On February 3, 2012, Judge Baer of the Southern District of New York certified a class of over 150 RMBS investors in a lawsuit against Goldman Sachs, and designated the Public Employees’ Retirement System of Mississippi class representative. The class action complaint alleges material misstatements and omissions in the offering documents for a single March 2006 offering of $698 million of RMBS certificates. In opposing class certification, Goldman Sachs argued that the claims were too individualized to be susceptible to class treatment – the securities at issue were sold through individually negotiated deals and the plaintiffs had differing information about the underlying loans. Judge Baer rejected this argument, holding that common issues predominated for reasons including that the common claims depend on the same allegedly misleading offering documents, and that all other requirements for class certification were also met. Complaint.
Month: February 2012
FDIC Proposed Stress Tests
On February 3, the FDIC requested comment on a notice of proposed rulemaking to implement Section 165(i)(2) of the Dodd-Frank Act which requires FDIC-insured state nonmember banks and FDIC-insured state-chartered savings associations with total consolidated assets of more than $10 billion to conduct annual stress tests. Comments must be submitted by March 23. This notice of proposed rulemaking is substantively similar to regulations proposed by the Fed and the OCC. FDIC Release. Notice of Proposed Rulemaking.
Bank of America Wins Dismissal of Allstate Lawsuit
On February 3, 2012, Judge Mariana Pfaelzer of the Central District of California dismissed Bank of America from litigation brought by Allstate Insurance Company and its affiliates arising out of Allstate’s purchases of RMBS issued by Countrywide Financial Corporation. Allstate argued that Bank of America could face liability arising out of its acquisition of Countrywide because that acquisition amounted to an actual or constructive fraudulent transfer. Alternatively, Allstate asserted that Bank of America was liable under successor and vicarious liability theories. Judge Pfaelzer determined that Allstate failed to plead that Bank of America’s acquisition lacked reasonably equivalent consideration or was made with fraudulent intent. Judge Pfaelzer also found that Bank of America had not agreed to assume Countrywide’s liabilities, and that the acquisition of Countrywide was not a de facto merger such that Bank of America could face successor liability. Order.
Assured Guaranty Files Suit Against UBS AG for RMBS Insurance Losses
On February 2, 2012, Assured Guaranty Municipal Corp. filed a complaint in New York state court against UBS AG related to RMBS issued in 2006 and 2007. Assured claims that it would not have insured 2,400 allegedly defective loans had their quality been adequately described. The complaint alleges breach of contract claims for which Assured seeks an unspecified amount of damages. Complaint.
Sealink Brings RMBS Suit Against RBS
On February 2, 2012, Sealink Funding Ltd. filed a summons with notice against The Royal Bank of Scotland Group (“RBS”). Sealink’s allegations arise from the alleged sale by RBS of $90 million in RMBS to certain Sealink. Sealink alleges that the offering materials issued in connection with the RMBS contained material misrepresentations and omissions regarding the underwriting standards used to issue the underlying mortgage loans, the validity of the assignments of the mortgage loans into certain trusts, the legal validity of the trusts themselves, and statistical characteristics of the mortgage loans underlying the RMBS, including the loan-to-value ratios and combined loan-to-value ratios, as well as the percentage of owner-occupied properties. Summons.
Asset Management Fund Sues Banks For $500 Million
On February 1, 2012, Asset Management Fund filed a summons with notice against JPMorgan Chase, EMC Mortgage, Bear Stearns, Washington Mutual, Credit Suisse, Bank of America Securities, and related entities, in New York state court seeking $515.5 million in damages. AMF alleges that the RMBS offering materials issued by the banks contained material misrepresentations and omissions regarding the underwriting standards used to issue the loans and key statistical characteristics of the mortgage loans underlying the securities. The notice includes claims for common-law fraud, fraudulent inducement, negligent misrepresentation, aiding and abetting fraud, declaratory judgment, breach of contract, rescission, and restitution. Summons.
SEC No-Action Letter on Rule 15Ga-1 and Ginnie Mae
On February 1, the SEC issued a no-action letter to PNC Bank relating to Rule 15Ga-1 which, pursuant to Section 943 of the Dodd-Frank Act, requires ABS securitizers to disclose repurchase requests. The SEC indicated that it will not recommend enforcement action against a securitizer that does not file repurchase request disclosures with respect to Ginnie Mae MBS under certain circumstances. SEC No-Action Letter. Incoming PNC Request.
FHFA REO Initiative
On February 1, the FHFA announced the first step of its REO Initiative targeted to hardest-hit metropolitan areas which will allow qualified investors to purchase pools of foreclosed properties with the requirement to provide a specific rental period. Interested investors will have the ability to pre-qualify to bid on transactions in the initial pilot phase and in subsequent phases. FHFA Release. REO Asset Disposition Page. Investor Pre-Qualification Process.
Obama Administration Housing Plan
On February 1, President Obama released a fact sheet outlining his plan to assist the recovery of the housing market. The key aspects of the President’s plan include: (i) broad based refinancing; (ii) a new homeowner bill of rights; (iii) a pilot sale by the FHFA to transition foreclosed property into rental housing; (iv) providing a full year of forbearance to unemployed borrowers; (v) a joint investigation into mortgage origination and servicing abuses; and (vi) expanding HAMP eligibility and increasing modification incentives.