Fannie Mae and Freddie Mac to Issue New Seller/Servicer Eligibility Requirements

On May 20, the FHFA announced that Fannie Mae and Freddie Mac are issuing new finalized operational and financial eligibility requirements for mortgage seller/servicers.  The updated requirements will be communicated through guides, bulletins and announcements and through best practices documents provided by Fannie and Freddie.  The operational requirements become effective no later than September 1, 2015 and the financial requirements become effective December 31, 2015.  ReleaseFannie Mae and Freddie Mac FAQs.

FHFA Releases Update on the Single Security Project

On May 15, the FHFA released an update on the structure of the Single Security, a project involving the development of a single mortgage-backed security that would be issued by Fannie Mae or Freddie Mac.  The update contains FHFA’s decisions made in response to input previously provided by industry stakeholders.  ReleaseUpdate.

Court Enters $806 Million Judgment in FHFA v. Nomura

On May 16, 2015, Judge Denise Cote of the United States District Court for the Southern District of New York entered a judgment requiring Nomura and RBS to buy back, at a total cost of $806 million, seven RMBS certificates sold to Fannie Mae and Freddie Mac from 2005 to 2007.  The judgment stemmed from Judge Cote’s May 11, 2015 Opinion finding Nomura and RBS liable for violations of the Securities Act of 1933, the D.C. Securities Act, and the Virginia Securities Act.  For those certificates for which FHFA prevailed under multiple statutes, FHFA was permitted to, and did, elect the maximum available remedies.  Judge Cote also ordered that FHFA is entitled to post-judgment interest, reasonable attorneys’ fees, and costs.  Judgment.

Nomura Found Liable in RMBS Trial

On May 11, 2015, Judge Denise Cote of the United States District Court for the Southern District of New York found Nomura Holdings Inc. liable for inaccurately characterizing the mortgage loan collateral backing seven RMBS certificates it sold to Fannie Mae and Freddie Mac between 2005 and 2007.  The suit against Nomura is the last that remains of sixteen lawsuits originally filed against by FHFA against RMBS issuers and sellers alleging violations of Sections 12(a)(2) and 15 of the 1933 Securities Act and state securities laws.  Judge Cote’s decision followed a nearly 4-week bench trial that concluded on April 9, 2015.

In a 361-page decision, Judge Cote found, among other things, that 45% to 59% of the sample loans were materially defective insofar as they deviated from relevant underwriting guidelines, and that 27% of the sample loans were subject to inflated appraisals.  Judge Cote treated this as strong circumstantial evidence that the appraisers did not believe in the credibility of their appraisals at the time that they were made.  Additionally, Judge Cote found that inadequacies in credit ratings of the offered certificates were due to inaccurate loan tapes Nomura provided to the rating agencies.  Finally, Judge Cote found that Nomura’s due diligence practices were insufficient, and rejected Nomura’s argument that market conditions, and not the misrepresentations, caused the losses alleged.  Judge Cote did not specify the amount of damages and asked the parties to submit a proposed judgment by May 15, 2015.  Opinion and Order.

FHFA Release Results of Fannie Mae and Freddie Mac Dodd-Frank Stress Tests

On April 30, the Federal Housing Finance Agency (FHFA) released a report providing the results of annual stress tests Fannie Mae and Freddie Mac are required to undergo under the Dodd-Frank Act.  The report provide updated information on possible ranges of future financial results for Fannie Mae and Freddie Mac under severely adverse economic conditions.  Press ReleaseReport.

Court Declines to Vacate Jury Verdict in Countrywide FIRREA Lawsuit

On February 3, Judge Jed S. Rakoff of the United States District Court of the Southern District of New York denied Bank of America Corporation’s and Rebecca Mairone’s motion for judgment as a matter of law, or, in the alternative a new trial. The jury found Bank of America and Mairone liable under the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) for the sale of mortgage loans to Fannie Mae and Freddie Mac before the financial crisis. Judge Rakoff found that the jury’s October 23, 2013 verdict was supported by sufficient evidence.  Order.

FHFA Proposes Minimum Financial Eligibility Requirements for Fannie and Freddie Seller/Servicers

On January 30, the Federal Housing Finance Agency (FHFA) today proposed new minimum financial eligibility requirements for Fannie Mae and Freddie Mac Seller/Servicers.  The proposed minimum financial requirements include net worth, capital ratio and liquidity criteria for the Enterprises’ Seller/Servicers.  FHFA is releasing the proposed criteria to provide greater transparency, clarity and consistency to industry participants and other stakeholders, and anticipates finalizing these requirements in the second quarter of 2015Release.

FHFA Director Testifies in Front of the U.S. House of Representative Committee on Financial Services

On January 27, 2015 the  FHFA Director, Melvin L. Watt, testified in front of the U.S. House of Representatives Committee on Financial Services.  Director Watt’s testimony provided, amongst other items, an update on the financial condition of Fannie Mae and Freddie Mac and the financial condition of the Federal Home Loan BanksRelease.

FHFA Issues 2015 Scorecard for Fannie, Freddie and Common Securitization Solutions

On January 14, FHFA released the 2015 Scorecard​ outlining specific priorities for Fannie Mae, Freddie Mac and their joint venture, Common Securitization Solutions, LLC.  The Scorecard assesses Fannie and Freddie’s performance under FHFA’s Strategic Plan for Fannie and Freddie and furthers the goals outlined thereunder, including building a new single-family securitization infrastructure for use by the Enterprises.  ReleaseScorecardStrategic Plan.