Credit Suisse Securities won an auction this week for $7.01 billion in predominantly non-agency mortgage-backed securities sold by the Federal Reserve Bank of New York. The securities were part of the Maiden Lane assets the Fed acquired from AIG and the amount of the winning bid was not disclosed. The Fed halted sales of the assets last year after demand for the securities decreased. The sale this week of most of the remaining Maiden Lane II assets was prompted by an unsolicited offer from Goldman Sachs. The Fed decided to auction the MBS sought by Goldman and Credit Suisse won, also beating bids by Barclays Capital and Merrill Lynch ... [Includes three briefs]

The home-equity loan market declined further during the third quarter of 2011 as depository institutions reined in new production and their existing portfolios – in most cases – continued to wither. According to the Federal Reserve, the outstanding supply of home-equity loans – both closed-end second mortgages and lines of credit – fell to $887.5 billion as of the end of the third quarter. That was down 1.9 percent from the midway point in 2011 and off 21.5 percent from the HEL market’s all-time high of $1.131 trillion reached back in 2007. Most home-equity loans are held in portfolio by..(Includes two data charts)

The Countrywide Financial legacy continues to sour for Bank of America, which recently was compelled to agree to pay $335 million to settle charges that Countrywide allowed pricing discrimination against African American and Hispanic borrowers, along with unchecked steering to subprime loans, when similarly qualified Caucasian borrowers were given prime loans at lower cost. It’s the largest fair lending settlement to date. This is the first time that the Justice Department has alleged and obtained relief for borrowers who were steered into mortgages because of their race or national origin, government officials said. The settlement – which requires court approval – mandates that Countrywide implement policies and practices to prevent discrimination if it returns to the lending business during the next four years. Countrywide currently operates as a subsidiary of Bank of America but does not originate new loans.

Issuance of non-agency mortgage-backed securities supported by newly originated mortgages will remain muted in 2012, according to industry analysts. A number of factors have combined to limit non-agency MBS issuance, including economic issues, regulatory issues and uncertainty regarding reform of the government-sponsored enterprises. Only two non-agency securities backed by new loans were issued last year – a total of $665.2 million in jumbo MBS from Redwood Trust. “The trickle of deals should continue into 2012,” according to analysts ...

The Congressionally-mandated increase in the guarantee fees charged by the government-sponsored enterprises and the FHA will not be enough to significantly shift activity to the non-agency market, according to industry analysts. One option for increasing non-agency activity has been an increase in GSE guarantee fees, but the 10 basis point increase approved by Congress in December does not appear to be enough for most products. “The argument that it will encourage homeowners to look for non-GSE/FHA loans is pretty silly and hides the foolishness of using housing to pay for payroll tax cuts,” said Adam Levitin, an associate professor of law at Georgetown University. ...

The Consumer Financial Protection Bureau announced this week that it will immediately begin supervision of non-bank servicers and lenders. The supervision became possible due to President Obama’s controversially executed appointment of Richard Cordray as director of the CFPB. “Since most of these businesses are not used to any federal oversight, our new supervision program may be a challenge for them,” Cordray said this week of non-banks. “But we must establish clear standards of conduct so that all financial providers play by the rules.” ...

Bank of America and the Department of Justice recently agreed to the largest residential fair lending settlement in history – for $335 million. The DOJ claimed that Countrywide Financial allowed pricing discrimination against minority borrowers as well as unchecked steering to subprime loans. The settlement, which is subject to court approval, will mark the first time that the DOJ has obtained relief for borrowers who were steered into loans based on race or national origin. The DOJ said the practice “systematically placed borrowers of color into subprime mortgage loan products while placing non-Hispanic white borrowers with similar creditworthiness in prime loans.” ...

The government-sponsored enterprises’ increased subprime activity in the mid-part of the last decade was driven by compensation incentives for former executives, the Securities and Exchange Commission claims. The allegations were included in recent lawsuits filed by the SEC regarding Fannie Mae’s and Freddie Mac’s disclosure of non-prime activity. In December, the SEC filed securities fraud lawsuits against six former GSE executives. The SEC claims the executives – including former Fannie CEO Daniel Mudd and former Freddie CEO Richard Syron – knew of and approved misleading statements in 2007 and 2008 claiming that the companies had minimal holdings of higher-risk mortgages. ...

Bank and thrift holdings of home-equity loans declined by 1.8 percent from the second quarter of 2011 to the third, according to the Inside Mortgage Finance Bank Database. HELs continue to demonstrate strong performance as the serious delinquency rate on the $1.20 trillion in holdings was 2.05 percent in the third quarter of 2011. Closed-end second liens accounted for 10.6 percent of bank and thrift total HEL business – which includes unused home-equity loan-of-credit commitments. The $127.2 billion in outstanding CES was down by 4.2 percent from the previous quarter. ... [Includes one data chart]

Wells Fargo this week agreed to a $940,056 settlement with Maryland’s attorney general regarding option ARMs. According to the AG, Wachovia and Golden West – the lenders that offered the loans, which Wells purchased – did not fully explain the loans’ negative amortization option to borrowers. Wells agreed to modify Maryland borrowers with the loans via the Home Affordable Modification Program if possible or via the servicer’s proprietary mod program. ... [Includes three briefs]