FHFA Strategic Plan for Fannie and Freddie

On February 21, FHFA sent to Congress a strategic plan for the next phase of the Fannie Mae and Freddie Mac conservatorships.  In the plan, FHFA identified three goals to guide the direction to be taken by the conservatorships: (i) build a new infrastructure for the secondary mortgage market; (ii) gradually contract the GSEs' market presence and shift mortgage credit risk to private investors; and (iii) maintain foreclosure prevention, loss mitigation activities, and credit availability for new and refinanced mortgages.  FHFA Strategic Plan.

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CFTC Final Rule on Swap Recordkeeping and Reporting

On February 23, the CFTC adopted final rules establishing reporting, recordkeeping, and daily trading records requirements for swap dealers and major swap participants, as required by Section 731 of the Dodd-Frank Act.  The final rules also describe the required contents of annual reports relating to compliance policies and activities.  CFTC Fact Sheet.  Final Rule Q&A.    

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CFTC Proposed Rule on Swap Categories

On February 23, the CFTC proposed rules pursuant to Section 727 of the Dodd-Frank Act which: (i) specify the criteria for determining swap categories and methodologies for determining minimum block sizes for large notional off-facility swaps and block trades and (ii) provide increased protections for the identities of swap counterparties.  These rules are re-proposed based on public comments received on the rule initially proposed on December 7, 2010.  CFTC Fact Sheet.  Proposed Rules Q&A.

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NY Court Foreclosure Initiative

On February 14, New York State Chief Judge Jonathan Lippman announced a plan that would partner bar associations with large banks to work with homeowners with respect to loan modifications and foreclosure proceedings.  NY Court Release (see page 13).  

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On February 24, S&P requested comments by April 24 on short-term/ long-term ratings linkage criteria for corporate and sovereign issuers.  S&P Release.

On February 23, Fitch updated its criteria for U.S. commercial mortgage Re-REMICs.  Fitch Report.

On February 23, Fitch updated its criteria for solar power projects.  Fitch Report.

On February 23, Moody's released its approach to counterparty instrument ratings.  Moody's Report.

On February 22, Moody's released its methodology for assessing the investment quality of equity funds.  Moody's Report.

On February 22, Moody's released its approach to rating structured finance interest-only securities.  Moody's Report.

On February 21, S&P released its methodology for global CDOs of pooled structured finance assets.  S&P Report.

On February 21, DBRS released its master European RMBS rating methodology and jurisdictional addenda.  DBRS Report.

On February 17, Fitch published guidelines for rating assessment-secured debt issued by state-sponsored property insurers. 
Fitch Report.

On February 17, Moody's revised its bond fund rating methodology and symbols.  Moody's Report.

Note: Free registration is required for Fitch, Moody's and S&P releases and reports.

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Mortgage Lenders and Originators Now Subject to Anti-Money Laundering and Fraud Reporting Regulations

On February 7, 2012, the Financial Crimes Enforcement Network, a bureau of the Department of the Treasury, finalized regulations requiring non-bank residential mortgage lenders and originators to establish anti-money laundering programs and file suspicious activity reports ("SAR") under the Bank Secrecy Act.  Click here to read more.

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Sealink Files Suit Over $949 Million in RMBS

On February 21, 2012, Sealink Funding, Ltd. filed a summons with notice in New York state court against 48 institutional defendants.  Sealink brings claims on behalf of a number of special purpose vehicles that allegedly purchased approximately $949 million face value of RMBS in 21 separate offerings.  Sealink alleges that the defendants made material misrepresentations and omissions in their RMBS Offering Materials regarding the underwriting standards used in connection with the origination of the underlying mortgage loans, the validity of the assignments of the loans to the Trusts, the characteristics of the underlying loans (such as LTV ratios and owner-occupancy rates), and the credit ratings assigned to the securities.  Sealink asserts claims for common-law fraud, fraudulent inducement, negligent misrepresentation, aiding and abetting fraud, and various contract claims. Sealink is seeking approximately $949 million in damages plus accrued interest and punitive damages.  Summons.

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German Bank Files Suit Over $71 Million in RMBS

Also on February 21, 2012, Landesbank Baden-Wurttemberg ("LBBW") filed a summons with notice in New York state court against the Royal Bank of Scotland and certain of its affiliates in connection with its alleged purchase of one RMBS certificate for $71 million face value of RMBS in 2006.  LBBW alleges that the defendants made material misrepresentations and omissions in their RMBS Offering Materials regarding the underwriting standards used in connection with the underlying mortgage loans, the validity of the assignments of the loans to the Trusts, the nature of the underlying loans (such as LTV ratios and owner-occupancy rates), and the credit ratings assigned to the securities.  LBBW asserts claims for common-law fraud, fraudulent inducement, negligent misrepresentation, aiding and abetting fraud, and various contract claims. LBBW is seeking approximately $71 million in damages plus accrued interest and punitive damages.  Summons.

Both the Sealink action and the LBBW action were brought by Labaton Sucharow, and the summaries of the allegations in the respective summonses with notice are substantially similar.