Faced with a deadline it was unable to meet, the Securities and Exchange Commission this week published interpretive guidance regarding references in federal regulations to MBS ratings. The Dodd-Frank Act mandated that such references be changed by July 20, but the SEC’s guidance will keep the references intact until the agency and others can establish new standards of creditworthiness. The DFA strikes references to credit ratings from nationally recognized statistical rating organizations in federal regulations and inserts new text that provides that in order to satisfy these definitions a security must meet standards of credit-worthiness established by the SEC. The SEC said it was unable...

There appear to be no immediate plans to move the GSEs beyond conservatorship status but news this week that the Federal Housing Finance Agency is actively investigating the possibilities of receivership may be designed to attract the attention of thus far indifferent policymakers and snap official Washington into action, say industry experts. The FHFA this week confirmed that it has commissioned the consulting firm PricewaterhouseCoopers to create contingency plans for taking Fannie Mae, Freddie Mac and the Federal Home Loan Banks into receivership. A Finance Agency spokesman said the hiring of PwC, which was not officially announced, is just one of a number of “ordinary regulatory activities” that the FHFA is authorized and obligated to pursue under the authority granted the agency by the Housing and Economic Recovery Act of 2008.

Fannie Mae is immune from punitive damage claims brought by a former staffer in her wrongful termination suit against the company as long as the GSE is under the conservatorship of the Federal Housing Finance Agency, a federal judge ruled last week. The ruling in the U.S. District Court for the District of Columbia is a major setback for Caroline Herron, a former Fannie vice president who left in 2007 but returned as a consultant in 2009. Herron filed suit against the GSE in June 2010, claiming she was wrongly fired for reporting what she said was Fannie’s mismanagement of the Obama administration’s housing rescue initiatives and grossly wasting public funds.

The Federal Housing Finance Agency may pursue its residential mortgage-backed securities legal action against affiliates of Residential Capital LLC, Ally Financial’s defunct mortgage unit, a federal judge has ruled. Last week, Judge Denise Cote of the U.S. District Court for the Southern District of New York denied ResCap’s request seeking an automatic bankruptcy stay of its numerous MBS lawsuits, including one filed by the FHFA last year. The FHFA, as GSE conservator, sued UBS Americas in July 2011 alleging that billions of dollars of MBS purchased by Fannie and Freddie were based on offering documents that contained “materially false statements and omissions.”

The Federal Housing Finance Agency should enhance its supervision of Fannie Mae, Freddie Mac and the 12 Federal Home Loan Banks by taking better advantage of the FHFA’s call report system, a recent audit has concluded. The FHFA’s Office of Inspector General report noted last week that despite requiring the GSEs to enter data into the CRS, the Finance Agency has not “optimized its use of the system” to enhance oversight. “Two FHFA supervisory divisions rarely use CRS in their analysis and oversight of the enterprises,” explained the OIG audit. “Instead, they receive routine submissions of loan-level data and standard management reports containing relevant metrics and data.”

The Federal Housing Finance Agency must improve its risk assessments of Fannie Mae and Freddie Mac’s real estate-owned properties to provide more comprehensive coverage of GSE risk areas, according to an audit by the agency’s official watchdog. In risk assessments of Fannie and Freddie conducted between 2008 and 2011, the FHFA noted that the GSEs’ large REO inventories were a “critical concern” – the agency’s most severe rating. However, the OIG noted that the agency didn’t perform any targeted examinations of Fannie and Freddie’s management and marketing of REO until 2011. Earlier this year, the FHFA completed four targeted examinations focused on GSE REO risks. The first two examinations focused on risks arising from Fannie and Freddie’s use of vendors to manage REO and the other two examinations looked at their efforts to mitigate losses from “problematic properties,” noted the OIG.

Compliance management, consumer complaints, fair lending and unfair, deceptive business practices will receive the most scrutiny during supervisory exams of large banks and nonbank financial institutions, according to the Consumer Financial Protection Bureau. Lenders should reevaluate their current policies and procedures for consumer protection even before they are selected for a comprehensive audit by the CFPB, suggested Allison Brown, program manager for mortgage supervision within the bureau’s Office of Nonbank Supervision. Penalties for noncompliance are unclear but noncompliant institutions will be required...

Lenders’ experiences with repurchase requests from the government-sponsored enterprises appear to have diverged in recent months, with big banks emerging fairly confident in their dealings with the GSEs. Other lenders, meanwhile, appear to have started to have significant interactions with Fannie Mae and Freddie Mac on the issue only recently. Wells Fargo had a decrease in GSE repurchase requests in the second quarter of 2012 compared with the previous quarter but the lender increased its repurchase reserves by $239 million during that time due to an increase in expected demands from the GSEs regarding 2006 to 2008 vintages. “We continue to see...

Mortgage lending representatives say the Consumer Financial Protection Bureau should not publish unreliable data on complaints about noncredit-card financial products that will mislead rather than inform consumers, and that it should permit more time to resolve mortgage complaints before posting such complaints publicly. “We find the bureau’s decision to publish details of complaints which it correctly characterizes as unverified, and therefore unreliable, to be contrary to its mission to help consumers ‘with timely and understandable information to make responsible decisions about financial transactions’ and inconsistent with its proclamations to be ‘data-driven,’” the American Bankers Association said in a comment letter to the CFPB. The proposed disclosure of complaints about mortgages and other financial products exacerbates...

The semiannual regulatory agenda released last week by the Consumer Financial Protection Bureau indicates the regulators have a very full plate and a tight January 2013 deadline. That means mortgage lenders will be just as busy trying to figure out what the new rules mean and how to comply with them. The most recent high-profile mortgage-related projects at the bureau include a detailed proposed rule to harmonize and streamline the mortgage disclosures that homebuyers must be given under the Real Estate Settlement Procedures Act and the Truth in Lending Act. In draft form, this one proposal ran more than 1,000 pages in length and has already raised industry hackles. Comments on the rule are due Nov. 6, 2012. The bureau also released...