On February 18, DBRS released its methodology for assessing RMBS servicing advance transactions. Methodology.
On February 16, Fitch released its criteria for assessing covered bonds of European public entities. Criteria.
On February 6, 2015, Judge Stanley Chesler of the United States District Court for the District of New Jersey granted in part and denied in part Bank of America’s motions to dismiss two related cases filed against it by several Prudential Insurance Company affiliates. Prudential asserted common law fraud, misrepresentation, and RICO claims against several Bank of America entities arising out of Prudential’s investment in $1.9 billion in RMBS. Judge Chesler dismissed Prudential’s fraud claim, holding that Prudential failed to adequately allege falsity and/or scienter in connection with alleged misstatements concerning occupancy status, appraisals, and credit ratings. He also held that, for the 21 securitizations at issue for which Bank of America served as underwriter only, Prudential failed to allege with the required specificity which Bank of America entity made which challenged representations. Judge Chesler dismissed both of Prudential’s negligent misrepresentation claims. He granted Prudential limited leave to amend in connection with the fraud claim relating to those securitizations for which Bank of America served as underwriter only. Opinion.
On February 6, 2015, plaintiffs Union Central Life Insurance, Ameritas Life Insurance, and Acacia Life Insurance filed a letter with the court stating that they had reached an agreement with Goldman Sachs to settle claims arising out of the insurance companies’ investments in RMBS sponsored by Goldman Sachs. The details of the settlement are not public. The plaintiffs had asserted causes of action for violations of federal securities laws as well as for common law fraud, negligent misrepresentation, and unjust enrichment. Letter.
On February 2, Standard & Poor’s Ratings Services settled claims brought by the Department of Justice, 19 states and the District of Columbia related to credit ratings it issued and maintained for RMBS and CDOs before the financial crisis. As part of the settlement, it agreed to pay a total of $1.375 billion, with $687.5 million paid to the Department of Justice and $687.5 million to the states and District of Columbia. Settlement Agreement.
Also on February 2, S&P settled similar claims brought by the California Public Employees’ Retirement System (CalPERS). The terms of that settlement agreement have not been made public.
On January 21, 2015, the SEC suspended Standard & Poor’s Rating Services (S&P) from rating conduit/fusion CMBS for one year as part of a settlement between McGraw-Hill Financial Inc., S&P’s parent company, and the SEC. The settlement stems from S&P’s disclosures in 2011 that it would utilize a certain methodology to rate six CMBS transactions and provide a preliminary rating for two others, when it actually used a different methodology, forcing S&P to pull a rating on a $1.5 billion bond that same year. In addition, S&P agreed to retract an allegedly untrue and misleading article that it published in 2012 and settled another claim that it failed to maintain and enforce internal controls regarding changes to its monitoring standards for certain RMBS. S&P further agreed to parallel settlements with New York Attorney General Eric Schneiderman and Massachusetts Attorney General Maura Healey. The rating agency has also agreed to pay more than $77 million to settle these claims with the federal and state regulators ($58 million to the SEC and another $19 million to New York and Massachusetts). SEC Settlement Order 1. SEC Settlement Order 2. SEC Settlement Order 3.
On January 15, 2015, the Federal Home Loan Bank of San Francisco (FHLB) agreed to a $459 million settlement with various banks stemming from the sales of billions of dollars of RMBS. FHLB originally filed the claims in the Superior Court of California, County of San Francisco in 2010 against Bank of America Corp., Credit Suisse Securities (USA) LLC, Countrywide Financial Inc., Deutsche Bank Securities, Inc. and other banks concerning 229 RMBS transactions. FHLB alleged causes of action for violation of the Securities Act of 1933 and the California Corporate Securities Act as a result of dealers allegedly concealing information and lying about the quality of RMBS sold to FHLB. It is unclear which banks are involved in the settlement.
On January 22, Fitch released its rating criteria for rating RMBS in Latin America. Criteria.
On January 22, Moody’s released its global methodology for rating small and medium size enterprise balance sheet securitizations. Release.
On January 20, Moody’s released its approach to rating ABS backed by equipment lease and loans. Release.
On January 20, Moody’s released its approach to rating consumer loan backed ABS. Release.
On January 20, Moody’s released its approach to rating RMBS Using the MILAN Framework. Release.
On January 20, Moody’s released its global approach to rating Auto Loan- and Lease-Backed ABS. Release.
On January 20, Moody’s released its global approach to monitoring life insurance ABS. Release.
On January 20, Fitch released its rating criteria for rating Non-Performing Loan Securitisations. Criteria.
On January 16, Kroll released its methodology for rating single-family rentals. Methodology.
On January 15, DBRS released its methodology for rating companies in the asset management industry. Release.
On January 8, 2015, plaintiffs in a class action lawsuit against JP Morgan Chase informed the court that the parties had an agreement in principle to settle the case. The suit was initially commenced against Bear Stearns in August of 2008, and alleged that the bank misrepresented the underwriting process and the quality of the underlying loans in connection with $17.6 billion in RMBS. The settlement will be subject to approval by Judge Swain of the United States District Court for the Southern District of New York. Preliminary papers seeking such approval are scheduled to be filed on February 2, 2015. Endorsed Status Report.
On December 23 and 24, Phoenix Light SF Limited and other RMBS certificateholders filed suit against HSBC, Wells Fargo, Deutsche Bank, Bank of New York Mellon, U.S. Bank, and Bank of America in the United States District Court for the Southern District of New York regarding $2.4 billion in RMBS. The complaints assert causes of action under the Trust Indenture Act and a provision of the New York Real Property Law known as the Streit Act, as well as under state law for breach of contract, breach of fiduciary duty, negligence, gross negligence, and negligent misrepresentation. Plaintiffs allege that the trustees breached their duties under the governing trust agreements by failing to notify the investors of deficiencies in the loans, failing to take action to address those alleged deficiencies, and failing to require the repurchase of defective loans. Plaintiffs seek compensatory damages and unspecified equitable relief. HSBC Complaint. Wells Fargo Complaint. Deutsche Bank Complaint. BNY Mellon Complaint. U.S. Bank and Bank of America Complaint.
On December 17, the parties in Oklahoma Police Pension and Retirement System v. U.S. Bank, N.A., No. 11-cv-8066 (S.D.N.Y.) asked the court to approve a $6 million settlement of class action claims asserted against U.S. Bank in its capacity as trustee for five RMBS trusts sponsored by Bear Stearns. The class consisted of 1,800 investors who had bought certificates in the trusts. Claims related to nine other trusts had been dismissed earlier in the litigation and were not included in the settlement. The complaint included claims for breach of contract, breach of the covenant of good faith and fair dealing, and violation of the federal Trust Indenture Act. Motion for Approval. Settlement Agreement.