Standard & Poor’s this week deployed legal countermeasures against the federal government by asking a judge to dismiss a civil fraud lawsuit brought against the rating agency, slamming the litigation as an “overreach.” In February, the Justice Department filed a $5.0 billion lawsuit against S&P accusing it of knowingly inflating its ratings on residential MBS and collateralized debt obligations to boost its revenue and market share in the years leading up to the 2008 financial crisis. The filing in California federal court by S&P’s parent company, McGraw-Hill Co., says...
Consumer advocates also recommend that state policymakers pass legislation or implement regulation requiring servicers to adopt and engage in loss-mitigation practices.
The White House wants to change the HARP eligibility date, making more underwater borrowers eligible for the program, Inside Mortgage Finance has learned.
Despite little vocal, organized opposition, expected industry group support and bipartisan praise, industry observers on Capitol Hill say it is far from a given that the White House will follow through and nominate Moody’s Analytics’ Chief Economist Mark Zandi to a five-year term as the director of the Federal Housing Finance Agency. The buzz has died down considerably since the White House leaked Zandi’s name early last week in the latest trial balloon of potential nominees to replace Edward DeMarco, who has led the FHFA in an acting capacity since September 2009. However, there’s a growing feeling of certainty within the industry that if President Obama does in fact follow through and sends a name to the Senate for confirmation, it would be Zandi.
Over the past year, Fannie Mae has sought to impose higher net worth requirements on seller/servicers but has been rebuffed – at least temporarily – by its regulator, the Federal Housing Finance Agency, industry sources familiar with the matter told Inside The GSEs. These same sources argue that the FHFA is definitely open to the idea of hiking the current net worth minimum of $2.5 million, but it wants to make sure that any change applies equally to originators that sell to both Fannie and Freddie. “Right now this is a process,” cautioned one observer. “It’s not an event. There’s no timeframe on this yet.”
Look for Fannie Mae’s and Freddie Mac’s regulator to press forward with its policy proposal to develop a set of aligned standards for force-placed insurance, the head of the Federal Housing Finance Agency told lawmakers last week. Testifying before the Senate Banking, Housing and Urban Affairs Committee, FHFA Acting Director Edward DeMarco said the agency plans to pursue a “broader approach” to force-placed insurance. “Our goal is to establish a set of standards that could be adopted by a broader set of mortgage market participants, similar to what was done with the Servicing Alignment Initiative,” said DeMarco. “This broadened approach will also enable greater regulatory coordination in an effort to consider the various issues associated with lender-placed insurance.”
The Inspector General of the Federal Housing Finance Agency told senators last week that the FHFA still doesn’t have enough examiners, in his opinion, to sufficiently regulate the GSEs, while the Finance Agency head noted that the FHFA has added more than 200 staffers since 2008, with just a bit more hiring planned. Testifying before the Senate Banking, Housing and Urban Affairs Committee, FHFA IG Steve Linick said that the Finance Agency is making progress on a number of fronts, including GSE assets and implementing the OIG’s audit and evaluation recommendations. However, following a 2011 OIG report which identified “shortfalls” in the FHFA’s examination coverage due to examiner shortages, the FHFA has made progress by “reorganizing the examination function and hiring new staff [but] it is not clear that the FHFA has achieved adequate resources.”
The Federal Housing Finance Agency is soliciting comments from the public on how its regulations may be “more effective and less burdensome.” The FHFA’s call for comments in a April 19 publication of the Federal Register is in keeping with a 2011 executive order that calls for each independent regulatory agency, including the FHFA, to analyze its existing regulations and “modify, streamline, expand or repeal them,” as well as to make public a plan to periodically review its “existing significant regulations” to make the agency’s regulatory program “more effective or less burdensome” in achieving regulatory objectives.
The Federal Home Loan Bank of Cincinnati says a unit of Lehman Brothers Holdings is not entitled to a multimillion dollar payday because the FHLBank did not short change the firm when it closed out swaps and options transactions ahead of Lehman’s 2008 bankruptcy. Last week, Lehman filed a breach of contract lawsuit in Manhattan federal court connected to 87 derivative transactions or interest-rate swaps with the FHLBank that fell apart when Lehman entered bankruptcy on Sept. 15, 2008, at the height of the financial crisis.According to its lawsuit, Lehman says the Cincinnati Bank violated its agreement by paying only $13.7 million when the transactions were terminated due to the firm’s Chapter 11 filing.
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