Leading secondary-market representatives told the Financial Industry Regulatory Authority they generally support its goal of mitigating the counterparty credit risk borne by participants in the “to be announced” market and reducing the potential for systemic risk. But they are opposed to FINRA’s proposal to require maintenance margin to attain that aim – something the Treasury Market Practices Group has already considered and rejected. Issued back in January, FINRA’s proposed amendments stipulated that for bilateral transactions in covered agency securities with non-exempt accounts, FINRA members must collect, in addition to variation margin, maintenance margin equal to 2 percent of the market value of the securities. If sufficient margin is not collected, the member would have to deduct the uncollected amount from the member’s net capital at the close of business following the business day on which the deficiency was created. Additionally, if the deficiency in margin is not resolved...
A North Carolina federal magistrate has recommended that a Justice Department fraud case against Bank of America be dismissed, but he also said a separate Securities and Exchange Commission lawsuit against the bank based on a different federal law should proceed. The DOJ last August filed suit against BofA under the Financial Institutions Reform, Recovery and Enforcement Act, accusing the bank of defrauding investors in the sale of $855 million of non-agency MBS. Last week, U.S. Magistrate David Cayer of the U.S. District Court for the Western District of North Carolina found that the government failed to prove the bank made “material” false statements to the former Federal Housing Finance Board. The DOJ claimed...
Allonhill LLC, a Denver-based due-diligence firm that served both Wall Street and primary market lenders, recently filed for bankruptcy protection, just days after losing a civil case where it was found liable for breach of contract and fraud, and ordered to pay its former client, Aurora Bank FSB, more than $25 million in damages. Last year, Allonhill’s owners – including principal Sue Allon – sold most of the firm’s assets to Stewart Title. From a legal standpoint, it was not a “franchise” deal, which means Stewart should not be on the hook for any actions of the corporate entity. However, the case may be...
The Securities and Exchange Commission late last week gave the securities industry another month to file comments on a proposed rule that most participants already know they don’t like. Comments were originally due March 28 on the SEC’s latest proposal to require asset-backed securities issuers to make loan-level details about pending issues available to investors on their own websites, rather than the agency’s Electronic Data-Gathering, Analysis and Retrieval system. On the day the comment period ended, the SEC extended it to April 28. Many issuers and large banks think...
In the pre-crash days, newly created MSRs were selling at 6 and even 7 times the servicing fee. “I even saw prices of eight,” said Chuck Klein, managing partner for Mortgage Banking Solution.
In its heyday, S&P used to rate more than 90 percent of new issuance of non-agency MBS, but in 2013 it accounted for just 40.0 percent of the market by dollar volume.
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