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EXHIBIT 10
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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK
No. 1 :15-cv-00293-LTS-JCF

S & A Capital Partners, Inc., et al.,

Plaintiffs,

-against-

JPMorgan Chase Bank, N.A., et al.,

Defendants.

EXPERT REPORT OF RICHARD W. PAYNE, III

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TABLE OF CONTENTS

Page

I. Introduction ..........................................................................................................................1

II. Summary of Opinions ..........................................................................................................1

III. Qualifications .......................................................................................................................2

A. Overview of Qualifications ......................................................................................2

B. Mortgage-Specific Experience.................................................................................3

C. Consulting and Litigation Experience .....................................................................7

D. Overall Summary of Experience ..............................................................................8

E. Professional Memberships .......................................................................................9

F. Publications ..............................................................................................................9

IV. Compensation ......................................................................................................................9

V. Supporting Documentation ................................................................................................10

VI. The Purpose of a Mortgage Loan Purchase Agreement ....................................................10

VII. Defendant’s Obligations Under the MLPA dated February 25, 2009 ...............................10

VIII. Plaintiff’s Obligations Under the MLPA dated February 25, 2009 ...................................11

IX. Opinions regarding Defendant’s MLPA Obligations ........................................................11

A. Defendant Represented that all of the Mortgage Loans were Closed End,
First Liens ..............................................................................................................12

B. Defendant Represented that the Mortgage Loan Schedule was Complete

and Accurate ..........................................................................................................13

C. Defendant Represented They Were the Sole Owner of the Mortgage Loans ........16

D. Defendant Represented that All of the Mortgage Loans Complied with the
Applicable Federal, State and Local Laws ............................................................19

E. Defendant Represented that ...................................................................................20

X. Opinions regarding Plaintiff’s MLPA Obligations ............................................................21

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XI. Conclusion .........................................................................................................................22

1. The Plaintiff had tremendous “opportunity cost” based on the fact

that the Plaintiff devoted time and effort on loans that were never
transferred and in some cases still owned by Defendant. ..........................22

2. The Plaintiff was subject to reputational and legal risks based on

the fact that the Defendant did not comply with RESPA regarding
its obligations to issue “Goodbye” letters to borrowers.............................22

3. The lack of complete information on the Mortgage Loan Schedule

(Exhibit A) prevented Plaintiff from properly servicing the loans. ...........22

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I. Introduction

I am the managing partner of Payne Advisory, LLC (“Payne Advisory”), and, together

with Payne Advisory, I have been retained by Walker & DiMarco, P.C. (“Walker & DiMarco”),

counsel for S&A Capital Partners, Inc., Mortgage Resolution Servicing, LLC, and 1st Fidelity

Loan Servicing, LLC (collectively the “Plaintiff”), to review the Mortgage Loan Purchase

Agreement (“MLPA”) at issue in this Action and determine whether Defendants complied with

the representations and warranties in the MLPA. My understanding is that Defendants

JPMorgan Chase Bank, N.A., JP Morgan Chase & Company, and Chase Home Finance LLC

(collectively the “Defendant”) acted as Seller for the Mortgage Loans.

II. Summary of Opinions

In reaching my opinions set forth below, I reviewed documentation regarding the sale of

the Mortgage Loans. A Mortgage Loan Purchase Agreement (“MLPA”) was executed on

February 25, 2009 between Plaintiff and Defendant. Based on a review of the MLPA and other

documents, I have determined that Chase violated the terms of the Agreement and therefore did

not fulfill its obligations. This failure not only caused the Plaintiff to suffer monetary damages

in the form of opportunity costs due to constrained capacity and extra expenditures, but also

caused the Defendant to be subject to reputation and regulatory risk. Furthermore, these

reputation and regulatory risks are ongoing, as Defendant continues to release liens owned by

Plaintiff and to assign mortgages to Plaintiff, without Plaintiff’s knowledge or consent.

The opinions in this Report are based on the results of my review and analysis of

documents, testimony and information provided to me; my education; my nearly 40 years of

relevant experience as a banker and mortgage lender, securities and mortgage trader, and

consultant to bankers and bank regulators; and my professional experience on related topics. I

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reserve the right to amend, supplement, and/or revise my findings and/or opinions if new

evidence becomes available, if the scope of discovery or the causes of action change in any

material way, or if Defendants attempt to rebut my findings.

III. Qualifications

A. Overview of Qualifications

I have over 39 years of experience in the financial industry, with a focus on the mortgage

sector. During that time, I have served as President and CEO of three mortgage companies that

were subsidiaries of publicly traded financial institutions. I was also in charge of the mortgage

capital divisions for two savings and loan associations that, at the time, were among the top ten

savings and loan associations nationwide in terms of assets. In these positions, my

responsibilities included the origination, purchase and sale of first and second lien Alt-A and first

and second lien subprime mortgage products. I also oversaw lender quality control and quality

assurance, including fraud detection and prevention, and negotiated and executed numerous

purchase and sale agreements for prime, alternative documentation, sub-prime and scratch and

dent transactions.

I have experience working as a Managing Director at a leading Wall Street firm and

managing whole loan trading at a top-tier investment banking firm. In this trading position, I

acquired and sold pools of residential mortgage loans and was in charge of hiring and overseeing

the contractors that underwrote the mortgage loans. I am a member of the Mortgage Bankers

Association and previously served on regional advisory boards of both Fannie Mae and Freddie

Mac.

I have been engaged as an expert in more than two dozen matters related to various

aspects of the mortgage and financial industries and retained on approximately twenty (20) pre-

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litigation assignments representing bond insurers and investors. I have testified in six trials, one

arbitration and twenty-four depositions, see Exhibit 2.

A copy of my curriculum vitae is attached as Exhibit 1. A summary of my experience

relating specifically to mortgage lending is provided below for reference, but is not intended as a

complete statement of my professional and educational experience.

B. Mortgage-Specific Experience

I have worked in the financial industry since 1978 and have been involved in all aspects

of residential mortgage lending. I have experience on “both sides of the street,” in that I have

worked on “Main Street”—in the primary lending market, originating and underwriting a wide

range of mortgage products over the years—and on “Wall Street”—assessing and purchasing

mortgage loans and structuring them into mortgage-backed securitizations (“RMBS”) offered for

sale to investors.

I began my mortgage career in 1978 by personally underwriting residential mortgage

loans as an Investment Assistant at Citizens Home Insurance (“CHI”) in Richmond, Virginia.

One of my responsibilities there was to service the company’s whole loan commercial and

residential mortgage portfolio.

In 1980, I was hired by Investors Savings Bank (“ISB”) as Controller for the bank and

handled the bank’s futures trading desk before being promoted to Director of Secondary Markets

for ISB’s mortgage subsidiary American Home Funding (“AHF”). At AHF, I was responsible

for establishing and monitoring AHF’s underwriting guidelines. I supervised the underwriters

and often reviewed loans to ensure conformance with underwriting guidelines. Additionally, I

managed the securitization and sale of loans to Fannie Mae, Freddie Mac, the Government

National Mortgage Association (also known as Ginnie Mae), and several savings and loan

associations around the country. During my time with AHF, I completed one of the first swaps

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of residential loans for Participation Certificates guaranteed by Freddie Mac—supporting the

creditworthiness of the underlying mortgage-backed security.

In 1985, I moved to Boston to work for Home Owners Savings Bank (“Home Owners”) as

the Director of Secondary Markets. At the time, Home Owners was one of the ten largest

residential mortgage originators in the country and was Freddie Mac’s largest source of mortgage

loans for purchase and securitization. I was later promoted to Director of Mortgage Capital

Markets and took on the responsibility of managing Home Owners’ investment portfolio of

mortgage-backed securities. At the time, Home Owners was among the country’s largest issuer

of private-label mortgage securities. In this role, I helped prepare for the issuance of many

securitizations, in part by managing the due diligence of mortgage pools and negotiating

representations and warranties. At Home Owners I developed the first principal-only and

interest-only collateralized mortgage in the industry. I was in charge of establishing and

monitoring underwriting guidelines, and the underwriting department reported to me. At Home

Owners, we had wholesale platforms on both coasts and also owned a mortgage banking

subsidiary, Knutson Mortgage. All of the underwriting functions of these operations reported to

me. I was also in charge of all mortgage servicing rights-related transactions.

From 1990 to 1992, I headed up whole loan commercial and residential trading at

Prudential Securities, Inc. During that time, I served as the Lead Advisor to the U.S.

government-owned asset-management company Resolution Trust Corporation (“RTC”), in

connection with its securitization of residential mortgage loans acquired from insolvent thrifts

during the savings and loan crisis of the 1980s. In that role, I oversaw the liquidation of

residential mortgage portfolios by RTC through structured RMBS. At regular review meetings

with RTC, I presented investment structure models that I helped to develop detailing how to

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maximize sale proceeds from mortgage securities. Also, while at Prudential, I assisted

investment bankers in the valuation of mortgage-related companies for mergers and acquisitions

and established a mortgage conduit where Prudential purchased mortgage loans from originators

and sold them in various forms to investors. In connection with these tasks, I oversaw the

establishment of underwriting guidelines as well as procedures for buying and selling loans,

establishing the risk-based pricing parameters.

In 1992, I returned to primary mortgage lending and joined Anchor Mortgage Services

(“Anchor”), the mortgage subsidiary of Anchor Bank—at the time a top-ten savings and loan

association based on assets. I oversaw the wholesale origination channel and the underwriting

and due diligence of residential mortgage loans, in addition to managing Anchor’s day-to-day

secondary market risk position. In this position, I was in charge of negotiating, executing and

ultimately overseeing the purchase and boarding of servicing rights onto the company’s

platform.

Starting in 1994, I served as the President and CEO of Eastern Mortgage Services, Inc.

(“EMS”) in Philadelphia, where I managed more than 500 employees, $2 billion of annual

production, and a $1.6 billion servicing portfolio. I had an oversight role with respect to

primary lending, and the underwriting manager and directors of servicing and secondary markets

reported to me. At EMS, I developed Alt-A and subprime products for sale into the secondary

market. This work involved developing underwriting guidelines for these products, obtaining

investor approval for the guidelines, and subsequently monitoring the underwriting of these

products through the EMS quality control department that reported to me. These loans were

sold in both servicing-retained and servicing-released, and both bulk and loan-by-loan,

transactions.

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In 1997, I left EMS and joined SIB Mortgage Corporation (“SIB”), a subsidiary of Staten

Island Bank, in Branchburg, New Jersey, as President and CEO. At SIB, I managed more than

2,500 employees and grew the company into a top-ten Alt-A lender, in terms of volume,

originating more than $2 billion of mortgage loans every month. I also directed SIB’s

secondary marketing, underwriting and servicing departments and, as a result, had ultimate

responsibility for the bundling of loan pools for securitization and the execution of whole-loan

sales. I worked with SIB’s due diligence firms and investor relations department to complete

final deliveries of loans to investors and was responsible for compliance with all laws, including

RESPA. I also handled all repurchase requests and personally underwrote all mortgage loans

exceeding $1 million. I also was in charge of negotiating all scratch and dent sales with various

investors. Because SIB was a nationwide lender, my familiarity with the mortgage market was

broad, encompassing regional differences among mortgage products and practices.1 In all of

the positions described above, I negotiated and executed well over 100 Purchase and Sale

Agreements.

During this time, from 1997 through 2003, I served intermittently on the Northeast

regional advisory boards of both Fannie Mae and Freddie Mac. I attended quarterly meetings

where I made recommendations for improving customer service. I also provided feedback to

the GSEs regarding proposed enhancements to their proprietary Automated Underwriting

Systems (“AUS”), Desktop Underwriter (“DU”) and Loan Prospector (“LP”).

In 2004, I oversaw Staten Island Bank’s sale of SIB to Lehman Brothers, and after the

sale continued at Lehman as a Managing Director. At that time, I also served as the Executive

1
Also, SIB was an early implementer of computerized fraud detection software
applications, which I directed and monitored.

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Vice President and Director of Wholesale Development at Lehman subsidiary Aurora Loan

Services (“Aurora”), in Denver, Colorado, where I was responsible for expanding Aurora’s

wholesale support division and forming an internal wholesale sales department.

In 2005, I joined New York Mortgage Company (“NYMC”) to create and run its

wholesale loan division. While at NYMC, I developed underwriting guidelines, underwrote

mortgage loans, and was involved in daily loan file reviews by the division’s underwriting panel.

I also evaluated all repurchase requests for loans that were originated by the wholesale division.

In 2007, NYMC’s wholesale division was sold to Franklin Credit Management

Corporation (“FCMC”). At that time, I became the President of FCMC’s mortgage origination

subsidiary, Tribeca Lending Corporation, where I managed its origination unit and continued the

practice of daily underwriting panel meetings to discuss loan approval issues. I also reviewed

loans in FCMC’s portfolio that were purchased from third parties to evaluate compliance with

representations and warranties in the Mortgage Loan Purchase Agreements.

C. Consulting and Litigation Experience

In 2008, I founded Payne Advisory, of which I am the managing partner. Since then, I

have provided consulting services related to the mortgage industry. My clients have included

warehouse lenders, community banks, servicing companies, and investment banks; and I have

been engaged on more than 30 mortgage-related litigation matters through either my affiliation

as a contractor for the consulting firm Reynolds Financial Services (“Reynolds”) of Summit,

New Jersey, or through Payne Advisory. My clients in the litigation matters include bond

insurers, FHLMC, FNMA, NCUA, various hedge funds and bankruptcy trustees. Most of my

assignments in the last 6 years have related to re-underwriting mortgage loans to determine if

they have met the R&W of the applicable loan sale or securitization agreement.

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Specifically, I have worked with Reynolds conducting on-site due diligence reviews

around the country to evaluate the lending policies and procedures of mortgage banking firms at

the request of warehouse lenders or investment banks that are considering, or already are

engaged in, business dealings with those firms. On occasion, we have performed quality

control reviews of loans as part of the due diligence reviews. These reviews have also entailed

evaluating various mortgage lenders and their policies and procedures to ensure that they were

originating and servicing loans properly and in compliance with federal and state laws. I have

also been engaged to advise institutions on their mortgage banking operations and have served as

an acting CEO of a mortgage banking subsidiary of a New Jersey Community Bank for six

months. My continued work on these due diligence projects has assisted me in staying apprised

of issues and standards related to the mortgage industry.

Because of my extensive mortgage loan origination and mortgage securitization

experience, hedge funds have engaged me to help them manage cash flows by predicting

prepayments on mortgages. To that end, I have reviewed loan summary data for such

characteristics as credit scores (commonly referred to as “FICO scores”), current LTV/CLTV

ratio profiles, and loan vintage in order to evaluate the overall security’s likelihood of

prepayment relative to similar mortgage securities. In addition, hedge funds have engaged me

to evaluate the credit quality of mortgage-backed securities.

D. Overall Summary of Experience

I have been involved in the mortgage origination, servicing, and securitization process,

including underwriting new loans, performing quality control and due diligence, packaging and

selling mortgage loan pools, purchasing mortgage loan pools, purchasing and selling mortgage

servicing rights, negotiating repurchase representations and warranties, negotiating repurchase

requests, and evaluating the mortgage-loan collateral underlying securities. I have overseen the

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underwriting of new mortgage loans for several originators, including two lenders that, at the

time of my employment, ranked among the top ten nationally in origination volume. I have

developed underwriting and servicing guidelines for many companies and various products,

including first-lien and second-lien Alt-A and first-lien and second-lien subprime mortgage

products. I have been on both sides of repurchase requests, having both demanded repurchases

and repurchased loans. I have also engaged in several scratch and dent transactions.

No court or other tribunal has ever determined that I am not qualified to testify as an

expert.

E. Professional Memberships

I am a member of the Mortgage Bankers Association. I have served on the Regional

Advisory Boards of both Fannie Mae and Freddie Mac. I am a former member of the Board of

Directors of the mortgage hedge fund SMAMC.

F. Publications

I have no publications in the last ten years.

IV. Compensation

I am being compensated for my work on this engagement at the rate of $625.00 per hour

for time spent conducting my loan analysis and in preparing this Report. I will be compensated

$625.00 per hour for time related to a deposition or court testimony.2 The payment of my fees

is not contingent upon either the opinions I render in this Action or the outcome of this Action.

2
In addition, Payne Advisory is compensated for the work of Payne Advisory employees
related to my work on this engagement. Payne Advisory and I are reimbursed at cost for any
out-of-pocket expenses.

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V. Supporting Documentation

For the purpose of rendering my opinion in this Action, I have been provided access to

the following sources of information: (1) documents produced by the Plaintiff and Defendant; (2)

deposition transcripts (and accompanying exhibits) of certain witnesses and third-party witnesses

deposed in this action; (3) Transaction Documents, including the Mortgage Loan Purchase

Agreement; and (4) information relating to the Mortgage Loans that were analyzed as part of my

review, including loan documents, emails, payment records, loan boarding information and

correspondence produced by Plaintiff, Defendant and third parties.

The documents and other evidence that I have considered and relied on in formulating my

opinions in this Action are listed in Exhibit 3.

VI. The Purpose of a Mortgage Loan Purchase Agreement

A Mortgage Loan Purchase Agreement is used to define the obligations of both the

Purchaser and the Seller of the Mortgage Loans. It is used to set the expectations of both

parties as to the profile of the assets being bought and sold. If the assets fall outside of this

profile, they should not be included in the transaction. A Mortgage Loan Purchase Agreement

should not be used to allow a Seller to convey problem assets and transfer their obligations

regarding compliance with state and federal regulations, as well as the inability to service the

assets, to an unwitting Purchaser unless these deficiencies were adequately disclosed.

VII. Defendant’s Obligations Under the MLPA dated February 25, 2009

The Defendant made the following representations regarding the Mortgage Loans:

 The Mortgage Loans were all closed end, first lien mortgage loans.

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 A complete and accurate Mortgage Loan Schedule would be provided that would list an
outstanding principal balance for each of the Mortgage Loans.
 The Seller was the sole owner of the Mortgage Loans.
 All of the Mortgage Loans complied with the applicable federal, state and local laws.
 Purchaser shall be entitled to all proceeds arising out of the Mortgage Loans received
after the Cut-off Date, which are not included in the Post Cut-Off Payments.
 Seller was responsible for the cost of the delivery of the servicing/origination files, the
preparing and recording any assignments of mortgage, notifying the mortgagors and
insurance companies and shipping all Mortgage Loan records and servicing related files.

VIII. Plaintiff’s Obligations Under the MLPA dated February 25, 2009

The Plaintiff made the following representations regarding the Mortgage Loans:

 The Purchaser will purchase the Mortgage Loans pursuant to the agreement as is with no
representations or warranties except as expressly provided herein, and with no recourse
whatsoever to Seller.
 Purchaser’s structure, capitalization, funding and all other matters incidental to its
involvement in the transaction contemplated herein, including, without limitation, the
purchase of the Mortgage Loans, comply with all applicable securities laws and
regulations.

IX. Opinions regarding Defendant’s MLPA Obligations

It is apparent that the Defendant took a “kitchen sink” approach to the selection of assets

to be included in this transaction and then relied upon the language in Section 4 and Section 6c.

of the MLPA that the assets were being sold with No Recourse to the Seller. In Section 4, this

No Recourse language is clearly conditioned by the statement “with no representations and

warranties except as expressly provided herein” (emphasis added) and, in Section 6c., the same

is true with the language “[e]xcept as otherwise expressly provided herein.” Based on this clear

language, Defendant did provide the representations in this MLPA to the Plaintiff and was

subject to a recourse obligation for loans that did not comply.

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Both parties acknowledged by executing the agreement that they were bound by these

representations based on Sections 4 and 6c. of the MLPA.

A. Defendant Represented that all of the Mortgage Loans were Closed End,
First Liens

The Loan Sale was advertised to entirely consist of “first lien walks”.3 At the end of the

day, the sale included second liens, unsecured loans because the liens were released by

Defendant, and, even worse, loans where the liens were released at some point by Defendant and

then the lien release was vacated rendering the loan basically uncollectible.4

Based on a review of subsequent documentation received by Plaintiff and the testimony

of Defendant’s own employees, many of the Mortgage Loans were in fact not first liens. The

May 29, 2013 Loan List provided by the Defendant indicated that 1,599 of the 2,714 records

reported on this List were first liens. The remaining consisted of 104 second liens, 4 third liens,

725 loans labeled as “0”, or unsecured, and 282 loans not identified (i.e., blank).5 Even

Defendant’s employees admitted to the inaccuracy of the lien positions. In an email dated

December 29, 2009, Jeffrey S. McGrane, Recovery Collector of the Recovery Mortgage

department, responded to Launi L. Solomon, Support Supervisor of the Recovery Mortgage

3
Deposition of Robert Adamovic taken on October 24, 2017 (Adamovic Tr.), at 40:20-
24, (“A walk, it is a jargon term in the bank. It means that they are not going to foreclose.)
4
See, e.g., email from Plaintiff to Defendant. Exhibit 4 of Deposition of O. Kassem
taken on 6-22-17, page 3 (“Omar, I just got word that two more borrowers have received letters.
One is a paying borrower and one is an active foreclosure. I need a retraction on this letter … so
my attorney can file a response with the court that it was a bank error.”) Also see, Answer to
Fourth Amended Complaint, paragraph 282 (“Chase admits that JPMorgan Chase Bank, N.A.
has executed and caused to be filed into public records vacations of lien releases and similar
documents…”).
5
See, JPMC-MRS-00386982.

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department, indicating that one loan was “[s]old as a 1st position and wasn’t. Lien released by

Chase” and another loan was “[s]old as 1st and Chase subordinated.”6

B. Defendant Represented that the Mortgage Loan Schedule was Complete and
Accurate

The Mortgage Loan Purchase Agreement was dated February 25, 2009 and was for the

sale and transfer of 3,529 loans. The MLPA refers to an Exhibit A, which was to identify “the

Mortgage Loans to be purchased under this Agreement”.7 The Exhibit A, with the heading of

“MORTGAGE LOAN SCHEDULE”, attached to the MLPA was blank.8

An Excel spreadsheet, labeled “MLPA List” was subsequently provided via an email

from the Defendant with an attachment titled “First Lien Final.zip”. This “List” included 3,528

individual loan account numbers. Based on my experience, the “List” provided was not a

complete Mortgage Loan Schedule and contained only certain information regarding the loans,

which included the account number (“ACCOUNT”), the account balance (“ACCTBAL”), the

last paid amount (“LPAYAT”), the last paid date (“LPAYDT”), 8 comment columns

(“COMM1” – “COMM8”), the debtor name (“DTR_1_NAME”), the debtor social security

number (“DTR_1_SSN”), 5 columns for the debtor’s address (“DTR_1_ADD1”,

“DTR_1_ADD2”, “DTR_1_CIT”, “DTR_1_ST”, “DTR_1_ZIP”), the debtor’s telephone

number (“DTR_1_TELNO”), and the same columns for the co-debtor, when applicable

(DTR_2_NAME”, DTR_2_SSN”, “DTR_2_ADD1”, “DTR_2_ADD2”, “DTR_2_CIT”,

“DTR_2_ST”, “DTR_2_ZIP”, “DTR_2_TELNO”).

6
See, JPMC-MRS-00018620.
7
Mortgage Loan Purchase Agreement, Section 2.
8
Mortgage Loan Purchase Agreement, page A-1, Exhibit A.

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There were some glaring omissions in the information required for the proper transfer of

these loans. In a standard sale and transfer of mortgage loans, the following, additional

information is essential, at a minimum, to be obtained on all of the loans being transferred:

 Property address (needed to perfect lien, check for lien deficiencies, to protect

property from hazards/maintain property and lien search),

 Original balance (needed to properly amortize the loan),

 Note date (needed to properly amortize the loan),

 Property type (for maintenance and legal purposes),

 Payment history (to analyze payment profile),

 Interest Rate (needed to properly amortize the loan), and

 Mortgage Payment (needed to properly amortize the loan).

In fact, Defendant was notified by the Plaintiff of the documentation needed prior to the

transaction closing date.9

According to an email from Mr. Guerrero to Mr. Schneider, dated October 30, 2008,

containing a spreadsheet attachment identified as “First Lien Walks Bank Owned.xls”, Mr

Guerrrero stated “Here you go, let me know if you need field descriptions or if you have any

questions. Keep in mind, they will try to have some competitive bids.”10

Upon receipt of the email from Mr. Guerrero, Mr. Schneider informed him that the data

tape lacked the collateral address of the potential note sale population. According to an internal

Chase email from Mr. Guerrero to Mr. Fox, with copy to Chad G. Paxton and Jason K.

Richmond, Mr. Guerrero informed Mr. Fox that “[u]nfortunately, the lists I have for first lien

9
See infra FNs 14, 15, and 16.
10
See SA0234456

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walks don't include the entire collateral address(brought to my attention after the file was sent to

the investor). The list that I ended up forwarding (attachment) has the city state and zip but

does not have the street address. Do we have a list that contains the entire collateral address or

can we bump this list up against something to fill in the street address? Let me know your

thoughts.” Mr. Fox then added Sam X. Brown to the email chain. Mr. Brown stated,

“Shouldn't be a problem. Is this in RCV1 by chance? If not, I can look elsewhere.” Mr.

Richmond then responded to all, “The collateral address is in FORTRACS-HE from VLS,

FORTRACS-PRIME for HE/RE, and DRI for Subprime. If it is not in those systems then it is

on the contract. As far as I know that is our only options.”11 Clearly, numerous Chase

employees knew that the proposed 1st Lien Data Tape did not come from a complete servicing

system of records.

The Plaintiff had experience in bulk sale transactions. It consummated a transaction

with Radian Services, LLC on January 31, 2008 that involved the purchase of 975 loans.12 The

agreement detailed the information that was to be included in the Schedule A and that Schedule

was attached with all of the information completed for each loan. This information allowed for

an orderly transfer of the servicing rights from Radian and included the following:

 The original loan amount

 Borrower name

 Subject property address

 Current unpaid balance

 Interest rate

11
See JPMC-MRS-00005207-00005209
12
See Exhibit 4, Agreement between Radian and Larry Schneider, and/or Assigns.

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 P&I payment

 Origination date13

This information was not consistently provided by the Defendant.

C. Defendant Represented They Were the Sole Owner of the Mortgage Loans

The MLPA further states that “Seller is the sole owner of the Mortgage Loans and has

full right to transfer and sell the Mortgage Loans to Purchaser.”14 Although it is unclear if the

Defendant owned all of the subject loans at the time the MLPA was consummated, it became

very clear that starting in 2012, the Defendant basically retroactively relinquished their

ownership of the subject loans, thus violating this representation. After the sale of the

Mortgage Loans, it was determined that many of the loans were no longer valid liens available

for sale, but rather had been subsequently released by Defendant or forgiven. It also became

clear that Defendant had been releasing liens owned by Plaintiff for over ten years without

Plaintiff’s knowledge or consent.

In fact, it was discovered by the Plaintiff that the Defendant had engaged in a 2nd lien

extinguishment program and included loans that were sold to the Plaintiff. This extinguishment

program was initiated to forgive liens on loans to borrowers in order to meet goals in the

Defendant’s settlement with the Department of Justice (“DOJ”).15 In a spreadsheet provided to

13
See, JPMC-MRS-00000982.
14
Mortgage Loan Purchase Agreement, Section 6a. (ii).
15
Deposition of Jason Oquendo taken on May 19, 2017 (Oquendo Tr. I), at 29:10-14,
(“Q. Can you explain to me what the 2nd Lien Extinguishment project was? A. We were asked
to fulfill a role where we would identify liens that would be eligible for extinguishment in turn
for credit towards the DOJ settlement.”)

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the Defendant in 2013, 725 of the loans that were sold to the Plaintiff no longer had a valid

lien.16

On December 5, 2012, Defendant notified Plaintiff that it had sent debt forgiveness

letters to 23 debtors.17 Plaintiff was “provided the option to sell back the loans for 1.5x the

purchase price or have retraction letters sent.”18 Plaintiff elected to accept a repurchase on a

total of 13 loans. Plaintiff’s offer to initiate a repurchase is clear evidence that Defendant

acknowledged they had recourse obligation under the representations and warranties.

On December 13, 2012, Defendant implemented a 2nd Lien Extinguishment Program.19

On December 14, 2012, just hours after receiving notification from its servicer, BSI, Mr.

Schneider notified Omar Kassem, a Chase representative, of debt forgiveness letters being sent

to Plaintiff’s borrowers, including Robert Warwick. In Mr. Schneider’s email, he states:

“This is the 2nd paying borrower who has received this letter from Chase "Cancelling
Her Debt", signed by Patrick Boyle. She said she is getting an attorney and is no longer
going to be sending payments. I don't necessarily need you to intervene on this
particular borrower but I need to know if this can potentially affect hundreds of my
borrowers. Was this DOJ scrubbed before being sent out?

If not, I need to know immediately so I can preemptively attempt to remedy the situation
for all affected borrowers so the problem does not become a major legal issue between
our entities, Chase and the Department of Justice.”20

According to an internal Chase email that same day, Mr. Kassem sent an email to Mr.

Boyle stating, “Not good! This isn't how I planned on remediating our note sale issues. It's

going to be a busy month as I've been getting remediation emails from most of our big

16
JPMC-MRS-00386982.
17
Fourth Amended Complaint, paragraph 193.
18
Id., paragraph 194 and Answer to Fourth Amended Complaint, paragraph 194.
19
See JPMC-MRS-00007517
20
See JPMC-MRS-00019032

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investors”.21 On November 14, 2012, Defendant analyzed the financial impact of its 2nd Lien

Credit Initiative and plan to remediate its harms to Plaintiff.22

When asked in a deposition, Mr. Kassem agreed that there were releases of Mr.

Schneider’s loans by Chase when Chase did not own the liens.23 Further in that deposition, Mr.

Kassem was asked if first liens that Chase did not own were released as well and he responded

“Yes.”24

In some cases, the Defendant attempted to reverse their errant lien releases by issuing a

Vacation and Rescission of Modification of Mortgage.25 Regardless of the enforceability of

this type of Agreement, which was used by the Defendant, in effect, to reverse the lien release, it

is my opinion that the lien release rendered the loan impossible to collect and, from a practical

matter, the vacation document did nothing to change this fact.

The release of liens not owned by the Defendant was facilitated by the fact that the

Defendant’s title vendor, Nationwide Title Clearing (“NTC”), engaged in a practice amounting

to “robo-signing” release documents. In a deposition, Brian Bly, an NTC employee, admitted

that NTC did not engage in any quality control prior to creating the documents, had no personal

knowledge of the contents of the documents and did not check to determine if Defendant owned

the mortgage prior to releasing the lien.26

21
Id.
22
See JPMC-MRS-00099890
23
See, deposition of Omar Kassem taken on June 22, 2017 (Kassem Tr.), at 20:6-10.
24
Id., 205:3-25.
25
See, SA00331584.
26
See, deposition of Brian Bly taken on March 21, 2017 (Bly Tr.), at 14:15-25 and 15:1-
8.

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D. Defendant Represented that All of the Mortgage Loans Complied with the
Applicable Federal, State and Local Laws

The Seller represented and warranted in the MLPA that “[e]ach Mortgage Loan complies

in all material respects with all applicable federal, state, or local laws, including, without

limitation, the Federal truth-in-Lending Act of 1969, the Federal Equal Credit Opportunity Act,

the Federal Real Estate Settlement Procedures Act of 1974, and state and federal usury,

consumer credit protection and privacy, predatory and abusive lending laws applicable to the

Mortgage Loans.”

One federal law, Regulation X, or the Real Estate Settlement Procedures Act (“RESPA”),

requires the mortgagors to be notified of any transfer of the mortgage loan servicing. RESPA

requires the transferor servicer to provide the notice of transfer to the borrower not less than 15

days before the effective date of the transfer of the servicing of the mortgage loan. The transferee

servicer is to provide the notice of transfer to the borrower not more than 15 days after the

effective date of the transfer. The transferor and transferee servicers may provide a single notice,

in which case the notice is to be provided not less than 15 days before the effective date of the

transfer of the servicing of the mortgage loan. There are additional conditions that could allow

up to 30 days for the notifications to be provided.27 In order for the transferee, in this case the

Plaintiff, to comply, certain information must be obtained in order to properly board the loans

onto the servicing system and to generate the servicing disclosures. Two months prior to the

transaction, the Plaintiff identified the necessary data needed to board the loans, as well as

requesting the loan files.28

27
See, Regulation X, Section 1.01, 1024.33 Mortgage servicing transfers, Notices of
transfer of loan servicing. 3. TIME OF NOTICE.
28
JPMC-MRS-00000129.

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The Plaintiff made a further email request in the month before the transaction outlining

the data needed for the initial boarding in order to send out the RESPA notifications.29

Three weeks after the transaction date, the Plaintiff was still trying to comply with

RESPA by again asking for a spreadsheet with principal balances so that they could board the

loans and send the RESPA letters.30

Twenty-six days after the transaction date, the Plaintiff inquired with the Defendant when

the Goodbye Letters would be going out, which would be the transferor’s notifications. The

Defendant’s response was “[n]ot exactly sure yet, still trying to tie it down.”31 There is no

indication that the Defendant ever issued the requisite RESPA letters.

The Plaintiff made several efforts to ensure it complied with the federal regulations, but

the Defendant did not cooperate.

E. Defendant Represented that They Would Bear the Cost of Delivering Files

The Seller represented and warranted in the MLPA that they “would bear the cost of the

delivery of the servicing/origination files for the Mortgage Loans to the Purchaser or its designee

(including any costs owed to Seller’s custodian related to the release and shipment of the

servicing/origination files to Purchaser or its designee); the costs of preparing and recording any

assignments of mortgage (including intervening assignments necessary to perfect (sic) title to

Purchaser) from Seller to Purchaser and endorsing notes to Purchaser, as required, the costs of

delivering complete master-file tape information and other electronically stored information to

Purchaser; the costs of notifying the mortgagors, hazard, flood and mortgage insurance

29
JPMC-MRS-00003418.
30
JPMC-MRS-00000793.
31
JPMC-MRS-00000555.

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companies, and others, as necessary, and the costs of shipping all Mortgage Loans records and

servicing related files to Purchaser.” Not only did the Defendant agree to bear the cost of

delivering the Mortgage Loans, they clearly acknowledged that they were responsible for

notifying the mortgagors and insurance companies of the transfer, as well as perfecting the title

to MRS, and delivering the Mortgage Loan files. As discussed throughout this Report, the

Defendant failed to fulfil their obligations for the majority of the Mortgage Loans.32

X. Opinions regarding Plaintiff’s MLPA Obligations

Section 4 of the MLPA stated that “Purchaser acknowledges that it has had an

opportunity to conduct a due diligence review of each Mortgage Loan.” Plaintiff spent a

considerable amount of time attempting to complete the due diligence, but was never furnished

with the documentation necessary to determine which loans were first liens.

For example, in an email from Plaintiff to Defendant, Plaintiff noted the extent of his

“analysis of the 1st Lien Walk pool”, which included 6000 loans.33 Although Plaintiff indicated

in an email that he projected “about 95% of the pool is truly unsecured”,34 in a deposition,

Plaintiff clarified that he “wouldn’t put much credence into that 95 percent, because still had not

received a substantial portion of the information which I was waiting for.”35 Repeatedly, we

see that Defendant did not provide the documentation requested by Plaintiff.

32
See, e.g., JPMC-MRS-00011966. Email from Launi Solomon to Tamika Williams
dated 9/24/2012 (“can someone please assist Larry on this???? We sold this account to Larry in
a bulk asset sale, in March 2009. We did NOT do assignments for this sale…”) (emphasis in
original email).
33
JPMC-MRS-00001016-21, at 16.
34
Id., at 19.
35
Deposition of Laurence Schneider taken on July 28, 2017 (Schneider Tr.), at 188:4-8.

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The Defendant maintained that a blanket assignment was executed to encompass all of

the loans in the transaction. When the Defendant questioned the Plaintiff regarding the

assignments, Mr. Guerrero responded “I just don’t think we were prepared…cuz we thought it

was taken care of by the blanket assignment.”36 However, no blanket assignment was executed

and individual assignments were not executed until Plaintiff requested them. In an email chain

dated September 24, 2012, Defendant stated “[w]e did NOT do assignments for this sale, we did

them one off as Larry needed them. This customer paid it off a year ago and Larry cannot do

anything, because we didn’t do an assignment, he’s been trying to get one since April… .”37

XI. Conclusion

It is my expert opinion that the Defendant did not meet the obligations as stated in the

Representations and Warranties. This failure to do so harmed the Plaintiff in the following

ways:

1. The Plaintiff had tremendous “opportunity cost” based on the fact that the
Plaintiff devoted time and effort on loans that were never transferred and in some
cases still owned by Defendant.

2. The Plaintiff was subject to reputational and legal risks based on the fact that the
Defendant did not comply with RESPA regarding its obligations to issue
“Goodbye” letters to borrowers.

3. The lack of complete information on the Mortgage Loan Schedule (Exhibit A)

prevented Plaintiff from properly servicing the loans.

36
JPMC-MRS-00000576-7.
37
JPMC-MRS-00011966-72.

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Dated: July 9, 2018

Summit, New Jersey

Richard W. Payne III

23 CONFIDENTIAL