Analysis Foreclosure Wave Averted as Doomsayers Defied
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Deutsche Bank Sued over Home Mortgage-Backed Securities
Deutsche Bank AG, Germany’s largest lender, was sued by a trustee over claims that some securities sold by a unit of the bank were backed by home-mortgage loans taken out by fraudulent borrowers, Bloomberg News reported today. DB Structured Products Inc.'s pool of more than 1,500 mortgages included more than 320 that were defective, HSBC Bank USA, acting as trustee, said in a lawsuit filed yesterday in federal court in Manhattan. HSBC seeks unspecified damages and said Frankfurt-based Deutsche Bank must buy back the breaching loans under its agreements with the trustee. The case is Deutsche Alt-A Securities Mortgage Loan Trust v. DB Structured Products Inc., 12-cv-8594, U.S. District Court, Southern District of New York (Manhattan).
JPMorgan Sued for Fraud by CIFG Assurance over CDOs
JPMorgan Chase & Co. was sued by CIFG Assurance North America Inc., which says that it lost more than $100 million on collateralized debt obligations (CDOs) created by Bear Stearns, the investment bank JPMorgan acquired in 2008, Bloomberg News reported yesterday. Bear Stearns stocked the CDOs with toxic mortgage securities and profited by betting against the portfolios, the insurer said in a complaint filed yesterday in New York State Supreme Court. Bear Stearns told CIFG that independent firms had selected the collateral, New York-based CIFG said. "As a result of its fraud, Bear Stearns was able to pass off huge losses onto CIFG," according to the complaint.
Equity Residential AvalonBay to Buy Lehmans Archstone
Archstone Inc., the biggest property holding of Lehman Brothers Holdings Inc., will be sold to Sam Zell's Equity Residential and AvalonBay Communities Inc. in a deal valued at $6.5 billion, Bloomberg News reported yesterday. Lehman will receive $2.69 billion in cash as well stock in Equity Residential and AvalonBay valued at $3.8 billion, based on closing prices from Nov. 23, New York-based Lehman said yesterday. The deal comes instead of an initial public offering for Englewood, Colorado-based Archstone, which Lehman announced in August. Lehman, which filed the biggest bankruptcy in U.S. history in 2008, left court protection in March.
BofA Wins on Limitations of Countrywide Securities Suits
Bank of America Corp. may limit its exposure to claims by Countrywide Financial mortgage-backed securities investors after a federal judge said that she may have erred two years ago by allowing some claims to proceed, Bloomberg News reported yesterday. U.S. District Judge Mariana Pfaelzer, who presides over the consolidated mortgage-backed securities cases against Bank of America's Countrywide, said in a Nov. 21 order that she no longer believes that the first investor lawsuits filed in California state court case extended the statute of limitation for claims brought subsequently in federal court. "The court is no longer convinced that this conclusion was correct," Pfaelzer said. The reasoning "represents a change in the court's analysis of existing case law." Pfaelzer in two rulings in 2010 and 2011 ruled that investors who had sued over $351 billion in downgraded Countrywide mortgage-backed securities, had only so-called standing to sue over $2.6 billion of the tranches of the securities that they had bought and that had also had been part of the first state court cases filed in 2007 and 2008.
ResCap Bankruptcy Examiner Says Report to Take Longer
A report on Residential Capital LLC's pre-bankruptcy transactions with parent company Ally Financial Inc. and others will take about two months longer than planned, said former Bankruptcy Judge Arthur J. Gonzalez, ResCap’s bankruptcy examiner, Bloomberg News reported yesterday. Judge Gonzalez said that he needs until early April to get required documents and to finish interviewing key witnesses. The case is In re Residential Capital LLC, 12-12020, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
Illinois New York Oppose FHFA Proposal to Boost Fees
State attorneys general of Illinois, New York and Connecticut criticized a Federal Housing Finance Agency proposal to increase lenders' guarantee fees for mortgages in those states, asking FHFA Acting Director Edward J. DeMarco to scrap the plan, Bloomberg News reported yesterday. The state attorneys general yesterday said that they oppose allowing the U.S.-owned mortgage finance companies Fannie Mae and Freddie Mac to increase those fees in states with higher foreclosure costs and longer processing times than average. The FHFA in September proposed the higher fees, which compensate for the companies' risks when they own or guarantee mortgages. "The fee increase would impose a penalty on borrowers in states that offer greater statutory protections to homeowners in foreclosure," the attorneys general wrote to DeMarco.
Judge Dismisses Former Fannie Mae Controller from Securities Class Case
Leanne Spencer, the former controller for Fannie Mae, was dismissed on Nov. 20 from a federal securities class action against the mortgage giant, making her the third former executive to win summary judgment since September, the American Law Daily reported on Friday. U.S District Judge Richard Leon found that the plaintiffs, former Fannie Mae shareholders, failed to present enough evidence that Spencer acted with the intent to deceive. Fannie Mae is accused of manipulating earnings and violating established accounting principles; Spencer individually was accused of making false statements about the company's practices and misleading investors.
Banks Hiring for Home Loans as U.S. Housing Market Rebounds
U.S. banks that have been earning record profits from home loans are adding or transferring thousands of staff to catch up with demand for refinancing after shortages blocked homeowners from getting lower rates, Bloomberg News reported today. Employment tied to mortgages rose 9 percent this year through September to 285,000, the most since 2008, according to the Bureau of Labor Statistics, as lenders responded to Federal Reserve efforts to push down borrowing costs, President Barack Obama loosened requirements, and housing recovered from a six- year slump. Even as banks added staff, they failed to keep pace, and kept mortgage rates “much higher” than they should be to curb demand, said Vipul Jain, an analyst at Morgan Stanley. Those constraints are lifting after banks built up units to handle the highest level of refinancing since 2009.
JPMorgan Credit Suisse Settle SEC Mortgage Inquiries
JPMorgan Chase & Co. and Credit Suisse Group AG agreed to pay almost $417 million to settle U.S. regulatory claims they misled investors while selling billions of dollars of investments linked to home loans, Bloomberg News reported on Saturday. JPMorgan resolved claims that it made misstatements about delinquency data for loans packaged into securities and that Bear Stearns Cos., which the bank acquired in 2008, did not tell mortgage investors it kept reimbursements on soured loans, the Securities and Exchange Commission said. Credit Suisse was also faulted for disclosures on reimbursements.