1.  1.  Wells Fargo’s Duties to (1) Notify the Warrantors and Other  Parties to the Governing Agreements When It Discovers a  Breach of the R&Ws; and (2) Enforce the Warrantors’  Obligations to Cure, Substitute or Repurchase Defective  Mortgage Loans   1.  Wells Fargo Discovered No Later than April 13, 2011 that the  Covered Trusts’ Warrantors Breached Their R&Ws, Thus  Triggering Wells Fargo’s Duty to Enforce the R&W Claims   1.  Wells Fargo Failed to Notify the Warrantors and Other Parties to  the Governing Agreements of R&W Breaches and Failed to  Enforce the Warrantors’ Obligations to Cure, Substitute or  Repurchase Mortgage Loans Breaching the Warrantors’ R&Ws, as  Required by the Governing Agreements and the TIA ...............................72   1.  Wells Fargo’s Duties to (1) Notify the Warrantors and Other  Parties to the Governing Agreements When It Discovers a Breach  of the R&Ws; and (2) Enforce the Warrantors’ Obligations to  Cure, Substitute or Repurchase Defective Mortgage Loans ......................19   2.  Wells Fargo’s Duties upon the Occurrence of Servicer Events  of Termination   2.  Wells Fargo’s Duties upon the Occurrence of Servicer Events of  Termination ................................................................................................21   2.  Wells Fargo Had Actual Knowledge of SEOTs No Later than April  13, 2011, Thus Triggering Its Duties to Act Under the Governing  Agreements and the TIA ............................................................................46  a.  Shortly After the Covered Trusts Were Formed, Wells  Fargo Became Aware of Widespread Loan Servicing  Abuses, and by the End of October 2010, Wells Fargo  Learned that the Master Servicers and Servicers Were  Committing SEOTs as to the Mortgage Loans in the  Covered Trusts ...............................................................................49  b.  By April 13, 2011, There Was No Doubt that Wells Fargo  Had Actual Knowledge that the Covered Trusts’ Master  Servicers and Servicers Had Committed SEOTs with  Respect to the Mortgage Loans in the Covered Trusts ..................58  c.  After April 2011, Wells Fargo Had Actual Knowledge that  the Master Servicers and Servicers Were Continuing to  Commit the Same SEOTs and Were Also Committing New  and Additional SEOTs with Respect to the Mortgage Loans  in the Covered Trusts .....................................................................64  d.  Wells Fargo Also Knew that Successor Servicer Ocwen  Was Committing SEOTs ................................................................64   2.  Wells Fargo Failed to Perform Its Duties with Respect to SEOTs  as Required by the Governing Agreements and the TIA ...........................74   3.  Wells Fargo’s Heightened Duty to Prudently Protect Plaintiff’s  and the Class’s Interests as Though They Were Wells Fargo’s  Own Interests During an SEOT   3.  Wells Fargo Failed to Exercise All of Its Rights and Duties Under  the Governing Agreements as a Prudent Person Would, as  Required by the Governing Agreements and the TIA ...............................76   3.  Wells Fargo’s Heightened Duty to Prudently Protect Plaintiff’s and  the Class’s Interests as Though They Were Wells Fargo’s Own  Interests During an SEOT ..........................................................................23   34.  The Warrantors that sold the Mortgage Loans that were ultimately transferred into the  Covered Trusts engaged in a nearly identical securitization process that was repeated thousands of  times by them and others during 2006 and 2007, the time period when the Mortgage Loans were  originated, warranted and transferred to the Covered Trusts.  Investor demand for RMBS was  skyrocketing during this period, and the Warrantors and other RMBS securitizers were hard pressed  to meet that demand.  RMBS securitizations proliferated during 2006 and 2007, and were extremely  profitable for all involved in their sale.  Hundreds of billions of dollars of RMBS were packaged and  sold to the investing public, and billions of dollars in profits were pocketed by the Warrantors, Master  Servicers/Servicers and other securitizers, including Wells Fargo.  In addition, Wells Fargo also  profited handsomely, and continues to profit, from the explosion in RMBS trusts caused by the  skyrocketing sales, as it is an RMBS trustee to hundreds of RMBS trusts, including the Covered  Trusts.   35.  RMBS securitizations involve the conversion of thousands of illiquid residential  mortgage loans like the Mortgage Loans into bond-like instruments – the RMBS certificates at issue  herein – which trade over the counter in capital markets.   37.  Typically, after aggregating the Mortgage Loans, the Warrantors then grouped the  Mortgage Loans into large pools, which they then sold and transferred to the Covered Trusts’  “Depositors” for ultimate transfer to the Covered Trusts and Wells Fargo as Trustee.  In many cases,  the Depositors were shell companies related to the Warrantors and/or Master Servicers/Servicers.   These sales from the Warrantors to the Depositors were typically accomplished via agreements called  “Mortgage Loan Purchase Agreements” or similarly titled agreements (collectively, the “MLPAs”).   38.  The Governing Agreements refer to and incorporate the MLPAs.  In the Governing  Agreements and/or MLPAs, the Warrantors: (i) make numerous R&Ws concerning the credit quality  and characteristics of the Mortgage Loans and vouch for the accuracy of all data they provide about  the Mortgage Loans; (ii) promise to cure, substitute or repurchase Mortgage Loans that do not comply  with those R&Ws; and (iii) typically state that the Trustee will ultimately have the right to enforce the  R&Ws against the Warrantors.   39.  After the Mortgage Loans are sold and transferred from the Warrantors to the Covered  Trusts’ Depositors, the Depositors then transfer the Mortgage Loans, along with the rights to enforce  the Warrantors’ R&Ws, to the Trustee for the benefit of plaintiff and the class, and in exchange, the  Trustee transfers the RMBS certificates to the Depositors.   4.  Wells Fargo’s “Duty of Trust” to Avoid Conflicts of Interest  with Plaintiff and the Class   4.  Wells Fargo’s “Duty of Trust” to Avoid Conflicts of Interest with  Plaintiff and the Class ................................................................................24   4.  Wells Fargo Failed to Discharge Its Common Law Duty of Trust  Owed to Plaintiff and the Class .................................................................76  E.  Plaintiff and the Class Have Suffered Significant Damages Due to Wells  Fargo’s Breaches of the Governing Agreements and Common Law and Its  Violations of the TIA .............................................................................................77  F.  Plaintiff May Sue Wells Fargo as Trustee .............................................................79  V.  41.  After the Covered Trusts’ securitizations are closed and their RMBS certificates are  sold to investors, the Mortgage Loans must be serviced.  Thus, the Governing Agreements designate  certain entities to be the Master Servicers and/or Servicers of the Mortgage Loans and require that  they service the Mortgage Loans legally, and with the same degree of skill and care as “prudent”  loan servicers.  Whenever a Master Servicer/Servicer fails to ensure the legal and “prudent” servicing  of the Mortgage Loans, a “Servicer Event of Termination,” or SEOT, occurs and the Trustee is  required to take certain actions to protect plaintiff and the class when it becomes aware of the event.   42.  Plaintiff’s and the class’s RMBS certificates entitle them to the cash flows generated  by the Mortgage Loans.  The Covered Trusts, as with other RMBS trusts, are structured such that the  risk of loss is divided among different “classes” or “tranches” of RMBS in each Covered Trust.  Each  class or tranche of the Covered Trusts has a different level of credit risk and reward (the interest or  yield), including different levels and types of credit enhancement or protection, and different  priorities to payment from the cash flows generated by the Mortgage Loans (the payment priority and  distribution is called the payment “waterfall”).  Because the classes/tranches have different credit  enhancements and different priorities of claim to the cash flow, they are assigned different credit  ratings by the credit rating agencies and they sell at different yields or coupons.  However, nearly all  of the classes/tranches of the RMBS are required to be rated as “investment grade” securities by a  credit ratings agency before they can be sold.  As previously alleged, the credit ratings agencies  require that the Warrantors make R&Ws, and they base their credit ratings of the RMBS certificates  on such R&Ws.   44.  The Governing Agreements set forth Wells Fargo’s powers and its duties to plaintiff  and the class.  The Covered Trusts are governed by PSAs (Pooling and Servicing Agreements) or TAs  (Trust Agreements), and related agreements such as the MLPAs (Mortgage Loan Purchase  Agreements) and/or SAs (Servicing Agreements), which the PSAs and TAs reference and incorporate  when relevant.  The Governing Agreements for each Covered Trust are substantially similar to one  another and impose substantially similar duties on Wells Fargo.  Accordingly, the ABFC 2006-OPT1  PSA (Exhibit A hereto) is used as a representative example of the Governing Agreements for both of  the Covered Trusts.   45.  While the Governing Agreements set forth the powers and responsibilities of Wells  Fargo, the TIA supplements the Governing Agreements.  The TIA was enacted in 1939 because  Congress recognized that previous abuses by trustees had adversely affected investors and the  national interest.  In enacting the TIA, Congress desired to ensure that there were certain minimum  federal protections available to investors, which are deemed to be incorporated into the Governing  Agreements.  Those minimum protections are discussed infra at ¶¶59-62.   48.  The Warrantors’ R&Ws are specifically referenced in the Governing Agreements,  along with the Warrantors’ obligations to cure, substitute and/or repurchase any defective Mortgage  Loans.  See ABFC 2006-OPT1 PSA §2.03(a).   49.  Importantly, the Governing Agreements also provide that whenever Wells Fargo  discovers a breach of a Warrantor’s R&W concerning a Mortgage Loan that materially affects  plaintiff and the class, Wells Fargo “shall promptly notify” the breaching Warrantor and other parties  to the Governing Agreement.  ABFC 2006-OPT1 PSA §203(a).  Thereafter, the breaching Warrantor  is required to promptly “cure such breach.”  Id.  If the Warrantor fails to cure the breach within a  specified time, then “the Trustee shall enforce such [Warrantor’s] obligation . . . under the [MLPA]  and cause such [Warrantor] to repurchase such Mortgage Loan” or “substitute” a new loan in its  place.  Id.   5.  Wells Fargo’s Duties and Obligations Under the TIA   5.  Wells Fargo’s Duties and Obligations Under the TIA ...............................25  C.  The Covered Trusts Suffer from Serious Defects Because Wells Fargo  Failed to Perform the Duties Required of It Under the Governing  Agreements, the TIA and Common Law ...............................................................26   51.  Wells Fargo also has obligations under the Governing Agreements and TIA whenever  it learns of Servicer Events of Termination (or SEOTs) by a Master Servicer or Servicer.4  Under the  Governing Agreements, an SEOT by a Master Servicer or Servicer occurs whenever there is any  failure by the Servicer [or Master Servicer, as applicable] . . . duly to observe or  perform, in any material respect, any . . . covenants, obligations or agreements of  the Servicer [or Master Servicer] as set forth in this Agreement, which failure  continues unremedied for a period of 30 days, after the date . . . on which written  notice of such failure, requiring the same to be remedied, shall have been given to  the Servicer [or Master Servicer], by the Trustee . . . .  ABFC 2006-OPT1 PSA §7.01(a)(ii).   53.  In order to properly, legally and “prudently” service the Mortgage Loans pursuant to  the Governing Agreements, the Master Servicers and Servicers must, inter alia: (1) ensure that the  payments by borrowers are properly and legally collected and promptly submitted to the Covered  Trusts; (2) ensure that timely and legal notices are sent to borrowers; (3) ensure that appropriate  insurance is in place when required; (4) ensure that accurate information about the Mortgage Loans is  maintained; (5) ensure that the Covered Trusts’ “REO” properties5 are properly maintained; and  (6)  ensure that the Mortgage Loans are legally, prudently and properly modified or foreclosed when  necessary.  See generally ABFC 2006-OPT1 PSA, Art. III, §§3.01-3.31.   55.  Because the failure to properly service the Mortgage Loans, or report breaches of the  Warrantors’ R&Ws, is so harmful to plaintiff, the class and the Covered Trusts, when Wells Fargo  becomes aware of an SEOT it is required by the Governing Agreements to act quickly.  Thus, upon  becoming aware of an SEOT, Wells Fargo is required by the Governing Agreements and TIA: (1) to  notify the offending Master Servicer or Servicer of its SEOT and require its cure (ABFC 2006-OPT1  PSA §7.01(a)(ii)); and (2) to give notice of uncured SEOTs to plaintiff and the class.  Id. §7.04(b);  see also 15 U.S.C. §77ooo(b).  In addition, if the offending Master Servicer or Servicer does not cure  the SEOT within the prescribed period of time, the Governing Agreements give Wells Fargo the  power to terminate and replace the offending Master Servicer or Servicer, or take over its servicing  duties.  See ABFC 2006-OPT1 PSA §§7.01(b), 7.02(a).   57.  Moreover, this heightened duty is not limited or applied only to Master  Servicers’/Servicers’ SEOTs.  Instead, under the Governing Agreements, once an SEOT exists,  “[Wells Fargo] shall exercise” all of the “rights and powers vested in it by th[e] [Governing]  Agreement[s],” not just those pertaining to the Master Servicers/Servicers.  Id.  Thus, Wells Fargo’s  heightened duty of care also requires it to prudently enforce the R&W claims against the  Warrantors as though Wells Fargo were seeking to protect its own interests.   59.  The TIA imputes certain terms into the Governing Agreements to protect investors.   The TIA imposes two sets of duties and obligations on Wells Fargo – one set “prior to default,” and  the other set “in case of default,” much like the Governing Agreements.   60.  Under the TIA, prior to a default, a Trustee must perform “such duties as are  specifically set out in” the Governing Agreements.  15 U.S.C. §77ooo(a)(1).  This reflects the  Governing Agreements’ pre-default provisions that require Wells Fargo to “perform such duties and  only such duties as are specifically set forth in this Agreement.”  ABFC 2006-OPT1 PSA §8.01(a).   Thus, prior to a default, the TIA requires Wells Fargo to perform all the duties assigned to it by the  Governing Agreements.   61.  In addition, under the TIA, a Trustee must “give to the indenture security holders . . .  notice of all defaults known to the trustee, within ninety days after the occurrence thereof.”  15 U.S.C.  §77ooo(b) (citing 15 U.S.C. §77mmm(c)).  Thus, Wells Fargo is required to inform plaintiff and the  class of any SEOTs and any other “defaults,” i.e., the Warrantors’ breaches of their R&Ws, within  90 days.   63.  As set forth herein, Wells Fargo is liable to plaintiff and the class for failing to  discharge the duties required of it by the Governing Agreements, the TIA and the common law.  In  addition, all of Wells Fargo’s duties mandated by the Governing Agreements, the common law, and  the TIA as alleged herein were continuing in nature, and required Wells Fargo to continuously  discharge such duties as long as Wells Fargo was Trustee of the Covered Trusts.  When Wells Fargo  discovered R&W breaches by the Warrantors and learned of SEOTs by the Master  Servicers/Servicers, as alleged herein, Wells Fargo was required to act prudently, quickly and  continuously to protect plaintiff and the class.  Wells Fargo utterly failed to act as required, thereby  breaching the Governing Agreements and common law, and violating the TIA, causing plaintiff, the  class and the Covered Trusts to suffer over $740 million in damages.  C.  The Covered Trusts Suffer from Serious Defects Because Wells Fargo  Failed to Perform the Duties Required of It Under the Governing  Agreements, the TIA and Common Law   A.  The Securitization Process for the Mortgage Loans   A.  The Securitization Process for the Mortgage Loans ..............................................15  B.  Wells Fargo’s Duties as Trustee for the Covered Trusts .......................................18   VI.  DERIVATIVE ACTION ALLEGATIONS ......................................................................82  COUNT I .......................................................................................................................................84 