Securitization participants and financial services providers flatly rejected a proposal to create an independent federal board that would assign credit rating agencies to initially rate non-agency MBS, ABS and other structured finance transactions. In separate comments, two industry trade groups and Fitch Rating Services opposed the proposal, which is being studied by the Securities and Exchange Commission. The Dodd-Frank Act instructs the SEC to study the concept and report back to Congress by July 2012 with its recommendations for regulatory or statutory changes. The idea of establishing a board to oversee credit rating agencies and address...

The massive legal action that the Federal Housing Finance Agency has initiated against many of the nation’s big lenders on behalf of Fannie Mae and Freddie Mac needs to be resolved forthwith, says an industry attorney, before a prolonged litigation “feeding frenzy” and resulting uncertainty paralyze mortgage market participants.Two weeks ago, the Finance Agency filed legal papers contending that the 17 financial institutions which sold Fannie and Freddie $196 billion of mortgage-backed securities, mostly between 2005 and 2008, duped the GSEs into buying tens of billions of dollars of MBS that went south after the housing bubble burst.

Fannie Mae and Freddie Mac are reportedly in talks with the Securities and Exchange Commission to settle claims that the two GSEs failed to disclose to investors the companies’ exposure to risky subprime mortgages prior to the 2008 housing market crash.

Two Ohio pension funds have filed suit in federal court against the Federal Housing Finance Agency to overturn a recent Finance Agency rule that could curtail any award for damages the funds might someday receive in their securities fraud suit against Fannie Mae. In papers filed in the U.S. District Court, District of Columbia, lawyers for the Ohio Public Employees Retirement System and the State Teachers Retirement System of Ohio disputed a final rule issued…

The Consumer Financial Protection Bureau is taking a different tack in its latest round of prototype integrated consumer mortgage disclosure forms, this time utilizing the same form to facilitate comparison shopping of two different types of loans. Under its Know Before You Owe project, the CFPB is trying to integrate the current Truth in Lending Disclosure Statement and the Good Faith Estimate under the Real Estate Settlement Procedures Act into a single disclosure document. “In the first three rounds of Know Before You Owe, we asked you to compare different draft versions of a simplified mortgage disclosure form,” said Patricia McCoy, who heads...

A Senate lawmaker and the Mortgage Bankers Association warned House lawmakers that a narrow “qualified residential mortgage” rule will result in overuse of the FHA program and make it more difficult for private capital to re-enter the housing finance market. Testifying before the House Financial Services Subcommittee on Insurance, Housing and Economic Opportunity last week, Sen. Johnny Isakson, R-GA, said the six federal agencies charged with crafting risk-retention requirements apparently failed to consider the impact of a narrow QRM rule on the FHA program. Isakson, who co-authored a Senate exception to...

Overlooked in the often rancorous partisan sniping during last week’s hearing to consider the nomination of Richard Cordray as the first director of the Consumer Financial Protection Bureau were some remarks the candidate made that suggest he is interested in reducing the regulatory compliance burden facing mortgage lending institutions. “I ... am convinced that the bureau will find many opportunities to streamline regulations and disclosures,” Cordray told members of the Senate Banking, Housing and Urban Affairs Committee last week. “Our ‘Know Before You Owe’ project is working to combine the mortgage disclosure forms required under two distinct but overlapping statutes to make the costs, risks and responsibilities of a home loan clearer to consumers and at the same time to reduce paperwork burdens for lenders – which is a true win-win.

Iowa Attorney General Tom Miller, who’s heading up the 50-state settlement talks with the nation’s top mortgage servicers over industry foreclosure practices, is defending the decision to proceed without the direct participation of New York Attorney General Eric Schneiderman. In a letter to the New York delegation to the U.S. House of Representatives, Miller rejected the assertion that the state AGs had removed Schneiderman from the negotiation table. “New York State Attorney General Eric Schneiderman voluntarily walked away from the negotiation table in June,” Miller said.

Goldman Sachs will likely have no appetite to wade back into the mortgage servicing business anytime soon, following the enforcement action taken against it last week by the Federal Reserve Board – a regulatory move that still leaves monetary penalties on the table and likely to be imposed before long. The action orders Goldman Sachs to retain an independent consultant to review foreclosure proceedings initiated by Litton Loan Servicing LP, Goldman’s former mortgage servicing platform, that were pending at any time in 2009 or 2010. The review is intended to provide remediation to borrowers who suffered financial injury as a result of wrongful foreclosures or other deficiencies identified in a review of the foreclosure process, according to the Fed.

With the shelf life of the National Flood Insurance Program about to expire once again, the Senate Banking, Housing and Urban Affairs Committee last week passed the latest program reauthorization legislation, the “Flood Insurance Reform and Modernization Act” that includes a five-year extension of the NFIP along with various program reforms. This bill would reauthorize the program and its funding through 2016, phase in premium rates that more accurately reflect the risk facing a property, and allow for the NFIP to build reserves and modernize flood maps. The bill also requires that lenders provide to all purchasers a disclosure of the availability of flood insurance under the Real Estate Settlement Procedures Act.