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I think status conf and earnings both next week
Earnings coming up, status conference coming up, institutions have loaded and most who own are now holding. weak hands have folded, penny flippers and day traders don't see enough volitility. We are lucky for this little move on such light volume. Anticipation is keeping us waiting.
I have read that article 4 times and it just keeps sounding better for shareholders every time I read it.
Investors Unite gets the cold shoulder at Guggenheim Securities
Maloni makes the case for keeping Fannie and Freddie
July 29, 2014
Trey Garrison
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GSE reformGuggenheim SecuritiesHousingInvestors Unite
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Guggenheim Securities held a by-invitation only event last week in New York for big investors titled “Fannie & Freddie: Is There Value Worth Saving?” but members of Investors Unite – that is, the retail investors – were shut out.
All except one, who spoke to HousingWire on the condition of anonymity.
The keynote speakers were Sen. John Corker’s (of Corker-Warner fame, or infamy, depending on your perspective) housing policy advisor, Michael Bright. He’s the former Countrywide executive who authored Corker-Warner.
Bright made his case with a 90-page PowerPoint.
Speaking for the other side – he was teleconferenced in and his account can be read on his blog – was Bill Maloni, the former Fannie Mae lobbyist.
Alex Forschner, a New York-based Investors Unite member who was refused admittance, said that this kind of cold shoulder for individual investors is par for the course.
“I was refused admittance even though it was supposedly open to Fannie and Freddie investors,” Forschner said. “This marks another in a long string of discussions from which ordinary Fannie/Freddie investors have been denied admittance. Not only does this type of exclusion encourage group think, but it is a step in the wrong direction for GSE reform.”
Investors Unite opposes any of the GSE reform measures that do not protect the rights of shareholders.
In 2008, a conservatorship agreement required that Fannie and Freddie Mac pay the U.S. Treasury a 10% dividend payment to repay the loan that was made. To date, the GSEs have repaid $204 billion dollars to the Treasury, tens of billions in excess of what was originally loaned, but the government refuses to exit its conservatorship.
Since January of 2013, the government has been confiscating 100% of Fannie and Freddie dividends.
Investors Unite believes that replacing Fannie and Freddie with a new, gargantuan federal entity, the Federal Mortgage Insurance Corporation, which would explicitly back mortgages, would add $5 trillion to the taxpayer’s balance sheet and give more control of the mortgage market to the big banks.
“As an individual investor, I represent hundreds of thousands of others throughout our country who have received zero-dividend payments on our investments due to the government’s enactment of a total sweep of profits from the GSEs,” Forschner said. “While the Senate has debated GSE reform crafted by Mr. Bright himself, the legislation clearly ignores investor rights and violates the rule of law. It is clear that this legislation was crafted without the small investor in mind. Keeping us out of these discussions will only perpetuate this problem.”
Forschner couldn’t get in, but another Investors Unite member did.
“Ultimately they don’t see that Fannie and Freddie have worked well up until 2004, and over the last six years,” the investor tells HousingWire. “Why reinvent the wheel – you can work with the regulations and G-fees to bring back in private capital.”
Our source reports largely what Maloni wrote on his blog, but points out that basically, no one -- not on either side of the discussion at Guggenheim -- really seemed to care one whit about whether retail investors were protected. Or paid.
They seemed to reflect the let them eat cake mentality of FHFA Director Mel Watt, who said in May “I don’t lay awake at night worrying about what’s fair to the shareholders.”
HousingWire's source says that while Maloni made no real mention of shareholder rights, he did at least defend the position held by Investors Unite that the GSEs should be preserved.
“I argued that virtually all the legitimate issues people had with F&F have been solved via regulation or easily could be going forward. Most people who still opposed the two, largely, were swayed by a false narrative,” Maloni said. “The case I made for Fannie Mae and Freddie Mac was simple.
“They successfully produced voluminous amounts of mortgage financing, for a variety of income groups, and worked well before the post 2005 PLS debacles. Since being put into ‘conservatorship,’ they still are spectacularly successful—buttressing the nation’s mortgage market – when their regulation was tightened up post-2008,” Maloni said. “ I suggested, with some regulatory relief and little legislative head knocking, they could be revived and permitted to play a principal role in the mortgage market before any of the various F&F alternatives could be operational.
“Fannie and Freddie have been tightly regulated for the past 6 years and—assuming that regulation stays in place—there is little chance of a repeat of the subprime debacle for reasons everyone knows (the primary one being F&F cannot touch low quality mortgage loans),” Maloni said. “With QM mortgages now the rule, F&F as principals in a mortgage finance system offering common products, common prices, competition among primary lenders, efficient operations, and with their own money at stake, would be far better at regulating their customers (most of which are banks or bank affiliates) against consumer and systemic abuse than any federal agency.”
Ultimately, Maloni said he is resigned to the belief shared by so many that no GSE reform is coming before the next president is sworn in.
“Again, I believe that only a new president with both congressional chambers controlled by his (or her) party will set the stage for any omnibus mortgage reform legislative proposal with the soonest that can occur is 2017,” Maloni said. “This Administration could move via regulation to make it easier for F&F to produce for the country.”
Guggenheim is free to invite whomever they please, but it seems troubling that so little regard is given to the rights of the very shareholders -- retail though they be -- whose investments went into building and maintaining Fannie and Freddie.
Or don't they count?
http://www.housingwire.com/blogs/1-rewired/post/30832-investors-unite-gets-the-cold-shoulder-at-guggenheim-securities
We need Jayz to tweet that he likes fannie.
They will always be a gse unless they are wound down. We need release from conservatorship and third amendment overturned.
US FHFA Extends Deadline for Input On Fannie, Freddie G-fees
By Ian McKendry
WASHINGTON (MNI) - The Federal Housing Finance Agency Tuesday announced that it is extending the deadline for stakeholders to provide input on the mortgage guarantee fees charged by Fannie Mae and Freddie Mac.
FHFA Director Mel Watt suspended the original plan put in place by his predecessor Ed Demarco, that raised guarantee fees, and has taken a policy stance that aims to support the housing market rather than reducing the governments presence in housing finance.
The FHFA said the deadline for input is now September 8, 2014 which also coincides with the deadline for input on tighter rules for private mortgage insurers. The previous deadline for input on guarantee fees was August 4, 2014.
--MNI Washington Bureau; tel: +1 202-371-2121; email: imckendry@mni-news.com
https://m.mninews.com/content/us-fhfa-extends-deadline-input-fannie-freddie-g-fees
Jumping off of herbal life and jumping onto FnF
The real reason Fannie and Freddie don't do principal modifications
Looking out for your retirement
Brent Nyitray
July 29, 2014 12:00AM
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time is money
DeMarcoFannie MaeFHFAFreddie Macprincipal modificationsWatt
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Affordable housing advocates have been pushing hard for principal mods on mortgages backed by Fannie Mae and Freddie Mac.
Ed DeMarco, the former acting head of the Federal Housing Finance Agency had refused to embrace principal mods, choosing instead to do rate / term modifications through the Home Affordable Modification Program.
As the Acting FHFA Chairman, DeMarco’s prime directive was to protect the taxpayer, and the fear was that a mass principal refi program would trigger a wave of strategic defaults, where people who had the ability to repay their mortgage would choose to stop paying in hopes of getting a principal mod.
The left thought they had finally scored a victory by replacing Ed DeMarco with Mel Watt, a politician seen as more amenable to principal mods. So far, the left has been disappointed.
Why is the government resisting principal mods?
Because there is one big investor in MBS that the government is worried about – pension funds.
Principal mods for Fannie and Freddie mortgage-backed securities could be a game changer for this paper.
Why? Because lots of MBS from the late bubble years are backed by underwater, above market-rate mortgages. The prepayment speeds for these mortgages is depressed because the borrower cannot refinance.
This means that these bonds trade at premiums to par.
What happens if the feds start forgiving principal on these loans?
Well, first of all, someone is going to have to eat the loss on the principal mod. In all likelihood, that would be the government. But that doesn’t mean the pension fund escapes without losses.
The prepayment rates for those above-rate MBS would skyrocket as borrowers get principal mods and immediately refinance.
Those bonds will go from, say 110 to 100 in a heartbeat. Perhaps the funds would be protected if the government only modified loans actually held by Fannie and Freddie, but that creates another issue: Why should one borrower get a principal mod when their loan is held by Fannie, but another borrower is ineligible because their mortgage is in a MBS held by Texas Teachers or General Motors?
Think about the plight of the typical pension fund these days.
With interest rates pressed against the lower bound, they are having a terrible time earning enough on their portfolio to meet their future obligations.
The actuarial tables couldn’t care less that money is free and it is hard to earn a high single digit return in relatively riskless assets. Many pension funds are fully funded only if you squint at the underlying assumptions regarding their expected return on plan assets.
And you can bet that big funds like CALPERS are whispering in the ears of their representative imploring them not to go down this route.
The last thing they need are capital losses, let alone having to give up high yielding paper for the low yielding stuff that is being originated now. Don’t forget one last thing – where do politicians have their retirement money?
You guessed it.
Therefore, let's put this argument to rest. It's now pretty clear why principal mods on Fannie and Freddie paper are a long shot.
http://www.housingwire.com/articles/30824?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:housingwire/uOVI(HousingWire)
Fannie and Freddie Investor Blackstone Also Sought Advisory Role
By Dan Freed - 07/29/14 - 1:32 PM EDT
Tickers in this article: BX FMCC FNMA
NEW YORK (TheStreet) -- The Blackstone Group 's involvement with Fannie Mae and Freddie Mac appears deeper than previously known.
Blackstone sought to advise the Treasury Department on what to do with its controlling stake in the two government-sponsored home-loan companies in 2011, according to pitch documents provided to TheStreet by a public relations firm representing Investors Unite, a group of Fannie and Freddie shareholders. This information, which hasn't been previously reported, is noteworthy because in April Blackstone confirmed reports that it holds preferred shares in Fannie and Freddie.
Blackstone spokeswoman Christine Anderson refused to say whether Blackstone owned Fannie and Freddie preferred shares at the time the private equity firm made its June 13, 2011 pitch to Treasury along with New York law firm Skadden, Arps, Slate, Meagher & Flom. She said the issue was moot since it never won the assignment.
"Blackstone had no conflict with its investment in Fannie/Freddie because its Restructuring group was neither engaged by nor advising Treasury. Blackstone did no more than submit a generic and preliminary pitch based on publicly available information," she wrote to TheStreet via email Tuesday.
Read More: Obama AIG Fix-It Man Bets on Fannie and Freddie Turnaround
A Treasury spokesman also downplayed the meeting with Blackstone and Skadden.
"As part of the policy making process, Treasury routinely engages with key stakeholders, market participants and consumer advocates. Treasury did not issue a Request for Proposals, and no contract was awarded," he said Tuesday in an e-mailed statement. The spokesman asked that his name not be used.
Van Durrer, a partner in Skadden's corporate restructuring practice, declined to comment.
The 52-page pitch shows Blackstone bidding to advise the Treasury on how best to dispose of its stakes in Fannie and Freddie. Blackstone and Skadden noted Fannie and Freddie's financial performance was improving and that its loss reserves were stabilizing. Much of the pitch was devoted to describing the group's qualifications as a potential adviser to the Treasury Department.
"We are pleased to have the opportunity to meet with the Department of the Treasury to discuss our qualifications and potential strategic alternatives regarding FNMA and FMCC," states the document, dated June 13, 2011, stamped "confidential" and including the Treasury seal on its cover page.
Flash forward three years to when Blackstone confirmed on April 17 that it owned preferred shares of the two government sponsored enterprises (GSEs). During a conference call with the media, Blackstone President and COO Hamilton "Tony" James said that the firm had "a plan that makes a lot of sense in terms of getting the GSEs out of being a liability for the government." James didn't say at the time when Blackstone acquired the shares.
Read More: Blackstone Discusses Fannie and Freddie Stake
Blackstone spokesman Peter Rose told TheStreet later in April that the plan was distinct from one floated last year by high-profile Fannie and Freddie shareholder Fairholme Capital, but he declined to elaborate.
Treasury put Fannie and Freddie into conservatorship in 2008 at the height of the financial crisis at a time when its preferred and common shares had lost nearly all of their value and most observers doubted that the entities would ever again be profitable. However, by 2011 some small hedge fund managers were already going public with a contrarian view that Fannie and Freddie were a very attractive turnaround story. Behind the scenes, giant hedge fund Perry Capital was also betting on the shares, information that didn't become public until Perry sued the government on July 7, 2013.
The reason for Perry's suit, and several others filed around the same time, was a controversial 2012 third amendment to the government's conservatorship of Fannie and Freddie which sent all profits from the companies to the Treasury, effectively wiping out both common and preferred private shareholders. The 2011 pitch documents were turned over to attorneys for Fairholme following a recent federal claims court ruling mandating their release. An email message to spokesmen for Fairholme and one of the investor's attorneys, Cooper & Kirk managing partner David Thompson, wasn't returned.
Blackstone has not sued the Treasury Department over the GSEs, spokesman Rose told TheStreet in April.
When the third amendment was issued on Aug. 17, 2012, public preferred shares in Freddie Mac trading under the ticker FMCKJ -- a favorite at the time with sophisticated investors -- fell from $2.83 to $0.42. They have since rebounded, partly on the view that investors suing the government have a strong case. On Tuesday they traded at $12.
The 52-page pitch document from Blackstone and Skadden suggests three options for allowing the government to monetize its stake in the two GSEs by selling it to the private sector. Such a proposal, though, ran counter to the Obama administration's preference at the time: winding down the GSEs by allowing their loan portfolios to run off over time.
Each of the three options includes a list of pros and cons. In each of the three scenarios, mitigating litigation with holders of preferred stock is listed as a pro, while "potential holdouts reap windfall" is listed as a con. The litigation referred to in the 2011 document preceded the higher-profile lawsuits, including those of Perry and Fairholme, which followed the 2012 amendment.
http://www.thestreet.mobi/story/12823463/1/fannie-and-freddie-investor-blackstone-also-sought-advisory-role.html
I am taking it's00dbh7 mental condition very seriously. Gender confusion, split personality, bipolar, manic depression. Take your pick or mix and match. Her confused state of mind influences his opinions of FnF. Maybe it's parents named Fannie and Freddie beat her or made him wear dresses.
Private Mortgage-Bond Market Dead or Dormant?
It’s been nearly seven years since the market for so-called private-label mortgage bonds, or those that aren’t backed by government-related entities, dried up. For years, government policy makers and financiers have speculated over when those markets might meaningfully revive.
But given the weak issuance of such private mortgage-backed securities since the financial crisis deepened, there’s a good case to be made that that market is dead, said Joseph Tracy, a senior adviser at the New York Federal Reserve Bank, at a conference sponsored by Zillow last week in Washington.
Lawmakers and U.S. officials in recent years have suggested that limiting the reach of mortgage companies Fannie Mae and Freddie Mac , both by restricting the firms to purchasing smaller mortgages and raising the fees that the companies charge lenders, might help “crowd-in” private investment to the mortgage-bond market.
These markets may sound obscure but they have served in the past as a key source of financing for U.S. homeowners, particularly for borrowers seeking loans that don’t conform to the standards of Fannie, Freddie or government agencies, which generally can’t guarantee loans that exceed $417,000. (Select high cost markets, such as San Francisco and New York, have ceilings as high as $625,500.)
More than $1 trillion in private-label mortgage-backed securities were issued by Wall Street firms in 2005 and 2006, but the market imploded in late 2007. In 2010 and 2011, a handful of deals came to market, consisting entirely of “jumbo” mortgages that are too large for government backing. Post-crash issuance hit a high–relatively speaking–last year of around $20 billion, according to data tracked by J.P. Morgan Chase & Co., but dropped off after mortgage rates jumped. Securities firms have issued around $2.7 billion so far this year.
Treasury Secretary Jacob Lew said last month that the Obama administration would convene a task force in a bid to coerce private-sector players to agree to certain standards that might make investors more confident in the rules of the road going forward.
Mr. Tracy said that more work needs to be done to repair investor confidence in these mortgage securities, particularly the role of credit-rating firms like Moody’s Investors Service or Standard & Poor’s Ratings Services. Their ratings, which investors relied heavily upon during the housing boom, proved to be wildly optimistic. And some investors have questioned the role of the ratings firms, which received more business during the bubble if they provided the ratings that Wall Street firms were looking for.
“I think the trust that that investor group has with the whole rating process was completely destroyed in the bust,” he said. Until a new model develops by which investors can have confidence in ratings, “I don’t see that market coming back,” Mr. Tracy said. “I’m more of a mind that it’s dead than dormant.” Mr. Tracy said he was offering his own views and not those of the New York Fed.
http://craiggroom.com/2014/07/28/is-the-private-mortgage-bond-market-dead-or-dormant-3/
Yes but they are paid well for acts of desperation. Their best qualification is a total lack of shame.
Anybody have a subscription?
As Goldman Mulls Deal, Banks Suffer New Blow in FHFA Cases
Jan Wolfe 07/28/2014
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With trial approaching for Goldman, RBS, HSBC and Nomura, a judge rejected the argument that Fannie Mae and Freddie Mac knew they were being misled about billions of dollars in residential mortgage-backed securities they purchased before the financial crisis.
http://m.litigationdaily.com/module/alm/app/lit.do#!/article/1691136166
How a lone New York judge squeezed billions from banks in MBS cases
By Alison Frankel
July 28, 2014
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banking | mbs
Asking a federal appeals court to step into the fray of an ongoing case to reverse a decision by a trial judge is extraordinary. Petitions for a writ of mandamus, as such requests are known, assert that trial judges have committed such egregious errors that their appellate overseers must undo the damage immediately, before the case gets to a final judgment. Mandamus petitions are a desperation move, a last resort when you’ve got nothing to lose from alienating a trial judge who’s already ruled against you.
Last Thursday, RBS filed not one but three mandamus petitions at the 2nd, 9th and 10th circuits — an apparently unprecedented response to what the bank claims is an unprecedented abdication of responsibility by trial judges presiding over cases brought by the National Credit Union Administration (NCUA).
The suits, which involve billions of dollars in mortgage-backed securities purchased by failed credit unions, were filed in different federal districts, and the Judicial Panel on Multidistrict Litigation denied requests by bank defendants to consolidate them. But according to RBS, the trial judges took it upon themselves to streamline discovery, agreeing to abide by the rulings of a single “coordination judge.”
Why does RBS, which had previously asked for the cases to be consolidated, now bitterly oppose coordinated discovery?
Because the judge whose rulings will apply in all of the NCUA cases is U.S. District Judge Denise Cote of Manhattan, the avenging angel of financial crisis litigation.
Judge Cote has probably done more than any other single person to extract accountability from big banks for their deceptive MBS practices. Her anti-bank rulings in the suite of cases filed by the Federal Housing Finance Agency in 2011 have already forced 15 defendants to pay about $16 billion in settlements in order to avoid hurry-up trials on FHFA’s claims that they deceived Fannie Mae and Freddie Mac about the mortgage-backed securities they underwrote and sponsored. Only four banks are still fighting FHFA’s claims, and it looks like one of them, Goldman Sachs, is on the verge of capitulation; on Saturday, Reuters confirmed a Wall Street Journal report that Goldman is in talks to settle with FHFA for as much as $1.25 billion.
Those negotiations are a tacit acknowledgment of Cote’s latest rejections of bank defenses. On Wednesday, according to Reuters, the judge said she was unlikely to revisit her previous ruling that Congress extended all time limits for Fannie Mae and Freddie Mac securities fraud claims when it passed the 2008 law creating FHFA. The banks had been hoping (without much hope, really) that Cote would be swayed by a U.S. Supreme Court ruling last month that distinguished between two different kinds of time bars, but Cote suggested at Wednesday’s hearing that she wasn’t interested in hair-splitting.
Nor is she persuaded that the banks aren’t liable to well-informed MBS investors like Fannie Mae and Freddie Mac. On Friday, Cote ruled that no reasonable jury would find that Fannie and Freddie knew the banks were misrepresenting specific characteristics of particular mortgage loan pools. The judge acknowledged that Fannie and Freddie had access to all kinds of general information about shoddy mortgage underwriting practices. But the banks’ representations in offering documents were based on specific, loan-level information Fannie and Freddie didn’t have, Cote said. Her grant of summary judgment to FHFA and its lawyers at Quinn Emanuel Urquhart & Sullivan and Kasowitz, Benson, Torres & Friedman severely handicaps Goldman and the other remaining bank defendants in the FHFA cases: HSBC, RBS and Nomura.
That’s nothing new. The banks in the FHFA litigation have argued for the past two years — most notably in a joint petition they filed at the 2nd Circuit in March 2013 — that Judge Cote’s one-sided decisions and fast-track trial schedule left them no choice but to settle. (The 2nd Circuit summarily denied the joint petition last July.) But what RBS’s new mandamus filings show is how Cote’s views of bank liability for the MBS debacle will shape NCUA’s ongoing cases as definitively as they’ve impacted the FHFA litigation — even though Cote is not overseeing all of the NCUA suits.
The judge’s control over far-flung NCUA claims is no accident. Last September, when NCUA’s lawyers at Kellogg, Huber, Hansen, Todd, Evans & Figel and Korein Tillery filed six new MBS fraud suits in federal court in New York, they asserted that the cases were related to FHFA’s MBS litigation and therefore belonged before Judge Cote. Cote accepted the assignment, over objections from the banks.
The banks had asked instead that the New York cases be transferred to a federal judge in Kansas who’d been presiding over different (and much larger) NCUA suits since 2011. After the Judicial Panel on Multidistrict Litigation rejected that request, Judge Cote, according to RBS, acted quickly to extend her influence over NCUA litigation in Kansas and California. Cote called U.S. District Judges John Lungstrum of Kansas City and George Wu of Los Angeles to suggest a coordinated discovery plan.
At a joint hearing in April in cases across the three jurisdictions, according to RBS, Cote announced that the judges had agreed upon a coordinated discovery protocol and that all discovery disputes — even those arising just in Kansas or California — were to be submitted to her as the “coordination judge.” She said she would consult with the other judges before issuing rulings, but according to RBS, Judge Lungstrum’s name wasn’t even on several orders in the Kansas case.
Both Lungstrum and Wu have rejected RBS calls to stop Cote from issuing rulings in cases outside of her jurisdiction. The bank contends that neither the judges nor NCUA — which is perfectly happy to see Judge Cote in charge — have cited precedent for this sort of informal delegation of judicial authority. RBS wants the federal appeals courts to wrest control from Cote before the NCUA bank defendants end up in the same predicament as those in the FHFA litigation. Hence, those mandamus petitions.
Such petitions are granted very rarely, and it won’t help RBS that the 2nd Circuit has already heard banks whinge about Judge Cote in their joint mandamus filing in the FHFA case. Chances are that the appeals courts will permit to Cote to continue to decide how much information NCUA and the banks can obtain from one another in discovery. Those rulings, in turn, will determine whether the banks can dispose of NCUA’s claims short of settlement.
RBS counsel at Kirkland & Ellis declined to comment. NCUA’s lawyers, Stephen Tillery of Korein Tillery and David Frederick of Kellogg Huber, didn’t respond to my email request for comment.
http://blogs.reuters.com/alison-frankel/2014/07/28/how-a-lone-new-york-judge-squeezed-billions-from-banks-in-mbs-cases/
Fairholme Win ‘Very positive’ For Fannie Shareholders: Bove
by Saul GriffithJuly 28, 2014, 5:51 pm
The decision paves the way for a court case on the ‘takings’ plea by Fairholme Capital against FHFA
Last week, Federal Judge Margaret Sweeney cleared the way for a court case that will determine whether the government’s ‘takings’ of profits generated by GSEs Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC), under the stewardship of the FHFA, was illegal and to the detriment of the companies’ shareholders.
Fannie Mae Freddie Mac FHFA Federal National Mortgage Assctn Fnni Me (FNMA) Bove
Fannie Mae, Freddie Mac
Fannie Mae, Freddie Mac vs FHFA: Jurisdiction
The judge ruled in no uncertain terms in her Discovery Order that her court had the authority to consider the merits of the lawsuit.
“With respect to the defendant’s claim that the court lacks the authority to affect the exercise of the FHFA’s powers or functions, the court agrees with the case law of the United States Court of Appeals for the Ninth Circuit which states that the ‘FHFA cannot evade judicial review … simply by invoking its authority as conservator’,” she said.
“Thus, rather than turning a blind eye to a case and immediately dismissing it from its docket merely because the case concerns the FHFA, the proper approach is for a court to examine the factual underpinnings and legal contentions presented by the complaint, in order to determine whether the exercise of its jurisdiction is proper,” she clarified. “In essence, defendant asserts that the court should merely take its word that the documents – some of which the defendant, itself, has not reviewed—are privileged. This suggestion is contrary to law.”
Fannie Mae, Freddie Mac: Discovery of Documents
The Judge also addressed the issue of the period for discovery of documents pertaining to Fairholme’s claim. (Discovery is a pre-trial phase in a lawsuit in which each party, through the law of civil procedure, can obtain evidence from the opposing party by way of requests of production of documents and relevant information).
The court ordered the FHFA to submit to discovery requirements for Privileged Material (from April 1, 2008 to December 31, 2008, and June 1, 2012 to August 17, 2012) and for Non-Privileged Material (from August 18, 2012 to September 30, 2012).
Significantly, the Judge allowed expanded discovery periods even beyond what the FHFA argued for: September through December 2008 and January through August 2012.
Boost for Fannie Mae and Freddie Mac shareholders
Richard X Bove, renowned banking analyst and Vice President Equity Research at Rafferty Capital Markets, commented that the orders of the court mean that the plaintiff’s (Fairholme Capital) case is bolstered because of the availability of discovery information, and that the lawsuit will now progress further.
“If so, I continue to believe that the government will lose and its taking of the monetary claims of the plaintiffs will be reversed,” he said. “This would be very positive for the stockholders of the GSEs.”
Fairholme Capital on Fannie Mae and Freddie Mac reform
In November 2013 Fairholme Capital proposed to acquire the mortgage insurance businesses of Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) and convert them to private insurance companies subject to State regulation.
“The new companies could be cornerstone participants in a reinsurance program along the lines contemplated by proposals under discussion in the Senate, if that is the result of the legislative process now underway,” Fairholme had said in its press release at the time. “Alternatively, the new companies could serve as cornerstone participants in a new, competitive market with less Federal involvement, such as proposals being contemplated in the House, putting their private capital at risk to achieve the best possible pricing and availability for mortgage borrowers under those parameters.”
The proposal did not cut much ice with the Obama administration, and housing reform, in the form of various bills by different legislators, is still stuck in Washington.
By current reckoning, nothing substantial is likely to be achieved until 2015.
Housing numbers receive a jolt
Meanwhile sales of new homes in the US during June were unexpectedly below expectations, falling 8.1% compared to the previous month.
Richard Bove attributed the downward trend in new home sales after June 2013 to declining money supply rather than falling demand for homes.
falling-home-sales Fannie Mae, Freddie Mac
He observed that historically, home sales tended to rise when housing prices and interest rates were rising because the possibility of investment gains was a crucial element in a decision to purchase a new home.
Why then were new home sales tending to fall in an environment of rising home prices?
Money supply ‘drying up’
“No one has considered the fact that money supply is drying up for this industry as the reason that new housing sales have been in a downward trend for the past 12 months,” he says.
The factors responsible, according to Bove, are the Federal taper of mortgage purchases, banks losing billions of dollars to litigation claims from government as well as the private sector regarding mortgage issues, increasing delays in the mortgage processing system and declining profitability on mortgages as a financial product.
“No one wants to put up the money, relatively speaking,” he says. “It is time that analysis of the housing sector was broadened from conventional, and misleading, clichés to a broader look at the key factors driving the business.”
http://www.valuewalk.com/2014/07/fairholme-win-fannie-mae/
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The 187 billion dollar lie. 1:03 AM
28 Monday Jul 2014
Posted by timhoward717 in Uncategorized
˜ 13 Comments
Of all the lies regarding Fannie and Freddie, (GSE’s) the most pervasive of all is the 187 billion dollar amount. This figure is incorrectly used over and again when calculating how much of a profit the taxpayers have made off of Fannie and Freddie to date. It is breathtaking how this figure remains fixed in the public consciousness. It is even on the seemingly official http://projects.propublica.org/bailout/ site. It is repeated by virtually every media source and cited as gospel in every GSE discussion in DC. Let me clarify this for everyone, when the GSE’s were put into conservatorship the terms were that they would have to pay a quarterly dividend to the treasury every quarter based on an annual rate of 10% per year on the aggregate liquidation preference of the senior preferred stock. The treasury forced Fannie and Freddie to borrow additional money from the government every quarter to pay the dividend. For documentation, I am attaching “Fannie Mae Reports Fourth-Quarter and Full-Year 2011 Results” from Feb. 29th 2012. On page two, it clearly shows Draw Request from Treasury in tan and the Dividend Payment to Treasury in purple. You will see that a total of 4.6 billion was requested from the treasury, and 2.6 billion of that was to pay the 10% dividend. This is further explained on Page 9 of the report where it states:
“The Acting Director of FHFA will request $ 4.571 billion of funds from Treasury on the company’s behalf under the terms of the senior preferred stock purchase agreement between Fannie Mae and
Treasury to eliminate the company’s net worth deficit as of December 31, 2011. Fannie Mae’s fourth-quarter dividend of $2.6 billion on its senior preferred stock held by Treasury was declared by FHFA
and paid by the company on December 31, 2011.”
February of 2012 was the last quarter that Fannie had to borrow money from the government to pay the dividend. So when the 187 billion dollar figure is thrown around it is critical that people understand that 55 billion of that was immediately paid back to the taxpayers. The reality is that, thus far, the taxpayers have not only recouped their 132 billion dollar investment but have netted an 81 billion dollar profit so far. In comparison, the taxpayers invested 424 billion for all the other bailouts combined their profit, thus far, a paltry 15.7 billion!.
Let’s not stop here though let’s dig a little deeper. As we examined this lie closer we discovered that prior to the third-amendment profit sweep in August 2012 we find numerous sources that cited the correct amounts that Fannie and Freddie owed, they did not falsely include the interest payments in their figure. Many in the government regularly used the true amount prior to the sweep. So why the decision to perpetuate this outright lie? When it became clear in 2012 that the GSEs were going to begin to generate massive profits, the government made the fateful decision to do the unthinkable. They hastily crafted a ploy to divert all of Fannie and Freddies profits right into the treasury.They amended the terms to change the dividend from 10 percent to become all of Fannie and Freddies profits. And so began an unparalleled attempt to twist the truth.This marked a critical point in the completely false narrative that has been perpetuated by our government to defraud the shareholders of Fannie and Freddie of any profits and in a larger sense to rob America of the ability to have an honest and open debate based on facts. Up until this point it was already very difficult to discern fact from fiction when investigating the role of the U.S. government in the conservatorships of Fannie and Freddie, after the sweep it became virtually impossible.
The more we closely examine every aspect of the governments role in the Fannie and Freddie conservatorships it becomes very clear that little of what they say can be trusted as being factual. I would highly suggest that there can be no meaningful discussions on housing finance reform in this country until the court cases have been resolved, and we can begin to decipher the web of lies that the government has created. Keep the Faith!
http://timhoward717.com/
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Residential Mortgage-Backed Securities Are Heading Over a Cliff
July 27th, 2014
in contributors
by Keith Jurow, Capital Preservation Real Estate Report
Non-Agency Mortgage-Backed Securities
Non-Agency residential mortgage-backed securities (RMBS) are securitized mortgages that are not guaranteed by Fannie Mae or Freddie Mac or insured by the FHA.
These non-guaranteed RMBS existed prior to the bubble years of 2005 - 2007, but the outstanding amount was relatively small. By early 2004, however, that number had climbed rapidly to $644 billion.
Follow up:
Then the speculative mania began to really heat up. Subprime lenders enlisted an army of 50,000 mortgage brokerage firms to hawk loans to just about anyone who was breathing and could sign their name.
With Wall Street frantically securitizing these loans and the three large rating Agencies giving their stamp-of-approval with what later turned out to be highly-questionable AAA ratings, underwriting standards had completely disappeared by mid-2006.
By the end of 2006, speculation reached unheard of proportions and underwriting standards had totally collapsed. Mortgages for $500,000 or more with no down payment were commonplace. Borrowers could get mortgages even when their total debt-to-income (DTI) ratio exceeded 50%. I have written about speculators who were able to buy ten homes or more with little to no down payment on any of them. Nearly the entire nation had become caught up in a frenzy that could only end in disaster.
As major housing markets headed over a cliff, the total amount of outstanding sub-prime, Alt A and other zany mortgages soared into the stratosphere. When mortgage lending finally peaked in July 2007, an incredible $2.3 trillion of non-guaranteed RMBS were outstanding. At the time, no one could really tell what a catastrophe had been created.
Mortgage Modifications
Even before the bankruptcy of Lehman Brothers in 2008, homeowners with non-guaranteed mortgages started defaulting in increasing numbers. Servicers responded by modifying mortgage terms to slow down the avalanche of defaults.
Amherst Securities Group (ASG) was the leading firm supplying comprehensive data on the mortgage market. Its spring 2010 report on The State of the US Residential Mortgage Market provided an excellent look at how bad the situation had gotten by the end of 2009.
Using Loan Performance's enormous database on non-Agency securitized mortgages, ASG reported that roughly 613,000 of these mortgages had already been modified by the end of 2009. That was 11% of all the outstanding non-Agency mortgages. Hopes were high that modifications might stop the bleeding.
Unfortunately, borrowers didn't cooperate. They began to re-default on their modified mortgages in huge numbers. ASG reported that by the end of 2009, 61% of borrowers with modified mortgages had re-defaulted within 12 months. What was worse, a third of them had defaulted within 90 days of the modification.
The rate of default for non-Agency mortgages was directly related to how severely the property was underwater. The more underwater properties had become, the higher were the rates of default.
For example, ASG reported that for loans originated in 2006, the annualized default rate for properties with a combined loan-to-value (LTV) ratio of 80% was only 4.7% at the end of 2009. The default rate jumped to 10% when the LTV was 110 - 120% and these homes had gone underwater. With properties severely underwater and the LTV at a sky-high 150 - 180%, default rates soared to 22%.
Regretfully, the rating agencies failed to see this connection until years after the collapse began.
Modifications of non-Agency securitized mortgages have been taking place for more than six years. Take a look at the growth.
You can see that the percentage of non-Agency securitized mortgages which have been modified has risen steadily since late 2008. That includes nearly half of all outstanding sub-prime mortgages.
Has the modification of millions of loans helped to slow down defaults? Take a good look at this very recent TCW graph.
You can see that the re-default rate for the earliest modifications was extremely high. That was because modifications were given to just about any delinquent borrower. Once the servicers became more selective, default rates for the most recent modifications dropped substantially.
Although I have used this graph several times, I now have some reservations about the default rates for 2010 and 2011 modifications. Let me explain why.
A mortgage report issued by ASG early in 2012 contained a similar graph showing re-default rates broken down by year of modification. It showed that for modifications done in 2011, 30% were in default within 12 months. For those completed in the first half of 2011, nearly 40% had re-defaulted within 18 months. Both of these percentages are considerably higher than in the TCW graph. I have a great deal of confidence in ASG and its data. I will let you decide whose numbers may be more accurate.
The important thing to keep in mind is that for the past five years, serious delinquency rates would have been considerably higher had these modifications not occurred. Obviously, we do not know how high the delinquency rate might have climbed. However, it is absolutely clear to me that the delinquency rate announced every month by the Mortgage Bankers Association and others is totally useless for describing the state of the mortgage market.
Downgrades of Non-Agency RMBS by S & P
After the sub-prime collapse began in early 2007, 75% of all sub-prime mortgage RMBS tranches rated by Standard & Poor's (S & P) had been either seriously downgraded from a AAA rating or had their rating withdrawn as of early 2013.
Over the last few years, S & P has continued to badly underestimate the expected default rates on sub-prime RMBS. In September 2012, S & P surprised investors by lowering the ratings of dozens of sub-prime RMBS issued between 2005 and 2007.
A month before the September 2012 downgrade announcement, S & P had carefully explained why it was revising their default projections for mortgages collateralizing non-Agency RMBS. It is worthwhile to carefully review how they explained the change.
This is what S & P said:
"We have increased our roll rate assumptions for loans that are currently delinquent (meaning we expect more of these loans to ultimately default). We are also raising default rate estimates for 'reperforming loans' vis à vis current loans."
S & P was admitting that its previous assumptions on default rates for non-Agency RMBS tranches were much too optimistic. This applied to both delinquent loans and modified loans that had become current.
S & P explained that its new default estimates applied to roughly 80% of all the outstanding RMBS that they rate. This included subprime, Alt A, negative amortization and prime mortgages originated before 2009.
Then they elaborated on how it reached these conclusions. It had performed an "impact study" covering about 10% of all the tranches to which its new estimates would apply. The results of this study suggested that for the sampled tranches, "approximately 30% of ratings will be lowered by four or more notches."
What about the remaining 70% of the sampled tranches? The answer of S & P was kept very unclear:
"The majority of the ratings (approximately 68%) will remain within three notches of the current rating." Would most of these rating changes be upgrades or downgrades? They didn't say. All they stated about upgrades was that "Approximately 2% of ratings will be raised by four or more notches" and that 2/3 of the upgrades will involve "movements from CCC to CC."
My reading of this lack of clarity is that S & P was not prepared to admit that the vast majority of the rating changes coming would be downgrades. Because of my familiarity with how S & P determined its previous default estimates, I am quite confident that most of the rating changes in store for market participants would be downgrades.
What did they say about the likely change to all the tranches it currently rates?
"Higher ratings are more likely to be lowered than lower ratings."
In researching this article, I discovered the following table from a recent analysis by three Michigan State University scholars showing the total downgrades for all non-Agency tranches rated by S & P as of February 2013.
Click to View
Let's take a careful look at this comprehensive table. Of the 121,584 non-Agency RMBS tranches rated by S & P, more than half were originally given the highest rating at the time the security was reviewed. These were the senior tranches of the RMBS which had the most protection in case of defaults by borrowers.
Notice what has happened to these senior tranches. Only 25% of those initially rated AAA have maintained that rating. One-third of all those originally rated AAA have had such high levels of default that they have had their rating withdrawn (WR). I suggest that you think long and hard about that.
There were still more than 23,000 tranches rated A or better as of February 2013. S & P seemed to be saying that these investment grade securities have the greatest risk of being downgraded. That would spell big trouble for anyone with a portfolio of these higher rated tranches.
Toward the end of its explanation, S & P went on to give specific percentages for what it calls the "base case default frequency assumptions." It stated unequivocally that for any mortgages in non-Agency tranches which were 90 or more days delinquent, it expected that 100% of them would end up in default. Not most of them. Not the vast majority of them. All of them!
In reading S & P's explanation while preparing this article, I was even more shocked than when I first read it a year ago. S & P seemed to be warning investors that thousands of downgrades were to be expected. Yet Wall Street and the media gave the initial 2012 announcement hardly any attention at all. I found it almost by accident while doing research on non-Agency RMBS. I have still not found a single article or report covering it. Amazing!
Back in 2013, I had had a phone conversation with an S & P spokesperson. From him, I learned something else very important. For all non-Agency loans where the loan-to-value ratio (LTV) was greater than 120%, they assumed that 100% of these mortgages would also eventually end up in default.
That conversation just amazed me. For more than four years, I have written about the bubble era mortgages and the collapse in underwriting standards. I have no doubt at all that the vast majority of non-Agency first mortgages originated in the major metros in 2006 and 2007 have LTVs of more than 120%. Just think what this means for the holders of these mortgages.
Take a look at S & P's own analysis of the connection between expected default rate and LTV ratio for 2005 sub-prime loans.
The chart ends at 120% LTV because, as I explained, S & P now assumes that at higher LTV ratios, 100% of the mortgages will default.
Are there certain metros where this will have the greatest impact? According to American Securitization Forum's January 2013 report, 45% of all outstanding non-Agency RMBS mortgages were originated in California, Florida, Nevada and Arizona. The housing markets in these states suffered the largest decline in value when the bubble collapsed. Hence the overwhelming majority of these properties have LTVs in excess of 120%.
Downgrades of RMBS Continue Unabated
Although downgrades of sub-prime tranches have been massive since the collapse, don't think for a minute that these downgrades are winding down.
The June 2014 Mortgage Market Monitor from TCW reported that 34% of all securitized subprime mortgages were either seriously delinquent, in default, in bankruptcy, or already repossessed by the servicing bank. It was only because 46% of all subprime mortgages have been modified that this serious delinquency percentage was not substantially higher.
In April 2013, S & P published a new "US RMBS Recovery Analytics" report. Applying its new rating criteria from the previous year which I just reviewed, the report revealed that of the 7,111 pre-2009 tranches rated AAA in 2012, a mere 1,119 remained at this level. Incredible! Nearly 85% of these tranches have been downgraded. One out of five was downgraded to BBB or lower. It gets worse. More than 10% of them lost their rating completely.
Downgrades by rating agencies continue this year. On May 14, Moody's reported that it had downgraded $216 million of RMBS tranches holding sub-prime mortgages originated in 2003. All eleven tranches had previously been downgraded either in 2011 or 2012.
A Moody's press release described the reason for the new downgrade as "a result of deteriorating performance and/or structural features resulting in higher expected losses for the bonds than previously anticipated." That sounds like S & P's warning from August 2012. Moody's warned that ratings in the US RMBS sector "remain exposed to the high level of macroeconomic uncertainty, and in particular the unemployment rate." Good luck figuring out what that means.
This downgrade of sub-prime tranches is very troubling. Loans issued in 2003 - even subprime mortgages - had much higher underwriting standards than those originated in 2005 and 2006. If performance of these loans is "deteriorating" as Moody's puts it, what does that suggest about the worst-of-the-worst mortgages originated in 2006 and early 2007?
Putting Rating Downgrades in Perspective
Since the vast majority of these formerly top-rated RMBS tranches have been either seriously downgraded or lost their credit rating entirely, how much credibility should be given to their current credit rating? As I see it, not much at all. The fact that so many continue to be downgraded well after the credit crisis was supposed to have ended supports my skepticism.
It seems quite reasonable to doubt the soundness of the current credit ratings. The important question is how does this impact an investor in non-Agency RMBS? Put differently, how can a prudent investment advisor of a client who owns these tranches either through shares of a mortgage REIT or a hedge fund determine what risks they pose to return of capital?
MFA Financial
To help you, let's talk a close look at a mortgage REIT with huge holdings in non-Agency RMBS tranches. MFA Financial (MFA) has one of the largest non-Agency RMBS portfolios of all the mortgage REITs.
As stated in its first quarter 2014 10-Q report, MFA held non-Agency RMBS tranches with a market value of slightly more than $5 billion. The majority of loans in this portfolio were originated during the bubble years of 2005 - 2007.
Only one-half of these mortgages were amortizing loans. The rest were interest-only. One-third of the non-Agency mortgages were cash-out refinancing loans taken out by the borrower to tap the rising equity in their home. For the 2006 and 2007 loans taken out by owners with high FICO scores, the outstanding balance averaged more than $500,000. Because of these characteristics, I am almost certain that the vast majority of these properties are badly underwater.
Although the total non-Agency portfolio had an overall serious delinquency rate of 15.8%, it was more than 22% for 2006 and 2007 loans where the borrowers had FICO scores below 715. In the past twelve months, 30% of them were delinquent at some point. Remember this -- Had so many delinquent loans not been modified, the delinquency rate would have been far higher.
In the 10-Q report, there is no breakdown of the non-Agency portfolio by type of loan. So we have no idea what percentage of them are sub-prime, Alt A, Option ARM or prime loans.
The report only categorizes loans originated before 2006 as "2005 and Prior." You must keep in mind that the overwhelming majority of these were originated in the bubble year of 2005. How do we know? In its April 2013 Recovery Analytics report, S & P had explained that only 7% of all 2004 and earlier securitized sub-prime loans remained in RMBS tranches.
The percentage of loans still outstanding is not much higher for other 2004 and earlier non-Agency loans. Only 12% of the Alt A loans remain in RMBS pools, 10% of Option ARMS, and a mere 7% of sub-prime loans.
Why is this important? These 2004 and earlier loans were underwritten with higher standards than the bubble era loans. Even more important is the fact that they had substantially more equity in the property than the 2005 - 2007 loans. The loans remaining in MFA's non-Agency portfolio are there because the borrower's credit was too weak to refinance later or because the property was underwater.
Here is one final scary fact in the 10-Q report. The protection that is built into an RMBS to shield the higher-rated tranches from principal losses is known as "credit enhancement." Losses up to that amount go first to the lower, riskier tranches. In some RMBS, the credit enhancement is 40% or more. However, the average credit enhancement in MFA's portfolio is a mere 2%. Tranches that contain 61% of their non-Agency mortgages have no credit enhancement at all.
That is quite shocking. It means that these tranches are fully exposed to principal losses from defaults. Remember what I said earlier about S & P's latest assumption. They expect that 100% of non-Agency loans where the LTV is more than 120% will default. Cumulative losses in MFA's non-Agency portfolio could be well over $1 billion dollars before the collapse is finished.
There is little in MFA's 10-Q report which would indicate even to savvy investors that these potential losses were likely. Like most investors in mortgage REITs, they would probably focus on the dividend yield and little else. When these losses finally become evident, they would be caught totally unprepared.
One thing that is apparent to even the casual reader of the 10-Q report is that cash and equivalents on hand was cut in half from the previous quarter. Paying the $0.20 dividend in the second quarter will be difficult without additional financing.
My advice to owners of MFA shares is simple. Sell them while the market is liquid and the price is still close to its 52-week high.
Conclusion
The non-Agency RMBS market is still large - roughly $800 billion in thousands of tranches. Even after the sell-off of a year ago, prices on the secondary market are substantially higher than the lows of early 2009.
Wall Street and most investment advisors are quite euphoric about the long-term outlook for the non-guaranteed RMBS market. I have tried to show you compelling reasons why this optimism is completely misplaced.
The crash in housing and in the bubble-era mortgages which enabled the speculative madness is far from over. I strongly urge you to shed the euphoria and act in a prudent, defensive way on behalf of your clients.
http://econintersect.com/b2evolution/blog3.php/2014/07/27/residential-mortgage-backed-securities-are-heading-over-a-cliff
Big Bank Financial Settlements: Get out of Jail Free Cards?
Posted: 07/25/2014 5:31 pm EDT Updated: 1 hour ago
In mid-July, Citigroup agreed to pay $7 billion for what the U.S. Department of Justice (DOJ) called "egregious misconduct" related to its handling of subprime mortgages and mortgage securities in the run up to the financial crisis. This was not a singular result. It is part of a trifecta.
In March of this year, Bank of America entered in to a $9.5 billion settlement with the Federal Housing Finance Agency as the conservator for Fannie Mae and Freddie Mac for its alleged transgressions on mortgage securities. In addition to this, the DOJ is reported to be seeking as much as $17 billion from Bank of America to make its settlement.
In November of 2013, JPMorgan Chase made a "record settlement" with the DOJ of $13 billion for its sale of troubled mortgages.
Billions here - billions there - this adds up to real money. The question is whether it is sufficient to resolve these matters entirely. We think not given the level of harm that was done to home buyers and investors and its enduring impact.
As Attorney General Eric Holder noted in his announcement of the Citigroup agreement at news conference, the deception around these mortgages "shattered lives." Holder observed that, as the bank increased its profits and market share, "They did so at the expense of millions of ordinary Americans and investors of all types - including other financial institutions, universities and pension funds, cities and towns, and even hospitals and religious charities.
Consumer and public interest groups criticized this deal and the earlier ones as inadequate. Bartlett Naylor of Public Citizen stated, of the Citigroup settlement, "In the context of the damage done, the damage even described by the attorney general, we're not even in the same ball park." Simon Hodes of Lynn United for Change, a Boston area advocacy group against foreclosures declared, "Seven billion sounds like a lot but compared to the number of families that lost their homes, it is not very much at all."
We will not opine on the size of these financial settlements. We do believe, however, that no matter how large the amount these firms pay, civil action should be just part of the remedy to be pursued in these instances.
That is why we were pleased to hear Tony West, associate attorney general at the DOJ and lead negotiator on the Citigroup and the other deals, comments during an interview with Judy Woodruff of the PBS Newshour on July 14. West declared, "...this is a civil resolution. It's not a criminal resolution. And, in fact, by the very terms of the settlement agreement, we have not written off any ability to pursue criminal charges, should the evidence merit that."
Woodruff probed, "So that could still come?" To which West responded, "That's always a possibility out there."
This possibility of criminal behavior by bank executives and employees at each and all of these big banks that have reached financial settlements is one that needs to be fully investigated. And, as appropriate, criminal charges should be brought and, if they are convicted, jail time must be served.
There are three reasons for this. The first is that while the banks appear to be settling for megabucks. In the grander scheme of things and on their long term balance sheets, it's more like "chump change."
For example, Citigroup's $7 billion settlement was about 50% of its $13.7 billion profits of last year. $3 billion of the settlement will be tax deductible. On the day that the Citigroup settlement was announced, investors drove its share price up by 3 percent because they were pleased that an agreement was reached and the bank's latest results exceeded expectations.
JPMorgan's $13 billion settlement was a little more than 55% of the $23 billion it had set aside for its litigation reserve fund for this matter. $7 billion of the settlement was tax deductible.
The second reason is that there were so many victims. Some of them will be compensated from the dollars that have been paid but millions have had homes foreclosed on and savings lost because of this and they will never see any restitution.
It is estimated that in the United States today there are about 750,000 people incarcerated and approximately 4 million arrested for "victimless crimes". To date, no one from any of these big banks has been arrested or charged for these financial shenanigans which have been so "victim-full". This seems like a miscarriage of justice.
This brings us to the final reason and that is the need for consequences for misdeeds in order to modify future behavior. A concern about personal consequences can serve as a deterrent.
If bank executives think they can buy their way out - exercise their "get out of jail free" cards, they could fall back into the same miscreant pattern and practices that brought us the great recession or invent even more diabolical and destructive ones. If on the other hand, they have the potential of being handed another card - one that reads "Go directly to jail. Do not pass go. Do not collect $200., they may think more than twice about doing something nefarious.
We recognize that jails are not known as good places for rehabilitation and reform. We are not talking about that here, however. What we are talking about is a matter of fairness and equitable treatment.
Civil settlements get us part way to justice with these banks. Due process and consideration of the criminality of individuals for their "egregious misconduct" gets us the rest of the way.
http://en.actu.net/redirect.php?url=http://www.huffingtonpost.com/frank-islam/big-bank-financial-settle_b_5617243.html
Settlements and Fines from TBTF Institutions Since the Crisis
StalingradandPoorski's picture
Submitted by StalingradandPoorski on 07/25/2014 19:26 -0400
8.5%
AIG
Bank of America
Bank of America
Barclays
Bear Stearns
CDO
Citigroup
Countrywide
Credit Suisse
Deutsche Bank
Fannie Mae
FINRA
Foreclosures
GMAC
Goldman Sachs
goldman sachs
Institutional Investors
Lehman
LIBOR
Merrill
Merrill Lynch
MF Global
Morgan Stanley
RBS
Securities Fraud
US Bancorp
Wachovia
Wells Fargo
Yen
inShare1
Let's take a look at the amount of
settlements/fines from various banks and financial institutions around the world
since the crisis. There are probably a lot of settlements/fines I have missed, frankly the amount below is already staggering, so this is a very rough estimate. Some perspective, most of these individual banks have now paid more in fines then the value of most countries GDP's. Total tally from the listed Fines/Settlements below is $174,489,800,000. Reminder: Jail time served by any board members or CEO's of the following TBTF list=0. #FreeCorzine. Meanwhile, Supreme Leader Obama is going on and on about making the system "fair," while the same people who caused the last financial crisis are the same people still in charge.
http://www.zerohedge.com/news/2014-07-25/settlements-and-fines-tbtf-institutions-crisis
2006
*AIG 1.6 Billion Settlement with SEC, New York
State over securities fraud
2008
*Bank of America $8.4 Billion Countrywide
Predatory Lending Settlement
2010
*Goldman Sachs $550 Million Settlement to SEC
for Subprime Mortgage CDO
2011
*KPMG $37 Million Settlement over Auditing at
Wachovia
*Wells Fargo $590 Million Settlement in Claims
over Wachovia
*Bank of America $8.5 Billion Settlement with
BNY Mellon over Mortgages
*Bank of America $1.6 Billion Assuared Guarantee
Settlement
*Bank of America $1.5 Billion Fannie Mae
Settlement
*Citigroup $285 Million Settlement with SEC over
Fraud Charges
*UBS $2.5 Million Fine to FINRA over Lehman
Notes
2011 Total $12,514,000,000
2012
*Deutsche Bank $202 Million to Settle Misleading
Department of Housing and Urban Development on Mortgages
*JPM $1.8 Billion Settlement Nationwide
Settlement over Improper Foreclosures
*JPM $269.9 Million Settlement with SEC over
Creation and Underwriting of MBS
*JPM $20 Million Settlement Mishandling of
Lehman Funds
*Ally/GMAC, BofA, Citi, JPM, Wells Fargo $25
Billion National Mortgage Settlement
*UBS 1.5 Billion Settlement over Rate
Rigging
*Barclays $453 Million Settlement over Libor
Probe
*Bank of America $2.4 Billion Merrill Lynch
Securities Fraud Settlement
*Bear Stearns $275 Million Settlement with
Shareholders
2012 Total $31,919,000,000
2013
*JPM $13 Billion Civil Settlement with Justice
Department for Mortgage Lending Practices
*JPM $110 Million Settlement on manipulation of
Japanese version of Libor
*JPM $4.5 Billion to 21 Institutional Investors
to Settle losses tied to Mortgage-Backed Securities
*JPM $100 Million Settlement to CFTC for London
Whale Trades
*JPM $920 Million Settlements with OCC, SEC,
FED, UK Fin. Conduct Authority over London Whale
*JPM $410 Million Settlement over California
Electricity Rigging
*JPM $5.1 Billion FHFA Settlement
*Deutsche Bank $1.9 Billion Settlement with FHFA
*Deutsche Bank €725 Million Settlement for
Euribor and Yen Libor Rigging
*Bank of America $11.2 Billion Fannie Mae
Settlement
*Bank of America $2.9 Billion Settlement with
FED and OCC
*Bank of America $1.7 Billion MBIA Settlement
*Bank of America $131.8 Million SEC Settlement
over Mortgage Deals
*Societe Generale €446 Million Settlement
Euribor Manipulation
*RaboBank $475 Million Settlement over Libor
Manipulation
*UBS $885 Million Settlement over FHFA Lawsuit
*RBS €391 Million Interest Rate Rigging
*Goldman Sachs & Morgan Stanley $557 Million
Settlement over Foreclosures
*Wells Fargo $541 Million Fannie Mae Loan
Settlement
*MF Global $100 Million to CFTC
*Citigroup $3.5 Billion FHFA Settlement
2013 Total $44,491,800,000
2014
*JPM $2.6 Billion Settlement related to
Madoff Fraud
*Morgan Stanley $1.25 Billion Mortgage
Settlement
*Bank of America $6.3 Billion Settlement of
Mortgage Securities Suit
*Citi $7 Billion Settlement for Mortgage
Probe
*US Bancorp $200 Million Settlement with DOJ
over bad Mortgage-Loan Apps
*Credit Suisse $885 Million Settlement over
FHFA
*JPM $4 Billion Settlement over FHFA
Lawsuit
*Deutsche Bank $1.9 Billion Settlement over
FHFA Lawsuit
*Credit Suisse Guilty with $2.6 Billion fine
over Tax Evasion
*Bank of America $16.6 Million Settlement over
Sanctions Violations
*Bank of America $9.5 Billion FHFA Settlement
*Morgan Stanley $275 Million SEC Settlement over
Risky Mortgages
*Citigroup $5 Million SEC Settlement over
Lavaflow
*BNP Paribas $8.9 Billion PLEADS GUILTY
*Pending Bank of America $13 Billion Settlement
over U.S. Mortgage Probe
2014 Total $75,015,000,000
Total Penalties $174,489,800,000.
It seems that the government lawyers have a great capacity for humiliation. They know more than we know so they must know the public flogging from Judge (Judy) Sweeny will continue. If I were in their place I would have a sense of self preservation. I would try to back out with a little dignity at this point. The whole world sees through this pitiful sideshow for a lack of a real defense. It makes me more patient. I will just keep riding the FnF express. It is a little slow but it is powerful and there is no stopping it !
Chalmer I have seen it before. I choked on my iced tea the first time. She was so focused on grandstanding and then she slips up and tells the truth.
King I am reposting article w/o the link
Court Forces Government to Release Documents in Fannie/Freddie Suit
Submitted by Carl Horowitz on Fri, 07/25/2014 - 14:50
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The burden carried by the holders of stock in mortgage giants Fannie Mae and Freddie Mac, each operating for nearly six years under federal conservatorship, just got lighter. On July 16, U.S. Court of Federal Claims Judge Margaret Sweeney, in a procedural ruling, held that shareholder-plaintiffs in Fairholme Funds Inc. et al. v. United States are entitled to know material facts that the government wants to keep secret. The shareholders are seeking compensation for foregone income resulting from the Treasury Department's "sweep" rule of August 2012, which forced the companies to forward all dividends to the department in perpetuity. Government lawyers had filed a motion for a protective order on May 30 to inhibit discovery. The outcome of this case will have major implications for the future of property rights in this country.
National Legal and Policy Center has been following the situation at the Washington, D.C.-based Federal National Mortgage Association ("Fannie Mae") and the McLean, Va.-based Federal Home Loan Mortgage Corporation ("Freddie Mac") following the federal takeover of the two publicly-traded companies in September 2008. The nation's financial services industry at the time was in free fall. House prices were plummeting. Defaults and foreclosures were on the rise. And Fannie Mae and Freddie Mac, which now guarantee or hold a combined $5 trillion in U.S. residential mortgages - almost half of outstanding loan volume - had become dangerously undercapitalized. There was a real danger that the holders of their bonds, known as mortgage-backed securities, would not be repaid. An independent federal regulatory agency created by Congress that summer, the Federal Home Finance Agency (FHFA), used its authority several weeks later to seize the companies and place them under conservatorship. Conservatorship was intended as a temporary measure. The purpose was to keep Fannie and Freddie, as "Government-Sponsored Enterprises," solvent, thus ensuring timely payments to bond investors. The arrangement was not permanent.
Over the next few years, the Treasury Department provided the companies with a combined $187.5 billion in loans. The money came out of government-held senior preferred stock representing 79.9 percent of shareholder equity. This bailout came attached with some heavy strings. Most significant was a requirement that Fannie Mae and Freddie Mac had to forward 10 percent of their accrued dividends to the Treasury Department. As their share prices were depressed at the level of penny stocks, their earnings depended on dividends. But during 2011-12, the housing market, unexpectedly and for various reasons, made a comeback. The Treasury Department, seeing an opportunity to speed up debt collection, developed the "third" or "sweep" rule. Issued on August 7, 2012, it would supersede the 10 percent rule. It effectively barred shareholders from realizing any profits on current or future earnings. In the department's own words, the sweep refers to "every dollar of profit that each firm earns going forward." Investors were righteously angry. And given that hedge funds and other financial intermediaries held much of their stock, a spate of lawsuits seemed inevitable. Over the course of 2013, they materialized. One of the most publicized of these suits was filed by the New York-based equity fund, Fairholme Capital Management. The action sought to rescind the sweep amendment and to compensate shareholders. This case eventually incorporated similar ones.
On merit alone, Fairholme and co-plaintiffs have a very strong case, especially at this point in time. During Second Quarter 2014, Fannie Mae and Freddie Mac already had sent more than $200 billion in profits to Treasury, a total that was set to rise to $213.1 billion by the quarter's end - about $25 billion more than what the government had loaned them. To retain the rule would appear in direct contravention with the very purpose of the FHFA conservatorship. Forcibly diverting company profits to the government in perpetuity, argued the plaintiffs, was the antithesis of the intent of the Housing and Economic Recovery Act of 2008, which authorized the conservatorship as a temporary measure. Indeed, this was little short of de facto nationalization. The Treasury Department has countered that the plaintiffs have failed to make a convincing case for a regulatory taking.
But there is a reason why the plaintiffs have had difficulties on this score: lack of access to information. The government over the years has kept secret its decisions regarding Fannie Mae and Freddie Mac. And when details of that decision-making are made publicly available, they validate suspicions that the Treasury Department has never had any intention of abiding by the terms of the conservatorship. In late 2013, a New York hedge fund, Perry Capital, filed a separate suit to rescind the sweep rule. Unlike Fairholme, the plaintiffs in that case are not seeking financial compensation. Representing Perry Capital, the Washington law firm of Gibson, Dunn & Crutcher somehow managed to acquire a Treasury Department internal memo, dated December 20, 2010 (see pdf), sent by Undersecretary Jeffrey Goldstein to Secretary Timothy Geithner. In discussing Fannie Mae and Freddie Mac, the memo referred to "the administration's commitment to ensure existing common equity holders will not have access to any positive earnings from the G.S.E.'s in the future." In no way did the Treasury Department notify shareholders of this policy change. Had it done so, it is highly unlikely anyone would have continued to hold stock in these companies.
The plaintiffs in Fairholme believe that where there is smoke, there is fire. They seek full access to Treasury Department documents, whether in the form of financial statements, memos or e-mails. In this way, they can better determine whether the department acted contrarily to the conservatorship law. The U.S. Court of Federal Claims issued an order this past February 26 that allowed each party to engage in jurisdictional discovery. The government didn't like this. It meant that a good many of its private documents could be exposed to light. To that end, on May 30, the Treasury Department filed a motion for a protective order, arguing that Section 4617(f) of the HERA legislation bars the Court from taking "any action to restrain or affect the exercise of powers or functions of the Federal Housing Finance Agency." Moreover, argued the department, disclosing the contents of the document would impede the conservatorship process and have "a destabilizing effect on the nation's housing market and economy." And it alleged that the documents, as privileged property, are protected from deliberative discovery.
On July 16, Judge Margaret M. Sweeney issued an Opinion and Order (No. 13-465 C). It was all but a total victory for the shareholders. Her decision covered two areas: 1) the authority of the court to affect the exercise of Federal Housing and Finance Agency powers; and 2) the authority of the Treasury Department to invoke executive privilege to withhold the availability of confidential documents to outside parties. In each case, she ruled for the plaintiffs and, more broadly, for public transparency.
On the issue of whether the Treasury Department could insulate itself from discovery relating to the operations of the Federal Housing Finance Agency, Judge Sweeney referred to recent rulings by the U.S. Court of Appeals for the Ninth Circuit, which held that FHFA "cannot evade judicial review...simply by invoking its authority as conservator" (County of Sonoma v. FHFA) and "cannot evade judicial scrutiny by merely labeling its actions with a conservator stamp" (Leon County v. FHFA). The approach to be taken in this case, argued Sweeney, ought to be "for a court to examine the factual underpinnings and leg contentions presented by the complaint, in order to determine whether the exercise of its jurisdiction is proper." Then she lowered the boom:
For purposes of the instant motion, there is no request by plaintiffs that would potentially restrain or affect the exercise of powers or functions of the FHFA as conservator. Consequently, blanket assertions concerning the court's ability to conduct these proceedings, especially as they pertain to a discovery matter related to the question of jurisdiction, has no merit.
The court made its position clear: The Treasury Department and the FHFA have to release documents at the request of shareholder lawyers insofar as they have the potential to reveal the rationale for decisions affecting the value of Fannie Mae and Freddie Mac stock.
On the issue of whether the federal government reserves the right to assert executive privilege in turning over documents, the ruling also weighed in on the side of the plaintiffs. Justice Department lawyers referred to NLRB v. Sears, Roebuck & Co., which protects "documents reflecting advisory opinions, recommendations and deliberations comprising part of a process by which governmental decisions and policies are formulated." Yet the court argued that while this principle is valid, it has practical limits. The ruling read: "Generally, to be exempt from disclosure under the deliberative process privilege, the government must show that the information is pre-decisional and deliberative." Referring to In re United States, 321 F. Appendix at 958 (citation omitted), Judge Sweeney added that pre-decisional documents "may include recommendations, draft documents, proposals, suggestions, and other subjective documents which reflect the personal opinions of the writer rather than the policy of the agency." Such documents qualify as deliberative "to the extent that they reveal the mental processes of decision makers."
The court added that a claim of deliberative process privilege, even when properly established, "is not absolute" and "subject to judicial oversight" (Marriott International Resorts L.P. v. United States). Quoting other cases, Judge Sweeney stated that after the government makes a sufficient showing of entitlement to the privilege, "the court should balance the competing interests of the parties" (Scott Paper Co. v. United States) and that plaintiffs may overcome the privilege by making "a showing of evidentiary need...that outweighs the harm that disclosure of such information may cause to the defendant" (Pacific Gas & Electric Co. v. United States). The government's claim of protection from discovery in the current Fairholme case, Judge Sweeney concluded, did not pass muster:
Here, defendant has not provided a privilege log explaining why documents identified as responsive to plaintiffs' discovery requests would be protected. Indeed, defendant admits that even it has not reviewed some of them, and yet claims that the documents are privileged....Overall, the defendant advances general claims concerning the sensitive nature of the documents, and the adverse consequences that would result from divulging them. Without more detail regarding the content of the documents, or the opportunity to review them, the court cannot make a finding that they fall under the privilege...In essence, defendant asserts that the court should merely take its word that the documents - some of which defendant, itself, has not reviewed - are privileged. This suggestion is contrary to law. However, even as it is difficult to evaluate the likelihood of the fallout from disclosure that defendant describes, out of abundance of caution, the court will exercise care in attempting to avoid the dire consequences that defendant claims will occur.
Judge Sweeney concluded that she "has fashioned a solution to balance the parties' competing needs, and to comply with the dictates of the deliberative process privilege." Jurisdictional discovery, she wrote, must proceed in phases: April 1, 2008 through December 31, 2008; June 1, 2011 through August 17, 2012; and August 18, 2012 through September 30, 2012. The plaintiffs will inform the court as to their belief in the necessity of subsequent discovery.
The ruling is procedural, but it is a key victory for Fannie Mae and Freddie Mac shareholders all the same. In extracting all profits, the sweep rule at once has confiscated income and suppressed share prices. Surely they, and the lawyers who represent them, should have an opportunity to review documents pertinent to the issuance and enforcement of the rule. And shareholders are substantial in number. At the time of the December 20, 2010 memo from Under Secretary Goldstein to Secretary Geithner, about 18,000 investors held 1.1 billion shares of Fannie Mae common stock and about 2,100 investors held 650 million shares of Freddie Mac common stock. For the last couple of years these companies have been profitable. There is no reason why the shareholders shouldn't be allowed to realize a portion of the profits.
The Fairholme case underscores a larger property rights issue. It's true that Fannie Mae and Freddie Mac received a government lifeline in order to pay off the holders of their mortgage bonds. But that should not serve as a justification for putting them or their shareholders in a state of perpetual servitude. These two mortgage firms have more than paid off their $187.5 billion combined debt. They should be allowed to function as normal companies, minus their official Government-Sponsored Enterprise status. The problem with government bailouts is that even the "successful" ones may take a toll on the recipients. The conservatorships of Fannie Mae and Freddie Mac are not intended as a permanent arrangement. The forced diversion of company profits into federal coffers in perpetuity constitutes legalized theft. Shareholders are right to take action against the thievery.
Judge Rules Against Federal Housing Finance Agency
24 Jul, 2014
By: Sarah
682 3
inShare1
federal Housing, Judge, FairholmFairholme Funds was awarded a great victory when Judge Margaret Sweeney ruled that there should be broad access in terms of discovery to the FHFA records that go back for a long time. The ruling swept aside the narrow 2012 period which the FHFA desired to restrict the discovery to.
Historical judgment
The Judge also disallowed the FHFA argument that the concerned court lacks authority when it comes to affecting the FHFA functions or powers. She reminded the agency of not being outside the purview of US law. Fairholme Funds is regarded as entry point for GSE shareholders and Investors Unite who are suing against FHFA.
Her judgment also noted that the court is in accordance with case law of United States Court of Appeals for Ninth Circuit. This appeals court states that it is not possible for FHFA to evade judicial reviews.
Judge Sweeney issued the requisite orders and opinions to permit the process of discovery to go on in this notable lawsuit. The judge granted discovery starting from June 2011 to August 2012, despite FHFA arguing that the court must permit discovery only in the period beginning January 2012 and ending August 2012. She also permitted discovery from April 2008 to December 2008, versus the government requested September to December 2008.
Opaque policies
The Judge's order is important as it will encompass more pre-decision deliberations that Investors Unite claims is important to the case. Investors in GSEs prefer mortgage giants to give the shareholder profits owed to them. However, the GSEs are not complying with that as a component of bailout agreement with the federal government.
When Freddie Mac and Fannie Mae were bailed into life during the recent financial crisis and put into conservatorship, the total profits were funneled back into the US Treasury. Since the government now has got back its dues, investors want their rights and stake to be upheld.
Ralph Nader, the consumer advocate, Tim Pagliara, the CEO of CapWealth, Carl Icahn, the investor and many other GSE shareholders coming from a number of states are participating in the campaign under the Investors Unite banner.
Pagliara said that theft is not a privilege and the order and opinion from the judge is a positive step when it comes to Freddie Mac and Fanny Mae investors and members of Investors Unite all over the United States. He added that investors must know when US Treasury found out that Freddie and Fannie will be profitable and the way it was incorporated into decision making process around Third Amendment Sweep.
http://www.financialbuzz.com/judge-rules-against-federal-housing-finance-agency-financial-law-119505
timhoward717
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Setting the stage.
24 Thursday Jul 2014
Posted by timhoward717 in Uncategorized
˜ 16 Comments
Maxine Waters The Ranking Democratic Member of the House Financial Services made some very telling remarks at today’s Financial Services Committee Hearing entitled, “Assessing the Impact of the Dodd-Frank Act Four Years Later”.
I will expand a little more later but these quotes say quite a bit.
“They incorrectly blame the financial crisis on government efforts to house the poor and disadvantaged – despite the fact that private mortgage securitizations built on predatory mortgage loans started the crisis, exotic over-the-counter derivatives exacerbated it, and poor corporate governance and risk management allowed it to flourish.”
“And though they are the loudest critics, Republicans have never offered an alternative. No alternative to protect consumers. No way to wind-down large, complex banks. And no capacity to pass reforms of Fannie Mae and Freddie Mac.”
The narrative is continuing to shift. The stage is being set.
keep the faith!
http://timhoward717.com/
S&P May Face SEC Enforcement Action Over MBS Ratings
Share us on: By Jeff Sistrunk
Law360, Los Angeles (July 23, 2014, 9:11 PM ET) -- Standard & Poor's Ratings Services could face an enforcement action by the U.S. Securities and Exchange Commission over alleged violations of federal securities laws with respect to its ratings of several commercial mortgage-backed securities, S&P parent McGraw Hill Financial Inc. said in a Wednesday SEC filing.
McGraw Hill disclosed in the filing that it has received a so-called Wells notice from the SEC indicating that commission staff have made the preliminary determination to recommend an enforcement action against S&P over its ratings of six commercial MBS...
http://www.law360.com/articles/560571?utm_source=rss&utm_medium=rss&utm_campaign=articles_search
Banks face challenge averting U.S. regulator's mortgage lawsuits: judge
By Nate Raymond
NEW YORK | Wed Jul 23, 2014 8:00pm EDT
By Nate Raymond
NEW YORK (Reuters) - A federal judge on Wednesday said banks faced an uphill battle in convincing her to dismiss a U.S. regulator's claims that they misled Fannie Mae and Freddie Mac into buying mortgage-backed securities that later went sour.
At a hearing in New York, U.S. District Judge Denise Cote cast doubt on whether she would revisit her ruling finding the Federal Housing Finance Agency (FHFA) did not wait too long in suing the banks.
"I don't want anyone to be surprised if in my view the defendants have a steep hill to climb here," Cote said before hearing arguments from the lawyers.
The hearing was prompted by motions by HSBC Holdings plc, Goldman Sachs Group Inc and Nomura Holdings Inc, the three primary remaining banks with lawsuits before Cote out of 18 the FHFA filed in 2011 over about $200 billion in mortgage-backed securities.
A ruling for the banks could avert what would be some of the biggest U.S. trials to spill out of the 2008 financial crisis. Goldman Sachs and HSBC are scheduled to face trial Sept. 29. A trial in the Nomura case is due for Jan. 26.
Other banks have settled ahead of trial, enabling the FHFA to recover $16.1 billion.
The cases moved forward after Cote in 2012 issued a key ruling rejecting an argument by UBS AG that the case against it was untimely.
The 2nd U.S. Circuit Court of Appeals in New York upheld Cote in 2013. UBS later settled for $885 million, but the ruling's reasoning subsequently was applied to the remaining cases.
In June, the U.S. Supreme Court ruled in an environmental case that a federal law did not preempt a state-law statute that placed time limits on bringing a lawsuit that applied even if a plaintiff did not know it had a claim.
The ruling prompted HSBC, Goldman and Nomura to push Cote to consider the timeliness issue again in the FHFA cases, which also assert state-law claims.
On Wednesday, the banks and FHFA, both brought in high-profile litigators, David Boies and Kathleen Sullivan, respectively, to argue the case.
Sullivan, a former dean of Stanford Law School representing the FHFA, said a 2008 law establishing the agency as conservator for Fannie and Freddie after the financial crisis was intended to give it time to build cases like these.
"The statute's purpose is to enable the FHFA to have the time it needed," she said.
But Boies, who represented HSBC and is perhaps best known for representing former Vice President Al Gore in the 2000 presidential election recount, said similarities between the FHFA's cases and the Supreme Court one were "striking."
"The issue that we have here is not a disagreement between Ms. Sullivan and myself," he said. "The issue is we have a disagreement between the plaintiff and the Supreme Court."
The case is Federal Housing Finance Agency v. HSBC North America Holdings Inc, U.S. District Court, Southern District of New York, No. 11-6189.
http://mobile.reuters.com/article/idUSKBN0FS2E920140724?irpc=932
Fannie Mae sees 2014 new-home sales hitting highest level in seven years
July 23, 2014, 11:41 AM ET
(This post has been updated to clarify that the most recent projection from Fannie Mae was an upgrade.)
Mortgage-finance giant Fannie Mae grew more optimistic this month about U.S. sales of new single-family homes, and now sees 2014 hitting the highest level in seven years, data released Wednesday show.
Fannie’s FNMA July housing-market forecast estimates that sales of new single-family homes will reach 486,000 this year — the most since 2007 — a bit higher than June’s estimate of 478,000, which would have been the greatest since 2008.
Despite the uptick in the July forecast, over the past year Fannie has slashed its outlook for new-home sales, showing just how disappointing the market’s been in 2014. Back in July 2013, federally controlled Fannie had expected 2014 sales of new single-family homes to hit 588,000.
Rising mortgage rates, a low supply of new homes and unusually poor winter weather each took a bite out of residential sales this year. It’s also been tough for many borrowers to meet lenders’ strict credit standards.
And builders themselves have narrowed the pool of potential buyers. Wary of putting up too many new houses, many large builders have opted to focus less on the volume of units that they sell, and have poured construction into high-demand areas that can command premium prices. This ratcheting up of prices means that fewer buyers can afford a new home.
On Thursday, the government will release its latest monthly sales snapshot for new single-family homes, and economists polled by MarketWatch expect to see the annualized rate drop to 475,000 in June from 504,000 in May.
Just how weak are home sales? Five years after the end of the recession, sales of new single-family homes still remain far below an annual average of more than 770,000 over the 20 years leading up to a 2005 peak, government data show.
But there’s good news, too. With a strengthening labor market, builders are feeling more optimistic about home sales, and could increase construction rates. A recent government report showed that construction permits for single-family homes — an indicator of future demand — grew throughout most of the country in June, hitting the fastest pace in seven months.
Still, building has been disappointing this year. Fannie dropped its outlook for 2014 single-family-home construction starts, lowering July’s forecast to 696,000 from a year-earlier expectation of 876,000.
Also Wednesday, Fannie cut its outlook for economic growth in 2014, saying it now expects fourth-quarter gross domestic product to rise 1.5% from the year-earlier period, compared with the company’s prior forecast of 2.1% growth.
–Ruth Mantell
http://blogs.marketwatch.com/capitolreport/2014/07/23/fannie-mae-slashed-forecast-for-new-home-market-over-past-year/
Does anybody know what this means? It could be important. check the link
http://financialservices.house.gov/calendar/eventsingle.aspx?EventID=388388
JEB HENSARLING, TX , CHAIRMAN United States House of Representatives Committee on Financial Services 2129 Rayburn House Office Building Washington, D.C. 20515
MAXINE WATERS, CA, RANKING MEMBER
M E M O R A N D U M
To: Members of the Committee on Financial Services
From: FSC Majority Staff
Date: July 21, 2014
Subject:July 24,2014, Subcommittee on Capital Markets and Government Sponsored Enterprises
Hearing Entitled
“Oversight of the SEC’s Division Corporation Finance”
The Subcommittee on Capital Markets and Government Sponsored Enterprises will hold a hearing entitled
“Oversight of the SEC’s Division of Corporation Finance,” at10a.m. on July 24, 2014, in room 2128 of the Rayburn House Office Building.
Keith Higgins, Director of the Division of Corporation Finance,
will be the only witness.
Background The SEC has a three-part mission:to protect investors; to maintain fair, orderly and efficient markets; and to facilitate capital formation.The SEC currently has five Divisions ,17 Offices,and 11Regional Offices. The SEC’s Divisions and Offices are based at the SEC’s headquarters in Washington, D.C., and they report to the Chairman. The Division of Corporation Finance’s activities and responsibilities currently include, but are not limited to: regularly monitoring and reviewing filings made under the Securities Act of 1933(Securities Act) and Securities Exchange Act of 1934 (Exchange Act) to ensure compliance with disclosure and accounting requirements; conducting a comprehensive review of the SEC’s rules governing public company disclosure; completing rule makings to implement the crowd funding and Regulation A+ provisions of the Jump start Our Business Start ups Act (Pub. L. No. 112-106); completing rule makings to implement disclosure-related provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Pub. L. No.111-203) (Dodd-Frank Act); and conducting oversight of the proxy process, including the activities of proxy advisory firms.11 See About the Division of Corporation Finance, available at
http://www.sec.gov/divisions/corpfin/cfabout.shtml#.U8A19kAoF-4.
86,200 no fluff
Yes..and one day we will be rich bastards
Average is $4.12
Yes...long play. The hard part of hanging on to this stock is that it is manipulated so blatently by govt. agencies and by our esteemed elected officials with their DOA bills introduced with no hope of passing and by the market makers. But I suppose those reasons are why I was able to buy it cheap for the last six months. Now I just ride the gut wrenching roller coaster.
Makes sense to me. I had not considered the domino effect that should take place one suit after another. Or I guess it could be said that the whole government arrogant strategy is a house of cards. Anyhow...We win! Thanks for the response. It put things in better perspective for me.
Thanks. It was a collage in my head. All mixed into the same thing
The Way Forward for Affordable Housing
by Jeffery Hayward and Anne McCulloch
JUL 22, 2014 10:00am ET
http://www.americanbanker.com/bankthink/the-way-forward-for-affordable-housing-1068848-1.html
Jeffery Hayward is senior vice president and head of Fannie Mae's multifamily business. Anne McCulloch is Fannie Mae's senior vice president for credit and housing access.
Jeffery Hayward is senior vice president and head of Fannie Mae's multifamily business. Anne McCulloch is Fannie Mae's senior vice president for credit and housing access.
"When you think you know what you're doing in affordable housing, you're wrong," Sister Lillian Murphy once told Fannie Mae's National Housing Advisory Council. She was referring to the constantly shifting landscape of affordable housing, which she'd experienced first-hand as the chief executive of the nonprofit Mercy Housing.
Sister Lillian, who recently retired from her role at Mercy Housing, was being modest. She has been a leader in doing affordable housing the right way, helping Mercy to achieve a presence in over 200 cities, serving more than 152,000 people in over 45,000 homes. During her tenure at Mercy, she emphasized the need to build whole communities that offer working people not only a place to live but the opportunity to provide for their families, the resources to raise and educate children, and access to health care.
On the occasion of her retirement, it is important to take stock of where we are in affordable housing and consider what else can and should be done.
The country is emerging from a deep and difficult recession. Working families have borne the brunt of the foreclosure crisis, along with rising rents, stagnant wages and meager job growth. Finding a place to call home, whether you own or rent, has rarely been more difficult for many families and working people in America.
As a country, we must ensure that mortgage lending is safe and sound while also accessible to a broad spectrum of creditworthy borrowers.
We are making progress. Increasing clarity from Fannie Mae about credit standards, in combination with lender improvements in their loan manufacturing process, has resulted in a fuller range of potential homeowners having access to credit. Lenders have been removing some of the additional credit restrictions that they implemented on top of the standards set by Fannie Mae and other investors. Some lenders have begun originating loans with lower down payments or offering mortgages to borrowers with a broader range of credit scores than in recent years.
At Fannie Mae, we believe this is a good thing. If lenders meet our full spectrum of allowable credit characteristics, then more families who can afford a sustainable and responsible mortgage will be able to get one.
There is also more work to be done in the area of affordable rental housing. As Sister Lillian has emphasized, we must focus on preservi
ng and building rental homes that are
close to job centers, transportation, good schools and qualit
y health ca
re. Renters need quality housing that helps them support their families.
With limited available federal and state support for affordable rental housing in recent decades, it is harder to preserve affordable units. Builders are understandably motivated to construct market-rate apartment buildings in sought-after areas. But new construction of affordable properties is much less frequent, especially in lower-profile markets.
Despite these challenges, there are ways to preserve affordable rental units. Fannie Mae and Freddie Mac offer a range of options to finance existing affordable properties. For example, Fannie Mae offers Green Preservation Plus, a product that allows owners of affordable properties to access additional equity to use for energy and water efficiency upgrades. This allows apartment building owners to improve the property's quality while reducing energy and water expenses, making the property more profitable for the owner and maintaining affordability for tenants.
Sister Lillian has shown us that what is good for communities can also be good for business. There is a growing and compelling need for affordable housing, and lenders, building owners, Fannie Mae and Freddie Mac, governments and nonprofit organizations must work together to meet it. We should honor Sister Lillian's good work by building on her legacy in affordable housing.
http://timhoward717.com/
Refugees/media and beyond 10:46pm
22 Tuesday Jul 2014
Posted by timhoward717 in Uncategorized
˜ 1 Comment
I want to start tonight by posting the agreement we made with Jacob Wolinsky from Value walk on July 1st,
“Jacob, I like your approach, let’s keep it as simple as possible for now. On behalf of the timhoward717.com blog I give you permission to re-post any and all content you like with the only condition you credit the timhoward717 blog. This email constitutes a verbal agreement between the timhoward717.com blog and Jacob Wolinsky/Valuewalk.com. This agreement can be rescinded or modified at any time for any reason.
If you were considering any compensation, I would ask that you simply donate it to a charity of your choice that helps impoverished children. I am partial to the Lakota Sioux reservations in South Dakota but use your own judgement. I do not need to see any accounting or proof, I will trust your word.
I will also make mention of what you are doing in support of our cause in a future blog post. It is also fine to feed any and all content to the Street and where ever else you can help spread the word.”
We have turned down numerous offers to commercialize and or profit off our work here I must say that if I did not care deeply about this than there are very few people who could afford what I would require to perform what I offer for free here.
We chose to do this to help spread our simple message to a wider audience. We chose Jacob Wolinsky because he has consistently been reporting on our cause like a true reporter; he is not afraid to expose exactly what the government is attempting to do.
It came to our attention last night that a reporter at Housingwire.com basically copied part of our post and used it in his article. Now I am thrilled that many of the points we have been driving home have been turning up in all areas of discussion. But please folks let’s try and show a little more discretion and observe the normal protocols when using someone else’s writing in your articles a simple “as was pointed out on timhoward717.com” and quotation marks could solve this issue.
I want to welcome stock twits refugees to our forum I feel like our family grew a little bigger today. As I said, earlier this will be a good place for me to share little tidbits when I don’t have the time or material for a full blown new post. I will try and answer as many questions as possible there as well.
I want to point out an article that shows the tide is truly shifting. It’s titled “The Way Forward for Affordable Housing.” It’s written by JEFFERY HAYWARD AND ANNE MCCULLOCH two premiere Fannie Mae executives. It’s great to see Fannie employees being allowed once again to share with the world the great things they are doing you were silent too long. I want to point out that we are exploring options to purchase billboards in Virginia to personally thank the employees of Fannie and Freddie for helping to save America from financial ruin.
Finally, I just want to mention that the documents have begun to flow from the government. Keep the faith!
What are the basic differences in the two lawsuits? Anybody
This is old but I posted to save it.
Hedge Fund’s Suit on Fannie and Freddie May Spell Trouble for U.S.
By STEVEN DAVIDOFF SOLOMON and DAVID ZARING
July 29, 2013 2:46 pmJuly 29, 2013 8:59 pm
Harry Campbell
The lawsuit brought by the hedge fund Perry Capital against the federal government over the Fannie Mae and Freddie Mac bailout may be the case that finally subjects the government’s bailout practices to closer outside scrutiny.
The Fannie Mae and Freddie Mac bailouts were two of the biggest and earliest of the financial crisis. In September 2008, a government team led by the Treasury secretary at the time, Henry M. Paulson Jr., placed the companies into a conservatorship and provided them with hundreds of billions of dollars in backstop financing. In return, the government required the companies to issue super-preferred stock to the Treasury Department, stock that would pay the government before all other creditors, at a 10 percent rate.
As part of the rescue, the common stock and some classes of preferred were rendered worthless, or so the government assumed. It was a punitive act meant to penalize these security holders for failing to properly supervise the two government-sponsored entities.
Deal Professor
But as was often the case in the bailouts, the government cherry-picked creditor classes. Senior debt holders went unharmed, mainly because the government thought to impair their investments would further spook markets.
The bailout was borne out of the government’s desperate attempts not to put the two companies’ trillions of debt on its books. Even though the government thought they were worthless, the common stock and preferred stock were left outstanding, so it could be argued that the two government-sponsored enterprises were still independent. At the time, the government likely thought this wouldn’t be a problem because Fannie and Freddie were thought to be insolvent.
But by 2012, Fannie and Freddie unexpectedly turned back into profitable firms. Seeking a way to keep the common and preferred stock worth nothing, the government changed the way the two paid their dividends in a fashion that meant all dividends went directly to Treasury – that any remaining common and preferred-stock holders would receive nothing.
Perry Capital has accumulated both common and preferred stock in the two entities before this change, and now wants those dividends to be paid to those shareholders once the government’s priority preferred stock has received its 10 percent. It argues that the government failed to justify the change in dividend payments.
The firm is now suing, pitting its resources against the federal government. Perry is taking this matter seriously, hiring the superstar litigator Theodore Olson. Mr. Olson has good experience suing governments, and is the lead lawyer representing the bondholders in the big sovereign debt litigation going on in the United States Court of Appeals for the Second Circuit in Manhattan.
The government’s failure to cleanly deal with Fannie and Freddie is coming back to haunt it with Perry Capital’s suit.
During the financial crisis, the government did deals first, and thought about the consequences later. In an article that the two of us published in 2009, we labeled it “regulation by deal,” and observed that it was a form of regulation immune from most of the usual sources of oversight. The deals went unchallenged in court, and were paid for by Congress with little tightening placed on the purse strings.
At the time everyone was too worried to protest much. And to be fair to the government, it was acting on a tight time frame with limited options.
Now, things are calmer, and it is going to be harder for the government to act so quickly or cleanly. Perry Capital’s suit is not aimed at the initial bailout but rather the dividend restructuring last year. It’s clear that the government was merely cleaning up something it failed to put in place back in the financial crisis. The smart people at Treasury likely just didn’t think about it.
But the government’s actions are going to be much harder to justify now that the crisis is receded.
Still, the sailing will not be entirely smooth for Perry Capital. It is not clear that the Housing and Economic Recovery Act of 2008, the statute under which the government has been acting, contemplated these sorts of suits, and that statute is one of the legal bases for the complaint.
Whenever the government is sued, its actions are reviewed deferentially by the courts; when the Treasury Department is engaged in crisis management, that deference, for better or worse, gets even bigger. The question here is whether the courts will even want to wade into this mess, or will instead simply defer to the government.
Moreover, the ordinary remedy if the plaintiff wins in an administrative law case like this one is a remand to the agency, rather than a cash payment to the plaintiff. A remand would give the Treasury Department an opportunity to better articulate its reasons for the change in dividend policy, but would do nothing for Perry Capital’s bottom line.
Finally, the government is likely to argue that the firm has not suffered an injury serious enough to sue over, despite all those billions in dividends diverted. Perry holds both common and private sector preferred stock in Fannie and Freddie. But after the conservatorship, purchasers of the both types of stock could be construed as having some notice that the government might vary the dividend payment. If Perry Capital purchased its stake after 2008, it might not have standing to sue.
A lot of money is at stake. Fannie and Freddie are expected to pay tens of billions to the federal government over the coming years as the housing market recovers. The case also will affect how Congress and the government ultimately restructure these entities, as the government is now more likely to be more considerate of the preferred and common stockholders, if for no other reason than the desire to avoid litigation risk.
Whatever its outcome, though, the case may be more important for offering a look at the government’s drastic action during and after the financial crisis, which until now have been almost completely insulated from judicial oversight. Many have criticized the quiescence in Congress and the courts related to these extremely important and very expensive government programs. This may now be their chance to have this conduct reviewed.
Moreover, Perry Capital’s allegations suggest that the potential abuses often associated with government ownership – a dog that has not yet barked much in the wake of the crisis – are not entirely hypothetical.
The government has kept an arm’s length distance from the car companies it bailed out, and was repaid so quickly by most of the financial firms that received bailout money that it did not have much of a chance to tinker with corporate policy. It may be that, as the government prepares to celebrate its fifth year as the controlling shareholder of Fannie and Freddie, that it is growing increasingly ill suited to its role.
Attempts to fix mistakes made in the depths of the financial crisis are going to be harder now that the courts and Congress are not as scared of challenging the executive branch as they were back then. This is normal cycle of these crises. The executive branch gets more latitude during the time, but afterward there is a demand for accountability.
In other words, now that the government has saved the markets, the markets want them gone. And in the background looms a hard look at the decisions made during those dark days five years ago.
http://dealbook.nytimes.com/2013/07/29/hedge-funds-suit-on-fannie-and-freddie-may-spell-trouble-for-u-s/
It seemed like Mr. Ackman versus the world.
In a punishing referendum, Herbalife’s stock price rose throughout the talk, climbing more than 25 percent by the end of the trading day. Mr. Ackman said he did not mind, adding that he had spent $50 million attacking Herbalife and would ultimately be proved correct.
“I’m an extremely, extremely persistent person. Extremely,” he said. “And when I believe I am right, and it is important, I will go to the end of the earth.”
My only point is that he will not roll over. : )
http://dealbook.nytimes.com/2014/07/22/ackmans-death-blow-to-herbalife-falls-short-of-its-billing/?_php=true&_type=blogs&_r=0