The Federal Housing Finance Agency and the Treasury Department illegally implemented the so-called sweep amendment last summer that altered Fannie Mae’s and Freddie Mac’s preferred stock purchase agreements to seize nearly all the two GSEs’ profits, in direct violation of the 2008 conservatorship legislation, according to investors’ lawsuits filed in federal court last week. Unlike the initial litigation filed by investors last month that challenges the entire 2008 government takeover of Fannie and Freddie, the separate suits filed by hedge-fund Perry Capital and by Fairholme Capital Management claim that Treasury’s August 2012 amendment to the preferred stock purchase agreements violated the Housing and Economic Recovery Act of 2008, which placed the GSEs in conservatorship.
The Federal Housing Finance Agency has wrongfully denied Fannie Mae and Freddie Mac permission to uphold their statutory duty under the Housing and Economic Recovery Act of 2008 to make contributions to the National Housing Trust Fund, according to a lawsuit filed by the National Low Income Housing Coalition. Fil0ed last week in the U.S. District Court for the Southern District of Florida, the suit by the NLIHC – along with the Right to City Alliance and four other individual plaintiffs – calls on the FHFA to make good on the GSEs’ obligations to make contributions into the trust fund. The fund was set up under HERA to provide subsidies to rehabilitate and fund low-income housing, but Fannie’s and Freddie’s payment obligations to the trust fund were suspended when the GSEs were placed into government conservatorship in September 2008.
The Federal Housing Finance Agency’s official watchdog recommended in a report this week that the agency devise a way to measure how its guaranty fee hikes of the past two years have actually increased the participation of private investment in the mortgage-backed securities sector. As Fannie Mae’s and Freddie Mac’s conservator, the Finance Agency directed the GSEs to increase their guaranty fees as a means to encourage greater private-sector investment in mortgage credit risk, reduce their dominant position in housing finance and limit potential taxpayer losses, the FHFA Office of Inspector General report noted. “The enterprises’ average combined guaranty fees have nearly doubled since 2011 – due to legislation and FHFA’s initiative – and FHFA plans further gradual guaranty fee increases to spur private-sector mortgage investment,” said the OIG. “However, it is not yet clear how high FHFA must increase guaranty fees to achieve its objectives.”
A Manhattan federal judge earlier this month dismissed a class-action lawsuit against Standard & Poor’s Financial Services after finding no evidence that the rating agency defrauded investors when it gave a favorable rating to Fannie Mae stock prior to the financial crisis.The suit, filed in December 2012 on behalf of potentially hundreds of thousands of investors who bought stock in an offering by Fannie in May 2008, four months before the GSE was taken over by the government, alleged that S&P knowingly misrated Fannie’s stock. Valued at about $25 per share when it was issued, the stock dropped to about $3 per share after Fannie’s government conservatorship began in September 2008.
Consumer complaints filed with the Consumer Financial Protection Bureau about their residential mortgages fell to 12,531 during the second quarter, down 9.2 percent from the first three months of the year, according to an analysis of the bureau’s complaint database by Inside the CFPB, an affiliated publication. That rate of decline is better than the overall 8.2 percent drop in complaints seen across all financial services product lines in aggregate, but not as good as the declines related to ...
While new regulations have been costly for servicers to implement, they have helped improve borrower satisfaction, according to J.D. Power’s latest primary servicer satisfaction study. “The fact that satisfaction continues to increase seems to indicate that changes being made in response to these new regulations are having a positive impact on the experience of customers,” said Craig Martin, director of investment services at J.D. Power. He cited regulations from the Consumer Financial Protection Bureau ...
The high-stakes game of chicken Congressional Democrats and Republicans have been playing for the better part of the last two years over President Obama’s nomination of Richard Cordray to be director of the Consumer Financial Protection Bureau came to an end this week as GOP members of the Senate blinked first. On Tuesday, the Republicans agreed to allow an up-or-down vote on Cordray to avert a showdown over longstanding filibuster rules in the Senate. Sen. Majority Leader Harry Reid, D-NV, has been threatening to upend the Senate’s traditional filibuster mechanism and change the rule under which presidential nominees must receive 60 votes in order to be approved. Cordray’s nomination to a full five-year term was approved...
Compliance experts are urging FHA lenders to express their concerns about a potential new enforcement regime the Department of Housing and Urban Development has proposed that could raise the risks of doing business with the FHA. The HUD proposal, which was published as a notice in the Federal Register with a comment deadline of Sept. 9, seeks comment on measures that would further enhance quality assurance in origination, underwriting and servicing. HUD has routinely used quality assurance methods, including routine and targeted audits, post-endorsement loan reviews and monitoring of early default and claim rates to evaluate lender compliance. Attorneys with K&L Gates cautioned...
The Consumer Financial Protection Bureau may have over-reached by extending its new bulls-eyes on debt collectors to mortgage servicers, according to some top mortgage industry attorneys. The CFPB last week warned all companies under its jurisdiction that they will be held accountable for unlawful conduct in collecting a consumer’s debts, citing its authority under the Dodd‐Frank Act, which prohibits “unfair, deceptive, or abusive” acts or practices (UDAAPs). Attorney Alan Kaplinsky, a practice leader in the Philadelphia office of the Ballard Spahr law firm, said it’s particularly significant that the bulletins not only address the conduct of debt collectors and debt buyers, but also are directed at creditors and servicers. CFPB Bulletin 2013‐07 makes...
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