On January 18, the Fed, CFPB, FDIC, FHFA, NCUA and OCC issued a joint final rule, effective January 18, 2014, which establishes new appraisal requirements for “higher-priced mortgage loans”. For these loans, the rule requires creditors to: (i) use a licensed or certified appraiser who prepares a written appraisal report based on a physical visit of the interior of the property and (ii) disclose to applicants information about the purpose of the appraisal and provide consumers with a free copy of any appraisal report. Joint Release. Final Rule.
On December 17, 2012, the National Credit Union Administration Board, acting in its capacity as liquidating agent for four failed credit unions, sued several Bear Stearns affiliates in federal court in Kansas in connection with $3.6 billion in RMBS allegedly purchased by the failed credit unions. The NCUA alleges that the originators of the mortgage loans underlying the RMBS systematically disregarded the underwriting guidelines stated in the offering documents. It also alleges that the offering documents contain untrue statements of material fact concerning the evaluation of the borrowers’ capacity and likelihood to repay the mortgage loans, reduced documentation programs, loan-to-value ratios, and credit enhancement. The NCUA asserts 24 separate counts for relief under Sections 11 and 12(a)(2) of the Securities Act of 1933, the California Corporate Securities Law, the Kansas Uniform Securities Act, the Texas Securities Act, and the Illinois Securities Act. Complaint.
On September 6, 2012, the National Credit Union Administration Board (NCUA) sued UBS in the United States District Court for the District of Kansas. The NCUA filed the suit in its capacity as Liquidating Agent of U.S. Central Federal Credit Union and Western Corporate Federal Credit Union, which collectively are alleged to have purchased over $1.1 billion in RMBS from UBS. The complaint alleges that the originators of the mortgages collateralized into the RMBS had “systematically abandoned” the underwriting guidelines described in the offering documents. The NCUA also alleges that the offering documents contained untrue statements of material fact concerning weighted average LTV ratios, the evaluation of the borrowers’ capacity and likelihood to repay the mortgage loans, and the reduced documentation programs used by the originators. The NCUA asserts claims under Sections 11 and 12(a)(2) of the Securities Act of 1933, Sections 25401 and 25501 of the California Corporate Securities Law, and the Kansas Uniform Securities Act. The NCUA seeks rescission or rescissionary damages or, in the alternative, compensatory damages. NCUA Complaint.
On August 15, the Fed, CFPB, FDIC, FHFA, NCUA, and OCC issued a proposed rule to establish new appraisal requirements for “higher-risk mortgage loans”. The proposed rule would implement amendments to the Truth in Lending Act enacted by the Dodd-Frank Act, which classify mortgage loans as higher-risk if they are secured by a consumer’s home and have interest rates above a certain threshold. Comments must be submitted by October 15. Joint Release. Proposed Rule.
On June 21, the Fed, CFPB, FDIC, NCUA, and OCC issued guidance to mortgage servicers to address risks related to military homeowners who have informed the servicer that they have received military Permanent Change of Station orders. If the agencies determine that a servicer has engaged in unfair, deceptive, or abusive practices, or practices that otherwise violate Federal consumer financial laws and regulations, the agencies will take supervisory and enforcement actions. Guidance. Fed Release.
On June 4, pursuant to Section 1025 of the Dodd-Frank Act, the Fed, the CFPB, the FDIC, the NCUA and the OCC released a memorandum of understanding clarifying how the agencies will coordinate their supervision of insured depository institutions with over $10 billion in assets and their affiliates. Joint Release. Memorandum of Understanding.
On March 12, 2012, the National Credit Union Administration (“NCUA”) announced that it reached a settlement with HSBC concerning potential claims arising out of HSBC’s sale of RMBS to five failed credit unions. HSBC agreed to pay $5.25 million, and admitted no fault or liability in connection with the settlement. This is the third pre-litigation settlement that NCUA has reached in connection with the potential RMBS claims of failed credit unions. Press Release.
On January 31, the FDIC, Fed, NCUA, and OCC issued supervisory guidance on the allowance for loan and lease losses estimation practices for loans and lines of credit secured by junior liens on 1-4 family residential properties. The agencies reiterated key GAAP concepts and existing guidance relating to such loss estimation practices. FDIC Release.
On December 19, 2011, Judge George H. Wu of the Central District of California issued a tentative ruling that the National Credit Union Authority has failed to sufficiently allege that defendants, which include RBS, Wachovia and Nomura, systematically disregarded underwriting standards in connection with the offering and sale of RMBS. The complaint includes claims for violations of Sections 11 and 12(1)(2) of the Securities Act of 1933 and Sections 25401 and 25501 of the California Corporations Code. The court explained that the NCUA’s reliance on post-purchase statistics and other public information is “conclusory” and, without additional information, would fail to satisfy the pleading standards. Judge Wu requested additional supplemental briefing and stated that he will review the additional information before making a final decision. Decision.
On November 28, 2011, the National Credit Union Administration (“NCUA”), an independent federal agency that supervises and charters federal credit unions, filed a complaint in the federal district court for the District of Kansas against Wachovia Capital Markets LLC. NCUA is suing in its capacity as the liquidating agent of two failed credit unions, U.S. Central Federal Credit Union (“U.S. Central”) and Western Corporate Federal Credit Union (“WesCorp”). NCUA seeks approximately $200 million in damages based on alleged untrue statements and omissions in the offering documents for 5 RMBS purchased by U.S. Central and WesCorp. NCUA asserts causes of action under Sections 11 and 12(a)(2) of the federal Securities Act, as well as violations of the California and Kansas securities laws. Complaint.