s&S COPY

UNITF,D STATES DISTRTCI COURT jj()RK , k SOUTHERN UIMUCT OF

:1 k r.

New Jeremy Carpenters Health Fund, On Behalf ofItself. and All Others Similarly Situat ,
PhdrItit
V.

BALI Series 2006-QO I Trust RALI Series 2006-QO2 Trust, RAM Series 2006-Q03 Trust, BALI Series 2006-QO4 Trust, RALI Series 2006-QO5 Trust, RALI Series 2006QO6 Tnist, E ALI Series 2006-Q07 Tntst,

Civil Action No.:

.BALI Series 2006-QOIO Trust, RALI Series 2007-QO1 Trust, RAM Series 2007-QO2
Trust, RALI Series 2007-QO3 Trust RALI Series 2007-QO4 Trust and RALI Series 2007Q05 Trust, Deutsche Bank Trust Comfy Americas, US. Bank National Association, Residential Accredit Loans, Inc., Bruce paradis, Davee L. Olsen, Kenneth M. Duncan, Ralph T. Flees, Lisa. R. Lundsten, James G, Jones, David M. Bucker,. James X. Young, Goldman, Sachs & Co., RBS Greenwich Capital, UBS Investment Bank, Credit Suisse Securities (USA), LLC, Deutsche Dank Securities, Ie. and GMAQ RFC, Seorities, Defendants. --

; Removed From:
Supreme Court of the State of New York Index No . 0502727

:x

1LOTICE.OF UMOVAL Defendants RAM Series 2006-QO1 Tr , BALI Series 2006-Q02 Trust, RALI

Series 2006-Q03 Trust BALI Series 26-QO4 Trust, BALI Series 2006-QO5 Trust,. RALI

Series 2006-Q06 Trust, RALI Series 2005-QO7 Trust, BALI Sines 2006-QO 1 D Trust, RALI Series 2007-QOI Trust, BALI Series 2007-QO2 Trust, MALI Series 2007-QO3 Trust, RALI

Series 2007-Q04 Trust, RALI Series 2007-Q05 Trusts Residential Accredit Loans, Inc., Bruce Paradis, Davee L. Olsen, Rtxmeth M. Duncan, Ralph T. Flees, LisaR Lundsten, James G. Jones, David M. Bricker., and Jam es N. Young (collectively, the `BALI I3cfeudants"), by and through their undersigned counsel, Sbearman 8 Sterling LLP, hereby remove this action from the Supreme Court of the State ofNew York, County ofNew York to the United States District Court for the Southern District ofNew York pursuant to 28 U.S.C; . 1332,. as amended by the

Class Action Fairness Act of2005, 28 U.S.C.- 1446, and '28 U.S.C. 1453.' In support oftheir Notice ofRemoval, the RALI Defendants state as follows: L On or about September 22, 2008, plaintiffNew Jersey Carpenters. Health

Fund ("Plaintiff') filed this. putative class actson.in the Supreme Court of the State ofNew York, County ofNew York, Index No. 0602727, on behalf ofitself and all others who purchased certificates -pursuant or traceable to thirteen offerings of RALI Mortgage AssetBacked PassThrough Certificates. 2. The Complaint alleges, among other things, that certain registration

statements and prospectuses filed inconnection with the offerings ofthe certi$cates . contained misrepresentations and omissions in violation of Secion. 11, Section 12(a)(2), and Section 15 of the Securities Act of 1933, 15 U.S.C. 3. 77k, 771(a)(2), 77o. (Complaint'" 107-138.)

This Notice of R=oyal is timely - under 28 U.S.C. 1 446(x) and (b). It is

being tiled within thirty days ofthe filing and service ofthe Summons and Complaint. The Complaint was filed on September22, 2008, and none ofthe RALI Defendants was served before October 1, 2008.

any and all, defenses I By removing tb4s matter, the BALI I]c'cn&ats do not wive, and =pr=91y preerve, that they may have including, but not limited to, lack ofpersonal juu risd ion and =vice ofprocess.

Class Action Riess Act

4. This Corot has jurisdiction over this action pursuant to the Class Action

Fairness .Act of2005 ("CAFA"). A putative class action filled air Februarys 18, 2005 may be removed under 28 U.S.C. 1332(d)(2) and. 1453 if (a) the amount in controversy exceeds the sum. or value of $5,.000,000, exclusive ofutmsts and costs; (b) any member of the putative class is a citizen of a state different, from any defendant; and (c) no specified exceptions apply. Consent ofall defendants is not required to remove an action under CAFA. 28 U.S.C. 1453(b). Additionally, ` AFA overrides the Securities Act's anti uavat provision." See N.J.

Carpenters Vacation Fund v. JiarborView Mortgage Loan Trust 2006-4, No. 08 Civ. 5093 (RB), 2008 VAT:, 4369840, at *6 (S]:N.Y. Sept. 24, 2008). 5. CAFA applies in this action because the state court action was

commenced on or about September 22, 2008,1 e,, after the effective date of CAFA_ 6. The state court action is a "class action" within the meaning of CAFA.

(Complaint 143 C`Plaintiff brings this action as a class action pursuant to Article 9 ofthe. New Pork. Civil Practice Law and. Rules ("CPLR") on behalf of a class consisting of all persons who p=hased or acquired the Certificates (the "Class") pursuant to and/or traceable to the

Registration Statement and Prospectus issued in connection with the Offering from the effective date through the dale of the filing of this act') T. The state court action satisfies CAFA:' s a untin-controversy

requirem ent Under 28 U.S.C. 1332(d)(6), the amount in controversy, in a putative class action is determined by aggregating the amount at issue in the claims of all members of the putative class. Here, the Complaint alleges that the Defendants made false anti misleading statements in connection with certificate offerings of over $8 billion and that the value of Plaintiffs holdings

declined by over 95%. (Complaint IN I, 106.) Although the RALJ Defendants deny that
Plaintiff or any putative class member is entitled to recover any amount or to any relief, these allegations show that the amount in controversy exceeds $5,000,000, exclusive of interest and

costs. $. The state court action satisfies, CAFA' s diversity-of-citizenship

requirement. 28 U.S.C. 1332(d)(2}(A). Under CAFA, itis sufficient that any one member of the putative class is a citizen of a state. different from any one defendant; complete diversity is not required. Plaintiff asserts that it is a benefit fund with offices located in the State of New Jersey. (Complaint 7.) Allof the RALI Defendants are citizens of a dif ent state as they

maintain offices in Minnesota and are organized under the laws of the State of New York or the State of Delaware . (Complaint In 82Q, 23, 33 9. No exceptions to CAFA's -applicability apply in this case. Other Procedural R Yemenis

10.

In accordance with 28 U.S.C. 144.5(a), attached hereto as Exhibit A is a:

file-stamped copy of all process, pleadings and orders served on'the RALI: Defendanta, namely the Summons and Complaint

11.

The BALI Defence will promptly serve a copy of the Notice of

Removal on Piainti ' s counsel and file with the Clerk ofthe Supreme Court of the State ofNew York, County ofNew York, a Notice ofFibbg of Notice of Removal, pursuant to 28 U.S.C.
1446(d). 12. of Civil Procedure. This Notice ofRemoval is signed pursuant. to Rule 1 1 of the Federal Rules

WHE EFOEE, this action should proceed in the United States District Cowt for the Southern District of New York, as an action properly removed theta.
Dated: New York, blew York October 14, 2008

HEA;RMA;N & STERLING LLP

By:

/(

'Swart-J. Baskin
5ba$ki,[email protected] Ric hatd F. Schwed

[email protected] 599 Lexington Avenue

New York, NY 10022 Telephone. (212).848-4000 Facsimile: (212) 848-7179 Attorneysfar Defendants RALI Series
2006Qo1 Tom, k4LISevier 2006Q02 Trust, RALi Series 2006Q03 Trust, RALI

Series 2006:Q04 Tram RAil series

2006-Q05 Trust, RAM Series 2006-QO6

Trust,, RALI Series 2006-Q07 Titer, RAm

,Series2006-QOJO Trust, RALISenes

2007QOI Trust RALiSeries 2007-Q02 That, R4Ll series 2007Q03 Ti usr, R,4LI series 2007Qa4 Trust, RAil Series ,2007-Q05 T is , Resdentiai Accredit
Looms, Inc., Bruce Paradls, Davee L. Olsen, Kenna M Duncan, Ralph T. Flees, Lisa R. Lundsten, James G. Jones, DavidM Bric1er; and James 1V. Young

IT A

} sw

SUPREME COURT OF TEE STATE OF NEW YORK COUNTY OF NEW YOB New Jersey Carpenters Health Fund, On Behalf d.,. of Itself and All Others Si=lady Si
PJa tif.

Index No. SUMMONS

V.
RALI Series 2006-QO } Trust, RATI Series 2006-QD2 Trust, RALI Sys 2.006-Q03 Trust, RALI Series 2006-QD4 Trust, RALI Series 2006-Q05 Trust, RALI Series 2006-Q06 Tn t, RALI Series 2006-Q07 Trust, RM Series 2006-Q0I O Trust, RALI Sexies 2007-QO1 Trust, RALI Series 2007-Q02 Trust, RALI Series 2007-QD3 Trost, RA,LY Series 2007-Q04 Trust and RALI Series 2007-QD5 Tmst, Deatw* Bank Trust Company Americas, U.S. Bank National Association, Res4entil Accredit Lo awn& .Inc, Bnace Patadis, Davee L. Olsen, Kwne:Ch M. Duncan, Ralph T Flees, Lisa RLimdsren, Jars. G. Jones, David M. Bricker,

L33Y CLERICS

OFOM

WITVA

omppFIED CC)pY FILED

James N. Yomg, Goldman, Sachs & Co, RBS Greenwich Qapital, tJBS Invent Bank Credit Suisse Securities (USA), LLC, Deutsche ities, Bank Securities, I c. and GMAC BFC. S Defendants.

To the above named Defends rd: YOU ARE EEREBY SUMMONED and required to serve upon Plaintiff's attorneys a Veried Answer to the Veiafied Complaint.in this action within twenty (20) days after the vice of t1us summons, exclusive of the day of service, or within thirty 00) days after service is complete if this moons is not personally delivered to you within the State of-Now York. In case of your failure to answer, judgment wi l l be taken :against you by default for tbr- r el ief demanded in the complaint

Dated: September 22, 2O0

r rack Scbiaipa, Esq^old Sporn Libman & LomeW, PC 1.9 Puixon Street Suite 406 Now York, New York 10036 Tel: (212) 964-0046

Aitorneyx or?Iai

& Proposed Class

Trial is desired in the County ofNew Y The basis of venire designated above is that Defendants maintain aadfor conduct their business in the County ofNew York-

S[PREM COURT DFTHE STATE OF NEW YORK CO `Y OF NEW YORK New: Jersey Carpenters Health Fund, On Behalf ofItself and All Others Similady Situated., Plaintiff;
V.

Index No.

- [pba11

CLASS ACTON

RALI Series 6-QOl Trust, RALI Series 2006-QO2 Trust, RALI Series 200" 03 Trust, RALT Series 2006-Q04.Tri RALT Series 2006-QD5 Trish RALI Saes 2006-QO6 Trust, BALI Series 2006-QO7 Trust, RAU Series 2006-QOIO Trust. RALI Series 2007-QOI Trust, 1RALI Series 2007QOZ Trust, RALI Series 2007-QO3 Trust,. RALI Series 2007-Q04 Trust and RALF Series 2007-QD5 Trust, Deutsche Bank Trust Company Americas, .US. Bark Nati Associiatio, Residential Accredit Loans, Inc., Bruce Paradis, Davee L Olsen, Kenneth M. Duncan? Ralph T. Flees, Lisa R. L en, James a Jones, David M. Bricker,

VERIFMD CO PLAINT FOR VIOLATION OF SECTIONS Ii, I2 AND 15 OF T$E ;SECURITIES ACT OF 1933

YORK OWN Q-01es COURV

NOT COMPARE ^ WITH CCFY.h`!

James N.'Young, Goldman, Sachs & Co., RBS. Greenwich Capital, UBS Investment Sank, Credit Suisse Securities (USA), LLC, Deutsche Bank Securities, Inc_ and GNJAC RFC Securities,

Defdants.

x
Plaintiff alleges the fallowing based upon the investigation of counsel, Schoengold Spom Laitman & Lometti, P.C., which eluded a review of United St C :s Securities and Exchange

.ission ("SEC') filings by Residential Accredit Loans. Inc. '`BALI") and BALI Series

2006-QUI Trust,. BALI des 2006-QO2 Trust, BALI Series 2006-QO3 Trus, RALI Series 2005-Q04 Trust, BALI Series. 2006-QO5 Trust, RALT Series 2006-Q06 Trust, RALI Series 2006-Q.07 Trust, RALI Series 2006-QOIO Trust, RAIN .Series 2007-QO3 Trust, RA3. Series 2007-Q04 Trust and BALI Series 2007-QO5 Trust (collectively the -Issuers" or the "BALI

Trust'), as, well as regulatory flings and reports and advisories about RAU and the RALI Trnsts,, press releases and- other public statements issued by ratings agencies about RAU and the RALI Trusts, and their own internal investigatiom Plaintiff believes that substantial additional evidentiary support will-exist for the allegations set forth herein after reasonable opportunity for discovery. The claims asserted herein do not sound in or arise from allegations of fraud. NAT= OF IM ACTION 1, This is a class action, brought by New Jersey Carpenters Health Fund (the

"Carpenters Health-Fund") alleging violations of Sections 11, 12 and 15 of the Securities Act of 1933;. 15 U.S.G. 77a et seq. ("Securities Act"), on behalf of purchasers of RALI Mortgage AssetBacked Pass-Through Certificates, Series 2006-QD1, Series 2406-Q02, Series 2406-Qfa3, Series 2006-Q04, Series 200&,QO$, Buries 20WQ06, Series 2006-Q07, Series 2006-QO IQ, Series 2007-QOl, Series 20072, Series 2007-Q03, S ies.2007-Q04 and Series 2007-QOS (the "Certificates" or the `%ALI Certtfioates") who purchased the Certificates, tacked by pools of one- to fourEmily residential, paymentoption, as justable-rate first lien mortgage loans with a negative amortization feature, pursuant to or traceable to the following Offerings: .e: $881,346,100 Offering of Series 2406-QOl Certificates on or about

January 26, 2006 issued by Defendant BALI Series 2006-QO1 Trust (the `2006-.QO1

.b.

$665,496,000 Offering of Series 2006-QU2 Certificates on or about 006-Q02

February 24, 2006 issucd by Defendant RALI Series 2006-QQ2 Trust (the

$664,812,000 Offering of des 2006-Q03 Ce

cafes on or about
03

March 28; 2006 issued by Defendant RALI Series 2006-Q03 Trust (the "20 Offering"}; d.

$843,226,000 Offering of Series 2006-Q04 Certificates on or about April 04 Offering);

26, 2006 issued by Defendant EALI Series 2006-Q04 Th at (the "2006

C.

$1,071,587,0000 Offering of Series 2006-Q05 Certificates on or about May

26, 2006 issued by Defendant RALU Series 7006-Q05 Trust (the "2006-QOS Offering"); f. $1,290;297,000 Offering of Series 7006-Q06 Certificates on or about June

2.8, 2006 issued by Defendant RAM Series. 2006-Q06 Trust (the "2006-QC6 Offering"); . g. $1,542,440 ,000 Offering of Series 2006-Q07 Certificates on or about

September 29, 2006 issued by Defendant RAIX Series 2006 -Q07 Trust (1he "2006-QC7 Offering"); h. $889,857,00.1) Ding. of Series 2006-Qa1O Certificates on or about

December 27, 2006 issued by Defendant BALI Series 2006-QCI6 Trust (the "2W& Q010 Offering'"`); i. 1,930,000 Offeaing of Series 20D7-QO1 Certificates on or about

7anuuy 29, 2007 issued by Defendant BALI Series 2007-QO1 TWst (the "2007-QOI offering*); j. $ 7, 32,000 Olftaixg, of Series 2007-Q02 Certificates on or about

Febbruaty 26, 2007 issued by Defendant RALI Series 2007-Q02 Trust (the "2007-QO2 Offer');

Defendant RBS Greenwich Capital M".RBS") was the Underwriter for the 20.05-Q04 Offering Defendant UBS Investment Bank ("UBS"} was the Underwriter for the 2006-QD5 and 2006Q07 Offerings; Defendant Credit Suisse Securities (USA). LLC ("CSS"} was the Underwriter for the 2007-QO i Ofexing; Defendant Deutsche Bank Securities, Inc. (-DBS1 was the Underwriter for the 2007-QO2 Offering; and, Defendant GMAG RFC Seem ties ("OMACRFC") was the Underwriter for the 2007-Qt7W, 2007-Q04 and 2007 ]5 Offerings (Defendants

GSC, RBS, UBS, CSS, DBS and GMACRFC are calleclively referred to herein as the "Underwriter Defendants' or "Undexwrit+eer-ss"). The Underwriters were obligated to conduct

meaningful, due diligence to ensure that the Registration Statements and Prospectuses contai no material misstatements or omissions, including the slated manner in which the. mortgages had been originated.. The Underwriters received massive fees for titer work in connection with the Offerings. Based on, interallad. the Underwriters' due diligence and The representations in'the Registration Statements and Pmspacbses relating to the under riting of the Certificate colla eral, rating agencies such as Moody's.Investors Service, Inc. ("Moody's"), Stands & Poor's ``S&P") and DBRS, Inc. ("DBRS'1) (collectively, the "Ratings Agencies') assigned the Certificates among the highm ratite applicable to such debt issue. At the time of the [ring, the Certificates were issued at apporoxiarately gar or $1000.00 fie value per Certificate. 3. Folio . the issrnee of the Certificates, discio 'began to emerge revealing

HFl routinely disregarded the underwriting guidelines in its mortgage lom origination. These disclosures were confirmed by sibsbmtially higher rates of delinquencies and foreclosures on collateral for such highly-rate. debt issues. These disclosures, and the poor performance of the collateral, caused the Rig Agencies to review and revise the ratings assigned to the Certificates due to the fact that the true nature of the collateral had not been properly-assesses at

k.

$295,a5,0oo Bering of series 2007-Q03 Certific ates on or about

March 28, 2007 issued by Defindant RALI Series 2007-Q03 Trust (the `2007-Q03
");

1.

$502,8370000 Offering of Series 2007-QO4 Certificates on or about May

30, 20007 imed by Defendant RALI Series 2007-QD4 Trust (the "2007-Q04 Offering"); and, m. icates on or about $231,1$7,000 Offering of Seines 2047-QOS Certif

August 29, 2007 issued by Defendant RALI Series 2007-Q05 Trust (the "2007-Q05

offer").
Z. The Certificates were issued Pursuant to a Form.S-3 Registration went

filed with. the Securities Exchange Commission on or about January 23, 2006, thereafter amended by the filing of a Form 5-31A on March 3, 2006 and a subsequent Form 8-3/A on April ). The Offerings occu=d in ibis venue. The 3, 2007 (collectively the "Registtation. Statements" Certificates herein are Mortgage Asset-Backed Pass-Through Certificates collateralized by mortgages originated by Hom wings Financial, LLC f]kla Home .inggs Financial Network

(`Homecomings" or `HFN"), which, at all relevant times, was a comme n ial and residential lender. The mortgages and liens on the mortgaged properties constituting the Certificates'

collateral we, as set forth in the Registration Statements, to be the principal sou= by which Certificate purchasers were to obtain repayment of their investmwt plus interest. As also set forth is the R4sh-afiou State, the Certificate collateral was purportedly originated by HFN pursuant to specific underwrWmg procedures and guidelines. The Undeswritaers of the Offerings

varied from Offering to

ing:

Defendant Goldman, Saris & Co. (`GSC") was the

Underwriter for the 2006-Qa1, 2006-Q02, 2006-Q03. 200.6-Q06 and 2005-QQ1 p Offerings;

the time of the f

ng The rating agencies d

ically downed the Certificates is both

April and June of 2009, resulting Pram the revelations regarding the true underwriting practices used to originate the collateral and. the tie value and quality of the Certificate colkgkial, which subsequently caused the subs antial decline in the value of the Cites. Plaintiff purchased certifi ates issued by one or more of the RALI Trusts pursuant to a registration statement described herein. However, as of the dafe the within action was commenced, Plawtif's L The damns. asserted herein under the Securities

iixvesm=t suffered a decline of over 95peTe

Act do not sound in or arise from allegations of fraud.

J[JEDLCTION AND V1^d^IIE 4. The claims asserted herein arise under and pursuant -to Sections 11, 12(a)(2), and

15 of the Securities Ac% 15 U.S.G: 77k, 771(a)(2) and 770.

5. T$is Court has jurisdiction over the subject mater of this action pursuant to

Section 22 of'the Securities Act`, 15 U.S.G. l7v.

6.

Venue is proper in this County pursuant to Section 22 of the Securities Act.

Many ofthe acts and transactions alley herein, including the preparation and dissemination of many of the material misstatements and omissions contained in the- Registration Statement and Prospectus filed . in con tion with the Offering, Occurred in sub al part in this County.

Additionally, the Certificates were actively marketed and sold in this County. In addition, Defendants Deutsche Bank Trust. Company Americas ('DBCTA' ,, GSC, UBS, CSS , DB S and GMAC-R'C maintain offices in this County.

7.

Plaintiff, the New Jersey Carpenters Health Fund, is a Taft-Hartley benefit fund

with offices located in M=4 New Jersey. The New Jersey Carpenters Health Fund purchased

certain of the RALI Certifictess described! previously at par value an the Offering. Plaintiff and the Clays purchased pursuant to the Registration Statements and Prospectuses wixith contained
tat ial Vie= and misleading. Pro Act. ions. of &cts essaly to make the facts stated t in not

Plaintiff and the Class relied on the misstatements and omissions in the ered damages pursuant to Sections 11, 12 and 15 Of the Securities.

cesses and have s

8.

Defendant RAM Series 2006-QC I Trust was the issuing entity for the 2006-QOI

Offs. Per its filings with the SEC, BALI Series 2006-QO 1 Trust has listed 8400 Norm&le i nneapolis, Minnesota 55437 as its principal office location. Lake Boulevard, Suite 600, M
Defendant R.ALI Seziies 2006-QOI Trust is. a trot formed under the laws of the State of New

York.
9. Defendant RAM Series 2005-Q02 Trust was the issuing entity for the 2006-Q02

Offering, Per its filings with the SECI BALI Series 2006-QC2 Trust has listed *400 NormWale Lake Boulevard, Suite 60Minneapolis, Minnesota 5 437 as its principal office location. Defendant 1AU Series 2006-Q02 Trust. is a trust ,formed under the laws of the State of New York. 10.
O

Defendant BALI Series 2006-QO3 Trust was the iss

g entity for the 200

03

ring. Per its filings with the SEC, RAL1 Series 2006-Q01 Trust has listed 8400 Nonadede

Lake Utmievard, suite 600, Vameapolis, Minnesota .55437 as its pa

ipal office location.

Defendant BALI Series 2006-Q03 Trust is a test . fanned under the laws of the State of Now
York. 11. Defendant RALI Series 2006-Q04 Trust was the issuing entity for the 2006-Q04

Offering. Per its filings with the SEC, RALI Series 2006-Q04 Trust has listed 8400 Nomu dale

Lake Boulevard , Suite 600, Minneapolis, Minnesota 55437 as its principal office loeatiomDefendant RALI Series 2006-QO4 Trust is a trust formed under the laws of the State of New York. 12. De ,dant .I Series 2006-QOS Tryst was the issuing entity for the 2006-QO5

Offering. Per its cgs with the SEC, RALX Series 2006-QO1. Trust has listed $4400 Normadale Lake Boulevard, Suite 600, Minneapolis, Minnesota, 55437 as its principal office location. Defendant RALI Series 200 - QOI Trust is a trust formed under the laws of the State of New York. 13. Defendant BALI Series 2006-QO6 Trust was the issuing entity for the 2006-QO6

Offering. Per its filings with the SEC, RA.LI Series 2006-QO6 Trust has listed 9400 Ni rmadale Ike Boulev , Suite 600, Min teapolis, Innesata 55437 as its principal office loc on.

Defendant RALI Series 2006-QO6 Trust is a trust formed under the laws of the State of New Yom
14. De ndant RAM Series 2006-QO7 Trust was the issuing entity for the 2006-QO7

Ofking, Per its filings with the SEC, BALI Series 2005-QO7 Trust has listed 8400 Normadale Lake Boulevard, Suite 6m Minneapolis, Minnesota 55437 as its ipal office- location.

Defendant RALI Series 2006-QO7 Trust is a trust ftmed under the laws of the State of New York. 15. Defendant. fALI Wes :006-QO10 Trust was the issuing entity for the 2006-

Q010 Offering. Per its filings with the SEC, BALI Series 2006-QO i 0 Trust has lisp 8400 Noaadale Lake Boulavard, Suite 600, Minneapolis, MI ota 55437 as its prindipal office

location. Defendant RAU Series 2006-Q(}10 Trust is a trust .fanned under the laws of the State ofNew York.

16.

Defendant R.ALI Series 2007-Qol Trust was the issuing entity for the 2D07QO1 ie

Ofibring. Per its firings with the SEC, BALI Series 2007-QOI Trust has listed 8400 Nn Lake Boulevard, Suite 600, Minneapolis , i

sota 55437 as its principal office location.

Defendant BALI Series 2007-QOl Trust is a trust formed -under the laws of the State of New York,

17.

Defendant RALI Series 2007-Q02 Trust was the issuing entity for the 2007-Q02

Offering. Per its filings with the SEC, BALI Series 2007-Q02 Trzast.has listed 8400 Nonnadale Lake Boulevard, Suite 500, 1 De York.
18. Defendant BALI Series 2007-Q03 Trust was the issuing entity for the 2007-Q03

eapolis, Minnesota 55437 as its principal office location.

dant RALI Series 2007-QD2 Trust is a trust formed under the laws of the State oI New

Ofeting, Per its flings with the SEC, RALI Series 2007-Q03 Trust has listed 8400 Normad^le Lake Boulevard, Suite 600, Minneapafis, Minnesota 55437 as its prineipal office location. Defendant BALI Scrin 2007-Q03 Trust is a trust wed under the laws of the State of New York.

19.

Defendant BALI Series 2007-Q04 Trust was the issuing entity for the 2007-Q04

Offering. Per its filings with the SEC, RAU Series 2007-Q04 Trust has listed 8400 Nommdale Lake Boulevard, Suite 600, Minneapolis, Nfiim=wta 55437 as its principal office location. Defendant BALI Series 2007-Q04 Trust is a fiat. funned under the laws of the State of New York.
20. Defendant RALI Series 2007-QD5 Trust was the issuing entity for the 2007-Q05

Offering. Per its flings with the SEC, BALI Series 2007-QO5 Trust has listed 840D Narnnadale Lake Boulevard;. Suite 600, Minneapolis, Minnesota 55437 as its pincipal office location.

Defendant RALI Series 2007-QO5 Trust is a trust farmed under the laws of the State of New York. 21. Deft Deutsche Bank Trust Company Americas {"DBTCA"} is the Trustee of

the 2006-QOI, 2006-Q03, 2006-Q04, 2006-Q05, .20D6-Q06, 2005-QU7, 2006-Q08, 2006-Q0.9, 2006-Q010, 2007-QO1., 2007-QOZ,: 2007-QO3, 2007AQ04 and 2007-Q05 Certificates and maintains offices in New York County at 60 Wall Street New York New York .10.005. 22. Defendant U S, Bank National Association ("USBNA"), a wholly owned

subsidiary of U.S. Bancorp , is the Trustee for the 2006-Q02 Certificates and maiptains its
principal saes att 425 Wab= Sth Ste. FRNT, Cinchmati, Ohio 452 23.. 3933.

Defendant Residential Accredit Loans, Inc. is the Depositor for the Offerings, and

the Parent Company of suers. RALI is a wholly owned operating subsidiary of Residential Capital Corporation ("ResCap") . Acw ding to its SEC filings, RALX maxim its principal offices located at 8400 Nomiadale Lake Boulev 24. , Suite 600, Minneapolis, Mint ota 55437.

RAI3 is a wholly owned operating subsidiary of Residential Capital Corporation

('"ResCap") ResCap is also the Parent Company of Residential Funding Corporation ("RFCI,
the Sponsor and Nfitster Services of the Certificates. Moreover, N is a wholly owned

subsidiary ofRFC. 25. Defendant Bruce Faradis (Turadis") was, dmiag the relevant period, a Dire#ar,

the President and Chief Executive Officer (Principal Executive Off=) of R.AU Pm-adis signed the January 23, 2005 . Registration Statement. Form. 9-3 pursuant to which the 2006-QO1 and 2006 QO2 Certificates were offered, and Ihe March 3, 2006 Amendment to the Registration Statement Form S-3/A pursuant to which the 2006 QO3r 2006-QO4, 2006-QO5,, 2006-QD6,

10

2006-QO7, 2006-QO70, 2007-Qol, 2007-Q02 and 2007-Q03 Cerdficates were offered, either
on behalf of himself or by the authori
26.

Attorney-In-Fact.

Defendant Kenneth M Dwwaa ("Duncan") was, during the relevant pecriod, the Duncan signed the

Acting Chief Financial Officer (Principal Financial Officer) of RALT.

January 23, 2006 Registration Statement Form S-3 pursuant to which the 2006-QOl and 2006Q02 C;rtificates were off, and March 3,, 2006 Ar eudnient to the Ramon St ent

Form 8-3/A pursuant to which the 2006-Q03, 2006-QD4, 2006-QO5, 2006-Q06, 2006-QD7, 2006-QO10, 2007-QO1, 2007-Q02 and 2007-Q03 C himself or by the wAhmized Attorney-Fn-Fast cates were off, either on behalf of

27,

Defendant Davee L. Olsen (Olsen") was, du ing the relevant period, a Director

of RALT. Olsen signed the January 23, 2006 Registration Stmt Form S-3 pursuant to which the 2006-WI and 2006-Q02 Certificates wCre offered, and the March 3, 2006 Amendment to the Regist ion. State=t Form- 5.3/A pursuant to which the 2006-QD3, 7006-Q04, 2006-QO5,

2006-Q06, 2006-QD7, 2006-QOlO. 2007-QQI, 2007-Q02 and 2007-Qo3 C dficates were offered, either on behalf ofhimself or by the authorized Attorney-In Fact.

28.

Defendant Ralph T. Flees ("Flees') was, at all times during the relent period, Flees signed the January 23, 2006 s

the controller (Principal Accounfing officer) of RA ;I.

Registration Statement Four. 8-3 pint to wh ich the 2006-QOl. and 2006-Q02 Ccrtific were offered, the Marcia 3, 2006 Amendment to the R

ion Statement Form S-31A pursuant

to which dw 2006-Q03, 2006-Q04, 2006-Q05 , 2006-Q06,.2006.QO7, 2006-QOI0, 2007-Q01 f 2007-Q02 and 2007-Q03 Certificates vmm offerei and the April 3, 2007 Amendment to the Registration Statement Form S-3/A pursuant to which the 2007-Q04 and 2007- Q05 Certificates were offered, either on behalf of t if or by the authorized Attorney-1;-Fad..

11.

29,

Defendant Lisa R. Lundstesn (``Luadstenl was, at all times during the relevant

mod, the authorized Attorney-:in-Fact forRALL The Power of Attorney sib by Defendants Paradis, Duncan, Fees an. Olsen is annexed as an Exhibit to the ranuaiy 23, 2006 Form S-3, Lundsten the March 3, 2006 Amendment to the Regi^n Statement FO= S-31A Pursuant- to which the 2006-QQ3, 20064M, 2006-QOM, =6_Q%, 2006-QO7, 2006-QOI0, 2007-Qol, 2007-Q02: and 2007QO3 Ce cates were ofI rcd and the April 3, 2007 Amendment to the cates

Registration Statement Farm S-3/A putsuant`to which.the 2007-Q04 and 2007-QO5 C were offered, as Attorney-inFact. 30.

Defendant James G. runes ("Jones") was, during the relevant period, the

President, Chief Executive Officer (Principal Executive Officer) and a .Director of RALL Tomes igz d the Apci13, 2007 Am=dnuzt to the Registration Statement Fora S-31A purest to which't a 2007-Q04 and 2007-Q0:5. Cedi1 the authorized At ozney-ln-Fact.. s were offcrcd , ei on behalf of himself or by

3I.

Defendant David M. Bricker ("Bricker") was, during the relevant period, the l Financial Officer) and a Director ofRALL Bucker signed the

Chief Financial off= (Pane

April 3., 2007 Amendment to the Registration Statement Form S-3/A pursuant to which the. 2007and 2007-QOS C.ertif tes r At omey-TnFact 32. Defendant lames N. Young (``3 oung) was, during the relevant period, a Director offered, either on behalf of himself or by the audwrized

of RALL Young signed the April 3, 2007 Amendment to the Registration Statement } omi 5-3/A pursuant to which the.2007-Q04 and 2007-Q05' Certific himself of by the authorized Attorney-In-Fat. s were offered, either on behalf of

12

33.

Dent Ps, Duncan, Olsen, Flees, Lundsten, Jones, Bricker and Young

are collectively referred to herein as the "Individual Defer." The Individual Deftdmits, because . of their positions with R AL : possessed the power and authority to control the contents of RALPa submissions to the SEC and the nxsrket, and. participated in the dtafliug and the Registration Statements and Pr iting of

tuses. The Individual Defence all conducted business

and had business residences at 84010 NQ inadale Lake Boulevard, Suite 600, Minneapolis, Minnesb& 55437.

34.

The Individual Defendants w= officers and/or directors of RAM at the times

the Registration Statements and Prospectuses for the Offerizigs became effective, and with their consent, were identified as such in the Regiis on Statement In addition, they each signed one.

or more ofthe relevant Registration Statements or authorized them to be signed on tt e r behaI

35. The Individual Defendants, as officers and/or directors each had a dirty to

promptly disseminate accurate and truthful information with respect to RALI and the RALI Trusts, and to correct any Previously issued statements issued by, or on behalf of RALI andlor the BALI Trusts that had become materially misleading. The Individual De&ridants'

misrepresentations and omissions in the Prospectus violated. these specific r quirements and obligations. The Individual Defimdants we signatories to the Registration Statements filed by nfereum in the Prospectuses. dants are all liable, jointly and severalty, as, participants in the issnence ing issuing, causing, or making materially misleading statements the sW=ents contained therein

with the SEC and incorp 36. The D

of the.-RALI Certificates, i

in the Prospectus and omitting material facts necessary to rn not misleading.

37.

Defendant Goldman, S c-hs a Co. is an investment bolting firm prmG

13

located at 85 Broad Scree, New York, New York 10004. Underwriter for the 20.06

Defendant GSC served as the

1, 2006-QO2, 2006-QO3, 2006-Q06 and 20(16-QOI0 Offerings. iled to perform The Prospectuses

Defendant GSC was intimakly involved in the aforementioned Ofterings and the requisite level of due diligence in connection with these Offerings.

disseminated in comiection with the 2006. QOl, 2006-QO2, 2006-QO3, 2006Q06 and 2006Q010 Offerings c ntai ned material misstatements . and omisSxons of material fact relating to the -Underwriting Practices" employed in originating the underlying subprime: mortgagee loans. GSC is one of the leading. ors in mortgage- and assethacked securities in the United States. According to industry researb, Goldman Sachs was one of the tog ten sellers of U.S.collateral zed mortgage backed securities betvmen 2005 and 207, selling. over $100 billion of such securities duuring that time period. Moreover, in the midst of the U. S. mortgage crisis that

has plagued the county since early 20O7, GSC grafted over $4 billion by bang on the collapse of the U.S. subpcime maw and short selling billions :of dollars of mortgage backed sec irities.
GSC, as an essential

pwt

of its investment banking business, maintains its principal offices in

New York County,

38. De&ndant RIBS Greenwich Capital, a subsidiary of Greenwich Capital Markets.

Tue., is an inert wing firm principally located at 600 Steamboat Road, Greenwich Connecticut 0683.0. Dot RBS served as the Underwriter for the 2006-Q04 Offering. Defendant RBS was intimately involved in the Wined Offering and failed to Pebrm the requisite level of due diligence in connectiori with the Offering. disseminated in counectim with the 2006.:QO4 Offering contained m Ilia Prospectus

rial miffs and

omissions: of mamial fact relating to the "Undmw6ting Practices" employed. in originating the underlying subprime mortgage: loans. RBS is one of the leading underwriters in mortgage- and

14

assetlacked securities is the United States. Since 1987. EBS has helped mortgage lenders issue more than $400 billion in asset-backed semoiti . RBR, as an essential part of its indent banking business, has substantial cpnt3ds with New York City and regularly and continually transacts business in New York - specifically in New York County (Le., Wall Street and the financial acts), 39. Defendant UBS. Investment Bank is an in vent banking firm principally

located at 12&5 Avenue of the Americas, 19th Floor, New York.; New York 10019. Defendant UB'S served as the Underwriter for the 2006-Q05 and 2006-QC7 Offerings. Defendant USS was intimately involved in the aforementioned Offerings and Bed to perform, the requisite level of due diligence in connection with these Offerings. The Prnqvxbx= di n ted in

connection with the 2006-Q05 and 20.06-QO7 Offerings contained material misstatements and omissions of mate iai fa, t relating to the "Underwriting Practices" employed in originating the underlying subprime mortgage loans. UBS is one of the leading underwriters in mortgage- and asset-backed securities in the United Sties. According-to industry research for 20053. UBS was the number five U.$.-coI1a^llzed mortgage backed securities loan underwriter and master

services UBS, as an essential part of its -investment banking business, maintains its principal offices in New York County. 40. Defendant Credit Suisse Securities (USA), LLC ["CSS"), formerly Credit Suisse

First Boston,. LLC, is.an investment bemking firm pfincipally. located at. 11 Madison Avenue, 7ffi Floor, Now York, New York 10010. Defendant CSS served as the Underwriter for the 2007Q01 Offering. Defendant CSS was intimately involved in the 2007`QO t Offmimg. Defendant CSS failed to perform to requisite level of due diligence in connection with the 2007-Qol Offring complained of'herein. The Prospeews disseminated in connection with the 2007-Qol

1S

Offering contained Material

s and omissions of material fact relating to the

"Under iting Practices" employed in originating the underlying subprime mortgage loans. CSS is one of the leading underwriters in mortgage- and asset-backed securities in the United St According to industry research for 2004-2005, Credit Suisse was the number three U S.-

collateralized mortgage backed securities loom contributor and master servicer_ CSS, as an essential. part of its investment banking business, maintains its principal acs in New York County.
41. Defendant Deutsche Bank Securities, Inc. is an investment banking firm

principally located at 60 Wall Sirtet, New York, New York 14005. Defendant DBS served as he Underwriter for the 2007-Q02 Offering, Defendant UBS was !Wmately involved 'in the aforementioned Offering: and failed to. perform the requisite level of dtw diligence in connection with the Offering The Prospectus disseminated in connection with the 2007-QO2 wing

contained material misstatement s and omissions of dal fact relating to the "Underwriting Practices" employed in on leading underwriters in mort es a'ting tho underlying subprime mortgage loans. DB5 is one of the

and asset-backed Mies in the United States. DB S. as an

ntial pad of its inert baWdng business, maintains its principal offices in New York

County.

42.

De

dant GMAC-RPC Securities is an invesirnent banking firm principally

located at 7501 Wisconsin Awe, Suite 900, Bc esda, Maryland 20814. Defendant GMACRFC served as the Undue for the 2007-QO3, 2007-QO4 and 2007-Q05 Offerings, Defendant GMAC-RFC was i imately involved in the afoznentioned Offerings and failed to pert the requisite level of due diligence in connection with these Ofkdngs. The

Prosper dish in connection with the 2047-.QO3, 2007-Q.044 and. 2007-QO5

16

Offerings contained material misstatements and omissions of material fact, relating to the -underwriting Practices" employed in originating the underlying subpt ne mortgage loansGMAC-RFC is one of the leading underwriters in wrtg - and assetbacked securities in the

United States, and in fact is the largest non-ageucy mortgage backed securities underwriter and dealer in the United States. CAS ACTXON AI.EGATIONS 43. Plaintiff brings this won as a class lion pursuant to ale 9 of the Now York

Civil Practice Law and Rules ("CPL ") on behalf of a class consisting of all persons who purch or acquired the Catificatw (the "Class") pursuant and/or traceable to the Registration tus issued in connection with the Offering from the effective date throu&

Statement and Pros

the date of the filing of this action. Excluded from the Class am Defendants their respective officers and directors at all relevant times, members of their immediate families: and their legal representat ves, heirs, successors or a3signs and any entity in which Duets have or had a

controlling interest 44. The menus of the Clays are so numerous that joinder of all members is ntly unknown to Plaintiff and

impmlicable. While the exact number of Class members is pr

can only be ash through appprapbti.t: discovery, Plaintiff reasonably believes that there
we thousands of members m the proposed Class. Record owners and other members of the Class

may be identified from records matnt

by Defendants andlor the Trustee for the Certificates

and may be notified of the pendency of this action 'by mail, the internet or publication using the m of notice similar to that any used in securities class actions, 45. PIaintifrs claims are typical of the claims of the members of the Class as all

members of the Class are simdarty affected by Defendants' w=gfid conduct in violation of

17

statutory law complained of Iercin.

46. Plaintiff will fairty and adequately protect the interests of the members . of the

Class and has retained Sch,

old, Sporn, Laitman & Lometti, P.C., counsel competent and

sE enced in class and securities litigaLion.

47.

Common questions of law and fact exist as to all members of the Class and

predominate over any questions solely erecting individual members of the Class. Among the questions of law and fact common to the Class are. a) whether the provisions ofthe Securities Act of 1933 were violated by the

Defendants as alleged herein; b) whether the Registration Statements and Prospectuses contained

materially untrue statements or omitted statements of material fact; and c) to what extent the members ofthe Class have sustained, damages pursuant

to the statutory mew of damages. 4S. A .class action is superior to all other available methods for the fair and efficient eimore, as

adjudication of this controversy since joinder of all members is impracticable. P

the damages suffered by individual Class members may be relatively small, the Mpense and burden of individual. litigation make it impossible for members of the Class to individually r ess the wrongs done to them, There will be no di$icu ly in the dement of this action as

a class action.
MBSIASM A LEGATX. 49. C S

tly, the United Sties is ensuated in a Enancial crisis arising, in matmdal

part; from the gmed which drove financial firms to issue billons of dollars of debt securities "collateralized" or saenritiwl with mortgages. which only recently have been revealed to have

I8

been recklessly underwritten and originated:

The Plaintiff and Clays as purchasers of Ihi

Cerfificates have been the victims of just such negligent pxactires, big p Certificates p concerni ct to Registration Statements which contained misstatements and omissions ing" the Ceriific s. The R.ALI Trusts and other

the mortgage collate-al "securi

entities relied to the Offering, e,, the Depositor and Underwriter Defendants , had enormous financial incentive to consummate the Offerings of Om Certifies as quicldy as possible since they were paid upon completion a P=Mtfige of the total dollar amount of the Offerings sold to investors Since the risk of thr, z lying collateral tiling was not. assumed by either ItALI the

RA,LT Trusts, the Trustees or the Underwriters, there was also enormous incentive not to conduct #`ull, complete and meaningful due diligence of the s naer is in the Registration tents

including those relating to the underlying mortgage- collateral.

50. The structure of each Of Ling was.. gerenay identical : RALI fled aRegisUation

Statement with the SEC, initially on January 23, 2006, and thm amending it once on March 3, 2006 and again on April 3, 2007, in connection with the ice t f vazicus series and classes of debt securities which would be governed by said Ramon Stateme t and Amendments. At some time at or subsequent to each Offering, the "Issuing Entity" Trust was then fanned under.. the laws of the. State of New York, Le., RALI Series 2006-QC1 Trust, for which a Prospectus was ffled on behalf of as entity responsible for issuing the Certificates at issue berein. 51. Typic a ly, the loans ace originated by the Sponsor, or in this case a subsidiary of

the Sponsor= HFN, who then. disposes of its loans primarily by selling them to third pa hies and through securitizations. The Sponsor works with the Underwrit and the rating agencies to

select the pool of mortgage loans and structure the seuritiz Lion transaction. The Sponsor or subsidiary reof also services the mortgage loans. On the. closing date. of any given Offering,

19

the Sponsor conveys the initial mortgage loans and the related mortgage insurance policies to the Depositor, who will in term convey the initial mortgage loans-and the related mom insurance policies to the Tnist, by way of the Trustee. The Certificates are backed by the der, and consist of, inter alai, the: mortgage loans; collections in rtopect of principal and interest of the mortgage loans received; and the amounts on deposit in the collection accoma, including the payment account in which amounts ate deposited prior to peLyment to the certificate holders. On the payment date, the certificate hotdeZS receime payments from the Trustee based on the particular tranche purchased; typically, available funds for each distribution date will equal the amount received by the trustee and available in the. payment account on that distribution date, ineIuding interest which differs depending upon the't the held.

52.

In connection with the. RAIL Offerings, RALI, the Tests and the various

ilnderwxiter :Defendants prepared and disseminated Registration tents and prate that contained material its offact and omitted fact's necessary to maim the its stated therein not misleading that were reasonably retied upon by Plaintiff and the Class to their own detriment.

The Registraion Statement and Prospers Contained Material Misstatements and Omissions of Fact
53. Ibr, Registration SW=eut represented that all of the loans which made up the

pool of residential, subptime mortZaM used to support the Certificates. were subject to cettam

underwriting guidelines which assessed the. borrower's creditworthiness, including multi-level reviews of loan applications and appraisals with only "case by case" exceptions to guidelines. 54. The, Registration Statements disclosed that the underlying. loans were. originexed

and/or acquired by HFN. Tice Registration. Statement represented that all the underlying loans were subject to underwriting guidelines which varied in the levels sc my depending on the

20

burrower, yet all of which stressed homeowner credit-w thiness and in most cares, fall
documentation would berequiredfrom-tlie borrower prior to bed approvedfor a loan:

The depositor effects that the originator of each of the mortgage loans will have applied, consistent with applicable federal and state laws and regulations, underwriting procedures intended to evaluate the borrower's credit standing and repayment ability and/or the value and adequacy of the related property as collateral. All oftbe mortgage loans constituting the mortgage pool for a series of certificates will have been acquired either directly or irdirmtly by the depositor through the Expanded Criteria Program, which is described below under 't-The Expanded Criteria Mortgage Program."
The mortgage loans in any mortgage pool may be underwritten by Residential Funding Corpora, a seller or a designated third party t ugh. the use of an automated underwriting system In the case of a Designated Seller T=ansacfion, the mortgage loans may be u dcomitten by the designated seller or a designated third party through the use of an automated under ring system For additional information regarding automated underwriting systems that are used. by g Corporation to review some of the mortgage loans that it Residential Fu purchases and that may be included in any mortgage pawl, see "Automated Underwritin " below.

General Standards
In most cases, under a #radth na1 '7u1 documentation program each mo gagor will leave been requireed to complete an application designed to rf credit arnsation. conwern ng the provide to the original lender p mortgagor. As part of The description of the mortgagor's financial conditiun, the mortgagor will have furnished information, which may be supplied solely in the application, with respect to its assets, liabilities, i== (except as described employment history and personal infomatiion, and bellow), cry bis furnished an authorization to apply for a wit report that summarizes the borrowers it histoy with local al merchants and lenders and any turd of required to authorize verifications bankruptcy. The mortgW may also have i of deposits at. financial institutions where the mortgagor bad demand or savings ac unts. Iu the case of investment properties and two- to fourunit dwellings, income derived from the mortgaged property may have been considered. for underwriting purposes;, in addition to the income of the mortgagor from other ty' consisting of vacation or second t to mortgaged pro sources. With. re homes, no income derived fiom the property will have been considered for underwriting purpose . In the case of min bormwer s with a ptable payment histories no income will be required to be stated,,. or verified, in. connection with the loan application,

21

If specified in the accompanying prospectus supplement, a mortgage pool may include mortgage loans that have been underwritten pint to a streamlined documentation refinancing program:, Such program permits some mortgage loans to be refinanced with only limited verification or updating of the underwriting information that was obtained at the time that. the original mortgage lam was originated . For ammple, a new appraisal, of a mortgaged property may not be d up to 24 months required if the related original mortgage low was on prior to the refinance . In addition, a mortgagor's income may not be verified, although continued employment is required to be verified. In certain circumstances a mortgagor may be permitted to borrow up to 100!0 of the outstanding principal amount of the original mortgage loan. Each mortgage loan men pursuant to this program will be treated as having been underwritten pursuant to the same un&xwriting documentation prim as the mortgage loan that it refinanced, including for pmpnses of the disclosure. in the accompanying pro's supplement. If specified in the accompanying prospectus suppled sore mortgage Roans may h on," "scatted documentation" ted under limited docwn : been on or "no documentation ' programs that require less documentation and verification than do traditional "full docum entation" programs. Under a Fnnitad damson, stated documentation or no documentation program, minimal investigation into the mortgages credit history and income profile is undertaken by the originator and the Ong may be based primarily or entirely on an appraisal ofthe mortgaged property and the LTG' ratio at origination.
The adequacy of a- mom: property as set ity for repayment of the related mortgage loan will typically have been determined by an appraisal or an automated valuation, as desedbed above under '=Loan-,to-Value Rafio."

Appraisers may be either staff appraisers employed by the originator or independent appraisers selected in accordance with pre-etablished guidelines established by or suable to the originator. The appraisal procedure guidelines will have required the appraiser or no agent on its behalf to personally inspect the prop y and to verify whether the proparty was in good condition and that construction, if new, had been substantially completed. The appraisal will have considered a mazes data analysis of recent sales of comparable properties and, when deemed applicabIe, an analysis based on income generated from the property or replacement cost analysis based on. the cuucat cost of constructing or ping a similar property.

The underwriting standards applied by an orb typically require that the underwriting officers of the originator be smeted that the value of the property being financed, as indicated by an appraisal or othe r accepUble valuation method as described below, currently supports and is anticipated to support in the # re some states Where the mortgaged properties the outstanding loan balance. In f may be located have "anti-deficiency" laves requiring, in general, that lenders providing credit on single wily property look solely to the property for

22

repayment in the event of foreclosure. See "Certain Legal Aspects of Mortgage Loans and Contact-," Any of these factors could change nationwide or merely could affect a locality or region in which all or same ,of the mortgaged properties are located. However, declining values of real fie, as experienced periodically in certain regions, or increases in the principal balances of some mortgage loans, such as GPM Loam and negative amortization ARM loans, could cause the principal balance of some or all of these mortgage loans to exceed the value of the mortgaged p opertxes. Based on the data provided in the application and certain verificadois, ifrequired; and the appraisal or other valuation of the mortgaged property, a determination ,Will have been made by the original lender that the mortgagor's monthly income, Ie the mortgagor to meet ita if required to be stated, would be sufficient to a and other expenses related to the monthly obligations on the mortgage loan property. Examples of other expenses include property taxes, utility costs, standard hazard and primary merge insurance, maintenance fees and other levies assessed by a Cooperative, .if applicable, and other fixed. obligations other than housing expels. The originator's guidelines for mortgage loans will, in most cases, specify that scheduled patents on a mortgage loan during the first year of its term plus taxes and insurance, including primary mortgage insuranc, and: all scheduled payments an obligations that extend beyond one year, in clud those mentioned above and meter fixed obligations, would equal no more than specified percentages of the prospective mortgagor's gross income. The originator may also consider The amount of liquid assets available to the mortgagor after origination. The le vet bf review by Residential Funding Corporation, if any, will vary depending on several factors. Residential Funding Corporation, on behalf of the depositor, typically will review a sample of the mortgage loans purchased, by l idential Funding Corporation for conformity with the applicable underwriting standards and to assess the likelihood ofrepayment of the mortgage loan from the various sources for such repayment, including the mortgagor, the mortgaged properly, and primary mortgage insuran , if any. Such underwriting reviews will, get ally not be conducted w th respect to any individual mortgage pool related to a series of certificates. In reviewing seasoned mortgage loans, or mortgage Ioaas that have been. outstanding for more than 12 months, Residential Funding Corporation may also take into consideration the mortgagor's actual payment history in assessing a mortgagor's current ability to make payments on the mortgage loan. In addition, Residential. Funding Corporation may conduct additional procedures to assess the current value of the mortgaged Properties. Those procedures may consist of drive-by appraisals, automated valuations or real estate brokees price opinions. The depositor may also consider a specific area's housing value trees T(rese alternative valuation methods may not be as ramble agorfinancial information or appraisals that are typicaUy as the type of Inc is undsrwrilinn analysis, Residential Funding obtained at Corpvrat rn may 4so consider the applicable Credit Scare of the reed

23

mortgage lnrnr, as mortgagor used in av tion with the origination of f ddermined based on a ereditswring made[ acceptable to the depsitar. With respect to the depositor's undwwriting standards, as well as any air erw riling studs that may be applicable to any mortgage loans, such underwriting standards typically include a set of specific criteria by which the underwriting evaluation is made. However, the application of the underwriting standards does not imply that each specific criterion was satisfied individually. Romer, a mortgage loan will be, ide red to be originated in accordance with a given set of underwriting staindards if, based on an overall qualitative evaluation, the loan is in substantial compliance with the underwriting standards. For exampl,e,.&-mortgzge loan may be considered tQ comply With a set of underwriting standards, even if one or more specs c criteria included in the underwriting standards were not sahsfie4 if other factors compensated for the trite .a that were not satisfied cur if the mortgage loan is considered to be in substantial compliance with the underwriting standards. In the case of a Designated Seller Transaction, the applicable underwriting standards will be those of the seller or of the originator of the mortgage loans and will be described in the accompanying prospectus supplement. ction with Credit Scores are oblairred by some mortgage lenders in co mortgage loan 4q p&ut ans to kelp assess a btrrower's creditworthhtem fist Funding Corporation .or addffon, Credit ,Scores may be obtained by RUMm the designated sel, after the origin of a mortgage loan if the seller does not provide to ResMmW ceding Corporation or the designated steer a Credit Score CreditScares obtainedfrom cry reports provided by vario credit reporting orgwdzzdons, each of which may employ ds;ff g computer mode r and methodology: The Credit Scare it designed to assess a borrower 's credit history at a singe point ire term ring object information cum onf lefar the borrower at a particular credit re orting drMmidion. Information aseA to create a Credit p Score may ire, yang other things, payment history, delinquencies on acoounts^ levels of rn anding indebtedness, length of reedit history, types of credit and bankruptcy mgmierice- Credit Scores range from appro i nately 3.50 to approximately 849, with higher scores indite an individual with a more f rable credit history compared to an individual with a lower score . However, a Credit Score prints only to be a measurement of the relative degree of risk a boirawer represents to a lender, i.e., a borrower with a higher score is stoically expected to. .tie less likely to default in payment than a borrower with a lower score. In addiiian, it should be. noted that Credit Scores were developed to indite a level of default probability over a two-year period, which does not loan. In most cases, mortgage loans generally correspond to the life of a mortg amnrfi a over a 15- to 30- year period. Fes, Creclit Scores were not

developed specifically for use in connection with mortgage loans,. .but ft consumer loans in general, and assess only the borrower's past credit history.

24

Therefore, in most cases, a Credit Score does not take into consideration the di ces between mortgage loans and consumer loans, or the specific characteristics of the related mortgage loan, including the LTV ratio, the collateral for the mortgage Ioa , or the debt to income ratio. There can be no assurance that the edit Scores of'the mortgagors will be an accurate predictor of the likelihood of repayment of'the related mortgage loans or that any mortgagor's Credit Score would not be lower if obtained as of the date of the accon panying prospectus SUMIMent. Qnmraff applicable employmer4 ereifif and pmper r informaden is. rece4i4 a dedenninidlon it made ns to wkether the prospect a hwmwer his sufficient monthly income awzikble to t the borrower's monthp obligations on .tie proposed mortgage loan. and other pensex related to the home, i Iuding and hazard insu once, and other financial obligations and monthly property la living expenses. ARM laws, Buy-Down .Mortgage Loans, graduated payment mortgage loans and any other mortgage loans will generally be underwritten an the basis of the borrower's ability to make monthly payments as determined by ire to the mortgage rates in effect at originati on or the reduced initial monthly payments, as the .cue may be, and on the basis of an assumption that the borrowers will likely. be able to pay the higher monthly payments that may result from later inks in the mortgage rates or from later increases in the month payments, as the case may be, at the time of the in se even though the higher payments at may not make the time of origination. be able to borxmwas the origination date of an ARM Iam or other The mortgage rate in effect from the hypes of loans to the first adjustment date are fly, to be lower, and may, be significantly lower, than the si mn of the then applicable index and Note Margin. Similarly, the amount ofthe monthly payment on Buy-Dawn Mortgage Loans and graduated payment mortgage loans will increase periodically. If the borrowers' se in an amount commensurate with the increases III Incomes do not in

monthly payments, the likelihood of default will increase. In addition,. in the case of either ARM logs or graduated payment mortgage loans that are subject to negative amortization, due to the addition of deferred interest the. principal balances of those mortgage loans are more ley to equal or exceed the value of the underlying mortgaged properties, hereby increasing the L keIihood of moults and losses. With respect to. BaICDon Loans Payment of the Balloon Amount will depend on the borrower's ability to obtain refinancing or to sell the mortgaged proper prior to the maturity ofthe Balloon Loan, and there can be no assurance that refinancing will be available to the borrower or that a sale will be possible. Generally, each mortgagor will have been required to a maples an application designed to provide to the original lender pertinent crediit information concerning the mortgagor .: At, part of the description of the mortg, .gor's financial condition, t e mortgagor will have fatnisbad information with respect to its assets, Iiabilitie;s, income (except as described below), credit 1n-story, employment lsto y and personal i arnU#ion, and fu nished an authorization to apply for a chit report
which summarizes the mortgagor' s credit history with local I ere S and

25

ptcy. The mortgagor may also have been lenders and any record of b required to authorize verifications of deposits at financial institutions where the mortgagor had demand or savings accounts. In the case of invent properties and -two to for unit dwe , income derived from 1 mart ed property may have been considered for underwriting pmposes, in addition to the income of the mortgagor from other somas. With respect to mortgaged property consisting of vacation or second homes, no income derived from the property generally will have been considered for underwriting: purposes. Xn the case of certain borrowers with acceptable payment histories, no income . will be required to be stated (or verified) in co=aection with the loan application.
Based on the data provided in the applipation and certain verification sf required) a determ ination is made by the original leader that the mortgagor' s monthly income ("ifrequired to be stated) will be su inient to enable the mortgagor to meet its monthly obligations on the mortgage loan and other expenses related to the property such as property taxes, utility costs, standard hard insurance and other fixed obligations other than housing expenses. Generally, scheduled payments on a mortgage loan during the first year of its term plus taxes and insurance and all scheduled paym ents on obligations that. extend beyond ten months equal no more than a specified percentage of the prospective mortgagor's gross income. The percentage applied varies on a case by case basis depending on a number of underwriting criteria, including the LTV ratio of the mortgage loan. The originator- may also consider the amount of liquid oriels available to the mortgagor aim' origination. The mortgage loans have been originated under "full" or "altetiative," `reduced do +on," "stated imoinclstated assets " or "no inaometho asset" programs. The "alts native, "reduced," `tee urcome/stated asset' and "no income/no asset" prog s geanerally require either alternative or less docume [tation and verifitation than do full do station programs which MaefFreddie Mac approved forms for generally require standard Fannie verification of incomelemployment, assets and certain payment histores. ive" docum enntation Program requires information Generally, an "alt regarding the mortgagors MICOM (i:e., W 2 fomas, tax retuns and/or pay stubs) tints) as does a "fall doe" loan, howev r, alternative and aseu (:e., b verifications are used, Generally, ureter both *%C' end forms of standard tioa programs at Yeast one year of inwme dommwa1at'k i "alternative" d0

is provided. Genne ally, under a "reduced documentation" prog r oa, either no verification of a mortgagor's stated some is undertaken by the originator or no or's awts is undertaken by the originator. Under a 1 fication ofa mart
"slated l momrJs ed 8ssets" program, no verification ofei r a m or's

oi's assets is tnmdertaken by the on tator alt hough both Mme oI a mozt income and assets we stated outhe loan application and a" easonableness test" is applied. Genetaliy, under R"no incomth o asset' program, the mortgagor is not required to stile his or her income or.assets and therefize, no vedtcation of such mortgagor's income or ash is undue by fire originator. The.underwriting

:26

for such mortgage loans may be based primarily or entirely on the estimated value of the mottgaged pmpetty and. the LTV ratio at origination as. well as on the payment history and credit scam The adequacy of the mortgaged property as gene lly have been security for repayment of the related mortgage Joan v with by appraisal amordance establisbed appraisal pm an determined in pre ure guidelines for appraisals established by or acceptable to the origi r. All appraisals confoun to the Uniform Standards of Professional Appraisal Practice adopted by the Appraisal Standards Board of the Appraisal Foundation and must be on forms acceptable to Fa nze Mae and/or Freddie Mac. Appraisers may be staff app isers employed by the originator or independe t appraisers selected in accordance with pre established appraisal procedure guidelines established by the originator. The appraisal procedure guidelines generally will have required the appraiser or an agent on its behalf to personally inspect the property and to verify wbetter the property was in good condition and that construction, if new, had been substantially co npleted. The appraisal generally will have bow based upon a market data analysis of recent sales of comparable properties and, when deemed applicable, an analysis based an income generated from the property or a replacement cost analysis based on the current cost of constructing or purchasing a similar property. Under some reduced documentation programs, the originator may rely on the original appraised value of the mortgaged property in connection with a refinance by an a fisting mortgagor.

See Residential credit Loans, InC.,, January 23, 2006 Fomi 5-3, at 13-16; see aW, BALI, March: 3, 2006 Form S-3/A, at 12 16; RALI, April 3, 2007 Form 8.3/A, at IS- 21. 55. The stag in the preceding mph contained misstatements and material

omissions including in connection with the underwriting of the collateral mortgages As set forth below, a material portion of tkhe underlying collateral for the BALI Certi.ficstes originated by I were not in accordance with the stated credit, appraisal and =derwrit standards.. set

forth above56. Specifically, the Registration Statements set forth Expanded Underwriting tion with wed Underwriting guidelines vvbieh the Company claimed to who

Criteria in eoui

increase the.probabil ity of approving loans for borrm wars with good credit scores and t
were more likely to not de&dt on the loans:

27

The wed Criteria iiortgage Program

Residential Funding Corparatioies Expanded Criteria. Program is designed for borrowers with pod credit who may have difficulty obtaining traditional 5zanciug pancy of the due to loan characteristics, such as LTV ratios higher than 80%, o mortgaged property or type of mortgaged property, or borrower cb .cteristies such as self-employment. The specific underwriting-standards with respect.-to the mortgage loans purchased pursuant to the Expanded Criteria Program will in most cases conform to those published in Residential Funding Corporation's Expanded Criteria Seller Guide as it applies to the Expanded Criteria Frogmin. or Seller Guide, as modified from time to time. The applicable undo-writing swindards are in most cases less stringent than underwriting standards applicable to mortgage loans utiginated under other first mortgage loan purchase programs such as those rim by Fannie Mae or Freddie Mac or by the depositor's affiducte, Residential Funding Corporation. for the purpose of collateralizing securities issued by Residential urities I, bac. For example, the Expanded Criteria Program Fun g. Mortgage may include mortgage loans with higher LTV ratios and larger principal balances, mortgage loans sad by smaller or larger parcels of land or by investment properties, mortgage loans with LTV ratios in excess of 80%n that do not require primary mortgage insurance and mortgage. loans made to borrowers who are selfemployed or are not recurred to state their income- Me applk bll under citing standards .are revived .based on. charging eond tons in the residential ntnrlgsge market wrd the mark& for the deposdor's mortgage pars.-through ceroftcaWs to U and may ul o be wahwd by Raid xtW FUn&ng Corporation from mortgage tes .ceured by c& series of Jor each The p> pectus sup*=nt loans purchased pursuant to the Expanded pia Program will describe the general. underwriting m7ak appiieable to such mortgage loans, as well as any ral standard deeded above. material changes to the g A portion of the.morWge loans typically will be reviewed by Residential Funding Corporation or by a designate . third party for compliance with applicable u derwriting criteria Residential Funding. Corporation may conduct this review using an automated underwriting systew. Sac "(Automated Undawritbzg" below. Any determination of undying eligibility using an automated system Will only on that the be based on the inform ation "ftnd into the system and the portion of "Underwriting above. A Policies'' to review. See system is programmed may be which the mortgage loans will. be purchased in negotiated transactions, governed by master commitment agreements mlating to ongoing porous of mortgage loans by Residential Funding Corporation or the designated seller. The sellers who sell to Residential Funding Corporation or the designated, seller agreements will represent to Residential Funding pursuant to master commi. Corporation or the did seller that the nonage laws have been origitated in accordance with underwriting standards agr=4 to by Residential FmAng Corporation or the designated seller, as applicable. Some other mortgage loans will be purchased from F anded Criteria. Program Sellers who will represent to Residential. Funding. Corpnxation or the designated seller that the mortgage, loans

'

28

were originated u nder.undarwriting standards determined by a mortgage -ins nce company or thud-pay origination system acceptable to Residential Funding Corporation or the designated seller. ResideWal Funding Corporation or the did seller may accept a cerfiflohon from an insurance company as to the mortgage loaifs insurabUity in a mortgage pool as of the date of certification as evidence of the mortgage luau conforming to applicable undmwriting standards. The certifications will likely have been issued before the purchase of the mortgage loan by Residential Funding Corporation, the designated seller, or the depositor:
4utarr ed Underwriting

In recent years, the use of automated undawriting: systems has become commonplace in the residential, mortgage market Residential Funding Corpowtion evaluates many of the mortgage loans that it pi=hases through the use of one or more automated underwriting systems. In goal,. these systems are programmed to review most of the information set forth in Residential Funding Corporation's itiq Seller Guide as the underwriting criteria necessary to satisfy each and the system.may program. In the case of the F deed Criteria Program, make prating factors, which could result in a mortgage loan adjustments for some c being approved even if all of the speei.fied.nnderwriting criteria in the Sella ' Guide fnr that underwriting program are not satisfied. In some asses Residential Funding Corporation enters iufozmation into the. automated underwriting system using documentation delivered to Residential Funding Corporation by the mortgage collateral seller. In this situation, each automated review will either generate an approval or a recommendation for Anther review. Most apgmved mortgage loans will not receive .any additional review of their credit compon ts. Iu the cue of a recommendation for further view, ting pasonnel may perform a xnamal review of the mortgage Icon and documentation before Residential Funding Corporation will accept. or reject the mortgage loan. For most mortgagee collateral seller Residential Funding on. If Corporation will conduct a limited review of the mortgage loan do that united review does not detect any material deviations from the applicable tmderwriting crit a, Residential Funding Corporation wilt prove that mortgage loan -for purchase. In other cases, the mortgage corral seller enters the information directly into the automated underwriting system. Mortgage loans that have been approved by the g. system, and submitted to Reside2dial Funding Corporation womated , for purchase may be revii to verify that the infommation entered by the mortgage caHawal seller accurately reflects information wed in the underwriting domuatiffion. For most mortgage collateral sell, Residential Funding Corporation will verify the accuracy of the information with respect to a sample of that mortgage collateral seller`s mortgage looms.

29

Because an automated underwriting system will only consider the information that it. is programmed to review, which may be .mare limited than the information that could be consider in the course of a manual review, the results of an automated underwriting review may not :be consistent with ' results ofa manual view In
addition, there could be propm=ing inconsistencies between an automated underwriting system and the u nderwriiing cxiteda set forth in Residential Finadang Corporation's Seller Guide, which could, in turn, be applied to numerous mortgage loans the system reviews; We cannot assure you that an automated underwriting review will in all cases result in the same d uination as a manual review with respect to whet s' a mortgage loam satisfies Residential Funding Corporation's derwriting criteria.

See Residential Accredit Loans, Inc., Janus y 23, 2006 Farm 5:3, at 16-18; see also RALI, March 3, 2006 For= 5-31A, at 16-17; RALL April 3, 2007 Form S-3/A, at 2.1-23. 57. The statements in the preceding paragraph cmUined. misstatements and material

omissions including that "credit risk" and "quality Contol" we materially disregarded, whether m anualIy or via mod fjring:ta criteria of the automated syslern, in favor of generating stf'icient loan volume to complete the massive Certificate securitizations as alleged herein and as set forth below.

58.

Each l

ing Pros

sus, which ineogo ate the language of the Registration wers that did

Stat^ set forth the applicable policy for granting ` exceptions" to certain I
not meet the applicable underwriting standards,.

. ,ceplions. As. described above, the foregoing. categories and criteria are basis, it may be d guidelines only. on a case by c ined that an applicant warrants a debt se iicee-to-incomeratio exception, a pricing exception, a loan-to.r risk value ratio a eption, an exception 1 certain requires of a part c ryr etc. An exception may be allowed if the -application reflects compensatig factors, such as: low loan to-value ratio; pride of ownership; a inaximuum of one 30 day late payment on all mortgage loans during the last 12 months; and stable employment or ownership ofcurrent residence of four or more years. An exception may also be allowed if the applicant places a down payment through escrow of at; least 20% ofthe purchase price ofthe mortgage d property or if the new loan reduces the ap icsnfa monthly aggregate mortgage payment by 25% or more, Accordingly, a mortgagor may qualify in a more favorable risk category than, in the absence of compensating f`actors,, would satisfy only the criteria of a. less favorable risk category. It is expected that a substantial portion of the New Century mortgage lows. will represent these kinds of exceptions.

30

(1d, at 5-32-33).
59. The statemcnis. in the preceding pauragraph contained miss, e,ts and mate

onions, including that the ".guidelines" for teeing

eptions ww a tedafly disregarded

in favor of gmerating s f do nt loan volume to complete the massive Cerhfcate. securitizatons as. alleged berein and as set forth below.
The Prospectus Stated That The Price of The Bonds Wre Tied To Credit R.atnu s 60. The Certificates were rated. by the Eating Agencies, which purported to take into

d accmint, Titer al u, the mzdmwri ing .stan ards used in oriemfing the imdearlying mortgages to address the likelihood of the .receipt of all dlstribufiona on the mode loans by the Certifitcateholdezs: RAThi GS
It is a condition of the issuance of the Class A. Certificates and Class X Gar Ifi that they berated "AAA" by Standard & Poor's, a division of. The McGraw-Hill Companies, Inc., Standard .. Poor's or S&P, and "Aar" by ion ofthe issuance of Moody's Investors Sex-vim Inc. or Moody' s. It is a catzdi1 the Class M-1, Class U-2, Class M-3, Class M-4, Class M-5 and Class M-6
"AA ,f7 Cerrtif eates that ` they be ram not to nr than "AA+," E+" and "EBB-" by Standard & Pool's and "Mi," "AA. 'O 'a2," "Al" 'Aa3, "AZ,W

"Baal" and

by Moody`s, respectively.

standard & Foor's ratings an mortgage pass-through eertifirates address the likelihood of t e receipt by mfiffiWxholders of payments required under the pooling and dicing agreement Sundarid & Poor's ratings time into consideration the credit quality of the mortgage pooL st ructmal and legal aspects associa#gd with the certificates, and the extent to which the payment dam in the mortgage pool is ate to make. payments required under the Bert es. . Standard & Poor's rating on the certificates does not binder, constitute a statement regarding frequency of prepayments on he mortgwge See "Certain Yield and Prepayment Considerations" in this prospectus supplant The ratings assigned by S&P's to the Class X Certificates do not address the likelihood of collection of prepayment charges. The rating on the -Residual Certificates only addresses the retarn of its Cep"icate Principal Bala= and interest on the Residual Ce eates at the relatedpass through raft.

31

The rating signed by Moody's to the offered certificates address the likeihood of the receipt by the offered certificatehoIdexs of all distributi ons to which they are enti tled tinder the pooling and servicing agreement.Moody's raUngs reflect its analysis . of the riskiness of the mortgage IQ= and the stru=e of the transaction as described in the pooling and servicing agmement The ratings assigned by M.oody's to the Class X Certificates do not address the likelihood of collection of prepayment charges. Moody' s ratings do not address the effect on the certificates' yield attributable to prepayments or recoveries on the mortgage loans.

61. Ac2cordingly, the Certificates were assigned the following initial Ratings: RALI 2606.4 001 Cer Gds. IAI 1 A2 1A1 2A2 2A3 2A
3AI

cater
ImCiai Cerkific.ate Ratm

S&P AAA AAA AAA AAA AAA

AAA

mood 's Ana Aa AM Ada Ana

Aaa

3A2 3A3 M1 Ml
M3

AAA AAA AA+

AA AA-

Aaa Ada Aal

Aa3 Aa3

M3
MS

A
BBB+

AZ
Baal

M6

BB-S

Baa3

RALI 2006-QO2 Certificates

k
clan Al A2

S&P
AAA AAA

MODI

VS

Aar. Agra

A3
M1 M M3 M4 M5 M6 M7 W

AAA
AA+ AA AAA+ A ABBB BBB-

Aaa
Aal, Aa2 Aa' Al A2 A3 Baa2 Baa3

32

RAU 2006-Q03 Ca Class Al A2 A3 Ml M2 M3 M4

.sates initial mate Raft Mood 'x Aga Aaa Aaa Aai Aa2 Aa3 Al

AAA AAA AAA AA+ AA AAA+

M5
X16 M6 M7

A+
A BBB+ BBB+

A2
A3 B Ba_

RALI200

04 Ca-fificafes
Ii itial Certificate Ra "

Class.

S&P

Moo

's

IAI
I2 1A 1

A
AAA
AAA

Asa
Aar
Aaa

2A3 MI

AAA AAA AA+

Am Aar Aal

M2
M3

AA
AA.

AW2
Aa2

M4
M5 M6 M7 M8

AAA+ A+ A BBB+

Aa3
Al A2 A3 Baal

M9
MID

BBB
BBB-

Baal
Bal

Ri

2006-WS Certificates WI CertifeateRL -

S&P
AAA AAA

Mop
Aaa Asa

's

CAA 1A2

IA3
2A I

AAA
AAA

Aas
A

2A2 23

AAA AAA 33

A sa Aaa

MU I V

r'

V v

^ ^--e

L'r1 5l

rnM rn M.

kid

2 IN

GMAC, rating agencies dramatically downgraded many of the RALI Cekti&ates whose value was based on leans originated and serviced by t T. In addition, one rating agency wwned that

ResCap would be a candidate. for immediate bankruptcy without a Massive ikon of cash or completion of an CxCbW a offs. 69. Fier, ResCap, in early May 2008, offered investors as tittle as $0.Z0 on the

dollar'to exchange or buy-back X14 billion in bonds in order to further stave off bankruptcy.

70.

Ilerfter, still in dir, iced of capita) and still hemorrhaging. cash as a result of

their subgrime expo, GMAC announced a $60 billion ragitalization of ResCap and its subsidiaries, inchiding HTN. In reVonse to this news, Moody's downgraded GMAC's edit

rating and the ratings on manynfthe RALI Cedifictes, citing that the "outlook is negative." As set forth below, this led to addiliona. downgrades by the rating agencies. 71. Most recently, a rding industry news reports, GMAC has disclosed its plans to

shut dow its retail mortgage loan origination business, cutting over.-5,000 jobs at Res.Cap and its snbsidiaiies. Moreover, GMAC announced that all OM.AC Mortgage retail o1fices were being closed, and that Homecomings will "amse all loan originations through brokers." E tially,

the only retail mortgage origination that would continue to operate vier ResCap would be its phoneirinternet lending platform known as "Di'Tech." Up to 3,0DO jobs weiv, to be cut

immediately and the Company expected to incur up to $120 million in charges relating to. the changes.

GSC Cores Under Iavestization By' The VBI And SEC

72_ GSC played a preminent role in rife and fall of the U.S. subprime mortgage

market. According to industry rewftrJ4 Goldman Sachs was one of the top ten sellers of U.S, collateralized mortgage banked securities between .20.05 and 2007, selling over $100 billion of

39

suc i securities during that time, period. Moreover, is the midst of the U.S. mortgage crisis that has plagued the country since early 2007, USC profited over $4 billion by betting on the. collapse of the U.S. subprirue market and short selling billions of dollars ofmortgage backed securities.

73. .in the

On January 30, 2008, the FBI announced a joint investigation into 14 companies P_ loan industry. GSC was nwed as one of

vestuent Wig, undmwiting and mor+

the companies in the investigaflcra that was responding to subpoenas sued by sous governmental agencies regarding its origination, underwriting and servicing. practices in connection with the U.S. subprinae housing market. The investigation centers amp whether GSC; as a seller of securities backed by subprime mortgage loans, failed to disclose to investors and rating agencies that some loam did not meet minimum underwriting standards. 74. In cannecti with the 2006-Q0I, 2006-QO2, 2006-QO3,, 2006--Q.O6 and 2006on with

QO10 Offerings GSC failed to conduct meaningful due. diligence, including in co the undenwriting standards used to originate the Certificate -doIlateral. RBS Comes Under Investigation For Its Role In The Collapse of The8ubprime Market
75. RB S CCree

ich Capital played a prominent role in rise and fall of the U.S.

subptime mortgage market Siren 1987, IBS Greenwich Capital has-helped mortgage leaders issue more than $400 billion in assetbacked securities As an underwriter on transactions

involving more than $193 billion of securities issued in MN , RBS Greenwich Capital ranked as the industry's No. 1 underwriter of sub-prime mortgages and the top asset-backed sales orgaairation.. In. 2005, IBS Greenwich Capital ranked No. 2 in the top ten subprime MISS un tars. In both 2OD4 and.: 2005, RBS Crcee twit h Capital ranked No. 3 in the top ten non-

iit ers. agcy MBS underw

40

76.

On March 8, 2008, it was reported in a Stamford Tribune article entitled "RBS

RB5 carifirmed that its Greenwich Cap ttal unit is part of a

Arm Involved in SEC Fnquiry," t

SEC. probe into the collapse of the subpriue market and has been order to lum over financial documents to. the SEC regudung, inter alia, odginations ofmortgages. accozmtur , due diligence, sales and insider trading: Feb 08, 2008 (The Stamford Advocate - McClatchy-Tribune Lufonnatian Services via CQMTM The Royal Salk of Scotland has confirmed its Greenwich Capital rust is part of a. Secures Exchange Commission probe into the mortgage marketcollapse ofThe srrbpr

The SEC has opened about tba'ee dozen inquiries, -including. those that involve major investment banks, ar ming to recent published reports.
Greenwich Cpit a1 a top &suer of mortgagebacked securities in the subprime unit was ar *ed by the marl're is.basedL.on Steamboat Road in Greenwich. SEC to hand over some of 1/sfinancial documents, but RBS officials would not comment on the probe beyond that "We will fully coops ate with the SEC or-any regulators,- said Carolyn McAdam, a spokeswoman for RBS global headquarters in the United Kingdom.

The . SEC will not cones or deny any of the companies it is investigating, a spokesman for the fission said this weed,..
The SEC. opened its investigation in Tune, launching a dozen investigations into collateralized debt obligations linked to the plummeting value of subprime mortgages. ft, due atlow of mortgages, acconn The SEC is said to be looking at or trading. inslifer and di gence sales ofsecurities Recent published reports cite sources claiming the SEC investigation now is moving at a mom vigorous pare. (Emphasis added). 77. Further, in connection with the SEC probe into the collapse of the subpdine med that its Greenwich Capital unit

market; as set forth above, on March 8, 2008, RBS con

41

had been ordered to turn over fin irwial documents to the SEC regarding on mortgages, accoiu 78. , due diligence, sales and insider iding.

shone of

In connection with the offerings, RBS failed: to conduct meaningful due

diligence, including in connection . with the underwriting staudaxds used to originate the Cetti$cate collateral.
UBS Cores Under LXLVest[aatfcm

79.

On December 10, 2007, UBS announced that it had incurred massive losses in

connection with the ailing subprhne markets in the United States,. resulting in it taking a $10 billion write-down in its mo ,ge:backed related invostnaents, and selling over $11 billion of its

mortgage-backed invesirncndts to the Govt of Singapore and Afiddle-Faster investors with the hopes of recapitalizing.
84. Qn. December 24, 2007, as reported on 1ht Dow Jones N swire, Swiss

regulators announced that the Swiss banking department charged with oversight of the Country's
investment hanks, would be inida6bg a.full investigation into how UBS incurred Such massive losses in connection, with risky U.S_ subprime and alt-A home loans.

8L

By as early as the middle of January 2008, VHS was already disclosing to

investors that it expected additional losses in the fim quarter of 2008 due to the Bb's -U.S. subprime mortgage exposure, mainly due to an additional $43 billion in write-downs of mortgage-hacked and related secure'ties. 8. On April 25, 2008,. UBS pressed Swiss banking regulators with a detailed and

explicit 5.0-page repot rich was censored for public release, detailing how the l3ank lost such massive amounts of shareholder value and money so quWy by investing in U.S. subprine
mortgage product-, One of fhe many conclusions the report reached was that UBS, just like

42

RALI 20072 Certificates

Initial Certificate Rating

Class Al A2-

S&P AAA

mood 's Am Aaa

A3 mi.
M2 3 M4 M 4
M6 M6

AAA AA+
AA

A Aaa
Aal Aal
Aa2 Ate. Al

AAA+ A A

mg M9

BBB BBB - B313-

A3 Baal Baal

RAM 2007-003 Certificates Initial Certificate Rating

mss S&P Moa 's

Al A2 A3 M1 1113 M4 M5 M6 M6 mg to

AAA AAA AAA AA+ AA :AA A+ A

Aaa Ana Ana Aaa Aal Aa1. Aar Al

A
BBB+

AZ
A3

BBB BBB-

Baa2 Baa3

RALI 2007

O4 Certificates Class
Al

eate Ratin g. XuitW CutM Mao S&'

AAA Aaa

's.

Ala A2. A3 1^1l1 !2 M3

M4.

AAA AAA AAA A+ AA AAA+

Ana Aa4

Aft9
Aaa Aa1 Aal
Aa2

36

M5
M6 M7 -Mg M9

A ABBB+

Aa3 Al
,A2

BBB BBB-

A3 Baal

x 297-205 Certificate& Initial

CIEs S&P

RatIM9
Moc s

A M3 M2 M3 M4 Ms

AAA AA A BfB+ BBB BOB-

Aaa AaZ Baal Baal Baa3

62. t

The statements contained the preceding paragraphs - and the initial ratings

selves - contained material misstatements of fact and:omitted facts necessary to make the
rein not mist ng Since the RWwg Agencies issued the Iatings based on an

facts s'tee'd t

outdated credit rating methodology designed in or about 2002 and because the Rating Agencies

presumed that

loans were of high credit quality issued in compliance with the stated

unnerv ing guidelines when, in fact, RALI and HFN had systematically disregarded its stated.
Underwriting (3uidelines, as set forth herein.

Disclosures Relates To
63. HN is a

N s Deficient Lending Fraefim

wholly owned subsidi of Residential Capital Corporation

e7twCap"). Rest is the Iargest privately held U.S. home lender, and. is owned and operated by GMAC Financial Services. ResCap is one of the top U& lenders which offers home loans through several businesses, the largest of which is HEN. H1 ope ed as one of the moon's

largest and most successful mortgage 5naace companies until its massive exposure to subprime

37

and alt-A mortgage loans placed the company in the midst of the growing crisis in United States mortgage lending in 2007 and 2008. 64. As the real estate market in this icau ry softened and interest rates increased,

ResCap, through its subsidiary HFN, kept pushing everincreasing sub-prime mortgage loan volume through its system by loosening the Company's underwriting praeti.cesand intmducing a growing percentage. of higher risk mort products, including adjustable-rate, inter--only ing.

lows and "stated income" Joao, where aven, W-2 wage == did not have to bvther'v their stated income levels.

65.

Sim the Offerings were consummated. P.PsCap's and ms's true deficient t ResCap to the brink of defaulting on its

lending practices have come to light, which loo

obligations and declaring bankruptcy by May 2008,. only to be- rescued by its Parent Company, GMAC to the tune of a $60 billion refinancing initiative announced June 4, 2008.
66. suit alleg In early 2008, IIFN was named as a De ant in a nafion wide class action law

among other things, that 19N violated state and federal laws in charging borrowers connection with HFN's loan servicing.

various unwanted fees, costs and premiums

67.

Moreover, despite three separate major cash infusions by GMAC into ResCap and

N prior to April 20G8,. ResCaq), as the largest private loan origination company in the Country, was on the brink of banbmVtcy as a result of six strcdght quarters of recording Ames, totaling over $53 billion- Such losses vme bringingR sCap dangerously close to violating several of its loan agreements. -- which included $4.4 billion in obligations and a $1.7 billion tern loan coming due in 2008, in addition to a minims i wow covenant requirement of $5.4 billion.
68. On the release of this news regarding Romp's state of capital reserves, and t line from its parent

baying come less than a month since ResCap received a $750 million r,

38

many of the other Underwriter Defendant banjo herein, was that UBS. was acquu ng huge portfolios of U.S_ subprime assets fxom failing businesses that t .e Bank was .acquiring in early 2007. Such portfolios vA= being acquired by investment banks such as UPS who did not have the-proper risk controls to monitor and equate the actual risk and benefits involved, 83. la response to the release of the report, mortgage-rel ated securities that had been

under wriften and/or issued by UBS were downgraded by U.S. rating agencies, specifically the 2006-QU5 and 2006 Q07 series:
84. On May 7, 7,008; just after the release of the report. to the Swiss regulators, UBS

announced a first quarter 2008 loss of $11 billion, and its plan to cut over 5, 000 jobs at t

Bank.

Having; incurred over $37 billion in U.S. mortgage related write-downs, UBS arm unwed that it

was exiting the U.S. housing ma*A complewly.

85. N erWess, in August 2008,,. UBS uaced significaotllosses in the second

quarter of 2008, resulting from $5.1 bill ian. in U.S. mortgage related write-downs. 86. r -QO7 Offerings, UBS failed to In connection with the 2005-Q05 and 2006

duct meaningful due d. lgence, including in connection with the underwriting standards used

to Originate the Certificate collateral and Wed to maj^ the proper risk controls to do so. Cam' Failure To Adhere To Underwriting Guidelines Result In Massive Warite-Dowwns 87. CSS played a key role in the subpxirae mortgage market and its v cc llapse_. izod

According to. industry research for 2004-2005, CSS was the number three U.S. coltat mortgage-hacked securities loan contnln

r and master servicer; among. the top five partitipcats

in leveraged loan syndications and U.S. collateralized debt obligations; and one of the foremast U.S. assetbased lending lead arranggene

43

88,

CSS' good fortune in the mortgage backed securities bu

ess didn't Last long.

CSS, beginning in 2006, kVU to experience an exponential increase in their mortgage default rate. Tellingly, a large percentage of the defaults were occwT*ng, not after rates: were ratcheted up by way of an adjustable mortgage, but instead within or around thirty days after the mortgages were approved - on either Ent or second payments and long before any adjustable .kicked up the rates on t 89. mortgages.

Having recognized the gross inadequacy of the mortgage eolla etal that they had

pe

d from various leaders around the country, CSS, through its wholly owned subsidiary

DLJ Mortgage ("DLI") filed several lawsuits in New York Federal District Court, Southern District. throughout 2007, against the lenders from which CSS had purchased the des;
DLJ Mortgage Capita4 Inc. Y. Sunset Direct Lendin& LAC, at a!., Civ. No. 0701418, filed February 27,2007; DLJ Mortgage Copitaa Loin v )Jght-e way Mortgage, Ina. Civ. No: 07-02791, filed April 6, 2007; DLI Afiwrgap Cupitat, Inc v. Sea Breeze Financial Services, Inc., Civ. No. 0703747, filed May 11, 2007; DII Mortgage Capful Inc. Y. Cann Frnancial Group, Inc-, fir. No. 0703746, filed May 11, 2007;

DL.T Mortgage Capital inc. v Horne. Loan Co poratim Civ. No. 07-04167, filed May 29, 2007; DLJ Mov i e C,apitaC Inc. v Eastern American M 07-07933, filed September 10, 2007. 90. ge Compw y, Civ. No.

These lawsuits asseited by CSS alleged breach of contract for failure to

repurchase looms due to early Payment defaults; failing to repurchase loans arising out of breaches of doss and v incurred due to early payment unties; and failing to reimburse CSS, or DLI, for losses defaults,

44

91.

Each agreement that DLI entered into with the respective mortgage lenders

contained clauses which required the lenders to repurchase: the mortgage obligations or reimburse DLI for losses in the event that defaults occurred within a certain time pear"od afkr DLPs original purchases. 92. By way of example, according to the Complaint filed by DLT against Sunset

Direct Leading, LLC, UL] incurred over $20 ,000,000 in losses due to defaults on loans purcha 93., from Sunset Direct between late July 2006 and early January 2007. As the mortgage crisis in the United Smites grew over the fast half of 2007, the

problems facing DLJ spread throughout CSS and its affiliates, ultimately resulting in massive write-downs and losses onihe company ' s underwriting. leading and investing arms, all of which were intricately involved in the mortgage backed securities Wsiness. 94. On October 1 ? 2007, CSS annvanced that its financial results . have been "hurt by

rat market events" ink the U. S. ho using market

Analysts immediately took this

announcement as a `profit warning for the Company 's third quarter results. 95. On or about November 1, 2007, tae. Associated Press reported that CSS suffered a
owns related to the U. S. housing market.

33 percent decline in earnings due to writ 96. "

*e-after, the Associated Press, on or about February 12, 2009, reported that

CSS had announced that the Company's ftmth quarter profit declined 72 percent due to write-

downs of $130 billion on debt and leveraged looms. 97. On or about February 20, 2008, an article published in the Now York Post te-down resulting from the

rted that CSS was forced to take an additional $2.85 billion

use ofoutdated pricing Mmnation in connection with the valuation of their US. mortgage

45

securities. On the same day, CSS anno nced that the additional write-downs and use of outdated pricing. models resulted in an internal investigation of a handful of its tsnders. 98. In an April 24, 2008 Associated Press article, it was reported that CSS was forced

to incur write-downs due to the U.S. mortgage crisis of over $5.30 billion, resulting in a net loss for the first quarter 2008 of over $2.D billion. 99. Not long after, in an article published by the Amexican Banker, it was disclosed

that CSS' losses in the first quarter of 2008 were maixily* due to CSS' losses resulting from massive write-downs related to the U.S. mortgage meltdown. 100. In conaaection with t 2407-QO1 Offering, CSS failed to conduct meaningful due

diligence; including in connection with the underwriting standards used to originate the Certificate collaterai.
Deutsche Bank Securities' Failure To Adhere To Underwriting Guidelines Result In Massive Write-Downs aid Federal Inyestimafions

101.

DBS also played a key role in the subprime m

ap mkt and its ultimate

collapse. DBS, in its 2005 Mtnuaal Review, stated that it had "coxmlidated its position as a Top 3 player in the global. Commercial, Mortgage Backed Securities market and in Real Estate CDOs. Deutsche Bank was the No. 1 Commercial Real Estate Bank in Euromoney's ix al Real

Estate: pall." However, like Wachovia and RBS, DBS played a role in the downf of those markets. DBS r quarter of 2007. forced to write down $3.1 billion in subpirime-related investments in the third In late April 2008, DBS marked down EUR 2.7 billion (apprnx;^y $6 loans and loan commitments, commercial real estate and cities."

billion) in connection with. "levee residential mortgage-backed s

102.

Furthermore, DBS also was caught up in governmental investigations of the

collapse of the subprime market. On December 7, 2007, as reported in The Wall Street Journal,

46

the office of the New York State Attorney General served subpoenas to several Wall Street finns - including DBS -- s icing infotmalion related to the packaging and selling of debt tied. to high risk mortgages. According. to the toumal, "Tf a review ... is. examining how adequately the

invest ent banks reviewed the quality of mortgages before packaging them into products that were then sold to investors... The subpoenas also requested infoimaticn about how the debt was pooled into securities, including the bates'. relationship with credit natWg fem." 103. In connection with the 2007-Q02. O .g, DBS conducted substandkd and

deficient due diligence, including in connection with. the underwriting standards used to originate the Certificate collateral. Disclosures of True Deficient Lending Practices Underwriter Lapses and High Certificate Collateral Delinquency Rates Remelt in Certificates Collateral ])awn2a-ades 104. As set forth above, throughout early 2004, O AC in an attempt to bolster

outlook on ResCap's financial condition, provided three massive capital infusions its subsidiary in order to quell doubts as to its viabiliity. Such infusions did not slow.the decline of the large t privately held U.S. ho= lender, w.}d on April 18, 2008, IRrsCap borrowed an additiotm . $468 million from the Company's credit line from GI nongs on ResCap by two. not C. On April 24, 2008, S&P lowered its

from. B to CCC+. In motion, Moody's expressed its concern

that ResCap would falter On a $1.75 billion bank loan due to mature in July 2008 and an $875 million revolving: credit facility that umtures in June 2008. Prior to April 24, 2008, Moody's rating on kesCap was Caal, vylicb coiamctes debt that is -subject to very high credit risk." K,. 105. Over these concerns, between Apes and August 2008, Mvody's and S&P, and

Fitch in regards to the 2006-Q07 Certificates, revised. their ratings on the BALI Certificate

4asm over the concern d at due to the massive writedowns and exposure to

su bprim e mortgage

41

markets, I

Cap would not be able to satisfy its financial obligations as they come due dm g
eS Were as fol.OWS;

mmuner of 2009. TICSC down

RALI 2006-QOI Certified" Class IAi 1A2 2A1 2A2 2A3 3AI
3A2

Initial Certifi cate Rating 5&I Mood 's Asp. AAA Area AAA AAA Aaa AAA Aaa Aaa AAA AAA Ana
AAA An

Revised Certificate Rating Moots 's S&P AAAn/c BBBAmnl'c AAAAAAU10 BBBAaa n/c AAABBBn/c

3A3
Ml

AAA
AA+

Aaa
Aal

BBBBB

AgaBaa3

M2 M3
M4

AA AAA

Aa2 Aa3
AZ

B CCC
CCC

BaZ B2B3-

M5
M6

BBB+
BBB

Baal
Bas3.

CC
CG

Ca
Ca

RALI2006-Q02 Certificates Initial Certificate Eatta Rid Certificate Rain

Class
Al

S&P
AAA

Moody's
Aaa

S&P
n/c

Moo
n!c

's

AZ
A3 MI

AAA
AAA AA+

Aaa
Aaa Aal

n/c
n/G n/C

n/c
n/c nfc

M2 M3 M4 MS M6 MT Mg R.ALL2006-Q03 Certificates

AA AAA+ A AEBB EBB-

Aa2 A%3 Al AZ A3 Baal Baa3

nlc nic n/c n/c n/c BB B

A3 13=3 Ba3 B2_ B2B3_ Ca

Initial C"ficate.Ra'iu
CIass S Moody's

Revised Certificate Rain

5&P Mood IS

Al

AAA

Aga

n/c

n/c

48

L3

Cy N ^.yi^ y4Q V

eg

Ca

. ti

G]

C]

^+1 r^s N tn t^

M V

i^

Z]

[3

U'

!]

("y

e)

t]

..C3

E^

opol

^]

oz m

^^^

^r

m d

b t^DO

Ll III LP

III

... 11,

-LA

Y1 Ir

M4 M5 M6 M7

A+ BBB+ EBBBB

Al A3 Baal &a2

A+ BBBBBB BBB-

CCC CC CC CC

CealCa Ca. Ca

BCCC CC CC

BALI 2006-QO1O Citieat Initial Cer iI cate Rating Revised Certibcate Rati

Class Al
A2
A3

S&P AAA
AAA,
AAA

Moody 's Aga

Ma
Aga

S&P AAAAAAAAA-

Maud 's nlc

We
n/c

Ml M2 M3 M4 M5

AA+ AA AAA+ A

Aaa Aal Aa2 Asa Al

BBB BB B B B

Aa2 BaaI Baa3 Ba3 BI-

M6
M7 MS NID
RAI1l 2007-QOl Certificates

ABBB+ BBB BBB-

A2
A3 Baal BaO

B
B CCC CC

B2B3Caa]Ca

Initial Certificate Rati

Revised Certificate Ratio

Clasp Al A2 A3 Mi

5&P AAA AAA AAA AA+

Moody's Aga Aaa Aaa Aaa

S&P nic nlc n/c n/c

Mood 's a/c a/c We nlc

M
M3 M4 M5 M6 M7 M8 M9
RALU 2007-Q02 Certificaf^

AA
AAA+ A+ ABBR+ BBB+ EBB-

Aal
Ail Aa2 Aa3 Al A3 Baal Baal

n'c
AAA+ A BBBB CCC. CCC

Aa2
Al Baal Baa3 Ba3 BIB2 B3-

r,

Class Al

buiifial Cerd{icate Ratin: Moo 7s &P AAA Aax

Revised Certificate Rating S&P moo 15 n/c n/c

51

CS

la

^7

G7

Z]

i]

O . ^]

t]

!7

L]

i]

i?

iJ

C7

t]

tY '^'^

!Q0
lu

fA

0%
a ^.

Miii
.!Q 544

M8 M9
RALI2007-QOS Certificates

BBB BBB-

A3 Baal

BB $B-

132$3-

Initial Certificate Rating

Revised Certificate Rating

Gds
A M1 NU M3 M4

S&P
AAA AA A BBB+ BBB

Moo
Asa Aa2 A2 Baal Baal

S&P
nlc n/c n/c n!c nlc

M
tic A2 Baal Bal Ba3

's

M5
106.

BBB-

Baa3

nlc

$1-

As a result of these disclosures and the Rating: Agencies' reassessment of the

appropriate ratings to be assigned to the Certificates, . the value of the Certificates has substantially collapsed. The Carpenters Health Fund' s investment in BALI Certificates has

declined by over 95% - from $180,156.60 at t e time ofthe Oft erm8 to $9,072.00 at the time this action was commend. COUNT I
Violaion of Section 11 of The Securities Act (Against AU Deffendauts

107. 198.

Plaintiff repeats and realieges each and every all

tioxx eontaused_abovc.

This claim is brought by PIaintiffpmsuantto ration 11 oftheSecurities Act and

asserted nn behalf of all other members of the Class who purchased or acquired BALI.

Certificates on or traceable to the Offe4ng. 109.

St

Defendant RA :I is the registrant for the pigs and filed the Registration
ses as the Ler of the RALI. Certificate s as. defined in Section

ems and Pmspe

11(.a)(1) ofthe Securities Act. 110. The Individual Defendants were officers au/or directors of RALI at the: time the

Registration Statements filed in connection with the Offerings became effective, and at the time

53

cifthe issuance of the Prospectuses, and with their consent were iderdified as such therein. The
Individual Defendants are liable for the misstatements and omissions in the Registration

Statements alleged herein under Section 11(x)(1) of the Securities Act t 111. 1> dants GSC, RBS, UBS, CSS DBS and GMAC:RPC served as the

Underwriters for the G$et'sngs and each qualify as such according to the . defiunition in Section 2(a)(I1) of the Securities Act, 15 U.S.C. 77b[a)(11). As such, the Underwriter Defendants participated in the solicitation, ofering, and sale of the RA l Certify to the investing public pursuant to the registration Statements and the Prbsgechses, 112. The Regis r tion Statements and the Pr s ses, at the time they became

effective, contairzed material misstatements of fact and. omitted facts necessary to make the facts stated therein not misleading, as set forth above. The facts misstated and omitted would have
been material to a reasonable person reviewing the Registration Statements and the Fropecb=&

I13_

The Defendants did, not nnke a reasonable investigation and perfori due

diligence and did. not possess reasmable grounds for believing that the stag contained in
the Region Statements and P ospectuses were truer did not omit any material fact, and were not materially misleading.

114.

Plaintiff and the other Class members did not know, and in the seise of

reasonable di1'igence, could not have known of the misstatements and omissions contained in the Registration Statements and the Pros ctusess. 115. Pleiri and other Class members sustained damages asa result of misstatements

and omissions -inn the Registration Statements and the Prospectise s, fi rwhich they are entitled to compensation.

54

116.
statzments

Plaintiff brought this action. within one year after the. discovery of the untrue
omissions, and within tree years air the OfferingCOu NT II Violation of Section 1Z(a)(2) of the Securities Act (%2ainst AD Defendant

117.
118.

P1_ intiff repeals and realleges. each a nd :every allegation contained above.
This Count is brought pursuant to won 12($)(Z) ofthe Securities Acton behalf'

of the Class, against all Defendants.

119. By means of the Registration Stat ne and Prospectuses, and by using means

and instruments of transportation amd communication, in irate ice and of the trails, the Defendants Hugh the Offerings sold BALI Certificates to Plaintiff and other members of the Class, 120. Defendants RALI, the RALI Trusts, the Individual Defer and the

Underwriter Defendants each suecessfiIIy solicited these purchases, motivated at ],eft in part by their own fvmCwl ix rest. The Defendants each reviewed and. participated in drafting the Prospeciuses . Through ensuring -the successM completion of the Offerings, the Underwriter De&ndots obtained sub 121_ al underwriting fem. temp and the Prospectuses. at the time they became

The Registration

effective, contained material misstatements of fact and omitted facts necessary to make the its

stated therein not misleading, as set forth above. The facts misstated and omitted would have
been material to a reasonable person =viewing the stration Statements and the Prospeefiises.

122.

tents as 'sellers,' owed to the purchasers of the RAALI Certificates.

including Plaintiff and other Class members, the duty to porn due diligence and make a reasonable and diligent investigation of the statements conbbed in to Registration Statements

55

and the Prospectuses, to ensure that such statements were true and that there was no omission to. state a material fact required to be stated in order to make the statemexfs contained therein not. misleading. Defendants knew of, or in the exercise ofreasonable care should have known of, the misstatements and emissions contained in the IPO materials as set forth above.

123.

Plaintiff and other members of the Class pumhas4d or otherwise acquired

RALT Certificates pmuant to the defective Reg s ration Statements and Prospectuses. Plaintiff did notknow, or in the exercise of reasonable diligence could not'have known, of the untruths and omissions contained. in tie Registration Statements and the Prospectusea 124. those se Plaintif, individually and rpresentati vely, hereby offers to tender to Defendants

cities which Plaintiff and other Class members continue to own, on behalf of an

members of the Class who continue: to oven such securities, in return for the consideration paid for those securities together with interest thereon. Class members who have sold their RAU Certificates are entitled to resclssiona*y damages. 125. By reason of the conduct alleged herein, these Defendants violated, and/or

contgLled a person who violated Section 12(a)(2) of the des Act. Accordingly, Plaintifff and Members of the Class who holdRA ,U C fcatea pn based pursuant and/or traceable to the

offerings have the right to rescind and recover the consideration paid for their RALI Certificates and hereby elect to rescind and tender their MI Certificates to the Defendants sued herein. Plaintiff and Class members who have sold their RAU C damages. cates a entitled to msc onary

COUNT m
Violation of Section 15 of The Securities Act (Against Defendants RAU the R i1Trusts and the ndjv d al Defendants) 126. Plaintiffrepeats and realleges each and every allegation contained above.

56

127.

This claim is Iron

t by Plaintiffpixrsu

to Section 15.ofthe Securities Act and

asserted on behalf of all Class members who. purchased or acquired RALI Certificates M" the
Offerings.

128.

The Individual Defendants at all relevant times participated in. the operation and

management of BALI and the BALI Trusts, and conducted and participated, directly and

indirectly, in the conduct ofRALI and the RALI mists' business affairs. 129. diss As officers and/or directors of RALI, the Individ ual Dekndants had a dirty to

irate arose and truthful information in the Remotion Statements and, the

Prospscttses.

130.

Defendant RALI is the Parent Corporation and sole owner of the

,I Trusts,

and a4 all relevant times participated in the operation and m

ent of the RA.T I Trusts, and

conducted and participated, directly and indirectly, in-the conduct of the Trusts' business affairs. 131. As set- forth above, it is alleged that the Re on Statements and Prospeetrtses rial misstatements of fact, and

issued in connection with the BALI Offerings contained .

omitted facts necessary to make the facts contained therein not misleading, in violation of
Sections I laud 12 ofthe. Securities:Ant.

132. , Because of their positions .of control and au hority as senior officers and directors ofRAU the Individ a1. Defendants were able to, and did, control the contents of the Registration Statements and Pr tuses which coati d extol misstatements of t and omitted fixts

necessary to make the fizft sited therein not misleading . T fber

Individual Defendants were

re "controlling peons" ofRALI within the meaning of Section 15 ofthe Securities Act. 133. In addition, bey of its sole ownership of the BALI Trusts and its control and

authority as Parent Corporation,. Defendant RALI was able to, and did, control the contents ofthe

57

Registration Statement and the Prospectus which contained material misstatmients of fact and omitted facts necessary to nWm the facts stated theme not misleading . Defendant BALI was therefore a "controlling person" of the RALI Tnusts within the meaning of won 15 of the Securities Act.
134, Plaintiff and other Clans members puiehased BALI CeEtificat s issued pumutnt to

the Offerings. The Offerings was conducted pursuant to the Registration Statements and the
plospe cti]ses:

135.

The Ran Statements and Prospectuses, at the time they became efrmtive,

co

ined material misstatements of hwt and omitted f

necessary to make the facts slated

therein not misleading.

The fad misstated and. omitted would have been material to a aes.

reasonable person reviewing the Region Statements and, the Pro.

136.

Plaintiff and the Class did not know, and in the excise of reasonable diligenee,

could not have known of the misstatements and omissions in the Registration Stets and the Prospectuses. 137. Plaintiff and the Class have sustained . d sages as a result of the misstatements rents. and the Prospectuses, for which they are entitled to

and omissions of the Registration St compensation. 138.

Plainfiff trot this action within one year after the 'discovery of the untrue

statements and omissions,. and within three yeas after the Offerings.

5.

WIfEREFORE, Plaintiff prays for relief and jud (a) (b)

nt, as follows:

Determining that- this action is a proper clays action under CPLE Article 9; Awarding comp atory damages in favor of Plaintiff and the other

Class members against all Defmdants, ,jointly and severally, for all images sustained as a result ofDefer' wrongdoing in an amount to be.proven at trial, including interest thin; (c) Awarding Plaintiff and the Class their reasonable costs and expenses

incurred in this action, including counsel fees and a tpe t fees; and (d) Such other and further relief as the Court may Acm just and proper:
JURY TRIAL DEMAND

Plaintiff hereby demands a trial by jury.

Date.: September 22, 2008 New York, New York Respectfully submitted,

Joel. P. Lammnu Christopher Lometti Frm* R Schirripa Daniel B. Reims

SCf10ENGOLD SPURN LAITMAN & LOOMEm , F.C.

19 Fulton Street, Suite 406 New York, New York 10038 Telephone: (212) 964-0046 Facsimile: (212) 267-8137

CowzreIfor Plaintiffcmd the Proposed Cures

59

STJ REME COURT OF THE STATE OF NEW YORK COUN'T'Y OF NEW YORK New Jersey Carpe itexs He IIh Fund,. On Behalf of Itself and AU Others Similmdy Situated,
Plaintiff,
Y.

I dex No.

RALY Series 2006-QOl Tvust^ RALI Series 200&Q02 Tint, BALI Series 2006-Q03 Trust, RALI Series 2006-Q04 Try RALI Series 2OO6-QO5 Trust, RAU Series 2006-QO6 Trash BALI Series 2006-Q07 Trust, BALI Series 2006-QOIO Trust, BALI Series 2007-QUI Trust BALI Series 2007-QO2 Tnist, BALI Series 2007-Q03 Try, RAT Series 2007-Q04 Trust and RALI Series 2007-Q05 Trus. Deutsche Bank Trust Company Americas, U.S. Bank Na ivnal Association, Residential Accredit Loam Inc.. Bx es. P adi95 Da e.L. Olsen, Kenneth M. Dm=u% Ralph T. Flees, Lisa R. Lug , James G.. Jones, David M. Thicker, James A Yon& Gotdmaon, SwIs & Co., RBS

VERIFICATION

Csreenwicn Cantai, un i InVestz enL Ban , Credit Suisse Securities (USA), LLC, Deutsche Banc St=ties, Inc. and GMAC RFC Securities, Defendants,

60

(STATE OF NEW YORK

OF NEW YORK

}
)

(CO UNTY OF NEW YORK

Frank Schirripa, being duly sworn, states that he is one of the attorneys for Plaintiff in this action and that the foregoing complaint is trite to his own nowledge, except as to matters therein stated on won and bei and as to those matte he believes to. true; that the ground of his belief as to A matters not stated upon his knowledge ate upon review of publicly available infrmation filed with the United States Secuarities and F. rouge Commission, media and newspaper articles and in ation contained on the inteme't and that the reason vdiy the verification is not. madc by Plaintiff is that; PlaintiffNew Jersey Carpenters Health Fund is not in the county where rlaintiwsattor ey has their office.

Prank Schin ipa, Esq.

47 ^No Public Swo;n to me before this

AZ &y of 7FCIt

JAYP, SALIZ)M r fir. ^ssJ

.2008

61

SLEP$EME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK x New Jersey Carpenters Health Fwmdy On Behalf of Itself and All Others Similarly Situated, Plaintiff , v. RALI Series 2006-QO1 Trust, RALI Series 2006-Q02 Trust, RAT. Series 2006-Q03 Trust, RALL Series 2006-QO4 Trust,. BALI Series 2006-QO5 Trust, RALI Series 2006-QO6 Trust, BALI Series.2006-QO7 Trust, BALI Series 2006-QOI O Trust, RALI Series 20071 Trust, RALI Series 2007-QO2 Tnast,1RAU Series 2007-QO3 Trust, RALI Series 2007-QO4 Trust and B ALI Series 2007.Q05 Trust, Deutsche Bane Trust Company Arnericas, . U .S. Banlc. National Assoc att n,.Ressidential Accredit Loans, Inc., Bruce Parades, Davee L Olsen, Kenneth M Duncan, Ralph T, Flees, Lisa R. Lundsten, James G. Jones, David M. Bricker,
James N. Yourkg, Goldman, Sachs & Co, BBS Greenwich Capital, UBS Investment Bank, Credit Suisse Securities (USA), LLC, Deutsche Bank Securities; Iac- and OMAC RFC Securities;

1ndexNo.

Defendants. X

VERIFIED CONTLAINT

CERTIFICATION: I, Frank R Sohin ipa,. Esq. hereby certify that all of the pass that I have served, wed or submitted to the court in this drvoree action at not frivolous as defined in subsection (c) of Section 130-1.1 of the Rulesofthe Chief Adminerror of the Dated: September 22, 2008 6 HOENCOLD SPORN LAI MAN & L?MEM, P:C. 19 Fulton Street Suite 406 New York, New York 1003.8. Telephone: (212) 90-0045 Facsimile: (212) 267-8137 Counselfor the Plaintiff and Proposed Class

MC-1

4U
EDIrfIITIU SERVICE 69MPA.MY'

Notice of Service of Process

Primary Conti Kate Hartmann Residerft Funding Company, LLC One Meridian Crossing Sufte 100
Minneapolis , MN 55423
Copy of transmittal only provided to: Skylar Hanson

viii /ALL Transmittal Number..6088527 Date Proces sed: 1 0103/20 08

Entity:

Residential Accredit Loans, inc.. Entity Io Number 2600685

Entity Served:
The of action:

Residential Accredit Loans, Inc.

New Jersey Carpenters Health Fund vs. FIALI Series 2406-001 Trust

Document(s) Type;
Nature of Action:

Summons/Complaint
Other

Court:
Case Number :
Jurisdiction served: Date Served on CSC: Answer or.A rance Due:

New York Courtly Supreme Court New York

08-602727
Minnesota 10/02/2008 20 Days

Originally Served On:

How Served:

CSC
Personal. Service

PlanbWs Atloorner

Frank R. Schilripa 212-9"4046

Informailon cor 1ained on this trartsn-taf 4arm is for record keeping, nett cation and forward ' the attached document(s). It sloes not n. con to a legal opinion . The recipient is responsible for interpreting the documents and ^g appropriate

To avoid pgtential delay, please do not send your response to CSC CSC is SAS Type 1! certified for ifs L11igafiion Management System. Wilmington, DE 19808 (888).690.2882 : 1 [email protected] 2711 Centerville F

SVPR E COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK x New Jersey Carpenters Health. Fund, On Behalf ofitself and All Ohs Sim laxly Situated, Index ATo. PlafhtA
V.

U)

2.1

SUMMONS

RALI Series 2006-QOI Tmst, I AJ1 Series 2006-Q02Trust, RALI Series 2006-Q Try RAID Sew 2006-Q0 4 Tr s4 RAIl Smies 2006-Q05 Trust RALI Series 200&Q06 Tn RALI Series 207 Tzust, IULZ Sew 2006-QOla Trr RALI Series 20&7-QOI Trust

^'K CLEFTS QM

RALI

es 2OO7-QO Trust RALI Series

140; . Bank National

2007-QG3 Trust RALI Series 2007-Q04 Tr us t

Bruce Pei s, Da^vee L.. }lsen, Kenneth M. Duncan, Ralph T. Flees, L^ R. Ln sten, James G. Jam, 'd M. Bri es N. Youu Goldman, & Ca., RBS I`n^ x ], UBS Bank, Credit Su se Sys. (USAF, LLC, Deuce Bank S ices, Inc. and GMAC RFC Sectaities, Defendants. x

To the above named Defents: YOU ARE EWREBY SUMMONED and required to serve upon Plaintifi's attorneys a Verified Answer to the Verged Complaint in this action within twenty (20) days after the service of this summons, exclusive, of the day of service, or whin thirty (30) days aft service is ronmplete if this sunumm is not personally delivered to you within the State of New York In me of your lure to answer, judgment will be taken against you by default for the relief demanded in the complaint.