Regulators Release Guidance on Private Student Loans With Graduated Repayment Terms at Origination

On January 29, the federal financial regulatory agencies (the Board of Governors of the Federal Reserve System, the Consumer Financial Protection Bureau, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Office of the Comptroller of the Currency), in partnership with the State Liaison Committee (SLC) of the Federal Financial Institutions Examination Council, issued guidance for financial institutions on private student loans with graduated repayment terms at origination.

This guidance provides principles that financial institutions should consider in their policies and procedures for originating private student loans with graduated repayment terms which are structured to provide for lower initial monthly payments that gradually increase. The Agencies issued this guidance because they recognize that the competitive job market, traditionally low entry-level salaries, and higher student debt loads can contribute to some borrowers preferring greater flexibility with their payments as they transition into the labor market. Press Release. Published Guidance.

FHFA Director Testifies in Front of the U.S. House of Representative Committee on Financial Services

On January 27, 2015 the FHFA Director, Melvin L. Watt, testified in front of the U.S. House of Representatives Committee on Financial Services. Director Watt's testimony provided, amongst other items, an update on the financial condition of Fannie Mae and Freddie Mac and the financial condition of the Federal Home Loan Banks. Release.

Federal Reserve Issues "Strategies for Improving the U.S. Payment System"

On January 26, 2015 the Federal Reserve issued a multi-faceted plan for collaborating with payment system stakeholders, including large and small businesses, emerging payments firms, card networks, payment processors, consumers and financial institutions to enhance the speed, safety and efficiency of the U.S. payment system. Release.

Michael Brickman Named Deputy Comptroller for Special Supervision

On January 26, 2015 Michael Brickman was named Deputy Comptroller for Special Supervision at the OCC. As Deputy Comptroller of Special Supervision, Mr. Brickman will oversee the supervision of the OCC's most critical problem midsize and community banks as well as the development and implementation of rehabilitation or resolution strategies for assigned banks and savings associations, including the orderly management of closings, when necessary. Release.

CFTC Issues No-Action Relief to Certain Introducing Brokers

On January 23, 2015 the CFTC Division of Swap Dealer and Intermediary Oversight issued no-action relief to certain introducing brokers (IBs) with respect to net capital and financial reporting requirements under Commission Regulations 1.10 and 1.17, respectively. The conditioned relief permits foreign-domiciled IBs to file audited and unaudited form 1-FR-IBs, as applicable, using local accounting principles in effect where the IB is domiciled in lieu of U.S. Generally Accepted Accounting Principles or International Financial Reporting Standards. In addition, eligible foreign-domiciled IBs will not be required to apply certain foreign currency capital charges under Regulation 1.17 and staff guidance. Release.

On January 23, 2015 DBRS released its methodology relating to Structured Finance Flow-Through Ratings. Report.

SEC Suspends S&P From Rating Certain CMBS As Part Of $77 Million Settlement

On January 21, 2015, the SEC suspended Standard & Poor's Rating Services (S&P) from rating conduit/fusion CMBS for one year as part of a settlement between McGraw-Hill Financial Inc., S&P's parent company, and the SEC. The settlement stems from S&P's disclosures in 2011 that it would utilize a certain methodology to rate six CMBS transactions and provide a preliminary rating for two others, when it actually used a different methodology, forcing S&P to pull a rating on a $1.5 billion bond that same year. In addition, S&P agreed to retract an allegedly untrue and misleading article that it published in 2012 and settled another claim that it failed to maintain and enforce internal controls regarding changes to its monitoring standards for certain RMBS. S&P further agreed to parallel settlements with New York Attorney General Eric Schneiderman and Massachusetts Attorney General Maura Healey. The rating agency has also agreed to pay more than $77 million to settle these claims with the federal and state regulators ($58 million to the SEC and another $19 million to New York and Massachusetts). SEC Settlement Order 1. SEC Settlement Order 2. SEC Settlement Order 3.

Federal Home Loan Bank of San Francisco Settles RMBS Claims Against Banks

On January 15, 2015, the Federal Home Loan Bank of San Francisco (FHLB) agreed to a $459 million settlement with various banks stemming from the sales of billions of dollars of RMBS. FHLB originally filed the claims in the Superior Court of California, County of San Francisco in 2010 against Bank of America Corp., Credit Suisse Securities (USA) LLC, Countrywide Financial Inc., Deutsche Bank Securities, Inc. and other banks concerning 229 RMBS transactions. FHLB alleged causes of action for violation of the Securities Act of 1933 and the California Corporate Securities Act as a result of dealers allegedly concealing information and lying about the quality of RMBS sold to FHLB. It is unclear which banks are involved in the settlement.

S.D.N.Y. Rejects "Pervasive Breach" Claim and Issues Numerous RMBS Rulings In Deciding Trusts' and Issuer's Motions for Summary Judgment

On January 9, 2015, in a series of rulings, Judge P. Kevin Castel of the United States Court for the Southern District of New York granted in part and denied in part motions for partial summary judgment brought by three MASTR Adjustable Rate Mortgages Trusts (2006-OA2, 2007-1, and 2007-3) (the Trusts) and UBS Real Estate Securities Inc. (UBS). The Trusts filed this repurchase claim against UBS after purchasing 17,082 loans, which the Trusts claimed contained breaches of the Pooling and Servicing Agreements' representations and warranties. First, Judge Castel held that, as a general matter, the Trust could only proceed on loans which were the subject of timely repurchase demands – i.e., the demand's 90-day cure period must have expired within the six-year statute of limitations period. Second, Judge Castel found that the Trusts could also recover on loans for which it proved UBS' independent discovery of breaches of representations and warranties, even if those loans were not included in any breach notices. The Trust would be required to prove discovery as to individual loans at trial, In addition, Judge Castel ruled that the Trusts could not recover under a theory of "pervasive breach." Judge Castel further held that the Trusts could recover losses incurred on liquidated or foreclosed properties, that evidence of default was not required in order to show a breach of representations and warranties, that summary judgment was inappropriate for determining whether loan files were incomplete at the time of origination, and that the Trusts could not recover rescissory damages. Order.

iGlobal Forum: Distressed Investing Summit

Date: February 4^th, 2015
Location: Park Lane Hotel, 36 Central Park S, New York, NY

Orrick is sponsoring the 6^th Global Distressed Investing Summit, a conference for exclusively senior-level representatives from leading distressed fund managers, private equity firms, hedge funds, distressed debt providers, M&A and turnaround advisors, bankruptcy advisors, loan originators and rating agencies.

Douglas Mintz, of Orrick's Restructuring Group, will be moderating the panel "Unlocking Opportunities in Puerto Rico and Other Emerging Markets."

We encourage you to attend this event, and would like to offer a special 50% discount on registration. Please contact Katherine Musgrave at kmusgrave@orrick.com to be registered and click here for full details on the conference.