On June 13, the OCC announced that it has extended by 30 days the deadline for submission of certain items required by the consent orders for foreclosure practices issued on April 13 against eight large residential mortgage servicers. OCC Release.
Month: June 2011
The Future of Municipal Bonds – Distressed Muni Investor Considerations
June 22, 2011 – Orrick lawyers will discuss the distressed municipal markets and important investment considerations and opportunities, and review the lessons learned from municipal insolvencies and bankruptcies that have impacted bondholder rights. Click here for more information and to RSVP.
Financial Executives International Committee on Benefits Finance
June 14, 2011 – Orrick Of Counsel Sarah Downie will be speaking on a panel titled, “The Dodd-Frank Act and its Impact on Benefits Executives,” during the FEI Committee on Benefits Finance 2011 Summer Meeting. Click here for more information.
Orrick’s Annual Financial Services Roundtable
June 14, 2011 – Orrick’s Global Employment Law Group and in-house counsel will host an interactive discussion of critical employment law issues impacting the financial services industry. Click here for more information and to RSVP.
FDIC Files Lawsuit Alleging Mortgage Broker Misconduct
On June 3, 2011, the FDIC, as receiver for Downey Savings and Loan Association, F.A. (“Downey”), filed a complaint in the U.S. District Court for the Central District of California against Amerifund Financial, Inc. (“Amerifund”), its principal shareholder, and its loan officers, alleging negligence, fraud, and breach of contract. The complaint alleges that Amerifund submitted mortgage loan applications and supporting documents, including appraisals, that were altered and/or inflated borrowers’ stated incomes and information; this allegedly led to the collapse of Downey. This suit follows two similar actions recently brought by the FDIC as receiver for Washington Mutual Bank. FDIC Complaint.
Royal Bank of Scotland and Ten Underwriters Move to Dismiss Remaining Subprime Mortgage Claims
On June 1, 2011, the Royal Bank of Scotland (“RBS”) moved to dismiss claims brought in the U.S. District Court for the Southern District of New York by investors in RBS preferred securities. Plaintiffs allege that RBS failed to disclose its exposure to subprime mortgage-backed assets early enough. Plaintiffs also allege that ten banks which underwrote the RBS preferred securities were negligent in preparing the offering documents. In January, Judge Deborah Batts dismissed approximately 95 percent of the claims – those brought by the Massachusetts Pension Reserves Investment Management Board and the Public Employees’ Retirement System of Mississippi. RBS argues in its motion that the remaining claims should be dismissed on forum non conveniens grounds and consolidated with litigation ongoing in the United Kingdom. The ten underwriters separately moved to dismiss, arguing that plaintiffs claims are untimely and fail to adequately allege violations of Sections 11 and 12(a)(2) of the ’33 Act. RBS Memo in Support. RBS Memo to Dismiss.
New York Federal Court Dismisses Class Action on Behalf of Citigroup Employees
On June 7, 2011, Judge Sidney Stein of the U.S. District Court for the Southern District of New York dismissed a suit brought by participants in the Citigroup employee stock purchase program that asserted claims against various Citigroup defendants. The employees alleged violations of Section 12(a)(2) of the ’33 Act, Sections 10(b) and 10b-5 of the ’34 Act, and various Minnesota state laws, contending that, in 2007, the defendants failed to disclose risks to Citigroup associated with the use of subprime mortgages in its CDOs and structured investment vehicles and also misrepresented Citigroup’s overall business outlook. Judge Stein dismissed all of the federal claims concerning Citigroup’s overall business outlook statements, finding plaintiffs had failed to allege a material misstatement. The court dismissed the remainder of the federal claims, finding that the Section 12(a)(2) claims were untimely because the allegedly concealed truth was disclosed no later than the end of 2007. The court also found that plaintiffs had failed to raise specific allegations to raise a strong inference of scienter as required for their Section 10(b) claims. Finally, Judge Stein dismissed the state law claims, finding that (a) the deceptive trade practices claim was precluded by SLUSA, and (b) plaintiffs could not maintain a breach of fiduciary duty claim because the allegations did not support the existence of a fiduciary relationship between plaintiffs and defendants. The Court also dismissed unrelated state law claims concerning the forfeiture provisions of the stock plan for departing employees and the enforceability of releases obtained from certain plan participants. Stein Order.
Syncora Guarantee Inc. Sues J.P. Morgan Securities LLC as Successor to Bear Stearns & Co.
On June 6, 2011, Syncora Guarantee Inc. filed a complaint in New York state court against J.P. Morgan Securities LLC as successor to Bear Stearns & Co. Syncora’s complaint alleges that Bear, as underwriter of the GreenPoint Mortgage Funding Trust 2007-HE1, made false and misleading statements about the loan pool that fraudulently induced Syncora to issue a financial insurance gauranty policy for the trust. Further, Syncora alleges that J.P. Morgan has since interfered with the originator’s contractual obligation to repurchase loans that breached the originators representations and warranties. Syncora alleges it has paid more than $320.2 million in unreimbursed insurance claims owing to $404 million in losses for the GreenPoint Trust. Notably, Syncora alleges that it uncovered the evidence it cites to support its claim through ongoing federal litigation against the originator, EMC Mortgage Corp. Syncora Decision.
SEC Open Meeting to Consider Adoption of New Rules for Private Fund Advisers
On June 9, the SEC announced an Open Meeting scheduled for June 22 at 10:00 a.m. to consider the adoption of: (i) rules and rule amendments under the Investment Advisers Act of 1940 (Advisers Act) designed to give effect to provisions of Title IV of the Dodd-Frank Act that, among other things, increase the statutory threshold for registration of investment advisers with the SEC, require advisers to hedge funds and other private funds, including private equity funds, to register with the SEC, and address reporting by certain investment advisers that are exempt from registration; and (ii) rules that would implement new exemptions from the registration requirements of the Advisers Act for advisers to “venture capital funds” and advisers with less than $150 million in private fund assets under management in the United States. The SEC also will consider whether to adopt a rule defining “family offices” that will be excluded from the definition of an investment adviser under the Advisers Act. We will provide an analysis of the final rules adopted and other actions taken after publication. SEC Sunshine Act Meeting Notice.
Rating Agency Developments
On June 8, S&P revised its methodology for its principal stability fund criteria. S&P Release.
On June 7 and June 8, DBRS published methodologies for numerous types of U.S. securitizations. DBRS Methodologies.
On June 7, Fitch published a master criteria report on its methodology for assessing credit risk in RMBS in Europe, the Middle East, and Africa. Fitch Release.
On June 7, Fitch published an exposure draft on proposed Australian RMBS criteria. Comments must be submitted by July 8. Fitch Release.
On June 6, Fitch updated its criteria for SME CLOs. Fitch Release.
Note: Free registration is required for Fitch and S&P releases and reports.