On July 3, the FHFA announced that the winning bidders in a real estate owned (REO) pilot initiative have been chosen and transactions are expected to close early in the third quarter. The FHFA launched the pilot program in late February, and bids were solicited from qualified investors to purchase approximately 2,500 single-family Fannie Mae foreclosed properties. FHFA Release.
Fannie Mae
SDNY Denies UBS’s Motion to Dismiss FHFA’s Claims as Untimely
On June 26, 2012, Judge Denise L. Cote of the Southern District of New York denied UBS’s motion to dismiss the Federal Housing Finance Agency’s RMBS action against it as untimely. The FHFA’s suit arises out of Fannie Mae’s and Freddie Mac’s investments in $6.4 billion in UBS residential mortgage backed securities. Judge Cote held that the repose periods for the claims did not begin to run until the securities were actually marketed for sale. Order.
FHFA Anti-Fraud Measures for Fannie, Freddie and Federal Home Loan Banks
On June 18, the FHFA announced the Suspended Counterparty Program, an initiative to require Fannie Mae, Freddie Mac and the Federal Home Loan Banks to notify the FHFA whenever an individual or company with whom they do business is adjudicated to have engaged in fraud or other financial misconduct. The FHFA will determine whether the individual or company should be suspended from doing business with Fannie Mae, Freddie Mac or the Federal Home Loan Banks. The program becomes effective on August 15. FHFA Release.
FHFA Proposes Rule for PACE Programs
On June 15, the FHFA, as required by a preliminary injunction from the Northern District Court of California, issued a notice of proposed rulemaking on state and local energy retrofit financing arrangements known as Property Assessed Clean Energy, or PACE. FHFA, as conservator, had directed Fannie Mae and Freddie Mac not to purchase any mortgage where PACE financing with a priority lien was placed on the underlying property. Comments must be submitted by July 30. Notice of Proposed Rulemaking.
FHFA Releases Draft Strategic Plan
On May 14, the FHFA released its draft “Strategic Plan: Fiscal Years 2013-2017”, which has been updated to incorporate the strategic plan for the conservatorships of Fannie Mae and Freddie Mac. The draft plan sets four goals for the FHFA: (i) safe and sound housing government-sponsored enterprises; (ii) stability, liquidity, and access in housing finance; (iii) preserve and conserve Fannie Mae and Freddie Mac assets; and (iv) prepare for the future of housing finance in the U.S. Comments must be submitted by June 13. FHFA Release. FHFA Plan.
Manhattan Federal Judge Denies UBS’s Motion to Dismiss FHFA Suit
On May 4, the Honorable Denise Cote of the Southern District of New York denied UBS Americas Inc.’s (“UBS”) motion to dismiss the Federal Housing Finance Agency’s (“FHFA”) complaint against it for violations of the Securities Act. FHFA alleges that UBS fraudulently induced Fannie Mae and Freddie Mac into purchasing $6.4 billion worth of mortgage-backed securities from 22 different securitizations by misrepresenting the quality of the mortgage loans and that the mortgage loans complied with the applicable underwriting guidelines. Judge Cote held that the complaint was timely and not barred by the Securities Act’s Statute of Repose, as well as that FHFA had standing to bring the action. The Court also held that the complaint stated a claim under the Securities Act because FHFA had alleged actionable misrepresentations in the offering documents concerning LTV ratios, owner-occupancy status and compliance with underwriting guidelines. Judge Cote did, however, dismiss FHFA’s claims for negligent misrepresentation, concluding that because both parties were sophisticated, no special relationship existed that would support such a claim. Decision.
Fannie and Freddie Streamline Short Sales
On April 17, the FHFA directed Fannie Mae and Freddie Mac to develop enhanced and aligned strategies to facilitate short sales, deeds-in-lieu and deeds-for-lease to help more homeowners avoid foreclosure, including requiring that servicers review and respond to short sale requests within 30 days from receipt of a short sale offer. The first stage of these developments will take effect in June. FHFA Release.
FHFA Roadmap for Fannie and Freddie
On March 9, the FHFA released a 2012 Conservatorship Scorecard, which provides the implementation roadmap for the FHFA Strategic Plan announced in February and includes specific objectives and timetables for Fannie Mae and Freddie Mac in support of the plan, including: (i) developing a template for enhanced loan-level disclosures for single-family MBS by June 30; (ii) developing a plan for a single securitization platform with multiple future issuers by December 31; and (iii) initiating risk sharing transactions by September 30. The FHFA also announced 2012 executive compensation programs at Fannie Mae and Freddie Mac.
FHFA Release.
FHFA Pilot REO Sale Program
On February 27, the FHFA announced the first pilot program transaction under the Real Estate-Owned (REO) Initiative, targeted to hardest-hit metropolitan areas (Atlanta, Chicago, Las Vegas, Los Angeles, Phoenix, and parts of Florida). Prequalified investors will be able to submit applications to demonstrate their financial capacity, experience, and specific plans for purchasing pools of Fannie Mae foreclosed properties with the requirement to rent the properties for a specified number of years. FHFA Release.
HAMP Program Expansion
On January 27, Treasury and the Obama Administration announced updates to the HAMP program which will aim to extend the reach of HAMP to a broader pool of homeowners. The updates to the program include: (i) extending the program through December 31, 2013 (which conforms to the extended deadline for the HARP program); (ii) providing for more flexible eligibility criteria, including the DTI and occupancy standards; (iii) increasing incentives for principal reduction from between 6 and 21 cents on the dollar to between 18 and 63 cents on the dollar; and (iv) offering principal reduction incentives for loans owned or guaranteed by Fannie Mae or Freddie Mac. Treasury Release.