UPDATE 1-FHFA wins key sampling ruling in cases against banks

Mon Dec 3, 2012 9:56pm EST

By Jessica Dye

NEW YORK Dec 3 (Reuters) - A U.S. judge on Monday ruled in favor of a federal regulator wishing to use statistical sampling in its lawsuits against big banks including Credit Suisse Group AG and Bank of America Corp over allegations they misled Fannie Mae and Freddie Mac into purchasing billions of dollars of risky mortgage debt.

U.S. District Judge Denise Cote in Manhattan federal court denied a motion from defendants in 15 consolidated lawsuits to strike the Federal Housing Finance Agency's proposed methodology for sampling and evaluating the more than 1.1 million mortgage loans at issue in the cases.

The FHFA, which regulates Fannie and Freddie, last year sued 18 banks over the housing finance giants' losses on more than $200 billion in mortgage-backed securities. The lawsuits accuse the banks of misrepresenting the quality of the loans underlying the securities and violating U.S. securities laws.

The banks have denied the regulator's allegations and argued they should be dismissed. Among the arguments by the defendants is a contention that the lawsuits were filed after the statute of limitations had expired.

As some of the cases proceed to trial, FHFA has sought an easier way to determine whether the mortgages in question conformed to proper lending standards. Re-underwriting a single mortgage loan file can take up to 3 hours of work and cost as much as $400, Cote wrote - a "tremendous cost" for the agency.

Instead, FHFA proposed a method for sampling those loans, which it said would yield a clear analysis of potential liability without having to evaluate each loan individually. The defendants disputed FHFA's methodology and questioned its reliability.

But Cote's ruling clears the way for FHFA to employ its sampling method as it prepares for trial in the cases, the first of which is scheduled to begin in January 2014.

Representatives for defendants Bank of America, JP Morgan Chase & Co and General Electric Co. declined to comment. Representatives for FHFA and other defendants could not be immediately reached for comment after regular business hours Monday.

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Comments (1)
CharlesReed wrote:
Crazy is that the two biggest player in the world in mortgages are saying that they been fooled into buying a bad product, however American are somehow still blaming millions of borrowers who lost there jobs, but are told by the President of the United States that “people wanted to live outside there means”!

Now what such a wide brushing statement does is paints everyone with the same brush. So we got borrowers in the government insure loans that are not and never have been stated loans and are based on a 28% housing debt of gross monthly pay. But you got most subprime that were full document loans, and most borrowers were qualified for a government insured loan.

However we got a mortgage lending system that the regulators had no clue of what was going on, or these two giant mortgage player who were buying this crap, being the money supply to keep fueling even more bad loan to eat Wall Street apatite that creating products that the entire world did not understand.

We got the Chairman of the Fed if we believe him as he said he did not understand this crap, but the only 700,000 or so primary resident subprime borrowers should have known better how?

So President Obama with a great command at speaking took key loaded word and for the last 4 years used them against families effected by mortgage fraud from coast to coast.

How do we have 9.9 million foreclosures from 2007 until now and only about 700,000 subprime loans in the mix, but everybody purchase more home than they could afford. Stupid is stupid but too the bone dumb is 5 years later and law suit coming from every crack that sophisticated firm in financing are pleading their case to a judge and winning, but borrowers at the bottom of the borrower pool has somehow negotiated with Mr. Countrywide, Wells, BOA, Chase and WaMu and they sit down in the boardroom and come up with a tailor made that the bank now they cannot pay back?

So was there WMD in Iraq? 30% of Republicans still believe their was and that Saddam was involved in 9/11. So $190 billion later and FHFA does not want to allow borrowers who have not missed a housing payment, refinance because they are underwater? What!

Dec 04, 2012 12:34am EST  --  Report as abuse
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