Illinois AG Settles with New York Investment Bank Over RMBS Practices

Last week, Illinois AG Madigan announced a $41 million settlement with a New York-based investment bank for its alleged misconduct in connection with the marketing and selling of at risk residential mortgage-backed securities (RMBS) prior to the economic collapse in 2008. Specifically, according to an investigation led by AG Madigan’s office, the investment bank allegedly failed to disclose the actual risk of RMBS investments. Under the terms of the settlement, $16 million of the settlement funds will go toward consumer relief, with the remainder being distributed to the Teachers Retirement System of the State of Illinois, the State Universities Retirement System of Illinois, and to the Illinois State Board of Investment. Finally, the investment bank’s settlement with Illinois is part of a $5 billion national settlement led by the DOJ – as well as additional federal entities – and the state AGs of New York and California.

LinkedInFacebookTwitterGoogle+Share
COMMENTS: Comments Off
TAGS: ,
POSTED IN: Banking, Mortgages, State Issues

New York AG Schneiderman Announces Settlement with New York-Based Financial Institution Regarding RMBS Practices

On February 11, New York AG Schneiderman announced a $3.2 billion settlement that includes $550 million for New York with a New York-based financial institution over its alleged deceptive practices involving the sales and issuance of Residential Mortgage-Backed Securities (RMBS) leading up to the financial crisis. According to the settlement agreement, the financial institution (i) increased the acceptable risk levels for loans held in its securitized pools; (ii) securitized certain loans that did not comply with underwriting guidelines and did not have adequate compensating factors; (iii) purchased and securitized loans which its credit and compliance team advised it not to purchase; and (iv) allowed for the purchase of loans it knew to be risky without a loan file review for credit and compliance. The settlement requires the financial institution to (i) provide at least $400 million in consumer relief directly to struggling families and communities across the state; and (ii) pay $150 million “in consideration for the settlement of potential legal claims by the NYAG as compensation for harms to the State of New York allegedly resulting from [its] creation, packaging, marketing, underwriting, sale, structuring, arrangement, and issuance of RMBS in 2006 and 2007.” Read more…

LinkedInFacebookTwitterGoogle+Share
COMMENTS: Comments Off
TAGS: ,
POSTED IN: Banking, Mortgages, State Issues

FDIC Announces RMBS-Related Settlement with New York-Based Financial Institution

On February 2, the FDIC announced a settlement for more than $62 million with a New York-based financial institution to resolve “federal and state securities law claims based on misrepresentations in the offering documents for 14 RMBS [residential mortgage-backed securities] purchased by three failed banks.” The FDIC, as the receiver of the three failed banks, filed four lawsuits from February 2012 to January 2014 against the financial institution and other defendants for their alleged involvement in the sale of the RMBS to the three failed banks. These lawsuits are four of the 19 RMBS-related lawsuits that the FDIC has filed, as of December 31, 2015, on behalf of eight failed institutions.

LinkedInFacebookTwitterGoogle+Share
COMMENTS: Comments Off
TAGS: ,
POSTED IN: Banking, Federal Issues, Mortgages

DOJ and State AGs Announce Settlement with Credit Rating Agency

On February 3, the DOJ announced a settlement agreement with a large credit rating agency and its parent company for $1.375 billion – a record amount according to the DOJ – in connection with the agency’s alleged “scheme to defraud investors in structured financial products known as Residential Mortgage-Backed Securities (RMBS) and Collateralized Debt Obligations (CDOs).” In 2013, the DOJ, along with 19 states plus the District of Columbia, brought the lawsuit against the agency for misrepresenting the securities’ true credit risks through inflated ratings, which led investors to suffer substantial losses right before the financial crisis. While the agency is neither admitting to nor denying the allegations, it has agreed to (i) “retract an allegation that the United States’ lawsuit was filed in retaliation for the defendant’s decision with regard to the credit of the United States;” (ii) abide by the consumer protection statutes set forth by the settling states and DC; and (iii) answer requests from any of the states and DC regarding information on potential violations of the consumer protection laws.

LinkedInFacebookTwitterGoogle+Share

NCUA Files Latest Suit Over Purchased RMBS

On December 23, the NCUA announced its latest suit against a major bank. Filed in the SDNY, the 122-page complaint alleges that the bank violated state and federal laws by failing to fulfill its duties as trustee to 27 RMBS trusts. The NCUA is suing the bank in its capacity as liquidating agent for five failed federal credit unions who purchased the RMBS. This latest suit comes less than a week when the NCUA filed a similar suit against another large global bank.

LinkedInFacebookTwitterGoogle+Share