Fannie Mae and Freddie Mac continued to trim their retained holdings of MBS and unsecuritized mortgages in keeping with their conservatorship mandate as the two government-sponsored enterprises each posted a profit during the third quarter of 2014. The two GSEs ended September with a combined $851.71 billion in mortgage-related holdings, down 2.4 percent from the previous quarter. Compared to a year ago, their combined mortgage portfolio was down 16.0 percent and down 46.5 percent from the $1.592 trillion the two firms held in the fourth quarter of 2008 shortly after being placed in government conservatorship. One of the conditions of the conservatorship the GSEs entered six years ago was...[Includes one data chart]

The National Credit Union Administration this week sued Deutsche Bank National Trust Co., alleging the bank violated federal and state laws by failing to carry out its duties as trustee for 121 non-agency MBS trusts. According to the complaint filed in federal district court in Manhattan, Deutsche Bank failed to protect five corporate credit unions – U.S. Central, WesCorp, Members United, Southwest and Constitution – that purchased $140 billion in RMBS issued from the trusts between 2004 and 2007. The securities lost...

Shopping for credit ratings is alive and well despite the laws and regulations that have been put in place to curb the practice, but so far credit rating agencies have not lowered their standards, according to Morningstar Credit Ratings. “Arrangers and issuers of structured debt continue to tightly control the selection of credit rating agencies,” Morningstar said in a recent analysis. But information quality and transparency fall short of investor expectations, and the general interests of the key stakeholders remain somewhat misaligned, the rating service said. Arrangers and issuers of residential MBS, non-mortgage ABS and commercial MBS continue...

And there could be some good news on lower LLPAs. Fannie said that come May 2015, it will change how it treats loans where there are two or more borrowers...

Ohio Court Sides With Freddie in Pre-Crisis Shareholder Lawsuit. An Ohio federal court late last week tossed out a shareholder class action lawsuit that accused Freddie Mac of lying about its exposure to subprime loans prior to the 2008 financial crisis. The suit, filed in 2008 by the Ohio Public Employees Retirement System, claimed that Freddie artificially inflated the value of its common stock by making false public financial statements that obscured its subprime exposure.OPERS claimed it lost as much as $27.2 million as a result of Freddie’s alleged cover-up of its subprime exposure.

The new documentation was released in conjunction with a non-agency RMBS reform symposium held in New York by SFIG and Information Management Network.

“Banks of all sizes are having problems with the new limits,” the three trade groups argue.

Wells Fargo estimates that a settlement could cost the bank at least $950 million.

Wells Fargo is in discussions with the Department of Justice about a possible resolution of alleged improper origination and servicing of FHA loans that resulted in huge paid claims and significant losses to the agency’s Mutual Mortgage Insurance Fund. The ongoing talks are related to a complaint filed by the government in federal district court in Manhattan on Oct. 9, 2012, alleging, among other things, that Wells Fargo improperly certified FHA mortgages between 2001 and 2010 for insurance even though it knew the underwriting was flawed. The complaint said that the bank’s insurance claims should not have been paid when some of the loans later defaulted. It further alleged that Wells Fargo did not disclose the loans’ deficiencies to the FHA before making insurance claims. On Dec. 1, 2012, Wells Fargo filed...

Although residential lenders are coming off a better than expected production quarter – and enjoying a decent last three months of the year – analysts and investors seem undecided on whether there’s opportunity in the market or it’s time to stay on the sidelines. Several high profile publicly traded shops that are considered “high touch” specialists – Nationstar Mortgage, Ocwen Financial and Walter Investment – continue to trade at steep discounts to their 52-week highs with all three facing possible class-action lawsuits from angry investors who’ve seen billions of dollars in stock equity evaporate over the past year. And then there’s...