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Afterreviewingvariousitemsgiventomebythedefense,Ihavecometothefollowingconclusionsand opinionswhichIwilltestifyto. Ihavegroupedthesebyareaandhopethatisacceptable,referringtoaloanoragroupofloans whereappropriate,andhavereferencedsomeindividualloansasanexampleoftheconclusionI cameto. Multipleloanshadthesameorsimilarcharacteristics,thereforeIusedoneexamplebutIusually foundmultipleloansthatthesameconclusionappliedto.

Inreachingmyconclusions,Ireviewedthefollowingitemsasprovidedfortheloans: BrokerFile(labeledBF), LenderFile(labeledLF);& TitleFile(labeledTF)plus OFRfilewhereprovided. Variousadditionaldocumentsprovidedbythedefense,includingreviewofrepair documentation,photos,billtracking,etc. Somecopiesofdocumentsgiventosomeoftheborrowersatclosing(whichgenerallymatched tosomeoftheotherfiles,butwereinafewcasesnotcompletedastodatesorsignatures) ReviewedsomeofMs.Walzaksloananalysesontheloansinquestion

Othersourcesutilizedincluded: OnlinerecordsofrecordedMortgagesandDeedsthroughtheCountyClerkswebsite,to confirmwhatwasactuallyrecordedandwhen.Icomparedthosetothecopiesprovidedtothe borrowerswhereavailable. Generalindustryexperienceandknowledgeofprogramsavailableduringthetimeframethese loanswereoriginatedtoevaluatethedocumentspresentedandtheloanprogramstheBrokers placedthevariousloansinto. Copiesofloanprogramsavailableduringthetimeframe(fromthewebandfrompersonal experienceasIdirectedandinsomecasescreatedthedescriptionsheetsfordistributionto brokersandlendersforseveralcompaniesduringthetimeperiodinquestion)

*Note:Iamusingthegovernmentfilereferencenumberwhenreferringtopropertiesbynumber.IfI sayallitreferstotheloansnumbered117;1938,4247,49,50,5255,60&6366.Theother loanswereremovedornotincludedsoIdidnotcompleteareviewofthem. MajoritemsandConclusions/Opinions 1. AlltheLoansappeartocontainvariousamountsoffraudulentdocumentation.Inreviewing theabovesourcesanddocuments,itisveryobviousthattheloanscontaindocumentsthat

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appeartohavebeenforged,alteredorotherwiseprovidedbysourcesotherthanwherethey shouldhavecomefrom. Initialdisclosures,forexample,allhavevastlydifferentlyappearingsignaturesthattheclosing documents.[coversall38loansreviewed] ThetwodefendantsIhavespokenwithdirectly(JoeGuaracinoandhisbrotherDennis) toldmetheyneversaw,signed,orreceivedcopiesofanyoftheinitialdisclosures,which violateslendingrequirementsandfederaldisclosurerequirements(anddid,evenback then.) Onlythedocumentsactuallysignedatclosingappeartohavebeensignedbytheactual borrowers;eventhosedocumentswerenotcreatedbytheborrowers,justsignedby them,soifnotreadindetail,theywouldnotknowwhatwasinthem. Employmentverificationdocumentsareinthenormalcourseofbusinessareproducedonlyby brokersororiginatinglenders,notborrowerorrealestateagents,andaresolelyunderthe controlofthebroker/processor[appliestoallloans]. Applications(1003)andotherverificationdocumentsarealwayscreatedbytheBrokerorloan originator,andaresupposedtobesignedbytheborrowers.Ineachofthefilesreviewed,there werecopiesoforiginalapplicationsthathaddifferentsignaturesthatthoseonthefinal applicationssignedatclosing.[appliestoallfilesreviewed] Verificationdocumentsproducedforverificationofassetswouldhavebeentotallyunderthe controlofthebroker.Notedthatmostfilescontainedonlyaverificationofasset,notcopiesof bankstatements.[appliestoallfilesreviewed] Leasespresentinsomeofthefilesappearverysimilarandhaveevidentlysubsequentlybeen showntonothavebeentruthful.(ex:#7,#22,#3,#25,andothers) Inthecaseofseveralloans,useofinflatedincomeorfalseleasesdoesnotappeartohavebeen necessaryastheborrowerslikelywouldhavequalifiedbasedonfactualinformation. o JoeGuaracinoprovidedactualleasesonsomeoftheproperties;howeverthebrokers usedwhattheyapparentlyhadinthesystem o Useofactualincome,forexample,on#15%hadactualincomebeenusedthe ratioswouldhavebeenacceptablepertaxrecordsprovided. Partialcopiesoffilesand/ordocuments,includingpoorcopiesoforiginallyfaxeddocuments (withoutidentifyingrequiredfaxnumberstoindicatesourceoffax,orobliteratedidentifying information),makesitdifficultorimpossibletofullyanalyze(files,information.)Atleastonefile (#2)containedaVerificationofEmploymentpurportedtobesignedbyJoeGuaracino;however thesignaturedoesnotappeartomatch,furthermorehewasneverinHRwiththepolice department,andperthefaxheader,andthefaxcamefromAeroPartsfurthersupportthat thedocumentswerenotlegitimate. Closingdocumentsappeartohavebeensignedbytheactualborrowers[referstoallloans.]Did notethatthefinal1003applicationssignedatclosingappeartobeverysmallwhichwouldhave madeitdifficulttoreadanythingonthem.[#3,4,5,7,10,11,2033,37,38,4447among others.]Myopinionisthatthisisatacticusedtokeepsomeonefromclearlyunderstandingor readingwhattheyaresigning;itwouldbereasonableforsomeonesigningthesetoassumeif

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theylookedbasicallycorrectthattheycontainedtheactualinformationgiventothebrokerto preparethem.Itisapersonsresponsibilitytoknowwhattheyaresigning,butitappearsonall theloansborrowerswerepresentedwithsomethingthatappearstobeintentionallydesigned tomakeithardtoread.Furthermore,theclosingprogresswasandstillisafairlyquickprocess, withmosttitlecompaniesallowing3060minutestocloseanormalloan,duringwhichreams ofpaperarepresentedforsignature;sufficienttimeisNEVERprovidedtoreadalldocuments beingsigned. Conclusion:TheBrokers(MattGulla/ReneRodriguez)appeartohavecreated,engineeredor otherwisemodifiedthedocumentsundertheircontrolsotheycouldmaketheloansandthereforebe paid;includingtheoriginalapplication,initialdisclosures,finalapplication,verificationdocumentsand leases.Theborrowersdidnotcreatethedocumentsandinmostcasesdidnotsignthemorpresent them;closingdocumentswereapparentlysignedbytheborrowersineachfile,butwithoutfull understandingofwhattheyweresigningduetohowtheywerepresented.(I.e.noonereadsclosing documents.) Itappearssomeoneotherthantheborrowerssignedtheoriginalapplicationanddisclosures,to enabletoBrokerstosubmitandobtainapprovaloftheloans.[Appliedtoallloans]. Borrowersdonotcreatethedocuments.Underwritingandprocessingformsfromthebroker andlenderthosedocumentsarenevercreatedbyborrowerorbyanyrealtor,orundertheir control. Nothinginfileindicatesmostinitialdocumentswereevenseenbyborrowerssignatures,ifany ontheoriginationdocuments;donotappeartobethesignatureoftheborrowers. Traditionally,documentsarepresentedfairlyquicklyandpeopleareaskedtosignthematthe bottomwithabriefexplanationofwhattheyaresigning.Theopportunitytoreadthe documentsisgivenbutsinceitwouldtakehourstoactuallydothat,peoplearegivencopiesof thedocumentstotakewiththemwiththeadmonitiontoreadlaterifyouwish.Withthe exceptionofmaindocuments(Note,Mortgage&HUD1)allotherdocumentsareusually referredtoasjunkdocsandnoemphasisisplacedonreviewingthemwiththeborrower,just gettingthemsigned. Inmyopinion,theBrokersandinsomecasestheTitleCompanyparticipatedtogetherto encouragetheborrowerstojustsignthedocumentstoclosetheloan,asneitherBrokernor Titlegetspaidifuntiltheloancloses. Alsoformedopinionsthatthereweremultipleidentifiedareaswherethelender/underwriter/ reviewerhadopportunitiestonoticediscrepanciesindocumentationoritemsprovidedbythe brokerand/ortitlecompany. In my experience, the lending community was so hungry for loans during this time, and so convincedthatvalueswerenevergoingtodrop,thatsolongasthesecurity(property)forthe loan appeared to be correctly valued, and the borrowers were real living people, they didnt look at much else. Companies were stressed and busy, staff was in many cases overloaded and/or inexperienced, and if a loan appeared to fit the parameters of the program it was

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submitted for, it wasapproved and closed. The Brokers (like Matt Gulla and Rene Rodriguez) wholearnedwhatthoseexpectedparameterswereandhowtofitaloanintoit,madeatonof money.Itappearsfromlookingatthefilesthattheydidwhatevertheyhadtodotogetaloan approved,whetheritwasthetruthornot. After reviewing these files and documents, I also think that the Brokers Matt Gulla and Rene Rodriguez,sawJoeasapotentialforagreatpartnerwhodidntknowalotandapparentlygrew totrustthemastheexperts.Hehadagoodexperiencebuyinghomeswiththem.Theygothim whatheneededloansandthentheygothisfamilyandfriendsloans.Likealotofpeople,I thinkhetrustedthemtodotherightthingandtrustedthattheyknewwhattheyweredoing. 2. OwnerOccupancyCertification(appliestoallreviewedloansexceptthosethatactuallywere owneroccupied) Actualcertificationiscontainedinmortgagedocuments(paragraph#6ofmost mortgages);borrowerisgenerallyalsoaskedtosignaseparateowneroccupancy affidavit.Theaffidavitindicatesthattheborrowerwilloccupythepropertyashis/her primaryresidencewithin60daysofclosingandremaininoccupancyforatleastone year;intheeventofarefinanceitconfirmsthepropertyiscurrentlyowneroccupied. However,inallcases,theclauseinthemortgageindicatesthattheborrowermaynotify thelenderofthechangetorequestconsenttonotoccupy,permissionforwhichshall notbeunreasonablywithheld(forexample,intheeventthatitisnecessarytolive elsewhereduetodisability,ormovingforajob,orsomething)ornotifythemofno longerlivingintheproperty;theyarealsoexcusedfromitforextenuating circumstancesforexampleillnessthatforcesthemtoliveelsewhere,ortheproperty notbeinghabitable. Therecoursegiventhelenderintheeventtheoccupancyclauseisbreachedisspelled out:thelendermaycalltheloandueandpayable,ortheymayincreasetherateto whatitwouldhavebeenforanonoccupantloanbuttheydonotHAVEtodoanyof thosethings,anditisstrictlyunderthecontrolofthelenderwhethertodoanyofthose things. Conclusionandopinion:Traditionally,mostlendershavedonenothing(iftheyevennoticed)so longaspaymentscontinuedtobemadeontime.Theborrowersonlyliabilityistopaythe higherrateifimposed,and/orpayanycostsincurredbythelenderdirectlyrelatedtothe occupancychange.Itisverydifficulttoproveintentsomostlendersdonttrysolongasthe loaniscurrent. 3. PricingtoBenefitofBrokersnotborrowers Ireviewedtheprogramsthattheloanswereplacedinto,aswellasthepricing.Itwastothebenefitof thebrokerstoportraytheloanstothelendersasowneroccupiedbecausethepricingtothem(the

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broker)wasfarmorefavorable.Bluntlytheymademoremoneybypretendinganinvestmentpurchase (whichtheycouldchargetheborrowermorefor&placeatahigherrate,withthejustificationthatyou chargedmoreforinvestmentproperties(whichisstillthecase)BUTsincetheytoldthelenderitwasan owneroccupiedproperty,itwastheBROKER(nottheborrowers)whomadeadditionalmoney.[Applies toallfilesreviewed] BrokersandTitlecompanycombinedmadeapproximately$15,000perloanonaverage.[appliestoall loansreviewed] Investmentpropertieswere(&are)associatedwithhigherinterestrates,higherfees,andless favorableterms.Bytellingthelendersthatthepropertieswereowneroccupied,thebrokers wereabletogetloansapprovedwheretheymightnothave,hadtheaccurateloanportrait beengiventothelender. Appearsthatinsomecasesborrowerswereplacedinahigherriskloan(interestonlywitha prepaymentpenalty)whentheywouldhavequalifiedforalessriskyloanwithbetterterms(for example,#7&#15).Theseloanspaidmoretothebrokerduetohavingahigherratethan predominateatthetime,plushavingaprepaymentpenalty. Borrowersweregiventheequivalentoflessfavorabletermsforwhattheborrowerknewitwas aninvestmentproperties(interestrates,points,fees)bythebrokers;thebrokersthen portrayedtheloantotheLendersasowneroccupied,andwereabletoobtainhigherpayments tothemselvesasaresultofsellinghigherratesandadditionalfeeitems Onactualowneroccupiedloans,borrowersmayhavebeenabletoobtainmorefavorableterms buttheBrokerappearstohavedirectedthemtoaloanclassthatpaidmoretotheBroker(a versionofsteering,whichisnowformallyillegalbutinmyopinionconfirmsthattheBrokerwas takingadvantageoftheseborrowers.)[#8,15,21,37] Someoftheloanscarried35yearprepaymentpenaltyclauses,whichalsogarneredhigherfees forthebrokersandwereriskierfortheborrowers(whosincetheyintendedtosellthe propertieswithinafewyears,automaticallywouldhavehadtopaytheassociatedpenaltiesat thetimeofsale.)

4. Escrowholdbacks/repairfunds: ReviewedtheholdbacksdonethroughtheTitleCompany.32outofthe53filesIreviewedhad holdbacksvaryingfromafewthousanddollarsto$300,000.(Allbut2,7,8,12,13,22,23,24,26,28,34, 42,44,47,53,55,64,65,66) Holdbackswereoftencommonatthattimeforrepairsorcompletion,forexampleof landscapingorapoolthatwasnotyetdoneatthetimeofclosing. Holdbacksarenotillegalandinfactaredoneallthetimetopayoutstandingliensorotheritems pendingafinalamount,orinthecaseofcompletionescrowsasnotedabove.

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Theproblemisifitisunknowntolender,i.e.ifnotportrayedinpurchaseagreementand presentedtothelender,thenaholdbackchangesthestructureoftheloan.

ConclusionsandOpinions: Inthecaseoftheholdbacksonthesefiles,mostofthemappearedontheoriginalpurchase agreement(whichwasgiventothebrokerandthetitlecompany. TheBrokerapparentlyprovidedanalteredversiontotheLenderwhensendinginthefile,soLender wasnotawareofthem,andborrowerswouldnothavebeenawarethattheBrokerwasnothonest withtheLender.(Forexample,in#4&#16,amongotherfiles.) Theholdbackwasvariouslyidentifiedasanescrowholdback,secondpayofforothervariation ontheHUD1statement. AppearsallHUD1swereapprovedbylendersbuttheyobviouslywerenotlookingtooclosely atthemortheywouldhavequestionedlargeholdbacksorpayoffsthatdidnotshowasan obligationonthetitlereport.Opinionhereisthatlendersweresoanxioustocloseloansthat theywerenotlookingforanythingbeyondwhattheirchecklistaskedfor. Joeorotherborrowerswouldnothaveknownthatthelenderhadbeengivenanaltered purchasecontract,asthatwasoutoftheirscopeorcontrol. Aslongasaloanclosedandfunded,theywouldhavebeenunawareofhowtheloanwas processed,submitted,underwritten,orapproved,andwouldnothavebeenawareofany closingorpostclosingitemsorrequirements.[appliestoall32oftheholdbackfilesreviewed]

Additionalobservationsontherepairfunds:Appearsthetransactionswerestructuredtoallowforthe purchaseandrehabilitationofolder,solidhomestobeupgradedandmodernized.Thereareactually loansthatarestructuredtodothis,mostnotablyFHA203Kloans,however,theyaremostlyforowner occupiedpropertiesandyoucanreallyonlygetoneperperson.Itappearsthatthewaytheseloans werestructuredmimicstherehabloanwhereyouwindupwithoneloanthatcoverspurchaseand rehabcosts. Afterlookingattheplansandbefore&afterpicturesoftheproperties,itdoesappearthatasubstantive amountofrehabilitationwascompletedonthe32propertieswithholdbacks,aswellasonsomeofthe otherproperties.Myopinionthereforeisthattheborrowerswerenottryingtoripofffundsthey wereactuallyintendingtobuyandrehabilitateproperties,whichtheydidinmostcases;rentthemout forayearortwo,andthensellthemataprofit,whichtheyalsodidinmostcases.Only12ofthe58 loansreviewedwerenotsold.Somewere,asthemarketdeclined,soldatalowerlevelordistresssale, andsomearestillheld.Itisnotillegaltobuyaproperty,fixitup,andsellithopefullyforaprofit.Lots ofpeopletriedtodothatduringtheboomtimes,andcontinuetodothat. Itisonlyillegalifyouobtainagovernmentrelatedloanaspartofthetransactionandyoudonttellthe Lenderthetruthaboutthetransaction;inthiscase,itappearsitwasnottheborrowerswhowere

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behindnottellingthetruthtotheLenders,itwastheBrokerswhocreatedandsubmittedthe documentsandapplications,andapparentlytoldtheborrowersthisishowtogettheloanyouwantfor theproperty. Opinion:Mostborrowersgotoaspecialisttotellthemhowtodosomething,andiftheygettoldhere iswhatyouneedtodotheyusuallyfollowthosedirections.Atbest,theborrowers,includingJoe Guaracino,wereinadvertentparticipantswhobelievedtheiradvisors;atworst,theywerevictimstooas itappearstheywerechargedalotofmoneytogettheseloans. QuitClaims AppliestoallloanswithQuitClaims(forreviewedloansthisincludesmostexceptthosewhereJoe Guaracinowasontitleinitially,#3,19,20,37,38,47,65.) ConclusionsandOpinion: 1. QuitClaimsarenotillegal.Theyaresimplyawayofadding(orremoving)someonefromTitle ofaproperty.(Usuallydonetoaddaspouseorparentsmayaddachildforestatepurposes,for example.) 2. QCsaresignedbythepartyassigningtheinterestintheproperty.Theyarenotsignedbythe personbeinggiveninterest.(Forexample,JoewasQuitClaimedontotitlefor#7&#9among others;hedidnotsigntheQuitClaimdocument,itwassignedbytheownerandthenrecorded.) 3. AllQuitClaimsonthesetransactionswererecordedafterthemortgagetransaction,sometimes monthsafterwards.Thisappearstohavebeendonesothelenderwouldnothaveoriginally seenthatanotherpartywasaddedtotitleiftheydidaQualityControlreviewwithinthefirst fewmonthsaftertheloanclosed,aslendersaresupposedtodoforapproximately10%oftheir production. Conclusions&Opinions: Inmyopinion,someoneelsecameupwiththisidea.WhenItalkedtoJoeaboutit,he(even recently)keptcallingitaQuickClaim.Ihadtoexplainthatwhileitisfast,itiscalledaQUITclaim. Ifhedoesntevenknowwhatitis,howcouldhehavepossiblythoughtthisup?Ireallydoubtthat hewasbehindallthis. Again,theproblemisnottheQuitClaimitself,itisthefactthatthelenderwasnotmadeawareof theexistenceoftheintenttoshareownership.HadJoesimplybeenputonTitleatclosing,there wouldhavebeennoneedforaQuitClaim. Borrowerswouldnothaveintentionallycausedaloantobedueandpayableappearsthiswas someoneelsesidea.Infact,recordingaQuitClaimafterthemortgagewasrecordedtechnically

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puttheborrowersinaworseposition,becausehadtheLendernoticedit,theloancouldhavebeen calleddueandpayableonthespot,sincetheMortgagedocumentcontainsaclausethatallowsthe lendertocalltheloanifownershipchanges,andaQuitClaim,evenwiththeoriginalownersstaying ontitle,isachangeofownership.