A precedent-setting court case decided in May has disrupted the MBS and ABS markets, according to the Securities Industry and Financial Markets Association and the Structured Finance Industry Group. The trade groups filed an amicus brief to the Supreme Court of the United States late last week, calling for the court to hear an appeal of the ruling in Madden v. Midland Funding. In May, the U.S. Court of Appeals for the Second Circuit ruled that federal preemption under the National Bank Act doesn’t apply to nonbanks that purchase loans from banks. The Madden ruling subjects nonbank purchasers of loans originated by banks to state usury laws. If a bank’s preemption from such laws isn’t transferred when a nonbank acquires a loan originated by a bank, the loan can be...

The U.S. residential MBS sector will continue its slow, steady recovery in 2016 amid a host of challenges, showing further improvement in housing fundamentals, credit quality and mortgage performance, according to analysts. The challenges to MBS structured financing boil down to the following: tapering of Federal Reserve investment in MBS, MBS supply and demand, interest rates and prepayment risk. Fitch Ratings notes...

Initial industry reaction to the rate hike was muted. Late this week, mortgage rates hardly budged...

The legacy of the housing bust continues to play out in the enforcement arena. Last week, the National Credit Union Administration announced a $225 million settlement with Morgan Stanley, bringing to a close litigation stemming from the purchase of allegedly faulty residential MBS by four corporate credit unions that ultimately failed. The settlement addresses claims brought in 2013 by the NCUA on behalf of U.S. Central Federal Credit Union, Western Corporate FCU, Members United Corporate FCU and Southwest Corporate FCU. As a result of the settlement, the NCUA will dismiss pending suits against Morgan Stanley in federal district courts in New York and Kansas. The firm did not admit...

The Basel Committee on Banking Supervision issued a revised proposed standardized approach for gauging credit risk, making adjustments suggested by industry participants. Among the revisions was the allowance for certain banks to use external credit ratings as part of determining capital requirements for credit risk. While regulators in various countries appear likely to adopt the proposed use of credit ratings, U.S. banking regulators wouldn’t be able to due to provisions in the Dodd-Frank Act. Anticipating the divergence among regulators, the BCBS noted that banks would classify exposures into three different buckets, provided that certain minimum criteria are met. U.S. banking regulators noted...

Rod Alba of ABA offered up this sobering thought: for violating the TRID rule, lenders could be fined up to $5,000 per violation, per day.

More than two months into the Consumer Financial Protection Bureau’s integrated disclosure rule, known as TRID, many lenders apparently are still at the mercy of their technology vendors to get fully and finally up to speed. “Our members report that problems and glitches are still prevalent everywhere,” said Rodrigo Alba, senior regulatory counsel at the American Bankers Association, during a webinar this week sponsored by Inside Mortgage Finance, an affiliated publication ...

Wells Fargo is close to reaching a $25.75 million settlement of a class-action lawsuit involving delinquent borrowers who were charged fees for property inspections. The settlement would resolve allegations of violations of the Racketeer Influenced and Corrupt Organizations Act, among other issues. The bank has denied the allegations while noting that it desires to settle the lawsuit to avoid “the burden, expense and uncertainty of continuing litigation.” The lawsuit, Young v. Wells Fargo ...

There was a flurry of activity, including a call for an investigation by the Department of Justice of Mortgage Bankers Association President David Stevens and two others, following a Dec. 7 New York Times piece criticizing the Obama administration and MBA for looking to shut down the GSEs. Stevens, along with Michael Berman, a former MBA chair, and Jim Parrott, senior fellow at the Urban Institute, all former government officials turned private-sector employees, each met with housing policy officials at the White House after leaving their government posts, according to a guest log review by the New York Times.

The CFPB will scrutinize a lender's TRID training and, potentially its handling of early technical problems, said one webinar panelist...