The Federal Deposit Insurance Corp. recently filed a lawsuit against the auditors of Colonial Bank alleging that they could have prevented “enormous losses” suffered by the bank due to fraud by Colonial’s largest mortgage banking customer, Taylor Bean & Whitaker Mortgage. The lawsuit is the first by the FDIC post-crisis against the accountants of a failed bank. Colonial was closed in August 2009 by the Alabama State Banking Department and the FDIC was named as receiver and is now ...

The Securities and Exchange Commission has been quietly meeting with investors in non-agency mortgage-backed securities looking for leads to bring regulatory actions. Reaction from investors to the SEC’s outreach has been decidedly mixed, though Reid Muoio, a deputy for the SEC’s structured and new products unit, said the SEC is working to improve regulation on behalf of investors. Speaking at the recent ABS East conference sponsored by Information Management Network in Miami, Muoio detailed an SEC outreach program that was apparently previously undisclosed. He said that a ...

Wells Fargo has asked a federal district court in Washington, DC, to declare the U.S. government in violation of the terms of the landmark $25 billion mortgage servicing fraud settlement earlier this year that resolved federal and state claims against the bank and four other major servicers for alleged servicing malpractices. In a complaint filed last week, Wells Fargo also asked the D.C. court to order the Department of Justice to halt all legal actions seeking to impose additional liability on Wells Fargo based on a ...

There is substantial risk that the FHA may end up with a negative net worth, which would require congressional appropriations for the mortgage insurance fund and passage of legislation reforming the FHA, said a former top official at the Department of Housing and Urban Development. In remarks this week at the Urban Institute, John Weicher, former assistant secretary for housing and FHA commissioner in 2001-2005, said it is very unlikely in this weak economic recovery to see ...

The volume of loans guaranteed by the Department of Veterans Affairs rose 4.0 percent in the third quarter of 2012, reflecting an upward trend that the agency attributes to strong underwriting. A production increased to $33.3 billion from $32.0 billion in the second quarter and $28.3 billion in the first quarter. The agency reported $93.6 billion in total originations over the nine-month period, with refinancing accounting for 51.8 percent of guaranteed loans. “VA has had the best performing loans in the industry for quite some time, with the ... [1 chart]

The Department of Justice’s recent civil lawsuit against Bank of America/Countrywide over allegedly defective loans sold to Fannie Mae and Freddie Mac is a clear sign of the government’s more aggressive use of the False Claims Act and the 1989 thrift bailout law to target not only participants in government loan programs but any lender who sold loans to the government-sponsored enterprises, according to industry lawyers. Filed last week by the U.S. Attorney for the Southern District of New York, the suit is another example of the government’s increasingly aggressive effort to recoup taxpayer losses from the financial meltdown and to remind potential violators of the significant whistleblower provisions in the FCA and the Financial, Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA), noted the Washington, DC, law firm BuckleySandler. The DOJ is following...

Republicans in the House will approve a package of legislation to reform the government-sponsored enterprises next year, according to the chief of staff for Rep. David Schweikert, R-AZ. The Arizona lawmaker is also working on a bipartisan bill to establish a framework for the non-agency mortgage-backed security market. Speaking at the ABS East conference sponsored by Information Management Network this week in Miami, Matthew Tully, chief of staff for Schweikert, said GSE reform is a top agenda item for House ...

With the help of consumer advocates, five borrowers filed a class-action lawsuit last week against Morgan Stanley alleging racial discrimination tied to the issuance of subprime mortgage-backed securities. The case appears to be the first to connect securitization and racial discrimination and the first class-action by borrowers against an investment bank. “It literally is the first case of Main Street holding Wall Street accountable for the abuses that happened and the aftermath in the Great Recession,” ...

The federal government this week filed a lawsuit against Bank of America regarding stated income mortgages originated by Countrywide Financial’s former subprime unit and sold to the government-sponsored enterprises in 2007 through 2009. The lawsuit is the first of its kind, though some legal analysts question the strength of the claims. U.S. v. BofA was filed by the U.S. Attorney for the Southern District of New York, the Inspector General of the Federal Housing Finance Agency and the Special Inspector General ...

Morgan Keegan and Regions Financial reached a $68.0 million settlement this month with mutual fund investors relating to a lawsuit alleging breaches of fiduciary duty in connection with their alleged mismanagement of the funds and their assets. The companies were accused of fraudulently overstating the values of non-agency mortgage-backed security investments and reporting false net asset values per share, resulting in significant losses to investors in four closed-end mutual funds ... [Includes three briefs]