Exactly one year after it filed for bankruptcy, Residential Capital announced this week it has entered into a “comprehensive plan support agreement” with its parent, Ally Financial, and ResCap’s creditors, who say they are owed some $25 billion in mortgage liabilities. The plan gets Ally out from under the threat of billions of dollars in lawsuits by settling all existing and potential claims between Ally and ResCap and all potential claims held by third parties related to ResCap that could be brought against Ally and subsidiaries that are not Chapter 11 debtors. The settlement, which is subject to approval by a federal bankruptcy court in Manhattan, fully releases...
The Federal Reserve’s MBS purchase party isn’t over – yet – but it looks like the nation’s central bank is getting nearer to the last call. Late last week, the Wall Street Journal reported that officials at the nation’s central bank have developed a strategy for dialing back their unprecedented level of support of the housing market. The plan involves reducing the amount of bonds the Fed buys “in careful and potentially halting steps,” the WSJ said, with the purchases varying on the read officials have of the job market and of inflation. And although the timing of the Fed’s wind-down is...
While non-agency MBS participants largely oppose a credit rating assignment system proposed by Sen. Al Franken, D-MN, some of the main players in the market endorse a model based on ratings rotation. At a roundtable hosted by the Securities and Exchange Commission this week, Martin Hughes, CEO of Redwood Trust, said issuer-paid rating conflicts could be reduced by requiring non-agency MBS issuers to alternate rating services so that one firm didn’t rate more than two consecutive deals from the issuer. He noted that Redwood has established a self-imposed rotation between Moody’s Investors Service and Standard & Poor’s on its non-agency MBS issuance. “The requirement to frequently alternate among the nationally recognized...
Efforts by the U.S. Attorney for the Southern District of New York to use the False Claims Act to recoup $1 billion in losses suffered by Fannie Mae and Freddie Mac have suffered a big setback. Last week, U.S. District Court Judge Jed Rakoff dismissed claims for treble damages and penalties the federal government brought under the FCA against Bank of America as successor to Countrywide Financial for allegedly selling defective loans to the two government-sponsored enterprises while representing that the mortgages complied with their requirements. The government asserted...
The ability-to-repay rule promulgated by the Consumer Financial Protection Bureau is perhaps the single most important mortgage-related regulation the CFPB will produce under the Dodd-Frank Act, and mortgage lenders will need a vigorous and comprehensive strategy if they are going to make qualified mortgages profitably while maintaining the desired level of legal protection. But before lenders get to the compliance pieces of the QM puzzle, they’ve got to figure out “how to get to QM” and what types of loans they want to make. “We’re assuming...
Over the past few weeks, speculators have been driving up the price of Fannie Mae and Freddie Mac common stock and “trust” preferred shares in the hope of a payoff somewhere down the line. But according to interviews conducted by Inside Mortgage Finance, the only payoff might come if they can find someone else willing to pay more than they did for stock that is considered virtually worthless. Industry lobbyists, former government-sponsored enterprise executives and some investors say...
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