It is not a matter of “if” or even “when” but rather “how” the remaining defendants settle lawsuits filed by the Federal Housing Finance Agency over billions in non-agency MBS sold to Fannie Mae and Freddie Mac in the years leading up to the housing crisis. Last week, the FHFA announced it recovered $7.88 billion in civil settlements in 2013 from seven of the 18 defendants the agency took to court in 2011. Eleven firms have yet to settle, with Bank of America facing the largest exposure because of its ownership of Countrywide Financial Corp. and Merrill Lynch, two of the largest issuers in the now-defunct subprime MBS market. In its original claim, the conservator of Fannie and Freddie accused...[Includes one data chart]
Fannie Mae and Freddie Mac mortgage-backed securities remained the preferred investment choice of the 12 Federal Home Loan Banks during the third quarter of 2013, with a modest increase from the previous quarter, according to a new analysis and ranking by Inside The GSEs based on data from the Federal Housing Finance Agency. Meanwhile, Ginnie Mae securities posted a pocket-sized increase within the FHLBank system during the period ending Sept. 30, 2013.
Declining refinance volume contributed to a marked decline in the GSEs’ overall business at the end of 2013 as Fannie Mae and Freddie Mac posted big declines in business on a quarterly and total 12-month basis, according to a new Inside The GSEs analysis. Fannie and Freddie issued $182.2 billion in new single-family mortgage-backed securities during the three-month period ending Dec. 31, 2013, a two-year low.
The Federal Housing Finance Agency said it recovered $7.88 billion in civil settlements in 2013 from less than half of the 18 defendants it is suing over billions of dollars in losses from toxic non-agency mortgage-backed securities sold to the GSEs before the housing crisis. Seven of the big banks made deals with Fannie Mae’s and Freddie Mac’s conservator to get out from under the massive MBS litigation effort launched by the FHFA in 2011.
In 2014, lawmakers and the Obama administration will no longer be able to avoid confronting claims by GSE shareholders seeking recovery, says an expert. This week, while attending a Financial Services Roundtable Housing Policy Council forum on GSE reform, financial industry consultant Bert Ely quizzed Sens. Bob Corker, R-TN, and Mark Warner, D-VA, about GSE securities.
Nationally-recognized credit-rating agencies continue to show improvements in certain problem areas despite new concerns raised by federal examiners in their latest review, according to a Securities and Exchange Commission staff report. The SEC’s 2013 credit-rating agency examinations found deficiencies in eight key areas, particularly in the credit-rating agencies’ internal controls. Examiners stopped short of branding their “essential findings” as “material regulatory deficiencies,” although the SEC may do so in the future and require stronger corrective action, the report noted. Based on the latest exams, the SEC’s Office of Credit Ratings found...
A commercial MBS issued in late December that received AAA ratings from Fitch Ratings and Standard & Poor’s wouldn’t have been rated higher than A1 by Moody’s Investors Service. Moody’s said the $375 million RBS Commercial Funding Inc. 2013-GSP Trust lacked structural support to obtain the highest ratings. The deal was a single-asset transaction without subordinate classes to absorb expenses that the trust can’t pass along to the borrower. “In cases where a subordinate class is not present to protect highly rated senior investors, some other feature, such as a reserve fund, has been employed to mitigate the risk,” according to Daniel Rubock, a senior vice president at Moody’s. “The GSP Trust lacks any such structural mitigant.” Fitch said...
The Securities Industry and Financial Markets Association is opposed to the Financial Industry Regulatory Authority’s recent proposal to begin disseminating data for transactions in ABS and non-agency commercial MBS, out of concern it could compromise market liquidity. At issue are FINRA’s proposed changes in Trade Reporting and Compliance Engine to disseminate additional ABS transactions and at the same time reduce the reporting periods for such securities. The proposal would implement shorter reporting timeframes for ABS transactions (initially 45 minutes for six months, then 15 minutes), as well as real-time dissemination of trade information. “While SIFMA members agree...
Sens. Bob Corker, R-TN, and Mark Warner, D-VA, said this week they are unmoved by arguments that the government-sponsored enterprises have all but repaid the capital fronted by the federal government and that future GSE profits should be directed to GSE shareholders, including hedge funds that have increased their holdings in recent months. “We respect the Constitution, and we understand there are some issues that need to be worked through. But at the end of the day, the GSEs would have no value whatsoever had the government not stepped in,” Corker said at a discussion hosted by the Financial Services Roundtable. He told shareholders – such as Pershing Square Capital Management and Fairholme Funds – to file lawsuits against the federal government. “Go through the courts and seek legal remedy,” Corker said. Warner said...
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