The mortgage finance industry has only had about a week or so to begin digesting the federal banking regulators’ proposal to implement the Basel III regulatory capital reforms and other changes mandated by the Dodd-Frank Act, but there are plenty of concerns that have arisen in just that short a space of time. “This is a substantial increase in the amount of capital that banks have to hold, and it requires not only more capital, it changes the quality and the composition of the capital,” said Carter McDowell, managing director and associate general counsel at the Securities Industry and Financial Markets...

The Federal Housing Finance Agency’s case against UBS Americas will serve as a test case in a series of lawsuits the agency filed in connection with non-agency MBS purchased by Fannie Mae and Freddie Mac, a Manhattan federal district court ruled last week. In a June 13 decision, Judge Denise Cote of the U.S. District Court for the Southern District of New York denied UBS’s request that it should not be the first of 17 cases to proceed because it is not a loan originator and was not accused of fraud. According to the court, UBS was the best test case because the number of securitizations and...

The Office of the Comptroller of the Currency has finalized a rule replacing certain credit rating references with alternative standards of credit worthiness to help banks determine whether a security is “investment grade.” Published in the June 13 Federal Register, the final rule is identical to the rule proposed by the OCC in November 2011 to implement directives in the Dodd-Frank Act to prevent over-reliance on credit ratings. Congress partly blamed inflated credit ratings for the financial crisis when triple A-rated mortgage securities lost their value as interest rates rose and home values...

Current and potential defendants in residential MBS litigation should expect more lawsuits stemming from the mortgage market collapse, particularly by or on behalf of state actors, but entities named in those suits are not without legal countermeasures, according to legal experts. During a webinar sponsored this week by the State Attorneys General Enforcement Network, attorneys Jason Halper and Martin Seidel of the law firm of Cadwalader, Wickersham & Taft predicted that the mortgage industry is only about halfway through the onslaught of MBS litigation to be brought by aggrieved investors. “I think this...

Capital rules proposed by federal regulators last week for banks could have a significant impact on originations and holdings of non-agency mortgages and mortgage-backed securities. The changes are part of Basel III reforms. Non-bank special servicers have already started to increase their portfolios due to sales by banks getting a head start on complying with Basel III rules. Industry analysts warn that originations of “non-vanilla” mortgages will also be curtailed. “Following the qualified mortgage rules and ...

Attorneys representing non-agency mortgage-backed security issuers suggest fighting repurchase-request lawsuits to narrow the claims and eventually settling such lawsuits. Jason Halper and Martin Seidel, partners at the law firm of Cadwalader, Wickersham & Taft, said reducing the claims can help lead to a better settlement for issuers. “You can very often narrow the case substantially,” Seidel suggested this week during a presentation by the State Attorneys General Enforcement Network. Among other issues ...

Berkshire Hathaway became the lead bidder for Residential Capital’s loan portfolio this week while Nationstar Mortgage remained the stalking horse bidder for ResCap’s mortgage servicing rights and origination platform. ResCap’s parent company Ally Financial was previously the top bidder for ResCap’s loan portfolio. Auctions for the MSRs, origination platform and loan portfolio are expected in October. An investigation by the Consumer Financial Protection Bureau helped a borrower receive a ... [Includes two briefs]

Widespread objection by stakeholders has forced the Department of Housing and Urban Development to rescind a new lending policy regarding borrowers with disputed debt and unresolved collection issues and to consider clarifying the issue in future guidance. The policy, announced along with other FHA underwriting changes in February, was initially to take effect on April 1. However, industry concern about fewer borrowers qualifying for an FHA-insured loan caused HUD to extend the policy’s effective date to July 1 to reexamine and gather more information from stakeholders. HUD announced its decision to ...

Advocates for FHA condominium rule changes may have to wait a bit longer for a proposed rule currently in development, according to Acting FHA Commissioner Carol Galante. Galante said the Department of Housing and Urban Development is reviewing the current FHA condo rules for future revisions that would remove the roadblock to buyers, sellers and lenders. A proposed rule is in the works but it could take considerably more time to finish and finalize it, she said without providing a timetable. In the meantime, new guidance is on the way to ...

The real estate industry called on the Department of Veterans Affairs to offer an existing pilot program on property rehabilitation similar to the FHA’s 203(k) program in all markets, especially those with a high veteran population. In a letter, the National Association of Realtors asked that the Veterans Renovation Pilot Program be administered through the VA Loan Guaranty Program, allowing veterans to purchase distressed property for repair, alteration, renovation and improvement. The VA pilot resembles the FHA’s “fixer-upper” program for buyers interested in purchasing ...