Motion for Order to Publish in Hsbc Bank Usa, National Association, In Its Capacity As Trustee Of Nomura Home Equity Loan, Inc., Asset Backed Certificates, Series 2007-2 v. Nomura Credit & Capital, Inc.| Trellis.Law

On January 30, 2013 a Exhibit,Appendix was filed involving a dispute between Hsbc Bank Usa, National Association, In Its Capacity As Trustee Of Nomura Home Equity Loan, Inc., Asset Backed Certificates, Series 2007-2, and Nomura Credit & Capital, Inc., for Commercial Division in the District Court of New York County.

Preview
FILED: NEW YORK COUNTY CLERK 08/04/2022 12:56 PM INDEX NO. 650337/2013
NYSCEF DOC. NO. 1833 RECEIVED NYSCEF: 08/04/2022

Cooper 2006-FM2
Report
FILED: NEW YORK COUNTY CLERK 08/04/2022 12:56 PM INDEX NO. 650337/2013
NYSCEF DOC. NO. 1833 RECEIVED NYSCEF: 08/04/2022

Tel: 703-893-0600 8401 Greensboro Drive, Suite 800
Fax: 703-893-2766 McLean, VA 22102
www.bdo.com

SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
NOMURA HOME EQUITY LOAN, INC., SERIES
2006-FM2, pursuant to a Pooling and Servicing Index No. 653783/2012
Agreement, dated as of October 1, 2006, by HSBC
BANK USA, NATIONAL ASSOCIATION, solely in IAS Part 60
its capacity as the Trustee,
Justice Marcy S. Friedman
Plaintiff,

-against-

NOMURA CREDIT & CAPITAL, INC.,

Defendant.

NOMURA CREDIT & CAPITAL, INC.,

Third-Party Plaintiff,
Third Party Index No.
-against- 595352/2014
WELLS FARGO BANK, N.A. and OCWEN LOAN
SERVICING, LLC,

Third-Party Defendants.

Expert Report of Thomas D. Cooper, CPA
BDO USA, LLP
January 8, 2020

HIGHLY CONFIDENTIAL
FILED: NEW YORK COUNTY CLERK 08/04/2022 12:56 PM INDEX NO. 650337/2013
NYSCEF DOC. NO. 1833 RECEIVED NYSCEF: 08/04/2022

Table of Contents

I. SUMMARY OF QUALIFICATIONS ........................................................................................... 3

II. SCOPE OF ENGAGEMENT ........................................................................................................ 4

III. SUMMARY OPINION .................................................................................................................. 8

IV. BACKGROUND.......................................................................................................................... 10

A. The Mortgage Loans In The NHELI 2006-FM2 Trust .................................................................. 10
B. The Relevant Provisions Of The PSA ............................................................................................ 10

V. WARREN’S ANALYSIS ............................................................................................................ 14

VI. WARREN’S ANALYSIS IS UNRELIABLE.............................................................................. 19

A. If Nomura Provided Ocwen And Wells Fargo With Prompt Notice,
They Would Have Earned Less Compensation Than They In Fact Earned .................................. 19
B. Warren Improperly Includes Mortgage Loans
In His Damages Calculation That Were Active ............................................................................. 20
C. Warren Erroneously Includes Mortgage Loans In His
Damages Calculation That Were Never Serviced by Ocwen ......................................................... 21
D. Warren’s Reliance On Snow’s Sampling Is Fundamentally Flawed ............................................. 22
E. Warren Failed To Account For Ocwen’s Additional Servicing Compensation ............................. 25
F. Warren Failed To Properly Account For The Costs
Associated With The Servicing Of The Mortgage Loans .............................................................. 35
G. Warren’s Conclusion That Ocwen Would Have Earned An 18% Yield Is Unsupportable .......... 36

VII. CONCLUSION ............................................................................................................................ 39

APPENDIX A --- EXPERIENCE & QUALIFICATIONS

2
FILED: NEW YORK COUNTY CLERK 08/04/2022 12:56 PM INDEX NO. 650337/2013
NYSCEF DOC. NO. 1833 RECEIVED NYSCEF: 08/04/2022

I. SUMMARY OF QUALIFICATIONS

1. I am a Managing Director and Atlantic Lead for BDO USA, LLP (“BDO”)1 Forensic

Accounting and Investigation’s practice. I received a Bachelor of Science degree in

Economics as well as Accounting from Purdue University. I have also received my

Master of Business Administration from the University of Notre Dame. I am a

licensed CPA in the state of Virginia.

2. I have over 20 years of experience in the financial services industry, providing

accounting, auditing, business advisory, and litigation support services. As a

Managing Director, I oversee engagements involving securities litigation, regulatory

compliance reviews, and monitorships. I have also led financial statement audits for

mortgage companies such as, but not limited to, Federal Home Loan Bank of

Indianapolis, Northern Trust, Irwin Mortgage, and Bank One. I served as the lead

Director drafting new mortgage servicing standards for the Monitor of the National

Mortgage Settlement, who oversaw the nation’s largest banks/mortgage servicers’

compliance with the new standards for mortgage servicing, including loan

modifications for distressed borrowers. In addition, I was the lead advisor assisting

the monitors overseeing residential mortgage-backed securities (“RMBS”)

settlements for Bank of America, Morgan Stanley, Goldman Sachs, and the Royal

Bank of Scotland. Prior to joining BDO’s Forensic Accounting and Investigations

practice, I was a Director in BDO’s assurance practice where, for approximately five

years, I assisted the Federal Deposit Insurance Corporation (the “FDIC”) in

1
BDO is a national professional services firm providing assurance, tax, and advisory services to private and publicly-
traded businesses.

3
FILED: NEW YORK COUNTY CLERK 08/04/2022 12:56 PM INDEX NO. 650337/2013
NYSCEF DOC. NO. 1833 RECEIVED NYSCEF: 08/04/2022

performing mortgage servicing compliance reviews related to their Shared Loss

Agreements.

3. Prior to joining BDO, I was a consulting Senior Manager with Ernst & Young and an

assurance Manager with PriceWaterhouseCoopers. I have also been employed as an

Internal Audit Vice President at Fannie Mae where I was responsible for the audit of

the accounting, capital markets, financial models, and various risk groups. In

addition, I held an officer level position at Sallie Mae, where I oversaw the loan

reporting and the analysis group responsible for the allowance for loan loss, analysis

of loan servicing operations, and calculation of net interest margins. A copy of my

curriculum vitae is attached to this report as Appendix A.

II. SCOPE OF ENGAGEMENT

4. I have been retained through BDO by Constantine Cannon LLP (“Counsel”), Counsel

for the Defendant and Third-Party Plaintiff, Nomura Credit & Capital, Inc.

(“Nomura”) to provide expert testimony in connection with litigation involving

HSBC Bank USA, National Association (“HSBC” or the “Trustee”), Nomura, Ocwen

Loan Servicing, LLC (“Ocwen” or the “Servicer”),2 and Wells Fargo Bank, N.A.

(“Wells Fargo” or the “Master Servicer”).

5. HSBC, in its capacity as Trustee for the Nomura Home Equity Loan, Inc. (“NHELI”)

Asset-Backed Certificates, Series 2006-FM2 (“NHELI 2006-FM2 Trust” or the

“Trust”) brought the instant action against Nomura (the “First-Party Action”).

Nomura served as the “sponsor” of a residential mortgage-backed securitization

through which the Trust was created. In that role, Nomura purchased and aggregated

2
“Ocwen” is also used to refer to Ocwen Financial Corporation. Ocwen Loan Servicing, LLC is an operating
company of Ocwen Financial Corporation. See, e.g., Ocwen 2006 Form 10-K at Ex. 21.0.

4
FILED: NEW YORK COUNTY CLERK 08/04/2022 12:56 PM INDEX NO. 650337/2013
NYSCEF DOC. NO. 1833 RECEIVED NYSCEF: 08/04/2022

mortgage loans originated by third-party originators that were ultimately deposited

into the Trust. The Trust initially contained 5,714 conventional, one-to-four family

fixed and adjustable rate Mortgage Loans secured by first or second liens on

residential real properties (the “Mortgage Loans”).

6. As is common in RMBS securitizations, the Trust issued “certificates,” which were

offered to investors. Certificateholders received distributions derived from principal

and interest collected in connection with the Mortgage Loans.

7. The securitization transaction was governed by two contracts: (i) the Pooling and

Servicing Agreement, among NHELI, Nomura, Equity One, Inc. (“Equity One” or,

together with Ocwen, the “Servicers”), Wells Fargo, and HSBC, dated as of October

1, 2006 (the “PSA”); and (ii) the Mortgage Loan Purchase Agreement, between

Nomura and NHELI, dated October 31, 2006 (the “MLPA”).

8. In the MLPA, Nomura made certain representations and warranties regarding specific

characteristics of the Mortgage Loans (the “Representations”). In the First-Party

Action, the Trustee alleges that some of the Mortgage Loans in the Trust did not

comply with certain of those Representations.3

9. Nomura commenced a related third-party action against Ocwen and Wells Fargo, in

their respective roles as Servicer and Master Servicer for the Mortgage Loans in the

Trust (the “Third-Party Action”).4 In the Third-Party Action, Nomura alleges, inter

alia, that Ocwen and Wells Fargo breached their obligations under the PSA by (i)

failing to provide prompt written notice to Nomura upon discovery of breaches of

Representations that materially and adversely affected the interests of the

3
See Amended First-Party Complaint, dated November 26, 2019.
4
See Third-Party Complaint, dated August 26, 2014 (“Third-Party Complaint”).

5
FILED: NEW YORK COUNTY CLERK 08/04/2022 12:56 PM INDEX NO. 650337/2013
NYSCEF DOC. NO. 1833 RECEIVED NYSCEF: 08/04/2022

Certificateholders; and (ii) failing to service and administer the Mortgage Loans in

the Trust in the best interest of and for the benefit of the Certificateholders in

accordance with PSA.5

10. Ocwen and Wells Fargo asserted counterclaims against Nomura in the Third-Party

Action alleging that Nomura breached its obligation to notify them that certain of the

Mortgage Loans did not comply with the Representations.6 Ocwen and Wells Fargo

further allege that they “suffered damages” as a result.7 And, in its counterclaims,

Wells Fargo alleges that Nomura’s purported failure to notify “reduced the

compensation that Wells Fargo would have received but for Nomura’s failure to

comply with its obligation to notify Wells Fargo.”8

11. In an effort to quantify their alleged damages, Ocwen and Wells Fargo retained

Samuel Warren (“Warren”) to analyze “whether and to what extent Ocwen and Wells

Fargo, in their respective roles as Servicer and Master Servicer, suffered losses

resulting from the underperformance of the Mortgage Loans in the Allegedly

Breaching Loan Population.”9

12. The “Allegedly Breaching Loan Population” was identified by the following experts

engaged by HSBC: Robert W. Hunter (“Hunter”), John A. Kilpatrick, Ph.D.

5
See Third-Party Complaint, ¶¶ 43-67.
6
See Ocwen Answer, Affirmative Defenses, and Counterclaims, dated August 3, 2018 (“Ocwen Counterclaims”),
¶¶ 31-38; Wells Fargo Answer and Affirmative Defenses to Third-Party Complaint and Counterclaims, dated August
3, 2018 (“Wells Fargo Counterclaims”), ¶¶ 27-34.
7
Ocwen Counterclaims, ¶ 37; Wells Fargo Counterclaims, ¶ 33. Both Ocwen and Wells Fargo have also asserted a
Cause of Action for declaratory relief against Nomura requesting “that the Court enter an order declaring that
Nomura is barred from obtaining the reliefsought from” Ocwen and Wells Fargo to the extent of Nomura’s
purported failure to provide Ocwen and Wells Fargo “with notice as provided for by the PSA.” Ocwen
Counterclaims, ¶ 41; Wells Fargo Counterclaims, ¶ 37.
8
Wells Fargo Counterclaims, ¶ 33.
9
See Expert Report of Samuel Warren, dated July 8, 2019 (“Warren Report”), ¶ 11.

6
FILED: NEW YORK COUNTY CLERK 08/04/2022 12:56 PM INDEX NO. 650337/2013
NYSCEF DOC. NO. 1833 RECEIVED NYSCEF: 08/04/2022

(“Kilpatrick”), Peter D. Rubinstein, Ph.D. (“Rubinstein”), and Karl N. Snow, Ph.D.

(“Snow”).10 Warren extrapolated his conclusions regarding the Allegedly Breaching

Loan Population to the “Extrapolated Allegedly Breaching Loan Population.”11

13. I have been retained by Counsel for Nomura to evaluate the opinions asserted by

Warren with respect to the alleged losses Ocwen and Wells Fargo incurred as a result

of Nomura’s purported failure to provide them with notice that certain of the

Mortgage Loans breached the Representations.12 My report does not assume or

accept the assumption that Nomura breached its Representations, nor am I opining

with respect to any of the opinions offered by the other HSBC experts designated in

the First-Party Action. It is my understanding that Nomura objects to the opinions

offered in the reports of each of HSBC’s experts and Nomura’s other experts have

and/or will be addressing the opinions contained therein.

14. My work has been performed in accordance with the American Institute of Certified

Public Accountants consulting standards.13

15. This report was prepared by me, supported by BDO personnel and Covius Real Estate

Services working under my supervision and direction. It sets forth my opinions and

conclusions in this matter based on the information available to me through the date

of this report.

16. BDO is being compensated for the time that I spend working on this matter at a billing

rate of $650 per hour plus reasonable out-of-pocket costs incurred. BDO is also being

compensated for the services of its professional staff at billing rates ranging from

10
See Warren Report, ¶¶ 4-8.
11
Warren Report, ¶ 26; see also Warren Report, ¶¶ 30, 32-34, 36-37, 40-47, 56-57.
12
See Ocwen Counterclaims, ¶¶ 31-38; Wells Fargo Counterclaims, ¶¶ 27-34.
13
I have not been retained to perform an audit, review, or compilation of any financial statements.

7
FILED: NEW YORK COUNTY CLERK 08/04/2022 12:56 PM INDEX NO. 650337/2013
NYSCEF DOC. NO. 1833 RECEIVED NYSCEF: 08/04/2022

$215 to $550 per hour. BDO’s fees are not contingent upon the opinions I express

nor the results of this matter.

17. My work in this matter is ongoing, and I reserve the right to amend, modify, or

supplement my analysis and opinions, including if new information becomes

available to me which bears on my opinions or conclusions contained herein.

III. SUMMARY OPINION

18. The basis of Ocwen and Wells Fargo’s claim is that Nomura failed to notify the other

parties to the PSA of its breaches of the Representations.14 As a result of this

purported failure to notify, Ocwen and Wells Fargo contend that they suffered

damages in the form of earning less than they would have earned had Nomura

provided such notice.15 In making this claim, Warren assumed that Nomura, in fact,

breached its Representations.16 Nomura’s other experts have concluded that there is

no basis for such an assumption and this report does not make such assumption.

19. Even if HSBC establishes that Nomura breached the Representations, Ocwen and

Wells Fargo have, nevertheless, failed to demonstrate that they earned less than they

otherwise would have. The PSA provides, and Ocwen and Wells Fargo recognize,17

that the sole remedy as against Nomura should it breach the Representations is for

Nomura to cure the breach, repurchase the Mortgage Loan, or, in certain limited

circumstances, substitute a new mortgage loan for the breaching Mortgage Loan.18

Warren does not offer an expert opinion or cite to any evidence to the effect that, had

14
See Ocwen Counterclaims, ¶¶ 31-38; Wells Fargo Counterclaims, ¶¶ 27-34.
15
See Ocwen Counterclaims, ¶ 37; Wells Fargo Counterclaims, ¶ 33.
16
See Warren Report, ¶¶ 11, 22.
17
See Ocwen Counterclaims, ⁋ 35; Wells Fargo Counterclaims, ⁋ 22.
18
See PSA § 2.03(c) at pp. 91-93.

8
FILED: NEW YORK COUNTY CLERK 08/04/2022 12:56 PM INDEX NO. 650337/2013
NYSCEF DOC. NO. 1833 RECEIVED NYSCEF: 08/04/2022

Nomura provided the requisite notice, it would have done anything other than

repurchase the Mortgage Loans in question. And, as more fully demonstrated below,

if Nomura had repurchased the Mortgage Loans in the Allegedly Breaching Loan

Population or in the Extrapolated Allegedly Breaching Loan Population, Ocwen and

Wells Fargo would have earned less money than they in fact earned.

20. Nor does Warren address the fact that the PSA does not guarantee Ocwen and Wells

Fargo any set amount of income. Rather, the income to which they were entitled was

dependent on a host of factors, including, but not limited to, the number of borrowers

who pre-paid their Mortgage Loans, the number of Mortgage Loans that defaulted,

the time it took to foreclose on properties, and the time it took to sell “real estate

owned” or REO properties. Even if, however, Nomura’s alleged failure to provide

notice afforded Ocwen and Wells Fargo with a basis for damages, Warren’s analysis

suffers from the following fundamental flaws:

 Warren improperly includes Mortgage Loans in his damages calculation
that are active;

 Warren erroneously includes Mortgage Loans in his damages calculation
that were never serviced by Ocwen;

 Warren’s use of Snow’s sampling results was improper;

 Warren fails to account for all of the servicing and default related fees that
Ocwen earned;

 Warren failed to account for the actual servicing costs in connection with
the servicing of the Mortgage Loans; and

 Warren’s use of an 18% discount rate is improper.

9
FILED: NEW YORK COUNTY CLERK 08/04/2022 12:56 PM INDEX NO. 650337/2013
NYSCEF DOC. NO. 1833 RECEIVED NYSCEF: 08/04/2022

IV. BACKGROUND

A. The Mortgage Loans In The NHELI 2006-FM2 Trust

21. At inception, the Trust contained 5,714 conventional, one-to-four family fixed and

adjustable rate Mortgage Loans secured by first or second liens on residential real

properties with an aggregate principal balance at issuance (“Issuance Balance”) of

$1,228,042,345.19 The 5,714 Mortgage Loans consisted of two pools with 3,891

fixed and adjustable-rate Group I Mortgage Loans (“Loan Group I”) and 1,823 fixed

and adjustable-rate Group II Mortgage Loans (“Loan Group II”).20

22. Equity One, through its subservicer affiliate Popular Mortgage Servicing, Inc.

(“Popular” or, together with Equity One and Ocwen, “Servicer”), was the original

Servicer of all the Mortgage Loans in the Trust.21 By February 2007, Equity One,

through Popular, was servicing 1,994 Mortgage Loans, with Litton Loan Servicing,

Inc. (“Litton” or, together with Equity One, Ocwen, and Popular) becoming the

Servicer for remaining Mortgage Loans.22 Ocwen subsequently acquired Litton and,

effective September 2011, Litton transferred the servicing rights to Ocwen.23

B. The Relevant Provisions Of The PSA

23. PSA § 2.03(c) provides that if a Servicer discovers a breach of the origination-related

representations and warranties that materially and adversely affects the interests of

19
See Prospectus Supplement for the NHELI 2006-FM2 Trust, dated October 30, 2006 (the “Prospectus
Supplement”) at p. S-2.
20
See Prospectus Supplement at pp. S-12-13.
21
See PSA § 1.01 at p. 66 (Servicer).
22
See Wells Fargo, (as Master Servicer) February 26, 2007 loan-level data file and Wells Fargo (as Master Servicer
and Servicer) February 26, 2007 distribution report obtained from https://www.ctslink.com.
23
See, e.g., OCW_FM2_002841895; see Wells Fargo (as Master Servicer) November 25, 2011 loan-level data file
reports obtained from https://www.ctslink.com; see also Warren Report, ¶ 10. As of September 2011, Popular was
no longer servicing loans in the Trust.

10
FILED: NEW YORK COUNTY CLERK 08/04/2022 12:56 PM INDEX NO. 650337/2013
NYSCEF DOC. NO. 1833 RECEIVED NYSCEF: 08/04/2022

the Certificateholders, that Servicer must provide the parties to the PSA with prompt

notice of the breach.24 Nomura then has a certain amount of time during which to

cure, repurchase, or, if the breach occurs within the first two years of the Trust, to

substitute the Mortgage Loan at issue.25 The PSA further provides that Nomura’s

obligation to cure, repurchase, or replace such Mortgage Loan is the sole remedy as

against Nomura.26

24. Pursuant to PSA § 3.01, Servicers are retained to provide services in connection with

the underlying assets within the Trust. Specifically:

[T]he Servicer shall service and administer the Mortgage Loans on behalf
of the Trust Fund and in the best interest of and for the benefit of the
Certificateholders (as determined by the Servicer in its reasonable
judgment) in accordance with the terms of this Agreement and the
Mortgage Loans and to the extent consistent with such terms and in
accordance with and exercising the same care in performing those
practices that the Servicer customarily employs and exercises in servicing
and administering mortgage loans for its own account and of the same
type as such Mortgage Loans in the jurisdiction where the related
Mortgaged Property is located (including, compliance with all applicable
federal, state and local laws).27

Consistent with the foregoing, each Servicer “shall seek the timely and complete

recovery of principal and interest on the Mortgage Notes related to the Mortgage

Loans”28 and, in effect, minimize realized losses passed onto the Certificateholders

of the Trust.

25. Unlike investors, who earn returns based on risk assumed, servicers are compensated

for providing these services and do not receive a premium for assuming more risk.

24
See PSA § 2.03(c) at pp. 91-93.
25
See PSA § 2.03(c) at p. 91.
26
See PSA § 2.03(c) at p. 93.
27
PSA § 3.01 at p. 100.
28
PSA § 3.01 at p. 100.

11
FILED: NEW YORK COUNTY CLERK 08/04/2022 12:56 PM INDEX NO. 650337/2013
NYSCEF DOC. NO. 1833 RECEIVED NYSCEF: 08/04/2022

26. PSA § 3.10 provides that the Servicers are compensated for servicing and

administering the Mortgage Loans within the Trust as follows:

As compensation for its activities hereunder, the Servicer shall be entitled
to retain or withdraw from the Custodial Account out of each payment of
interest on each Mortgage Loan serviced by it included in the Trust Fund
an amount equal to the Servicing Fee. In addition, the Servicer shall be
entitled to recover any unpaid Servicing Fees payable to it out of
Liquidation Proceeds, Insurance Proceeds or condemnation proceeds
related to the Mortgage Loans serviced by the Servicer to the extent
permitted by Section 3.27.29

27. This monthly Servicing Fee is defined in the PSA as 1/12th of the Servicing Fee Rate

which is further defined as 0.50% per annum multiplied by the “Stated Principal

Balance” of each Mortgage Loan.30

28. The Servicer is entitled to the Servicing Fee for each month that a Mortgage Loan

remains in the Trust until the Mortgage Loan is liquidated, regardless of whether the

Mortgage Loan is performing.31 Servicing Fees that are not paid to the Servicers

while a Mortgage Loan is in default are reimbursed to the Servicer by the Trust to the

extent that such unpaid Servicing Fees are not otherwise recoverable from

“Liquidation Proceeds, Insurance Proceeds or other amounts received with respect to

any Liquidated Loan….”32

29. Pursuant to PSA § 3.10, Servicers are also entitled to the following additional

servicing compensation:

Excess Liquidation Proceeds, assumption fees, late payment charges,
insufficient funds charges and ancillary income to the extent such fees or
charges are received by the related Servicer, all income and gain net of

29
PSA § 3.10 at p. 109.
30
See PSA § 1.01 at pp. 64-65 (Servicing Fee and Servicing Fee Rate); see also PSA § 1.01 at p. 65 (Stated Principal
Balance).
31
PSA § 3.10 at p. 109. Once a Mortgage Loan has been charged off, the Servicer is no longer entitled to the
Servicing Fee. See PSA § 3.09(a) at p. 107.
32
PSA § 3.27(a)(v) at p. 122; see also PSA § 3.10 at p. 109.

12
FILED: NEW YORK COUNTY CLERK 08/04/2022 12:56 PM INDEX NO. 650337/2013
NYSCEF DOC. NO. 1833 RECEIVED NYSCEF: 08/04/2022

any losses realized from Permitted Investments with respect to funds in or
credited to the related Custodial Account shall be retained by the Servicer
to the extent not required to be deposited in the Custodial Account
33
pursuant to Section 3.27.

30. PSA §§ 3.27(a)(iii) and (v) also entitle the Servicers to reimbursement of “Servicing

Advances” which are defined as:

[a]ll customary, reasonable and necessary “out of pocket” costs and
expenses (including reasonable legal fees) incurred … in the performance
by the Servicer of its servicing obligations hereunder, including, but not
limited to, the cost of (i) the preservation, restoration, inspection,
valuation and protection of a Mortgaged Property, (ii) any enforcement
or judicial proceedings, including foreclosures, … (iii) the management
and liquidation of any REO Property (including, without limitation,
relator’s commissions), (iv) compliance with any obligations under
Section 3.07 hereof to cause insurance to be maintained, (v) payment of
taxes, (vi) obtaining broker price opinions and (vii) obtaining any legal
documentation required to be included in the Mortgage File and/or
correcting any outstanding title issues … reasonably necessary for the
Servicer to perform its obligations under this Agreement. Servicing
Advances also include any reasonable “out of pocket” cost and expenses
(including legal fees) incurred by the Servicer in connection with
executing and recording instruments of satisfaction, deeds of
reconveyance or Assignments to the extent not recovered from the
Mortgagor or otherwise payable under this Agreement.34

31. PSA § 4.01 addresses the administration and master servicing of the Mortgage Loans

and specifies the oversight responsibilities of Wells Fargo as Master Servicer as it

relates to the Trust. Pursuant to PSA § 4.01:

[t]he Master Servicer shall supervise, monitor and oversee the obligation
of the Servicer to service and administer the Mortgage Loans in
accordance with the terms of the Agreement, as applicable, and shall have
full power and authority to do any and all things which itmay deem
necessary or desirable in connection with such master servicing and
administration. In performing its obligations hereunder, the Master
Servicer shall act in a manner consistent with Accepted Master Servicing

33
PSA § 3.10 at pp. 109-110; see also PSA § 3.26(b) at p. 120 (“payments in the nature of late payment charges or
assumption fees, if collected, need not be deposited” in the Custodial Account by the Servicer; if, however, they are,
the related Servicer may withdraw such payments).
34
PSA § 1.01 at p. 64 (Servicing Advances); see also PSA § 3.09(a) at p. 107; PSA § 3.11(c) at p. 104; PSA §§
3.27(a)(iii) and (v) at pp. 121-122.
The “Nonrecoverable Advances” referenced in PSA § 3.27(a)(iii) are defined in
the PSA to include Servicing Advances. See PSA § 1.01 at p. 44 (Nonrecoverable Advances).

13
FILED: NEW YORK COUNTY CLERK 08/04/2022 12:56 PM INDEX NO. 650337/2013
NYSCEF DOC. NO. 1833 RECEIVED NYSCEF: 08/04/2022

Practices. Furthermore, the Master Servicer shall oversee and consult
with the Servicer as necessary from time-to-time to carry out the Master
Servicer's obligations hereunder, shall receive, review and evaluate all
reports, information and other data provided to the Master Servicer by
the Servicer and shall enforce each Servicer’s obligation to perform and
observe the covenants, obligations and conditions to be performed or
observed by the Servicer under this Agreement. The Master Servicer shall
independently and separately monitor the Servicer's servicing activities
with respect to each Mortgage Loan, reconcile the results of such
monitoring with such information provided in the previous sentence on a
monthly basis and coordinate corrective adjustments to the Servicer's and
Master Servicer's records, and based on such reconciled and corrected
information, provide such information relating to the Mortgage Loans to
the Securities Administrator as shall be necessary to enable it to prepare
the statements specified in Section 5.06 and any other information and
statements required to be provided by the Securities Administrator
hereunder. The Master Servicer shall reconcile the results of its Mortgage
Loan monitoring with the actual remittances of the Servicers to the
Distribution Account.35

32. Pursuant to PSA § 4.12, the Master Servicer receives a monthly Master Servicing Fee

defined as 1/12th of the Master Servicing Fee Rate which is further defined as

0.0110% per annum multiplied by the State Principal Balance of each Mortgage

Loan.36

V. WARREN’S ANALYSIS

33. Assuming the validity of the conclusions and purported findings of HSBC’s other

experts in the First-Party Action, including those of Snow, Warren purports to analyze

“whether and to what extent Ocwen and Wells Fargo, in their respective roles as

Servicer and Master Servicer, suffered losses” based on the assumption that the

Mortgage Loans in the Allegedly Breaching Loan Population underperformed.37

35
PSA § 4.01 at p. 130; see also PSA § 4.02 at p. 131 (“The Master Servicer shall be responsible for monitoring the
compliance by the Servicer with its duties under this Agreement.”).
36
See PSA § 1.01 at p. 38 (Master Servicing Compensation, Master Servicing Fee and Master Servicing Fee Rate);
PSA § 1.01 at pp. 62-63 (Stated Principal Balance); PSA § 4.12 at p. 136.
37
Warren Report, ¶ 11; see also Warren Report, ¶¶ 22-25, 32, 36.

14
FILED: NEW YORK COUNTY CLERK 08/04/2022 12:56 PM INDEX NO. 650337/2013
NYSCEF DOC. NO. 1833 RECEIVED NYSCEF: 08/04/2022

34. Snow selected samples from four subpopulations of the Mortgage Loans in the Trust.

Specifically, after setting aside the Loan Group I and II Mortgage Loans that had paid

in full by January 31, 2016, Snow divided the remaining Mortgage Loans in each

Loan Group by those Mortgage Loans in the Trust that he contends “were charged

off in full for accounting purposes with a loss of greater than or equal to $100 and

that had not been repurchased as of January 31, 2016” (the “Loan Group I Liquidated

Loans” and the “Loan Group II Liquidated Loans”), and the Mortgage Loans in the

Trust that he contends “were neither charged off, nor paid in full, nor repurchased by

Nomura as of January 31, 2016” (the “Loan Group I Active Loans” and the “Loan

Group II Active Loans”).38

35. Snow then claims that he drew a random combined sample from each of the foregoing

four subgroups of 1,100 Mortgage Loans (the “1,100 Primary Sample Loans”) broken

down as follows: (i) 325 Loan Group I Liquidated Loans; (ii) 300 Loan Group II

Liquidated Loans; (iii) 275 Loan Group I Active Loans; and (iv) 200 Loan Group II

Active Loans.39

36. Snow also drew a corresponding back-up sample of 150 Mortgage Loans from each

of the four subgroups in the 1,100 Primary Sample Loans “to be used to replace any

Mortgage Loans in the corresponding Primary Samples that … Hunter determined

could not be properly underwritten.”40 Snow stated, however, that “Hunter never

38
See Second Amended Expert Report of Karl N. Snow, Ph.D., dated December 26, 2018 (the “Second Amended
Snow Report”), ¶ 13.
39
See Second Amended Snow Report, ¶ 54.
40
Second Amended Snow Report, ¶ 55.

Case Info

Judge

Melissa Anne Crane Track Judge’s New Case

Case No.

(Subscribe to View)

Document Filed Date

August 04, 2022

Case Filing Date

January 30, 2013

County

Parties

CHERNOV, JOEL A Attorney for the Defendant
CRANER, MATTHEW LAWRENCE Attorney for the Defendant
Darden Restaurants Attorney for the Plaintiff
DELUCIA, EILEEN MONAGHAN Attorney for the Plaintiff
DEMAY, BRENDON THOMAS Attorney for the Plaintiff
DUNOGUE, AGNES Attorney for the Defendant
EBERSOLE, JOSHUA TIMOTHY Attorney for the Defendant
Freedom Trust 2011-2 Non Party
GIUDICE, LAUREN NICOLE Attorney for the Plaintiff
HEALY, DWIGHT A. Attorney for the Plaintiff
HEIDLAGE, BENJAMIN FREDERICK Attorney for the Plaintiff
Holwell Shuster & Goldberg LLP Attorney for the Plaintiff
HOPPIN LEGAL, PLLC Attorney for the Plaintiff
HOPPIN, MARGARET BARRINGER Attorney for the Plaintiff
HOSCHANDER, JEFFREY DAVID Attorney for the Defendant
HSBC BANK USA, NATIONAL ASSOCIATION, in its capacity as Trustee of Nomura Home Equity Loan, Inc., Asset Backed Certificates, Series 2007-2 Plaintiff
ISRAELI, AVI BRIAN Attorney for the Plaintiff
KAHN, DANIEL AARON Attorney for the Defendant
KLEBAN, DAVID SAMUEL Attorney
NELSON, MEREDITH JAYNE Attorney for the Plaintiff
NOMURA CREDIT & CAPITAL, INC. Defendant
Olifant Fund, Ltd., FFI Fund Ltd., and FYI Ltd. Non Party
ORDWAY, DEMIAN ALEXANDER Attorney for the Plaintiff
SELENDY GAY ELSBERG PLLC Attorney for the Plaintiff
SHOLL, HANNAH SUZANNE Attorney for the Plaintiff
SHUSTER, MICHAEL STEVEN Attorney for the Plaintiff
STOVALL, AMIANNA Attorney for the Defendant
SULLIVAN, DANIEL MARTIN Attorney for the Plaintiff
TEPLIN, STEPHANIE ANN Attorney
UNGAR, DORIT Attorney for the Plaintiff
JAYANT TAMBE Attorney
HOWARD SIDMAN Attorney
JULIET BUCK Attorney
ZACHARY MAZIN Attorney
ABDALLAH SALAM Attorney
WILLIAM FOLEY Attorney
JOSEPH BOYLAN Attorney
LERON THUMIM Attorneys for Plaintiffs
TOBY FUTTER Attorneys for Plaintiffs
JOHN ANSBRO Attorneys for Defendants
Richard Jacobsen Attorneys for Defendants
KATHERINE MACO Attorneys for Defendants
ELISABETH MUELLER Attorney
KATHERINE STOLLER Attorney
PHILIPP SMAYLOVSKY Attorney
ALVIN LI Attorneys for Plaintiffs
NATHAN MONROE-YAVNEH Attorneys for Plaintiffs
CHRISTOPHER JOHNSON Attorney
COURTNEY STATFELD Attorney
AYANA RIVERS Attorney
KAREN SEBASKI Attorneys for Plaintiffs
CEALAGH FITZPATRICK Attorney
MATTHEW MOORE Attorney
ADAM GOLDSTEIN Attorney
KEISHA JAMES Attorney
BLAIR KAMINSKY Attorney
DANIEL GOLDBERG Attorney
NEIL LIEBERMAN Attorney
COLIN FITZPATRICK Attorney
ANDREW BREIDENBACH Attorney
ANGELA GIL Attorney
ADAM KIRGIS Attorney
NADIA KLEIN Attorney
DANIEL FLEMING Attorney
DAVID MARK Attorney
KALITAMARA MOODY Attorney
ROBERT SCHEEF Attorney
JOSEPH FRANK Attorney
DAVID SCHIEFELBEIN Attorney
JACK CHEN Attorney
ASHLEY HAMMETT Attorney
LANI PERLMAN Attorneys for Plaintiffs
CASEY HOWARD Attorney
FRED KNOPF Attorneys for Plaintiffs
HARRIS BERKMAN Attorneys for Plaintiffs
LARA ROMERO Attorney
MATTHEW WARGIN Attorney
PAUL LEVINSON Attorneys for Plaintiffs
CINDY MCBENNETT Attorney
JONATHAN KOPPELL Attorneys for Plaintiffs
EMILY SCHULTZ Attorney
MICHAEL FAY Attorney
RACHEL GUPTA Attorney
JANE BYRNE Attorney
D. TRICE Attorney
HOLLY ENGELMANN Attorneys for Plaintiffs
MARTHA PAMPEL Attorney
NANCY PRAHOFER Attorney
PARUL BHATIA Attorney
AMANDA DOLLINGER Attorney
JOHN PAUL Attorney
MARK SULLIVAN Attorneys for Plaintiffs
MICHAEL CARLINSKY Attorney
MARK ZAUDERER Attorney
CRAIG SINGER Attorney
JASON COHEN Attorneys for Defendants
BARAK STEINER Attorney
MICHAEL ONUFER Attorney
JEAN KIM Attorney
BRUCE CLARK Attorneys for Defendants
WILLIAM PORTER Attorney
JONAH PERLIN Attorney
NOAH WEISSMAN Attorney
DORIT BLACK Attorneys for Plaintiffs
CARLA BROWN Attorney
DAVID WOLLMUTH Attorney
JAY HANDLIN Attorney
Ronald Aranoff Attorney
SAMANTHA GLAZER Attorney
PAUL RUGANI Attorneys for Defendants
JENNY KIM Attorneys for Defendants
THOMAS EGLER Attorneys for Plaintiffs
STEPHEN POSS Attorneys for Plaintiffs
WILLIAM BRADY Attorneys for Plaintiffs
Christopher Johnson Attorney
JAMES SERRITELLA Attorney
JARED SIEGEL Attorney
BRENDAN CARROLL Attorney
ANDREW SPILLANE Attorney
LAUREN WEINSTEIN Attorney
BRIAN WEINSTEIN Attorney
JENNIFER DELGADO Attorney
ALEXANDRA DROZ Attorney
JEFFREY SCOTT Attorney
Michael Ware Attorney
PAMELA MILLER Attorney
MONIQUE GAYLOR Attorney
DANIEL GIMMEL Attorney
STEPHEN SELTZER Attorney
MARIA DA SILVA Attorney
Andrew Benard Attorney
CHRISTOPHER FONTENELLI Attorney
EARL KNOTT Attorneys for Plaintiffs
MICHAEL SCHUSTER Attorneys for Plaintiffs
Erik Haas Attorneys for Plaintiffs
BARRY LEVIN Attorneys for Defendants
DAVID WOLL Attorneys for Defendants
MARY VYSKOCIL Attorneys for Defendants
Brian Weinstein Attorneys for Defendants
ELISABETH GRIPPANDO Attorneys for Defendants
ERIK HAAS Attorneys for Plaintiffs
John Ansbro Attorneys for Defendants
DANIEL BROCKETT Attorneys for Plaintiffs
PHILIPPE SELENDY Attorneys for Plaintiffs
PENNY SHANE Attorneys for Defendants
Darrell Cafasso Attorneys for Defendants
MATTHEW LIPPERT Attorneys for Defendants
ANDREW BRAUNSTEIN Attorney
William Foley Attorney
EVAN STEIN Attorney
RICHARD LANDAU Attorney
JONATHAN KOPP Attorney
MICHELLE PARTHUM Attorneys for Plaintiffs
MATTHEW CORMACK Attorneys for Defendants
DANIEL MAGY Attorneys for Defendants
LESLEY CHEN Attorneys for Defendants
DAVID KISTENBROKER Attorney
DANIEL HENDLER Attorney
Christopher Malloy Attorney
P. JOHNSON Attorneys for Plaintiffs
ALEX COHEN Attorneys for Defendants
RYAN NELSON Attorneys for Defendants
PETER SHAKRO Attorneys for Defendants
JORDAN BOTJER Attorneys for Defendants
NATHANIEL BRONSTEIN Attorneys for Defendants
ELIZABETH CURRAN Attorney
ALEXANDER SHAPIRO Attorney
Henry Ricardo Attorneys for Plaintiffs
CORBAN RHODES Attorneys for Plaintiffs
JOEL BERNSTEIN Attorneys for Plaintiffs
LAUREN MOSKOWITZ Attorneys for Defendants
HENRY NEWMAN Attorney
RICHARD KIM Attorney
JAMES BOYLAN Attorney
DAVID HOLAHAN Attorney
William Russell Attorney
Isaac Rethy Attorney

For full print and download access, please subscribe at https://www.trellis.law/.

Exhibit,Appendix: Hsbc Bank Usa, National Association, In Its Capacity As Trustee Of Nomura Home Equity Loan, Inc., Asset Backed Certificates, Series 2007-2 v. Nomura Credit & Capital, Inc.

Preview

Related Topics

Case Info

Parties