On September 10, the FHFA announced that Pacifica Companies, LLC has purchased 699 Fannie Mae properties in Florida as part of the REO pilot initiative. The FHFA will announce the winning investors for properties in other areas upon closing of the transactions in the coming weeks. FHFA Release.
Month: September 2012
FHFA, Fannie and Freddie Launch Representation and Warranty Framework
On September 11, the FHFA announced that Fannie Mae and Freddie Mac are launching a new representation and warranty framework for conventional loans sold or delivered on or after January 1, 2013. The framework’s objective is to clarify lenders’ repurchase exposure and liability on future deliveries. Under the new framework: (i) lenders will be relieved of some repurchase obligations for loans that meet specific payment requirements; (ii) HARP loans will be eligible for representation and warranty relief after 12 months’ of acceptable payment history; (iii) information about exclusions from representation and warranty relief will be detailed; and (iv) Fannie Mae and Freddie Mac will make available for lenders a range of tools to improve loan quality. FHFA Release.
Council of the European Union Publishes Compromise Proposals on MiFID, MiFIR and MAR
The Presidency of the Council of the European Union has published compromise proposals on the:
- MiFID II Directive (dated 31 August 2012);
- MiFIR Regulation (dated 31 August 2012); and
- The proposed regulation on insider dealing and market manipulation (MAR) (dated 3 September 2012).
These compromise proposals are marked up to show the changes made as against the previous versions.
European Commission Consults on the Regulation of Benchmarks and Market Indices
On 5 September 2012, the European Commission published a consultation document seeking views on issues relating to a possible framework for the regulation of the use and production of indices serving as benchmarks in financial and other contracts. The consultation follows the recent revelations regarding the alleged manipulation of the LIBOR and EURIBOR benchmarks.
The Commission has requested views on the following points:
- Information on indices and benchmarks – their definition, their purposes, the methodology behind their production and the persons who produce them.
- Governance and transparency issues concerning the calculation of benchmarks, including data usage and persons contributing such data.
- The use and purposes of benchmarks.
- The ways in which private and public bodies provide benchmarks.
- The potential impact of regulating benchmarks, including the international issues that will need to be considered.
The Commission has requested comments on the consultation by 15 November 2012.
FSA Consults on Proposals to Change Client Money and Custody Assets Regime
On 6 September 2012, the FSA published a consultation and discussion paper proposing changes to the client money and custody assets regime for firms undertaking investment business. The paper is split into three parts:
I. A consultation on changes to the FSA’s client assets regime to bring them into line with EMIR’s segregation and portability requirements.
II. The introduction of proposals to permit investment firms to operate multiple client money pools that will be legally and operationally separate.
III. An overview of the FSA’s review of its client assets regime, focusing on ways to improve the regime in the event that an investment firm becomes insolvent.
The proposed introduction of client money sub-pools is considered by the FSA to potentially be the most radical change in the client assets regime in over two decades.
The deadline for comments on Part I is 16 October 2012, with comments on Parts II and III required by 30 November 2012. The FSA anticipates the publication of a feedback statement on Part I during December 2012, with feedback on Parts II and III to be provided in the first half of 2013.
FSA Publishes a Guidance Consultation on the Risks to Customers from Financial Incentives
On 5 September 2012, the FSA published a guidance consultation on the risks to customers from financial incentives (GC 12/11).
GC 12/11 includes proposed guidance for firms on:
- incentive scheme features that increase the risk of mis-selling; and
- managing the risks and governance of incentive schemes.
The publication of GC 12/11 marks the launch of what the FSA is calling its initiative to outlaw flawed sales bonuses that encourage mis-selling and was accompanied by the publication of a speech by Martin Wheatley (Managing Director, FSA and chief executive officer designate, FCA) entitled ‘The incentivisation of sales staff – are consumers getting a fair deal?’. In his speech Mr. Wheatley explained that the FSA’s initiative – in which he would be taking a lead role – was aimed at ensuring that financial institutions view their customers as people to be served, as opposed to people “to sell to”.
The FSA invites firms to respond to GC 12/11 by 31 October 2012.
Israel’s Largest Bank Sues Morgan Stanley for $281 Million
On August 29, 2012, Bank Hapoalim B.M. filed a summons with notice for a case against Morgan Stanley and related entities in the Supreme Court of New York for allegedly making knowing misrepresentations and omissions in offering materials concerning the loans pooled into $140 million worth of RMBS issued between September 2006 and June 2007 in eight RMBS securitizations. The causes of action are for fraud, fraudulent inducement, aiding and abetting fraud, negligent misrepresentation, declaratory judgment, breach of contract, rescissory damages, and violations of the Securities Act of 1933. Summons with Notice.
Irish Financial Firm Sues UBS Alleging RMBS Misrepresentations
On September 5, 2012 Sealink Funding Limited filed a summons with notice against UBS AG in the Supreme Court for the State of New York for allegedly misrepresenting the nature of nearly $160 million worth of RMBS securities. Sealink alleges misrepresentations and omissions regarding underwriting standards, transfers of loans to the trusts, loan-to-value ratios, owner-occupied status, and credit ratings. The causes of action are for fraud, fraudulent inducement, aiding and abetting fraud, negligent misrepresentation, declaratory judgment, rescission, restitution, and mutual mistake. Summons with Notice.
German Bank Sues Goldman Sachs and Citigroup for a Total of $210 Million
On September 5, 2012, German bank IKB Deutsche Industriebank AG filed summonses with notice against Goldman Sachs and Citigroup in the Supreme Court of the State of New York, New York County claiming $210 million in losses. In two separate actions, the bank alleges that Goldman Sachs and Citigroup provided offering materials that misrepresented or omitted material information about the originators’ underwriting practices, the transfer of loans to the relevant trusts, and the ability of the trusts to recoup interest and principal on the loans. IKB asserted claims for fraud, fraudulent inducement, negligent misrepresentation, aiding and abetting fraud, declaratory judgment, rescission, restitution, and mutual mistake. Goldman Sachs Complaint. Citigroup Complaint.
WaMu Settles RMBS Suit for $26 Million
On September 4, 2012, named plaintiffs Doral Bank of Puerto Rico, Policeman’s Annuity Benefit Fund of the City of Chicago and Boilermakers National Annuity Trust moved for approval of a $26 million settlement with Washington Mutual in an action for alleged violations of Sections 11, 12, and 15 of the Securities Act. Plaintiffs brought the class action against specific WaMu divisions alleging that RMBS offering documents contained material misstatements about the underwriting quality of the underlying loans. Plaintiffs originally sought more than $550 million in the suit. Motion.