A handful of critical lawsuits stemming from the mortgage market collapse may yield meaningful legal precedents for the securitization markets as 2012 unfolds, according to a legal observer. Were finally getting to the point where there can be meaningful precedent established, said Isaac Gradman, a managing partner at IMG Enterprises. For the last three or four years, there has been a wide gap in the claims banks have made and the claims monolines and investors have made as to the merits of these suits. What comes from the courts will become the standards by which the new MBS market...
Manhattan District Attorney Cyrus Vance has charged Abacus Federal Savings Bank and a group of its former employees in a massive mortgage fraud scheme for allegedly originating and selling fraudulent mortgage loans to Fannie Mae over a five-year period. The Manhattan-based bank, which provides loans and other banking services in New York Citys Chinatown, as well as 19 former employees, were charged with residential mortgage fraud, securities fraud, grand larceny, conspiracy and falsifying business records. Eleven of the banks employees were indicted in state court two weeks ago, while eight waived indictment and admitted guilt, according to the DAs 184-page indictment.
Non-agency mortgage-backed security investors are hoping to influence the implementation of the recent $25 billion foreclosure settlement and ward off similar agreements in the future. They raised concerns this week at a hearing before the House Financial Services Committees Subcommittee on Capital Markets and Government Sponsored Enterprises. As it stands, it will damage residential MBS markets further, said Vincent Fiorillo, a trading/portfolio manager at Doubleline Capital, on behalf of the Association of Mortgage Investors. By adding yet another risk premium to government intervention, it will further...
A federal judge in Los Angeles has dismissed a number of claims in an American International Group lawsuit against Bank of America over mortgage securities issued by Countrywide Financial, although AIG has promised to continue its legal efforts to recoup more than $10 billion in MBS losses. U.S. District Judge Mariana Pfaelzer of the Central District of California in a new ruling dismissed AIGs federal securities-law claims because they were filed too late more than three years after the MBS were first sold. AIG filed suit against BofA as Countrywides owner and Merrill Lynch in New York state court...
The settlement baked into the Residential Capital bankruptcy agreement is facing new challenges, including one from Warren Buffets Berkshire Hathaway and another from unsecured creditors. When ResCap announced its bankruptcy last month, it did so with a plan to sell its mortgage origination platform and servicing rights to Nationstar Mortgage, a division of Fortress Investment Group, for $4 billion and its portfolio loans to its parent company Ally Financial. Part of the deal is a release of legal liability for Ally, which will pass along some of its lingering obligations like follow through on the...
Non-agency mortgage-backed security investors and politicians on both sides of the aisle were critical this week of the recent $25.0 billion servicing settlement. The settlement requires principal reduction loan modifications on mortgages held in five banks portfolios and allows the servicers to receive credit for reducing principal on mortgages in non-agency MBS. Vincent Fiorillo, a trading/portfolio manager at Doubleline Capital, noted that the Association of Mortgage Investors is not opposed to principal reduction mods ...
If investors in non-agency mortgage-backed securities had easy access to the addresses of mortgages included in non-agency MBS, the sectors market share would increase, according to a new proposal by the Reason Foundation, which promotes libertarian principles. Ignorance of the borrowers address and identity is a major disadvantage for the residential MBS investor or anyone trying to analyze residential MBS deals, according to Marc Joffe, a research associate at the Reason Foundation and Anthony Randazzo ...
Making the Department of Veterans Affairs adjustable-rate mortgage programs permanent would cost $144 million in new direct taxpayer subsidies over the next 10 years, according to Congressional Budget Office estimates. Based on the number of ARM and hybrid ARM loans the VA has guaranteed in recent years, CBO estimates that the VA would guarantee approximately $1.3 billion worth of additional loans annually over the next 10 years. Consequently, additional subsidy costs for those loans would increase direct spending by $52 million over 2012-2017 and $144 million over 2012-2022, the CBO said. Subsidy costs of those additional loan guarantees would be paid from a ...
A proposal to replace the FHAs current Tier Ranking System with a Servicer Performance Scorecard as a basis for determining servicer incentive payment is expected to be published in the Federal Register by the end of this month. In the previous issue of Inside FHA Lending (Volume 5, Issue 11, May 25), it was reported that a coalition of industry groups asked the FHA to adopt a private transfer fee rule in harmony with the final rule recently adopted by the Federal Housing Finance Agency. In a recent seller/servicer bulletin, Freddie Mac announced that, effective July 16, it will not purchase mortgages that are ...
In a move intended to maintain the integrity of data that helps guide the decisions of MBS investors, the Financial Industry Regulatory Authority last week fined Citigroup Global Markets $3.5 million for allegedly providing inaccurate mortgage performance information, supervisory failures and other violations in connection with subprime residential MBS. Citigroup posted data for its RMBS deals that it should have known was inaccurate; and even after they learned that the data was inaccurate, Citigroup did not correct the problem until years later, said Brad Bennett, FINRA executive vice president and...