The rating services are set for increased oversight after the Securities and Exchange Commission approved a final rule addressing internal controls, conflicts of interest and procedures in an attempt to protect the integrity of rating methods. The SEC approved the final rule on a 3-2 vote last week, with the two Republican commissioners voicing strong opposition to provisions required by the Dodd-Frank Act. Among other issues, the final rule aims at preventing sales and marketing considerations from influencing the issuance of credit ratings on structured finance products. Under the rule, rating services are prohibited from issuing or maintaining a credit rating when a person within the rating service that participates in determining or monitoring the rating also participates in sales or marketing of a product or service of the rating service or an affiliate. The rule also targets...
Commercial banks held $1.386 trillion of residential MBS at the end of June, marking their second consecutive quarterly gain in MBS investment, according to a new Inside MBS & ABS analysis. The 0.7 percent increase in bank MBS holdings was enough to offset a 3.5 percent drop in thrift investment in the sector. On a combined basis, banks and thrifts saw an 0.3 percent increase in residential MBS during the second quarter, though the industry remained 0.2 percent below the level set at the midway point in 2013. All of the increase came...[Includes two data charts]
The legal settlement between Goldman Sachs and the Federal Housing Finance Agency over soured non-agency MBS sold to Fannie Mae and Freddie Mac featured an unusual buyback of the securities by the investment bank. It leaves just three big defendants left to settle or go to trial, legal observers note. Under the terms of the settlement announced Aug. 22, Goldman is required to pay $3.15 billion to repurchase securities that were the subject of the claims in the FHFA’s lawsuit. The economic value of the settlement is estimated...
Standard & Poor’s is evaluating comments on a proposal to incorporate new criteria for rating residential MBS backed by mortgage servicer-advance receivables. Issuance of servicer-advance MBS has been scarce in 2014 due to the heightened regulatory scrutiny on nonbank servicers and potential ratings volatility, leading to fewer purchases of mortgage servicing rights. So far, only one deal – a $400 million unrated servicer-advance securitization in early April – has been seen this year. But with additional clarity being provided in S&P’s proposed ratings criteria and the revised methodology getting finalized over the near term, “issuers may start feeling...
A proposal from the National Credit Union Administration to permit covered credit unions to securitize loans they have originated – but not purchased – is widely seen as insufficient by the credit union industry because of that limitation. That’s likely to prompt the regulator to favorably revise the proposal in the coming months, industry analysts say. Back in June, the NCUA issued a proposal to authorize loan securitizations by credit unions, but only for loans originated, not purchased. It also proposed permitting the creation of special purpose vehicles (SPV) to hold the assets collateralizing the securities. Additionally, the proposal lists a number of minimum requirements and limitations on residuals and retained interests. The Credit Union National Association, in its comment letter to the agency, indicated...
The Federal Housing Finance Agency’s proposed tightening of rules for private mortgage insurers that do business with Fannie Mae and Freddie Mac is a “thoughtful effort,” but “modest changes” are required, conclude a trio of economists in a paper issued last week. Moody’s Analytics’ Mark Zandi and Chris deRitis and the Urban Institute’s Jim Parrott said that the FHFA’s Private Mortgage Insurance Eligibility Requirements “should succeed” in ensuring that private MI are strong counterparties to the GSEs, while serving as “a much improved bulwark against excessive risk” in the system.
The Inspector General of the Federal Housing Finance Agency is looking for a supervisory criminal investigator to work on what it calls “unique, complex and sensitive projects,” according to a recent employment ad posted on USAjobs.gov. The applicant, who must have a top secret security clearance, can earn anywhere from $134,000 to $227,000 per year. The in-house investigator would supervise the IG’s hotline team at least 25 percent of the time, and manage and maintain both the Computer Investigative Forensics Program and the National Firearms and Training Program of the department, among other duties.
Bank of America this week launched an appeal to overturn a jury verdict that found it liable for thousands of bad mortgages sold by Countrywide leading to a $1.27 billion judgment. U.S. District Court Judge Jed Rakoff levied the judgment in July after a New York jury last fall found the Charlotte, NC-based bank liable for fraud over a Countrywide program known in the industry as “the Hustle.”
HSBC Holdings is headed for trial later this month, absent a deal, after a New York federal judge rejected a last ditch effort by HSBC and Nomura Holdings to toss their mortgage-backed securities suit brought by the Federal Housing Finance Agency. U.S. District Judge Denise Cote’s ruling reaffirmed earlier rulings that the Housing and Economic Recovery Act of 2008 extended the time that the FHFA could file claims against a host of big banks.
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