PDF Supreme Court of The State of New York County of New York

[Pages:100]SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK

FEDERAL HOUSING FINANCE AGENCY, AS CONSERVATOR FOR THE FEDERAL HOME LOAN MORTGAGE CORPORATION,

Plaintiff,

-against-

ALLY FINANCIAL INC. f/k/a GMAC, LLC, GMAC MORTGAGE GROUP, INC., RESIDENTIAL CAPITAL LLC f/k/a RESIDENTIAL CAPITAL CORPORATION, GMAC-RFC HOLDING COMPANY, LLC d/b/a GMAC RESIDENTIAL FUNDING CORPORATION, RESIDENTIAL FUNDING COMPANY, LLC f/k/a RESIDENTIAL FUNDING CORPORATION, ALLY SECURITIES, LLC f/k/a RESIDENTIAL FUNDING SECURITIES, LLC d/b/a GMAC RFC SECURITIES AND f/k/a RESIDENTIAL FUNDING SECURITIES CORPORATION, RESIDENTIAL ASSET MORTGAGE PRODUCTS, INC., RESIDENTIAL ASSET SECURITIES CORPORATION, AND RESIDENTIAL ACCREDIT LOANS, INC., J.P. MORGAN SECURITIES LLC f/k/a J.P. MORGAN SECURITIES, INC. AND AS SUCCESSORIN-INTEREST TO BEAR, STEARNS & CO. INC., CREDIT SUISSE SECURITIES (USA) LLC f/k/a CREDIT SUISSE FIRST BOSTON LLC, RBS SECURITIES, INC. d/b/a RBS GREENWICH CAPITAL AND f/k/a GREENWICH CAPITAL MARKETS, INC., CITIGROUP GLOBAL MARKETS INC., BARCLAYS CAPITAL INC., UBS SECURITIES LLC, GOLDMAN, SACHS & CO.,

Defendants.

Index No._______________ Date Purchased:

Plaintiff designates New York County as the place of trial The basis of venue is the residence of one or more of the parties pursuant to CPLR ?503

SUMMONS

TO THE ABOVE NAMED DEFENDANTS:

YOU ARE HEREBY SUMMONED to answer the Complaint in this action and to serve a

copy of your answer, or if the Complaint is not served with this summons, to serve a notice of

appearance on Plaintiffs' attorneys within 20 days after the service of this summons, exclusive of

the day of service (or within 30 days after the service is complete if this summons is not

personally delivered to your within the State of New York); and in the case of your failure to

appear or answer, judgment will be taken against you by default for the relief demanded in the

Complaint.

Dated: New York, New York September 2, 2011

KASOWITZ, BENSON, TORRES & FRIEDMAN LLP

By:_/s/ Marc E. Kasowitz Marc E. Kasowitz (mkasowitz@) Hector Torres (htorres@) Michael S. Shuster (mshuster@) Christopher P. Johnson (cjohnson@) Charles M. Miller (cmiller@) Michael A. Hanin (mhanin@)

1633 Broadway New York, New York 10019 (212) 506-1700

Attorneys for Plaintiff Federal Housing Finance Agency, as Conservator for the Federal Home Loan Mortgage Corporation

SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK

FEDERAL HOUSING FINANCE AGENCY, AS CONSERVATOR FOR THE FEDERAL HOME LOAN MORTGAGE CORPORATION,

Plaintiff,

-against-

ALLY FINANCIAL INC. f/k/a GMAC, LLC, GMAC MORTGAGE GROUP, INC., RESIDENTIAL CAPITAL LLC f/k/a RESIDENTIAL CAPITAL CORPORATION, GMAC-RFC HOLDING COMPANY, LLC d/b/a GMAC RESIDENTIAL FUNDING CORPORATION, RESIDENTIAL FUNDING COMPANY, LLC f/k/a RESIDENTIAL FUNDING CORPORATION, ALLY SECURITIES, LLC f/k/a RESIDENTIAL FUNDING SECURITIES, LLC d/b/a GMAC RFC SECURITIES and f/k/a RESIDENTIAL FUNDING SECURITIES CORPORATION, RESIDENTIAL ASSET MORTGAGE PRODUCTS, INC., RESIDENTIAL ASSET SECURITIES CORPORATION, and RESIDENTIAL ACCREDIT LOANS, INC., J.P. MORGAN SECURITIES LLC f/k/a J.P. MORGAN SECURITIES, INC. and as successor-in-interest to BEAR, STEARNS & CO. INC., CREDIT SUISSE SECURITIES (USA) LLC f/k/a CREDIT SUISSE FIRST BOSTON LLC, RBS SECURITIES, INC. d/b/a RBS GREENWICH CAPITAL and f/k/a GREENWICH CAPITAL MARKETS, INC., CITIGROUP GLOBAL MARKETS INC., BARCLAYS CAPITAL INC., UBS SECURITIES LLC, and GOLDMAN, SACHS & CO.,

Defendants.

Index No.________ COMPLAINT

TABLE OF CONTENTS Page

NATURE OF ACTION........................................................................................................................1 PARTIES ............................................................................................................................................... 4

Plaintiff .....................................................................................................................................4 Defendants ................................................................................................................................ 5 GMAC Defendants...................................................................................................................5 Non-GMAC Defendants..........................................................................................................7 Non-Party Originators............................................................................................................10 JURISDICTION AND VENUE ........................................................................................................11 FACTUAL ALLEGATIONS ............................................................................................................11 I. FACTUAL ALLEGATIONS APPLICABLE TO ALL CLAIMS .....................................11 A. The Securitizations ....................................................................................................12

1. Residential Mortgage-Backed Securitizations Generally...........................12 2. Securitizations at Issue in this Case .............................................................13 3. Securitization Process ...................................................................................16

a. The Sponsors Grouped Mortgage Loans in Special-Purpose Trusts .................................................................................................16

b. The Trusts Issued Securities Backed by the Loans ........................17 B. Defendants' Participation in the Securitization Process .........................................20

1. Ally.................................................................................................................21 2. RFC ................................................................................................................21 3. RALI, RASC and RAMP .............................................................................23 4. RFS.................................................................................................................23 5. GMAC-RFC ..................................................................................................24 6. Ally, GMACM and ResCap .........................................................................24

i

7. Non-GMAC Underwriters ............................................................................25

C. Statements in the Prospectus Supplements ..............................................................26

1. Compliance with Underwriting Guidelines.................................................26

2. Occupancy Status of Borrower.....................................................................29

3. Loan-to-Value Ratios....................................................................................31

4. Credit Ratings ................................................................................................34

D. Falsity of Statements in the Registration Statements and Prospectus Supplements ............................................................................................................... 36

1. The Statistical Data Provided in the Prospectus Supplements Concerning Owner-Occupancy and Loan-to-Value Ratios was Materially False .............................................................................................36

a. Owner-Occupancy Data was Materially False ...............................36

b. Loan-to-Value Data was Materially False ......................................38

2. The Originators of the Underlying Mortgage Loans Systematically Disregarded Their Underwriting Guidelines ...............................................41

a. Government and Private Investigations Confirm That the Originators of the Loans in the Securitizations Systematically Failed to Adhere to Their Underwriting Guidelines.......................................................................................... 42

i. New Century Violated Its Underwriting Guidelines..........43

ii. HFN Violated Its Underwriting Guidelines........................46

iii. MLN Violated Its Underwriting Guidelines.......................48

b. The Collapse of the Certificates' Credit Ratings Further Shows that the Mortgage Loans were not Originated in Adherence to the Stated Underwriting Guidelines .........................49

c. The Surge in Mortgage Delinquency and Default Further Demonstrates that the Mortgage Loans were not Originated in Adherence to the Stated Underwriting Guidelines.....................50

E. Freddie Mac's Purchases of the Certificates............................................................52

F. Freddie Mac was Damaged by Defendants' Violations of Sections 11, 12 and 15 of the Securities Act ......................................................................................53

ii

II. ADDITIONAL FACTUAL ALLEGATIONS .....................................................................54

A. Defendants Were Incentivized to Fund Risky Residential Mortgage Loans and to Securitize and Sell Them to Investors..........................................................54

B. Defendants' Material Misrepresentations and Omissions in the Offering Materials ..................................................................................................................... 58

C. The Fraud Defendants Knew or were Reckless in not Knowing that Their Representations were False and Misleading ............................................................62

D. Freddie Mac Justifiably Relied on the Misrepresentations and Omissions in the Offering Materials and was Damaged by Defendants' Fraudulent Conduct ......................................................................................................................70

FIRST CAUSE OF ACTION ............................................................................................................72

Violation of Section 11 of the Securities Act of 1933 (Against Defendants RALI, RASC, RAMP, RFS, JPM, Credit Suisse, RBS, Citi, Barclays, UBS and Goldman Sachs).........................................................................................................72

SECOND CAUSE OF ACTION .......................................................................................................75

Violation of Section 12(a)(2) of the Securities Act of 1933 (Against Defendants RALI, RASC, RAMP, RFS, JPM, Credit Suisse, RBS, Citi, Barclays, UBS and Goldman Sachs).........................................................................................75

THIRD CAUSE OF ACTION ...........................................................................................................78

Violation of Section 15 of the Securities Act of 1933 (Against RFC, GMAC-RFC, ResCap, GMACM and Ally) ....................................................................................78

FOURTH CAUSE OF ACTION .......................................................................................................81

Primary Violations of the Virginia Securities Act (Against RALI, RASC, RAMP, RFS, JPM, Credit Suisse, RBS, Citi, Barclays, UBS and Goldman Sachs) .........81

FIFTH CAUSE OF ACTION ............................................................................................................84

Controlling Person Liability Under the Virginia Securities Act (Against RFC, GMAC-RFC, ResCap, GMACM and Ally).............................................................84

SIXTH CAUSE OF ACTION ...........................................................................................................88

(Common Law Fraud Against RALI, RAMP, RASC, RFC, RFS JPM, Credit Suisse, RBS, Citi, Barclays, UBS and Goldman Sachs).........................................88

SEVENTH CAUSE OF ACTION.....................................................................................................89

iii

(Aiding and Abetting Fraud Against Ally, GMACM, GMAC-MG, ResCap, GMAC-RFC, RFC, RALI, RASC and RAMP).......................................................89

EIGHTH CAUSE OF ACTION ........................................................................................................91 (Negligent Misrepresentation Against RALI, RASC, RAMP, RFC, RFS, JPM, Credit Suisse, RBS, Citi, Barclays, UBS and Goldman Sachs)..............................91

PRAYER FOR RELIEF.....................................................................................................................93

iv

Plaintiff Federal Housing Finance Agency ("Plaintiff" or "FHFA"), as Conservator of the Federal Home Loan Mortgage Corporation ("Freddie Mac"), by its attorneys Kasowitz, Benson, Torres & Friedman LLP, for its Complaint against the defendants named herein ("Defendants"), alleges as follows:

NATURE OF ACTION 1. This action arises from false and misleading statements and omissions in registration statements, prospectuses, and other offering materials pursuant to which certain residential mortgage-backed securities ("RMBS") were purchased by Freddie Mac. Among other things, these documents falsely represented that the mortgage loans underlying the RMBS complied with certain underwriting guidelines and standards, and presented a false picture of the characteristics and riskiness of those loans. These representations were material to Freddie Mac, as they would have been to any reasonable investor, and their falsity violates Sections 11, 12(a)(2), and 15 of the Securities Act of 1933, 15 U.S.C. ? 77a et seq., as well as Sections 13.1522(A)(ii) and 13.1-522(C) of the Virginia Code. Freddie Mac justifiably relied on Defendants' misrepresentations and omissions of material fact to its detriment. In addition to its strict statutory liability under federal securities law and liability under state law, Defendants' statements and omissions give rise to liability under state common law. 2. Between September 23, 2005 and May 30, 2007, Freddie Mac purchased over $6 billion in Certificates issued in connection with 21 securitizations that were virtually all sponsored and underwritten by Defendants.1

1

For purposes of this Complaint, the securities issued under the Registration Statements

(as defined in note 2, infra) are referred to as "Certificates." Holders of Certificates are referred

to as "Certificateholders."

 ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download