Fannie Mae settles shareholder lawsuit for $170 million
Fri, Oct 24 18:32 PM EDT
image
By Jonathan Stempel
NEW YORK (Reuters) - Fannie Mae (FNMA.OB) has reached a $170 million settlement of a lawsuit accusing it of misleading shareholders about its finances, risk management and mortgage exposure before it was seized by the U.S. government during the 2008 financial crisis.
The settlement, which requires court approval, was disclosed in a Friday filing with the U.S. District Court in Manhattan.
It resolves shareholder allegations that Fannie Mae defrauded shareholders and inflated its stock by issuing false and misleading statements about its internal controls, capitalization, accounting, and exposure to subprime and low-documentation "Alt-A" mortgages.
The settlement allocates $123.8 million to common stockholders and $46.2 million to preferred stockholders between Nov. 8, 2006 and Sept. 5, 2008.
Fannie Mae's market value peaked during that period at more than $60 billion. It is now $2.71 billion.
"We are pleased to put this matter behind us," Joseph Grassi, Fannie Mae's interim general counsel, said in a statement. "This is another sign of progress as Fannie Mae continues our focus on serving the market and helping lenders make mortgage credit available to qualified borrowers."
The government seized Fannie Mae and the smaller Freddie Mac (FMCC.OB) on Sept. 7, 2008, and put them into a conservatorship under the Federal Housing Finance Agency, where they remain.
Fannie Mae and Freddie Mac together drew about $187.5 billion of bailout funds, but have returned roughly $218.7 billion to taxpayers in the form of dividends.
The lead plaintiffs suing Fannie Mae are the Massachusetts Pension Reserves Investment Management Board, the State-Boston Retirement Board and the Tennessee Consolidated Retirement System, and are seeking class-action status.
They said the settlement averts potential "numerous and substantial risks" of continuing the lawsuit after similar litigation against Freddie Mac was dismissed last year.
"We're extremely pleased with the results, particularly in light of the dismissal of a similar lawsuit against Fannie Mae's sibling company, Freddie Mac," Daniel Greene, the chairman of State-Boston, said in a statement.
The law firms Labaton Sucharow and Berman DeValerio, which represent common stockholders, and Kaplan Fox & Kilsheimer, which represents preferred stockholders, plan to seek fees of as much as 20 percent of the settlement fund, court papers show.
A separate lawsuit over Fannie Mae's disclosures was brought in 2011 by the U.S. Securities and Exchange Commission against former Chief Executive Officer Daniel Mudd and former Chief Risk Officer Enrico Dallavecchia, and remains pending.
The SEC filed a similar lawsuit against former Freddie Mac officials, including onetime Chief Executive Officer Richard Syron.
The case is In re: Fannie Mae 2008 Securities Litigation, U.S. District Court, Southern District of New York, No. 08-07831.
(Reporting by Jonathan Stempel in New York; Editing by Chris Reese and Alan Crosby)
==================================
Australia faces tough balancing act on housing loan rules
Thu, Oct 02 11:09 AM EDT
image
By Wayne Cole
SYDNEY (Reuters) - Australia's regulators are attempting the tricky task of tightening lending rules to take the heat out of house prices, without doing collateral damage to a much-needed revival in home building.
Appearing before a Senate committee on Thursday, central bank officials said the intention was to avoid an upward spiral in prices that could potentially spill over into a bust that hurts household wealth and spending.
The danger was real enough that policy makers were prepared to experiment with macro prudential rules that aimed to limit the build up of leverage and risk-taking in the banking system as a whole, rather than just at individual banks.
Any steps would be targeted at restraining risky lending for investment in buy-to-let housing in inner-city districts of Sydney and Melbourne where prices were running hot, said Reserve Bank of Australia (RBA) Assistant Governor Malcolm Edey.
Edey said the Australian Prudential Regulation Authority, which oversees the banks, had already tightened its oversight of lending but was now considering "turning up the dial".
"We are discussing with APRA steps that might be taken to reinforce sound lending practices, particularly for investor finance, though not necessarily limited to that," Edey told the Senate inquiry into affordable housing.
A preliminary announcement on the steps was likely to come before the end of the year, he added.
The RBA last week surprised many by saying it was open to tougher rules on lending for housing lending given rapid loan growth and rising home prices.
Price growth had slowed somewhat in September, according to figures from property consultant RP Data, but were still up 9.3 percent on the same month last year.
In Sydney, annual price growth was running at a rapid 14.3 percent with Melbourne following at 8.1 percent.
BUT WHAT ABOUT HOME BUILDING?
Senators, however, were concerned that any new regulations would not choke off the recovery in housing in general, and particularly the ongoing resurgence in home building.
Government figures out on Thursday showed approvals to build new homes climbed 3 percent in August to a seven-month high, thanks entirely to a 9.6 percent jump in the apartment sector.
The central bank has been counting on a revival in home construction as one way to offset the winding down of a decade-long boom in mining investment.
"The construction upswing underway is, undoubtedly, the brightest spot of this patchy economy and key in generating employment, expenditure, and confidence," said Su-Lin Ong, a senior economist at RBC Capital Markets.
"The RBA clearly wants investors to participate but possibly not to the extent that is emerging at present and with rising leverage. Finding the right balance may prove more difficult."
Edey said setting a cap on loan to valuation ratios, as has been used by New Zealand, was unlikely to be included since it would have little impact on investors who typically were wealthy enough to afford large deposits on properties.
He would not be drawn on what steps might be taken but RBC's Ong saw scope for a greater rate buffer for investors loans, increased capital provision against such loans, and some paring back of lending to areas which have a high concentration of investor activity.
(Reporting by Wayne Cole; Editing by Eric Meijer)
=============================================================
========
Watt The?
The U.S. mortgage watchdog is risking a repeat of the subprime lending debacle. New rules on government guarantees from the Federal Housing Finance Agency clarify criteria for lenders. The trouble is, they also cut down payments to as little as 3 percent. That’s an invitation for another wave of underwater borrowers.
Mel Watt took over from Ed DeMarco in January as director of the agency that sets standards for federal guarantors Fannie Mae and Freddie Mac. He quickly shifted its focus from avoiding another bailout like the nearly $190 billion crisis-era rescue toward making it easier for Americans to buy homes.
For believers in home ownership as a social good, there’s a reason. The U.S. home ownership rate declined to under 65 percent in the second quarter, revisiting 1995 levels, after peaking above 69 percent as the housing and mortgage markets boomed in 2004. Earlier this year, Watt began rolling back plans to cut the size of the loans Fannie and Freddie could insure.
His latest announcement at a Mortgage Bankers Association shindig in Las Vegas goes further. Down payments as low as 3 percent of a home’s value will soon be accepted by Fannie and Freddie, which have lately required at least 5 percent. That tops UK Chancellor George Osborne’s aggressive 2013 plan to promote home ownership by partially guaranteeing mortgages with 5 percent down.
Such skinny down payments put Fannie and Freddie back in competition with the Federal Housing Administration, the agency explicitly charged with promoting home ownership for those with lower incomes. Such policies inspired a race to the bottom last time around until the crisis intervened and left millions of Americans with mortgages bigger than the value of their homes.
Among other things, Watt also plans to make clearer when Fannie and Freddie can force lenders to take back loans that don’t meet all the required criteria. Greater certainty is helpful, even if it could sometimes leave the government enterprises more exposed rather than less.
The reduced down payments, though, carry a worrying echo of pre-crisis complacency. Too much emphasis on helping consumers borrow, rather than ensuring lending is prudent, helped inflate the last bubble.
U.S. Federal Housing Finance Agency Director Mel Watt on Oct. 20 announced a series of new policies. One initiative involves the agency, which sets standards for federal mortgage guarantors Fannie Mae and Freddie Mac, setting more specific guidelines for conditions when lenders can be forced to take back defective government-guaranteed home loans.
Watt also announced a step to allow lower mortgage down payments, between 3 percent and 5 percent of a home’s value, in an effort to expand credit availability.
=======================
Wed, Aug 20 15:45 PM EDT
image
WASHINGTON (Reuters) - Bank of America Corp is expected to pay more than $16.5 billion to end investigations into mortgage securities that the bank and its units sold in the run-up to the financial crisis, in a deal that could be announced as early as Thursday, a person familiar with the matter said.
The bank has been hammering out the final details of the record-breaking accord with the U.S. Department of Justice and is expected to pay around $9 billion in cash and the rest in assistance to struggling homeowners.
A $16.5 billion payout would be the largest in a series of soaring penalties against banks for a range of misconduct, including violating U.S. sanctions and inappropriately marketing mortgage securities.
An agreement in principle was reached earlier this month after a phone call between the bank's chief executive, Brian Moynihan, and Attorney General Eric Holder.
The negotiations have been driven by an investigation into securities sold by Merrill Lynch, which the bank agreed to acquire in 2008 at the height of the financial crisis, people familiar with the matter have said.
Representatives of the Justice Department and Bank of America declined comment.
(Reporting by Aruna Viswanatha, additional reporting by Peter Rudegeair; Editing by Karey Van Hall and Steve Orlofsky)
No comments:
Post a Comment