FHFA

FHFA Extends Comment Period on Proposed Revisions to Federal Home Loan Bank Membership Eligibility Requirements

On October 6, the FHFA announced that it is extending the comment period for its proposed rule on Federal Home Loan Bank membership by 60 days, or to January 12, 2015. The proposed rule would revise the requirements for financial institutions to apply for and retain membership in one of the 12 Federal Home Loan Banks. Press Release. Proposed Rule.

HSBC Settles RMBS Claims with FHFA

On September 12, the FHFA and several HSBC affiliates and certain of their current and former officers (collectively, HSBC) announced a US$550 million settlement of claims that the FHFA had brought against HSBC in the Southern District of New York.  FHFA, acting as conservator for Fannie Mae and Freddie Mac, alleged that HSBC made false and misleading statements in offering documents issued in connection with 19 RMBS securitizations.  It brought claims for violations of Sections 11, 12(a)(2), and 15 of the Securities Act of 1933, as well as the Virginia and Washington, D.C., Securities Acts.  HSBC did not admit liability or wrongdoing.  Settlement Agreement.

FHFA Proposes Revisions to Federal Home Loan Bank Membership Eligibility Requirements

On September 2, the FHFA proposed a rule that would revise the requirements for financial institutions to apply for and retain membership in one of the 12 Federal Home Loan Banks (Banks).  The proposed rule would revise FHFA’s existing Bank membership regulation to ensure that members maintain a commitment to housing finance and that only eligible entities can gain access to Bank advances and the benefits of membership.  ReleaseProposed Rule.

Federal Agencies Seek Comment on Swap Margin Requirements

On September 3, the Fed, the Farm Credit Administration, the FDIC, the FHFA, and the OCC sought comment on a proposed rule to establish margin requirements for swap dealers, major swap participants, security-based swap dealers and major security-based swap participants as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).  The proposed rule would establish minimum requirements for the exchange of initial and variation margin between covered swap entities and their counterparties to non-cleared swaps and non-cleared security-based swaps.  The margin requirements mandated by the Dodd-Frank Act are intended to address a number of weaknesses in the regulation and structure of the swap markets that were revealed during the recent financial crisis.  The requirements are intended to reduce risk, increase transparency, and promote market integrity.  Proposed Rule.

Goldman Reaches Settlement with FHFA

On August 22, Goldman Sachs and FHFA announced a US$3.15 billion settlement of claims brought by FHFA against Goldman in two separate lawsuits related to RMBS purchased by Fannie Mae and Freddie Mac between 2005 and 2007.  FHFA, as conservator for Fannie Mae and Freddie Mac, asserted claims for violations of federal and state securities law on the basis of alleged material misrepresentations or omissions in the offering documents for the RMBS sold to Fannie Mae and Freddie Mac.  As part of the settlement, Goldman is repurchasing most of the RMBS at issue.  Goldman did not admit any liability or wrongdoing as part of the settlement.  Fannie Mae AgreementFreddie Mac Agreement.

FHFA Wins Summary Judgment That It Did Not Have Actual Knowledge of RMBS Misrepresentations

On July 30, Judge Denise Cote of the United States District Court for the Southern District of New York granted the motion for partial summary judgment brought by FHFA, as conservator for Fannie Mae and Freddie Mac.  FHFA initiated securities fraud cases against a number of banks alleging false statements made in the offering documents for RMBS purchased by the GSEs between 2005 and 2007.  FHFA’s action remains pending against HSBC, Goldman Sachs, RBS Securities and others.  In its motion for summary judgment, FHFA sought a ruling that no reasonable jury could find that the GSEs knew the banks’ statements were false.  The defendants argued seven categories of circumstantial evidence illustrated the GSEs’ awareness of the information that they now allege was concealed.  These included the GSEs’ knowledge about loan originators, participation in the subprime and Alt-A markets, knowledge of risk associated with reduced documentation programs, and anti-predatory lending reviews.  The court held that these categories were not enough to prove that the GSEs had actual knowledge that any representation was false, as required by Sections 11 and 12(a)(2) and the Blue Sky Laws.  The court therefore granted summary judgment for FHFA on that issue.  Decision.

Bank of America Settles RMBS Securities Claims for US$9.3 Billion

On March 26, Bank of America and the Federal Housing Finance Agency (FHFA), as conservator of Fannie Mae and Freddie Mac, announced a settlement of FHFA’s RMBS-related suits against the Bank.  The Bank has agreed to pay approximately US$9.3 billion to settle allegations that it violated federal and state securities laws in connection with private-label RMBS purchased by Fannie Mae and Freddie Mac between 2005 and 2007.  Pursuant to the agreement, approximately US$5.83 billion will be allocated by FHFA to settle all claims asserted in four lawsuits brought by FHFA against Bank of America, Countrywide, and Merrill Lynch, and the remainder will be allocated to repurchases by Bank of America of RMBS held by Fannie Mae and Freddie Mac.  Bank of America Press ReleaseFHFA Press ReleaseSettlement Agreement.

Société Générale Agrees to $122M Settlement in RMBS Suit

On February 27, the Federal Housing Finance Agency (FHFA) announced that it reached a settlement with French bank Société Générale of an RMBS suit in the U.S. District Court for the Southern District of New York.  FHFA alleged violations of federal and state securities law in connection with RMBS purchased by Fannie Mae and Freddie Mac in 2006.  The settlement agreement contains no admission of liability or wrongdoing.  Société Générale and four of its subsidiaries will pay $122 million dollars to the agency.   Press Release.