deposition transcript of michael schloessman
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7/30/2019 Deposition Transcript of Michael Schloessman
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ILED: NEW YORK COUNTY CLERK 12/11/2012 INDEX NO. 602825/
YSCEF DOC. NO. 3969 RECEIVED NYSCEF: 12/11/
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7/30/2019 Deposition Transcript of Michael Schloessman
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7/30/2019 Deposition Transcript of Michael Schloessman
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In The Matter Of:
MBIA
INSURANCE
CORPORATION
v.
COUNTRYWIDEHOMELOANS,INC.,etal.
___________________________________________________
MICHAELW.
SCHLOESSMANN
Vol.
3
August29,2012
_________________________________________________
HIGHLY CONFIDENTIAL
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7/30/2019 Deposition Transcript of Michael Schloessman
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c2ec3655-85ea-4ce7-b9a1-c78
HIGHLY CONFIDENTIAL
MICHAEL W. SCHLOESSMANN - 8/29/2012
1-800-325-3376 www.merrillcorp.com/law
Merrill Corporation - New York
Page 825
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK-----------------------------------------xMBIA INSURANCE CORPORATION,
Plaintiff,
Index No. 08/602825vs.
COUNTRYWIDE HOME LOANS, INC.,COUNTRYWIDE FINANCIAL CORP.,COUNTRYWIDE SECURITIES CORP.,COUNTRYWIDE BANK, F.S.B., andBANK OF AMERICA CORP.,
Defendants.-----------------------------------------xHIGHLY CONFIDENTIAL
August 29, 20129:45 a.m.
Continued Videotaped Deposition of
MICHAEL W. SCHLOESSMANN taken by Plaintiff,
pursuant to Notice, at the offices of Quinn
Emanuel Urquhart & Sullivan LLP, 51 Madison
Avenue, New York, New York, before TAMMEY M.
PASTOR, a Registered Professional Reporter,
Certified LiveNote Reporter and Notary Public
within and for the State of New York.
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7/30/2019 Deposition Transcript of Michael Schloessman
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c2ec3655-85ea-4ce7-b9a1-c78
HIGHLY CONFIDENTIAL
MICHAEL W. SCHLOESSMANN - 8/29/2012
1-800-325-3376 www.merrillcorp.com/law
Merrill Corporation - New York
2 (Pages 826 to 829)
Page 826
1
2 A P P E A R A N C E S:3 QUINN EMANUEL URQUHART & SULLIVAN LLP
Attorneys for Plaintiff4 51 Madison Avenue
New York, New York 10010
5BY: PHILIPPE Z. SELENDY, ESQ.
6 -and-SARAH E. TROMBLEY, ESQ.
7 (pselendy@quinnemanuel.com)(Sarahtrombley@quinnemanuel.com)
8
9
GOODWIN PROCTER LLP10 Attorneys for the COUNTRYWIDE Entity
Defendants11 901 New York Avenue, NW
Washington, D.C. 2000112
13 BY: DAVID I. FREEBURG, ESQ.(Dfreeburg@goodwinprocter.com)
14
15
GOODWIN PROCTER LLP16 Attorneys for the COUNTRYWIDE Entity
Defendants
17 Exchange PlaceBoston, MA 02109
18
19 BY: SARAH HEATON CONCANNON, ESQ.(sconcannon@goodwinprocter.com)
20
21
22
23
24
25
Page 827
1
2 APPEARANCES CONTINUED:O'MELVENY & MYERS LLP
3 Attorneys for Bank of America Corp.Times Square Tower
4 7 Times SquareNew York, New York 10036
5
BY: ALLEN W. BURTON, ESQ.6 (aburton@omm.com)7
8 ALSO PRESENT:9
CHRISTOPHER LUCHT, Assistant General Counsel10 MBIA Insurance Corporation1109:15:21 DAVID SANDERS, Videographer
Merrill Legal Solutions12
13
14
15
16
1718
19
20
21
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2509:57:10
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1 MICHAEL SCHLOESSMAN-HIGHLY CONFIDENTIAL
209:57:59 THE VIDEOGRAPHER: Here begins
309:58:00 volume 3, videotape number 13 in the
409:58:05 deposition of Mike Schloessmann.
509:58:09 Today's date is August 29, 2012. The609:58:12 time on the video monitor is 9:58 a.m.
709:58:18 The video operator today is David
809:58:21 Sanders of Merrill Legal Corporation,
909:58:23 225 Varick Street, New York, New York
1009:58:27 10014.
1109:58:28 Counsel please voice identify
1209:58:33 yourself and state whom you represent.
1309:58:36 MR. SELENDY: Philippe Selendy of
1409:58:40 Quinn Emanuel for Plaintiff MBIA. I am
1509:58:41 here with my colleague Sarah Trombley.
1609:58:45 MS. CONCANNON: Sarah Concannon
1709:58:46 of Goodwin Procter on behalf of the
1809:58:47 Countrywide Defendants and the witness,
1909:58:49 Michael Schloessmann. With me is David
2009:58:52 Freeburg also of Goodwin Procter.
2109:58:54 MR. BURTON: Allen Burton from
2209:58:55 O'Melveny & Myers on behalf of
2309:58:57 Defendant, Bank of America Corporation.
2409:58:58 THE VIDEOGRAPHER Please begin.
25
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1 MICHAEL SCHLOESSMAN-HIGHLY CONFIDENTIAL
2
3 MICHAEL SCHLOESSMANN,
4 resumed, having been previously duly
5 sworn, was examined and testified6 further as follows:
709:59:00 CONTINUED EXAMINATION BY MR. SELENDY:
809:59:00 Q. Mr. Schloessmann, welcome back.
909:59:02 A. Thank you.
1009:59:04 Q. You understand you are still
1109:59:05 under oath?
1209:59:06 A. Yes.
1309:59:07 Q. Which companies are you working
1409:59:08 for now?
1509:59:10 MS. CONCANNON: Objection.
1609:59:14 A. I am an employee of Countrywide
1709:59:18 Home Loans.
1809:59:18 Q. Is that the only company you
1909:59:20 are an employee of?
2009:59:20 A. Yes, as an employee I have dual
2109:59:23 officer roles with Bank of America National
2209:59:27 Association, as well as my title at
2309:59:30 Countrywide Home Loans and various other
2409:59:32 Countrywide entities.
2509:59:36 Q. Other than Bank of America
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7/30/2019 Deposition Transcript of Michael Schloessman
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c2ec3655-85ea-4ce7-b9a1-c78
HIGHLY CONFIDENTIAL
MICHAEL W. SCHLOESSMANN - 8/29/2012
1-800-325-3376 www.merrillcorp.com/law
Merrill Corporation - New York
3 (Pages 830 to 833)
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1 MICHAEL SCHLOESSMAN-HIGHLY CONFIDENTIAL
209:59:37 National Association and Countrywide Home
309:59:39 Loans and the other Countrywide entities, do
409:59:41 you have any titles or positions within Bank
509:59:46 of America?609:59:47 A. I don't believe so.
709:59:50 Q. Do you know which company pays
809:59:51 your salary?
909:59:53 A. Countrywide Home Loans.
1009:59:55 Q. Has your title changed since
1109:59:57 you were last deposed in this case?
1209:59:59 A. No, it hasn't.
1310:00:02 Q. What is your current title?
1410:00:03 A. I am Senior Vice President at
1510:00:06 BANA, Bank of America National Association.
1610:00:11 President of Countrywide Home Loans and
1710:00:12 Countrywide Financial Corporation.
1810:00:17 Q. Have your responsibilities
1910:00:18 changed since March of 2011?
2010:00:20 A. Yes.
2110:00:20 Q. In what respect?
2210:00:21 A. In the approximate fourth
2310:00:24 quarter of 2011 I assumed a role more
2410:00:33 focused on resolution strategy and the rep
2510:00:36 and warrant and mortgage insurance space.
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210:00:39 Really resolution strategy and settlement
310:00:42 related.
410:00:43 Prior to that I had managed the
510:00:47 entirety of the rep and warrant or610:00:50 representations and warranties organization,
710:00:52 including the operational infrastructure.
810:00:56 Q. Okay. Is there a name for that
910:00:58 representation and warranties organization
1010:01:01 that you previously managed?
1110:01:02 A. It is currently representations
1210:01:05 and warranties. It was previously referred
1310:01:09 to as workout strategies group also.
1410:01:21 Q. Is there an organizational name
1510:01:22 for the resolution strategy group you're
1610:01:27 managing now?
1710:01:28 A. It is not a group. I'm an
1810:01:29 individual contributor focused on helping
1910:01:33 devise resolution strategies and execute
2010:01:36 settlements in the related space.
2110:01:38 Q. Okay. Who do you report to
2210:01:39 today?
2310:01:40 A. John Dixon.
2410:01:42 Q. What is his title?
2510:01:44 A. John Dixon, I believe is also
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210:01:49 an SVP of BANA. I also believe he is an
310:01:56 employee of Countrywide, although I'm not
410:01:58 sure. And I don't know exactly what his
510:02:02 title is with Countrywide.610:02:03 Q. What are his responsibilities?
710:02:05 A. John basically assumed my
810:02:10 operational role, so he is managing the
910:02:12 representations and warranties organization.
1010:02:16 Which includes the strategy, settlement side
1110:02:19 as well as the operational side.
1210:02:24 Q. Okay. And who reports to you
1310:02:26 today?
1410:02:26 A. As I said, I am an individual
1510:02:29 contributor, so no one reports to me other
1610:02:31 than my administrative assistant.
1710:02:34 Q. All right. When you say you
1810:02:36 are an individual contributor, in what
1910:02:38 capacity are you contributing to the
2010:02:41 resolution organization?
2110:02:42 A. So, I work very closely with
2210:02:47 those in the representations and warranties
2310:02:50 organization helping devise strategies
2410:02:53 around the operational infrastructure, as
2510:02:58 well as resolution strategies which I
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1 MICHAEL SCHLOESSMAN-HIGHLY CONFIDENTIAL
210:03:00 mentioned.
310:03:01 So, you know, whether it is how
410:03:03 we are executing our responsibilities on a
510:03:08 loan level basis or on a more aggregated610:03:12 basis, alternative resolution strategies.
710:03:17 Q. Are there any people that you
810:03:18 tend to work with on a regular basis in that
910:03:23 connection?
1010:03:23 A. Within representations and
1110:03:25 warranties?
1210:03:25 Q. Yes.
1310:03:26 A. I work with quite a number of
1410:03:29 people on a regular basis.
1510:03:32 Q. Who would you identify as
1610:03:34 people you work with most closely?
1710:03:36 A. John Dixon, Sili Jacobson.
1810:03:49 S-I-L-I Jacobson. Do you want the whole
1910:03:51 litany? There are many I interact with
2010:03:52 daily.
2110:03:53 Q. Yes. Let's have the names of
2210:03:54 people you interact with on a daily basis,
2310:03:57 sure.
2410:03:57 A. Josh Cousins. Elizabeth Chen.
2510:04:08 Oleg Kotylar, K-O-T-Y-L-A-R, I believe.
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7/30/2019 Deposition Transcript of Michael Schloessman
7/93
c2ec3655-85ea-4ce7-b9a1-c78
HIGHLY CONFIDENTIAL
MICHAEL W. SCHLOESSMANN - 8/29/2012
1-800-325-3376 www.merrillcorp.com/law
Merrill Corporation - New York
4 (Pages 834 to 837)
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210:04:21 Laurence Howard. By the way, this isn't
310:04:23 necessarily a daily basis. I am having
410:04:26 trouble differentiating those quite possibly
510:04:28 I talk to daily and others that are less610:04:30 frequent.
710:04:32 Patrick Yousef, Y-O-U-S-E-F.
810:04:42 I'm not sure that is an exhaustive list. It
910:04:44 probably is not.
1010:04:49 Q. How did you come to get the
1110:04:50 position of being a contributor to the
1210:04:56 resolution strategies function at BANA?
1310:05:02 A. Pardon me?
1410:05:04 Q. How did you, how were you
1510:05:07 selected for this position to contribute to
1610:05:09 the resolution strategies function?
1710:05:11 A. Okay. It is not BANA. It's
1810:05:17 within Countrywide. I think it occurred a
1910:05:21 couple months after the head of legacy asset
2010:05:24 servicing, Terry Laughlin assumed chief risk
2110:05:29 officer role within the bank. Ron
2210:05:32 Sturzenegger assumed Terry's job.
2310:05:36 And as we continue to monitor
2410:05:38 the evolution of the activity in the
2510:05:41 representations and warranties space and the
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1 MICHAEL SCHLOESSMAN-HIGHLY CONFIDENTIAL
210:05:46 substantial amount of growth, I think there
310:05:49 was a desire to have me focus on an area
410:05:54 that was less operationally intense, you
510:05:57 know, had grown to a group in excess of a610:06:00 thousand employees. And focus on the
710:06:05 transactional strategy related issues while
810:06:07 leveraging John's experience managing, you
910:06:12 know, large organizations.
1010:06:15 Q. When you refer to a thousand
1110:06:16 employees, that's in the workout strategies
1210:06:19 group; is that right?
1310:06:20 A. Now, again, the group is
1410:06:24 referred to as representations and
1510:06:25 warranties, previously workout strategies,
1610:06:28 but, yes, that was the group I was referring
1710:06:30 to.
1810:06:39 Q. Did you have any
1910:06:40 responsibilities regarding repurchases prior
2010:06:41 to the merger of Bank of America and
2110:06:42 Countrywide?
2210:06:44 MR. BURTON: Objection.
2310:06:50 A. I was involved in repurchases
2410:06:51 in a number of realms. One of which was my
2510:06:58 former role in Countrywide Capital Markets
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210:07:02 and Countrywide Securities Corporation.
310:07:05 That was very limited and I would also
410:07:09 clarify that it wasn't responsibility so
510:07:13 much as awareness and involvement in terms610:07:17 of representing our investor base.
710:07:22 Subsequent to that and really
810:07:23 going to early 2008, and I can't remember
910:07:28 the dates exactly, I had at some point in
1010:07:34 that first half of the year, prior to the,
1110:07:37 you know, Legal Day 1, July 1, I was getting
1210:07:43 increasingly involved in it. I can't be
1310:07:45 sure exactly when that occurred, however.
1410:07:50 Q. When you say you were getting
1510:07:51 increasingly involved, in what respect were
1610:07:54 you involved in repurchases?
1710:07:57 A. Outside of -- well, as we were
1810:08:00 leading up to midyear, I was, my role had
1910:08:08 continued to change in light of market
2010:08:09 conditions, we had consolidated, for
2110:08:12 instance, all the transaction management
2210:08:13 functions.
2310:08:15 So I assumed a role, similar
2410:08:17 role in addition to having the capital
2510:08:19 markets portfolio. Also having Countrywide
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210:08:23 Home Loans, transaction management team and
310:08:24 investor relations group.
410:08:27 I also believe around that time
510:08:32 we started, although I can't be sure, we610:08:35 started to get involved in light of the up
710:08:40 tick in repurchase activity, in interfacing
810:08:43 with lawyers, interfacing with
910:08:46 counterparties such as MBIA and other
1010:08:51 stakeholders within Countrywide. Again, I'm
1110:08:56 unclear as to when that actually happened in
1210:08:59 2008.
1310:09:01 Q. Is it fair to say your interest
1410:09:03 in repurchases started to increase at least
1510:09:05 as early as 2006?
1610:09:07 MS. CONCANNON: Objection.
1710:09:10 A. I -- well my interest in
1810:09:12 repurchases, again you have to, I feel like
1910:09:17 differentiation is needed.
2010:09:19 In 2006 I was Managing Director
2110:09:23 overseeing Countrywide Capital Markets,
2210:09:26 Countrywide -- and Countrywide Securities
2310:09:30 Corporation's transaction management group.
2410:09:31 In that capacity I dealt with
2510:09:35 or I interacted with the repurchase space in
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7/30/2019 Deposition Transcript of Michael Schloessman
8/93
c2ec3655-85ea-4ce7-b9a1-c78
HIGHLY CONFIDENTIAL
MICHAEL W. SCHLOESSMANN - 8/29/2012
1-800-325-3376 www.merrillcorp.com/law
Merrill Corporation - New York
5 (Pages 838 to 841)
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210:09:39 two respects. One, is the responsibility
310:09:45 for a limited number of repurchase or
410:09:50 limited repurchase activity related solely
510:09:53 to Countrywide Capital Markets, you know,610:09:57 whole loan purchases from third parties.
710:10:02 And to be differentiated from Countrywide
810:10:06 Home Loans and its activities.
910:10:07 And the second was my role in
1010:10:12 basically providing a voice for our investor
1110:10:18 base in terms of what we were hearing in the
1210:10:22 fixed income investor community. I was
1310:10:25 involved in communicating those concerns as
1410:10:32 well as trying to formulate or articulate,
1510:10:35 you know, recommendations for consideration
1610:10:37 of Countrywide Home Loans, although with
1710:10:39 respect to that aspect I had no direct
1810:10:42 responsibility in terms of decision-making
1910:10:45 at that time.
2010:10:47 Q. Starting with the first of
2110:10:48 those two functions, you mentioned that you
2210:10:51 had responsibility for repurchase activity
2310:10:54 for the Countrywide Capital Markets whole
2410:10:56 loan purchases.
2510:10:58 Was that in connection with
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210:11:01 CCM's outbound repurchase demands?
310:11:05 MS. CONCANNON: Object to the
410:11:06 form.
510:11:06 Q. Is that fair?610:11:07 A. In connection with that, that
710:11:10 is what I'm referring so. So we would buy
810:11:15 loans and the activity was predominantly
910:11:19 related to early payment defaults where we
1010:11:24 had explicit contractual protection. So if
1110:11:29 a loan went down within the contractually
1210:11:32 covered period, we would have recourse back
1310:11:34 to our sellers.
1410:11:35 So as part of our
1510:11:37 responsibility within the transaction
1610:11:39 management group we would monitor and
1710:11:43 prosecute those claims where contractually
1810:11:47 appropriate.
1910:11:47 Q. Do you call those outbound
2010:11:50 repurchase demands versus inbound?
2110:11:53 A. Yes.
2210:11:54 Q. With respect to your valuation
2310:11:56 of the outbound repurchases, were there
2410:12:00 standard guidelines you had from entities
2510:12:03 that sold whole loans to CCM?
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210:12:06 MS. CONCANNON: Objection.
310:12:08 A. Can you be more specific around
410:12:10 guidelines?
510:12:11 Q. Right. How would you determine610:12:12 whether or not to initiate repurchase
710:12:14 demands for the outbound repurchases?
810:12:20 A. It was, as I said earlier,
910:12:24 predominantly, if not entirely, early
1010:12:27 payment default related. So it is an
1110:12:31 entirely objective measure.
1210:12:33 You would post purchase of a
1310:12:34 loan or portfolio of loans, you would
1410:12:39 monitor the performance such that if that
1510:12:41 loan went delinquent or whatever the
1610:12:43 specific triggering event was, you could
1710:12:46 monitor that by querying the data, since we
1810:12:51 would take on, in the vast majority of the
1910:12:55 cases, the servicing as well.
2010:12:56 And so, by monitoring the
2110:12:59 performance, the early performance of those
2210:13:02 loans during the contractually covered
2310:13:04 period, we would then generate repurchase
2410:13:10 demands based on those findings.
2510:13:12 Q. And you referred to that as an
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210:13:14 objective basis for the repurchase demand?
310:13:17 A. I did use the word objective.
410:13:20 Q. Do you distinguish the inbound
510:13:21 repurchase demands as not being objective?610:13:26 MS. CONCANNON: Objection.
710:13:27 Q. Or not being evaluated on an
810:13:29 objective standard?
910:13:30 MS. CONCANNON: Objection.
1010:13:30 A. I would use the term object --
1110:13:33 I wouldn't use the term objective
1210:13:35 exclusively for outbound or inbound for that
1310:13:39 matter.
1410:13:42 It would come down to specific
1510:13:43 contractual terms that were being implicated
1610:13:46 in the activity. And looking at what the
1710:13:50 standard was, and whether it required
1810:13:52 subjective or judgmental input or whether it
1910:13:55 was purely objective in describing an
2010:14:01 inbound or outbound claim along those lines.
2110:14:05 Q. And in your judgment did
2210:14:07 Countrywide evaluate inbound repurchase
2310:14:10 demands on an objective standard?
2410:14:12 MS. CONCANNON: Objection.
2510:14:17 A. Did we evaluate? It would
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7/30/2019 Deposition Transcript of Michael Schloessman
9/93
c2ec3655-85ea-4ce7-b9a1-c78
HIGHLY CONFIDENTIAL
MICHAEL W. SCHLOESSMANN - 8/29/2012
1-800-325-3376 www.merrillcorp.com/law
Merrill Corporation - New York
6 (Pages 842 to 845)
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210:14:19 depend entirely on each and every loan level
310:14:22 claim. Okay. And the contractual term that
410:14:27 was cited by a claimant in bringing such a
510:14:30 claim.610:14:31 There are, I imagine specific
710:14:38 representations and warranties that are at
810:14:40 least relatively speaking more objective
910:14:42 than others. And, conversely, others that
1010:14:44 are more subjective than others.
1110:14:48 So I would hesitate to
1210:14:50 characterize, you know, claims in a sort of
1310:14:54 broad sweeping way that your question
1410:14:57 suggests.
1510:14:58 Q. How would you distinguish
1610:15:00 between the objective and subjective claims
1710:15:02 for inbound repurchases?
1810:15:07 MS. CONCANNON: Objection.
1910:15:07 A. First of all, I don't, I don't
2010:15:12 believe my description of objective or
2110:15:15 subjective, there is no formality associated
2210:15:19 with that. We don't bucket claims or
2310:15:21 process claims by categorizing them as
2410:15:24 objective or subjective.
2510:15:26 I'm simply referring to the
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210:15:30 subjective quality or judgmental quality
310:15:34 required to assess the merits of a
410:15:38 particular claim.
510:15:39 Again, wholly dependent on what610:15:42 that claim is, which rep and warrants is
710:15:44 cited, what factual base, evidentiary
810:15:47 support is provided by the claimant and so
910:15:52 forth.
1010:15:52 Q. Let me show you an exhibit we
1110:15:54 had previously introduced as Exhibit 260.
1210:16:06 (Deposition Exhibit 260
1310:16:06 for identification previously marked,
1410:16:06 email string dated 5/17/06 production
1510:16:06 numbers CWMBIA 0009882017 through 221.)
1610:16:18 BY MR. SELENDY:
1710:16:18 Q. As you will recall this is the
1810:16:20 paper you wrote up in 2006; is that right?
1910:16:30 A. I would like a minute just to
2010:16:31 look at this.
2110:16:32 Q. Sure.
2210:16:39 A. Yes, I'm familiar with this
2310:16:41 write-up, which is mine and which is from
2410:16:43 2006, to answer your question.
2510:16:45 Q. Right. In the paper you
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210:16:46 identified on the page ending in Bates
310:16:52 number 218, a problem which you described as
410:16:57 a course of discontent from buyers of
510:16:59 Countrywide bonds largely attributable to610:17:02 the following two factors "The observed
710:17:04 performance, particularly in the early
810:17:07 stages of Countrywide's prime and Alt-A
910:17:10 deals is inferior to our peer group after
1010:17:13 normalizing for collateral differences; and
1110:17:16 two, Countrywide's unwillingness to
1210:17:19 repurchase loans absent a clear showing of a
1310:17:23 rep and warranty breach, irrespective of the
1410:17:26 nature of default, e.g. fraud."
1510:17:29 Then you go on to say, "While
1610:17:31 all of these investors readily acknowledge
1710:17:34 the inherent risk embedded in first loss and
1810:17:37 other credit sensitive bonds and have paid a
1910:17:42 significant risk premium in turn for
2010:17:44 repurchasing the bonds, none of them accept
2110:17:45 the premise they should have to price for
2210:17:47 the fraud and other similar risks which they
2310:17:50 believe are impossible to quantify."
2410:17:54 Let me pause right there. What
2510:17:56 did you mean when you said "they don't
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1 MICHAEL SCHLOESSMAN-HIGHLY CONFIDENTIAL
210:17:57 accept the premise they should have to price
310:17:59 for the fraud?"
410:18:02 MS. CONCANNON: Objection.
510:18:05 A. I was trying to communicate610:18:06 that which certain of our investors and I
710:18:11 can't remember with particularity which
810:18:15 ones, but that which certain of our
910:18:17 investors had communicated to me either
1010:18:19 directly or most likely indirectly through
1110:18:21 our sales force. And that basically
1210:18:25 represented the position of at least one
1310:18:28 fixed income investor, which is what I was
1410:18:30 trying to communicate knowing that the
1510:18:32 audience for this would be at Countrywide
1610:18:35 Home Loans where the repurchase activity
1710:18:39 responsibility resided.
1810:18:41 Q. What does it mean to price for
1910:18:42 the fraud?
2010:18:43 MS. CONCANNON: Objection.
2110:18:46 A. What I was intending to
2210:18:49 communicate, again, by virtue of what was
2310:18:52 communicated to me is that you're pricing
2410:18:59 these credit sensitive assets based on
2510:19:02 expected performance.
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7/30/2019 Deposition Transcript of Michael Schloessman
10/93
c2ec3655-85ea-4ce7-b9a1-c78
HIGHLY CONFIDENTIAL
MICHAEL W. SCHLOESSMANN - 8/29/2012
1-800-325-3376 www.merrillcorp.com/law
Merrill Corporation - New York
7 (Pages 846 to 849)
Page 846
1 MICHAEL SCHLOESSMAN-HIGHLY CONFIDENTIAL
210:19:03 So, therefore you are modeling
310:19:06 a number of attributes like expected default
410:19:09 rate, loss severity, things of that nature.
510:19:11 Prepay speeds.610:19:14 And that certain risks, at
710:19:17 least based on what one or more investors
810:19:20 had communicated were not part of those
910:19:24 default rate assumptions. And therefore, to
1010:19:28 the extent the assumptions are assisting
1110:19:32 buyers in generating a price they are
1210:19:35 willing to pay for their, for a bond, a
1310:19:38 given bond, that that would not be built in
1410:19:43 or incorporated into their pricing of the
1510:19:45 bond.
1610:19:46 Q. And specifically you singled
1710:19:48 out fraud as not incorporated into the
1810:19:50 investor's pricing of the bonds as an
1910:19:53 example?
2010:19:53 MS. CONCANNON: Objection.
2110:19:54 A. That's what my write-up
2210:19:57 indicates, yes.
2310:19:58 Q. And did you think that was a
2410:20:01 fair objection on the part of the investors?
2510:20:04 MS. CONCANNON: Objection.
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1 MICHAEL SCHLOESSMAN-HIGHLY CONFIDENTIAL
210:20:05 A. Quite honestly I don't know
310:20:07 exactly what I thought. Again, my goal or
410:20:11 my role at this time was to ensure we gave
510:20:16 voice to what we were hearing from610:20:18 investors. And to the extent that was
710:20:19 impacting our, you know, our pricing levels
810:20:24 that we were seeing on our securities, I
910:20:26 thought it was worthy of consideration.
1010:20:30 And as I later advocate, or
1110:20:34 asked for consideration of, I wanted people
1210:20:36 to think about, you know, whether there was
1310:20:38 a different way, a more pragmatic way of
1410:20:42 addressing this, this issue.
1510:20:46 Q. You clearly gave credit to the
1610:20:47 concern you're proposing that Countrywide's
1710:20:50 repurchase policy be changed; right?
1810:20:53 MS. CONCANNON: Objection.
1910:20:55 A. I, again, my role here, okay,
2010:20:58 is representing our fixed income investors
2110:21:02 and providing CHL with market color.
2210:21:06 So, we had an interest in
2310:21:09 Countrywide Capital Markets of developing,
2410:21:13 maintaining and enhancing customer
2510:21:17 relationships. So, I viewed that as, you
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1 MICHAEL SCHLOESSMAN-HIGHLY CONFIDENTIAL
210:21:20 know, one of a large number of
310:21:23 responsibilities I had in my organization.
410:21:26 And, frankly, others in a customer facing
510:21:29 business, you know, had similar610:21:32 responsibilities to, again, give voice to
710:21:35 our investors inside of Countrywide and give
810:21:39 them basically market color or market
910:21:41 commentary.
1010:21:42 Q. And as reflected on page 220 of
1110:21:45 the document you gave credit to the concern
1210:21:50 about not pricing for fraud in proposing
1310:21:53 specific modifications to the repurchase
1410:21:57 policy. And you state -- isn't that right?
1510:22:00 MS. CONCANNON: Objection.
1610:22:00 Q. Section sub C of your document.
1710:22:03 MS. CONCANNON: Objection.
1810:22:13 A. I apologize, can you repeat the
1910:22:14 question. I'm now looking at subsection C.
2010:22:17 Q. You gave credit to the investor
2110:22:19 concerns about repurchases including as to
2210:22:23 not pricing for fraud in proposing a
2310:22:26 modification of Countrywide's repurchase
2410:22:29 policy as reflected in subsection C of your
2510:22:32 white paper; correct?
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1 MICHAEL SCHLOESSMAN-HIGHLY CONFIDENTIAL
210:22:33 MS. CONCANNON: Objection.
310:22:38 A. Not having restudied this, you
410:22:42 know, exhaustively, I think generally what I
510:22:46 am proposing for consideration is a, you610:22:54 know, I don't know I would characterize it
710:22:56 as a change, that we ought to rethink our
810:23:00 repurchase process, in here -- I think,
910:23:06 again, as written, you know, the white
1010:23:09 paper, if you want to call it that as
1110:23:11 written is basically asking CHL to rethink
1210:23:19 how it goes about repurchases.
1310:23:24 Q. Is it fair to say that you
1410:23:25 encouraged CHL to adopt a more reasonable
1510:23:28 repurchase standard?
1610:23:29 MS. CONCANNON: Objection.
1710:23:35 A. I think that's a, you know, not
1810:23:38 unreasonable inference from this. I was
1910:23:40 bringing investor concerns to the table. I
2010:23:43 was articulating what it was doing in terms
2110:23:46 of execution on our bonds at Countrywide.
2210:23:52 And was suggesting that a more
2310:23:55 accommodative policy that wasn't, you know,
2410:24:01 built squarely on, you know, the contractual
2510:24:04 obligations or at least interpretation,
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7/30/2019 Deposition Transcript of Michael Schloessman
11/93
c2ec3655-85ea-4ce7-b9a1-c78
HIGHLY CONFIDENTIAL
MICHAEL W. SCHLOESSMANN - 8/29/2012
1-800-325-3376 www.merrillcorp.com/law
Merrill Corporation - New York
8 (Pages 850 to 853)
Page 850
1 MICHAEL SCHLOESSMAN-HIGHLY CONFIDENTIAL
210:24:08 strict interpretation of the contractual
310:24:11 obligations where there was flexibility to
410:24:13 do so that we ought to think about being
510:24:15 more accommodative to those investor610:24:19 concerns.
710:24:21 Q. And you state, "The single most
810:24:24 important prerequisite to turning around
910:24:27 this problem is to adopt a more reasonable
1010:24:30 repurchase standard, one that is better
1110:24:31 aligned with that of our competition and the
1210:24:34 reasonable expectations of our bondholders."
1310:24:37 Is that fair?
1410:24:39 MS. CONCANNON: Objection.
1510:24:40 A. You're reading that from where?
1610:24:42 Q. It is the first sentence of
1710:24:43 your paper under the heading Modify
1810:24:46 Repurchase Policy.
1910:24:51 A. Okay. That's what it says.
2010:24:52 Q. That's what you were
2110:24:53 recommending; right?
2210:24:54 MS. CONCANNON: Objection.
2310:24:59 A. What I appear to be indicating
2410:25:03 here is presuppose if you want to change the
2510:25:08 course we were on, which I've articulated
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1 MICHAEL SCHLOESSMAN-HIGHLY CONFIDENTIAL
210:25:11 earlier in this write-up, then the single
310:25:16 most important prerequisite was to adopt a
410:25:21 more reasonable or accommodative repurchase
510:25:25 policy or standard.610:25:29 Q. And you go on to say as an
710:25:31 example that "Certain loans with fraud or
810:25:33 substantial value discrepancies should be
910:25:36 considered for repurchase to a greater
1010:25:38 extent than the current policy allows, even
1110:25:42 absent specific fraud or value reps and
1210:25:46 warrants."
1310:25:47 Is that right?
1410:25:50 A. Is it right that it says that?
1510:25:51 Q. That was part of your
1610:25:53 recommendation; correct?
1710:25:54 MS. CONCANNON: Objection.
1810:25:56 A. I can't tell without sitting
1910:25:58 here reading the whole thing what I'm
2010:26:00 recommending and what I am putting up for
2110:26:04 consideration. Whether or not it is
2210:26:05 important or not, I don't know where you're
2310:26:07 going with this. But, I wanted them to
2410:26:12 consider the problem and possible solutions.
2510:26:17 So I tried to, in an expansive
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1 MICHAEL SCHLOESSMAN-HIGHLY CONFIDENTIAL
210:26:21 way, tried to lay out what the issues were
310:26:25 and how we might go about addressing them if
410:26:31 Countrywide Home Loans was so inclined in
510:26:33 terms of doing a cost/benefit analysis.610:26:39 Q. And in developing your
710:26:41 recommendations is it fair to say you had
810:26:43 reviewed conclusions on repurchase claims in
910:26:46 order to assess whether investors'
1010:26:50 objections had merit?
1110:26:53 MS. CONCANNON: Objection.
1210:26:55 A. I don't know if I reviewed any
1310:26:58 repurchase claims in a context of this and
1410:27:03 what was informing this write-up.
1510:27:06 As I recall, many of the
1610:27:12 concerns expressed were not based on actual
1710:27:16 repurchase activity. Bondholders were
1810:27:21 observing loans, for instance, that went
1910:27:23 down or had some anomalous, you know, loss
2010:27:28 severity relative to -- whatever their
2110:27:32 concern they expressed it not necessarily
2210:27:34 within the context or confines of a
2310:27:36 repurchase demand, but just that, you know,
2410:27:40 more in terms of inquiry what it was we were
2510:27:43 going to do about, for instance, an early
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1 MICHAEL SCHLOESSMAN-HIGHLY CONFIDENTIAL
210:27:47 payment default.
310:27:50 Q. Well can I direct you to the
410:27:55 next page, page 221, you will notice under
510:27:57 subheading I in the middle paragraph that610:28:01 you write "It is clear to me based on having
710:28:04 reviewed the LERC conclusions on countless
810:28:08 repurchase claims that in many, if not most
910:28:12 cases a reasonable argument can be proffered
1010:28:15 in support of a repurchase claim based upon
1110:28:18 this particular rep and warranty, even
1210:28:22 though LERC may have come to the opposite,
1310:28:24 but also not unreasonable conclusion."
1410:28:24 Do you see that?
1510:28:28 A. Yes, I do.
1610:28:30 Q. So in fact you had reviewed the
1710:28:31 conclusions on what you characterize as
1810:28:33 countless repurchase claims?
1910:28:35 MS. CONCANNON: Objection.
2010:28:35 A. That's what it indicates, yes.
2110:28:37 Q. What was LERC?
2210:28:41 A. LERC was Countrywide's Loss
2310:28:46 Exposure Review Committee.
2410:28:46 Q. It was after you had reviewed
2510:28:49 these countless repurchase claims that you
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7/30/2019 Deposition Transcript of Michael Schloessman
12/93
c2ec3655-85ea-4ce7-b9a1-c78
HIGHLY CONFIDENTIAL
MICHAEL W. SCHLOESSMANN - 8/29/2012
1-800-325-3376 www.merrillcorp.com/law
Merrill Corporation - New York
9 (Pages 854 to 857)
Page 854
1 MICHAEL SCHLOESSMAN-HIGHLY CONFIDENTIAL
210:28:51 developed your recommendations to
310:28:52 Countrywide Home Loans?
410:28:53 A. I don't know if -- well, I'm
510:28:58 not sure if you're suggesting one610:29:00 precipitated the other.
710:29:01 I obviously stand by what I
810:29:07 indicated here. I said I reviewed countless
910:29:10 findings from the LERC materials, then I
1010:29:15 reviewed countless findings. That was my
1110:29:17 impression when I wrote this six years ago.
1210:29:21 Q. Okay. And the rep and warranty
1310:29:24 you were referring to states and this is the
1410:29:26 sentence immediately preceding "The
1510:29:29 origination, underwriting servicing and
1610:29:34 collection practices used by Countrywide
1710:29:36 with respect to each mortgage loan have been
1810:29:38 in all respects legal, proper, prudent and
1910:29:42 customary in the mortgage lending and
2010:29:44 servicing business."
2110:29:45 Do you see that?
2210:29:45 A. Yes.
2310:29:48 Q. Why did you conclude based on
2410:29:50 that rep and warranty a reasonable argument
2510:29:52 could be proffered in support of a
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1 MICHAEL SCHLOESSMAN-HIGHLY CONFIDENTIAL
210:29:54 repurchase claim in many, if not most cases?
310:29:57 MS. CONCANNON: Objection.
410:30:02 A. So, well in answering that I
510:30:03 will provide some contractually grounding.610:30:07 We, nor any issuer for that
710:30:12 matter is at liberty of repurchasing loans
810:30:18 or otherwise depositing monies in a trust
910:30:20 that aren't specifically contemplated in the
1010:30:24 governing contracts.
1110:30:29 So in order to repurchase a
1210:30:30 loan, you would have to cite or be able to
1310:30:34 invoke one of, you know, one of several
1410:30:38 enabling provisions, including repurchase
1510:30:41 for breaches of representations and
1610:30:44 warranties which materially and adversely
1710:30:47 affects the interest of the bondholders, for
1810:30:49 instance, is a fairly common standard in
1910:30:52 many PSAs.
2010:30:54 So, with that as a grounding,
2110:30:57 what I was saying here is that given that
2210:31:04 many, there would appear to be many of the,
2310:31:06 you know, repurchase claim conclusions that
2410:31:08 I am indicating here having reviewed were
2510:31:11 predicated on notions of prudent
Page 856
1 MICHAEL SCHLOESSMAN-HIGHLY CONFIDENTIAL
210:31:13 underwriting, that that standard is
310:31:20 sufficiently subjective and judgmental that
410:31:23 you could have two reasonable people coming
510:31:27 to different conclusions on the same set of610:31:31 facts.
710:31:32 And so, in fact I think I cite
810:31:35 here that LERC may have come to an opposite,
910:31:39 but also not unreasonable conclusion. So
1010:31:41 suggesting that if we wanted to be more
1110:31:46 accommodative, like some of our, or we were
1210:31:49 lead to believe some of our competitors were
1310:31:51 being, that we had the ability, in my
1410:31:55 judgement to come to a different conclusion
1510:32:00 around subjective issues like prudent
1610:32:03 underwriting, even if it didn't call into
1710:32:06 question the appropriateness of LERC's
1810:32:09 conclusion, we still had the ability, again,
1910:32:15 in my judgment at the time, to do that.
2010:32:18 And that I wanted CHL to
2110:32:20 consider doing that. And I didn't think the
2210:32:24 fact that issues around true sale
2310:32:28 accounting, which is very important, which
2410:32:30 means we had to have enabling provisions to
2510:32:34 do whatever it is we were doing, vis-a-vis
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1 MICHAEL SCHLOESSMAN-HIGHLY CONFIDENTIAL
210:32:37 the trust, we had what I believed to be the
310:32:41 latitude to rethink that or recalibrate
410:32:45 that.
510:32:47 Q. In what capacity did you610:32:48 conduct the review of the repurchase claims
710:32:51 prior to writing up this paper?
810:32:56 A. I'm sorry, in what capacity?
910:32:58 Q. Right. What was your purpose in
1010:33:01 reviewing the repurchase claims before you
1110:33:02 wrote up this paper?
1210:33:04 MS. CONCANNON: Objection.
1310:33:06 A. I, having testified earlier
1410:33:08 today that I don't recall this white paper
1510:33:11 being precipitated specifically by reviewing
1610:33:14 these -- reviewing repurchase requests, I
1710:33:18 have since refreshed my recollection reading
1810:33:21 this, my understanding still to this day is
1910:33:26 much of that, the impetus for this came from
2010:33:31 investors, directly or indirectly to my
2110:33:34 attention. And I felt in my role it was my
2210:33:39 responsibility to bring that to the
2310:33:40 attention of CHL.
2410:33:42 Perhaps in developing this
2510:33:45 write-up, which was not just a top of mind
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7/30/2019 Deposition Transcript of Michael Schloessman
13/93
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HIGHLY CONFIDENTIAL
MICHAEL W. SCHLOESSMANN - 8/29/2012
1-800-325-3376 www.merrillcorp.com/law
Merrill Corporation - New York
10 (Pages 858 to 861)
Page 858
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210:33:49 stream of consciousness, I think I put a
310:33:51 considerable amount of thought into it, I
410:33:55 may have leveraged, right, I may have -- not
510:33:58 leveraged, but I may have wanted to see what610:34:01 it was that we were observing in the
710:34:05 repurchase space. It could have been in
810:34:07 response to what CHL was communicating, you
910:34:12 know, back to us in terms of our inability
1010:34:15 to just repurchase loans without showing a
1110:34:19 contractual enabling provision.
1210:34:23 Q. In the next subparagraph you
1310:34:26 say, "Given the inherent subjectivity of the
1410:34:32 aforementioned rep and warranty, the concern
1510:34:35 about one string of repurchases requiring
1610:34:38 another is easily overcome. The unique
1710:34:42 facts and circumstances involved in each
1810:34:44 individual repurchase claim should allow us
1910:34:46 to make subjective judgment calls in favor
2010:34:49 of repurchases for some loans and against
2110:34:53 repurchase on others without it all being
2210:34:55 inconsistent in our approach."
2310:34:55 Do you see that?
2410:34:59 A. Yes.
2510:34:59 Q. What did you mean by that?
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1 MICHAEL SCHLOESSMAN-HIGHLY CONFIDENTIAL
210:35:06 A. I think what you read, I am
310:35:12 trying to think how to expand on that. I
410:35:15 guess I would underscore the importance of
510:35:21 the fact that every single loan has its own610:35:25 individual and unique facts and
710:35:26 circumstances. Right.
810:35:28 Yes, there are attributes
910:35:30 common to many a loan. But the combination
1010:35:34 of attributes and specific borrower profile
1110:35:36 and other facts around the origination or
1210:35:40 the borrower's credit capacity, the, you
1310:35:43 know, collateral being pledged against the
1410:35:45 loan when taken together in totality,
1510:35:48 present a unique profile on each and every
1610:35:51 single loan.
1710:35:52 And so, we were not, you know,
1810:35:56 what I was suggesting to the extent, I think
1910:35:58 I was responding to a concern or I'm going
2010:36:02 to assume I put this in here to blunt any
2110:36:06 concern that if we did this selectively and
2210:36:11 accommodatively in the interest of
2310:36:13 furthering our customer relationship. That
2410:36:17 it was not going to necessarily bind us or
2510:36:22 should not bind us on other loans.
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210:36:26 Q. Meaning you could favor one
310:36:28 investor without favoring another and in
410:36:30 your view not be subject to a charge of
510:36:33 inconsistency?610:36:34 MS. CONCANNON: Objection.
710:36:37 A. I don't know if it was favoring
810:36:38 one investor over another. It was trying to
910:36:41 address a specific issue brought to our
1010:36:45 attention from investors.
1110:36:48 So there is a natural tension
1210:36:51 that exists in the relationship between
1310:36:58 subsidiaries, in this case, you have
1410:37:00 Countrywide Home Loans and, you know, the
1510:37:03 parent company responsible for credit policy
1610:37:05 and risk management for the broader
1710:37:07 organization.
1810:37:09 And then we had our, we being
1910:37:11 Countrywide Capital Markets and Countrywide
2010:37:13 Securities Corporation, had very specific
2110:37:17 interests in furthering the client
2210:37:20 relationship.
2310:37:21 So, I am basically an advocate
2410:37:26 for what we're seeing take place in the
2510:37:29 marketplace. What we're hearing from
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210:37:31 investors. It was not as though, you know,
310:37:35 my recommendations, decisions, judgments,
410:37:38 were dispositive of this issue.
510:37:43 I think it was part of a610:37:45 healthy tension that exists between, you
710:37:48 know, subsidiaries, as I said, to have, make
810:37:54 sure you are considering all the angles.
910:37:55 My job wasn't necessarily to
1010:37:57 focus on a more top of the house view, but
1110:38:02 rather, again, focus on the customer
1210:38:04 relationship and what we were seeing happen
1310:38:06 in the marketplace.
1410:38:08 Q. Is it fair to say that you were
1510:38:11 arguing that Countrywide Home Loans could be
1610:38:14 more accommodative to one investor than to
1710:38:17 another without being subject to a charge of
1810:38:19 inconsistency?
1910:38:21 MS. CONCANNON: Objection.
2010:38:23 A. I don't believe my thinking was
2110:38:25 at all around favoring one investor over
2210:38:28 another. In fact, it's not what I was
2310:38:31 trying to communicate is just, you know,
2410:38:37 because you buy back some loans, okay, maybe
2510:38:43 it could be, for instance, the fraud that I
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7/30/2019 Deposition Transcript of Michael Schloessman
14/93
c2ec3655-85ea-4ce7-b9a1-c78
HIGHLY CONFIDENTIAL
MICHAEL W. SCHLOESSMANN - 8/29/2012
1-800-325-3376 www.merrillcorp.com/law
Merrill Corporation - New York
11 (Pages 862 to 865)
Page 862
1 MICHAEL SCHLOESSMAN-HIGHLY CONFIDENTIAL
210:38:46 cited, right.
310:38:48 You know, that to the extent we
410:38:49 had the contractual flexibility for certain
510:38:53 kind of issues that were, you know, viewed610:38:56 most problematic or as most problematic as
710:38:59 investors, that that didn't necessarily need
810:39:01 to be viewed as a slippery slope.
910:39:05 That was my view as the voice
1010:39:07 of the investor, right, that I wanted the
1110:39:10 top of the house to consider as part of it's
1210:39:13 on going, you know, review and assessment of
1310:39:18 its repurchase policies.
1410:39:20 Q. And you said that "CHL could
1510:39:22 make subjective judgment calls in favor of
1610:39:24 repurchase for some loans and against
1710:39:27 repurchase on others." Right?
1810:39:32 MS. CONCANNON: Where are you?
1910:39:33 Q. Same section. Second sentence
2010:39:41 of your sub point 2. Isn't that what you
2110:39:43 were arguing you could subjectively decide
2210:39:45 to accept repurchases on some loans and not
2310:39:48 others without it being inconsistent?
2410:39:50 MS. CONCANNON: Objection to form.
2510:39:51 A. Yes. I think that's, I think
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210:39:53 that's further to the point I just made.
310:39:56 That it's, you know, some loans, some fact
410:39:59 patterns, for instance, again, you know the
510:40:04 issues that borrowers -- that investors610:40:07 found most problematic we could address
710:40:10 without necessarily consigning ourselves to
810:40:15 buy back every claim. Consign ourselves to
910:40:19 have to legitimately buy back every claim.
1010:40:21 That doesn't, you know, so far
1110:40:25 as I can tell suggest one investor versus
1210:40:27 another.
1310:40:27 Q. Well in fact Countrywide did
1410:40:31 take into account the relationship with its
1510:40:34 investors in determining whether to
1610:40:36 implement repurchases; isn't that right?
1710:40:38 MS. CONCANNON: Objection.
1810:40:41 A. When you say implement
1910:40:42 repurchases, I don't follow.
2010:40:45 Q. Countrywide did in fact take
2110:40:46 into account the relationship with its
2210:40:48 investors in determining whether to
2310:40:50 repurchase loans that were the subject of
2410:40:53 repurchase demands; correct?
2510:40:55 MS. CONCANNON: Objection.
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210:40:57 A. Are you asking did we factually
310:40:59 do that?
410:40:59 Q. Yes.
510:41:00 A. Am I recommending that we --610:41:02 Q. Didn't Countrywide in fact do
710:41:03 that?
810:41:05 MS. CONCANNON: Objection.
910:41:05 A. So in the period in question,
1010:41:11 what I can say is not having been
1110:41:13 responsible for the repurchase activity at
1210:41:14 Countrywide, but having had conversations
1310:41:18 implied by this note, that it was always
1410:41:23 central to Countrywide's repurchase policy
1510:41:29 that its activities be grounded upon the
1610:41:33 contractual obligations that we undertook in
1710:41:36 selling loans into the marketplace.
1810:41:41 How Countrywide Home Loans at
1910:41:43 the time went about repurchasing loans from
2010:41:46 the variety of investors to whom Countrywide
2110:41:49 sold loans, I can't recall and I wasn't, you
2210:41:55 know, front and center in that, as I didn't
2310:41:57 have responsibility for it. I clearly had
2410:41:59 awareness as evidenced by this write-up.
2510:42:04 Q. After the merger of Countrywide
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1 MICHAEL SCHLOESSMAN-HIGHLY CONFIDENTIAL
210:42:05 and Bank of America, is it fair to say that
310:42:10 Countrywide Home Loans did in fact take into
410:42:14 account the nature of its relationships with
510:42:17 counterparties in determining whether to610:42:18 repurchase loans that were the subject of
710:42:20 repurchase demands?
810:42:22 MS. CONCANNON: Objection.
910:42:29 A. Well I'm a little bit confused
1010:42:30 by the reference after the purchase.
1110:42:36 So, as I said, back in this
1210:42:38 time it may or may not have influenced
1310:42:40 Countrywide. I'm unaware of it. And I'm
1410:42:44 unaware of it being untethered again from
1510:42:47 what we thought our contractual obligations
1610:42:49 were.
1710:42:49 You know, post 2008, latter
1810:42:51 part of it where I assumed an increasing
1910:42:55 role I can speak of firsthand experience in
2010:43:01 terms of what the standards were that we
2110:43:05 established for repurchasing loans. And
2210:43:11 those were with, again, always grounded upon
2310:43:13 what our contractual obligations were.
2410:43:15 Q. Sir, I guess I need to be a
2510:43:20 little more specific. Is it fair to say
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7/30/2019 Deposition Transcript of Michael Schloessman
15/93
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HIGHLY CONFIDENTIAL
MICHAEL W. SCHLOESSMANN - 8/29/2012
1-800-325-3376 www.merrillcorp.com/law
Merrill Corporation - New York
12 (Pages 866 to 869)
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210:43:22 that for the past few years while you've had
310:43:26 direct responsibility for repurchases in the
410:43:30 Bank of America organization, that in fact
510:43:34 repurchases of Countrywide Home Loans have610:43:38 taken into account the nature of the
710:43:40 relationship between Countrywide Home Loans
810:43:43 and its counterparties?
910:43:46 MS. CONCANNON: Objection.
1010:43:48 A. I think that is -- well, I'll
1110:43:50 answer it this way: We, again, focus on the
1210:43:55 specific contractual relationship we have
1310:43:57 with a counterparty. We focus on the
1410:44:03 specific and unique fact pattern associated
1510:44:05 with each loan in the execution of our
1610:44:13 repurchase activities.
1710:44:14 Now, where we have issues that
1810:44:15 arise, disputes, I think it's fair to say
1910:44:19 that in sizing up those disputes and where,
2010:44:25 you know, and how best to resolve those
2110:44:26 disputes, I think it's fair to say that, you
2210:44:30 know, that we, you know, there is
2310:44:33 consideration given to okay, who is the
2410:44:35 counterparty, what is our status with them.
2510:44:38 Okay. By no means divorces the process from
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1 MICHAEL SCHLOESSMAN-HIGHLY CONFIDENTIAL
210:44:43 what I had just referenced, specific
310:44:45 contractual obligations, unique fact pattern
410:44:49 on each and every loan.
510:44:50 I do think that's -- I think610:44:53 that's a fair assessment to say that we were
710:44:55 not unmindful of the fact that, you know,
810:45:01 for instance, a, you know, GSE investor,
910:45:03 right, what is our ongoing business, our
1010:45:08 current business. But more as a means of
1110:45:10 how do we resolve disputes. Not how do we
1210:45:15 decision loan level or make loan level
1310:45:18 decisions on repurchase claims.
1410:45:21 Q. Your testimony is that that
1510:45:22 does not relate to whether Countrywide
1610:45:25 actually repurchases loans? You're saying it
1710:45:29 is only with respect to the resolution of
1810:45:32 disputes?
1910:45:33 A. Well it's -- I want to make
2010:45:37 sure I'm careful it is not misinterpreted.
2110:45:40 We're going to review and respond to every
2210:45:46 claim on a loan level basis based on the
2310:45:50 specific contractual language.
2410:45:53 It is not uncommon that we find
2510:45:56 ourselves in disagreement with a
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1 MICHAEL SCHLOESSMAN-HIGHLY CONFIDENTIAL
210:45:58 counterparty who has asserted the claim.
310:46:00 We've done our review. Responded
410:46:03 thoughtfully and expansively typically to
510:46:05 those claims. And we're at an impasse.610:46:10 And so, you know, recognizing I
710:46:13 think this also sort of underscores the
810:46:16 inherent subjectivity of some claims, right,
910:46:20 where you have two sides coming to different
1010:46:22 conclusions.
1110:46:23 And in terms of how we resolve
1210:46:25 those, or do we resolve those, short of
1310:46:29 litigation, for instance, I do think it is a
1410:46:31 consideration to understand what the nature
1510:46:34 of the relationship with a counterparty is.
1610:46:36 And what, for instance, litigation might do
1710:46:39 to that relationship.
1810:46:43 Q. So let me go back to your 2006
1910:46:44 paper. Do you know what use, if any, was
2010:46:47 made of your paper?
2110:46:51 A. I don't know specifically. I
2210:46:52 know it went to CHL. David Spector, I
2310:46:55 believe at the time was managing secondary
2410:46:59 marketing for Countrywide Home Loans.
2510:47:02 I sent this to David. I know
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1 MICHAEL SCHLOESSMAN-HIGHLY CONFIDENTIAL
210:47:04 it got some circulation around Countrywide.
310:47:12 I don't know exactly who saw this and
410:47:15 exactly what, if anything, was done in
510:47:17 response to it.610:47:20 Q. Let me show you a document
710:47:21 that's previously has been marked as
810:47:22 Plaintiff's Exhibit 573.
910:47:22 (Deposition Exhibit 573
1010:47:22 for identification previously marked,
1110:47:22 Memo undated, production numbers CWMBIA
1210:47:22 0009912977 through 80.)
1310:47:37 BY MR. SELENDY:
1410:47:37 Q. My question here is whether you
1510:47:38 have seen this before? You will note at the
1610:47:40 top it states "This memo is intended to be
1710:47:45 read and evaluated with conjunction with the
1810:47:48 white paper drafted by Michael Schloessmann
1910:47:50 M.D. Countrywide Securities Corp. regarding
2010:47:53 our current standing in the investor
2110:47:55 community and the impact on liquidity that
2210:47:57 our policies are having."
2310:47:59 Have you seen this paper
2410:48:00 before?
2510:48:10 A. It does look familiar. I'm
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7/30/2019 Deposition Transcript of Michael Schloessman
16/93
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HIGHLY CONFIDENTIAL
MICHAEL W. SCHLOESSMANN - 8/29/2012
1-800-325-3376 www.merrillcorp.com/law
Merrill Corporation - New York
13 (Pages 870 to 873)
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210:48:12 thinking perhaps I saw this in connection
310:48:15 with earlier testimony with you back in
410:48:18 March, if memory serves me. But I don't
510:48:24 remember prior to that time if I saw this.610:48:26 Perhaps I was on a distribution, I don't see
710:48:28 a distribution. I always welcome having my
810:48:32 recollection refreshed. But I'm not sure
910:48:37 sitting here right now.
1010:48:39 Q. Are you aware of any steps that
1110:48:40 were taken at Countrywide Financial or
1210:48:46 Countrywide Home Loans to make the
1310:48:48 repurchase policy more reasonable as of the
1410:48:52 2006, 2007 period prior to the merger with
1510:48:55 Bank of America?
1610:48:57 MS. CONCANNON: Objection.
1710:48:57 MR. BURTON: Objection.
1810:49:00 A. Sorry, could you restate your
1910:49:01 question.
2010:49:01 Q. Yes. Let's take the entire
2110:49:03 period after you wrote your white paper, up
2210:49:07 until the merger with Bank of America.
2310:49:09 Are you aware of any steps that
2410:49:11 were taken during that period to make a
2510:49:14 Countrywide repurchase policy more
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1 MICHAEL SCHLOESSMAN-HIGHLY CONFIDENTIAL
210:49:15 reasonable?
310:49:16 MS. CONCANNON: Objection.
410:49:21 A. I think I just testified, I
510:49:25 don't know what steps were taken. If you're610:49:26 talking about specifically in response to my
710:49:29 recommendation, I don't know.
810:49:31 Overall, I'm not really sure as
910:49:34 I didn't have responsibility for that. And
1010:49:36 I don't have a specific recollection of what
1110:49:39 might have actually been done.
1210:49:42 Q. Did you seek to become more
1310:49:43 involved with the repurchase process as --
1410:49:48 after the merger had been announced, the
1510:49:50 prospective merger had been announced?
1610:49:53 MS. CONCANNON: Objection.
1710:49:54 A. Did I -- I am not sure if I
1810:49:56 sought to be more involved. I had testified
1910:49:59 earlier, although I couldn't remember
2010:50:03 specifically when in 2008, but I, outside of
2110:50:09 the realm we've just explored in terms of my
2210:50:11 role in Countrywide Capital Markets, I don't
2310:50:16 know when exactly in 2008, or whether,
2410:50:18 frankly I, you know, affirmatively sought
2510:50:21 out more responsibility in this realm.
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210:50:24 I think there was a tremendous
310:50:27 amount of change due to the market
410:50:28 conditions going on and, for instance,
510:50:32 securitization basically ceased, you know,610:50:35 on and after August 2007.
710:50:41 And, you know, as we got into
810:50:43 2008, you know, including, you know, what we
910:50:45 saw from MBIA in the first half of 2008 it
1010:50:49 obviously, you know, warranted, you know,
1110:50:52 more attention because it was something
1210:50:55 that, you know, heretofore we had not seen.
1310:50:58 Q. And do you recall any specific
1410:51:00 functions that you had before Bank of
1510:51:03 America purchased Countrywide with respect
1610:51:05 to repurchases in that 2008 period?
1710:51:08 MS. CONCANNON: Objection.
1810:51:10 A. Other than as I just testified,
1910:51:13 my recollection that I had been getting
2010:51:18 increasingly involved, and I think it
2110:51:22 predated, I don't think it was related to
2210:51:25 the merger, but predated the merger, July 1,
2310:51:30 I can't remember specifically what that
2410:51:34 involvement was.
2510:51:36 I -- well, full stop.
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210:51:56 MR. SELENDY: I am going to mark
310:51:57 as Exhibit 4051, BACMBIA-P 000092542 --
410:52:08 sorry Exhibit 4044. Excuse me.
510:52:19 BACMBIA-P 92542 through 543.610:52:24 (Deposition Exhibit 4044
710:52:24 for identification, email string dated
810:52:19 11/20/08, production numbers BACMBIA-P
910:52:21 0000092542 through 543.)
1010:52:28 MS. CONCANNON: I assume you
1110:52:29 allocated numbers to Minton and to this
1210:52:32 deposition so we are not duplicating?
1310:52:35 MS. TROMBLEY: Yes.
1410:52:35 BY MR. SELENDY:
1510:52:37 Q. Just take a moment to look at
1610:52:39 that document. Top of the second page
1710:53:01 states this is the email from Len Clamp
1810:53:04 entitled Secondary Marketing Repurchasing
1910:53:08 and Claims Business Process Follow-Up dated
2010:53:10 November 13, 2008.
2110:53:12 "Net net, our team (LOB and
2210:53:14 change) kicked off a process reengineering
2310:53:17 effort for the repurchases/investor claims
2410:53:21 area coming out of assessment. Mike
2510:53:28 Schloessmann will head this group and they
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7/30/2019 Deposition Transcript of Michael Schloessman
17/93
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HIGHLY CONFIDENTIAL
MICHAEL W. SCHLOESSMANN - 8/29/2012
1-800-325-3376 www.merrillcorp.com/law
Merrill Corporation - New York
14 (Pages 874 to 877)
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210:53:30 are now moving into Brucker's world from
310:53:33 secondary from an organization perspective."
410:53:36 Do you see that?
510:53:36 A. Yes.610:53:36 Q. Do you know what that's
710:53:38 referring to?
810:53:38 MS. CONCANNON: Objection.
910:53:39 A. I believe, it is my
1010:53:40 understanding that as it involves change
1110:53:49 management. I believe this was part of a
1210:53:56 far more expansive undertaking to assess the
1310:54:02 function, you know the various functions,
1410:54:05 systems and the like within Countrywide in
1510:54:06 figuring out what was to become those
1610:54:11 functions. And people, process, systems as
1710:54:16 a result of Bank of America's purchase of
1810:54:18 Countrywide. Which is common place in any
1910:54:22 sort of merger transaction.
2010:54:25 One of those, in a small sort
2110:54:27 of way, the repurchase world, this is
2210:54:31 indicating that, as I testified earlier, I
2310:54:34 had assumed responsibility some time in 2008
2410:54:38 for a part of the repurchase activity.
2510:54:45 Q. Were you involved in the Bank
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1 MICHAEL SCHLOESSMAN-HIGHLY CONFIDENTIAL
210:54:47 of America assessment?
310:54:50 A. I am not sure what Bank of
410:54:52 America assessment means, but inasmuch as it
510:54:56 was part of the multitude of discussions610:55:00 that took place as far as transition in
710:55:05 terms of what the organization was going to
810:55:07 look like following the merger, I was
910:55:10 involved in some of those. As I said, there
1010:55:14 were hundreds if not more that took place
1110:55:17 across Countrywide as Bank of America was
1210:55:19 assessing what it was they were, you know,
1310:55:22 purchasing, I believe.
1410:55:26 Q. Do you have any understanding
1510:55:27 of the conclusions reached as part of the
1610:55:29 transition assessment with respect to the
1710:55:32 Countrywide repurchases?
1810:55:36 MS. CONCANNON: Objection.
1910:55:36 Q. Or the repurchase process at
2010:55:37 Countrywide?
2110:55:38 MS. CONCANNON: Objection.
2210:55:43 A. One conclusion or outcome,
2310:55:44 rather, of that was in terms of my role,
2410:55:54 that that role would include, among other
2510:55:56 things, responsibility for part of the
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1 MICHAEL SCHLOESSMAN-HIGHLY CONFIDENTIAL
210:56:01 repurchase activity. By part of, I'm
310:56:03 differentiating, you know, the strategy and
410:56:06 related components from the, what was then
510:56:10 referred to as investor audit, basically the610:56:14 team of underwriters that were actually
710:56:16 reviewing the loan level claims.
810:56:19 That was not directly in my
910:56:24 purview, although there was, you know,
1010:56:25 interaction obviously in terms of the role
1110:56:28 that is described in Len's email.
1210:56:30 Q. Just to clarify that, you said
1310:56:32 the investor audit function refers to the
1410:56:34 team of underwriters that would review,
1510:56:37 actually review the repurchase demands?
1610:56:39 A. That's correct.
1710:56:42 Q. And your function instead was
1810:56:43 part of the strategy of how to deal with the
1910:56:46 results of those reviews; is that fair?
2010:56:48 A. Well, no. At that time my role
2110:56:55 which was developing, was, you know,
2210:56:56 recognizing the changing landscape, that we
2310:57:03 needed more to address given the landscape
2410:57:05 had changed and was changing considerably.
2510:57:11 That we needed more focus
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210:57:13 around counterparty, among other things,
310:57:16 counterparty engagement. Consultation with
410:57:18 legal around, you know, governing contracts,
510:57:21 contractual interpretation and assorted610:57:24 other issues to augment the underwriting
710:57:29 group, whose subject matter expertise was,
810:57:34 you know, limited to reviewing and
910:57:35 responding to loan level claims. But
1010:57:37 certainly not interpreting legal contracts
1110:57:41 and engaging in counterparty dialogue
1210:57:44 outside of, again, a very limited, you know,
1310:57:46 loan level -- I shouldn't say limited, but
1410:57:49 aside from a loan level universe of
1510:57:53 activities.
1610:57:57 Q. Is it fair to say that one of
1710:57:58 the outcomes of the BAC transition review
1810:58:02 was that the reengineering effort -- sorry,
1910:58:05 the repurchase effort had to be reengineered
2010:58:09 as to process, as this email reflects?
2110:58:11 MS. CONCANNON: Objection.
2210:58:16 A. Well, whether Len described it
2310:58:19 as such, I would describe it as we were
2410:58:23 developing, in response to again a changing
2510:58:26 repurchase landscape, we were developing
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7/30/2019 Deposition Transcript of Michael Schloessman
18/93
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HIGHLY CONFIDENTIAL
MICHAEL W. SCHLOESSMANN - 8/29/2012
1-800-325-3376 www.merrillcorp.com/law
Merrill Corporation - New York
15 (Pages 878 to 881)
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210:58:29 greater functionality or more diverse
310:58:33 functionality that we thought the existing
410:58:38 landscape called for that at that time or
510:58:43 previous to that time we did not believe was610:58:47 sufficient given, again, the changing
710:58:49 circumstances that we were observing.
810:58:52 Q. Other than adding functionality
910:58:55 to the process, do you recall specific
1010:58:58 changes that were made to how Countrywide
1110:59:01 evaluated repurchase demands?
1210:59:05 MS. CONCANNON: Objection to form.
1310:59:07 A. I don't -- well, other than the
1410:59:11 guidance of, you know, reviewing or guidance
1510:59:17 stemming from review of the governing
1610:59:20 contracts and what our obligations were in
1710:59:22 providing guidance that could be
1810:59:25 incorporated into loan level claim
1910:59:29 decisioning parameters I'm not sure what
2010:59:34 else you're -- or I'm not sure what else to
2110:59:38 say about, you know, the repurchase claim
2210:59:43 decisioning itself.
2310:59:50 Q. Okay. So you said that one of
2410:59:51 the changes was to ensure that the governing
2510:59:53 contracts were reviewed in the process of
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1 MICHAEL SCHLOESSMAN-HIGHLY CONFIDENTIAL
210:59:58 deciding whether to repurchase loans; is
311:00:01 that fair?
411:00:02 MS. CONCANNON: Objection.
511:00:06 A. Repeat that back, I'm sorry.611:00:11 Q. You said that one of the
711:00:12 changes was to ensure the governing
811:00:14 contracts were reviewed in the process of
911:00:17 deciding whether to repurchase loans; is
1011:00:19 that fair?
1111:00:19 MS. CONCANNON: Objection.
1211:00:20 A. Let me -- I'm not sure that is
1311:00:26 or not. What I said is we wanted to make
1411:00:29 sure, given the increase in repurchase
1511:00:34 claims that we had, particularly in the
1611:00:39 non-GSE segments, including from MBIA, you
1711:00:45 know, given that that process was less
1811:00:48 mature, because we really had no historical
1911:00:51 precedent or experience outside of the GSE
2011:00:56 space in any meaningful numbers, that we
2111:01:00 needed to ensure that each and every
2211:01:03 contract governing a transaction and loans
2311:01:07 included in that transaction was reviewed.
2411:01:09 And we clearly understood and
2511:01:12 the team understood what the contractual
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211:01:14 obligations were, which necessarily informs
311:01:16 how you would review and respond to a claim.
411:01:20 So I'm not sure if I was clear.
511:01:22 Q. I guess I'm trying to611:01:23 understand what changed. How was that
711:01:26 different than the way in which the investor
811:01:31 audit team previously looked at repurchase
911:01:33 requests?
1011:01:33 MS. CONCANNON: Objection.
1111:01:34 A. Well, I wasn't responsible for
1211:01:37 that area beforehand. My understanding is
1311:01:40 that that activity was limited predominantly
1411:01:48 to GSE claims. It was an established
1511:01:51 process, had been selling loans to the GSEs
1611:01:56 for 20-some-odd years, if not more.
1711:02:00 That there was, while nothing
1811:02:02 of the magnitude that we have seen in the
1911:02:04 last four years, we had a steady flow of
2011:02:09 repurchase activity that investor audit was
2111:02:13 established at least in part, it perhaps had
2211:02:16 other duties to review and respond to
2311:02:18 pursuant to those two unique contracts
2411:02:22 within that case Fannie and Freddie.
2511:02:25 So the introduction of
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211:02:26 repurchase claims in meaningful numbers from
311:02:31 non-GSE claimants implicated issues that I
411:02:38 don't know to what extent we would have had
511:02:40 occasion to review and study from a611:02:43 contractual and other standpoints.
711:02:49 Q. Okay. I would like to show you
811:02:50 a document I marked as Exhibit 4045. It is
911:02:53 an email from 2008 attaching a draft
1011:02:58 document entitled Investor Loan Claim
1111:03:02 Process Target State And Action Plan for
1211:03:05 Secondary Marketing Investor Relations,
1311:03:08 Credit Risk Investor Audit, Investor Claim
1411:03:12 Analytics and Reporting.
1511:03:12 (Deposition Exhibit 4045
1611:03:12 for identification, email string dated
1711:03:12 7/21/08, production numbers CWMBIA-B
1811:03:12 000009808 through 824.)
1911:03:27 BY MR. SELENDY:
2011:03:27 Q. In the middle of the first page
2111:03:29 you'll see that you are one of the cc's on
2211:03:31 the page.
2311:03:38 My first question will be
2411:03:39 whether you recall the document that's
2511:03:40 attached to the email?
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7/30/2019 Deposition Transcript of Michael Schloessman
19/93
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HIGHLY CONFIDENTIAL
MICHAEL W. SCHLOESSMANN - 8/29/2012
1-800-325-3376 www.merrillcorp.com/law
Merrill Corporation - New York
16 (Pages 882 to 885)
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211:04:42 MS. CONCANNON: Do you have some
311:04:43 magnifying glasses floating around the
411:04:46 firm?
511:04:47 MR. SELENDY: I keep wishing you611:04:48 would produce pages that can be better
711:04:50 read.
811:04:50 MS. CONCANNON: We produced them
911:04:51 in the best form available to us.
1011:04:53 MR. SELENDY: You didn't produce
1111:04:54 magnifying glasses with the document,
1211:04:56 so.
1311:04:57 MS. CONCANNON: No. But they
1411:04:59 have been provided to us at prior
1511:05:01 depositions in response to witness
1611:05:02 requests. I know you have them
1711:05:04 available.
1811:05:04 MR. SELENDY: If that is a
1911:05:05 serious request.
2011:05:06 MS. CONCANNON: It is a serious
2111:05:08 request, I am not being snide about the
2211:05:10 document, but there are portions of it
2311:05:11 I'm unable to read.
2411:05:12 MR. SELENDY: I don't disagree
2511:05:14 with you. We will see if we can get a
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211:05:15 glass.
311:05:21 A. Okay. I reviewed the email and
411:05:23 the attachment. I don't recall this deck
511:05:30 specifically, but it is consistent with my611:05:34 general understanding during this period we
711:05:35 were evolving the repurchase process in
811:05:40 response to, you know, in response to again
911:05:44 the changing landscape insofar as
1011:05:47 repurchases were concerned.
1111:05:48 Q. On the first page in the email
1211:05:52 from James Baker to Frank Aguilera, the
1311:05:55 second sentence states, "Please keep Mike
1411:05:58 and I posted as to the status of the
1511:05:59 presentation so that Mike can review any
1611:06:02 final deliverable prior to its presentation
1711:06:04 to senior management."
1811:06:06 Do you see that?
1911:06:06 A. Yes.
2011:06:07 Q. And did you in fact make a
2111:06:11 presentation of this deck to senior
2211:06:12 management at Bank of America?
2311:06:15 MS. CONCANNON: Objection.
2411:06:16 A. I, having made a number of
2511:06:18 presentations, I don't remember specifically
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1 MICHAEL SCHLOESSMAN-HIGHLY CONFIDENTIAL
211:06:19 this one. But inasmuch as we had developed
311:06:22 the deck and James is indicating -- I think
411:06:29 it is James, where are we here -- yes, James
511:06:32 is indicating we are scheduled or expected611:06:35 to present, I don't have any reason to think
711:06:37 that didn't happen. But I don't have
811:06:38 specific recollection of that presentation.
911:06:42 Q. If you would turn to the page
1011:06:43 ending in 9814 there is a slide entitled
1111:06:46 Executive Management Post LD 1. Do you see
1211:06:53 that?
1311:06:53 A. Yes.
1411:06:54 Q. Were you put in charge of the
1511:06:55 operations at this time for repurchasing?
1611:06:57 MS. CONCANNON: Objection.
1711:06:58 A. I was not.
1811:06:58 Q. I am noting your name Michael
1911:07:04 Schloessmann operations in the second box.
2011:07:05 Do you see that?
2111:07:06 A. Yes.
2211:07:06 Q. So what does that signify to
2311:07:09 you?
2411:07:09 A. So that was, that was a
2511:07:12 secondary marketing related role. My role
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211:07:15 was evolving through '08. I think in the
311:07:21 first part of '08 I was chief operations
411:07:24 officer or something along those lines for
511:07:27 secondary marketing.611:07:29 The operations really referred
711:07:31 to, as I recall, managing the loan delivery
811:07:36 system, the GSE loan delivery system. That
911:07:38 is the front end business where we were, you
1011:07:40 know, delivering newly originated loans to
1111:07:43 the GSEs. And I recall specifically it was
1211:07:46 not the repurchase operations at this time,
1311:07:52 July 2008.
1411:07:52 Q. Okay. So did you subsequently
1511:07:54 assume responsibility for the operational
1611:07:57 side of repurchases or no?
1711:07:59 A. Yes.
1811:08:00 Q. When was that?
1911:08:00 A. I believe that was in the first
2011:08:03 quarter of 2009.
2111:08:09 Q. I do have a magnifying glass,
2211:08:11 if that's helpful for you.
2311:08:13 A. Okay.
2411:08:13 Q. Just to keep handy.
2511:08:15 MS. CONCANNON: Thank you.
-
7/30/2019 Deposition Transcript of Michael Schloessman
20/93
c2ec3655-85ea-4ce7-b9a1-c78
HIGHLY CONFIDENTIAL
MICHAEL W. SCHLOESSMANN - 8/29/2012
1-800-325-3376 www.merrillcorp.com/law
Merrill Corporation - New York
17 (Pages 886 to 889)
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1 MICHAEL SCHLOESSMAN-HIGHLY CONFIDENTIAL
211:08:19 Q. If you would turn please to the
311:08:20 page ending Bates number 9819 entitled
411:08:27 Target State Organizational Proposal. Do
511:08:27 you see that?611:08:36 A. Yes.
711:08:37 Q. There is a the top bullet
811:08:39 refers to investor relations transaction
911:08:41 management. The second bullet refers to
1011:08:42 investor audit group. What is the
1111:08:48 distinction there drawn between those two
1211:08:50 parts of the organization?
1311:08:52 A. What is the operational
1411:08:53 distinction?
1511:08:54 Q. Yes.
1611:08:55 A. So, as I testified to earlier,
1711:08:59 the investor audit group had responsibility
1811:09:04 for the review and response, review
1911:09:09 assessment response to each loan level
2011:09:11 claim.
2111:09:11 So while we were plugged into
2211:09:15 the process, obviously we had awareness, we
2311:09:17 had engagement with the group, we had to
2411:09:20 work, you know, in sync with one another
2511:09:23 because we both owned different parts of the
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211:09:26 repurchase process, that group exclusively
311:09:30 reviewed loans and tendered responses.
411:09:38 Whereas investor relations and
511:09:41 transaction management, and -- I'm sorry, is611:09:44 your question as it pertains, what is the
711:09:46 difference as it pertains only to repurchase
811:09:49 activity because there were other activities
911:09:51 and responsibilities within my portfolio
1011:09:52 that didn't necessarily have anything to do
1111:09:54 with repurchases?
1211:09:55 Q. So let's first start with the
1311:09:59 distinction as it pertains to repurchases.
1411:10:02 MS. CONCANNON: Objection to form.
1511:10:09 A. Sorry, is this -- I'm confusing
1611:10:11 myself -- is this, you're asking what this
1711:10:14 is contemplating or what actually existed at
1811:10:17 the time? I'm sorry.
1911:10:22 Q. We can again break that down as
2011:10:24 of July 2008 what was the structure that
2111:10:26 existed in the immediate aftermath of LD 1?
2211:10:31 MS. CONCANNON: Objection.
2311:10:34 A. I continue to testify to lack
2411:10:35 of total clarity around when each of these,
2511:10:40 other than, you know, the exhibits you're
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211:10:44 putting in front of me which is in part
311:10:46 refreshing my recollection. I had
411:10:49 repurchase responsibility at some point in
511:10:52 2008 that continued to develop as we were611:10:54 developing a process for managing the
711:10:59 changed repurchase landscape, which included
811:11:01 what's referred to as the strategy
911:11:05 component, counterparty engagement, you
1011:11:07 know, legal engagement.
1111:11:09 Those kind of things I believe
1211:11:12 resided, if not in July it was to my
1311:11:18 recollection some time shortly after that.
1411:11:23 Again, it was an evolving process. Just as
1511:11:26 the repurchase activity we were observing
1611:11:28 was evolving.
1711:11:29 Q. And what was the proposal with
1811:11:30 respect to the development of the target
1911:11:34 state organization?
2011:11:36 A. So I'm going to need to refresh
2111:11:38 my memory because -- we did not, as I
2211:11:41 testified to prior to '09 we, my group did
2311:11:44 not have ownership for the loan level
2411:11:47 claims. I want to read what this target
2511:11:52 state is contemplating.
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211:11:53 Q. Yes.
311:11:54 A. I can tell you when and if this
411:11:55 actually came to pass.
511:12:48 Okay. So this, this was not611:12:55 the state that existed in July, clearly
711:12:59 investor audit managed that. This
811:13:01 contemplated target state references
911:13:06 investor relations transaction management
1011:13:09 which was the organization I managed,
1111:13:11 logging in all incoming claims, you know,
1211:13:14 subjecting claims to a review to ensure, you
1311:13:19 know, a number of things like proper
1411:13:22 standing and things of that nature. And
1511:13:27 making definitive decisions on resolution
1611:13:29 outcome of all claims.
1711:13:33 That was, you know, the
1811:13:35 decisioning parameters contemplated here, I
1911:13:38 don't know when exactly we took
2011:13:41 responsibility for those. I believe it's my
2111:13:46 understanding those, you know, became
2211:13:50 basically joint responsibilities between the
2311:13:52 two groups, because we were obviously
2411:13:55 reliant on investor audit to do the loan
2511:14:00 level claim and report out its findings.
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7/30/2019 Deposition Transcript of Michael Schloessman
21/93
c2ec3655-85ea-4ce7-b9a1-c78
HIGHLY CONFIDENTIAL
MICHAEL W. SCHLOESSMANN - 8/29/2012
1-800-325-3376 www.merrillcorp.com/law
Merrill Corporation - New York
18 (Pages 890 to 893)
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1 MICHAEL SCHLOESSMAN-HIGHLY CONFIDENTIAL
211:14:02 We also had an interest in
311:14:03 ensuring those findings were consistent with
411:14:07 contractual standards and other relative
511:14:11 criteria, but contractual standards being611:14:16 first and foremost. As they are generally
711:14:18 consistent across the board.
811:14:21 As I think back to that time my
911:14:23 desire to involve my organization which
1011:14:24 wasn't doing loan level reviews was an
1111:14:27 effort to provide basically a check and
1211:14:29 balance to what the investor audit group was
1311:14:31 doing.
1411:14:33 Q. What criteria did the investor
1511:14:37 relations transaction management group look
1611:14:39 at other than contractual standards with
1711:14:42 respect to the review of the findings from
1811:14:45 investor audit?
1911:14:46 MS. CONCANNON: Objection.
2011:14:47 A. Sorry, what did they -- at this
2111:14:53 time they didn't.
2211:14:54 Q. Right. Once this target state
2311:14:56 was implemented. So as of first quarter
2411:14:59 2009, thereafter you indicated that the
2511:15:04 transaction management group looked at
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211:15:08 contractual standards as well as other
311:15:10 crite
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