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Investments

FHFA resolves 6 of 18 RMBS suits against big banks

12 lenders remain in line of fire after $8B in settlements

watch and money

Nearly three years ago, the Federal Housing Finance Agency slapped 18 banks with lawsuits, alleging they sold private-label residential mortgage-backed securities to Fannie Mae and Freddie Mac without disclosing some of the toxic loans underlying the transactions.

As of today, the FHFA has settled six of the private-label RMBS cases, recovering nearly $8 billion for taxpayers.

Twelve of the cases remain, including FHFA’s lawsuits against Barclays Bank (BCS), Bank of America (BAC), Credit Suisse Holdings (CS), First Horizon National Corp., Goldman Sachs & Co. (GS), HSBC North America (HSBC), Merrill Lynch & Co., Morgan Stanley (MS), Nomura Holding America (NMR), SG Americas (Societe Generale), The Royal Bank of Scotland Group (RBS) and Countrywide Financial Corp.

FHFA released a rundown of the resolved cases Thursday, noting that General Electric Co. (GE) settled private-label RMBS claims for $6.25 million. Other settlements included deals with: Citigroup ($250 million deal), UBS Americas ($885 million), JPMorgan Chase ($4 billion), Deutsche Bank ($1.925 billion) and Ally Financial Inc. ($475 million).

The Citigroup and GE amounts were previously undisclosed.

FHFA also entered into a settlement over securities issued in a case that never went to litigation – the FHFA versus Wells Fargo case, which ended in a $335.23 million settlement.

The finalized agreements are the direct result of FHFA taking over as conservator of Fannie Mae and Freddie Mac back in 2008. Before that time, numerous banks sold mortgage-backed securities to the GSEs between 2005 and 2007. Those securities became the subject of private-label RMBS litigation as FHFA in its role as conservator began to notice securities law violations and instances of fraud.

Most housing agencies have been pursuing settlements aggressively, with market observers suggesting that outgoing FHFA acting director Ed DeMarco wants to get all of this behind the conservator as soon as possible.

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