The Federal Housing Finance Agency has settled the first mortgage-backed securities lawsuit with the smallest player in the FHFA’s massive litigation against non-agency MBS issuers and underwriters it says sold toxic MBS to Fannie Mae and Freddie Mac. In papers filed with the U.S. District Court, Southern District of New York, the FHFA “voluntarily dismisses with prejudice” its lawsuit against General Electric Co., ending the legal action in which the Finance Agency had claimed the firm had misled Freddie into purchasing some $549 million of toxic MBS. The terms of the settlement were not disclosed by the FHFA but the agreement also dismissed claims against Morgan Stanley and Credit Suisse as underwriters for the securities. “This settlement resolves the dispute between FHFA, and GE consistent with FHFA’s responsibilities as conservator of Freddie Mac,” said FHFA General Counsel Alfred Pollard in a statement. “FHFA is pleased this lawsuit has been resolved and appreciates the work of Freddie Mac on this matter.” The FHFA filed suit during the summer of 2011 against 18 financial institutions, including GE, alleging violations of the federal Securities Act of 1933. The Finance Agency seeks tens of billions of dollars in damages incurred by the GSEs on purchases of approximately $200 billion in non-agency MBS sold between 2005 and 2007. GE had the smallest legal exposure among the major firms named in the FHFA’s lawsuits as GE’s one-time subsidiary, WMC Mortgage, sold MBS only to Freddie.
The Federal Housing Finance Agency and other government regulators could “permanently enshrine” Fannie Mae, Freddie Mac and other government housing entities “as the only large-scale source of mortgage credit in our country” if they fail to design a new mortgage rule with care, says one senior Republican senator. Sen. Bob Corker, R-TN, a member of the Senate Banking, Housing and Urban Affairs Committee, in a letter last week urged federal regulators to “simplify and synchronize underwriting standards for new mortgage lending rules to avoid permanently regulating the private sector out of the housing finance business.” Corker, in his letter to the FHFA, Federal Reserve, Department of Housing and Urban Development, and the Securities and Exchange Commission, among other agencies, noted that the proposed, but yet to be finalized, “qualified residential mortgage” rule exempts loans sold to Fannie, Freddie and the Federal Housing Administration.
Mortgage lenders are still trying to figure out how much regulatory uncertainty they are facing thanks to Friday’s court decision that appears to invalidate the appointment of Richard Cordray to head the Consumer Financial Protection Bureau.
The new ability-to-repay (ATR) rule and the “qualified mortgage” definition will result in more predictable, less costly servicing for prime QMs and increased complexity for subprime and non-QMs, according to an analysis by Deloitte Touche. The ATR rule defines an ability-to-repay standard for mortgages, including eight borrower characteristics to be considered in the lending decision. It also creates a QM definition that clarifies compliance with the ATR standard for loans with certain features and ...
Final rules establishing national mortgage servicing standards may reduce the incentives for states to adopt their own varied, unique versions, thus reducing the patchwork of state mortgage servicing laws. At the same time, however, the final rules are a floor and states – and the government-sponsored enterprises – may adopt more stringent consumer protections, cautioned attorneys with SNR Denton. An analysis by the Washington, DC, law firm said the final rule issued by the Consumer Financial Protection Bureau ...
HUD is investigating reports that a loan officer of an approved FHA lender had participated in a reverse mortgage borrower’s counseling session, a practice HUD frowns upon.
A large and potentially lucrative RFP issued several months ago by FHFA regarding its strategic plan for taking the GSEs to the next stage in their evolution has yet to be awarded.
The recent court ruling which called into question the legitimacy of certain recess appointments – including that of CFPB director Richard Cordray – also means the agency may not have any regulatory oversight over nonbanks.
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