A recent decision by the Second Circuit Court of Appeals on a key aspect of the timing of securities lawsuits – squarely at odds with the ruling of another federal appeals court – has called into the question the legal viability of a 40-year-old Supreme Court precedent, prompting expectations that the high court will eventually clarify the conflict. The Second Circuit on June 27 ruled in Police & Fire System of City of Detroit v. IndyMac MBS Inc. to uphold a lower court ruling that blocked retirement systems from intervening in a putative class action that accused several major banks – including IndyMac, Morgan Stanley and Goldman Sachs – of misrepresenting certain MBS. The groups had attempted...
The Securities Industry and Financial Market Association cautioned drafters of a proposed model law on mortgage foreclosures against adopting a provision that would eliminate or repeal the holder-in-due-course rule in the case of home loan foreclosures. Commenting on the Uniform Law Commission’s discussion draft on the “Residential Real Estate Mortgage Foreclosure Process and Protections,” SIFMA urged the commission not to repeal or limit the holder rule. The trade group warned that the rescission of the rule in the context of home loan foreclosures could convert a secured loan into an unsecured loan. “This is...
Rep. Jeb Hensarling this week provided a detailed blueprint for his vision of the MBS market that would replace Fannie Mae and Freddie Mac with a voluntary securitization platform that would be prohibited from providing any guaranties, government-backed or otherwise. The Texas Republican’s proposed National Mortgage Market Utility would be built from the work already underway at the government-sponsored enterprises to design a common securitization platform. Like the existing CSP project, which was assigned to the GSEs by their regulator, the NMMU would develop standards for servicing, pooling and securitizing home mortgages, as well as a “publicly accessible securitization outlet.” Hensarling’s proposed utility, part of his Protecting American Taxpayers and Homeowners Act, goes...
Two insurance industry trade groups recently filed suit in federal district court to contest the Department of Housing and Urban Development’s final rule formalizing its “disparate impact” interpretation of the Fair Housing Act, which asserts that housing policies and practices can be deemed discriminatory not only through their intent but also by their effects. The rule, issued in early February, formally establishes the three-part burden-shifting test for determining when a practice with a discriminatory effect violates the Fair Housing Act. The American Insurance Association and the National Association of Mutual Insurance Companies, whose members sell homeowners insurance, challenged...
The mortgage banking industry recently declared victory in the wake of a federal appeals court decision to overturn a previous court ruling, which had upheld a 2010 administrative interpretation by the Department of Labor that mortgage loan officers are entitled to overtime pay. In Mortgage Bankers Association v. Seth D. Harris, acting secretary of U.S. Department of Labor, a three-judge panel from the U.S. Court of Appeals for the District of Columbia reversed a lower court’s decision denying the MBA’s motion for summary judgment. At the same time, the appellate court remanded the case to the district court with instructions to vacate the DOL’s 2010 interpretation of the administrative exemption under the Fair Labor Standards Act (FLSA). The court, however, left...
Fannie Mae and Freddie Mac announced this that week that they will rely on mortgage sellers to make sure all the loans sold to the government-sponsored enterprises starting next year will be “qualified mortgages” that meet the controversial limit on points and fees. Some aspects of the QM standard will be easy to quantify and meet, such as maximum loan terms of 30 years and no interest-only payment plans. The 43 percent cap on debt-to-income ratio that’s part of the ability-to-repay rule issued by the Consumer Financial Protection Bureau will be waived for the GSEs. The stickiest wicket is...
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