On August 31, the SEC issued a Concept Release to seek public comment on interpretations of Section 3(c)(5)(C) of the Investment Company Act and its use by REITs in acquiring mortgages and mortgage-related instruments. Click here to read more.
Month: September 2011
FHFA Sues 17 Banks For More Than $200 Billion In MBS Losses
On September 2, 2011, the Federal Housing Finance Agency (“FHFA”) – the federal agency overseeing Fannie Mae and Freddie Mac – filed suit against 17 major banking institutions in New York and Connecticut courts. The suits claim that the banks misrepresented the quality of the mortgage loans backing securitizations purchased by Fannie Mae and Freddie Mac, and bring claims under Sections 11, 12, and 15 of the Securities Act of 1933. Complaints.
California Supreme Court Denies Review of Teren Decision, Enhancing Investor Position in Life Settlements
On August 31, the California Supreme Court declined to review the Court of Appeal’s decision in Lincoln Life and Annuity Co. v. Berck, commonly referred to as the Teren case. Click here to read more.
Rating Agency Developments
On September 9, Fitch submitted a comment letter to the SEC on Section 939-F of the Dodd-Frank Act. Fitch Letter.
Note: Free registration required for Fitch releases.
MSRB Request for Comment on Broker’s Brokers Proposed Rules
On September 8, the MSRB issued a request for comment on a revised draft rule covering the activities of broker’s brokers, revised amendments to existing rules, and a draft notice covering the activities of dealers that use the services of broker’s brokers. Broker’s brokers act as financial intermediaries between selling and bidding dealers. Comments must be submitted by November 3. MSRB Release.
SEC Statement on Proxy Access Litigation
On September 6, SEC Chairman Schapiro confirmed that the SEC is not seeking a rehearing or Supreme Court review of the decision by the U.S. Court of Appeals in Washington, D.C. vacating Rule 14a-11 which would have required companies to include shareholders’ director nominees in company proxy materials. The SEC had also previously adopted Rule 14a-8 which permitted eligible shareholders to require companies to include shareholder proposals for proxy access procedures in company proxy materials. The SEC stayed the effective date of Rule 14a-8 until the court’s decision on Rule 14a-11 is finalized, which is expected to be September 13. SEC Release.
SEC Review of Existing Regulations
On September 6, the SEC issued a request for information relating to its plan to conduct retrospective reviews of its existing regulations. The SEC is seeking comment on the process it should use to conduct these reviews, including: (i) how often rules should be reviewed; (ii) the factors that should be considered; and (iii) ways to improve public participation in the rulemaking process. Comments must be submitted by October 6. Sec Release. Request for Information.
Justice Department Amends Complaint Against Deutsche Bank
On August 22, 2011, the U.S. Department of Justice filed an amended complaint against Deutsche Bank, alleging additional details about Deutsche Bank’s acquisition of MortgageIT, Inc. in 2007. The amended complaint contains allegations regarding DB’s due diligence preceding the transaction and the integration of the mortgage unit into the bank. It also adds claims against two additional DB units, DB Structured Products Inc. and Deutsche Bank Securities Inc. The suit asserts claims under the False Claims Act and for breach of fiduciary duty, negligence, gross negligence, and indemnification. Amended Complaint.
California Appellate Court Directs Dismissal of Homeowner-Borrowers’ Fraudulent Concealment Claim Against Countrywide In Connection With Sale of RMBS
On August 24, 2011, the California Court of Appeal directed the dismissal of claims against Countrywide Financial Corp. brought by a group of homeowner-borrowers. The complaint alleges that Countrywide fraudulently concealed a scheme to sell RMBS at inflated values that caused the plaintiffs’ home values to drop when the real estate bubble burst. The trial court had overruled the demurrers to this claim, and Countrywide sought a writ of mandamus. The court found the broad-based decline in home values was not causally related to the alleged fraud, and that Countrywide did not have a duty to disclose any intent to commit fraud to the homeowners. Decision.
SDNY Dismisses Claims Against Bank of America
On August 25, 2011, Judge Sweet of the Southern District of New York dismissed two causes of action brought by BNP Paribas and Deutsche Bank against Bank of America. BNP Paribas and Deutsche Bank collectively held nearly $1.7 billion in notes issued by Ocala Funding LLC. Bank of America served as Indenture Trustee, Collateral Agent, Depositary, and Custodian for Ocala Funding. Plaintiffs allege that Bank of America improperly sold the mortgage loans that served as collateral for the notes, despite assuring plaintiffs that it was holding the loans for the noteholders’ benefit. Further, according to plaintiffs, Bank of America never distributed any sales proceeds to the noteholders. Judge Sweet granted Bank of America’s motion to dismiss, noting that plaintiffs did not themselves own the loans, but rather owned only the notes. Decision.