The chairman of the House Committee on Oversight and Government Reform wants the Federal Housing Finance Agency to explain why it hired two outside law firms in a massive legal action to recover losses suffered by Fannie Mae and Freddie Mac on their investments in non-agency MBS. Rep. Darrell Issa, R-CA, wrote FHFA Acting Director Edward DeMarco on Sept. 29 asking why the agency hired outside counsel from Quinn Emanuel & Sullivan and from Kasowitz Benson Torres & Freidman to initiate lawsuits against financial institutions and how much the agency is paying them. Issa posed detailed questions and requested documents regarding...

A “who’s who” list of a number of the largest and most well-known mortgage lenders in the country – including Wells Fargo, Countrywide Home Loans, Bank of America, JPMorgan Chase, PNC Bank, GMAC Mortgage Corp., Citimortgage and Suntrust Mortgage – have been accused by two whistle-blower types of charging U.S. military veterans illegal fees to refinance their home mortgages. According to the accusations, made in a complaint unsealed in federal court in Atlanta late last week, the mortgage lending entities charged refinance fees that are prohibited by the Department of Veterans Affairs and hid the charges by padding or inflating other allowable charges so they could obtain government guarantees for the mortgages, all without telling the veterans.

The U.S. Attorney’s office in Manhattan has entered into an agreement with the law firm of Steven J. Baum, one of the largest volume mortgage foreclosure firms in New York state, that requires the firm to pay $2 million to Uncle Sam and to extensively change its mortgage foreclosure practices. The agreement resolves an investigation into Baum’s mortgage foreclosure-related practices, specifically whether the firm, on behalf of its lender clients, filed misleading pleadings, affidavits and mortgage assignments in state and federal courts in New York.

California. The state amended a number of its mortgage loan originator licensing provisions under the California Finance Lenders Law last week, including one amendment that permits applicants who have an expunged or pardoned felony conviction to obtain a license. The underlying crime, facts or circumstances can be considered when determining whether to issue a license. Another amendment permits a person exempt from the California Finance Lenders Law to register with the Commissioner of Corporations so as to sponsor one or more individuals required to be licensed under the SAFE Act if specific requirements are met.

Federal Housing Finance Agency. OIG Finds Room for Improvement. The FHFA recognizes how important it is to oversee Fannie Mae’s and Freddie Mac’s default-related legal services, but it needs to improve its capacity to identify new and emerging areas of risk, according to a new report released by the agency’s Office of Inspector General. Additionally, “FHFA does not have a continuous supervision plan or detailed examination guidance to govern its oversight of Fannie’s Retained Attorney Network, and it had not accomplished any targeted examinations of the RAN until it initiated a special review in late 2010, which has not yet been published,” the OIG said. Moreover, “FHFA also has not developed formal policies to address poor performance by law firms that have relationships – either directly through contract or through its loan servicers – with both enterprises to ensure that information is shared.”

New issuance of mortgage- and asset-backed securities faltered in the third quarter, although production levels were gaining strength in September. A new Inside MBS & ABS analysis reveals that $330.12 billion of ABS and residential MBS were issued during the third quarter, a decline of 6.3 percent from the previous three-month period. The surprisingly tepid increase in residential MBS issuance was not nearly enough to offset a substantial drop in non-mortgage ABS activity. Non-mortgage ABS issuance fell 43.4 percent from the second to the third quarter, sinking to $24.84 billion and reversing the very...(Includes one data chart)

The improvements that the Federal Housing Finance Agency is expected to make to the government’s Home Affordable Refinance Program will likely come at the expense of MBS investors, say experts. The outlines of an expanded HARP are far from clear, but the FHFA is said to be giving serious consideration to lifting the 125 percent loan-to-value limit, in addition to waiving loan-level pricing adjustments, representation and warranties imposed on lenders, valuation requirements and the portability of mortgage insurance. The agency, which oversees Fannie Mae and Freddie Mac, is expected to make an...

The credit rating industry is generally making progress in implementing a landslide of new regulatory requirements – both in the U.S. and from overseas regulators – but several firms continue to wrestle with conflict-of-interest standards and other issues, according to an annual report released this week by the Securities and Exchange Commission. Problems were found at all 10 ratings firms. The three larger nationally recognized statistical rating organizations – Standard and Poor’s, Moody’s Investors Service and Fitch Ratings – all have more than 1,000 credit analysts and credit analyst supervisors, while...

The strategic default problem is not going away, keeping pressure on servicers and MBS investors to find ways to dis-incentivize these actions. House prices continue to fall, and more underwater homeowners are willing to batter their credit rating and default on their mortgage to get out of an uneconomic deal. In a recent report, analysts at Deutsche Bank said the threat of legal action and risks to assets other than the mortgaged property play a large role in a homeowner’s decision to strategically default. Eleven states are considered non-recourse states, either because they explicitly forbid deficiency judgments or...