Securitization market participants continue to face significant uncertainty from regulatory forces on both sides of the Atlantic that is dampening securitization activity, raising costs and probably leaving some deals undone. Much of the problem stems from capital requirements and the use of credit ratings, which have fallen into disrepute among many lawmakers and regulators in the wake of the collapse of the subprime mortgage market and the resulting credit market freeze in 2008. After last years enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Federal Reserve, the Federal Deposit Insurance Corp., the...
Between 2006 and early 2011, Fannie Maes regulator repeatedly tolerated delays by the GSE in establishing an acceptable and effective operational risk-management program despite repeated calls to do so, according to a report by the Federal Housing Finance Agency Office of Inspector General.
A report issued this week by the Federal Housing Finance Agency Office of Inspector General found preventable flaws in the FHFAs oversight and approval of a $1.35 billion settlement between Bank of America and Freddie Mac in December 2010 which resolved most past, present and future repurchase demands on 787,000 loans.Fannie Mae made its own similar repurchase settlement with BofA for $1.52 billion that same month.The FHFA-OIG evaluation found the agreement was based on Freddies flawed review process and that a lack of independent action by FHFA senior management may have led and could lead to significant losses by the GSE.
States are moving quickly to implement laws and regulations facilitating eExamination of mortgage lenders, leveraging technological innovation to bring the industry closer towards the goal of self-examination and self-regulation. We are close to 30 states that are doing eExaminations, and were trying to bring on additional states as we move forward, said Michael Chan, vice president of technology vendor Compliance Ease. One of the reasons why I would say were reaching a tipping point is that state regulators are conducting limited-scope electronic exams, he added. The idea behind that is...
The Securities and Exchange Commission is considering launching a civil injunctive action against Standard & Poors Rating Services, alleging violations of federal securities laws with respect to the companys ratings for a 2007 collateralized debt obligation. According to a Form 8-K filing this week by McGraw-Hill, the rating services parent, the federal agency is looking into S&Ps rating of Delphinus CDO 2007-1, which was to be mostly backed by non-agency residential MBS. In connection with the contemplated action, the [SEC] staff may recommend that the commission seek civil money penalties, disgorgement of fees and...
The Securities and Exchange Commission this week approved a proposed conflict-of-interest rule that attempts to walk a tightrope between preventing abusive securitization practices and not interfering with legitimate competitive activity in the market. The agency got a lot of feedback on how to implement the Dodd-Frank Act conflict-of-interest provisions, including from the chief sponsors of the provisions in Congress. Senate Democrats Jeffrey Merkley (OR) and Carl Levin (MI) were largely inspired by dealings in which Goldman Sachs allegedly allowed a hedge fund to choose assets for a collateralized debt obligation and then...
Recent proposals by the Securities and Exchange Commission could eliminate or impose more regulatory burden on mortgage real estate investment trusts and complicate securitizations, experts warned. The SEC earlier this month launched a preliminary effort to reconsider the exemption that REITs currently have from the Investment Company Act. Although the agency did not propose any specific changes, the REIT industry and its supporters see the initiative as a potential game-changer for how they do business. The SEC concept release, at first blush, appears to signal impending regulatory burdens for mortgage REITs and to...
The FHA is urging Congress to restore the authority of community banks to close FHA loans in their own names without having to maintain an FHA lender approval to do so. While it took a regulation by the Department of Housing and Urban Development to take away small banks FHA correspondent status, federal law requires lenders to have FHA approval before they can close an FHA-insured loan. Only Congress can make the changes necessary for non-direct endorsement lenders to return to the business of originating and closing FHA loans in their name, according to a former HUD official. Assistant Secretary for Housing and...
FHA lenders that fail to report mortgage record changes for mortgage sales, transfers and termination of mortgage insurance will be referred to the Mortgage Review Board for disciplinary action, including civil fines, the agency warned. In Mortgagee Letter 2011-33, the FHA reminded lenders of their responsibility to reconcile their portfolios and ensure all accounts are properly identified. When the FHAs records do not match lenders records, the latter are required to take corrective action. The Department of Housing and Urban Development will not pay any claims if the name and identification number of the holder or the...
A House Republican legislative proposal to transfer the Department of Agricultures rural housing programs to the FHA to eliminate potentially duplicative housing services would be disruptive if not premature, according to officials from both agencies. Testifying during a recent House subcommittee hearing on a GOP discussion draft to reform FHA, Ginnie Mae and the Rural Housing Service of the Department of Agriculture, agency representatives expressed their opposition to the proposal. The Republican discussion draft is under consideration in the House Financial Services Subcommittee on Insurance, Housing and Economic Opportunity to...