The Federal Housing Finance Agency incorrectly piggybacked and failed to independently verify Fannie Mae’s and Freddie Mac’s mandated assurances or “covenants” that the GSEs were in compliance with the Treasury Department’s terms in exchange for taxpayer support during conservatorship, according to a recent report by the FHFA’s official watchdog. The FHFA’s Office of Inspector General noted a “gap” in the Finance Agency’s compliance with the terms of the preferred stock purchase agreement with the Treasury.“Until June 2012, FHFA did not provide Treasury with a certification that the enterprises’ filings and related documents were free of materially false or misleading statements,” said the OIG report, issued in August.

The battle over legacy MBS continues to rage in courts across the country as Bank of New York Mellon filed repurchase-related lawsuits against two financial institutions, Massachusetts Mutual was allowed to proceed with its claims against Countrywide, and a federal banking regulator sued major banks for alleged MBS misrepresentations. On Aug. 21, BNY Mellon, in its capacity as trustee for a pool of loans known as GE-WMC Mortgage Securities Trust 2006-1, sued WMC Mortgage and GE Mortgage Holdings for their alleged failure to repurchase approximately $680 million in defective residential mortgages. According to the lawsuit filed in New York state court, a holder of more than 25 percent of the voting rights under the pooling and servicing agreement notified...

Last month’s surprise move by the Treasury Department to revise the preferred stock purchase agreements with Fannie Mae and Freddie Mac definitively settles the question of “when” not “if” the two government-sponsored enterprises are to be wound down but it also removes any remaining sense of urgency to push a legislative solution to GSE reform, according to industry analysts. On Aug. 17, Treasury announced it will require Fannie and Freddie to turn over any profits they earn to the government. Rather than continue to borrow from the Treasury to make a 10 percent dividend payment to the Treasury, the revised PSPA implements a “full income sweep” of GSE profits. Additionally, Treasury’s announcement calls...

The Securities and Exchange Commission revealed details last week on its battle for due diligence reports on non-agency MBS issued by Ally Financial’s Residential Capital. A number of other ongoing non-agency MBS lawsuits and SEC investigations have been based on information included in due diligence reports. The SEC is seeking due diligence reports prepared by Office Tiger Global Real Estate Services, a wholly-owned subsidiary of Donnelly, on behalf of investment banks that underwrote 17 non-agency MBS issued by ResCap. The SEC said it is investigating possible fraud in the offering and sale of residential MBS by ResCap. “The information in Donnelley’s possession is...

The Small Business Administration is urging the Consumer Financial Protection Bureau to delay making any changes until it has fully analyzed the impact of a proposed rule establishing new disclosure requirements and forms under integrated federal consumer protection regulations. Speaking on behalf of small banks and settlement service providers, the SBA’s Office of Advocacy in a comment letter warned that proposed changes to the finance charge and to the high-cost mortgage coverage test could potentially lead some small businesses to leave the marketplace or stop making mortgage loans. In addition, the agency reiterated its concerns about the inadequate notice for small entities about the proposal. On Aug. 23, the CFPB published...

The initial progress report released last week on the national mortgage settlement drew attention to the early loss mitigation completed by the five banks participating in the settlement. However, Joseph Smith, the monitor of the $25.0 billion settlement, has also stressed that he is looking for noncompliance with the settlement’s 304 servicing standards. The Office of Mortgage Settlement Oversight allows borrowers and professionals assisting homeowners to detail experiences with servicers participating in the settlement. “It’s important for people in the marketplace to let me know if they see conduct that they think violates the settlement agreement,” Smith said. Smith said he has received...

One of the most worrisome elements to emerge so far in the Consumer Financial Protection Bureau’s proposed rule on mortgage loan originator compensation is the agency’s consideration of factors that may serve as proxies for prohibited transaction terms and how they may be used to restrict originator compensation. The CFPB proposal would implement statutory changes made by the Dodd-Frank Act to the Truth in Lending Act/Regulation Z loan originator compensation rule, including a new, additional restriction on the imposition of any upfront discount points, origination points or fees on consumers under certain circumstances. The proposal provides...

Fannie Mae and Freddie Mac late this year will raise guaranty fees on single-family mortgages by another 10 basis points, under a directive that the government-sponsored enterprises’ conservator announced late last week. The g-fee increases will be effective on Dec. 1, 2012, for loans exchanged for mortgage-backed securities, and on Nov. 1, 2012, for loans sold for cash. According to FHFA Acting Director Edward DeMarco, who telegraphed the move in a notification to Congress earlier this summer, the g-fee increases are designed...

Fannie Mae recently added Nationstar Mortgage, PHH Mortgage, Seterus and Green Tree Servicing to the list of its top performing servicers for the first half of 2012. They join Citigroup, JPMorgan Chase, Wells Fargo, GMAC Mortgage and EverBank in the government-sponsored enterprise’s Peer Group One as the largest firms with the highest scores. “Fannie Mae wants servicers to be responsive to homeowners who are struggling and work with them to prevent as many foreclosures as possible,” said Leslie Peeler, Fannie’s...

The Consumer Financial Protection Bureau has asked the Office of Management and Budget for a generic clearance to collect information on compliance costs and the other effects of regulations – something the American Bankers Association and the Consumer Bankers Association said they oppose. Back in June, the CFPB published a notice in the Federal Register about its plans “to collect qualitative information from industry participants regarding the compliance costs and other effects on providers and consumers...