State attorneys general and federal officials this week announced a massive legal settlement with five major mortgage servicers, finally concluding a torturous 16-month-long negotiation. Some 49 states – including New York, California and Florida – agreed to the $25 billion settlement with JPMorgan Chase, Bank of America, Wells Fargo, Ally Bank and Citigroup. The agreement does not provide blanket immunity for the lenders, which can still face criminal charges and are subject to claims over securitization practices and claims brought by individual borrowers. The agreement is based on investigations by...

A week after federal and state enforcement agencies launched a residential MBS investigative effort, reports have surfaced that Ally Financial, Bank of America, Citigroup, Deutsche Bank and Goldman Sachs are about to be sued by the Securities and Exchange Commission for allegedly misrepresenting the quality of mortgages they packaged and sold to investors. Officials at the SEC, which never confirms specific Wells Notices of impending legal action, declined to comment on the investigation, as did spokesmen for Ally, Citi and Goldman. Representatives from Bank of America and Deutsche Bank did not...

MBS trustees are facing challenges on a number of fronts, according to panelists at the American Securitization Forum’s ASF 2012 conference last week in Las Vegas. Issuers are counting on trustees to provide new information required by the Securities and Exchange Commission, communications with the rating services have become strained, and municipalities are looking to require property maintenance on abandoned homes. Under the Dodd-Frank Act, the SEC now requires ABS issuers to disclose the three-year history of the repurchase requests they’ve received – including those withdrawn and those disputed...

Federal and state enforcement agencies late last week launched a broad new initiative to investigate and develop litigation on fraud and misconduct in the non-agency MBS market, issuing civil subpoenas to 11 financial companies. The RMBS Working Group is being co-chaired by five officials: two assistant attorneys general in the Justice Department, the head of enforcement at the Securities and Exchange Commission and state attorneys general from New York and Colorado. Some 55 DOJ officials are participating, including 15 attorneys and 10 Federal Bureau of Investigation agents, with 30 more attorneys...

While a major regulatory concern of the past few years – the risk-retention rule – has yet to be resolved, the industry is squaring its shoulders for new challenges: the so-called Volcker Rule, a proposal on conflicts of interest in securitization and new bank capital requirements regarding market risk. These projects could do “enormous or irreparable damage to the industry, and entire sectors of the industry could be lopped off,” said Tom Deutsch, executive director of the American Securitization Forum, during the ASF conference last week in Las Vegas. Only about one eighth of the regulatory requirements...

The Department of Housing and Urban Development has announced a new regulation prohibiting lenders from using sexual orientation or gender identity as a basis for determining borrower eligibility for FHA-insured mortgage financing. The regulation specifically extends federal anti-discrimination protections to lesbians, gays, bisexuals, transgender persons and their families when applying for HUD-assisted or HUD-financed rental housing or an FHA-insured mortgage loan. The regulations will become effective 30 days after their publication in the Federal Register. HUD Secretary Shaun Donovan said the policy will ...

Mortgage Guaranty Insurance Corp. announced a new two-year waiver from regulatory capital requirements from the Office of the Insurance Commissioner for the State of Wisconsin, which would allow it to write new business through Dec. 31, 2013. Approved on Jan. 23, the waiver came after the previous waiver expired at the end of last year. As did the prior order, the new waiver allows MGIC to write new business as long as it maintains a level of capital sufficient to keep the company afloat. The new waiver required MGIC to contribute $200 million to MGIC Indemnity Corp. (MIC), a direct subsidiary of MGIC, by Jan. 31 as part of a ...

The six federal agencies that have to respond to massive protests over a proposed qualified residential mortgage definition have offered little guidance on their next step, one that industry groups say is critical given its interaction with a separate rule that sets standards for qualified mortgages that show the borrower has the ability to repay a loan. “We will probably see a QM rule before a QRM rule,” said Joseph Pigg, senior counsel at the American Bankers Association. “Getting six regulatory agencies to agree will make QRM a longer process,” he noted. The QM/ability-to-repay rule is under...

Federal banking regulators this week reminded banks and thrifts to pay close attention to how they monitor risks and calculate loss reserves in their home-equity loan business. An interagency supervisory memo sent this week does not change the regulators’ policy on allowance for loan and lease losses for closed-end second mortgages and home-equity lines of credit, but it urges lenders to “monitor all credit quality indicators” relevant to junior liens. Although many observers have raised concerns about the risk of second mortgages, delinquency rates on loans held by banks, thrifts and credit unions have been lower...

MBS and ABS markets in the U.S. are increasingly being shaped by global forces, from the impact of the European debt crisis to the worldwide adoption of new international regulatory standards and the surge in Euro securitizations that’s taking up some of the slack from the depressed U.S. non-agency MBS sector. There was an unmistakable international flavor to the ASF 2012 conference sponsored by the American Securitization Forum in Las Vegas this week. A significant number of the more than 5,000 attendees – an ASF record – came from outside the U.S., and numerous panels were devoted to global issues...