The banks are thrilled at the latest settlement, confirming yet again their ability to break the law with impunity. Consider the following, from the litigation between Syncora Guarantee (formerly XL Capital  Assurance) vs EMC Mortgage Corp, and Ambac Assurance vs vs EMC Mortgage Corp:

Compare Comments made by Consultants Hired to do Foreclosure Reviews:

“Oversight by the regulators was nearly nonexistent, the reviewers said. Some employees hired by one of the consultants, Promontory Financial, to pore over hundreds of thousands of Bank of America foreclosures said that without a watchdog some consultants worked to minimize the number of homeowners found to be harmed. One reviewer described how her supervisors routinely kicked back loans where she had identified harm. The reviewers would speak only if they were not named because they were searching for work…”

With comments made by Whistelblowers about due diligence on mortgages before they were securitized – full transcript attached:

19 Q. So as I understand it, through the team leads you received directions that the clients wanted the underwriters to ignore certain defects in loans?
24 A. That is correct.
Q. Turn to paragraph 17 of your affidavit, which is on page 5.It says here in the first line: “Clayton supervisors would often inform the due diligence underwriters that the purchasers wanted the underwriters to approve loans that often did not satisfy the underwriting guidelines.”
11 A. That is correct.
12 Q. Is the same statement true for Watterson Prime?
14 A. Yes.
15 Q. Was this a practice which was pervasive at Watterson and Clayton?
17 A. Yes.
18 Q. Across all clients?
19 A. Yes.

 

I see if I can find the PDF of the full deposition; most of the transcript is after the jump

 

19 Q. So as I understand it, through the team leads you received directions that the clients wanted the underwriters to ignore certain defects in loans?

24 A. That is correct.
Q. Turn to paragraph 17 of your affidavit, which is on page 5.It says here in the first line: “Clayton supervisors would often inform the due diligence underwriters that the purchasers wanted the underwriters to approve loans that often did not satisfy the underwriting guidelines.”
11 A. That is correct.
12 Q. Is the same statement true for Watterson Prime?
14 A. Yes.
15 Q. Was this a practice which was pervasive at Watterson and Clayton?
17 A. Yes.
18 Q. Across all clients?
19 A. Yes.
20 Q. What type of deviations from underwriting guidelines are you referring to in this sentence?
23 A. You have — you have things for appraisals where the value wasn’t there. They ignore it. You would have as far as income that didn’t — that wasn’t jailed, in other words, the income wasn’t there.
4 THE COURT REPORTER: “That wasn’t” — A. Jailed, or, in other words, that income wasn’t there for these borrowers and they will say find exceptions to compensate or for that loan is not — that’s not lining up
10 correctly, don’t worry about it, let’s get it done, get the information in there and compensate it out, we will compensate it.
Q. 16 You said just now that you found that the income wasn’t there. What do you mean by that?
19 A. You would look at — you would look at underwriters that are front-end underwriters that approve the loan at one income and it’s true enough they may have — if they had the documents — if you had all the documents in
24 the loan the income may have been that, but based on what you have in front of you the income didn’t line up, and then sometimes when you look at some of the income even if you had all the documents and recalculated it, it
5 wasn’t — the income wasn’t there. In other words, the loan lacked substance of being approved.

10 Q. Did you work on stated income loans at Watterson and Clayton?
12 A. Yes, I did.
13 Q. When you say that the income wasn’t there, could that be related to stated income loans?
16 MR. EDLIN: Objection. Leading.
17 A. That is correct. You had some stated income loans that was out of the box and unreasonable.
22 Q. Your testimony is that on stated income loans you found many times that the income listed on these loan applications was not reasonable?
2 A. Yes, there was.

23 Q. Let me go back to paragraph 17 of your declaration. Let me read the second line here. It states that: “I recall specifically one occasion when representatives of Bear Stearns (the purchaser) told my supervisors
4 that because Bear Stearns was willing to purchase loans that did not meet the underwriting guidelines, we should try to find a compensating factor for every single loan that did not meet the underwriting guidelines.”
9 A. That is true.

15 Q. Do you recall any other instances?
16 A. That’s pretty much on all jobs.

5 Q. So it’s fair to say that even though you don’t remember any other specific occasions when you received similar instructions, that you did receive these types of instructions on a regular basis?
10 MR. EDLIN: Leading.
11 A. I would say yes, I did.
12 Q. To your knowledge, was it a pervasive practice at Watterson and Clayton for underwriters to fail to follow the underwriting guidelines?
18 Q. To your knowledge, was it a pervasive practice at Watterson and Clayton for underwriters re-underwriting the loans to not follow the underwriting guidelines?
24 A. Yes.
25 Q. In paragraph 17 you also state: “When I could not find a compensating factor for certain defective loans even after a thorough review of the loan files, I was told to return to my desk and search again. Due
6 diligence underwriters like myself were forced to find compensating factors for defective loans where none existed.”
9 A. Yes.
10 Q. Is that a true statement?
11 A. That is true.
12 Q. Did the same practice take place at
13 Watterson Prime?
14 A. Yes.
15 Q. How common was it for Clayton and Watterson Prime underwriters to provide as compensating factors those that were not sufficient or were contrived?
19 A. It was very common.
20 MR. EDLIN: Leading and lack of
21 foundation.
22 A. It was very common for that type of practice for both Watterson and Clayton.
Q. Now, this paragraph in particular, paragraph 17, refers to a particular Bear Stearns job; correct?
3 A. Yes.
4 MR. EDLIN: Objection.
5 Q. Is it your testimony that on this particular job you found compensating factors that were contrived?
8 A. Yes.
9 MR. EDLIN: Objection.
10 Q. Take a look at paragraph 18. It says: “For example, on one occasion the loan application for a stated income loan that I processed stated that the borrower made $8,500 per month working as an assistant manager at
15 McDonalds restaurant. I told my supervisor that the borrower’s stated income was unreasonable. I was told to find a compensating factor and approve the loan. The compensating factor that I found did not sufficiently compensate for the defect.”
21 A. That is correct.
22 Q. That’s a true statement?
23 A. Yes, that is.
24 Q. Do you recall any other specific instances?
2 A. There were several instances that I can’t recall, but that stood out particularly, because I remember it was a California loan and they tried — and the team lead tried to basically say this is California, of course
7 they are going to pay higher, and at that time I believe 8,500 for someone that’s around about 19 or 20 coming out of high school was not reasonable at a hundred thousand and you are not even the owner of a McDonalds.

13 Q. Even though you may not be able to recall, as you testified, other specific examples, do you believe that you found loans like this where the stated income was not reasonable on other occasions?
18 A. Yes.
19 Q. On Bear Stearns jobs?
20 A. Yes.
21 MR. EDLIN: Move to strike.
22 Q. And you graded those loans as 1s, 2s
23 or 3s?
24 A. Most of the time it was graded as a 2. It was graded as a 2 and later on down the line it was changed to a 1.

11 Q. Paragraph 20 of your declaration states that: “Due diligence underwriters like myself often faced significant pressure from supervisors to review loan files quickly as possible and to avoid finding defects.” Is
16 that a correct statement?
17 A. I would say that is true.
18 Q. Okay. And this statement applies equally to Watterson Prime?
20 A. Yes, that is true as well.
21 Q. What pressure, if any, did you receive as an underwriter to underwrite a large volume of loans and to avoid finding defects?
24 A. Basically the pressure I received was basically get the loan information into the system as quickly as possible. These loans already closed.
4 Q. The statement also says that the pressure was there to avoid finding defects.
6 Do you see that?
7 A. Yes.
8 Q. That’s a correct statement?
9 A. That is correct.
10 Q. Do you remember any specific recollections of times when you were told to avoid finding defects?
13 A. Most of the time it was on a lot of Countrywide deals and also Bear Stearns and Lehman Brother deals.
16 Q. And do you recall any statements that were made to you by team leads?
18 A. One particular that stands out like say it was always any time we did a Bear Stearns job it was pretty much we just entering data into the system like Bear don’t care. You know, that was like the little slogan that they
23 used to just basically throw around. So we just pretty much put the information in there.

3 Q. So the slogan Bear don’t care, was that a slogan which was also used by team leads?
6 A. Pretty much. I have heard one team leader say that.
8 Q. Do you recall the name of the team lead?
10 A. I want to say Steve Shockley, but I don’t want to put it on that particular team lead, but he pretty much — you know, he had the attitude like that, but I can’t recall if that was the team lead that actually said that
15 at one time.
18 Q. Now, you said that there was a significant amount of pressure here in the statement to review loans quickly.
23 A. if you had too many days where you had less loans than the hours you worked, you would pretty particularly – you probably were not going to get staffed again.

19 Q. Now what happens to underwriters were not doing twelve hours — twelve loans per day in a twelve-hour day?
22 A. You in particular might not get staffed again, because you are not producing quantity and it was basically driven by quantity, not quality, because you may have 2,500 loans and you calculated per underwriter — it was calculated per underwriter how many we had to get out of each underwriter in order to finish that pool in
6 that particular time.
9 Q. So Clayton and Watterson traded quality for quantity?
11 A. Yes.
13 Q. And how did the quality of the loans or the quality of the loan underwriting, rather, and the review of those loans suffer due to the pressure to increase the volume of loans reviewed?
20 A. You would ignore — you would ignore some things that if you was to take your time writing that — underwriting that loan that you would have caught — that you would have caught — caught mistakes or things that you could have looked at and, say, you know, this is not right.
4 Q. Who put pressure on you to review that large number of loans per day?
6 A. Your team leads, they set the goals.
13 Q. Copying what from what?
14 A. You are basically copying what’s already written and you are not even bothering to calculate, you are just entering — basically you are just straight data entering, entering information directly from the loan application into the system. You are not even looking at the documents.

21 Q. Well, let me just turn to paragraph 20 of your declaration on page 6 that states, the second sentence: “These pressures” — and these pressures are to review loans quickly and not to find defects — “led many due diligence underwriters to simply enter into the CLAS database information found on the loan application rather than entering information from the verification documents in the loan file, as required by the protocol.” Do you see that?
12 Q. And then you continue to write here: “CLAS was therefore “re-calculating” the same information which already often appeared on the spreadsheet provided by the seller.”
16 A. That is correct.
17 Q. So that practice is referred to as 1003 or 1008 underwriting?
19 A. That is correct.
20 Q. Did this practice take place at Watterson?
22 A. Yes.
23 Q. And Clayton?
24 A. Yes.
25 Q. How prevalent was 1008 and 1003 underwriting at Watterson and Clayton?
4 A. It was very common. It goes back to some of the same people who had no experience at underwriting, so, therefore, they were copying straight from those documents.
8 Q. Did this practice take place on jobs for Bear Stearns?
10 A. Yes.
11 Q. Did this practice take place on jobs for Credit Suisse?
13 A. Yes.
14 Q. Countrywide jobs?
15 A. Yes.
16 Q. Deutsche Bank jobs?
17 A. Yes.
18 Q. Do you recall any particular underwriters who engaged in this practice?
20 A. Jason Westmore.
21 Q. Any others?
22 A. Some of the ones that were related to Barry Barmore.
24 Q. Jason Westmoreland, which company did he work for?
2 A. Watterson Prime.
3 Q. And Gary Barmore, which company did he work for?
5 A. Clayton.
6 Q. You said that some of these individuals engaged in this practice were related to Gary Barmore?
9 A. Jason was not related to Gary Barmore. He is just a particular individual that stood out that was notorious for doing it at Watterson Prime.

22 Q. And earlier you stated that you know that relatives of Gary Barmore were also 24 engaged in 1008, 1003 underwriting?
25 A. Yes.
2 Q. And Gary Barmore, you testified earlier, was a team lead at Clayton?
A. Yes, he was.
9 Q. Were they continued to be employed by Clayton?
11 A. They got staffed at every job because they put out numbers doing that type of underwriting.
17 Do you remember reviewing stated income loans at Watterson and Clayton?
19 A. Yes.
20 Q. Okay. What, if any, instructions did you get from Watterson and Clayton team leads on how you should review stated income loan products?
24 A. Basically don’t look at them as harsh as — you know, the loans are already closed and these people are already in their homes, just go ahead and enter information what they got down there, what they have stated on
5 the application.
8 Q. Were you given any instructions on whether you should find and mark as defective those loans where the stated incomes were not reasonable?
13 A. Yes. Some — there is a particular — one particular team lead, Steve Shockley, he would have an exception written on a board or written down on a piece of paper, “hey, if you come into this type of problem,
18 put this in your comment section for that stated income.”

9 Q. And you testified earlier that the comp factors that you found at the direction of the team leads were either contrived or not sufficient to overcome the defects?
14 A. That is correct.
15 Q. This practice on stated income loans and comp factors, did that apply to all deals that you worked on?
18 A. Yes.

12 Do you recall during your employment at Watterson and Clayton coming across documents in loan files that appeared to be fraudulent?
18 A. Yes, I have during that time.
Q. What instructions, if any, did you receive from Watterson Prime and Clayton supervisors and team leads on what you should do with these documents?

25 A. Usually the instructions were just go ahead and keep it moving, enter the information, we will take care of that with the investor, the seller, or we will get the document — the correct documents later.

20 A. Once we — once a lot of the documents were missing or it was prevalent that we don’t have these documents, we were told to ignore, ignore that and grade them as normal, ignore that document that was needed.
.
11 During your employment at Watterson and Clayton if you came across a document or when you came across a document which was — which appeared to be fraudulent, how did you grade such loans?
18 A. It depends on the team lead. They pretty much sometimes would just ignore it, don’t worry about that, that document, we will take care of it later, go ahead and grade it as normal, ignore that document.

12 Q. Did you ever notice in reviewing stated income loan products at Watterson and Clayton W-2s and other tax documents that were left in the loan file?
17 A. Yes. There had been plenty of times that W-2s, pay stubs, other documents that were in the file.
20 Q. On stated income loan products?
21 A. Yes.
22 Q. Did at times any of these documents,W-2s or the tax documents, contradict or call into question the income listed by the borrower on the loan application?
3 A. Yes.
4 Q. What instructions, if any, did you receive on what you should do with these loans?
7 A. Usually it would depend on the job,either they pull the documents — they pull those documents out or we were told to turn them over and put them at the very back of the documents.

15 Q. When you say “pull those documents out,” what do you mean by that?
17 A. Pull them out of their folder, meaning that they don’t exist.
20 Q. And do what with them?
23 A. We would put them in a pile — sometimes we would put them in a pile and whatever they did with them, either they shredded them or they got — in other words, they disappeared, they disappeared, and sometimes the explanation would have been, well, this borrower was going for a full doc but they went stated.

14 Q. So a lot of times these documents were pulled out of the loan file and just destroyed?
18 A. Yes, they were destroyed, but it was not by the underwriter. They was hidden.

24 “Supervisors and project managers repeatedly told due diligence underwriters that the loans that we were reviewing had already closed and that the borrowers had already moved into their new houses, and as such, the due diligence underwriters should not be too strict in their review.” Is that a true statement?
7 A. Yes.

4 Q. Turn to paragraph 19 of your affidavit, which is on page 6. It states here basically that you were instructed that because the loans had already closed your review of those loans should not be too strict.
9 A. That is correct.
12 Q. Okay. And paragraph 21, the first line here reads: “There was a general attitude at Clayton that underwriters should not be searching for discrepancies.” Is that a true statement?
17 A. Yes.
18 Q. The same practice took place at
19 Watterson?
20 A. Yes.
21 Q. Turn to paragraph 30. It states
22 here in the last line on page 10: “With respect to one particular job for Bear Stearns, I recall a Watterson supervisor stating, “I don’t care how bad the loans are, I only want to see them graded as 1s and 2s”.” Do you 12 Q. Do you recall the name of the team lead here?
14 A. Steve Shockley.
15 Q. You testified earlier that you believe that these instructions were coming from the clients. Do you recall that?
18 A. Yes, I did.
19 Q. What basis do you have to say that these instructions to not focus on finding defects and to grade loans as 1s and 2s were coming from the clients?
23 A. Usually at the beginning of every project the team lead or project manager would state “here is what the client wants and give your parameters as met,” and usually either somewhere in between that day or the next day
4 after that either that project manager would get on the phone or go in a private meeting,they would come back and say, “well, the client is not accepting this,” that usually come out of the project managers, “the client is not accepting this.”

14 Q. So you heard it from the mouths of your team leads –
16 A. Yes.
17 Q. — that the clients did not want you to find these types of defects?
19 MR. EDLIN: Objection. Leading.
20 A. Yes. It came out of project manager’s mouth that here — the client accept this.
3 Do you recall the names of any particular clients which come to mind?
6 A. Bear Stearns were one of them.

9 Q. Do you recall the name of the particular Bear Stearns representative which the team leads referenced?
12 A. No.
13 Q. Does the name John Mongoluzza sound familiar?
15 MR. EDLIN: Objection. Leading.
16 A. Yes.
17 Q. Okay. Do you recall instances where the team leads relayed instructions to you from
19 Mr. Mongoluzza?
20 A. Yes.
23 Q. Did these instructions — what were these instructions?
25 A. Pretty much similar to what we just stated before, go ahead — they gave us instructions to ignore this, go ahead, the client will accept that. That’s usually when you have seen the project manager either talking to the side with Mr. Mongoluzza or on the phone with him.
11 Q. I want to go back to paragraph 21 of your declaration on page 6. It states here, the third line: “It was an understood rule at Clayton that if a due diligence underwriter graded a significant number of loans as EV-3s,
16 that underwriter would not be hired for the next due diligence job.”
3 Q. And you state here that basically if underwriters were grading too many loans or a significant number of loans, that’s what it says here, as EV-3s, those underwriters were not hired by Clayton for future jobs.
8 A. That is correct. You usually wouldn’t see that underwriter for a while unless we had a huge job and they needed every pretty much body on a project and get a bunch of loans out.

19 Q. I am going to turn to paragraph 25 of your affidavit, which is on page 8. It states that — here that: “When due diligence underwriters determined that a particular loan had a defect that was not sufficiently overcome by compensating factors — resulting in a grade of 3 — supervisors would frequently change the
2 grades for those loans to a 1 or a 2. I remember multiple occasions where I looked back at a loan that I had graded as a 3 and found that the grade had been changed to a 1 or a 2 without justification.” Is that a true
7 statement?
8 A. Yes.
9 Q. Do you believe that the changes which were made to these loans, changes from 3s to 1s and 2s, were justified?
13 A. No, I don’t believe they were justified at all, because there were particularly notes I put in there why they were 3s.
17 Q. Could you give us examples of loans that you had graded as 3s where the grade of those loans was changed to a 1 or 2 for unjustified reasons?
21 A. I have been on multiple loans, but I couldn’t just give any single example, but it did happen. It happened like say I recorded these loans every night on my scratch-off pad, would have the calculations of everything with the loan number and usually I put a circle on that and go back and look at it again with — hoping that, well, let me see if I can see it with a fresh mind and fresh start and usually I will go back and they were changed.
9 Q. Okay. So basically as I understand it, you kept a notebook which indicated loan numbers and how you graded those loans?
12 A. Yes. Because any time — any time they had any discrepancy on how many number of loans you have done, I could always refer back to here is the loans I worked on.
16 Q. Okay. And on the next day after you had done the review for a particular day, you went back and you checked to see whether grades that you had marked as defective on the previous day remained as defective in the Watterson and Clayton computer systems?
24 Q. And you found, as I understand your testimony, that on many of these times when you checked the following day you noticed that the loans that you had marked as defective the day before were marked now as non-defective?
5 A. Yes.
6 Q. Was this practice prevalent at Watterson and Clayton?
8 MR. EDLIN: Objection.
9 A. Yes.
10 Q. And these changes in grades you believe took place for unjustified reasons?
13 A. Yes. Correct.
The next line reads: “When such changes occurred, Watterson’s computer system deleted any evidence of the earlier grade.”
19 A. Yes.
20 Q. That’s a true statement?
21 A. That is true.
22 Q. I want to turn to paragraph 29 now. I want to read just a couple of lines at the top. “Mr. Weeks pressured due diligence underwriters to complete a review of loans quickly, even if that meant sacrificing quality of loans.” Do you see that?
4 A. Yes.
9 Q. And who is Mr. Weeks?
10 A. Mr. Weeks was a project office manager in the Atlanta office for Watterson Prime.
13 Q. Okay. Next line reads: “He told us that we should “clear” (approve) the loans quickly and that Watterson would “clean it up on the back end”.” Do you see that?
17 A. Yes.
20 Q. “During this “clean up” process Mr. Weeks instructed Watterson personnel to change data on Watterson’s due diligence reports to ensure that it matched the information on the spreadsheet or “loan tape”.”
25 Is that a true statement?
2 A. Yes.
3 Q. Now, how do you know — strike that. Did Mr. Weeks instruct you to change data on Watterson’s due diligence reports to ensure that it matched the data provided on the loan tape?
A. No, he did not instruct me.
Q. And how do you — did he instruct others?
12 A. Yes.
13 Q. And how do you know that he instructed others?
15 A. He made several occasions “don’t worry about it, we will have the QCers and analysts take care of that on the back end” and they changed this information.
22 Q. Were you present when he provided those instructions?
24 A. Yes, I was. There was many times when he may be talking openly on the floor to personnel and I am sitting right by at my desk.
5 Q. You also provide here a statement where it says: “This changing of the data was done without any review of the documents in the loan file.” Do you see that?
9 A. Yes.
10 Q. That’s a true statement?
11 A. Yes, it is.
24 Clayton did it when we went home for the night, the QCers and the project managers stayed back maybe about an hour or two later and did that.
5 Q. ‘For example” — and I am reading here from paragraph 29 — “on numerous occasions, based upon a review of the “HUD-1″ forms, the due diligence underwriters found loans defective because they were considered “high cost” loans under state law. For these loans, Mr. Weeks would routinely delete evidence of many closing charges from
13 Watterson’s computer systems despite the fact that these charges were clearly shown on the HUD-1 forms. Deleting evidence of closing charges from Watterson’s computer systems did not change the fact that the HUD-1 forms clearly showed that the borrowers paid those fees. Mr. Weeks was considered the master of engineering apparent compliance with state law and manipulating the numbers.” Is that a true statement?

7 Q. In summary, just to wrap it up, is it your view that the due diligence underwriting practices at Watterson and Clayton did not accurately or properly determine whether loans complied with the underwriting guidelines?
14 A. Yes, it was.
15 Q. Is it your view that Bear Stearns improperly directed Watterson and Clayton to deviate from underwriting guidelines and improperly changed loans ranked defective to loans ranked approved?
21 A. Yes. Bear Stearns was neglect and negligent on their part as well as Watterson
23 Prime and Clayton.

Q. I want to focus a little bit on your jobs — your job as an underwriter at both Watterson and Clayton. What is your understanding of what the role of an underwriter was at Watterson and Clayton?
3 A. My understanding at the time was to re-underwrite the loans to specific guidelines to see if they were met and to give them a risk assessment that ranges from a 1, 2 or 3, so, therefore, the investor can assess whether to buy that group of loans or that particular loan that I underwrote.

16 It says here: “Importantly, in reviewing each loan, the due diligence underwriter also had to assess whether the loan met the criteria set out in the underwriting guidelines. For example, the underwriting guidelines for stated income loans required, among other things, that the borrower’s income listed on the loan application must be reasonable.”

24 A. That is correct.
25 Q. Did the underwriting guidelines also require the underwriter to look for red flags of fraud?
4 A. Yes.
5 Q. And what do the underwriting guidelines say about red flags for fraud?
7 A. They were — they were not 8 particular — in other words, they were not particularly good loans and possibly these loans shouldn’t have been approved.

10 Did you find that the guidelines that you were provided by these project leads and team leads of both Watterson and Clayton, did they always apply to the loans that you were reviewing?
15 MR. EDLIN: Objection.
16 A. No, they did not. Some guidelines didn’t meet any of the parameters of these loans.
19 Q. Okay. And what do you mean when you say the guidelines did not meet the parameters of the loans?
22 A. Meaning the loans when they were approved were outside the box of what was given to us, if we had guidelines at all.

Q. When you say outside of the box, you are talking about a time period?
A. Yes. The loans may have been written to one set of guidelines compared to what you was given.

10 Q. So as I understand it, I want to make sure that the record is clear on this, that Watterson Prime and Clayton underwriters like yourself were not often provided with the guidelines which were applicable to the loans at the time they were originated?
16 A. That is correct. That is — that is correct. The guidelines, the majority of the time you would have them, did not line up or was parallel with the loan approval at that time. These were the guidelines we were going to go by.
25 A. These were the guidelines we are going to use for this particular project at that time and most of the time they were not parallel or lined up with the approval of how this underwriter came up with that decision.
Q. What direction, if any, did you receive from the clients of Watterson Prime and Clayton regarding how to conduct a re-underwriting review?
12 A. Usually it was channeled through the team lead or the project manager certain problems maybe after the first day we would run through and usually they would say, “hey, the client is — they are going to ignore that” or “that’s not a big concern and they will take care of that.”

2 A. Yes.
3 Q. You worked on their loans?
4 A. Yes.
5 Q. For Watterson or Clayton?
6 A. That was with Watterson.
7 Q. Flag Star?
8 A. That was with Watterson.
9 Q. You worked on their loans?
10 A. Yes.
11 Q. Sun Trust?
12 A. No.
13 Q. First Horizon?
14 A. Not familiar with them.
15 Q. Watterfield?
16 A. Not familiar.
17 Q. Maribella?
18 A. Never heard of them.
19 Q. Impac?
20 A. No.
21 Q. I want to focus a little bit on your
22 jobs — your job as an underwriter at both
23 Watterson and Clayton.
24 What is your understanding of what
25 the role of an underwriter was at Watterson and
2 Clayton?
3 A. My understanding at the time was to
4 re-underwrite the loans to specific guidelines
5 to see if they were met and to give them a risk
6 assessment that ranges from a 1, 2 or 3, so,
7 therefore, the investor can assess whether to
8 buy that group of loans or that particular loan
9 that I underwrote.
10 Q. And the investor that you mentioned,
11 you are talking about clients of Watterson and
12 Clayton?
13 A. Yes.
14 Q. And let me just turn to paragraph 15
15 of your declaration, which is on page 5 here.
16 It says here: “Importantly, in reviewing each
17 loan, the due diligence underwriter also had to
18 assess whether the loan met the criteria set
19 out in the underwriting guidelines. For
20 example, the underwriting guidelines for stated
21 income loans required, among other things, that
22 the borrower’s income listed on the loan
23 application must be reasonable.”
24 A. That is correct.
25 Q. Did the underwriting guidelines also
2 require the underwriter to look for red flags
3 of fraud?
4 A. Yes.
5 Q. And what do the underwriting
6 guidelines say about red flags for fraud?
7 A. They were — they were not
8 particular — in other words, they were not
9 particularly good loans and possibly these
10 loans shouldn’t have been approved.
11 Q. How did the underwriters receive the
12 guidelines and directions regarding the
13 guidelines?
14 MR. EDLIN: Objection.
15 A. It varied. It varied from project
16 to project. Sometimes some project leads would
17 give you the parameters and write things on a
18 flip pad or also on a dry board eraser, dry
19 board, or sometimes they may have them up there
20 near them, and sometimes we may be on the job
21 and not have any guidelines at all.
22 Q. So let me just clarify. It was the
23 project leads or the team leads who provided
24 you these guidelines or other instructions
25 relating to guidelines?
2 A. That is correct.
3 Q. To the best of your knowledge, where
4 did the project leads and the team leads get
5 these guidelines from?
6 A. To the best of my knowledge,
7 probably the investors or their originators.
8 Q. You mentioned that — well, I am
9 going to come back to that a little bit later.
10 Did you find that the guidelines
11 that you were provided by these project leads
12 and team leads of both Watterson and Clayton,
13 did they always apply to the loans that you
14 were reviewing?
15 MR. EDLIN: Objection.
16 A. No, they did not. Some guidelines
17 didn’t meet any of the parameters of these
18 loans.
19 Q. Okay. And what do you mean when you
20 say the guidelines did not meet the parameters
21 of the loans?
22 A. Meaning the loans when they were
23 approved were outside the box of what was given
24 to us, if we had guidelines at all.
25 MR. EDLIN: Objection. Move to
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2 strike as non-responsive.
3 Q. When you say outside of the box, you
4 are talking about a time period?
5 A. Yes. The loans may have been
6 written to one set of guidelines compared to
7 what you was given.
8 MR. EDLIN: Objection. Move to
9 strike.
10 Q. So as I understand it, I want to
11 make sure that the record is clear on this,
12 that Watterson Prime and Clayton underwriters
13 like yourself were not often provided with the
14 guidelines which were applicable to the loans
15 at the time they were originated?
16 A. That is correct.
17 MR. EDLIN: Objection. Lack of
18 foundation and leading.
19 A. That is — that is correct. The
20 guidelines, the majority of the time you would
21 have them, did not line up or was parallel with
22 the loan approval at that time. These were the
23 guidelines we were going to go by.
24 THE COURT REPORTER: I’m sorry?
25 A. These were the guidelines we are
2 going to use for this particular project at
3 that time and most of the time they were not
4 parallel or lined up with the approval of how
5 this underwriter came up with that decision.
6 MR. EDLIN: Objection. Move to
7 strike as non-responsive.
8 Q. What direction, if any, did you
9 receive from the clients of Watterson Prime and
10 Clayton regarding how to conduct a
11 re-underwriting review?
12 A. Usually it was channeled through the
13 team lead or the project manager certain
14 problems maybe after the first day we would run
15 through and usually they would say, “hey, the
16 client is — they are going to ignore that” or
17 “that’s not a big concern and they will take
18 care of that.”
19 Q. So as I understand it, through the
20 team leads you received directions that the
21 clients wanted the underwriters to ignore
22 certain defects in loans?
24 A. That is correct.
25 MR. EDLIN: Objection. Leading.
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2 Lack of foundation.
3 Q. Turn to paragraph 17 of your
4 affidavit, which is on page 5.
5 It says here in the first line:
6 “Clayton supervisors would often inform the due
7 diligence underwriters that the purchasers
8 wanted the underwriters to approve loans that
9 often did not satisfy the underwriting
10 guidelines.”
11 A. That is correct.
12 Q. Is the same statement true for
13 Watterson Prime?
14 A. Yes.
15 Q. Was this a practice which was
16 pervasive at Watterson and Clayton?
17 A. Yes.
18 Q. Across all clients?
19 A. Yes.
20 Q. What type of deviations from
21 underwriting guidelines are you referring to in
22 this sentence?
23 A. You have — you have things for
24 appraisals where the value wasn’t there. They
25 ignore it. You would have as far as income
2 that didn’t — that wasn’t jailed, in other
3 words, the income wasn’t there.
4 THE COURT REPORTER: “That
5 wasn’t” –
6 A. Jailed, or, in other words, that
7 income wasn’t there for these borrowers and
8 they will say find exceptions to compensate or
9 for that loan is not — that’s not lining up
10 correctly, don’t worry about it, let’s get it
11 done, get the information in there and
12 compensate it out, we will compensate it.
13 Q. We are going to come back to the
14 issue of compensating factors a little bit
15 later.
16 You said just now that you found
17 that the income wasn’t there. What do you mean
18 by that?
19 A. You would look at — you would look
20 at underwriters that are front-end underwriters
21 that approve the loan at one income and it’s
22 true enough they may have — if they had the
23 documents — if you had all the documents in
24 the loan the income may have been that, but
25 based on what you have in front of you the
2 income didn’t line up, and then sometimes when
3 you look at some of the income even if you had
4 all the documents and recalculated it, it
5 wasn’t — the income wasn’t there. In other
6 words, the loan lacked substance of being
7 approved.
8 MR. EDLIN: Objection. Move to
9 strike.
10 Q. Did you work on stated income loans
11 at Watterson and Clayton?
12 A. Yes, I did.
13 Q. When you say that the income wasn’t
14 there, could that be related to stated income
15 loans?
16 MR. EDLIN: Objection. Leading.
17 A. That is correct. You had some
18 stated income loans that was out of the box and
19 unreasonable.
20 MR. EDLIN: Objection. Move to
21 strike as non-responsive.
22 Q. Your testimony is that on stated
23 income loans you found many times that the
24 income listed on these loan applications was
25 not reasonable?
2 A. Yes, there was.
3 Q. What instructions –
4 MR. EDLIN: Just one second. Do we
5 have — just to keep the flow going and
6 lack of — just save a little time, we have
7 a standing objection, I take it, that any
8 objections are reserved if not made?
9 MR. FARIDI: I don’t know what the
10 usual stips are here.
11 MR. EDLIN: Do we have — what are
12 the usual stips on this dep?
13 THE COURT REPORTER: Do you want to
14 go off the record?
15 MR. EDLIN: Yes, we can go off the
16 record.
17 THE VIDEOGRAPHER: The time is
18 10:12. We are going off the record.
19 (Discussion off the record.)
20 THE VIDEOGRAPHER: The time is
21 10:13. We are back on the record.
22 BY MR. FARIDI:
23 Q. Let me go back to paragraph 17 of
24 your declaration. Let me read the second line
25 here. It states that: “I recall specifically
2 one occasion when representatives of Bear
3 Stearns (the purchaser) told my supervisors
4 that because Bear Stearns was willing to
5 purchase loans that did not meet the
6 underwriting guidelines, we should try to find
7 a compensating factor for every single loan
8 that did not meet the underwriting guidelines.”
9 A. That is true.
10 Q. Do you recall any other instances –
11 MR. EDLIN: Move to strike as not
12 responsive. Is there a question?
13 Q. Is that a true statement?
14 A. That is a true statement.
15 Q. Do you recall any other instances?
16 A. That’s pretty much on all jobs.
17 Q. So you don’t recall any of the
18 specific instances?
19 A. No. Like I said, that — those
20 loans — you are talking about a whole year
21 doing –
22 THE COURT REPORTER: I’m sorry?
23 A. You are talking about a whole year
24 doing multiple loans and different jobs.
25 That’s pretty much the standard through all –
2 throughout my clear at Clayton.
3 MR. EDLIN: Move to strike as
4 non-responsive.
5 Q. So it’s fair to say that even though
6 you don’t remember any other specific occasions
7 when you received similar instructions, that
8 you did receive these types of instructions on
9 a regular basis?
10 MR. EDLIN: Leading.
11 A. I would say yes, I did.
12 Q. To your knowledge, was it a
13 pervasive practice at Watterson and Clayton for
14 underwriters to fail to follow the underwriting
15 guidelines?
16 MR. EDLIN: Leading.
17 A. Ask the question again.
18 Q. To your knowledge, was it a
19 pervasive practice at Watterson and Clayton for
20 underwriters re-underwriting the loans to not
21 follow the underwriting guidelines?
22 MR. EDLIN: Leading and lack of
23 foundation.
24 A. Yes.
25 Q. In paragraph 17 you also state:
2 “When I could not find a compensating factor
3 for certain defective loans even after a
4 thorough review of the loan files, I was told
5 to return to my desk and search again. Due
6 diligence underwriters like myself were forced
7 to find compensating factors for defective
8 loans where none existed.”
9 A. Yes.
10 Q. Is that a true statement?
11 A. That is true.
12 Q. Did the same practice take place at
13 Watterson Prime?
14 A. Yes.
15 Q. How common was it for Clayton and
16 Watterson Prime underwriters to provide as
17 compensating factors those that were not
18 sufficient or were contrived?
19 A. It was very common.
20 MR. EDLIN: Leading and lack of
21 foundation.
22 A. It was very common for that type of
23 practice for both Watterson and Clayton.
24 Q. Now, this paragraph in particular,
25 paragraph 17, refers to a particular Bear
2 Stearns job; correct?
3 A. Yes.
4 MR. EDLIN: Objection.
5 Q. Is it your testimony that on this
6 particular job you found compensating factors
7 that were contrived?
8 A. Yes.
9 MR. EDLIN: Objection.
10 Q. Take a look at paragraph 18. It
11 says: “For example, on one occasion the loan
12 application for a stated income loan that I
13 processed stated that the borrower made $8,500
14 per month working as an assistant manager at
15 McDonalds restaurant. I told my supervisor
16 that the borrower’s stated income was
17 unreasonable. I was told to find a
18 compensating factor and approve the loan. The
19 compensating factor that I found did not
20 sufficiently compensate for the defect.”
21 A. That is correct.
22 Q. That’s a true statement?
23 A. Yes, that is.
24 Q. Do you recall any other specific
25 instances?
2 A. There were several instances that I
3 can’t recall, but that stood out particularly,
4 because I remember it was a California loan and
5 they tried — and the team lead tried to
6 basically say this is California, of course
7 they are going to pay higher, and at that time
8 I believe 8,500 for someone that’s around about
9 19 or 20 coming out of high school was not
10 reasonable at a hundred thousand and you are
11 not even the owner of a McDonalds.
12 MR. EDLIN: Move to strike.
13 Q. Even though you may not be able to
14 recall, as you testified, other specific
15 examples, do you believe that you found loans
16 like this where the stated income was not
17 reasonable on other occasions?
18 A. Yes.
19 Q. On Bear Stearns jobs?
20 A. Yes.
21 MR. EDLIN: Move to strike.
22 Q. And you graded those loans as 1s, 2s
23 or 3s?
24 A. Most of the time it was graded as a
25 2. It was graded as a 2 and later on down the
2 line it was changed to a 1.
3 Q. Okay. We are going to come back to
4 that a little bit later.
5 MR. EDLIN: Objection. Move to
6 strike.
7 Q. At Watterson and Clayton,
8 logistically speaking, how did the underwriters
9 record the results of the review of loans?
10 A. Once we entered all the information,
11 we hit “save” and it saves your initials or
12 your user ID name in there.
13 Q. When you say you enter information
14 and you hit “save,” where are you entering
15 information into and what are you hitting
16 “save” on?
17 A. We were provided their laptops,
18 Watterson and Clayton, and at the very end when
19 you hit “save” to move to the next loan — hit
20 “save” or either at the very — at the end of
21 the script on each system that takes you out of
22 that loan and, therefore, your name was — your
23 name or user ID was dropped in as the person
24 that completed that loan.
25 Q. Was there a particular software
2 installed on each of these computers where you
3 entered information into?
4 A. I think the CLAS system was based on
5 a DOS system, old DOS system, which is called
6 CLAS, and StratQ, I’m not — I can’t remember
7 what their — what their system was based on.
8 Q. You talked about a CLAS system.
9 Which company utilized the CLAS system?
10 A. Clayton used — utilized CLAS. That
11 was the name of their system, CLAS. StratQ was
12 the software that was created by Bruce
13 Watterson for Watterson Prime.
14 Q. So as I understand it, underwriters
15 enter information into the CLAS and the StratQ
16 systems; correct?
17 A. That is correct.
18 Q. Relating to each individual loans?
19 A. Yes.
20 Q. And I think you testified about a
21 grading scheme; correct?
22 A. Yes.
23 Q. And what was that grading scheme?
24 A. Both grading schemes were similar.
25 1s were loans that were pretty much no defects
2 and, you know, in other words, they was good
3 loans to buy. 2s were loans that they were
4 borderline, meaning that there was some type of
5 deficiency, but you had compensating factors
6 that could overcome that deficiency. And 3s
7 were loans which you graded that were high risk
8 to be defaults or loans that shouldn’t have
9 been approved on the front end.
10 Q. Did both Watterson and Clayton
11 utilize the same grading system?
12 A. Yes.
13 Q. StratQ and CLAS?
14 A. Yes.
15 Q. And I think you talked about
16 initials and user names of underwriters. I
17 want to make sure we have covered that and the
18 record is clear.
19 A. Okay.
20 Q. How did Clayton and Watterson track
21 which underwriter reviewed each loan?
22 A. Each underwriter always had a unique
23 user name that you use throughout your
24 employment or your contract employment with
25 them.
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2 Q. And did you — do you remember your
3 user name at Clayton for CLAS?
4 A. My user name at Clayton was .
5 Q. Okay. Do you remember your user
6 name at Watterson for StratQ?
7 A. I had several user ID names at that
8 time, because the system had upgraded several
9 times. was one. A combination of my
10 last name and last four of my social,
11 and, I think, may have — was
12 approximately one of my user ID names.
13 Q. So for StratQ ?
14 A. Correct.
15 Q. D
16 A. That is correct.
17 Q. And you said there was a third one
18 that you don’t remember?
19 A. Yeah, it might have been .
20 It was always a combination of your name or
21 some type of particular number that you — that
22 was assigned to you and pretty much stayed up.
23 Q. What about , does that sound
24 familiar?
25 A. It doesn’t sound familiar, but that
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2 would be my — would be one of my user IDs,
3 because I was the only at the company,
4 so there was no confusion that that was me.
5 Q. So we can tell what loans you
6 reviewed at both Clayton and Watterson and what
7 deals you worked on by checking whether your
8 employee user ID number is listed on the
9 reports for these loans and deals?
10 A. That is correct.
11 Q. Paragraph 20 of your declaration
12 states that: “Due diligence underwriters like
13 myself often faced significant pressure from
14 supervisors to review loan files quickly as
15 possible and to avoid finding defects.” Is
16 that a correct statement?
17 A. I would say that is true.
18 Q. Okay. And this statement applies
19 equally to Watterson Prime?
20 A. Yes, that is true as well.
21 Q. What pressure, if any, did you
22 receive as an underwriter to underwrite a large
23 volume of loans and to avoid finding defects?
24 A. Basically the pressure I received
25 was basically get the loan information into the
2 system as quickly as possible. These loans
3 already closed.
4 Q. The statement also says that the
5 pressure was there to avoid finding defects.
6 Do you see that?
7 A. Yes.
8 Q. That’s a correct statement?
9 A. That is correct.
10 Q. Do you remember any specific
11 recollections of times when you were told to
12 avoid finding defects?
13 A. Most of the time it was on a lot of
14 Countrywide deals and also Bear Stearns and
15 Lehman Brother deals.
16 Q. And do you recall any statements
17 that were made to you by team leads?
18 A. One particular that stands out like
19 say it was always any time we did a Bear
20 Stearns job it was pretty much we just entering
21 data into the system like Bear don’t care. You
22 know, that was like the little slogan that they
23 used to just basically throw around. So we
24 just pretty much put the information in there.
25 MR. EDLIN: Move to strike as
2 non-responsive.
3 Q. So the slogan Bear don’t care, was
4 that a slogan which was also used by team
5 leads?
6 A. Pretty much. I have heard one team
7 leader say that.
8 Q. Do you recall the name of the team
9 lead?
10 A. I want to say Steve Shockley, but I
11 don’t want to put it on that particular team
12 lead, but he pretty much — you know, he had
13 the attitude like that, but I can’t recall if
14 that was the team lead that actually said that
15 at one time.
16 MR. EDLIN: Move to strike the
17 hearsay.
18 Q. Now, you said that there was a
19 significant amount of pressure here in the
20 statement to review loans quickly. How many
21 loans were underwriters reviewing per day at
22 both Watterson and Clayton?
23 A. It depends. Each underwriter was
24 required to complete one loan per hour, so,
25 therefore, if we were there for a ten-hour day,
2 you was required at least to complete ten, and
3 some underwriters may have twelve to fifteen
4 and it varies, and if you had too many days
5 where you had less loans than the hours you
6 worked, you would pretty particularly — you
7 probably were not going to get staffed again.
8 Q. How many loans were you reviewing?
9 A. I was in the middle of the pack. I
10 was always like one or two loans more than the
11 hours that we worked, but I wasn’t at the very
12 top.
13 Q. So if you worked a twelve-hour day,
14 you would have reviewed at least twelve loans,
15 if not two or three more?
16 A. Correct, I would have no less than
17 that twelve loans in that twelve-hour period.
18 Probably I’d be around 14 or 15.
19 Q. Now what happens to underwriters
20 were not doing twelve hours — twelve loans per
21 day in a twelve-hour day?
22 A. You in particular might not get
23 staffed again, because you are not producing
24 quantity and it was basically driven by
25 quantity, not quality, because you may have
2 2,500 loans and you calculated per
3 underwriter — it was calculated per
4 underwriter how many we had to get out of each
5 underwriter in order to finish that pool in
6 that particular time.
7 MR. EDLIN: Move to strike as
8 non-responsive.
9 Q. So Clayton and Watterson traded
10 quality for quantity?
11 A. Yes.
12 MR. EDLIN: Move to strike.
13 Q. And how did the quality of the loans
14 or the quality of the loan underwriting,
15 rather, and the review of those loans suffer
16 due to the pressure to increase the volume of
17 loans reviewed?
18 MR. EDLIN: Objection. Leading and
19 lack of foundation.
20 A. You would ignore — you would ignore
21 some things that if you was to take your time
22 writing that — underwriting that loan that you
23 would have caught — that you would have
24 caught — caught mistakes or things that you
25 could have looked at and, say, you know, this
2 is not right.
3 MR. EDLIN: Move to strike.
4 Q. Who put pressure on you to review
5 that large number of loans per day?
6 A. Your team leads, they set the goals.
7 Q. What is 1003 or 1008 underwriting?
8 A. Basically that is — like in the
9 writing world that’s basically copying what’s
10 already written, plagiarizing.
11 MR. EDLIN: Objection. Move to
12 strike.
13 Q. Copying what from what?
14 A. You are basically copying what’s
15 already written and you are not even bothering
16 to calculate, you are just entering –
17 basically you are just straight data entering,
18 entering information directly from the loan
19 application into the system. You are not even
20 looking at the documents.
21 Q. Well, let me just turn to paragraph
22 20 of your declaration on page 6 that states,
23 the second sentence: “These pressures” — and
24 these pressures are to review loans quickly and
25 not to find defects — “led many due diligence
2 underwriters to simply enter into the CLAS
3 database information found on the loan
4 application rather than entering information
5 from the verification documents in the loan
6 file, as required by the protocol.” Do you see
7 that?
8 A. Yes.
9 Q. And is that the practice of 1008,
10 1003 underwriting?
11 A. That is.
12 Q. And then you continue to write here:
13 “CLAS was therefore “re-calculating” the same
14 information which already often appeared on the
15 spreadsheet provided by the seller.”
16 A. That is correct.
17 Q. So that practice is referred to as
18 1003 or 1008 underwriting?
19 A. That is correct.
20 Q. Did this practice take place at
21 Watterson?
22 A. Yes.
23 Q. And Clayton?
24 A. Yes.
25 Q. How prevalent was 1008 and 1003
2 underwriting at Watterson and Clayton?
3 MR. EDLIN: Objection.
4 A. It was very common. It goes back to
5 some of the same people who had no experience
6 at underwriting, so, therefore, they were
7 copying straight from those documents.
8 Q. Did this practice take place on jobs
9 for Bear Stearns?
10 A. Yes.
11 Q. Did this practice take place on jobs
12 for Credit Suisse?
13 A. Yes.
14 Q. Countrywide jobs?
15 A. Yes.
16 Q. Deutsche Bank jobs?
17 A. Yes.
18 Q. Do you recall any particular
19 underwriters who engaged in this practice?
20 A. Jason Westmore.
21 Q. Any others?
22 A. Some of the ones that were related
23 to Barry Barmore.
24 Q. Jason Westmoreland, which company
25 did he work for?
2 A. Watterson Prime.
3 Q. And Gary Barmore, which company did
4 he work for?
5 A. Clayton.
6 Q. You said that some of these
7 individuals engaged in this practice were
8 related to Gary Barmore?
9 A. Jason was not related to Gary
10 Barmore. He is just a particular individual
11 that stood out that was notorious for doing it
12 at Watterson Prime.
13 MR. EDLIN: Objection.
14 A. So, therefore, that was a reason why
15 he couldn’t pass an underwriter test, because
16 he was used to just entering information from
17 the 1008 when you had to actually calculate
18 this stuff from verified documents.
19 MR. EDLIN: Objection. Move to
20 strike the speculation. Move to strike the
21 non-responsiveness.
22 Q. And earlier you stated that you know
23 that relatives of Gary Barmore were also
24 engaged in 1008, 1003 underwriting?
25 A. Yes.
2 Q. And Gary Barmore, you testified
3 earlier, was a team lead at Clayton?
4 A. Yes, he was.
5 Q. What, if anything, was done with
6 these 1008, 1003 underwriters who were related
7 to Gary Barmore? Were they reprimanded?
8 A. No.
9 Q. Were they continued to be employed
10 by Clayton?
11 A. They got staffed at every job
12 because they put out numbers doing that type of
13 underwriting.
14 MR. EDLIN: Objection. Move to
15 strike as non-responsive.
16 Q. What, if any — strike that.
17 Do you remember reviewing stated
18 income loans at Watterson and Clayton?
19 A. Yes.
20 Q. Okay. What, if any, instructions
21 did you get from Watterson and Clayton team
22 leads on how you should review stated income
23 loan products?
24 A. Basically don’t look at them as
25 harsh as — you know, the loans are already
2 closed and these people are already in their
3 homes, just go ahead and enter information what
4 they got down there, what they have stated on
5 the application.
6 MR. EDLIN: Move to strike the
7 hearsay.
8 Q. Were you given any instructions on
9 whether you should find and mark as defective
10 those loans where the stated incomes were not
11 reasonable?
12 MR. EDLIN: Objection. Leading.
13 A. Yes. Some — there is a
14 particular — one particular team lead, Steve
15 Shockley, he would have an exception written on
16 a board or written down on a piece of paper,
17 “hey, if you come into this type of problem,
18 put this in your comment section for that
19 stated income.”
20 MR. EDLIN: Move to strike as
21 hearsay.
22 Q. And what was that particular
23 instruction?
24 MR. EDLIN: Objection.
25 A. You may have it worded — he would
2 have it worded up so it looks uniformly for
3 everyone to use that same exception.
4 MR. EDLIN: Move to strike. Move to
5 strike the hearsay.
6 Q. Did this particular instruction say
7 that you should grade the loans as defective or
8 as non-defective?
9 MR. EDLIN: Objection.
10 A. Basically you would grade them as
11 2s, instead of being non-defective as 2s and
12 they would clean them up on the back end.
13 MR. EDLIN: Move to strike the
14 hearsay. More to strike as non-responsive.
15 Q. We are going to come back to
16 cleaning them up on the back end a little bit
17 later.
18 Basically what I want to make sure
19 that the record is crystal clear on is whether
20 or not you graded those loans where the income
21 was not reasonable as 3s or 1s or 2s.
22 A. Majority, 2s.
23 MR. EDLIN: Objection.
24 Q. And I think you already testified
25 earlier about loans that you graded as 2s;
2 correct?
3 A. Yes.
4 Q. You said that 2s are loans which
5 have a defect but there is a comp factor;
6 correct?
7 MR. EDLIN: Objection.
8 A. Yes.
9 Q. And you testified earlier that the
10 comp factors that you found at the direction of
11 the team leads were either contrived or not
12 sufficient to overcome the defects?
13 MR. EDLIN: Objection.
14 A. That is correct.
15 Q. This practice on stated income loans
16 and comp factors, did that apply to all deals
17 that you worked on?
18 A. Yes.
19 MR. EDLIN: Objection.
20 Q. At Watterson and Clayton?
21 A. Yes.
22 MR. EDLIN: Objection.
23 A. For both.
24 Q. Bear Stearns job –
25 MR. EDLIN: Just — let’s just for
2 the purposes of the court reporter being
3 able to take a record, at the end of the
4 question if it’s clear I am objecting, just
5 wait for me to finish, then answer. At
6 least that way the court reporter can get
7 everything down.
8 THE WITNESS: Okay.
9 MR. FARIDI: So just make sure that
10 after I ask my question he doesn’t have an
11 objection, and if he lodges an objection or
12 if he doesn’t lodge an objection, then can
13 continue to answer.
14 THE WITNESS: Okay.
15 Q. This practice on stated income loans
16 that we were talking about as well as comp
17 factors, did this practice take place on jobs
18 for Bear Stearns?
19 MR. EDLIN: Objection.
20 A. Yes, this practice did take place on
21 Bear Stearns jobs.
22 Q. Were there times at Clayton and
23 Watterson when loans with unreasonable stated
24 incomes were simply graded as 1s?
25 MR. EDLIN: Objection. Lack of
2 foundation.
3 A. Yes. There were times they were
4 graded as 1s.
5 Q. The majority of the times –
6 MR. EDLIN: Objection.
7 Q. — or minority of the times?
8 A. It would be the majority.
9 Q. Do you recall during your employment
10 at Watterson and Clayton, in
11 coming across — strike that.
12 Do you recall during your employment
13 at Watterson and Clayton coming across
14 documents in loan files that appeared to be
15 fraudulent?
16 MR. EDLIN: Objection. Lack of
17 foundation.
18 A. Yes, I have during that time.
19 Q. What instructions, if any, did you
20 receive from Watterson Prime and Clayton
21 supervisors and team leads on what you should
22 do with these documents?
23 MR. EDLIN: Objection. Foundation
24 and compound.
25 A. Usually the instructions were just
2 go ahead and keep it moving, enter the
3 information, we will take care of that with the
4 investor, the seller, or we will get the
5 document — the correct documents later.
6 Q. Were you ever told to overlook these
7 documents?
8 A. Yes.
9 Q. Were you told ever to grade loans
10 where you found these types of documents as 1s,
11 2s or 3s?
12 A. What’s the question again?
13 Q. Let me rephrase that.
14 How were you told you should grade
15 these loans which had these types of documents?
16 MR. EDLIN: Objection.
17 A. Once we found a bunch of — like say
18 a lot of these documents were missing –
19 THE COURT REPORTER: I’m sorry?
20 A. Once we — once a lot of the
21 documents were missing or it was prevalent that
22 we don’t have these documents, we were told to
23 ignore, ignore that and grade them as normal,
24 ignore that document that was needed.
25 MR. EDLIN: Objection. Move to
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2 strike and move to strike the hearsay.
3 Q. I want to make sure we are talking
4 about the same thing. I was talking about
5 loans where the documents appear to be
6 fraudulent and I think you were talking about
7 loans where there were missing documents.
8 A. Okay. Okay.
9 Q. So let me just ask the question.
10 When — if — strike that.
11 During your employment at Watterson
12 and Clayton if you came across a document or
13 when you came across a document which was –
14 which appeared to be fraudulent, how did you
15 grade such loans?
16 MR. EDLIN: Objection. Lack of
17 foundation. Leading.
18 A. It depends on the team lead. They
19 pretty much sometimes would just ignore it,
20 don’t worry about that, that document, we will
21 take care of it later, go ahead and grade it as
22 normal, ignore that document.
23 MR. EDLIN: Objection. Move to
24 strike the hearsay.
25 Q. And normal, by “normal” you mean as
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2 a 1?
3 A. If the loan would have been a 1
4 without that document, go ahead and grade it a
5 1 or accordingly.
6 MR. EDLIN: Move to strike the
7 hearsay.
8 Q. Was this practice prevalent at both
9 Watterson and Clayton?
10 MR. EDLIN: Objection.
11 A. Yes, it was.
12 Q. Did you ever notice in reviewing
13 stated income loan products at Watterson and
14 Clayton W-2s and other tax documents that were
15 left in the loan file?
16 MR. EDLIN: Objection.
17 A. Yes. There had been plenty of times
18 that W-2s, pay stubs, other documents that were
19 in the file.
20 Q. On stated income loan products?
21 A. Yes.
22 Q. Did at times any of these documents,
23 W-2s or the tax documents, contradict or call
24 into question the income listed by the borrower
25 on the loan application?
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2 MR. EDLIN: Objection.
3 A. Yes.
4 Q. What instructions, if any, did you
5 receive on what you should do with these loans?
6 MR. EDLIN: Objection.
7 A. Usually it would depend on the job,
8 either they pull the documents — they pull
9 those documents out or we were told to turn
10 them over and put them at the very back of the
11 documents.
12 MR. EDLIN: Move to strike as
13 non-responsive and move to strike the
14 hearsay.
15 Q. When you say “pull those documents
16 out,” what do you mean by that?
17 A. Pull them out of their folder,
18 meaning that they don’t exist.
19 MR. EDLIN: Objection.
20 Q. And do what with them?
21 MR. EDLIN: Move to strike as
22 non-responsive.
23 A. We would put them in a pile –
24 sometimes we would put them in a pile and
25 whatever they did with them, either they
2 shredded them or they got — in other words,
3 they disappeared, they disappeared, and
4 sometimes the explanation would have been,
5 well, this borrower was going for a full doc
6 but they went stated.
7 THE COURT REPORTER: I’m sorry?
8 A. Sometimes they would tell us, well,
9 you know, this borrower was going a full doc
10 loan but they went stated.
11 MR. EDLIN: Move to strike as
12 non-responsive and move to strike the
13 hearsay.
14 Q. So a lot of times these documents
15 were pulled out of the loan file and just
16 destroyed?
17 MR. EDLIN: Objection. Leading.
18 A. Yes, they were destroyed, but it was
19 not by the underwriter. They was hidden.
20 MR. EDLIN: Move to strike as
21 non-responsive.
22 Q. Let me refer to page 6 of your
23 declaration, paragraph 19. It states that:
24 “Supervisors and project managers repeatedly
25 told due diligence underwriters that the loans
2 that we were reviewing had already closed and
3 that the borrowers had already moved into their
4 new houses, and as such, the due diligence
5 underwriters should not be too strict in their
6 review.” Is that a true statement?
7 A. Yes.
8 Q. Did the similar practices take place
9 at Watterson?
10 A. Yes.
11 MR. EDLIN: Muhammad, when you are
12 at a time for a quick break. Do you have
13 much longer to go?
14 MR. FARIDI: Let’s take a quick
15 break. I have got another fifteen minutes
16 maybe.
17 MR. EDLIN: Let’s take a quick
18 break.
19 MR. FARIDI: Okay. Let’s go off the
20 record.
21 THE VIDEOGRAPHER: The time is
22 10:41. We are going off the record.
23 (Recess was taken from 10:41 to
24 10:50.)
25 THE VIDEOGRAPHER: The time is
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2 10:50. We are back on the record.
3 BY MR. FARIDI:
4 Q. Turn to paragraph 19 of your
5 affidavit, which is on page 6. It states here
6 basically that you were instructed that because
7 the loans had already closed your review of
8 those loans should not be too strict.
9 A. That is correct.
10 Q. That’s true also?
11 A. Yes.
12 Q. Okay. And paragraph 21, the first
13 line here reads: “There was a general attitude
14 at Clayton that underwriters should not be
15 searching for discrepancies.” Is that a true
16 statement?
17 A. Yes.
18 Q. The same practice took place at
19 Watterson?
20 A. Yes.
21 Q. Turn to paragraph 30. It states
22 here in the last line on page 10: “With
23 respect to one particular job for Bear Stearns,
24 I recall a Watterson supervisor stating, “I
25 don’t care how bad the loans are, I only want
2 to see them graded as 1s and 2s”.” Do you see
3 that?
4 A. Yes.
5 MR. EDLIN: Objection to the
6 hearsay.
7 A. Yes.
8 Q. Is that a true statement?
9 A. Yes, it is.
10 MR. EDLIN: Move to strike the
11 hearsay.
12 Q. Do you recall the name of the team
13 lead here?
14 A. Steve Shockley.
15 Q. You testified earlier that you
16 believe that these instructions were coming
17 from the clients. Do you recall that?
18 A. Yes, I did.
19 Q. What basis do you have to say that
20 these instructions to not focus on finding
21 defects and to grade loans as 1s and 2s were
22 coming from the clients?
23 A. Usually at the beginning of every
24 project the team lead or project manager would
25 state “here is what the client wants and give
2 your parameters as met,” and usually either
3 somewhere in between that day or the next day
4 after that either that project manager would
5 get on the phone or go in a private meeting,
6 they would come back and say, “well, the client
7 is not accepting this,” that usually come out
8 of the project managers, “the client is not
9 accepting this.”
10 Q. So you –
11 MR. EDLIN: Objection. Objection.
12 Move to strike and move to strike the
13 hearsay.
14 Q. So you heard it from the mouths of
15 your team leads –
16 A. Yes.
17 Q. — that the clients did not want you
18 to find these types of defects?
19 MR. EDLIN: Objection. Leading.
20 A. Yes. It came out of project
21 manager’s mouth that here — the client accept
22 this.
23 MR. EDLIN: Move to strike the
24 hearsay.
25 Q. And do you recall whether — strike
2 that.
3 Do you recall the names of any
4 particular clients which come to mind?
5 MR. EDLIN: Objection. Leading.
6 A. Bear Stearns were one of them.
7 Q. Do you recall –
8 MR. EDLIN: Move to strike.
9 Q. Do you recall the name of the
10 particular Bear Stearns representative which
11 the team leads referenced?
12 A. No.
13 Q. Does the name John Mongoluzza sound
14 familiar?
15 MR. EDLIN: Objection. Leading.
16 A. Yes.
17 Q. Okay. Do you recall instances where
18 the team leads relayed instructions to you from
19 Mr. Mongoluzza?
20 A. Yes.
21 MR. EDLIN: Objection. Leading.
22 Move to strike the hearsay.
23 Q. Did these instructions — what were
24 these instructions?
25 A. Pretty much similar to what we just
2 stated before, go ahead — they gave us
3 instructions to ignore this, go ahead, the
4 client will accept that. That’s usually when
5 you have seen the project manager either
6 talking to the side with Mr. Mongoluzza or on
7 the phone with him.
8 MR. EDLIN: Move to strike as
9 non-responsive. More to strike the
10 hearsay.
11 Q. I want to go back to paragraph 21 of
12 your declaration on page 6. It states here,
13 the third line: “It was an understood rule at
14 Clayton that if a due diligence underwriter
15 graded a significant number of loans as EV-3s,
16 that underwriter would not be hired for the
17 next due diligence job.”
18 First off, EV-3s are the same things
19 as 3s that we have been talking about?
20 A. Yes.
21 MR. EDLIN: Objection. Objection to
22 the question. Lack of foundation.
23 A. Yeah. EV-3s, basically that’s just
24 Clayton’s version of just a — it’s a 3 what
25 Watterson Prime grades it as.
2 MR. EDLIN: Move to strike.
3 Q. And you state here that basically if
4 underwriters were grading too many loans or a
5 significant number of loans, that’s what it
6 says here, as EV-3s, those underwriters were
7 not hired by Clayton for future jobs.
8 A. That is correct. You usually
9 wouldn’t see that underwriter for a while
10 unless we had a huge job and they needed every
11 pretty much body on a project and get a bunch
12 of loans out.
13 MR. EDLIN: Move to strike as
14 non-responsive.
15 Q. So basically the only time
16 underwriters who graded too many loans as 3s
17 were called back for future jobs were when they
18 needed — when they didn’t have enough people
19 to cover a particular job?
20 MR. EDLIN: Objection. Leading.
21 Lack of foundation.
22 A. That is — that is correct. And it
23 was prevalent with Watterson Prime, because it
24 was small base and you pretty much knew
25 every — you pretty much knew underwriter.
2 MR. EDLIN: Move to strike as
3 non-responsive.
4 Q. Was it also prevalent at Clayton?
5 A. Yes, but the thing is it wasn’t as
6 easy to spot, because Clayton had pretty much
7 500 underwriters.
8 MR. EDLIN: Objection. Move to
9 strike as non-responsive.
10 Q. Do you recall the — any specific
11 instances where underwriters were not called
12 back for future jobs because they were grading
13 too many loans as defective?
14 MR. EDLIN: Objection.
15 A. Yes.
16 Q. Any particular names which come to
17 mind?
18 A. Not at this time.
19 Q. I am going to turn to paragraph 25
20 of your affidavit, which is on page 8. It
21 states that — here that: “When due diligence
22 underwriters determined that a particular loan
23 had a defect that was not sufficiently overcome
24 by compensating factors — resulting in a grade
25 of 3 — supervisors would frequently change the
2 grades for those loans to a 1 or a 2. I
3 remember multiple occasions where I looked back
4 at a loan that I had graded as a 3 and found
5 that the grade had been changed to a 1 or a 2
6 without justification.” Is that a true
7 statement?
8 A. Yes.
9 Q. Do you believe that the changes
10 which were made to these loans, changes from 3s
11 to 1s and 2s, were justified?
12 MR. EDLIN: Objection.
13 A. No, I don’t believe they were
14 justified at all, because there were
15 particularly notes I put in there why they were
16 3s.
17 Q. Could you give us examples of loans
18 that you had graded as 3s where the grade of
19 those loans was changed to a 1 or 2 for
20 unjustified reasons?
21 A. I have been on multiple loans, but I
22 couldn’t just give any single example, but it
23 did happen. It happened like say I recorded
24 these loans every night on my scratch-off pad,
25 would have the calculations of everything with
2 the loan number and usually I put a circle on
3 that and go back and look at it again with –
4 hoping that, well, let me see if I can see it
5 with a fresh mind and fresh start and usually I
6 will go back and they were changed.
7 MR. EDLIN: Objection. Move to
8 strike as non-responsive.
9 Q. Okay. So basically as I understand
10 it, you kept a notebook which indicated loan
11 numbers and how you graded those loans?
12 A. Yes. Because any time — any time
13 they had any discrepancy on how many number of
14 loans you have done, I could always refer back
15 to here is the loans I worked on.
16 Q. Okay. And on the next day after you
17 had done the review for a particular day, you
18 went back and you checked to see whether grades
19 that you had marked as defective on the
20 previous day remained as defective in the
21 Watterson and Clayton computer systems?
22 MR. EDLIN: Objection.
23 A. Yes.
24 Q. And you found, as I understand your
25 testimony, that on many of these times when you
2 checked the following day you noticed that the
3 loans that you had marked as defective the day
4 before were marked now as non-defective?
5 A. Yes.
6 Q. Was this practice prevalent at
7 Watterson and Clayton?
8 MR. EDLIN: Objection.
9 A. Yes.
10 Q. And these changes in grades you
11 believe took place for unjustified reasons?
12 MR. EDLIN: Objection. Leading.
13 A. Yes. Correct.
14 Q. Turn to paragraph 29. Strike that.
15 Let’s just stay on paragraph 25 for
16 a second. The next line reads: “When such
17 changes occurred, Watterson’s computer system
18 deleted any evidence of the earlier grade.”
19 A. Yes.
20 Q. That’s a true statement?
21 A. That is true.
22 Q. I want to turn to paragraph 29 now.
23 I want to read just a couple of lines at the
24 top. “Mr. Weeks pressured due diligence
25 underwriters to complete a review of loans
2 quickly, even if that meant sacrificing quality
3 of loans.” Do you see that?
4 A. Yes.
5 MR. EDLIN: Objection.
6 Q. That’s a true statement; correct?
7 A. Yes.
8 MR. EDLIN: Objection.
9 Q. And who is Mr. Weeks?
10 A. Mr. Weeks was a project office
11 manager in the Atlanta office for Watterson
12 Prime.
13 Q. Okay. Next line reads: “He told us
14 that we should “clear” (approve) the loans
15 quickly and that Watterson would “clean it up
16 on the back end”.” Do you see that?
17 A. Yes.
18 Q. That’s a true statement?
19 A. Yes.
20 Q. “During this “clean up” process
21 Mr. Weeks instructed Watterson personnel to
22 change data on Watterson’s due diligence
23 reports to ensure that it matched the
24 information on the spreadsheet or “loan tape”.”
25 Is that a true statement?
2 A. Yes.
3 Q. Now, how do you know — strike that.
4 Did Mr. Weeks instruct you to change
5 data on Watterson’s due diligence reports to
6 ensure that it matched the data provided on the
7 loan tape?
8 MR. EDLIN: Objection. Leading.
9 A. No, he did not instruct me.
10 Q. And how do you — did he instruct
11 others?
12 A. Yes.
13 Q. And how do you know that he
14 instructed others?
15 A. He made several occasions “don’t
16 worry about it, we will have the QCers and
17 analysts take care of that on the back end” and
18 they changed this information.
19 MR. EDLIN: Hold on. Let me just
20 read that.
21 Move to strike the hearsay.
22 Q. Were you present when he provided
23 those instructions?
24 A. Yes, I was. There was many times
25 when he may be talking openly on the floor to
2 personnel and I am sitting right by at my desk.
3 MR. EDLIN: Objection. Move to
4 strike the hearsay.
5 Q. You also provide here a statement
6 where it says: “This changing of the data was
7 done without any review of the documents in the
8 loan file.” Do you see that?
9 A. Yes.
10 Q. That’s a true statement?
11 A. Yes, it is.
12 Q. And then I think you go on to
13 provide an example here in paragraph 29.
14 Strike that. Let me just go back and wrap that
15 up.
16 Was this practice prevalent at
17 Watterson?
18 MR. EDLIN: Objection.
19 A. Yes, it was.
20 Q. What about at Clayton?
21 MR. EDLIN: Objection.
22 A. It wasn’t as blatantly done that
23 way. It was — like say usually they –
24 Clayton did it when we went home for the night,
25 the QCers and the project managers stayed back
2 maybe about an hour or two later and did that.
3 MR. EDLIN: Objection.
4 Non-responsive.
5 Q. ‘For example” — and I am reading
6 here from paragraph 29 — “on numerous
7 occasions, based upon a review of the “HUD-1″
8 forms, the due diligence underwriters found
9 loans defective because they were considered
10 “high cost” loans under state law. For these
11 loans, Mr. Weeks would routinely delete
12 evidence of many closing charges from
13 Watterson’s computer systems despite the fact
14 that these charges were clearly shown on the
15 HUD-1 forms. Deleting evidence of closing
16 charges from Watterson’s computer systems did
17 not change the fact that the HUD-1 forms
18 clearly showed that the borrowers paid those
19 fees. Mr. Weeks was considered the master of
20 engineering apparent compliance with state law
21 and manipulating the numbers.” Is that a true
22 statement?
23 MR. EDLIN: Objection. Leading.
24 A. That is a true statement.
25 MR. EDLIN: Objection. Move to
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2 strike.
3 Q. Was this practice prevalent on jobs
4 where Mr. Weeks was the manager?
5 MR. EDLIN: Objection.
6 A. Yes, it was.
7 Q. In summary, just to wrap it up, is
8 it your view that the due diligence
9 underwriting practices at Watterson and Clayton
10 did not accurately or properly determine
11 whether loans complied with the underwriting
12 guidelines?
13 MR. EDLIN: Objection. Leading.
14 A. Yes, it was.
15 Q. Is it your view that Bear Stearns
16 improperly directed Watterson and Clayton to
17 deviate from underwriting guidelines and
18 improperly changed loans ranked defective to
19 loans ranked approved?
20 MR. EDLIN: Objection. Leading.
21 A. Yes. Bear Stearns was neglect and
22 negligent on their part as well as Watterson
23 Prime and Clayton.
24 MR. EDLIN: Objection. Move to
25 strike as non-responsive.


Posted By Manal Mehta to Interesting Finance Articles at 1/11/2013 12:56:00 PM

Category: Foreclosures, Legal

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

18 Responses to “Why the Banks Were Thrilled About $8.5B Settlement”

  1. AHodge says:

    yes this is a billions wrist slap
    compared to the jail time type stuff in here
    i know syncora well was short its earlier name even better than xl
    i believe it went by Security Capital Assurance-shortened to syncora
    got to love the name

  2. Frilton Miedman says:

    “I pledge allegiance to the flag of the United States of Goldman Sachs, JP Morgan, Citibank, Morgan Stanley, Bank of America….”

  3. DSS10 says:

    This reminds me of Marc Rich back in the 80′s….

  4. rd says:

    An interesting story here about an ongoing trial regarding advisement during M&A: http://www.bloomberg.com/news/2013-01-11/goldman-sachs-tells-jury-dragon-rushed-toward-doomed-deal.html

    I think there will be much legalese milling around regarding terms like “standard of care”, “due diligence”, “fiduciary duty” etc. It is always important to remember that Wall Street owes you almost no duty unless somehow they have blundered and allowed “fiduciary duty” to enter into the discussion somewhere. They are just much better dressed than used car salesmen with more elegant Powerpoint graphics and nicer homes.

  5. Slash says:

    Disgusting.

  6. streeteye says:

    OCC #2 just went to work at…Promontory.

  7. Pantmaker says:

    Just waiting for the revolution.

  8. Northeaster says:

    This is just status quo…in a Banana Republic.

    Not sure why anyone is surprised anymore at this point. Yet The People keep sending career cronies, those that have usurped the Rule of Law to no end, back into office. There’s a reason why the Term Limits Bill dies every session, they know the masses, no matter how egregious their behavior is, continue to elect them.

    The People have only one place to look, the mirror.

  9. b_thunder says:

    S&P500 is at 5-year high – Mission Accomplished

    P.S. Corzine not only is a free man, nobody’s even trying to investigate MFG

    P.P.S. Maybe the Maurice “Hank the Schmuck” Greenberg, still immersed in his infinite greed self-aggrandizing, will unwittingly do something good for the society: given his wealth, connections and lawyers, his lawsuit against the Treasury and the Fed just might show the public the criminal nature of “extend and pretend.” The Wall St bailout via AIG was what started it all, it’s what made these farcical bank settlements an continuation of the policy adopted in 2008.

  10. Frilton Miedman says:

    Northeaster Says:
    January 11th, 2013 at 5:30 pm
    “This is just status quo…in a Banana Republic.

    Not sure why anyone is surprised anymore at this point. Yet The People keep sending career cronies, those that have usurped the Rule of Law to no end, back into office. There’s a reason why the Term Limits Bill dies every session, they know the masses, no matter how egregious their behavior is, continue to elect them.

    The People have only one place to look, the mirror.”

    ~~~

    I disagree with your estimate of the cause.

    The people vote among the choices presented.

    Those choices are selected by corporations, banks & wealthy campaign financiers who expect an ROI for the money they “donate” (bribe).

    (Refer to Eisenhower’s concern with the “Military-Industrial Complex”, defense contractors attaining power over Democracy and compelling us to wage war for their benefit. {Haliburton/Cheney/Iraq – 4,800 dead soldiers})

    To assert it’s the fault of the people is like asserting it’s an armed robbery victims fault for handing over his wallet at gun point because he made that choice versus the alternative presented by the armed robber. (death)

    We choose between what’s selectively presented to us by the wealthiest briber in hopes we get the lesser of two evils, as does an armed robbery victim.

    Term limits are meaningless, a single veto or vote in one politicians term in exchange for campaign bribes can make or break a decision that changes everything.

    Campaign finance and political nepotism/revolving doors has to be changed, until it is, it’s going to continue getting worse.

  11. Francois says:

    Welcome to the United Corporations of America.

    Nice place, huh?

  12. ConscienceofaConservative says:

    Barry,
    Someone buying a new issue deal today, gets the loan tapes. How does an investor get the comfort level that what’s on today’s tapes is accurate. How does one get assurance that the verification process is any better today? I’m not discussing break downs of full doc and full appraisal, bu whether the appraisal is correct or that the income level is what i states it is. Who looks/checks the underlying docs and how is the job conducted today vs in the past?
    For the sake of a healthy loan market, we need the shadow banking system to come back but not with its past conduct.

  13. ToNYC says:

    The unintended consequences of bailout nation is a cabal or at least a legion of “boys from brazil”: an outlaw tribe that is supra-sovereign that must control to survive. The unintentional acts of a former NJ governor helped win his election for instance, and this clear banking fraud settlement is small change indeed and further erosion of confidence cut in stone. No docs, no worries; the fix is in.

  14. Greg0658 says:

    manifest – if that objection was to Frilton Miedman’s statement
    SIT DOWN – OVERTURNED

  15. [...] a deeper understanding of just what the settlements are about, Barry Ritholtz has a link to the transcript from litigation involving Syncora Guarantee vs EMC Mortgage and Ambac [...]

  16. [...] latest bit of journalism magic helps explain why the banks were indeed thrilled with the $8.5 settlement. Tweet This [...]