An ongoing Securities and Exchange Commission investigation into possible misconduct related to Wells Fargo’s sale of almost $60 billion in MBS has resulted in the agency filing a subpoena enforcement action in the U.S. District Court for the Northern District of California against the firm. “The commission is investigating possible fraud in connection with Wells Fargo’s sale of nearly $60 billion in residential MBS to investors,” the SEC said. “Pursuant to subpoenas dating back to September 2011, the bank was obligated to produce (and agreed to produce) documents to the...

Concern among non-agency MBS investors over principal reductions that will occur under the multistate foreclosure settlement “is much greater than the reality,” said Iowa Attorney General Tom Miller, who played a pivotal role in those negotiations. During a webinar sponsored by Inside Mortgage Finance this week, Miller said that the $25 billion settlement includes protections for MBS investors. He said that negotiators met with MBS investors during the drawn-out process of reaching a settlement with the five largest servicers. The Association of Mortgage Investors has complained that investors...

Deutsche Bank AG has settled a class action suit with disgruntled MBS investors for $32.5 million, after plaintiffs argued that they received “false and misleading” information regarding their investment. The securities were pass-through Alt A MBS issued by Deutsche between May 2006 and May 2007, which were subsequently downgraded and “are no longer marketable at prices anywhere near the price paid by plaintiffs and the class,” said an amended complaint. The class action, filed in 2008 by unions Massachusetts Bricklayers and Masons Trust Funds, the Pipefitters’ Retirement Fund Local 597...

The Securities and Exchange Commission and Wells Fargo are in a dispute regarding due diligence reports relating to almost $60.0 billion in non-agency mortgage-backed securities issued by Wells between September 2006 and early 2008. The SEC last week filed a subpoena enforcement action against Wells for failure to produce documents. The bank disputes the SEC’s account. The SEC said it has been seeking the documents since September. The regulator claimed that Wells agreed to produce the documents but has failed to do so. The SEC said its action relates to its investigation into whether Wells made material misrepresentations or omitted material facts on certain non-agency MBS issued by the bank ...

Iowa Attorney General Tom Miller downplayed concerns raised by investors in non-agency mortgage-backed securities regarding the pending $25.0 billion servicing settlement. “The current set of concerns aren’t particularly warranted,” he said this week during a webinar hosted by Inside Mortgage Finance Publications. The Association of Mortgage Investors has asked for a number of changes to the settlement, including a cap on the amount of principal reduction that can be completed on non-agency MBS to meet the participating servicers’ loss mitigation requirements. Miller said the AMI is the only group he is aware of that might challenge approval of the settlement by the U.S. District Court for the District of Columbia. “I think that their concerns are not going to be realized ...

The FHA’s total capital resources dipped slightly by $400 million in the last three months of 2011, but things could have been much worse had it not been for lower claims activity, according to the FHA’s quarterly report to Congress on Mutual Mortgage Insurance Fund programs. On balance, the report shows little change and nothing unexpected during the quarter, said industry participants. The much-anticipated changes will come after two FHA premium adjustments become effective on April 1 – an annual mortgage insurance premium increase of 10 basis points and a 75 bps hike in upfront premiums, they said. The upfront premium increase is expected to ...

Despite the steps taken recently by the Department of Housing and Urban Development to shore up the FHA insurance fund, concerns remain as to whether such actions are enough to make up for FHA’s losses and restore the agency’s mandatory 2.0 percent capital reserve ratio in a timely manner, according to HUD’s top internal auditor. Testifying before the House Committee on Appropriations this week, HUD Inspector General David Montoya warned further actions might be necessary to ensure the stability of the FHA Mutual Mortgage Insurance Fund and reduce its risks. For example, FHA now uses credit scores to ...

A Texas-based mortgage lender that recently lost its approval to originate and underwrite FHA loans sued in state court to compel the Department of Housing and Urban Development to withdraw an announcement of the enforcement action. AmericanHomeKey filed the complaint in Dallas County Court to force the withdrawal of a March 23 HUD press release announcing the immediate and permanent revocation of the lender’s FHA authority to originate, underwrite and close new mortgages with FHA insurance. The lender said a premature announcement would ruin its relationship with investors and result in massive losses. The HUD Mortgagee Review Board announced ...

The Department of Housing and Urban Development has reminded mortgagees and servicers that it is illegal to use mortgage escrow funds for purposes other than those stated in federal regulation. In a recent FHA notice, HUD warned approved lenders and servicers against applying escrow funds to reduce the outstanding balance in the payoff amount of an existing loan. The department said it has not authorized the use of borrower money in escrow accounts for reasons other than making legitimate payments. Escrow funds are borrowers’ funds collected at ...

Banks will receive some release from liability for loan originations in the $25 billion mortgage settlement involving the industry’s five largest servicers, state attorneys general and the federal government, according to experts participating in an Inside Mortgage Finance webinar this week. While the settlement is often described as “landmark,” industry experts note that major components were drawn from a hodgepodge of federal and state initiatives. The detailed servicing standards, for example, are a “synthesized cut-and-paste” from sources including Office of the Comptroller of the Currency...