Tuesday, December 30, 2014

The FHFA has pursued the banks that sold $190 billion of mortgage-backed securities to Fannie and Freddie, settle for a total of more than $20 billion.

The GSEs
held approximately $100 billion in PLS in 2002, with roughly $35
billion in subprime and $3 billion in Alt-A PLS; at their peak,
in 2005, the GSEs’ PLS holdings had grown to approximately $350
billion, with roughly $145 billion in subprime and $40 billion
in Alt-A PLS. Cong. Budget Office

http://amlawdaily.typepad.com/0000coteruling.pdf

FHFA litigation against big banks
Manhattan U.S. District Judge Denise Cote hasn't shown much sympathy for the 18 banks that were sued by the Federal Housing Finance Agency. The FHFA, which is the conservator for Freddie Mac and Fannie Mae, has pursued the banks that sold $190 billion of mortgage-backed securities to Fannie and Freddie, claiming they grossly misrepresented the quality of the underlying loans. In a barrage of rulings, Cote has decimated the banks' defenses, leading all but two banks to settle for a whopping total of more than $20 billion.
Last July, for example, Cote rejected the defense argument that even if the banks did sell investments backed by shoddy loans, Fannie and Freddie fully understood the risks. In an 89-page, clearly reasoned ruling that displayed an intimate knowledge of these complex cases, Cote cut through the banks' thicket of arguments. "The defendants have identified no evidence—either direct or circumstantial—of the extremely improbable scenario they posit: [Fannie and Freddie], when investing billions of dollars in securities, knew of the falsity of defendants' specific representations," she wrote.
Cote's handling of this mass of cases has not only been decisive, but also refreshingly swift. Litigation as sprawling and complex as this could have dragged on for a long, long time. Here, all but two of the lawsuits were resolved within a relatively quick three years.


Read more: http://www.litigationdaily.com/id=1202713717951/Judging-the-Judges-in-2014#ixzz3NS0tyDve



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