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The Fhfa's Proposed Single Security Structure, David J. Reiss
The Fhfa's Proposed Single Security Structure, David J. Reiss
David J Reiss
The Federal Housing Finance Agency (FHFA) has posted a Request for Input on “the proposed structure for a Single Security that would be issued and guaranteed by Fannie Mae or Freddie Mac.” The FHFA states it is most concerned with achieving “maximum secondary market liquidity” (Request for Input, at 8)
I am skeptical about the reasons for this move to a Single Security and whether it will achieve maximum liquidity. Moreover, it is unclear to me that this move reflects an urgent need for the FHFA, the two companies, originating lenders or borrowers. While I have no doubt that it …
The Future Of The Private Label Securities Market, David J. Reiss
The Future Of The Private Label Securities Market, David J. Reiss
David J Reiss
The PLS market, like all markets, cycles from greed to fear, from boom to bust. The mortgage market is still in the fear part of the cycle and recent government interventions in it have, undoubtedly, added to that fear. In recent days, there has been a lot of industry pushback against the government’s approach, including threats to pull out of various sectors. But the government should not chart its course based on today’s news reports. Rather, it should identify fundamentals and stick to them. In particular, its regulatory approach should reflect an attempt to align incentives of market actors with …
Who Should Be Providing Mortgage Credit To American Households?, David J. Reiss
Who Should Be Providing Mortgage Credit To American Households?, David J. Reiss
David J Reiss
Who should be providing mortgage credit to American households? Given that the residential mortgage market is a ten-trillion-dollar one, the answer we come up with had better be right, or we may suffer another brutal financial crisis sooner than we would like. Indeed, the stakes are as high as they were in the Great Depression when the foundation of our current system was first laid down. Unfortunately, the housing finance experts of the 1930s seemed to have a greater clarity of purpose when designing their housing finance system. Part of the problem today is that debates over the housing finance …
Goliath Versus Goliath In High-Stakes Mbs Litigation, David J. Reiss, Bradley T. Borden
Goliath Versus Goliath In High-Stakes Mbs Litigation, David J. Reiss, Bradley T. Borden
David J Reiss
The loan-origination and mortgage-securitization practices between 2000 and 2007 created the housing and mortgage-backed securities bubble that precipitated the 2008 economic crisis and ensuing recession. The mess that the loan-origination and mortgage-securitization practices caused is now playing out in courts around the world. MBS investors are suing banks, MBS sponsors and underwriters for misrepresenting the quality of loans purportedly held in MBS pools and failing to properly transfer loan documents and mortgages to the pools, as required by the MBS pooling and servicing agreements. State and federal prosecutors have also filed claims against banks, underwriters and sponsors for the roles …
Dodd-Frank, Securitization, And The Subprime Mortgage Crisis, Stephen P. Hoffman
Dodd-Frank, Securitization, And The Subprime Mortgage Crisis, Stephen P. Hoffman
Stephen P. Hoffman
There are few things more constant in life than the rise and fall of financial markets. When markets crash, however, we are forced to restore them while learning from our mistakes. In the wake of the recent subprime mortgage crisis, Congress has drastically but deservedly overhauled the regulation of financial markets in order to not only prevent such disasters in the future, but to help restore financial stability more quickly if and when they do occur. In this Paper, I provide a background of the events leading up to the most devastating financial crisis since the Great Depression, focusing on …
The Uncertainty Of “True Sale” Analysis In Originator Bankruptcy, Stephen P. Hoffman
The Uncertainty Of “True Sale” Analysis In Originator Bankruptcy, Stephen P. Hoffman
Stephen P. Hoffman
While much of law is complex or unclear, it is unusual for a judge to comment that a legal doctrine is so unsettled that courts “could flip a coin” to decide an issue. Unfortunately for practitioners, determining what constitutes a “true sale” for bankruptcy purposes is such an issue. Add to this the recent novel and innovative processes of structured finance and asset-backed securitization, and you have the stuff of law students’—and corporate counsels’—nightmares. As a result, courts and legislatures need to provide clarity in this area so that originators can safely structure investments and transactions, not only for the …
• The Credit Crisis And Subprime Litigation: How Fraud Without Motive ‘Makes Little Economic Sense’, Peter Hamner
• The Credit Crisis And Subprime Litigation: How Fraud Without Motive ‘Makes Little Economic Sense’, Peter Hamner
Peter Hamner
The recent collapse of the financial markets spurred numerous lawsuits seeking a faulty party. Many plaintiffs argue that market participants committed securities fraud. They claim that deficient subprime loans caused the financial crisis. These risky loans were allegedly originated by banks to be sold off to third parties. The subprime loans were securitized and spread throughout the financial markets. The risk these loans presented was allegedly not disclosed to the buyers of the loans and securities on the loans. As these deficient loans and securities began to default the financial markets came to a halt. This article argues that securities …