UBS Americas failed in its bid to shut down a lawsuit brought by the Federal Housing Finance Agency in connection with non-agency mortgage-backed securities purchased by Fannie Mae and Freddie Mac, while in another case three former Freddie executives lost their own bid to dismiss a Securities and Exchange Commission securities fraud case against them. The Second Circuit Court of Appeals last week upheld a lower court’s ruling that denied UBS’ motion to dismiss the FHFA’s suit as time barred. In the summer of 2011, the FHFA filed 18 lawsuits in Manhattan federal court against UBS and other big banks on behalf of the GSEs, alleging violations of the federal Securities Act of 1933 for approximately $200 billion in non-agency MBS sold to Fannie and Freddie.

The new central counterparty for MBS trades is having a difficult time delivering results and is, in fact, experiencing a drawback because of stringent margin rules as well as other internal issues, according to financial advisory firm NewOak Capital Advisors. The regulated multilateral central counterparty trading platform for executing to-be-announced agency MBS is not at full power because most TBA participants are not doing what they are supposed to, observed Ron D’Vari, chief executive officer and co-founder of NewOak. “The key drawbacks are...

Ginnie Mae issuance fell in the first quarter of 2013 but was easily offset by significant gains from a year ago, according to Inside FHA Lending’s analysis of FHA data. Mortgage-backed securities production at the government facility dropped 5.1 percent to $104.1 billion in the first quarter but increased 28.6 percent year-over-year , which was more than enough for an offset. The securities were backed mostly by FHA and VA loans with a combined total of $99.33 billion. Federally guaranteed rural housing loans totaling $4.84 billion were also in the mix. Wells Fargo and Chase Home Finance led the Ginnie Mae market with a combined ... [1 chart]

The Treasury Market Practices Group announced last week that a margining recommendation for agency MBS initially set to be implemented in June will be delayed until the end of 2013. The provisions apply to primary dealers working with four broad categories of forward-settling agency MBS transactions as part of an effort to manage counterparty exposures. The implementation date was delayed in response to concerns from market participants. Timothy Cameron, managing director and head of the Securities Industry and Financial Markets Association’s asset management group, said buy-side participants need to negotiate agreements for each of their accounts, which can include thousands of documents. “It is clear many market participants will not be able...

The International Accounting Standards Board has proposed an accounting treatment that would force holders of all but the most senior tranche of an MBS to account for those assets at fair value through net income – something that has the Mortgage Bankers Association expressing concern. The MBA generally supports the introduction of fair value through an “other comprehensive income” (OCI) classification for financial assets held within a business model in which assets are managed both in order to collect contractual cash flows and for possible sale, according to James Gross, vice president of financial accounting and public policy for the trade group. However, the MBA has...

A white paper issued last week by the Securities Industry and Financial Markets Association recommends that a Securities and Exchange Commission mandated, but still nascent, automated securities monitoring system should and will eventually incorporate ABS and MBS products into its field of supervision. Last summer, the SEC approved a final rule requiring national securities exchanges, known as SROs, to establish a consolidated audit trail. The SEC rule requires securities exchanges and securities associations to submit to the SEC a plan to create a CAT system that will capture information regarding securities quotes and orders. In particular, the CAT system will have to track...

Investors in ABS backed by private student loans strongly oppose proposals in Congress to change bankruptcy laws in an effort to help such borrowers. In a letter this week to members of Congress, the American Securitization Forum said the proposals would increase the cost of private student loans and harm the investments of those holding private student loan ABS.

It hasn’t been an easy time for due diligence firms that make their living off the mortgage business, at least not this year. Firms like Allonhill LLC, which bulked up on staff to handle the rush of work on investor buyback demands, have been cutting back in recent months as those contracts run their natural course.

The key to advancing tomorrow’s big picture housing finance reform should begin today through a series of smaller steps starting with targeted, nearly ready-to-go reductions to Fannie Mae’s and Freddie Mac’s credit risk, according to a proposal by Moody’s Analytics.

The majority of financial institutions defending themselves against a massive litigation initiative by the Federal Housing Finance Agency on behalf of Fannie Mae and Freddie Mac for toxic mortgage-backed securities purchased by the GSEs launched a counteroffensive this week by urging a federal appeals court to intervene in their favor against the “unfair” trial judge. Fifteen banks, including JPMorgan Chase, UBS Americas, Citigroup, Deutsche Bank and Bank of America, filed a joint petition with the Second Circuit Court of Appeals in New York complaining that U.S. District Judge Denise Cote has engaged in a “one-sided” approach designed to force a settlement rather than “foster fair and reasonable determination of the issues.”