THE BASIS POINT

Status Updates On Facebook’s Goldman Deal, Roundup of BofA’s Legal Woes, Replacing Fannie & Freddie

Facebook Worth $50b After Goldman Deal
While everyone was working up clever holiday status updates on Facebook, the company was working up a deal with Goldman Sachs that places its value at $50b. NYT Dealbook’s report on the topic also previews the year’s hottest tech companies, and StockTwits $FBOOK feed will keep you up to speed.

How To Search Federal Profiles For Your Loan Agent
Besides updating status on Facebook, one of most fun things to do is surf profiles. Now that January is here, you can do the same for the mortgage lender you work with thanks to the Federally required National Mortgage Licensing System (NMLS). All mortgage lenders must pass Fed and state exams and be registered on the system, and consumers can search NMLS for lender profiles and background. Oh wait, bank holding companies are exempt from NMLS registration. Best consumer protection bank lobbies can buy.

Roundup Of BofA’s Legal Troubles
To be fair banks have to save money for their troubles. Consider Bank of America. They just said they settled outstanding repurchase claims with Fannie Mae and Freddie Mac over residential loans sold to them by Countrywide. BofA said its home loans and insurance business is expected to “record a $2 billion, non-cash, non-tax deductible goodwill impairment. It also expects to take a provision of about $3 billion related to repurchase obligations for residential mortgage loans sold by Bank of America affiliates directly to Freddie Mac and Fannie Mae.” The company agreed, among other things, to a resolution amount of approximately $1.52 billion, consisting of a cash payment of $1.34 billion made by Bank of America on 12/31, and credits for payments recently made or to be made by them. The agreement substantially resolves outstanding repurchase requests on 12,045 loans sold to BofA by Countrywide, addresses 5,760 other loans sold to it by Countrywide and permits the #2 lender to bring claims for any additional breaches of our representations and warranties that are identified with respect to those loans. Fannie Mae continues to work with Bank of America to resolve repurchase requests that remain outstanding. This agreement with Bank of America addresses approximately 44% of the $7.7 billion in repurchase requests (measured by unpaid principal balance) we had outstanding with all of our seller servicers as of September 30, 2010.”

But that doesn’t stop other lawsuits. Allstate Corp has sued BofA, its Countrywide lending unit and 17 other defendants for allegedly misrepresenting the risks on more than $700 million of mortgage securities it bought from Countrywide. Reuters reports that “Allstate, the largest publicly traded U.S. home and auto insurer, alleged it suffered ‘significant losses’ after Countrywide misled it into believing the securities were safe and the quality of home loans backing them was high. Allstate said that starting in 2003, Countrywide quietly decided to boost market share and ignore its own underwriting standards by approving any mortgage product that a competitor was willing to offer, in a ‘proverbial race to the bottom.’ Countrywide then passed on the added risks to investors who bought debt backed by the mortgages, Allstate said.”

News hit last week of a “setback” at Bank of America over its lawsuit with MBIA. (MBIA is/was in the business of providing insurance that covered the principal and interest payments to investors if the borrowers defaulted.) “The bank lost a major procedural ruling in a lawsuit over its liability for allegedly toxic mortgages. The ruling will make it harder for the bank to defend itself in that case, and it could set a standard for similar disputes. Bank of America had tried to set a high bar for plaintiff MBIA Insurance by requiring that the files for each of 368,000 or more disputed loans be evaluated individually. That process would have cost MBIA $75 million, and it would have taken a team of 24 people more than four years, MBIA estimated.” But the New York State Supreme Court declared that MBIA can pursue its case by focusing on a statistical sample of 6,000 disputed loans. That could pave the way for a trial to proceed as scheduled in 2011. Of course, the MBIA must still prove its case, which focuses on loans issued by Countrywide.

Are Covered Bonds Future Of Mortgage Banking?
Will “covered bonds” be the thing of the future in mortgage banking? Unlike regular securities backed by [fill in the blank], where investors have no recourse to the issuing bank, the loans backing covered bonds remain on a bank’s books and are ring-fenced, protecting bondholders even in bankruptcy. Will the added protection take the place of Freddie & Fannie? Worldwide issuance of the bonds was up 20% in 2010 versus 2009, hitting $356.5 billion this year according to data from Dealogic. Most of the issuance has been by European banks. The extra security offered by covered bonds has been particularly helpful for banks in countries that might be considered a little “iffy” by investors. Click ‘Covered Bonds’ tag below for more on this topic.