The Federal Housing Finance Agency’s public expression of “concern” last week about proposals to use the eminent domain powers of local governments to seize performing underwater mortgages might be enough to significantly delay or even derail the effort outright, say experts. The conservator of Fannie Mae and Freddie Mac and regulator of the 12 Federal Home Loan Banks warned that unspecified “action might be necessary” on its part “to avoid a risk to safe and sound operations” at the government-sponsored enterprises. “FHFA has significant concerns about the use of eminent domain to revise...

A federal judge in New York last week rejected the motion by a trio of former Fannie Mae executives to dismiss a securities fraud civil lawsuit brought late last year against the top GSE officers by the Securities and Exchange Commission. In December 2011, the SEC filed suit in the U.S. District Court for the Southern District of New York alleging that former Fannie executives made material misrepresentations to the public, investors and the media about the government-sponsored enterprise’s exposure to subprime mortgage loans in 2007 and 2008. The SEC filed an identical parallel civil suit against Freddie Mac the same day. The SEC’s complaint against former Fannie executives Daniel Mudd (CEO), Enrico Dallavecchia (chief risk officer) and Thomas Lund (EVP for single family) alleges...

A German-based, state-owned lender has filed suit in a Manhattan court against Great Britain’s second-largest bank, alleging it sold over $274 million of non-agency MBS under false pretenses.Bayerische Landesbank contends in its lawsuit filed Aug. 3 in New York State Supreme Court that Barclays PLC issued offering materials that contained “material misrepresentations and omissions” regarding the underwriting standards used while issuing the residential MBS.Barclays’ offering materials also allegedly misrepresented...

The Consumer Financial Protection Bureau initiated its first enforcement action last month, filing a sealed complaint in federal court in California against an attorney and affiliated partners and companies that offered loan modification and foreclosure relief services to struggling homeowners. The bureau’s complaint alleges that defendant Chance Edward Gordon, some of his colleagues and related companies in the Los Angeles area, deceived consumers with false promises of obtaining loan modifications in exchange for...

The withdrawal of one of the biggest opponents to Bank of America’s pending $8.5 billion settlement with non-agency mortgage-backed security investors will not necessarily speed approval of the deal, according to industry analysts. Last month, the hedge fund Baupost (known as Walnut Place in the lawsuit) dropped its objections to the settlement and moved to sell some its holdings on Countrywide Financial non-agency MBS. A number of other entities continue to oppose the settlement, including AIG and ...

Chicago is the latest municipality to consider using eminent domain to seize mortgages from non-agency mortgage-backed securities in an effort to help borrowers with negative equity. Meanwhile, the conservator of two of the largest holders of non-agency MBS joined other investors in raising concerns about the plan and industry analysts suggest the plan has serious defects. Chicago will hold hearings to consider the eminent domain plan proposed by Mortgage Resolution Partners. In June, San Bernardino ...

A group of San Francisco-area homeowners has filed a federal RICO class-action lawsuit against JPMorgan Chase, alleging the company charges inflated fees to homeowners who go into default. In a suit filed last week in the U.S. District Court, Northern District of California, the three named plaintiffs, Diana Ellis, James Schillinger and Ronald Lazar, accuse JPMorgan of violating California business standards law. The suit also says JPMorgan’s use of mail and wire communications to perpetuate its fraud against homeowners violates the federal Racketeer Influenced and Corrupt Organizations Act. The homeowners contend that JPMorgan is using...

Consumer Financial Protection Bureau Director Richard Cordray this week sought to allay the concerns of some members of Congress that small businesses in the mortgage industry and other sectors are about to be overwhelmed by regulatory overload. One of the main issues in this regard being considered by the House Small Business Committee is the CFPB’s recent proposal to integrate and simplify the consumer disclosures mandated by the Truth in Lending Act and the Real Estate Settlement Procedures Act. “Our committee is interested in how the regulations will affect...

California’s San Bernardino County Board of Supervisors has yet to decide if it wants to go ahead with a controversial proposal to seize performing underwater non-agency mortgages via eminent domain, repackage them and sell them to new investors. But just the fact they’re considering it has compelled some secondary mortgage market representatives to call in the big guns of the federal government to squash the notion. Late last week, Securities Industry and Financial Markets Association President and CEO Tim Ryan wrote to Treasury Secretary Tim Geithner, Federal Reserve Chairman Ben Bernanke, and Department of Housing and Urban Development Secretary Shaun Donovan to raise his membership’s concerns about the proposal and called on them to oppose it. “We believe that efforts by municipalities to employ the power of eminent domain to seize mortgage loans are...

The investor group that had been seen as the most formidable opponent to Bank of America’s proposed $8.5 billion MBS settlement pulled out of the fight this week. Walnut Place submitted a motion to New York State Supreme Court Judge Barbara Kapnick, which she granted, to formally withdraw its objection to the BofA settlement. “Walnut Place respectfully requests that it be permitted to withdraw as an intervenor in this proceeding,” the investor group wrote to the judge. Walnut Place, which represents...