”), now Bank of America, to refinance theirProperty including signing the Note and Mortgage. 2. Owners executed the Note naming Countrywide as “lender” and then separatelyexecuted the Mortgage naming Countrywide as “lender” and “MERS as nominee for lender andlender‟s successors and assigns. MERS is the mortgagee under this security instrument.” 3. Upon learning that most mortgages in the past 10 years were sold to investors asMortgage Bank Securities (“MBS”), Owners sent a Qualified Written Request (“QWR”) to BACand CHLS to learn the identity of potential MBS Investors who might own their Note. Saidattempt to obtain this information, which requested the documentation authenticating the identityof the owner of the Note, and an accounting that would show all money paid or received in Page 7 of 62
  • 8. connection with the subject obligation, was unsuccessful. See Exhibit A, QWR, attached heretoand incorporated herein by reference. 4. On _____________________________, Owners contracted with Luminaq toperform a securitization audit of the Loan on the Property (“Securitzation Audit”). Thefollowing fields were used to locate the specific MBS trust subject note was sold to: Loan IdNumber, Origination Date, Maturity Date, First Payment Date, Principal And SecuritizedAmount Of Loan, Term Of The Loan / Interest Rate / Type Of The Loan, Geo Location / County/ Zip Code, Servicer / Trustee Name / Trust Name, Status Of The Loan: Foreclosure, Bankruptcy,Reo, Date Of Foreclosure, Bankruptcy, Reo. See Exhibit B, Securitization Search Report,attached hereto and incorporated herein by reference. 5. Said Securitization Audit revealed that Owners Loan was sold prior to the Loanclosing on ______________________________, to Investors of MBS Securities as “The Bank ofNew York, in trust for registered holders of Alternative Loan Trust ______________, MortgagePass-Through Certificates, Series ______________, Group 1 Certificates.” (the “Trust”). 6. According to the Prospectus Supplement and Pooling and Servicing Agreement(“PSA”) for the Trust, the closing date of the MBS pool was _____________ and the cut-off date,________________. See Exhibit C, Prospectus pp. 9-12, attached hereto and incorporatedherein by reference. 7. CHLS, now BAC, as Sponsor and Countrywide Bank, now Bank of America asalleged “lender,” sold and assigned, without recourse, their entire interest in the Mortgage LoanContracts (“Receivables”) as the Debt/Obligations, under a Transfer and Servicing Agreement, Page 8 of 62
  • 9. to MBS Investors, Certificate/Bondholders. These Receivables were then securitized as part of alarge pool of Receivables. Certificates were then registered and issued to investors. 8. At the moment of the Note‟s transfer to investors, MERS could not have anagency/beneficiary/nominee status with the true “lender” as there was no further authority tosubstitute a mortgagee or trustee or transfer any other interest in the Mortgage to any party. Thereal parties in interest of the Note are the investors who, in order to foreclose on said mortgage,must prove they have an agency relationship, and BAC which is proceeding here as the allegedmortgagee, which has no standing to so proceed. 9. The alleged lender, Countrywide Bank FSB, was fully aware that the allegedLoan was funded by MBS Investors hence, the subsequent assignment of any and all rightspurported to have been assigned by the Mortgage Registration System (hereinafter “MERS”) toBAC are null and void. MERS was used by Countrywide and CHLS to conceal the true creditorand separate the borrowers from the investors by making it appear that someone other than thetrue creditor had a beneficial interest. 10. According to CWALT‟s Rule 424B5 Prospectus and Pooling and ServicingAgreement (Exhibit C), said documents establish and evidence the following: a) COUNTRYWIDE was the sponsor of the Mortgage Loan Installment Contract,Mortgage and Promissory Note as a Receivable and was neither the Owner nor Original Lenderunder the Mortgage Loan Installment Contracts. b) Countrywide Bank FSB, sold and assigned their entire interest in the Receivablesto Depositor CWALT ______________, under a PSA which is depicted in the Rule 424b5Prospectus. Page 9 of 62
  • 10. c) Upon information and belief, depositor CWALT then transferred and assigned itsentire interest in the Receivables/ Mortgage Loan Installment Contract to the Certificate holdersunder the PSA. d) The Trust then issued the notes to the Depositor CWALT under the IndentureAgreements and pledged the Receivables/Mortgage Loan Installment Contract to the IndentureTrustee, as the Owner Trustee‟s under a Trust Agreement. Depositor CWALT then sold theoffered Notes to the Certificateholders and Security Underwriters. 11. Hence, on ______________, Countrywide was not the true “lender.” Uponinformation and belief, neither Countrywide Bank FSB, CHLS nor MERS advanced funds toOwners with any of its own assets, nor did BAC or its predecessors in interest advance anymoney; hence BAC has no standing to make its Complaint as it is not the holder of the Note andis not in legal possession of the Note. 12. Owners are informed and believe and thereon allege that by the securitizationand sale of this Receivable, the enforceability of the original Receivable, or Note, was lost andBAC is not the holder of the Note. As BAC is not the holder of the Note, it has no standing toproceed on the Mortgage which secures the Note. Upon information and belief, BAC is not inpossession of, and is not the holder of the Note. 13. Standing requires that a party will suffer financial loss derived from non-performance (i.e., nonpayment) of the subject contract, which in this case is the obligation thatarose when the subject Loan was funded on behalf of the Owners. Since the funding occurredout of a pool of money received by Countrywide from the investors, the investors are the holders,rather than BAC as successor to CHLS, or Bank of America as successor to CHL. Page 10 of 62
  • 11. 14. Because neither Countrywide Home Loans, CHLS, BAC nor MERS advancedany funds in said Loan transaction, they do not stand to suffer any loss or harm should they beenjoined from foreclosing on the Property. 15. BAC has no standing to foreclose on behalf of unknown investors because of alack of agency and lack of authority. Thus, they do not have the right to request foreclosure ofthe Mortgage. 16. Based upon the securitization of the Mortgage, Note as Receivable and theMortgage Loan Installment Contract, BAC does not have enforceability rights as holder orholder in due course of the Note and Mortgage and lacks standing to proceed against Ownersunder the Note and Mortgage. 17. An action must be brought by the real party in interest, and BAC is not the realparty in interest with regard to Owner‟s Note and Mortgage. THE ALLEGED ASSIGNMENT 18. On __________________________ BAC filed a Mortgage Assignment whichread: MERS, as nominee for Countrywide Bank FSB, “sold, assigned and transferred” to BACaka CHLS “all right, title and interest in, and to a certain mortgage executed by Owners togetherwith said note therein described... This instrument serves to memorialize the transfer of this loanwhich has previously taken place. On ______________________, said Assignment of Mortgagewas recorded at the _________ County Recorder‟s office as Document Number _____________. 19. In said assignment, BAC claimed that it was the holder of the beneficial interestunder the Mortgage as of ______________. Owners are informed and believe and thereon allege Page 11 of 62
  • 12. that such claim was false. Upon information and belief, at that time, the investors of CWALTAlternative Loan Trust ____________, Mortgage Pass-Through Certificates, Series 2007-25,Group 1 Certificates, were the true and rightful holders of said note. Exhibit D, Assignment, isattached hereto and incorporated herein by reference. 20. Whatever MERS, as nominee for Countrywide in ______________, “has herebysold, assigned and transferred” to BAC aka CHLS of “all rights, title and interest in, and to acertain Mortgage executed by [Owners] together with said Note herein described...” was only therights it had in the Note and Mortgage. As it had no rights at that time, it had nothing to transfer. 21. On the Servicer Statement dated _________________ for the MBS CWALT____________ Trust to which Owners Loan was sold before _________, Owners Loan Number________________ is shown as “existing” in said Trust. Exhibit E, Servicer Statement, isattached hereto and incorporated herein by reference. 22. BAC is not the holder of the Note which is secured by the Mortgage asCountrywide has previously transferred the Note and BAC has no ongoing rights to proceed onthe Mortgage and lacks standing to bring this action and is thus barred from seeking reliefagainst Owners. SECOND AFFIRMATIVE DEFENSE (FRAUD) 23. BAC by its predecessor, CHLS, committed fraud with regard to the Loan toOwners related to the Property as set forth in the Counterclaim. THIRD AFFIRMATIVE DEFENSES (UNCLEAN HANDS) 24. In light of BAC‟s fraud and lack of standing, BAC is proceeding with uncleanhands and should be barred from seeking relief from Owners. Page 12 of 62
  • 13. WHEREFORE, Owners, ___________________ and _________________________,respectfully request that this Court grant judgment in their favor and against BAC Home LoansServicing, LP and for such other and further relief that this Court deems necessary and proper. COUNTERCLAIMS ______________________ an_____________________, as Owners, counterclaimagainst BAC Home Loans Servicing, LP, formerly known as Countrywide Home LoansServicing LP, as follows: COUNTERCLAIM THE PARTIES 1. Counter-plaintiffs, _____________________ and _______________(individually “Owner” and collectively “Owners”) are, and at all times mentioned herein are thetitle holders to the property that is the subject of this Counterclaim, the location of which iscommonly known as ________________________________________ (“the Property”) whichthey purchased in _____. 2. Owners are informed and believe and thereon allege that BAC HOME LOANSSERVICING LP F/K/A Countrywide Home Loans Servicing, LP (“BAC”) is a Texascorporation not licensed to do business in the state of Illinois. BAC was, and is, in the businessof being a "servicer" of "federally related mortgage loans" as those terms are defined in RESPA,12 U.S.C. §§ 2602(1) and 2605(i) (2). Owners are informed and believe and thereon allege thatBAC was and is in the business of the collection of consumer debts, either on behalf of itself orothers and it is therefore subject to the Illinois Consumer and Deceptive Practices Act, 815 ILCS505. 3. Owners are informed and believe and thereon allege that at all times mentionedherein, COUNTRYWIDE BANK, FSB (“Countrywide”), is a California corporation not licensedto do business in the state of Illinois; and was and is an entity in the business of purchasing andotherwise taking assignment of consumer credit transactions. Owners entered into a loan with Page 13 of 62
  • 14. Countrywide (“Loan” and in reference to all of the Loan Documents “Loan Documents”)pursuant to a promissory note (“Note”) and secured by a mortgage (“Mortgage”) on the Property. OTHER PARTIES 4. BAC is a wholly-owned subsidiary of Bank of America which purchasedCountrywide and upon information and belief, is the successor in interest to Countrywide and assuch has assumed all liabilities and obligations of Countrywide. In the event BAC answers andresponds to the counterclaim that it is not responsible for the actions of Countrywide or the otherrelated and affiliated entities to Countrywide, Owners reserve the right to add additional partiesto this counterclaim. BAC has brought its Complaint against Owners and it specifically allegesthat it was formerly known as Countrywide Home Servicing, LP (“Countrywide Servicing”) andthus BAC is referenced herein with regard to the actions of Countrywide Servicing, and theactions of its affiliates, Countrywide and Countrywide Home Loans, Inc. (“Countrywide HomeLoans”). 5. Owners are informed and believe and thereon allege, that at all times mentionedherein CWALT, Inc. (hereinafter “CWALT”); was the “depositor” for loans originated by CHLSinto Mortgage backed Securities Collateralized Debt Obligations (“CDO‟s”). Upon informationand belief, CWALT is a Delaware corporation not licensed to do business in the state of Illinoisand was a limited purpose financial subsidiary of Countrywide Financial Corporation; 6. Owners are informed and believe and thereon allege, that at all times mentionedherein The Bank Of New York (hereinafter "BNY") In Trust For Registered Holders OfAlternative Loan Trust _______________, Mortgage Pass-Through Certificates, Series____________, Group 1 Certificates is a banking corporation organized under the laws of theState of New York, as trustee (the “Trustee”) for Pooling and Servicing Agreement dated_______________ of which the Loan is a part of Securitized Asset Backed Receivables forCountrywide ALT ______________. 7. Owners are informed and believe, and thereon allege that at all times mentionedherein Mortgage Electronic Registration Systems, Inc. ("MERS") is and was a Delawarecorporation located at 1818 Library Street, Suite 300 Reston, VA 20190 and is registered to dobusiness in Illinois. Page 14 of 62
  • 15. 8. Upon information and belief, Owners allege that the actions of Countrywide,CHL, CHLS, Bank of America and their affiliates are the actions of BAC and that BAC is liableto Owners for their actions. JURISDICTION AND VENUE 9. This Counterclaim arises out of a Loan induced by fraud by BAC fka CHL andattempted foreclosure related to the Property of Owners. It is brought by Owners who are beingsued for foreclosure by BAC which lacks standing as a real party in interest to the underlyingNote. 10. The Property which is the subject of this complaint is located within___________ County. 11. Venue is proper in the Circuit Court of the ___th Judicial Circuit of the State ofIllinois. OVERVIEW 12. The allegations contained in paragraphs 1 through 24 of the First AffirmativeDefense are re-alleged and incorporated herein by reference. 13. The matters raised by Owners in their affirmative defenses and counterclaimscannot be viewed in a vacuum and need to be viewed in the context of what BAC and the relatedBank of America and Countrywide entities were doing. 14. Upon information and belief, BAC is foreclosing on Owners‟ Property withoutstanding to do so and has taken the following improper actionable wrongs against Owners. BACfka CHL lured Owners into a predatory mortgage loan instrument that has resulted in theforeclosure complaint against Owners with regard to their Property and the potential loss of theirsizeable investment. BAC fka CHL initiated what was to be Owners‟ fully-documented Loanwhere it qualified Owners for the Loan by falsifying Owners‟ loan application to ensure its Page 15 of 62
  • 16. approval, appraised the Property in excess of its value, altered Loan Documents from what wasrepresented to be the Loan terms at the time of the good faith estimate by changing the adjustablerate mortgage (“ARM”) converted said Loan into a security and sold it as a Mortgage-backedSecurity to the CWALT ____________ MBS Trust before the closing, failed to discloseunderlying market conditions which had been intentionally manipulated by it and other financialinstitutions which would result in the foreclosure of homes across America including Owners,employed “robo-signors” to execute legal documents and initiated a complaint to foreclosewithout standing. 15. BAC fka CHL‟s actions constitute false, misleading, deceptive, fraudulent, orotherwise illegal conduct under the law which seeks to strip Owners ________ and_____________ of everything they have worked their entire lives for. BACKGROUND OF THE FINANCIAL MARKETS AT THE TIME OF THE LOAN 16. MERS was established to track ownership of notes and mortgages as notes andmortgages are repeatedly sold and assigned to various parties. 17. On August 6, 2007, the secondary mortgage based securities (“MBS”) marketstopped trading most non-conforming securities as difficulties began surfacing in AAA-ratedMortgage Backed Securities. 18. On August 6, 2007, American Home Mortgage collapsed when CountrywideFinancial Corporation intentionally disclosed to the Securities and Exchange Commission that“these disruptions in the secondary market could hurt Countrywide.” 19. On August 10, 2007, a run on investment banks began as the secondary MBSmarkets shut down, which, in turn, curtailed new mortgage funding. Page 16 of 62
  • 17. 20. In August 2007, the perceived risk regarding Countrywide MBS bonds rose.Credit rating agencies downgraded Countrywide bonds 1-2 grades, some near „junk‟ statuscausing the cost to insure bonds to rise 22% overnight. Approximately fifty mortgage lendersfiled for chapter 11 bankruptcy. Countrywide was then cited as a bankruptcy risk by MerrillLynch which advised clients to sell Countrywide stock. 21. On August 16, 2007, the secondary market for MBS‟s declined further causingCountrywide to draw $11.5 billion from 40 banks including Chase. 22. On August 17, 2007, the Federal Revenue accepted $17.2 billion in re-purchaseagreements for MBS to aid in liquidity thereby calming Wall Street. To the naive unsuspectingpublic, this action, along with a host of others, provided BAC fka CHL with the ability tocontinue to make loans to Owners and others even though it was fully aware of the impendingmarket collapse. 23. On August 20, 2007 the Federal Revenue waived banking regulation requirementsfor Citigroup and BAC and agreed to exempt them from rules which limited the amountfederally insured banks are able to lend to related brokerage companies - down to only 10% ofthe bank‟s capital. Until that time, regulations stated that banks with federally insured depositsshould not be put at risk by brokerage subsidiaries activities. 24. On August 23, 2007, CITI, BAC and 2 other banks received $500 million in 30day loans from the Federal Reserve. Countrywide obtained $2 billion from Bank of America inexchange for stock whereby Bank of America assumed Countrywide‟s liabilities. 25. On January 11, 2008, Bank of America offered $5.50 per share for Countrywidestock and purchased Countrywide for $4 billion in an all stock transaction. Bank of America Page 17 of 62
  • 18. knew there would be lawsuits but stated publicly that they had weighed “Short term pain v. Gooddeal” for Bank of America stockholders. 26. On June 25, 2008, after numerous complaints from Illinois consumers, IllinoisAttorney General Lisa Madigan‟s Consumer Fraud Bureau conducted an investigation intoCountrywide Home Loans and filed a lawsuit against Countrywide alleging fraud (“IllinoisAttorney General Complaint”). 27. On July 1, 2008, Bank of America‟s purchase of Countrywide was finalized. 28. In August, 2009, Bank of America, as successor to Countrywide, agreed to pay$600 million to settle shareholder lawsuits over its mortgage losses. 29. On June 7, 2010, in a U.S. Department of Justice press release, Clifford White III(Justice Department Program Director of the executive office of U.S. Trustees) stated: “Over atwo year period, the US Trustee program worked closely with the FTC to carry out parallelinvestigations relating to Countrywide‟s improper conduct in servicing home loans.” FRAUD BY COUNTRYWIDE 30. Serious allegations of Countrywide company practices that are imputed to BACas successor to Countrywide, are consistent with the specific fraudulent practices raised here byOwners. The following is set forth to provide the context and further support the specificallegations made herein by Owners. These are extensively detailed in The Government of GuamRetirement Fund, et al. v. Countrywide Financial Corporation, et al., CV11-06239 (C.D. Cal.2000) and the following allegations 31 through 91 are taken from that complaint. Page 18 of 62
  • 19. 31. Numerous confidential witnesses confirm that Countrywide loosened andabandoned its underwriting standards. Many of the same confidential witness accounts byformer Countrywide employees are featured in the shareholders derivative complaint - In reCountrywide Fin. Corp. Deriv. Litig., Lead Case No. 07-CV-06293 (C.D. Cal. 2007). In denyingCountrywides motion to dismiss the derivative complaint, the court held that the "numerousconfidential witnesses"- whose accounts are detailed herein- "support a strong inference of aCompany-wide culture that, at every level, emphasized increased loan origination volume inderogation of underwriting standards." In drawing this inference, the court noted that theallegations of misconduct came from Countrywide employees (i) located throughout the UnitedStates; (ii) in varying levels of the Countrywide hierarchy (including underwriters, seniorunderwriters, senior loan officers, vice presidents, auditors, and external consultants); and (iii)employed at varying times. In the courts words, these witnesses “tell what is essentially thesame story - a rampant disregard for underwriting standards - from markedly differentangles.” 32. For example, according to Confidential Witness 1 (“CW1”), an underwriter forCountrywide in the Jacksonville, Florida processing center between June 2006 and April 2007,as much as 80% of the loans originated at Countrywide involved significant variations from theunderwriting standards that necessitated a sign-off by management. According to CW1,Countrywide was very lax when it came to underwriting guidelines. Management pressuredunderwriters to approve loans and this came from “up top” because management was paid, basedat least in part, on the volume of loans originated. CW1‟s manager directed CW1 to approve asmany loans as possible and push loans through. According to CW1, most loans declined by Page 19 of 62
  • 20. underwriters would “come back to life” when new information would “miraculously appear” –which indicated to CW1 that Countrywide was not enforcing its underwriting standards. 33. According to Confidential Witness 2 ("CW2"), a senior underwriter in Roseville,California from September, 2002 to September, 2006, Countrywide would regularly label loansas "prime" even if made to unqualified borrowers (including those who had recently gonethrough a bankruptcy and were still having credit problems). According to CW2, Countrywideslending practices got riskier in 2006 and the Company was more lax in enforcing itsunderwriting policies during that year. 34. According to Confidential Witness 5 ("CW5"), a former senior underwriter atCountrywide in Independence, Ohio, between August 2006 and April 2007, the Companys"philosophy was that you didnt turn down loans." According to CW5, the Company "didwhatever they had to do to close loans" including making exceptions to underwriting guidelines -everyone was motivated to increase loan volume and "approv[e] things that should nothave been approved." 35. According to Confidential Witness 14 ("CW14"), a former underwriter atCountrywide in Charlotte, North Carolina between 1997 and 2007, there was "a lot of pressure"on underwriters to approve a high volume of loans in order to keep their job. According toCW14, underwriters were held to a quota of at least eight files a day - preferably ten - andsupervisors preferred more. The Regional VP told underwriters that "as long as you get aCLUES Accept" they should approve the loan, and "if you dont do some bad loans, youre notdoing your job." According to CW14, there were incentives at Countrywide to approve as many Page 20 of 62
  • 21. loans as possible regardless of quality, the primary incentive being "keeping your job." In fact,CW14 stated that s/he was ultimately let go for not approving enough loans. 36. According to Confidential Witness 13 ("CW13"), a former underwriter atCountrywides Full Spectrum Lending Division from October 2005 until 2007, the underwritingpractices at Countrywide were "pretty much anything goes" and "theres nothing we wouldntdo." CW13 worked as part of a team of eight or nine underwriters at a branch office in Chandler,Arizona. According to CW13, quality restrictions did not slow down this team. And while aquality review group was supposed to evaluate the loans, originators worked on a bonus systemwhere negative quality ratings meant a deduction of bonus points – and negative ratings were"few and far between." 37. Indeed, according to CW10, it was "evident" that one of Countrywides goals wasto be able to fund any loan. According to CW10, senior management didnt want to have to turndown any loan application because it wanted to grow market share and didnt want borrowers,mortgage brokers, or other mortgage companies that sought warehouse lines of credit fromCountrywide to take their business to competitors. As a result, according to CW10, loans thatdid not meet Countrywides underwriting standards were approved and funded routinely. CW10added that senior managements philosophy was that if the risks associated with a particular loanwere simply priced right," Countrywide should be able to fund any loan. 38. The Illinois Attorney General Complaint also alleges that Countrywide employeesdid not properly ascertain whether a potential borrower could afford the offered loan, and manyof Countrywides stated income loans were based on inflated estimates of borrowers income.For example, according to the Illinois Attorney General Complaint: (i) a Countrywide employee Page 21 of 62
  • 22. estimated that approximately 90% of all reduced documentation loans sold out of a Chicagooffice had inflated incomes; and (ii) one of Countrywides mortgage brokers, One SourceMortgage Inc., routinely doubled the amount of the potential borrowers income on stated incomemortgage applications. 39. According to an FDIC Report, Countrywide had about 5,000 internal referrals ofpotentially fraudulent activity in its mortgage business in 2005, 10,000 in 2006, and 20,000 in2007, according to Francisco San Pedro, the former Senior Vice President of SpecialInvestigations at the Company. But it filed only 855 Suspicious Activity Reports with theFinancial Crimes Enforcement Network in 2005, 2,895 in 2006, and 2,261 in 2007. 40. Countrywide also failed to disclose that it used the appraisal process to inflate thepurported value of properties because doing so would result in lower loan to value (“LTV”)ratios. A lower LTV ratio would allow a loan to be approved when it otherwise would not be,and would appear less risky to investors. But loans based on inflated appraisals are more likely todefault and less likely to produce sufficient assets to repay the second lien holder in foreclosure.Part of Countrywides plan to increase market share and to make as many loans as possible alsoinvolved the practice of pressuring and intimidating appraisers - many of whom were affiliatedwith Countrywide - thus had a conflict of interest into using appraisal techniques that metCountrywides business objectives even if the use of such appraisal techniques was improper andin violation of industry standards and routinely circumvented. Countrywide knew the appraisalswere inaccurate because Countrywide itself required the use of specific appraisers, pressuredappraisers to falsely inflate the appraised values, and blacklisted appraisers who did not comply. Page 22 of 62
  • 23. 41. Because of the importance of appraisals in the home lending market, state andfederal statutes and regulations require that appraisals be accurate and independent. The UniformStandards of Professional Appraisal Practice ("USPAP"), incorporated into federal law, 12C.F.R. § 34.44, requires appraisers to conduct their appraisals independently: "An appraisermust perform assignments with impartiality, objectivity, and independence, and withoutaccommodation of personal interests. In appraisal practice, an appraiser must not perform as anadvocate for any party or issue." USPAP Ethics Rule (Conduct). 42. A civil complaint filed by a real estate appraisal company, Capitol WestAppraisals, LLC ("Capitol West"), provides compelling evidence that Countrywide encouragedand engaged in a practice of pressuring real estate appraisers to artificially increase appraisalvalues for properties underlying mortgages Countrywide originated and/or underwrote.According to that complaint, Countrywide loan officers sought to pressure Capitol West toincrease appraisal values for three separate loan transactions. When Capitol West refused to varythe appraisal values from what it independently determined was appropriate, Countrywide placedCapitol West on its "Field Review List," or an Exclusionary List. The Field Review List orExclusionary List was a Countrywide database containing the names of appraisers whose reportsCountrywide would not accept unless the mortgage broker also submitted a report from a secondappraiser. According to the complaint, the practical effect of being placed on the Field ReviewList was to be blacklisted" - no mortgage broker would hire an appraiser appearing on the FieldReview List to review a property sale in which Countrywide would be the lender because thebroker simply would not pay to have two appraisals done. Instead, the broker would simplyretain another appraiser who was not on the Field Review List. While an honest lender mighthave a legitimate purpose to maintain a list of appraisers it was unwilling to use, Capitol West Page 23 of 62
  • 24. claimed that Countrywide was falsely and fraudulently using their Exclusionary List to punishand retaliate against appraisers who even attempted to maintain the designed integrity andindependence of the appraisal process. 43. According to Capitol West, Countrywide created certain procedures to furtherenforce its blacklisting of uncooperative appraisers. For example, if a mortgage broker were tohire an appraiser that happened to be on the Field Review List, Countrywide used its whollyowned subsidiary, LandSafe, Inc. ("LandSafe"), to perform an appraisal and cut off the offendingappraiser. LandSafe performed a "field review" of the appraisal performed by the blacklistedappraiser, which was specifically intended to "shoot holes" in the appraisal. LandSafes appraisalwould then be used to complete the loan. 44. Allegations in the whistleblower complaint filed in the Southern District of Texas,Zachary v. Countrywide Fin. Corp., et al., No. 4:08-CV-01464, by Mark Zachary ("Zachary") (aformer Regional Vice President of Countrywides joint venture with KB Homes), againstCountrywide, confirm that the Company blatantly ignored its underwriting policies andprocedures by knowingly relying on overstated, low-quality appraisals that failed to conform toindustry standards. In September 2006, Zachary informed Countrywide about the questionableuse of only one appraiser to perform all of the appraisals on KB Home properties beingpurchased with Countrywides loans. According to Zachary, Countrywide executives knew thatappraisers were being strongly encouraged to inflate appraisal values by as much as 6% to allowhomeowners to "roll up" all closing costs. According to Zachary, this practice resulted inborrowers being "duped" as to the values of their homes. This also made loans more riskybecause when values were falsely increased, LTV ratios calculated with these phony numberswere necessarily incorrect. Zachary also stated that Countrywide loan officers were permitted to Page 24 of 62
  • 25. discard appraisals that did not support loans in favor of appraisals by replacement appraisers thatsupported a qualifying LTV ratio. 45. Zachary also advised Countrywide executives that this appraisal practice misledinvestors who later purchased these loans through securitizations because these investors werenot made aware that the actual home values were less than the inflated appraised values.According to Zachary, the inflated appraised values put buyers upside down" on their homesimmediately after purchasing them; that is, the borrowers immediately owed more than theirhomes were worth. Thus, the borrowers were set up to be more susceptible to defaulting on theirloans. This practice also put Countrywide at risk because they deliberately were unaware of thetrue value of the assets on which the Company was loaning money. Zachary brought hisconcerns first to the executives of the Countrywide/KB Homes joint venture, but when he was"brushed aside" by them, he turned to Countrywide executives in Houston, the CompanysEmployee Relations Department and finally the Companys Senior Risk ManagementExecutives. In January 2007, an audit was conducted and brought to the attention of theseCountrywide executives which corroborated his concerns. 46. Countrywide and its appraisal subsidiary, LandSafe, have also been sued byFannie Mae and Freddie Mac investors for damages arising from inflated appraisals for propertyunderlying mortgage packages sold to both Fannie Mae and Freddie Mac. 47. Countrywides strategy shift from traditional lending to a pump and dump"operation with all risk assumed by others, was further fueled by a compensation structure,devised and approved by management, that was closely linked to loan volume and not tied to thequality of loans originated. This structure facilitated a widespread and pervasive abandonment of Page 25 of 62
  • 26. sound risk management at the Company, an increase in the volume of exception loans that wereprocessed, and an extraordinary amount of falsified data entered into Countrywides computersystems. According to a former sales representative quoted on August 26, 2007, in a New YorkTimes expose, “[t]he whole commission structure in both prime and subprime was designed toreward salespeople for pushing whatever programs Countrywide made the most money on in thesecondary market." 48. Terry Gamer, a former Countrywide loan officer in Twin Falls, Idaho, commentedto The Wall Street Journal that pressure from superiors to boost loan volumes createdunbelievable, stress levels at Countrywide.” 49. Simply put, Countrywides whole business was designed with the goal oforiginating loans and selling them to the secondary markets as quickly as possible, regardless ofthe quality of the loans, the suitability of the products for the borrower, or the number andmagnitude of exceptions to Countrywides supposedly sound underwriting standards. Havingshifted the risk to the holders of the MBS securities and unsuspecting homeowners, any theCompany (or its employees) may have had to ensure that borrowers could repay the loans wasoutweighed by greed: the incentive to originate, bundle and sell as many loans as possible;accordingly, almost anyone could get a loan from Countrywide, even if he or she had very littleability to pay it back. In fact this paradigm shift from traditional lending to giving anyone whobreathes a mortgage, was so pervasive that columnist Dave Barry jokingly stated that he wasafraid of letting the dog outside for fear the dog would come back with a mortgage. 50. On December 13, 2007, a New York Times article reported that "[t]he Illinoisattorney general is investigating the home loan unit of Countrywide Financial as part of the Page 26 of 62
  • 27. states expanding inquiry into dubious lending practices that have trapped borrowers in high-costmortgages they can no longer afford." The New York Times further noted that "Lisa Madigan,the Illinois attorney general, has subpoenaed documents from Countrywide relating to its loanorigination practices." AS COUNTRYWIDES SUCCESSOR BANK, BANK OF AMERICA, BY ITS AFFILIATE, BAC IS LIABLE FOR COUNTRYWIDES ACTIONS 51. On January 11, 2008, Bank of America announced that it would purchaseCountrywide for $4.1 billion in an all-stock transaction. On July 1, 2008, Bank of Americacompleted its merger with Countrywide. 52. On October 6, 2008, Bank of America filed a Form 8-K with the SecuritiesExchange Commission (“SEC”) announcing, among other things, that Countrywide wouldtransfer all, or substantially all, of its assets to unnamed subsidiaries of Bank of America. Bankof America offered virtually no details about the contemplated asset sale. On information andbelief, the intended effect of this transaction was to integrate those assets further into theoperations of Bank of America while leaving the liabilities with Countrywide. 53. Countrywide transferred substantially all of its assets to Bank of America onNovember 7, 2008. On or about that time, Countrywide ceased filing its own financialstatements, and its assets and liabilities have since been included in Bank of Americas financialstatements. As Bank of America reported to the SEC, this transfer of assets occurred "inconnection with the integration of Countrywide Financial Corporation with [Bank of Americas]other businesses and operations." Virtually no details of this transaction were disclosed. Oninformation and belief, largely as a result of this transfer of assets, Countrywide and a mergersubsidiary (created to effectuate the merger) are now moribund organizations, with few, if any, Page 27 of 62
  • 28. assets or operations. As admitted in the Notice of Interested Parties Pursuant to L.R. 7.1-1filed on May 20, 2011, in Childrens Hospital & Medical Center Found. of Omaha v.Countrywide Fin. Corp., 11-CV- 02056-MRP-MAN (C.D.Cal.), Bank of America is theultimate parent" to Countrywide. 54. On April 27, 2009, Bank of America announced in a press release, that "[t]heCountrywide brand has been retired" and that it had rebranded Countrywide Home Loans as"Bank of America Home Loans." The press release announced that Bank of America HomeLoans "represents the combined operations of Bank of Americas mortgage and home equitybusiness and Countrywide Home Loans." 55. The April 27, 2009, press release made clear that Bank of America planned tocomplete its integration of Countrywide into Bank of America in 2009. While the integrationwas being completed, Countrywide customers had access to Bank of Americas 6,100 bankingcenters. The press release explained that Bank of America was in the process of rebrandingformer Countrywide "locations, account statements, marketing materials and advertising" asBank of America Home Loans, and stated that "the full systems conversion" to Bank of AmericaHome Loans would occur later in 2009. 56. As of September 21, 2009, former Countrywide bank deposit accounts werereportedly converted to Bank of America accounts. On November 9, 2009, online accountservices for Countrywide mortgages were reportedly transferred to Bank of Americas OnlineBanking website. On information and belief, Bank of Americas rebranded consumer real estatebusiness now operates out of over 1,000 former Countrywide offices nationwide. Many formerCountrywide locations, employees, assets, and business operations now continue under the Bankof America Home Loans brand. Countrywide has disclosed that its employees 401(k) plans were Page 28 of 62
  • 29. rolled into Bank of Americas 401(k) plan, effective April 6, 2009. Countrywides formerwebsite now redirects to the Bank of America website. Bank of America Home Loans is thus adirect continuation of Countrywides operations and is operating Countrywides mortgageorigination business as its own. 57. Bank of Americas Form 10-Q filed with the SEC for the period endingSeptember 3, 2009 stated that, "[t]he acquisition of Countrywide significantly expanded theCorporations mortgage originating and servicing capabilities, making it a leading mortgageoriginator and servicer." The Form 10-Q acknowledged pending litigation against Countrywideand stated that "Countrywides results of operations were included in the Corporations resultsbeginning July 1, 2008." 58. The Bank of America website announced that the companies merged. Bank ofAmerica noted on its website that it was "combining the valuable resources and extensiveproduct lines of both companies." Under the "Merger History" tab of Bank of Americas website,Countrywide is included among the list of companies Bank of America has acquired. Under the"Time Line" tab, the website states that Bank of America became the largest consumermortgage lender in the country following its acquisition of Countrywide in 2008. Lastly, underthe "Our Heritage" tab, the website states that the acquisition of Countrywide "resulted in thelaunch of Bank of America Home Loans in 2009, making the bank the nations leading mortgageoriginator and servicer." The Countrywide logo appears on the page. 59. In many other public statements, Bank of America has described its acquisition ofCountrywide and its subsidiaries as a merger and made clear its intent to fully integrateCountrywide and its subsidiaries into Bank of America. Page 29 of 62
  • 30. 60. For example, in a July, 2008 Bank of America press release, Barbara Desoer("Desoer"), identified as the head of the "combined mortgage, home equity and insurancebusinesses" of Bank of America and Countrywide, said: "Now we begin to combine the twocompanies and prepare to introduce our new name and way of operating." The press releasestated that the bank “anticipates substantial cost savings from combining the two companies.Cost reductions will come from a range of sources, including the elimination of positionsannounced last week, and the reduction of overlapping technology, vendor and marketingexpenses. In addition, Countrywide is expected to benefit by leveraging its broad product set todeepen relationships with existing Countrywide customers.” 61. In October, 2008, Desoer commented that the integration was proceeding onschedule, noting, "The company has named a mix of Bank of America and former Countrywideexecutives to leadership roles and will be tapping more managers through the end of the year." 62. Desoer was interviewed for the May 2009 issue of Housing Wire magazine,which reported that: “While the move to shutter the Countrywide name is essentially complete, the operational effort to integrate across two completely distinct lending and service systems is just getting under way. One of the assets [Bank of America] acquired with Countrywide, was a vast technology platform for originating and servicing loans and Desoer says that the bank will be migrating some aspects of [Bank of Americas] mortgage operations over to Countrywides platforms.” 63. Desoer was also quoted as saying: "Were done with defining the target and werein the middle of doing the development work to prepare us to be able to do the conversion of thepart of the portfolio going to the legacy Countrywide platforms." Desoer explained that theconversion would happen in the "late fall" of 2009 and that the integration of the Countrywideand Bank of America platforms was a critical goal. Page 30 of 62
  • 31. 64. After the integration had further progressed, Desoer stated in the October 2009issue of Mortgage Banking that "the first year is a good story in terms of the two companies[coming] together and meeting all the major [goals and] milestones that we had set for ourselvesfor how we would work to integrate the companies." For Desoer, it was the highlight of the yearwhen we retired the Countrywide brand and launched the Bank of America Home Loans brand."In the same issue, Mary Kanaga, a Countrywide transition executive who helped overseeintegration, likened the process of integration to the completion of a mosaic: “Everything [i.e., each business element] counts. Everything has to get there, whether its the biggest project or the smallest project. Its very much putting a puzzle together. If there is a missing piece, we have a broken chain and we cant complete the mosaic.” 65. Likewise, in its 2008 Annual Report, Bank of America confirmed that "[o]n July1, 2008, we acquired Countrywide," and stated that the merger "significantly improved ourmortgage originating and servicing capabilities making us a leading mortgage originator andservicer." In the Q&A section of the same report, the question was posed: "How do the recentacquisitions of Countrywide and Merrill Lynch fit into your strategy? Bank of Americaresponded that by acquiring Countrywide it became the "No. 1 provider of both mortgageoriginations and servicing" and "as a combined company," it would be recognized as a"responsible lender who is committed to helping our customers become successfulhomeowners." Similarly, in a July 1, 2008 Countrywide press release, Angelo Mozilo, the formerpresident of Countrywide, stated that "the combination of Countrywide and Bank of Americawill create one of the most powerful mortgage franchises in the world." 66. In purchasing Countrywide and its subsidiaries for only 27% of its book value atthe time, Bank of America was fully aware of the pending claims and potential claims againstCountrywide and factored them into the transaction. Bank of America has since confirmed in Page 31 of 62
  • 32. numerous statements and actions that it has expressly or impliedly assumed Countrywidescontractual and tort liabilities, including claims and potential claims against Countrywide and itsformer officers and directors. 67. Bank of Americas purchase of Countrywide for just 27% of its book value furthersuggests that the acquisition was structured to strip the corporate shells left behind of theirrespective recoverable assets. 68. For example, in an interview published on February 22, 2008, in the legalpublication, Corporate Counsel, a Bank of America spokesperson admitted that Bank ofAmerica had assumed Countrywides liabilities: “Handling all this litigation wont be cheap even for Bank of America, the soon-to-be largest mortgage lender in the country. Nevertheless, the banking giant says that Countrywides legal expenses were not overlooked during negotiations. "We bought the company and all of its assets and liabilities,” spokesman Scott Silvestri says, "We are aware of the claims and potential claims against the company and have factored these into the purchase." 69. Further, on October 6, 2008 during an earnings call, Joe Price, Bank of AmericasCFO, stated that "As we transfer those operations (i.e., Countrywide and its subsidiaries] ourcompany intends to assume the outstanding Countrywide debt totaling approximately $21billion." Asked about the "formal guaranteeing" of Countrywides debt, Kenneth D. Lewis("Lewis"), Bank of Americas former Chairman and CEO, responded that: “The normal process we followed is what are the operational movements well make to combine the operations. When we do that weve said the debt would fall in line and quite frankly thats kind of what weve said the whole time. [T]hats been very consistent with deals weve done in the past from this standpoint.” 70. Similarly, Lewis was quoted in a January 23, 2009 New York Times articlereporting on the acquisition of Countrywide and its subsidiaries, in which he acknowledged that Page 32 of 62
  • 33. Bank of America knew of the legal liabilities of Countrywide and its subsidiaries andimpliedly accepted them as part of the cost of the acquisition: “We did extensive due diligence. We had 60 people inside the company for almost a month. It was the most extensive due diligence we have ever done. So we feel comfortable with the valuation. We looked at every aspect of the deal from their assets to potential lawsuits and we think we have a price that is a good price.” 71. Bank of America made additional statements showing that it has assumed theliabilities of Countrywide. In a press release announcing the merger, Lewis stated that he wasaware of the "issues within the housing and mortgage industries" and said that "the transaction[with Countrywide] reflects those challenges." Despite these challenges, Lewis stated in October2009 that "[t]he Merrill Lynch and Countrywide integrations are on track and returning valuealready." 72. Likewise, in Bank of Americas Form 10-K filed with the SEC for 2009, Bank ofAmerica acknowledged that "[W]e face increased litigation risk and regulatory scrutiny as aresult of the Merrill Lynch and Countrywide acquisitions." 73. Brian Moynihan ("Moynihan"), Bank of Americas CEO and President, testifiedbefore the FDIC on January 13, 2010, that “our primary window into the mortgage crisis camethrough the acquisition of Countrywide. The Countrywide acquisition has positioned the bank inthe mortgage business on a scale it had not previously achieved. There have been losses andlawsuits from the legacy of Countrywide operations, but we are looking forward.” 74. Addressing investor demands for refunds on faulty loans sold by Countrywide,Moynihan stated "Theres a lot of people out there with a lot of thoughts about how we shouldsolve this, but at the end of the day, well pay for the things that Countrywide did." And, in a Page 33 of 62
  • 34. New York Times article published in December 2010, Moynihan, speaking about Countrywide,stated that "[o]ur company bought it and well stand up; well clean it up." 75. Similarly, Jerry Dubrowski, a spokesman for Bank of America, was quoted in anarticle published by Bloomberg in December, 2010 that the bank will act responsibly" andrepurchase loans in cases where there were valid defects with the loans. Through the thirdquarter of 2010, Bank of America has faced $26.7 billion in repurchase requests and hasresolved, declined or rescinded $18 billion of those claims. It has established a reserve fundagainst the remaining $8.7 billion in repurchase requests, which at the end of the third quarterstood at $4.4 billion. 76. During an earnings call for the second quarter of 2010, Charles Noski ("Noski"),Bank of Americas Chief Financial Officer, stated that we increased our reps and warrantiesexpense by $722 million to $1.2 billion as a result of our continued evaluation of exposure torepurchases including our exposure to repurchase demands from certain monoline insurers."And during the earnings call for the third quarter of 2010, Noski stated that "[t]hroughSeptember, weve received $4.8 billion of reps and warranties claims related to the monoline-insured deals, of which $4.2 billion remains outstanding, and approximately $550 million wererepurchased." 77. Consistent with its assumption of Countrywides liabilities, Bank of America hasreached various settlement agreements in which it has directly taken responsibility forCountrywides liabilities and paid to restructure certain of Countrywides home loans. OnOctober 6, 2008, Bank of America settled lawsuits brought against Countrywide by stateAttorneys General by agreeing to loan modifications for 390,000 borrowers, an agreementvalued up to $8.68 billion (including up to $3.5 billion to California borrowers). Bank of Page 34 of 62
  • 35. America also agreed to pay $150 million to help Countrywide customers who were already in orwere at serious risk of foreclosure, and an additional $70 million to help Countrywidecustomers who had already lost their homes to make the transition to other living arrangements.The loans were made before Bank of America acquired Countrywide. In 2008, Bank of Americarestructured 300,000 home loans of which 87% had been originated or serviced by Countrywide.In announcing that its loan modification program, known as the National Homeowners RetentionProgram ("NHRP"), will now have a "principal forgiveness" component, Bank of America notedthat it "developed and launched the NHRP to provide assistance to Countrywide borrowers." 78. On January 3, 2011, Bank of America paid $2.8 billion to Freddie Mac andFannie Mae to settle claims of misrepresentations on billions of dollars in loans that went sourafter Fannie Mae and Freddie Mac bought them from Countrywide. In exchange for thepayments, Freddie Mac and Fannie Mae agreed to drop their demands that Bank of America buyback the Countrywide mortgages. The payment of $1.28 billion to Freddie Mac settled 787,000loan claims (current and future) sold by Countrywide through 2008. The payment of $1.34billion (after applying credits to an agreed upon settlement amount of $1.52 billion) to FannieMae settled repurchase claims on 12,045 Countrywide loans (with approximately $2.7 billion ofunpaid principal balance) and other specific claims on 5,760 Countrywide loans (nearly $1.3billion of unpaid principal balance). 79. On June 29, 2011, Bank of America announced that it had reached an $8.5 billionagreement to resolve nearly all of the legacy Countrywide-issued first-lien RMBS repurchaseexposure. The settlement covers about $424 billion of the mortgage bonds created byCountrywide between 2004 and 2008. Bank of America stated that with this agreement andother mortgage-related actions in the second quarter of 2011, the company believed it had Page 35 of 62
  • 36. recorded reserves in its financial statements for a substantial portion of its exposure torepresentation and warranties claims on loans issued by Countrywide. The amount of theprovision totaled $14 billion. The settlement was the third in six months for Bank of Americafollowing the Fannie Mae and Freddie Mac settlement, and a similar deal with insurer AssuredGuaranty. "This is another important step we are taking in the interest of our shareholders tominimize the impact of future economic uncertainty and put legacy issues behind us," said Bankof America CEO Moynihan. We will continue to act aggressively, and in the best interest of ourshareholders, to clean up the mortgage issues largely stemming from our purchase ofCountrywide." 80. Bank of America has also taken responsibility for liabilities arising out oflitigation against Countrywides former officers and directors. In October 2010, The New YorkTimes reported that Bank of America is "on the hook" for $20 million of the disgorgement thatCountrywide‟s Mozilo agreed to pay in his settlement agreement with the SEC. The agreementand plan of merger between Bank of America and Countrywide provided that all indemnificationprovisions "shall survive the merger and shall continue in full force and effect for a period of sixyears." According to the article, "Because Countrywide would have had to pay Mr. Mozilosdisgorgement, Bank of America took on the same obligation even though it had nothing to dowith the companys operations at the time." 81. Bank of America has generated significant earnings from the absorption ofCountrywides mortgage business. 82. Bank of Americas 2009 annual report stated that "[r]evenue, net of interestexpense on a fully taxable-equivalent (FTE) basis, rose to $120.9 billion, representing a 63%increase from $74.0 billion in 2008, reflecting in part the addition of Merrill Lynch and the full- Page 36 of 62
  • 37. year impact of Countrywide." Bank of America also reported that "[m]ortgage banking incomeincreased $4.7 billion driven by higher production and servicing income primarily due toincreased volume as a result of the full-year impact of Countrywide." Insurance income alsoincreased $927 million "due to the full-year impact of Countrywides property and casualtybusinesses." 83. Based on the above, Bank of America has "de facto" merged with Countrywide,consolidating and merging with the Countrywide and acquiring substantially all of the assets ofall the Countrywide entities. Indeed, based on the same facts, the Supreme Court of the State ofNew York in MBIA Ins. Corp. v. Countrywide Home Loans, Index No. 602825/2008, held thatMBIA sufficiently alleged a de facto merger "in which Bank of America intended to absorb andcontinue the operation of Countrywide." Order on Motion to Dismiss at 15 (Apr. 29, 2010). 84. Bank of America is thus Countrywides successor in liability, and is thus liable forany and all damages resulting to Owners from the wrongful actions of Countrywide. 85. Moreover, BAC is liable for any and all damages resulting from the wrongfulactions of Countrywide as alleged herein, because it is the successor-in-interest to CountrywideLoan Servicing and is vicariously liable for the conduct of Countrywide as a result of a de factomerger of the two entities. 86. The Bank of America acquisition was a de facto merger because Bank of Americaintended to take over, and effectively took over, Countrywide and its subsidiaries in their entiretyand, thus, should carry the liabilities of Countrywide as concomitant to the benefits it derivedfrom the purchase. 87. The acquisition resulted in continuity of ownership - a hallmark of a de factomerger - because the shareholders of Countrywide became shareholders of Bank of America as a Page 37 of 62
  • 38. result of Bank of Americas acquisition of Countrywide on July 1, 2008 through an all-stocktransaction involving a wholly-owned Bank of America subsidiary that was created for the solepurpose of facilitating the acquisition of Countrywide. Bank of America has described thetransaction as a merger and has actively incorporated Countrywides mortgage business intoBank of America. 88. Bank of America assumed the liabilities ordinarily necessary for the uninterruptedcontinuation of the business of Countrywide - another hallmark of a de facto merger. Amongother things, the Countrywide brand has been retired and the old Countrywide website redirectscustomers to the mortgage and home loan sections of Bank of Americas website. On April 27,2009, Bank of America announced that "[t]he Countrywide brand has been retired." Instead,Bank of America operated its home loan and mortgage business through a new division namedBank of America Home Loans, which "represents the combined operations of Bank of Americasmortgage and home equity business and Countrywide Home Loans." The integration ofCountrywide into Bank of America is complete. 89. The ordinary business of Countrywide ceased and the Company dissolved soonafter the acquisition - another hallmark of a de facto merger. On November 7, 2008, Bank ofAmerica acquired substantially all of the assets of Countrywide. And, at that time, Countrywideceased submitting filings to the SEC; Countrywides assets and liabilities are now included inBank of Americas filings. 90. Bank of America has also taken responsibility for the pre-merger liabilities ofCountrywide, including restructuring hundreds of thousands of loans created and serviced byCountrywide. A spokesperson for Bank of America admitted: "We bought the company and allof its assets and liabilities." Page 38 of 62
  • 39. 91. Because Bank of America has merged with Countrywide and acquiredsubstantially all of the assets of Countrywide, BAC, formerly known as Countrywide Servicing,and is vicariously liable for the wrongful conduct, as alleged herein, of Countrywide. STATEMENT OF FACTS REGARDING OWNERS AND OWNERS’ LOAN 92. In ________, Owners entered into a joint venture agreement to purchase theProperty to build a spec home in an area where many older homes were being torn down andreplaced with new homes. Owners entered into an agreement where _________________ wouldconstruct a spec home. 93. At the time when Owners were proceeding with their loan application withCountrywide Home Loans, Owners had been attempting to sell the Property. 96. Owners received an offer for $_________________ to sell the Property beforeacquiring the financing and would have proceeded to sell the Property if the loan applicationwith Countrywide Servicing had been denied. COUNTRYWIDE HOME LOANS 98. Owner ______ contacted Countrywide Home Loans to refinance the existingconstruction loan. 99. In __________ Owner ______ spoke with CHL employee ______________, whooffered a specific loan product to Owners contingent upon Owners credit rating and appraisalvalue of the Property. Owners filed the loan application with Countrywide Home Loan . 100. On __________________, CHL employee, __________________, conducted atelephone interview with Owner _______ for a loan application where ____________ provided Page 39 of 62
  • 40. true and accurate information regarding his financial status at that time. _____________‟smonthly income, supported by documentation, was $___________. Upon information and belief,Countrywide Home Loans through its employee, ________________, and others who preparedand reviewed the Loan Documents, intentionally inflated Owners income so as to quality Ownersfor the Loan. Based upon this, a good faith estimate was prepared by ______________ ofCountrywide Servicing and loan application documents which included the false statement of______________‟s income were prepared by ______________of Countrywide Home Loans.Discovery will show whether ______________ and _________________ also participated in thepreparation of false documents in connection with the Loan. 101. Countrywide Home Loans, through its employees and agents, altered Owner‟sOwner‟s income from $___________ per month to $___________ per month so this Loan wouldfit the necessary criteria to obtain the Loan and to sell the Loan in the secondary market. 102. The Loan was represented to be a fully-documented “verified income” adjustablerate note with mortgage at ____% fixed interest with interest-only for __ years. According to theForm 1003, Uniform Residential Loan Application, Owners‟ Loan was an “Income VerificationLoan” to be fully documented. As part of the full loan documentation, the Loan Documentsincluded an IRS 4506-T request for a transcript of tax return to verify Owner‟s income and tounderwrite the loan. 103. On ___________________, the loan application documents, with the income of_____________ misstated as prepared by Countrywide Home Loans, were signed by Ownersand returned to Countrywide Home Loans. Owners did not notice the misstatement of Ownersincome on the loan application. As Owners understood this to be a fully-documented loan, Page 40 of 62
  • 41. Owners had no knowledge that Countrywide Home Loans had falsified Owner‟s income in orderfor the Loan to be approved. 104. On ___________________, an appraisal was conducted on the Property by aCountrywide Home Loans - owned appraisal company, Landsafe Appraisers, which then hiredFirst Executive Appraisers which appraised the Property for $_________. 105. The Appraiser had knowledge that the sale asking price on the Property had beenreduced by Owners to $_____________ in 200_ which later produced an offer of$_____________which Owners declined. 106. The subject property has 3 bedrooms and a 2 car garage but the Appraiser used“comparable” sales which had 3 car garages and 4 bedrooms which were not comparable,thereby driving up the Property‟s perceived value. Additionally “appraiser” used propertiesoutside of the __________________ area to be used as comparable sales which again, were notcomparable thereby validating a value which Countrywide needed to create a Loan to Value ratiowhich would meet the criteria of the CWALT, Inc. MBS Trust which Owners‟ loan was sold to. 107. On ________________, Owners refinanced the Property with Owners signing allof the Loan Documents, including the Note and Mortgage and thereby continued to hold legaltitle to the Property using funds allegedly acquired through a loan from Countrywide HomeLoans. The Loan Documents were prepared by ______________ of Countrywide Home Loansand included documents inconsistent with the Good Faith Estimate and contained theintentionally altered income of ___________ on the loan application. 108. The Loan Closing was held at ___________________in ____________ at whichtime Owners, acting without an attorney, were presented a mountain of documents printed in a Page 41 of 62
  • 42. tiny font with little time to read nor fully comprehend the implications in each of them, as______________Title Company had booked another closing immediately after said closing.Under pressure, Owners signed the Loan Documents specified by the closing agent withoutpaying much attention to said documents. Owners, having gone through many previousmortgage closings, had placed an implicit trust in Countrywide Home Loans and had no reasonto suspect foul-play. 109. The Countrywide entities all acted together with regard to the Loan to the Owners,as the Loan was processed through Countrywide Home Loans, the Note was in the name ofCountrywide, the alleged Lender in the name of Countrywide Bank FSB and the Mortgage wasin the name of Countrywide Home Loans now known as BAC. 110. The Mortgage was recorded with the _____________ County Recorder of Deedson _____________ as Document Number #R_____________. The Mortgage identified MERSas nominee and mortgagee for alleged “lender” Countrywide Bank. 111. In _______________ Owners enhanced the Property by an approximately$______________ improvement of the Property including finishing the 2100 square footbasement. 113. When the economic crisis was announced in September, 2008, Owner___________ became unemployed. 115. Real estate prices began to plummet financially devastating Owners. 116. After becoming unemployed and realizing the seriousness of the economic crisis,_____________ would no longer be able to support their family if they continued paying the Page 42 of 62
  • 43. mortgage payment on the Property, so they paid the last mortgage payment in__________________. 117. In desperation, Owners joined a group of similarly situated homeowners whourged them to examine their loan documents carefully. Accordingly, they scoured the closingdocuments from the subject loan with a fine-tooth comb and discovered that Owner‟s verifiedincome had been misstated by Countrywide Home Loans. Owners then discovered thatdocuments purportedly prepared at or about the time of the loan consummation relating toincome of Owners were deliberately falsified to reflect $____________ per month on page 2 ofthe loan application, a page which did not require Owners‟ signatures. 120. By letter of _______________________, Owners received notice of accelerationof the Mortgage from Countrywide. 121. In ___________________, after seeing a BAC full page ad in the ChicagoTribune on October 26, 2008 stating that they were “$11 billion serious...” about modifyingmortgage loans, Owners sought a modification of the Mortgage with BAC, the entity whichreplaced Countrywide. 122. On _____________________, BAC requested that Owners fax a letter ofhardship, along with income tax returns from 200_, 200_, and 200_, and Owner‟s 200_ paycheck stubs verifying his income from _____________ to ______________, to BAC for the loanmodification. Owners complied and faxed ___ pages of required documentation. However,despite repeated calls, Owner s heard nothing. 123. On ______________, Owners called BAC regarding modification, but BACclaimed that it “lost” the paperwork and asked them to refax it again which they did 2 more times. Page 43 of 62
  • 44. Upon information and belief, BAC had no intention of modifying the Loan as it was far moreprofitable for BAC to collect on government insurance predominantly through the FederalReserve, Fannie Mae or Freddie Mac along with TARP funds. As revealed in the House ofRepresentatives Judiciary Committee hearing on December 21, 2010 (transcript at:http://judiciary.house.gov/hearings/printers/111th/111-158_62935.PDF), Detroit attorney,Vanessa Fluker, also found a high rate of modification paperwork being “misplaced” - up to 10times in some cases - for clients she was trying to help modify their loans. She discovered thatany loan insured by Fannie Mae or Freddie Mac paid the bank the ENTIRE mortgaged amountwhereas a loan modification did not. The banks were profit-driven, and as BAC is doing in theinstant case, seeks even further recovery from Owners even though it may have alreadyrecovered. 124. In ___________, Owners learned of the ______________ County HousingForeclosure mitigation office and met with employee _________ of that office who assistedhomeowners with modifications of their mortgage. Owners informed _____that Countrywidehad altered the Loan Documents thereby committing fraud. When ________ contacted BAC,they asked her to have Owners refax the 96 pages an additional time. However, after bothOwners and _______tried contacting BAC numerous times to no avail, Owners decided that theironly recourse was to sue, so Owners filed a Federal suit in the United States District Court forthe Northern District of Illinois which they recently voluntarily dismissed to raise these issues inits Affirmative Defenses and Counterclaims here. 125. On April 27, 2009, Countrywide Servicing became BAC. Page 44 of 62
  • 45. 126. On _________________, BAC sent a letter to Owners denying their request formodification saying that said request did not meet investor guidelines. 127. BAC‟s letter also contained conflicting statements which stated that Owners‟ loanwas current but that a scheduled foreclosure sale would be conducted. It appears thatCountrywide as Master Servicer had made advances on behalf of the Owners per the pooling andservice agreement as evidenced in CWALT _______________Servicer Statement as of ___. THE ALLEGED ASSIGNMENT 128. On ________________, MERS, as nominee for alleged “Lender” CountrywideBank, “sold, assigned and transferred” to BAC aka Countrywide Servicing “all rights, title andinterest in, and to a certain mortgage executed by Owners together with said note thereindescribed... However, the note when signed in __________, never mentioned MERS, thereforeMERS cannot simply decide to now include it with the mortgage. On _________________, theAssignment document (Exhibit D) was recorded with __________ County Recorder of Deeds asDocument #_____________. 129. Said assignment Document was executed by Rhoena Rice, alleged Vice Presidentof MERS, and attested to by Aaron Fromby, alleged Assistant Vice President of MERS. Thedocument was notarized by Diane Taylor in Texas. 130. Owners are informed and believe and thereon allege that the Assignment to BACof _________________(date), presented by BAC fka CHLS, of Owners Mortgage was not madeby the real party in interest, but rather by an employee of BAC. Page 45 of 62
  • 46. 131. Owners are informed and believe and thereon allege that Rhoena Rice was neithera Vice President for MERS nor was Aaron Fromby an Assistant Vice President for MERS, butinstead both were employed by BAC as “robo-signers” having no personal knowledge of Ownersloan, nor power of attorney, to execute said document. See Exhibit F attached hereto andincorporated herein by reference. 132. On November 22, 2009 a document recorded by Bank of America in Woonsocket,Rhode Island, appointed Rhoena Rice as Vice President of BAC as of August 7, 2009. SeeExhibit G attached hereto and incorporated herein by reference. 133. On a document dated January 14, 2009, Rhoena Rice executed a documentappointing a law firm, Orlans Moran PLLC, under a power of attorney as of July 6, 2009, withher signing as Vice President for BAC. See Exhibit H attached hereto and incorporated hereinby reference. 134. On October 5, 2010, despite the fact that Rhoena Rice was a Vice President ofBAC, she executed yet another document as Vice President of MERS as nominee for FirstMagnus Financial Corporation attesting to a corporate Assignment of mortgage from MERS asnominee for First Magnus to an MBS Trust. See Exhibit I attached hereto and incorporatedherein by reference. 135. In the Superior Court of New Jersey, Bank of New York v. Victor and EnoabasiUkpe, Case #10-43081, a deposition by MERS Secretary Hultman revealed that MERS has noemployees, and that the signers on the assignments are certifying officers whose only link toMERS is a corporate resolution signed by MERS Secretary Hultman. Accordingly, thecertifying officers are employees of MERS Member Financial Institutions and attorneys at firms Page 46 of 62
  • 47. doing foreclosures for MERS banks, as well as non-member employees. Upon information andbelief, Rhoena Rice‟s appointment as an officer of MERS was not authorized by the MERS‟bylaws which state that only the board of directors can appoint a certifying officer and thatMERS Secretary Hultman did not have the authority to appoint the officers certifying to theAssignment of Owners Mortgage. 136. At the bottom of the alleged Assignment it states: “Prepared by and mailed to:Fisher and Shapiro, LLC, 4201 Lake Cook Road, Northbrook, Il.” see Exhibit D. 137. On a front page Chicago Tribune article dated Saturday, March 26, 2011, entitled“Altered Documents Stay 1,700 Foreclosures” it was stated: “Fisher and Shapiro LLC, one of thetop three law firms used by mortgage servicers to handle their local foreclosure actions, reportedto the court that, in a breach of protocol, affidavits in the cases were changed...the admission tothe court by Fisher and Shapiro does not involve rubber-stamping of documents but ratherremoving the signature page, altering the affidavits content and reattaching the content pageaccording to the (Cook County Circuit Court). See Exhibit J attached hereto and incorporatedherein by reference. 138. On ________________, Owners were served with a “Complaint to ForecloseMortgage” in this case, from BAC attorneys, Fisher and Shapiro. Exhibit A included an allegedcopy of the Note and exhibit B, an alleged copy of the Mortgage. A Lis Pendens was recordedon ________________ as Document #R_________________. 139. On _________________ Owners sent a Qualified Written Request (QWR) as thatterm is defined in RESPA, 12 U.S.C. § 2605(e)(I)(B). The QWR was sent via registered mail#_______________ which BAC received on _________________. Page 47 of 62
  • 48. 140. On _______________, pursuant to the Mortgage Section 20 it states: “borrowermay not commence, join, or be joined to any judicial action that arises from the other party‟sactions pursuant to this security instrument or that alleges that the other party has breached anyprovision of, or any duty owed by reason of, this security instrument, until such borrowers hasnotified the other party of such alleged breach and afforded the other party hereto a reasonableperiod after the giving of such notice to take corrective action.” 141. As such, Owners sent a “Letter of Tort” to BAC on __________________ whichdetailed the breaches by BAC fka CHLS. 142. On __________________, Owners received a reply from BAC counsel statingthat he had no idea what this letter was all about, and that BAC expressly rejected any claim,conclusion, or inference that any failure by BAC to respond to all or any portion of said letterwould cause any right, power, or authority to be granted or bestowed upon, or otherwise inuredto Owners or any agent and that the Loan Documents shall remain enforceable as written and therespective rights and obligations of the parties shall remain unaffected. COUNT I FRAUD 143. The allegations contained in paragraphs 1 through 142 of the counterclaim arerealleged and incorporated herein by reference. 144. The fraudulent acts of BAC include, but are not limited to, the following: a) Fraudulently misstating the income of Owners resulting in Owner s qualifying forthe loan from Countrywide that Owners would otherwise not be qualified for. Page 48 of 62
  • 49. b) Changing the adjustable interest rate from being indexed with treasury bonds tothe London Interbank Rate for One-Year Securities (“LIBOR”) resulting in additional charges toOwner. c) Providing Owners with a 10 year interest only loan. d) Providing Owners with an inflated appraisal resulting in the loan to Owners ofmoney greater than they could afford to repay. e) Bringing suit on behalf of an entity which is not the real party in interest whichhas no standing to sue. f) Concealing BAC‟s lack of standing in its complaint for foreclosure. g) The drafting and processing of affidavits and documents and the subsequentexecution of documents by Robo–signers, Rhoena Rice and Aaron Formsby. 145. Owners are informed and believe and thereon allege that BAC as successor toCountrywide Home Loans concealed material facts from them including, but not limited to, thefollowing: a) Intentionally concealing the magnitude and severity of the underlying marketconditions from Owners which were ripe for a downturn in the real estate market when thesubprime mortgages began to fail; b) Intentionally falsifying Owner‟s income to ensure that Owners‟ Loan would meetthe criteria established by the CWALT ____________ MBS Trust Pooling and ServicingAgreement; Page 49 of 62
  • 50. c) Intentionally altering the Loan Documents to reflect a change in the ARM indexfrom Treasury to LIBOR thereby ensuring that Owners‟ Loan would fit the criteria as set forth inthe CWALT MBS Trust ___________________ which over the life of the Loan could costOwners additional interest charges; d) Failing to properly underwrite Owners fully documented Loan according toestablished guidelines thereby falsely approving Owners Loan to the detriment of Owners. e) Filing false assignments of the Mortgage; and f) Using “robo-signers” to execute legal documents who had insufficient knowledgeof Owners‟ Loan to accurately reflect the true holder of the Loan Documents, NOR Power ofAttorney to execute said documents. 146. BAC‟s fraud must be viewed within the context of the practices and procedures ofCountrywide, its predecessors, which confirmed that the way that Countrywide acted,specifically with regard to the Owners, was a systematic pattern of fraudulent actions. 147. Countrywide Home Loans through its employee, ______________, intentionallymisled Owners to believe that Owners qualified for the Loan under residential loan underwritingstandards used in the industry. Upon information and belief, Countrywide Home Loanemployees, ________________ and _______________, also participated in this fraud of Owners. 148. Owners signed the Loan Documents not knowing of the fraudulent statementsconcerning Owner‟s income in the Loan application or the fraudulent changes from what hadearlier been presented to them. Page 50 of 62
  • 51. 149. As stated in People v. Countrywide Financial Corporation, 08 CH 22994 in theCircuit Court of Cook County, Illinois (“Illinois Attorney General Complaint”), Countrywidemortgage originators routinely falsified income and loan applications leading to an increase inmortgage defaults. 150. Similar to as stated in the Illinois Attorney General Complaint, Section 96,Owners were not aware that they were receiving a reduced documentation loan and did notrealize that they were being sold a loan they could not afford or qualify to receive. 151. Countrywide Home Loans acted fraudulently to allow Owners to obtain a loanwith 10 years of interest only payment knowing that they would not be able to repay the loan inits entirety. The interest only payments were substantially lower than the later fully – amortizingpayments that Owners would not have been able to afford. 152. Countrywide Home Loans did not advise Owners of the substantial risk that theywere being granted a Loan greater than they could afford and would not be able to repay. 153. Owners are informed and believe and thereon allege that Countrywide HomeLoans through its employee _________________, intentionally misled Owners to believe thatOwners qualified for the Loan under residential loan underwriting standards used in the industry.Countrywide Home Loans falsified Owner‟s relevant income to get the loan approved. This wasa pattern and practice Countrywide Home Loans routinely engaged in without regard to theconsumers repayment ability according to investigations conducted by Illinois Attorney GeneralLisa Madigan and as set forth in the Illinois Attorney General Complaint. 154. Countrywide Home Loans committed fraud when it posed as alleged “lender” offunds for Owners loan when in reality, investors of the Trust put up the funds for said loan. Page 51 of 62
  • 52. 155. Countrywide Home Loans committed fraud when it approved Owner‟s Loanwhen Owners did not qualify for the Loan. 156. Countrywide Home Loans committed fraud when it falsified Owner ‟s incomeand altered loan documents which changed the ARM index from Treasury to LIBOR thus addingmonies to be paid for Plaintiffs interest over the life of the Loan. 157. Owners are informed and believe and thereon allege that Countrywide HomeLoans facilitated fraudulent misrepresentations and did not implement underwriting standardsoversight thus causing a false loan approval to be prepared. 158. Owners are informed and believe and thereon allege that Countrywide HomeLoans altered Owner‟s income so that Owners loan would meet the criteria required in theCWALT INC ___________ MBS Trust which said Loan was sold to. 159. Said falsification of documents appeared to be routine according to IllinoisAttorney General Lisa Madigan in her investigation into Countrywide‟s wrongdoings. 160. Owners are informed and believe and thereon allege that Countrywide HomeLoans regularly approved loans to unqualified borrowers, and implemented practices in thisregard ranging from questionable to criminal. Further, on information and belief, Owners allegethat Countrywide Home Loans salespeople worked on commission, meaning the more loans theysold, the more bonus money they received. 161. Owners also allege on information and belief that Countrywide Home Loanssalespeople received a greater commission, or bonus, for placing borrowers in loans withrelatively higher yield spread premiums, and therefore borrowers were steered and encouraged Page 52 of 62
  • 53. into loans with terms less favorable than other loans for which the borrowers could actuallyqualify. 162. On _____________ an interest rate lock-in agreement, though executed more thana month before closing, was not given to Owners before closing as required, but at the closing.Said document did not match information provided on the Good Faith Estimate (GFE) pertainingto the adjustable rate mortgage (ARM) index rate (used to calculate Owners payments at specificintervals). On the actual loan documents, the ARM index was changed without Ownersknowledge. The GFE stated that the index was based on the Treasury Index, whereas closingdocuments stated that the index was based upon LIBOR. Upon examination of the Pooling andServicing Agreement for said MBS Trust “The Bank of New York, in trust for registered holdersof Alternative Loan Trust ______________, Mortgage Pass-Through Certificates, Series______________, Group 1 Certificates,” (hereinafter the “Trust”) the LIBOR index was theindex used. 163. Owners had a reasonable right to rely on the facts and disclosures of CountrywideHome Loans as true and in compliance with all laws. 164. Owners are informed and believe and thereon allege that Countrywide HomeLoans induced Owners into entering into the Loan based on fraud with the intent to defraudthem. 165. Owners are informed and believe and thereon allege that Countrywide HomeLoans, through its Appraiser, made omissions and misrepresentations that are material to thiscounterclaim with the knowledge of their falsity, thus misleading Owners into relying upon themand resulting in the approval of a Loan that Owners could not afford. Page 53 of 62
  • 54. 166. Owners are informed and believe and thereon allege that Countrywide HomeLoans made said omissions and misrepresentations that are material to this counterclaim with theknowledge of their falsity thereby misleading Owners into relying upon them. 167. Owners suffered damages in that they entered into a Loan transaction that Ownerscould not afford to pay which resulted in Owners not proceeding with the sale of the Propertythat would have resulted in the sale of the Property for a profit. 168. Countrywide Home Loans‟ actions were the proximate cause of damages toplaintiffs. But for the fraudulent actions of BAC through its predecessor Countrywide entities,Owners would have been denied a loan. In such an event, Owners would have proceeded to sellthe Property and Owners would not have invested an additional $_____________ to finish the2100 square foot basement which resulted in additional damages. 169. Owners have been damaged by Countrywide Home Loans‟ actions in that theProperty would have been sold for a profit, and Owners would not be faced with the mortgageforeclosure proceedings against the Property and would not have further invested in theproperty/her business which also resulted in a loss. 170. Owners were damaged because of Countrywide Home Loans‟ fraud. Owners didnot sell the Property which they would have done at a profit if this Loan had been denied. By theapproval of the Loan based upon Countrywide Home Loans‟ fraud, Owners invested moremoney into the Property resulting in further losses and this Foreclosure. WHEREFORE, Counterclaimants respectfully request the following relief: a) Award Counter claimants compensatory and punitive damages; b) Award such other relief as this Court may deem just and proper. Page 54 of 62
  • 55. COUNT IIUNFAIR BUSINESS PRACTICES - ILLINOIS CONSUMER FRAUD AND DECEPTIVE BUSINESS PRACTICES ACT, 815 ILCS 505/1 TO 515/12 171. The allegations contained in paragraph 1 through 170 of the counterclaim are re-alleged and incorporated herein by reference. 172. Countrywide Home Loans engaged in unfair and/or deceptive acts or practices byoriginating and granting the Loan to Owners who did not have the ability to repay this Loanthrough practices such as, but not limited to: a) Despite presenting loan application material showing that this would be a fulldocumentation loan, Countrywide Home Loans approved this Loan under reduceddocumentation underwriting guidelines in order to qualify Owners who did not have sufficientincome nor assets to obtain the Loan. b) Inflating Owners income on the loan application to qualify Owners for theCountrywide Loan. c) Qualifying Owners for the mortgage loan that had a 10 year interest – onlypayment option which was less than the fully amortizing payment. 173. Countrywide Home Loans engaged in unfair and/or deceptive acts or practices byoriginating this mortgage loan that exposed Owners to an unnecessarily high risk of foreclosure. 174. Countrywide Home Loans engaged in unfair and/or deceptive acts or practices byimplementing a compensation structure that incentivized brokers and employees to approveloans that did not meet underwriting standards and failed to exercise sufficient oversight over the Page 55 of 62
  • 56. loan process, which, upon information and belief, were the reasons why Owners‟ Loan wasapproved. 175. Owners have alleged numerous violations of various consumer protection laws toestablish a claim under the Illinois Consumer Fraud and Deceptive Business Practices Act, 815ILCS 505/1 TO 515/12. 176. The business practices of Countrywide Home Loans violated so many Illinoislaws that Illinois Attorney General Lisa Madigan appointed an investigation which revealed thatCountrywide as predecessor to BAC engaged in the following unfair and/or deceptive practices,many of which the Owners in the instant case have suffered, that included: a) Originating mortgage loans that borrowers could not afford; b) Relaxing certain underwriting guidelines, particularly through the company‟s reduced documentation loan program, dramatically increasing the risk that borrowers would be unable to pay; c) Originating mortgage loans that exposed borrowers to an unnecessarily high risk of foreclosure or loss of equity, particularly through risky products like pay option ARMs; d) Originating unnecessarily costly loans to borrowers; e) Engaging in unfair and deceptive marketing and advertising practices to lure borrowers into risky loans; f) Incentivizing employee and broker misconduct and the use of unnecessarily costly and risky loan products; and Page 56 of 62
  • 57. g) Engaging in deceptive practices in the servicing of mortgage loans, resulting in greater risk of foreclosures. 177. “Countrywide used egregiously unfair and deceptive lending practices to steerborrowers into loans that were destined to fail,” Madigan said. “As the nation‟s largest originatorof mortgage loans, Countrywide‟s conduct has had, and will continue to have, a devastatingfinancial impact on tens of thousands of families as well as many communities in Illinois.” 178. The conduct of Countrywide Home Loans, as set forth herein, constitutes unfair,fraudulent and deceptive trade practices prohibited under Illinois law and the Consumer FraudAct. 179. Countrywide Home Loans intended that Owners rely on its deceptive acts. 180. Countrywide Home Loans‟ deception occurred in the course of conduct involvingtrade or commerce. 181. As a result of Countrywide‟s unfair, fraudulent and deceptive practices, Ownershave suffered an ascertainable loss of monies and/or property and/or value. 182. Owners have suffered actual damages as a direct and proximate result of theactions of Countrywide in violation of the Illinois Consumer Fraud Act. WHEREFORE, Counterclaimants respectfully request the following relief: a) Find that Countrywide has engaged in and is engaging in trade or commercewithin the meaning of section 2 of the Illinois Consumer Fraud and Deceptive Business PracticesAct, 815 ILCS 505/2. Page 57 of 62
  • 58. b) Impose a civil penalty against Countrywide found by the court to have engaged inany method or practice declared unlawful under this Illinois Consumer Fraud and DeceptiveBusiness Practices Act. c) Require BAC to pay the costs of this action. d) Awarding such other relief as this Court may deem just and equitable. COUNT III ACTION FOR SLANDER OF TITLE 183. The allegations contained in paragraphs 1 through 182 of the Counterclaim are re-alleged and incorporated herein by reference. 184. As BAC has no standing, as it is not the holder of the Note and is not theMortgagee, its claim against the Owners in the complaint to foreclose against the Propertyconstitutes slander on Owners‟ title. 185. Owners own the Property in fee simple as acknowledged by BAC in its mortgageforeclosure complaint against Owners and others. 186. As BAC has no mortgage interest in the Property, its actions by bringing thisforeclosure action against Owners constitutes a slander on Owners‟ title. 187. Owners seek a declaration that BAC has no mortgage interest in the Property. THE MORTGAGE-BACKED SECURITIES TRUST Page 58 of 62
  • 59. 188. Countywide was fully aware that the Loan was funded by CWALT MBSInvestors pursuant to the Pooling and Servicing Agreement and that Owners‟ Mortgage shouldhave been assigned to the Trust. 189. Under “CONVEYANCE OF MORTGAGE LOANS” FROM PROSPECTUSPSA PG 52-53 “(a) Each Seller (CHL), concurrently with the execution and delivery hereof,hereby sells, transfers, assigns, sets over and otherwise conveys to the Depositor(COUNTRYWIDE BANK FSB), without recourse, all its respective right, title and interest inand to the related Initial Mortgage Loans, including all interest and principal received orreceivable by such Seller, on or with respect to the applicable Initial Mortgage Loans after theInitial Cut-off Date and all interest and principal payments on the related Initial Mortgage Loansreceived prior to the Initial Cut-off Date in respect of installments of interest and principal duethereafter, but not including payments of principal and interest due and payable on such InitialMortgage Loans, on or before the Initial Cut-off Date. (C) (i)The original Mortgage Noteendorsed by manual or facsimile signature in blank in the following form: “Pay to the order of______ without recourse,” with all intervening endorsements showing a complete chain ofendorsement from the originator to the Person endorsing the Mortgage Note (each suchendorsement being sufficient to transfer all right, title and interest of the party so endorsing, asnoteholder or assignee thereof, in and to that Mortgage Note); or(A)with respect to any LostMortgage Note, a lost note affidavit from Countrywide stating that the original Mortgage Notewas lost or destroyed, together with a copy of such Mortgage Note. 190. The CWALT ____________ Trust was a non-MERS member, so that once theloans were sold to the Trust, neither MERS nor Countrywide had the ability or the right toassign, sell or otherwise transfer ownership. Thus, the assignment by Countrywide to BAC, its Page 59 of 62
  • 60. successors and assigns, of all right, title and interest in the Mortgage executed by Owners toMERS solely as nominee for Countrywide had no legal effect and was not a proper assignment. 191. As BAC lacks standing to pursue this foreclosure complaint against Owners, thisaction is a slander on Owners‟ Title. 192. Owners request that this Court declare that BAC has no legal Mortgage on theProperty and that its Mortgage as assigned should be removed from Owners‟ title. REQUEST FOR RELIEFWHEREFORE, Counterclaimants respectfully request the following relief:I. Declare that BAC has no mortgage interest in the Property;II. Bar BAC and any and all persons claiming or having any interest in the Property throughit from asserting or claiming any interest, right or title in or to the Property, or any part thereof,adverse to the title of Owner; andIII. Award Owners such other and further relief as equity may require, including, but notlimited to, further declaratory and injunctive relief against BAC.Dated: ______________ ______, 2012 Respectfully submitted, _________________________________________ By: _________________ Page 60 of 62
  • 61. EXHIBIT A QWR EXHIBIT B SECURITIZATION SEARCH REPORT EXHIBIT C PROSPECTUS PAGES 9-12 EXHIBIT D NOVEMBER 4, 2009 ASSIGNMENT EXHIBIT E CWALT JANUARY 20 SERVICER STATEMENT EXHIBIT F RICE SIGNATURE DESIGNATED AS BAC ROBO-SIGNOR EXHIBIT G JANUARY 14, 2009 RICE ACTING FOR BAC- RHODE ISLAND EXHIBIT H AUGUST 12, 2010, RICE ACTING FOR BAC EXHIBIT I RICE- JUNE 7, 2010 VICE-PRESIDENT FOR BAC EXHIBIT JCHICAGO TRIBUNE MARCH 26, 2011 ARTICLE ON FISCHER AND SHAPIRO LLC Page 61 of 62
  • 62. CERTIFICATE OF SERVICEI, _________________, Pro-Se, certify that I mailed the foregoing document to the Clerk‟soffice of the ___th Judicial Circuit _____________County, _______, Illinois and a copy of samevia the US mail to be served to the following individuals below on this the ___th day of__________, 2012:To: (opposing counsel) Respectfully Submitted: ____________________________________ _________________ Page 62 of 62