Berkshire Hathaway and other new bidders are circling around the assets of Residential Capital, setting the stage for a showdown at the Southern District of New York Bankruptcy Court after the court approved the current way the mortgage unit is operating in bankruptcy. In a turn of events that has shaken the stability of ResCap’s initial bankruptcy plan that includes $8.7 billion to settle MBS investor lawsuits, Berkshire Hathaway objected to the current sale procedures in place, which have yet to be approved in court, in lieu of its own offer. The Nebraska-based conglomerate set the wheels in motion...

The attorneys general of New York and Delaware are now free to argue on behalf of absent investors against a proposed $8.5 billion settlement involving Bank of America, securities trustee Bank of New York Mellon and a group of investors to resolve the claims of other non-participating investors in non-agency MBS issued by Countrywide. A New York state judge last week granted a motion by NY Attorney General Eric Schneiderman and DE Attorney General Beau Biden to intervene in the litigation. At issue in this complicated case is whether the trustee acted legally and appropriately in entering into the...

The Federal Reserve is getting closer to recouping the last bit of its substantial investment in American International Group made during the financial market meltdown of 2008. This week, the Federal Reserve Bank of New York moved ahead with auctioning off seven related offerings of once-“toxic” securities in collateralized debt obligations with a combined $7.09 billion in face value held in its Maiden Lane III portfolio. There were two sales conducted on Wednesday, Altius 1, with a face amount of $1.073 billion, and Altius 2 ($853 million), an FRBNY official said, both of which ended up being sold to Merrill...

Asset-backed commercial paper investors in the ongoing legal squabble that resulted from the collapse of Taylor Bean & Whitaker Mortgage Corp. and its Ocala Funding LLC subsidiary may bring suit over claims arising in documents, despite not being parties to those documents, when their agent refuses to sue or allow the investors to sue, a federal judge has ruled. Last week, U.S. District Court Judge Robert Sweet in Manhattan permitted Ocala’s two sole investors, plaintiffs Deutsche Bank AG and BNP Paribas Mortgage Corp., to sue defendant Bank of America in its roles as indenture trustee and collateral agent...

The Federal Housing Finance Agency should continue projects already underway to create more uniformity in Fannie Mae and Freddie Mac operations and extend those efforts to reduce the liquidity gap in the MBS issued by the two government-sponsored enterprises, a key Wall Street group said. Giving priority to the alignment of Fannie and Freddie operations will “set the stage for the longer-term future of the enterprises and mortgage finance in this country more broadly, including non-agency securitization,” said the Securities Industry and Financial Markets Association. Recent FHFA projects to standardize...

A proposal to replace the FHA’s current Tier Ranking System with a Servicer Performance Scorecard as a basis for determining servicer incentive payment is expected to be published in the Federal Register by the end of this month. In the previous issue of Inside FHA Lending (Volume 5, Issue 11, May 25), it was reported that a coalition of industry groups asked the FHA to adopt a private transfer fee rule in harmony with the final rule recently adopted by the Federal Housing Finance Agency. In a recent seller/servicer bulletin, Freddie Mac announced that, effective July 16, it will not purchase mortgages that are ...

Making the Department of Veterans Affairs’ adjustable-rate mortgage programs permanent would cost $144 million in new direct taxpayer subsidies over the next 10 years, according to Congressional Budget Office estimates. Based on the number of ARM and hybrid ARM loans the VA has guaranteed in recent years, CBO estimates that the VA would guarantee approximately $1.3 billion worth of additional loans annually over the next 10 years. Consequently, additional subsidy costs for those loans would increase direct spending by $52 million over 2012-2017 and $144 million over 2012-2022, the CBO said. Subsidy costs of those additional loan guarantees would be paid from a ...

If investors in non-agency mortgage-backed securities had easy access to the addresses of mortgages included in non-agency MBS, the sector’s market share would increase, according to a new proposal by the Reason Foundation, which promotes libertarian principles. “Ignorance of the borrower’s address and identity is a major disadvantage for the residential MBS investor or anyone trying to analyze residential MBS deals,” according to Marc Joffe, a research associate at the Reason Foundation and Anthony Randazzo ...

Moody’s Investors Service announced last week that it is reviewing $47.5 billion in outstanding non-agency mortgage-backed securities for possible rating action. In a change of pace, however, most of the securities are being reviewed for potential upgrades. A whopping 78.3 percent of the combined subprime, Alt A, option ARM and jumbo MBS in question could potentially be upgraded. “The upgrade reviews are due to significant improvement in collateral performance and/or faster-than-expected pay-down on ...

Walter Investment Management is scheduled next week to begin subservicing the first batch of up to 30,000 mortgages in non-agency mortgage-backed securities for Bank of America. The transfer will mark the latest shift from BofA to subservicers as part of a still-disputed $8.5 billion proposed settlement with non-agency MBS investors. Nine subservicers were approved as part of the settlement: Acqura Loan Services, Bayview Loan Servicing, FCI Lender Services, Nationstar Mortgage, Residential Credit Solutions ...