OCC Proposed Stress Tests
On January 24, the OCC requested comment on a notice of proposed rulemaking to implement Section 165(i)(2) of the Dodd-Frank Act, which would: (i) require national banks and Federal savings associations with consolidated assets of more than $10 billion to conduct annual stress tests and (ii) impose reporting and disclosure requirements. Comments must be submitted by March 26.
OCC Release. Proposed Rule.
FHA Increases Lender Indemnification and Performance Standards
On January 20, the FHA announced a final rule to: (i) revise the process by which the FHA requires lenders to indemnify HUD for insurance claims on mortgages that do not meet the agency's guidelines and (ii) require all lenders with authority to insure mortgages on HUD's behalf to meet stricter performance standards. In a separate Federal Register notice, the FHA will propose to reduce the maximum allowable seller concession to reflect public comments to a proposal published on July 15, 2010. The new proposal will have a 30 day comment period. FHA Release. Final Rule.
FHFA Analysis Behind Exclusion of Principal Forgiveness as a Loss Mitigation Tool
On January 23, the FHFA, in response to a request from members of Congress, released the analysis that led it to exclude principal forgiveness as a loss mitigation tool by Fannie Mae and Freddie Mac. FHFA Release. FHFA Letter.
On January 25, Fitch updated its global dealer floorplan rating criteria. Fitch Release.
On January 24, DBRS released its CMBS rating methodology. DBRS Release.
On January 23, S&P updated its U.S. interest rate criteria to include assumptions for the five-year CMT Index. S&P Release.
On January 23, DBRS released its U.S. RMBS securities loss model and rating methodology. DBRS Report.
On January 23, DBRS described its U.S. RMBS surveillance process. DBRS Report.
Note: Free registration is required for Fitch and S&P releases and reports.
John Hancock Sues JP Morgan Over RMBS
On January 20, 2012, John Hancock Life Insurance Co. filed a complaint in New York state court against JPMorgan Chase & Co. and several related entities and individuals seeking to recover for losses allegedly incurred on certificates John Hancock purchased in 21 separate RMBS offerings from JPMorgan, Bear Stearns, and Washington Mutual Inc. John Hancock alleges that the defendants made misrepresentations concerning the quality of the mortgage loans underlying the certificates and failed to perform adequate due diligence. The complaint alleges violations of the Securities Act of 1933, common law fraud, negligent misrepresentation, aiding and abetting fraud, and fraudulent inducement, and seeks rescission and damages. Complaint.
Sealink Funding Sues Morgan Stanley for RMBS Losses
On January 20, 2012, Sealink Funding Ltd. filed a complaint in New York state court against several Morgan Stanley entities in connection with certificates in 11 RMBS offerings allegedly purchased by Sealink during 2006 and 2007 for approximately $556 million. Sealink alleges that Morgan Stanley made misrepresentations about its due diligence regarding the mortgage loans underlying the certificates and the underwriting guidelines used by the originators of those loans. Sealink asserts claims for common law fraud, fraudulent inducement, and negligent misrepresentation, and seeks rescission and damages. Complaint.
Loreley Financing Sues Citigroup Over CDO Investments
On January 24, 2012, several Loreley Financing Ltd. entities filed a complaint in New York state court against several Citigroup affiliates over nearly $1 billion in CDO investments backed by subprime mortgages, purchased in 2006 and 2007. Loreley alleges that Citigroup knowingly misrepresented the quality of the mortgage loans in order to transfer risk from its balance sheet. Loreley further accuses Citigroup of concealing the role of Magnetar in designing certain CDOs. Loreley asserts claims for common law fraud, rescission of contract, fraudulent conveyance, and unjust enrichment, and seeks rescission, disgorgement, injunctive relief, and damages. Complaint.
Dexia Sues JPMorgan for RMBS Losses
On January 19, 2012, Dexia SA/NV and related entities filed a complaint in New York state court against JPMorgan Chase & Co. and several related entities in connection with certificates in 53 RMBS offerings that Dexia allegedly purchased from JPMorgan, Bear Stearns, and Washington Mutual for approximately $1.7 billion. Dexia alleges that the defendants created, issued, and sold RMBS based on loans that the defendants knew to be of poor quality, made false and misleading representations about those loans to investors, and exerted undue pressure on credit rating agencies. Dexia asserts claims for negligent misrepresentation, aiding and abetting fraud, and fraudulent inducement, and seeks rescission and damages. Complaint.
BayernLB Sues Morgan Stanley Over RMBS
On January 25, 2012, Bayerische Landesbank filed a complaint in New York state court against several Morgan Stanley entities seeking to recover for losses allegedly incurred in connection with certificates in 22 RMBS offerings that BayernLB allegedly purchased in 2006 and 2007 for approximately $486 million. BayernLB alleges that Morgan Stanley made misrepresentations in the offering documents for those RMBS concerning the underwriting standards of the originators of the mortgage loans underlying the certificates, the appraisals of the mortgaged properties, and other facts regarding the quality of the mortgage loans. BayernLB asserts claims for common law fraud, fraudulent inducement, aiding and abetting fraud, and negligent misrepresentation, and seeks rescission and damages. Complaint.