The Federal Home Loan Bank of Cincinnati says a unit of Lehman Brothers Holdings is not entitled to a multimillion dollar payday because the FHLBank did not short change the firm when it closed out swaps and options transactions ahead of Lehman’s 2008 bankruptcy. Last week, Lehman filed a breach of contract lawsuit in Manhattan federal court connected to 87 derivative transactions or interest-rate swaps with the FHLBank that fell apart when Lehman entered bankruptcy on Sept. 15, 2008, at the height of the financial crisis.According to its lawsuit, Lehman says the Cincinnati Bank violated its agreement by paying only $13.7 million when the transactions were terminated due to the firm’s Chapter 11 filing.
One week after UBS Americas failed in its bid to shutter a lawsuit brought by the Federal Housing Finance Agency in connection with non-agency mortgage-backed securities purchased by Fannie Mae and Freddie Mac, the federal judge overseeing the case has ordered UBS to hand over internal documents to the FHFA the company argued were privileged. U.S. District Court Judge Denise Cote ruled last week that parts of memoranda from UBS’ outside counsel to the company which contained factual summaries of meetings held with third-party mortgage originators are not protected by attorney-client privilege and must be disclosed to the FHFA. “Even if it is true, as UBS argues, that the memoranda at issue were created for the ‘predominant purpose’ of rendering legal advice, that does not relieve UBS of the obligation to show that the entirety of each document is privileged,” wrote Judge Cote in her ruling.
Almost one in five mortgage lenders in the country is still actively considering switching to a new loan origination platform, driven largely by the need to keep up with increasing regulation and, to a lesser extent, the desire for new features to gain or keep a competitive edge in the marketplace. According to the seventh annual compliance survey by QuestSoft, a provider of mortgage compliance software based in Laguna Hills, CA, 18.6 percent of lenders are reevaluating their current LOS platform, up from 0.1 percent in last year’s survey. Historically, the percentage of lenders considering an LOS change hovered...
The Financial Stability Oversight Council issued a warning this week regarding the prolonged period of low interest rates, singling out real estate investment trusts that invest in agency mortgage-backed securities. “Agency REITs, a sector that how grown considerably in recent years, are highly exposed to a rise in interest rates,” said Trent Reasons, a senior policy advisor at the Treasury Department. An analysis of 16 REITs by Inside MBS & ABS, an affiliated publication, determined...
The Consumer Financial Protection Bureau late last week issued a proposed rule to clarify a number of issues about qualified mortgages and other aspects of its ability-to-repay final rule promulgated in January that is set to take effect in early 2014. The agency proposed to clarify a key issue regarding the QM status of loans originally securitized by Fannie Mae or Freddie Mac, or insured by the FHA or VA, that are later subject to repurchase demands. Lenders have been concerned that such loans might lose their automatic QM status as agency loans, but the CFPB said they will not. “The fact that a [government-sponsored enterprise] or agency demands...
It was once thought that Basel III proposals capping the amount of mortgage servicing rights counting toward Tier 1 capital would force depositories to either sell MSRs or severely mark down the value of the asset. And although certain banks – including most of the largest – have indeed reduced the value of their MSRs, certain regionals still have sky-high ratios of servicing rights that are being counted toward this key measurement. According to new figures compiled by Sterne Agee, at least two depositories that rank among the top 25 residential servicers have Tier 1 capital measurements north of 25 percent: Flagstar Bank FSB at 55 percent and EverBank at 26 percent. The readings are as of year-end. The Basel III accords, which are on hold and have yet to be adopted, cap...
Consumer advocates are working to get state legislatures to pass servicing laws that are more stringent than national standards established by the Consumer Financial Protection Bureau and others. Servicers oppose the efforts, warning that deviation from uniform national standards will create uncertainty, add costs and conflict with existing laws. The Center for Responsible Lending and Consumers Union are urging states to “close gaps” in the CFPB’s pending servicing rules and the $25 billion national servicing settlement. Their top priority is a private right of action allowing borrowers to pause the foreclosure process while a servicer corrects violations of law and encourages servicers to consider loss mitigation alternatives. “Although the CFPB rules will be...
Potentially conflicting federal regulations over mortgage lending practices and standards from different government agencies increasingly appear to have the industry in a damned-if-you-do, damned-if-you-don’t position. During a webinar on fair lending challenges this week sponsored by Inside Mortgage Finance, Melanie Brody, a partner at K&L Gates, highlighted one of the challenges the industry faces in navigating between the Department of Housing and Urban Development’s new discriminatory effect rule and the Consumer Financial Protection Bureau’s ability-to-repay rule. “The problem is that ability-to-repay and qualified mortgage requirements add up...
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