Fannie Mae and Freddie Mac are private companies, according to a recent Ninth Circuit Court of Appeals case that dismissed an argument stating that the mortgage giants are federal instrumentalities as it relates to them being liable under the False Claims Act. Now some say this ruling may influence and stir up reaction about a case in Delaware involving GSE shareholders who argue that the Treasury sweep of the GSEs’ profits was illegal. In the United States ex rel. Adams v. Aurora Loan Services, Inc., et al., a whistleblower case, James Adams, on behalf of the government, named 16 banks, lenders and servicers as defendants in a FCA breach of representations-and-warranties lawsuit. It was alleged...

The CPFB it will continue to work with institutions to support implementation of its mortgage rules and “begin to assess the effectiveness of significant rules.”

A working group led by potential investors in new non-agency MBS detailed principles for the role of a deal agent this week, signifying some progress in reform efforts. However, a revival of the non-agency MBS market looks a ways off as other industry participants consider how a deal agent will actually function. “We are now at a transition point for non-agency MBS reform efforts, where some market participants can start moving from a principles-level discussion to contractual negotiations,” Monique Rollins, deputy assistant secretary at the Treasury Department, said at the ABS Vegas conference produced by Information Management Network and the Structured Finance Industry Group. The Treasury helped facilitate...

The U.S. Department of Justice will reportedly decide within the next few months whether or not to bring the hammer down on Moody’s Corp. for allegedly overstating its ratings on MBS transactions in the run-up to the financial crisis, Bloomberg reported last week, citing “people familiar with the matter.” According to the news account, the Justice Department is scrutinizing credit ratings that Moody’s assigned during the housing boom and trying to determine if the firm massaged its criteria to earn business from Wall Street banks that were bundling residential mortgages into securities. A proposed settlement has apparently been...[Includes one data table]

Years of warnings from securities issuers and investors about regulatory uncertainty appear to have shifted to actual consequences as liquidity in the MBS and ABS markets has declined significantly in recent months. Almost every panel session at the ABS Vegas conference produced by Information Management Network and the Structured Finance Industry Group this week included comments regarding liquidity and regulation. Daniel McGarvey, the head of U.S. asset-backed products origination at Societe Generale, noted that in recent months spreads on MBS and ABS have increased due to illiquidity. “Credit risk is not currently a driver of credit spreads,” he said. “This should be a concern for all of us in the securitization market.” Delinquencies and losses, traditional factors in liquidity, remain...

The great irony of the mortgage market can be found in the MBS holdings of depositories: Even though banks are ceding origination market share to nondepositories, they continue to gobble up bonds backed by home mortgages. As Inside MBS & ABS noted last month, bank holdings of residential MBS hit a record $1.643 trillion at yearend 2015, a 2.2 percent sequential gain. Of course, a large chunk of that gain can be explained by Bank of America increasing its MBS holdings by a hefty $36.7 billion during the fourth quarter. The big question for banks – as well as real estate investment trusts – is...

The Ninth Circuit Court of Appeals has dismissed an argument in a whistleblower case, ruling that Fannie Mae and Freddie Mac are not “federal instruments” for the purposes of the False Claims Act, a federal statute that’s been used aggressively against FHA lenders. The FCA imposes liability on persons that defraud government programs and was originally enacted to penalize private parties that profited illegally in selling supplies to the U.S. Army during the Civil War. In the case of United States ex rel. Adams v. Aurora Loan Services, Inc., et al., the government argued...

Forty-five congressmen signed a letter addressed to the head of the Federal Housing Finance Agency on March 1 citing the need to reform the way nonperforming loan sales are conducted and singled out Lone Star Funds as a “bad actor” in the transactions. The letter, addressed to FHFA Director Mel Watt as well as Secretary Julian Castro of the U.S. Department of Housing and Urban Development, noted that there are improvements both agencies should take to better align the programs with the goals of stabilizing neighborhoods, alleviating the affordable housing crisis and working with organizations that have a track record of homeownership preservation.

One of the companies that purchased a large number of distressed homes from Fannie Mae following the housing crisis was the focus of a recent New York Times piece highlighting the problems brought on by investor-purchased homes that still linger today. Harbour Portfolio Advisors of Dallas is an investment firm that purchased thousands of single-family homes from Fannie in states like Florida, Georgia, Illinois, Michigan and Ohio, by way of a pool sales program that existed from 2010 to 2014. The article accused the firm of targeting and taking advantage of low-income buyers who don’t know what they’re getting themselves into once agreeing to buy a fixer-upper home from Harbour. The investment firm bought...

FHFA Ramps Up HARP Social Media Efforts. The Federal Housing Finance Agency kicked off a new social media campaign in late February, #HARPNow, to let more than 367,600 homeowners across the country know about the Home Affordable Refinance Program before it expires on Dec. 31, 2016. FHFA will use Twitter, LinkedIn and YouTube to reach homeowners in the 10 states with the greatest concentration of HARP-eligible borrowers. Fannie Names Winner of Second NPL Community Impact Pool. Fannie Mae announced that New Jersey Community Capital is the winning bidder of the company’s second Community Impact Pool of non-performing loans. This pool of loans was structured to attract diverse participation from non-profits, smaller investors and minority- and women-owned businesses. The transaction...