Exclusive: U.S. housing regulator paid law firms $373 million to sue banks

NEW YORK (Reuters) – The Federal Housing Finance Agency disclosed on Thursday that it paid two law firms over $373 million since 2010 to pursue litigation against several banks over mortgage-backed securities sold to Fannie Mae and Freddie Mac before the financial crisis.

The FHFA, which has acted as conservator for Fannie <FNMA.OB> and Freddie <FMCC.OB> since the government took them over in 2008, disclosed the sums in response to a Freedom of Information Act request by Reuters.

The disclosure marked the first time the FHFA had said how much it had paid Quinn Emanuel Urquhart & Sullivan LLP and Kasowitz Benson Torres Friedman LLP.

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Fannie Mae launches homebuyer education app

 

 

Housingwire:

Fannie Mae launched its new homebuyer application HOME that educates future homeowners about the steps and responsibilities of buying and owning a home.

The app is part of Fannie’s ongoing efforts to help its partners expand access to mortgage credit for qualified buyers by providing educational resources to reduce barriers to homeownership.

The application features:

• Dashboard and checklist to track their progress
• Four financial calculators: Estimate affordability, Calculate mortgage payment, Plan and budget for a down payment, Learn how paying ahead can save money and reduce loan payback times
• HUD-approved housing counseling agency “locator tool”
• Articles, videos, and more

Former Delaware Chief Justice files amicus brief in Fannie/Freddie sweep suit

Calls Treasury’s seizure of profits illegal

The Center for Individual Freedom has filed an amicus brief in the United States Court of Appeals for the District of Columbia Circuit in the case of Perry Capital LLC v. Lew.

The brief, authored by Myron Steele, the former Chief Justice of the Delaware Supreme Court and now a partner at the Delaware law firm of Potter Anderson & Corroon, was filed in support of private stockholders of Fannie Maeand Freddie Mac who effectively lost all value in their shares when the government opted for a conservatorship that granted the Treasury Department senior preferred stock status that allows for a “Net Worth Sweep” of the corporations’ net profits in perpetuity.

The brief argues that “[t]he ‘Net Worth Sweep’ is unenforceable and void ab initio under Section 151 of the Delaware General Corporation Law.”

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Fannie Mae raising mortgage modification interest rate yet again, new rate effective July 14

Fannie Mae is set to raise the benchmark interest rate for its Standard Modification program for the second month in a row.

Beginning July 14, Fannie Mae will raise its required interest rate for standard modifications from 4.125% to 4.25%. The standard modification rate hasn’t been that high since Nov. 2014.

Last month, Fannie Mae increased its standard modification rate from 4% back to 4.125%, which was the designated rate from April 14 through May 14.

In May, Fannie dropped the interest rate from 4.125% to 4% but it’s now raising the rate for the second straight month.

Fannie Mae announced the change Tuesday in an email sent to its servicers.

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Abacus Federal Savings Bank found not guilty of defrauding Fannie Mae

A jury ruled that New York-based Abacus Federal Savings Bank and two of its senior officers are not guilty of defrauding Fannie Mae, bringing some closure to a case that began in 2012 and a trial that began four months ago.

Just over two years ago, Manhattan District Attorney Cyrus Vance filed charges against Abacus Federal and 19 individuals associated with the bank, accusing the bank of selling fraudulent loans to Fannie Mae. The bank and its employees stood accused of inflating the income of loan applicants and falsifying documents.

According to a report from the New York Times, a New York jury found Abacus not guilty of charges including grand larceny, conspiracy, falsifying business records and residential mortgage fraud.

From the New York Times report:

Ten of the defendants pleaded guilty, and some of those agreed to testify for the prosecution against their superiors.

But the bank’s chief credit officer, Yiu Wah Wong, and Raymond Tam, who was the loan origination supervisor, went to trial in late January, along with the bank itself, as a corporate entity. Seven former employees still await trial.

Mr. Wong and Mr. Tam were found not guilty of all charges against them, including grand larceny, conspiracy, falsifying business records and mortgage fraud. They argued at trial that they were unaware of the fraudulent documents being created by loan originators, who earned commissions and had a financial incentive to burnish the borrower’s credentials.

According to the Times report, Abacus is a small bank that has a “major presence” among New York City’s Chinese population.

Again from the Times:

From the start, it was a difficult case for prosecutors to prove. Loan originators and borrowers testified they had colluded on loan after loan — evidence related to 32 mortgages was presented — to overstate the income and exaggerate the job titles of mortgage applicants. Yet few of the bank’s loans went into default. The bank’s default rate was 0.3 percent during the period covered by the indictment, from May 2005 to February 2010 — far below the national average.

Source: New York Times

Fannie Mae – New Shareholder Lawsuit: The Government’s Actions Are Illegal

There were two notable legal developments this week. On Thursday, three Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) And Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) shareholders in Iowa filed a lawsuit against the federal government in federal court in Iowa, claiming the Third Amendment Sweep amounts to a breach of contract and illegally taking of property. The previous day, lawyers for Fairholme Funds, Inc., filed formal arguments essentially rejecting the government’s rationale for withholding relevant documents in a case being litigated in Federal Claims Court.

The suit in Iowa is the first time individual shareholders have challenged the legality of the Sweep; and the first since reports of leaked Treasury documents have raised new questions about whether relevant information was withheld in the Fairholme case and another suit related to the Sweep.

In the new suit, three shareholders – Thomas Saxton, Ida Saxton and Bradley Paynter – accused the Federal Housing Finance Agency five violations of the Housing and Economic Recovery Act by:

– Failing to act as a conservator;
– Failing to put Fannie Mae and Freddie Mac into “sound and solvent condition;”
– Failing to preserve Fannie Mae’s and Freddie Mac’s assets;
– Failing to rehabilitate them into condition for return to private control;
– And failing to act independently and free of direction and supervision of other government agencies.

Read on.

Iowa Investors Sue US Over Fannie, Freddie ‘Profit Sweep’

Law360, New York (May 29, 2015, 9:05 PM ET) — Three Fannie Mae and Freddie Mac investors sued the Federal Housing Finance Agency and the Department of the Treasury in Iowa federal court Thursday in the latest case claiming the government illegally altered its bailout deal to pocket the mortgage finance companies’ profits.

The plaintiffs said the Treasury and the FHFA in 2012 executed a “Net Worth Sweep” of profits from Fannie and Freddie, which had been placed under the FHFA’s conservatorship and bailed out with Treasury investments in September 2008. With the housing market improving…

Source: Law360

GROUP ACCUSES FANNIE MAE OF RACIAL DISCRIMINATION

INDIANAPOLIS (WISH) — The Fair Housing Center of Central Indiana is one of 20 civil rights groups accusing the Federal National Mortgage Association, or Fannie Mae, of racial discrimination. The groups say Fannie Mae catered to primarily white neighborhoods, while neglecting neighborhoods with mostly minorities.

The National Fair Housing Alliance will lead an announcement in D.C. at 9:15 a.m. Wednesday, detailing what they call “illegal discrimination” in more than 60 cities, including Indianapolis. The civil rights groups say Fannie Mae ignored its foreclosed homes in African American and Latino neighborhoods, while consistently taking care of its homes in white neighborhoods.

According to the complaint, Fannie Mae did not market or maintain the homes in the minority neighborhoods — leaving property to deteriorate. Authorities have said run down homes hurt the neighborhoods and can lead to crime. The Fair Housing Alliance says this has been going on since at least 2009 and they’ve warned Fannie Mae about the problems before, but nothing has changed. At the announcement, the groups will release evidence they say they’ve gathered for the past five years.

Rest here…

Chase closes massive $45B Fannie Mae MSR deal from Ocwen

The previously announced sale of $45 billion in mortgage servicing rights fromOcwen Loan Servicing, a wholly-owned subsidiary of Ocwen Financial (OCN), to Chase, the banking business for JPMorgan Chase & Co. (JPM) is now official.

The sale was previously announced in March, and includes 266,000 “high-quality” Fannie Mae loans worth an estimated $45 billion.

The deal was subject to a definitive agreement and required approval from Fannie Mae and the Federal Housing Finance Agency. Those approvals are now official and the deal is done, according to Chase and Ocwen

“Buying this prime servicing book will improve the quality of our servicing portfolio and will help drive a stronger and less volatile mortgage business,” said Chase Mortgage Banking CEO Kevin Watters.  “We expect the portfolio, in addition to lower delinquency rates overall, will help improve the value of our business.”

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Nomura found liable for selling toxic mortgages to Fannie, Freddie

A federal judge ruled Monday that Nomura Holdings (NMR) misled Fannie Mae and Freddie Macmade false representations about the quality of mortgages that were used to back $2 billion securities it sold to the GSEs.

According to court records, U.S. District Judge Denise Cote found Nomura liable when he ruled for the Federal Housing Finance Agency, which acts as conservator for the GSEs, after overseeing the non-jury trial.

“The offering documents did not correctly describe the mortgage loans,” the judge said in his lengthy, 361-page decision. “The magnitude of falsity, conservatively measured, is enormous.”

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