CONTAINS HIGHLY CONFIDENTIAL INFORMATION
VIDEOTAPED DEPOSITION OF:
CYNTHIA SIMANTEL
FRIDAY, AUGUST 24, 2012
9:08 A.M.
VOLUME III
(PAGES 866-1218)
Transcript after the jump
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Transcript after the jump
10:34:04 8 BY MR. CALAMARI:
10:34:06 9 Q. You recall giving testimony to the SEC.
10:34:06 10 Correct?
10:34:09 11 A. Yes.
10:34:09 12 Q. Do you recall when that was?
10:34:13 13 A. When I did the SEC?
10:34:14 14 Q. Yes.
10:34:15 15 A. Not an exact date, no.
10:34:17 16 Q. Was it a few years ago?
10:34:19 17 A. I think so.
10:34:21 18 Q. Would your memory have been better when you
10:34:24 19 gave the SEC testimony?
10:34:26 20 MR. TANDY: Objection.
10:34:28 21 THE WITNESS: Well, it could have been
10:34:29 22 closer to the time frame or, you know, I may have
10:34:31 23 seen something that helped me, you know, a document
10:34:34 24 as far as an org chart or something. So it’s
10:34:36 25 possible.
Q. Do you feel you accurately gave your view
15:32:42 15 about severe unsatisfactory designations to the SEC?
15:32:49 16 A. To the best of my knowl- — yes. I mean,
15:32:51 17 absolutely. I had a ratings grid.
15:53:15 23 MS. BEA: This will be marked as 4035.
15:53:20 24 And just so the record’s clear, this was
15:53:22 25 previously marked in what appears to be the SEC case.
Page 1136
15:53:30 1 MR. CALAMARI: So we’re going to separately
15:53:32 2 mark it.
15:53:33 3 MS. BEA: For purposes of this case, yes.
15:56:04 23 Q. Did you see this document at the SEC
15:56:06 24 deposition, by the way?
15:56:08 25 A. You know, I — I honest- — I just can’t
15:56:10 1 remember.
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
—————————————–x
MBIA INSURANCE CORPORATION,
Plaintiff,
Index No. 08/602825
vs.
COUNTRYWIDE HOME LOANS, INC.,
COUNTRYWIDE FINANCIAL CORP.,
COUNTRYWIDE SECURITIES CORP.,
COUNTRYWIDE BANK, F.S.B., and
BANK OF AMERICA CORP.,
Defendants.
—————————————–x
HIGHLY CONFIDENTIAL
August 29, 2012
9:45 a.m.
Continued Videotaped Deposition of
MICHAEL W. SCHLOESSMANN
17:27:36 15 Q. Did Countrywide make a
17:27:37 16 presentation to the SEC about its repurchase
17:27:39 17 practices in the spring of 2010?
17:27:43 18 MR. BURTON: Objection.
17:27:48 19 A. This note refreshes my
17:27:49 20 recollection that we provided the SEC with
17:27:56 21 some claims related data that they had
17:27:59 22 requested around this time. And I think
17:28:01 23 this email string was developed in
17:28:08 24 connection with us trying to be responsive
17:28:11 25 to that request by the SEC.
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1 MICHAEL SCHLOESSMAN-HIGHLY CONFIDENTIAL
17:28:14 2 Q. Was there a meeting that
17:28:16 3 followed upon the provision of this data?
17:28:19 4 MS. CONCANNON: Objection.
17:28:22 5 A. I’m not sure if a meeting
17:28:26 6 followed this, you know, the production of
17:28:28 7 this data.
17:28:30 8 I do recall personally being
17:28:32 9 involved in a meeting with the SEC around
17:28:36 10 related topics. But I can’t recall when
17:28:40 11 that was, whether it was before or after, or
17:28:43 12 whether it had anything to do with this.
17:28:44 13 Q. Had the SEC requested the
17:28:46 14 meeting?
17:28:47 15 MS. CONCANNON: Objection.
17:28:47 16 A. Pardon me?
17:28:48 17 Q. Had the SEC requested the
17:28:50 18 meeting?
17:28:51 19 A. Yes.
17:28:51 20 Q. And what was the subject of the
17:28:53 21 meeting?
17:28:55 22 A. The rep and warrant process and
17:28:58 23 reserves, including reserves, rather.
17:29:01 24 Q. Do you recall what you
17:29:02 25 presented to the SEC?
17:29:04 2 MS. CONCANNON: Objection.
17:29:08 3 A. I recall having produced a
17:29:12 4 document that we presented to the SEC. The
17:29:17 5 particulars of which I can’t recall
17:29:19 6 specifically.
17:29:22 7 Q. Do you recall whether the SEC
17:29:23 8 had expressed concerns about how Countrywide
17:29:28 9 or Bank of America was processing repurchase
17:29:30 10 demands?
17:29:31 11 MS. CONCANNON: Objection.
17:29:32 12 MR. BURTON: Objection.
17:29:34 13 A. Do I recall concerns expressed
17:29:35 14 by the SEC as to how —
17:29:37 15 Q. Yes.
17:29:38 16 A. I don’t recall them expressing,
17:29:39 17 you know, concerns about the manner in which
17:29:42 18 we were processing the claims.
17:29:50 19 Q. Do you know whether there was
17:29:51 20 any follow-up meeting with the SEC after
17:29:52 21 that?
17:29:57 22 MS. CONCANNON: Objection.
17:29:57 23 A. I can’t recall the sequence of
17:30:00 24 events. I do recall related to a provision
17:30:02 25 of information. I recall a meeting, at
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1 MICHAEL SCHLOESSMAN-HIGHLY CONFIDENTIAL
17:30:05 2 least one meeting with the SEC. I can’t say
17:30:07 3 when it was.
17:30:11 4 There may have been other
17:30:12 5 discussions that I wasn’t a party to. I
17:30:17 6 can’t remember if there was a meeting I
17:30:19 7 participated in other than the one that I
17:30:22 8 recollect.
17:30:26 9 Q. You said there may have been
17:30:27 10 other discussions with the SEC you were not
17:30:30 11 a party to. Do you know in fact whether
17:30:31 12 there were such discussions?
17:30:33 13 A. No.
17:30:39 14 (Deposition Schloessmann
17:30:39 15 Exhibit 4063 for identification, email
17:30:39 16 string dated 4/16/10 production numbers
17:30:39 17 BACMBIA-X 0000017741 through 744.)
17:30:39 18 BY MR. SELENDY:
17:30:39 19 Q. I’d like to mark as
17:30:42 20 Exhibit 4063 a document from Michael Sands
17:30:47 21 to Susan Welsh and yourself listing the top
17:30:52 22 five reasons that we have approved
17:30:56 23 repurchase on the monolines.
17:31:28 24 My first question for you do
17:31:30 25 you know why this document was created?
17:31:34 2 A. Give me just a minute so I can
17:31:36 3 read the string.
17:31:38 4 Q. Yes.
17:32:31 5 A. The string, note from me
17:32:34 6 references a meeting the next day and I
17:32:36 7 can’t remember what the meeting was.
17:32:40 8 Q. That is a meeting with the SEC;
17:32:41 9 is it?
17:32:42 10 A. I can’t recall what the meeting
17:32:46 11 was.
17:32:47 12 Q. Okay. If you look at the
17:32:51 13 second page of the email, at the bottom of
17:32:53 14 your email to Shareef Abdou, among others
17:32:57 15 you say, “James, please work this into a
17:33:01 16 grid for inclusion into the SEC
17:33:04 17 presentation.”
17:33:04 18 Does that help?
17:33:05 19 A. Yes, it does. I overlooked
17:33:06 20 that. I’m sorry.
17:33:09 21 Q. So was this data put together
17:33:11 22 for presentation to the SEC?
17:33:12 23 MS. CONCANNON: Objection.
17:33:16 24 MR. BURTON: Objection.
17:33:22 25 Objection to the extent this contains
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1 MICHAEL SCHLOESSMAN-HIGHLY CONFIDENTIAL
17:33:23 2 privileged information.
17:33:33 3 A. It clearly is indicating the
17:33:35 4 intent to include it in the SEC
17:33:37 5 presentation. So I’m not going to take
17:33:40 6 issue or I don’t have a basis here today to
17:33:42 7 take issue with a note that I sent.
17:33:44 8 Q. Okay. If we go through the
17:33:45 9 chart at the top it lists the top five
17:33:50 10 reasons that Bank of America — does “we”
17:33:56 11 refer to Countrywide or Bank of America, by
17:33:57 12 the way?
17:33:57 13 MS. CONCANNON: Objection.
17:33:58 14 MR. BURTON: Objection.
17:34:01 15 A. Where?
17:34:01 16 Q. If the first sentence “Below is
17:34:05 17 the top five reasons we have approved
17:34:10 18 repurchase on the monolines.”
17:34:11 19 A. I can’t tell you. All I can
17:34:13 20 tell you CHL is the party that consummated
17:34:16 21 all repurchase transactions with respect to
17:34:17 22 the CHL sponsored deals.
17:34:19 23 Q. Okay. For the CHL repurchases,
17:34:21 24 the top five reasons that are listed are in
17:34:25 25 order, income, stated income unreasonable.
17:34:28 2 Misrepresentation, income. Then
17:34:35 3 documentation missing acceptable employment,
17:34:41 4 income documentation. 4, program guidelines
17:34:45 5 violation, LTV, CLTV exceeds guidelines.
17:34:49 6 And 5, documentation, missing sufficient
17:34:52 7 asset documentation.
17:34:53 8 Are those the five the
17:34:54 9 categories?
17:34:55 10 A. That is what is listed in
17:35:04 11 Shane’s email, yes.
17:35:04 12 Q. I take it each of these basis
17:35:06 13 would be a material and adverse breach such
17:35:13 14 that Countrywide Home Loans determined a
17:35:15 15 repurchase was appropriate?
17:35:17 16 MS. CONCANNON: Objection.
17:35:19 17 Q. Is that fair?
17:35:19 18 A. My understanding is to the
17:35:26 19 extent we repurchased loans we would have
17:35:28 20 first satisfied ourselves that the claimant
17:35:33 21 had demonstrated satisfactorily there was a
17:35:37 22 breach and the breach had a material adverse
17:35:40 23 effect consistent with the terms of the
17:35:41 24 contract.
17:35:42 25 I think the mere labeling of
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1 MICHAEL SCHLOESSMAN-HIGHLY CONFIDENTIAL
17:35:43 2 loans with these issues, however does not,
17:35:45 3 it does not necessarily follow because the
17:35:50 4 loans are tagged with this issue they are
17:35:52 5 necessarily repurchases.
17:35:53 6 We have claims in pipeline that
17:35:55 7 would be appropriately or also labeled
17:35:57 8 similarly where the burden was not sustained
17:36:01 9 by the claimant.
17:36:02 10 So, the labels themselves don’t
17:36:04 11 tell you whether you have a breach of
17:36:08 12 materially and adversely effects the
17:36:12 13 investors.
17:36:13 14 Q. These are the top five reasons
17:36:14 15 for which the repurchases were made by
17:36:17 16 Countrywide Home Loans; correct?
17:36:21 17 MR. BURTON: Objection.
17:36:23 18 A. That is what Shane Sands is
17:36:25 19 purporting to convey here based on my
17:36:28 20 request.
17:36:28 21 Q. Is that Michael Sands?
17:36:30 22 A. Yes.
17:36:31 23 Q. Michael Shane Sands, okay.
17:36:32 24 Understood.
17:36:34 25 Therefore if it is categorized
17:36:36 2 in this way the driving reason for the
17:36:41 3 repurchase will be the reason that is listed
17:36:44 4 here in this chart; right?
17:36:47 5 MS. CONCANNON: Objection.
17:36:53 6 A. My experience with the data we
17:36:56 7 capture in our PAT database at the time is
17:37:04 8 that, you know, it is not perfect in that we
17:37:08 9 get claims in that have multiple reasons.
17:37:12 10 There is a judgment made by the
17:37:16 11 person logging in the claims as to primary
17:37:20 12 finding. So it is, you know, I think it is
17:37:25 13 probably directionally correct, but I
17:37:27 14 wouldn’t, you know, suggest that it is
17:37:30 15 perfect because it does require judgment in
17:37:33 16 how someone characterizes an issue might
17:37:35 17 vary from person to person who is logging in
17:37:37 18 claims.
17:37:37 19 It doesn’t impact how the
17:37:39 20 decisioning that that loan is done. It
17:37:43 21 really is more around how the reporting that
17:37:45 22 we’re able, you know, to capture from the
17:37:47 23 data.
17:37:49 24 Q. Okay. I understand there could
17:37:51 25 be multiple defects that give rise to the
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1 MICHAEL SCHLOESSMAN-HIGHLY CONFIDENTIAL
17:37:54 2 determination the loan is eligible for
17:37:55 3 repurchase. Is that basically what you’re
17:37:57 4 saying?
17:37:58 5 MR. BURTON: Objection.
17:37:59 6 A. Yes. In that the data
17:38:00 7 presented here is based on running a data
17:38:05 8 query against the database. And basically
17:38:08 9 identifying loans by their, quote, “primary
17:38:13 10 finding,” unquote type.
17:38:14 11 And that that is — that is
17:38:19 12 itself subjective. So if we put another
17:38:22 13 issue in this primary finding, it may have
17:38:26 14 neglected some loans.
17:38:29 15 Conversely, we may have
17:38:30 16 overstated others. Again, I think it is
17:38:32 17 directionally correct. I just wanted to
17:38:35 18 point out, you know, there are, you know,
17:38:39 19 imperfections, you know, inherent
17:38:42 20 imperfections in the process.
17:38:43 21 Q. Okay. When you refer to
17:38:45 22 primary finding, is that the primary reason
17:38:47 23 why the loan would have been repurchased?
17:38:52 24 A. Typically it, as I understand
17:38:54 25 the process, a primary finding is determined
17:38:59 2 at the time we get the claim. And the
17:39:03 3 information on the claim is input in the
17:39:04 4 system.
17:39:05 5 I also seem to recall that as
17:39:08 6 the claim got processed, if an issue became,
17:39:12 7 you know, that wasn’t identified as a
17:39:14 8 primary became the prominent finding and
17:39:16 9 basis for repurchase, that field would have
17:39:18 10 been updated.
17:39:21 11 I can’t be sure if that in fact
17:39:23 12 is an accurate statement of the process or
17:39:25 13 if in fact it was regularly done. I just
17:39:28 14 don’t have enough specific knowledge around
17:39:31 15 how the data was captured.
17:39:33 16 Q. If you look at the five
17:39:34 17 categories here, would you agree any of
17:39:39 18 these misrepresentations, falling in these
17:39:42 19 categories — strike that.
17:39:43 20 Would you agree any of these
17:39:44 21 problems, whether they are
17:39:48 22 misrepresentations or documentation problems
17:39:51 23 or guideline violations may be sufficient
17:39:56 24 for a breach to be material and adverse?
17:40:01 25 MS. CONCANNON: Objection.
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1 MICHAEL SCHLOESSMAN-HIGHLY CONFIDENTIAL
17:40:06 2 A. Very difficult to say. I think
17:40:08 3 the way I would describe this is, again, go
17:40:12 4 back to the specific representations and
17:40:15 5 warranties we were making on a particular
17:40:20 6 deal and you’re going to have to make that
17:40:24 7 determination based on what facts were
17:40:26 8 demonstrated and whether they amounted to a
17:40:29 9 breach.
17:40:29 10 And I would just say as it
17:40:31 11 relates to your question under — this goes
17:40:34 12 to the inherent imperfections of the data
17:40:37 13 collection process, misrepresentation of
17:40:39 14 income in and of itself is not a basis for
17:40:44 15 repurchase.
17:40:45 16 So often times when we talked
17:40:47 17 about how claims get identified on the
17:40:51 18 system, that — we have some people who
17:40:54 19 input information that may have been a
17:40:55 20 stated income unreasonable, right. That
17:40:59 21 necessarily starts out with proving first of
17:41:01 22 all the income was misstated and secondly
17:41:05 23 misstated income that it was unreasonable.
17:41:07 24 Some of those loans in my
17:41:08 25 experience get categorized in income
17:41:12 2 misrepresentation. So, again, it’s difficult
17:41:14 3 to draw definitive conclusions.
17:41:19 4 I would again say this gives
17:41:21 5 you I think a good directional sense of the
17:41:24 6 claims we saw most often or at least that
17:41:26 7 were the basis for repurchase. But
17:41:29 8 imperfect.
17:41:30 9 Q. So you’re saying that some of
17:41:33 10 the loans listed here as misrepresentation
17:41:36 11 as to income may in fact be stated income
17:41:39 12 unreasonable?
17:41:41 13 MS. CONCANNON: Objection.
17:41:42 14 A. Yeah, where a prerequisite to
17:41:45 15 finding a breach would be first proving that
17:41:47 16 the income was in fact misstated before you
17:41:50 17 even talk about gauging reasonableness of
17:41:53 18 income. That would be the approach we would
17:41:56 19 apply in stated income.
17:41:57 20 Q. Is this how the data was
17:41:58 21 reported to the SEC, do you know?
17:42:00 22 MS. CONCANNON: Objection.
17:42:01 23 Q. In these categories?
17:42:02 24 A. I don’t know.
17:42:03 25 MR. BURTON: Objection.
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1 MICHAEL SCHLOESSMAN-HIGHLY CONFIDENTIAL
17:42:05 2 Q. Okay. I take it, however, for
17:42:06 3 any of these categories they may be
17:42:08 4 sufficient to there to be a material and
17:42:11 5 adverse effect on the loan, even if the loan
17:42:16 6 hadn’t yet defaulted; is that fair?
17:42:18 7 MS. CONCANNON: Objection.
17:42:26 8 A. Are you asking whether any of
17:42:28 9 these loans that we have flagged as
17:42:30 10 repurchases had not yet defaulted?
17:42:32 11 Q. I’m saying any of these
17:42:34 12 categories of problems that were listed as
17:42:39 13 the reasons for which Countrywide approved a
17:42:42 14 repurchase, could be sufficient to
17:42:45 15 constitute a material and adverse effect,
17:42:48 16 even if the loan had not yet defaulted;
17:42:53 17 right?
17:42:53 18 MS. CONCANNON: Objection.
17:42:55 19 A. That’s — I would not
17:42:56 20 characterize it that way. I believe the
17:43:00 21 material and adverse effect requirement in
17:43:05 22 what I believe is all of the pooling and
17:43:08 23 servicing agreements, the governing
17:43:11 24 contracts with respect to the deals the
17:43:13 25 monolines wrapped means something.
