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.
Month: August 2012
CFTC No-Action Letter on Trade Option Exemption
On August 15, the CFTC issued a no-action letter providing that, for a limited time, market participants can rely on the trade option exemption in CFTC regulation 32.3 without complying with specified provisions. The no-action letter is effective until the earlier of December 31 and the effective date of any final action taken by the CFTC on the trade option exemption interim final rules. CFTC Release.
CFTC DSIO Issues FAQ on CPO and CTA Compliance
On August 14, the CFTC Division of Swap Dealer and Intermediary Oversight issued a set of responses to frequently asked questions regarding compliance obligations for commodity pool operators and commodity trading advisers. The issues addressed include compliance dates, wholly owned subsidiaries, trading limits, and the process for transitioning from an exemption from registration to registering or claiming another exemption. CFTC Release. CFTC Proposed Rule.
CFPB Proposed Mortgage Servicing Guidelines
On August 10, the CFPB announced two notices of proposed rulemaking regarding mortgage servicing. The proposed rules relate to: (i) monthly mortgage statements; (ii) warnings before interest rate adjustments; (iii) force-placed insurance; (iv) early outreach for delinquent borrowers; (v) prompt crediting of payments; (vi) accurate information management; (vii) error resolution and information requests; (viii) direct and ongoing access to servicer personnel; and (ix) evaluation for alternatives to foreclosure. Comments must be submitted by October 9. CFPB Release.
SEC Extension of Rule on Retail Forex Transactions
On August 10, the SEC amended interim final temporary Rule 15b12-1T under the Securities Exchange Act, which temporarily permits a broker-dealer to engage in a “retail forex business”, to extend its expiry date from July 16, 2012 to July 16, 2013. Comments on the interim final temporary rule should be received on or before October 31. SEC Extension.
Rating Agency Developments
On August 17, S&P updated its outlook assumptions for the U.K. residential mortgage market. S&P Report.
On August 15, Fitch updated its criteria for securities firms. Fitch Report.
On August 15, Fitch updated its financial institutions recovery ratings criteria. Fitch Report.
On August 15, Fitch updated its criteria for market value structures. Fitch Report.
On August 15, Fitch updated its criteria for U.S. closed-end funds. Fitch Report.
On August 15, Fitch updated its global financial institutions master criteria. Fitch Report.
On August 14, Fitch updated its tax-supported rating criteria. Fitch Report.
On August 14, Fitch updated its non-financial corporate recovery ratings and notching criteria. Fitch Report.
On August 14, Fitch updated its global bond fund rating criteria. Fitch Report.
On August 13, Moody’s updated its criteria for Mexican RMBS. Moody’s Report.
On August 13, Fitch updated its sovereign rating criteria. Fitch Report.
On August 13, Fitch updated is country ceilings criteria. Fitch Report.
On August 13, DBRS updated its stability ratings for Canadian structured income funds. DBRS Report.
On August 13, DBRS updated its criteria for Canadian split share companies and trusts. DBRS Report.
On August 10, Fitch updated is U.S. Re-REMIC criteria. Fitch Report.
On August 10, Fitch updated is U.S. RMBS surveillance criteria. Fitch Report.
On August 10, Fitch updated is U.S. RMBS loan loss model criteria. Fitch Report.
On August 10, Fitch updated its structured finance servicing continuity risk criteria. Fitch Report.
On August 10, Fitch updated its criteria for analysis of CRE loans securing covered bonds. Fitch Report.
On August 10, Fitch updated its criteria for financial institution subsidiaries and holding companies. Fitch Report.
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FDIC Files Five Lawsuits Against Bank Entities Over RMBS
On August 10, the FDIC in its capacity as receiver for Colonial Bank filed five lawsuits – three in Alabama state court, one in New York federal court, and one in California federal court – seeking $741 million in damages from a number of investment banks, including Bank of America Corp., JPMorgan Chase & Co., Citigroup, Inc., and others, for making allegedly false and misleading statements that induced Colonial Bank into buying mortgage-backed securities. The FDIC alleges that the banks made numerous false and misleading statements in the offering documents for the RMBS regarding the credit quality of the mortgage loans underlying the securities. The three Alabama cases each assert two causes of action under the Alabama Securities Act, as well as causes of action under Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 (Securities Act). The New York and California cases each assert causes of action under Sections 11 and 15 of the Securities Act.
Complaint: Alabama – FDIC v Bank of America, et al.
Complaint: Alabama – FDIC v Citigroup Mortgage Loan Trust, et al.
Complaint: Alabama – FDIC v Countrywide Securities Corp, et al.
Complaint: New York – FDIC v Chase Mortgage Finance Corp., et al.
Complaint: California – FDIC v Countrywide Securities Corp, et al.
Bank Hapoalim Brings $361M RMBS Lawsuit Against JPMorgan
On August 10, Bank Hapoalim BM, an Israeli bank, filed a summons with notice against JPMorgan Chase & Co. in New York state court in connection with its purchase of $361 million in residential mortgage-backed securitites. Bank Hapoalim alleges that the purchase offerings were based on fraudulent misrepresentations and omissions regarding the characteristics of the mortgage loans underlying the securities. Bank Hapoalim asserts that Goldman Sachs either knew the information in the offerings was wrong or was negligent in not knowing. Bank Hapoalim asserts causes of action for common law fraud, fraudulent inducement, negligent misrepresentation, aiding and abetting fraud, declaratory judgment, and contract claims, including rescissory damages. Summons with Notice.
Sealink Brings $587M RMBS Lawsuit Against Goldman Sachs
On August 13, Sealink Funding Ltd. filed a summons with notice against Goldman Sachs & Co. in New York state court over its purchase of nearly $587 million in residential mortgage-backed securities. Sealink alleges that the offering documents for the RMBS included fraudulent misrepresentations and omissions regarding the characteristics of the underlying mortgage loans, the underwriting standards used to issue the mortgage loans, the transfer of those mortgage loans to trusts, and the legal validity of the trusts. Sealink asserts that Goldman Sachs either knew the information in the offerings was wrong or was negligent in not knowing. Sealink asserts causes of action for common law fraud, fraudulent inducement, negligent misrepresentation, aiding and abetting fraud, declaratory judgment, and contract claims, including rescission, restitution, and mutual mistake. Summons with Notice.
Assured Sues OneWest Bank in Connection with RMBS Insurance
On August 9, Assured Guaranty filed suit in California state court against OneWest Bank FSB, claiming that the company’s loan servicing was to blame for $335 million it has paid in insurance claims related to residential mortgage-backed securities. Assured alleges that when OneWest acquired IndyMac Bank FSB’s role as servicer in 2009 of the mortgage loans, the loans began to experience significant delinquencies and defaults. Assured alleges that PricewaterhouseCoopers conducted an independent audit and found that OneWest was materially noncompliant with several loan servicing requirements. Assured also alleges that the Office of Thrift Supervisions has brought an enforcement action against OneWest for unsafe and unsound practices regarding its handling of servicing and foreclosure proceedings. Assured asserts claims for breach of contract and for specific performance and declaratory relief seeking to terminate OneWest as servicer. Complaint.