Look for the Federal Housing Finance Agency to press its multiple legal actions against many of the nation’s biggest issuers of non-agency mortgage-backed securities after a federal judge rejected a bid by UBS Americas to turn back the FHFA’s lawsuit over its sale of non-agency MBS to Fannie Mae and Freddie Mac. Judge Denise Cote, of the U.S. District Court for the Southern District of New York, two weeks ago denied UBS’ motion to dismiss on statute of limitations grounds, while dismissing the FHFA’s negligent misrepresentation claims. The FHFA, as GSE conservator, sued UBS 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.”

Fannie Mae received a leg up earlier this month in its defense against a former staffer’s wrongful termination lawsuit when a federal judge ruled that the GSE is not legally considered a government entity while under the conservatorship of its regulator, the Federal Housing Finance Agency. Caroline Herron, a former Fannie vice president who left in 2007 but returned as a consultant in 2009, filed suit against the GSE in June 2010. Herron claims she was wrongly fired for reporting what she said was Fannie’s mismanagement of the Obama administration’s housing rescue initiatives. According to papers filed in U.S. District Court for the District of Columbia, Herron sought to prove that Fannie was not a private company but an adjunct of the state while under FHFA conservatorship as part of her claim against Fannie. Herron asserted a Bivens claim, a claim under the First Amendment for private damages against federal officials for civil rights violations outside the purview of the Federal Tort Claims Act.

Three mortgage lending industry groups have challenged the position of the Consumer Financial Protection Bureau in a key Truth in Lending Act case by asserting that borrowers must file a lawsuit within three years of a mortgage loan’s signing in order to exercise their right of rescission. As far as the industry is concerned, the crux of the dispute in Rosenfield v. HSBC Bank, No. 10-1442, currently before the 10th District Court of Appeals, is whether borrowers who notify lenders of their intent to rescind must also sue their lenders within three years. TILA gives certain...

The Consumer Financial Protection Bureau has sided with borrowers in an appeals case being brought under the Fair Debt Collection Practices Act, Birster v. American Home Mortgage Servicing, Inc., which is currently before the 11th Circuit Court of Appeals. The FDCPA prohibits debt collectors from using certain means to collect debts and from engaging in certain conduct in connection with the collection of a debt. In order for a plaintiff to successfully sue under the act, he or so must show two things: that the defendant is in fact a debt collector under the law, and the behavior...

In Bridge v. Ocwen Federal Bank, FSB, the U.S. Court of Appeals for the Sixth Circuit recently ruled that a pro se plaintiff stated a Fair Debt Collection Practices Act claim against a mortgage servicer where the mortgage was not actually in default, reversing the district court’s dismissal. The court came to the conclusion that the mortgage servicer and the purchaser of the mortgage came under the scope of the FDCPA because the mortgage servicer treated the mortgage as if it were in default and tried to collect on it as a debt that was in default. In Bridge, the homeowner...

In Gilbert v. Residential Funding LLC, the U.S. Court of Appeals for the 4th Circuit became the first federal appellate court to rule that a borrower only needs to send notice of rescission within the three-year period to exercise a valid right to rescind. In this case, the borrowers are appealing a district court’s dismissal of their claim that Deutsche Bank Trust Company Americas, as trustee for Residential Accredit Loans, Inc., Residential Funding LLC and GMAC Mortgage LLC, violated various consumer protection laws in connection with a refinance mortgage the borrowers secured...

Industry and legal concerns that enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act made substantial changes to the federal preemption landscape are “much ado about nothing,” according to two legal scholars at the law firm Barnett Sivon & Natter PC in Washington, DC. In a scholarly work scheduled for publication in the Virginia Law and Business Review this fall, the pair addresses the view of some commentators that the Dodd-Frank Act changed the standard used to determine if a state law is preempted. Some have felt that state law is only preempted if the law...

Kansas. Judge Robert Berger of the U.S. Bankruptcy Court for the District of Kansas ruled in three decisions late last month that a mortgage naming Mortgage Electronic Registration Systems, Inc., as mortgagee is valid and enforceable, upholding MERS’ role as agent for its members. Judge Berger’s rulings in In re Van Nostrand, In re Huerter and In re Wilkinson found that there was no splitting of the mortgage and note because MERS held the mortgage on behalf of the note owner. “The MERS system has been scrutinized and analyzed by other courts, and, provided MERS can produce a complete...

The massive legal action initiated by the Federal Housing Finance Agency last summer against many of the nation’s biggest lenders has survived its first legal challenge relatively unscathed following a federal judge’s rejection of the defendant’s motion to dismiss. Judge Denise Cote of the U.S. District Court for the Southern District of New York last week denied UBS Americas’ motion to dismiss on statute of limitations grounds. The ruling permits the FHFA to proceed full steam ahead with its claim that UBS violated federal securities laws by misleading Fannie Mae and Freddie Mac into purchasing $6.4...

The Federal Housing Finance Agency’s non-agency mortgage-backed security repurchase claims against UBS can proceed, according to a ruling last week by U.S. District Judge Denise Cote in Manhattan federal court. The decision could also be applied to the other 16 lawsuits the FHFA filed against non-agency MBS issuers. Among other issues, the ruling refuted claims ... [Includes two briefs]