Observers in MBS and legal circles are closely watching how a federal judge will rule on a pending motion by UBS Americas to dismiss the mortgage securities lawsuit brought last summer by the Federal Housing Finance Agency on statute of limitations grounds and the ruling’s potential impact on other pending FHFA MBS litigation. The FHFA sued UBS in July and then filed a blizzard of 17 lawsuits against some of the industry’s biggest institutions, including Bank of America, Credit Suisse, JPMorgan Chase, Morgan Stanley and others, seeking tens of billions of dollars in damages incurred by Fannie Mae and Freddie...

MBS investors were not at the negotiating table for the multistate servicing settlement, yet they will feel the reverberations of the principal reductions and loan modifications the banks have promised state attorneys general and federal agencies. The $25 billion agreement reached last week among 49 states, the federal government and five major servicers – Bank of America, Wells Fargo, JPMorgan Chase, Citigroup and Ally Financial – allocates $10 billion toward principal reductions for underwater borrowers at risk of default. The banks will cough up another $7 billion for other forms of borrower...

The $25.0 billion servicing settlement is just the latest step toward standardized servicing regulation, according to industry analysts. Many non-agency servicers have taken major steps to prepare for an overhaul of servicing regulation, though increased costs are a concern. “It appears that non-agency MBS servicers have already made significant operational changes in an effort to address process deficiencies identified in this settlement and by regulators,” Fitch Ratings said. As with federal consent orders several servicers agreed to last year ...

Citigroup, Inc. this week agreed to settle a civil fraud lawsuit with the Manhattan U.S. Attorney’s Office and the Department of Housing and Urban Development alleging reckless mortgage lending practices. The $158.3 million settlement was reached on Feb. 15, hours after Preet Bharara, the U.S. Attorney for the Southern District of New York, filed a civil fraud lawsuit against CitiMortgage, a subsidiary of Citibank. The suit sought treble damages and civil penalties under the Financial Institutions Reform, Recovery and Enforcement Act of 1989 and the False Claims Act, a federal Civil War-era statute Congress passed to ...

While the multistate servicing settlement reached by 49 states, federal officials and the nation’s five largest servicers gets the state and federal attorneys off the banks’ backs in regards to servicing and foreclosure, the banks are still wide open to servicing lawsuits from individuals, criminal charges and litigation over their securitization activities. “This is only one part of a long resolution process,” said Richard Andreano, practice leader of Ballard Spahr’s mortgage banking group. Despite complaints from a wide swath of consumer protection groups that the $25 billion in penalties to be...

In an unusual legal development, the City of St. Paul, MN, late last week suddenly removed its challenge in a case before the Supreme Court of the United States that could have produced a definitive ruling on the disparate impact theory of lending discrimination under the Fair Housing Act. What’s unusual in Magner v. Gallagher is that the city believes it would have prevailed in the nation’s highest court – but opted to ask for dismissal because city leaders came to the conclusion that a victory could substantially undermine important civil rights enforcement in housing throughout the nation. The city expects to...

The Department of Housing and Urban Development is going all out to bolster FHA’s capital reserves with budgetary proposals to increase annual premiums beyond the 10-basis points hike authorized by Congress late last year. The proposed premium increases are expected to complement the $1 billion that Bank of America has agreed to pay to resolve claims against the bank and its subsidiary, Countrywide Financial Corp., for alleged underwriting and mortgage origination fraud. The BofA settlement, half of which is a penalty paid directly to the FHA, is part of a $25 billion agreement among 49 state...

A Federal judge in Chicago tabled for the moment the Federal Housing Finance Agency’s hopes of a speedy ruling in its favor of its lawsuit to exempt Fannie Mae and Freddie Mac from the city’s new vacant building ordinance, although the judge appears open to hearing the FHFA’s jurisdictional argument.Last month, U.S. District Court Judge Joan Lefkow denied the FHFA’s request for summary judgment in its lawsuit against Chicago while she ordered the city to file its response to the Finance Agency’s litigation.Filed in December, the FHFA’s lawsuit on behalf of the two GSEs seeks to prevent the city from enforcing the ordinance which requires mortgagees to pay a $500 registration fee for vacant properties and requires monthly inspections of mortgage properties to determine if they are vacant.

The five large mortgage servicers that agreed to a $25 billion settlement with 49 state attorneys general this week have already established more than enough reserves to cover their costs, analysts say. Bank of America, Wells Fargo, JPMorgan Chase, Citigroup and Ally Financial agreed to pay $20.0 billion in financial relief to homeowners and $5.0 billion to federal and state governments, of which $1.5 billion will be used to compensate some borrowers who have gone through foreclosure. Both the Federal Reserve Board and the Office of the Comptroller of the Currency levied separate monetary penalties...

One potential coup for the mortgage industry in the landmark multistate robosigning settlement announced this week is the detailed look at national servicing standards at a time when the states are racing to implement their separate foreclosure and servicing reforms. The terms for the $25 billion deal reached by 49 states, federal officials and the five major banks – Bank of America, Wells Fargo, JPMorgan Chase, Citigroup and Ally Financial – have yet to be released. However, one document that immediately made its way onto the settlement’s new website was an overview of the new servicing...