Three non-agency mortgage-backed security trustees filed lawsuits this week against Richmond, CA, which plans to use eminent domain to purchase mortgages with negative equity. The city recently sent letters to servicers and trustees of non-agency MBS offering to purchase 624 mortgages. If the MBS trustees do not sell the loans for the offered price of 80 percent of the current value of the properties, Richmond Mayor Gayle McLaughlin, a member of the Green Party, said the city intends to ...

Carrington Mortgage Services recently reversed its response to a survey regarding accounting for principal forbearance. The servicer initially told Fitch Ratings that it reported all forbearance amounts as losses on modifications and will continue to report forbearance mods as losses at the time of modification. However, near the end of July, Carrington said it has approximately $300 million in principal forbearance amounts that haven’t been reported as losses ... [Includes four briefs]

The question of whether the FHA should allow the refinancing of underwater mortgages seized through eminent domain has reemerged as a key issue following a recent decision by the city of Richmond, CA, to use its authority to take over distressed mortgages for restructuring. There is a new twist to the question, however. Could FHA’s refusal to refinance such mortgages be deemed discriminatory against cities and homeowners if eminent domain programs meet the requirements of the FHA Short Refinance program? Is that tantamount to redlining? A top executive of Mortgage Resolution Partners, which developed the eminent domain strategy to help underwater homeowners at risk of foreclosure, said ...

Ocwen Financial expects to reach a settlement with state attorneys general regarding servicing practices “very soon,” according to Ronald Faris, the servicer’s president and CEO. State AGs have been working for more than a year to get other servicers to agree to terms similar to the $25 billion settlement reached with five large bank servicers in February 2012. A person with knowledge of the negotiations said terms with Ocwen have yet to be finalized or sent to the 50 state AGs, suggesting that it could be weeks before the settlement is completed. The source added that future settlements with servicers are likely to be reached on an individual basis, not bundled as they were with the settlement that involved Ally Financial, Bank of America, Citi, JPMorgan Chase and Wells Fargo. Ocwen’s Faris said...

Fannie Mae, Freddie Mac and mortgage-backed securities trustees representing investors in non-agency MBS sued the city of Richmond, CA, this week to stop it from further implementing a plan to use eminent domain authority to seize and purchase performing underwater mortgages. Wells Fargo and Deutsche Bank, acting as trustees for a group of investors that includes BlackRock, Inc., Pacific Investment Management and the government-sponsored enterprises, filed the lawsuit in federal court in San Francisco at the behest of certificate holders. The plaintiffs are asking the court to declare the “Richmond Seizure Program” unconstitutional and in violation of California laws, and to order city officials to end the program. Securitizers and investors are...

A federal district court in New York last week ruled that a landmark discrimination lawsuit, the first to connect racial discrimination to the securitization of mortgage-backed securities, can move forward against Morgan Stanley. A July 25 ruling by the U.S. District Court for the Southern District of New York in Adkins v. Morgan Stanley denied in part the investment bank’s motion to dismiss the case, which alleges violations of the Fair Housing Act and the Equal Credit Opportunity Act. The putative class-action suit was filed...

Mary Jo White, chair of the Securities and Exchange Commission, stressed this week that the regulator plans to increase its enforcement activity, including more emphasis on trials. However, she said the SEC needs more appropriations from Congress to accomplish its goals. “We can’t judge at this point how many additional trials we’re going to have, but we already don’t have enough,” White said at a hearing this week by the Senate Committee on Banking, Housing, and Urban Affairs. President Obama’s proposed...

Bank of New York Mellon has come under scrutiny for its actions in the proposed $8.5 billion settlement involving Bank of America and investors in 530 non-agency MBS issued by Countrywide Financial. A trial to approve the settlement regarding repurchase requests started in June and is on a break until early September. While the proposed settlement involves a payout from BofA, which acquired Countrywide, the settlement is an agreement between BNYM and 22 institutional investors represented by the law firm of Gibbs & Bruns. The agreement was reached under Article 77 which allowed BofA to have the settlement apply to all investors in the Countrywide securities in question. “I can honestly say...

More than a year after it was issued under court-ordered duress, the Federal Housing Finance Agency has withdrawn its proposed rule concerning Fannie Mae and Freddie Mac underwriting standards related to mortgages affected by Property Assessed Clean Energy programs. Local governments use the PACE Program, which is part of the American Recovery and Reinvestment Act of 2008, to provide financing secured by a priority lien on the property to homeowners for the purchase of energy-related home improvements. While 27 states and the District of Columbia have legislation in place to permit PACE financing for “green” homes, in July 2010 Fannie and Freddie stopped purchasing PACE-related mortgages that had automatic first-lien priority over previously recorded mortgages.

The Federal Housing Finance Agency announced last week it has reached a settlement with UBS Americas for nearly $900 million to cover claims of alleged violations of federal and state securities laws regarding non-agency residential mortgage-backed securities purchased by Fannie Mae and Freddie Mac. Under the terms of the agreement, the Swiss bank will pay some $885 million divided roughly in half between the two GSEs. UBS will pay Fannie approximately $415 million and $470 million to Freddie to settle claims related to residential MBS offerings between 2004 and 2007. “The satisfactory resolution of this matter provides greater clarity and certainty in the marketplace and is in line with our responsibility for preserving and conserving Fannie Mae’s and Freddie Mac’s assets on behalf of taxpayers,” said FHFA Acting Director Edward DeMarco.