Standard & Poor’s this week deployed legal countermeasures against the federal government by asking a judge to dismiss a civil fraud lawsuit brought against the rating agency, slamming the litigation as an “overreach.” In February, the Justice Department filed a $5.0 billion lawsuit against S&P accusing it of knowingly inflating its ratings on residential MBS and collateralized debt obligations to boost its revenue and market share in the years leading up to the 2008 financial crisis. The filing in California federal court by S&P’s parent company, McGraw-Hill Co., says...

The Federal Home Loan Bank of Cincinnati says a unit of Lehman Brothers Holdings is not entitled to a multimillion dollar payday because the FHLBank did not short change the firm when it closed out swaps and options transactions ahead of Lehman’s 2008 bankruptcy. Last week, Lehman filed a breach of contract lawsuit in Manhattan federal court connected to 87 derivative transactions or interest-rate swaps with the FHLBank that fell apart when Lehman entered bankruptcy on Sept. 15, 2008, at the height of the financial crisis.According to its lawsuit, Lehman says the Cincinnati Bank violated its agreement by paying only $13.7 million when the transactions were terminated due to the firm’s Chapter 11 filing.

One week after UBS Americas failed in its bid to shutter a lawsuit brought by the Federal Housing Finance Agency in connection with non-agency mortgage-backed securities purchased by Fannie Mae and Freddie Mac, the federal judge overseeing the case has ordered UBS to hand over internal documents to the FHFA the company argued were privileged. U.S. District Court Judge Denise Cote ruled last week that parts of memoranda from UBS’ outside counsel to the company which contained factual summaries of meetings held with third-party mortgage originators are not protected by attorney-client privilege and must be disclosed to the FHFA. “Even if it is true, as UBS argues, that the memoranda at issue were created for the ‘predominant purpose’ of rendering legal advice, that does not relieve UBS of the obligation to show that the entirety of each document is privileged,” wrote Judge Cote in her ruling.

Potentially conflicting federal regulations over mortgage lending practices and standards from different government agencies increasingly appear to have the industry in a damned-if-you-do, damned-if-you-don’t position. During a webinar on fair lending challenges this week sponsored by Inside Mortgage Finance, Melanie Brody, a partner at K&L Gates, highlighted one of the challenges the industry faces in navigating between the Department of Housing and Urban Development’s new discriminatory effect rule and the Consumer Financial Protection Bureau’s ability-to-repay rule. “The problem is that ability-to-repay and qualified mortgage requirements add up...

A top official from the CFPB last week tried to tamp down industry anxiety over the presence of bureau enforcement attorneys during examinations. It’s more about maximizing synergies and promoting efficiency and consistency than it is a harbinger of trouble, he basically said. “Our approach of having enforcement personnel involved in the examination process has garnered a great deal of attention,” CFPB Acting Deputy Director Steven Antonakes conceded before attendees at the American Bankers Association’s government...

The CFPB plans to spend a whole lot more in fiscal years 2013 and 2014 than it did in FY 2012, and a big chunk of that change is going to be devoted to supervision, enforcement and fair lending. In FY 2012, the CFPB budgeted just over $83 million for those three areas. For FY 2013, that is projected to leap to more than $132.8 million. For FY 2014, supervision, enforcement and fair lending will be earmarked more than $165.2 million. In every one of these fiscal years, SEFL categories have dwarfed all other CFPB programs except...

Bank of America agreed this week to pay $500 million to settle lawsuits from investors in non-agency mortgage-backed securities issued by Countrywide Financial in 2005 through 2007. If it receives judicial approval, the settlement on about $15.0 billion in non-agency MBS will be the largest-ever non-agency MBS class-action recovery. “After five years of hard-fought litigation, this record-breaking recovery is a tremendous result for MBS investors misled by Countrywide and ...

Department of Housing and Urban Development Secretary Shaun Donovan this week reiterated his agency’s request for additional legislative authority to regulate the Home Equity Conversion Mortgage program by mortgagee letter so that much-needed changes can be implemented immediately. Rather than go through the tedious legislative process of amending HECM legislation to improve the program and reduce HECM losses, expanding HUD’s authority would enable the department to undertake immediate reforms, such as restricting lump sum payments, requiring financial assessments of HECM applicants and requiring borrowers to ...

The Department of Justice recently announced enforcement actions against a New York-based FHA lender and its owner/president for fraudulent certification of FHA-insured loans as well as two separate settlements with bank subsidiaries for alleged violations of the Servicemembers Civil Relief Act. In the first action, the U.S. Attorney for the Southern District of New York, the Department of Housing and Urban Development, and the HUD Office of the Inspector General jointly announced a civil mortgage fraud lawsuit against ...

The Department of Housing and Urban Development’s Mortgagee Review Board slapped 157 FHA lenders during the first nine months of 2012 with various administrative actions, including more than $1.7 million in civil money penalties and indemnifications to HUD for paid and potential claim losses totaling $1.25 million. The MRB, which is HUD’s disciplinary arm, took action against the approved lenders from Jan. 1, 2012, to Sept. 30, 2012. According to a notice published in the April 11 Federal Register, the board withdrew the FHA approval of 130 lenders for failing to ...