DS News

10 SCORE ONE VICTORY FOR U.S. BANK Banks and other financial institutions have agreed to many multimillion- and even multibillion dollar settlements following the financial crisis for their mortgage practices. is week, however, the banks scored a victory when allegations against U.S. Bank of racial discrimination in REO maintenance were dismissed by HUD. e Washington, D.C.-based non-profit National Fair Housing Alliance (NFHA) alleged in a complaint filed in 2012 that the Minneapolis-based bank was in violation of the Fair Housing Act of 1968 by failing to maintain REO properties in predominantly African-American and Hispanic neighborhoods as well as it was maintaining REO properties in predominantly white neighborhoods. In its ruling following an investigation of the properties in question, HUD stated that the evidence did not show any difference in the bank's treatment of the properties that were motivated by race or ethnicity. Instead, HUD concluded from its investigation of the 119 residential properties for which U.S. Bank serviced on behalf of the FHA that the bank was properly maintaining those properties. In its 30-page report on the findings of its investigation, HUD concluded that "there is no reasonable cause to believe that Respondents engaged in a pattern or practice of discriminatory treatment as alleged, engaged in individual instances of discrimination as would be indicated by testing, or violated Sections 804 (a), (b), (c), or (d) of the Fair Housing Act." U.S. Bank spokesman Dana Ripley told DS News in an email that "we think the decision speaks for itself." NFHA has stated that it plans to appeal HUD's decision. NFHA's complaint against U.S. Bank "relies largely upon photographic evidence to demonstrate maintenance act-related discrimination," according to HUD. In its ruling, however, HUD found that the photos did not provide the context for claims of racial discrimination in REO maintenance and did not alone prove discrimination, saying that "the photographs fail to demonstrate action or inaction by Respondents" with regard to property maintenance. In addition, HUD examined the average amount of money spent on property maintenance for the 119 properties and found that "there is no pattern of spending disparity between properties in white neighborhoods and minority neighborhoods" and that "spending varies dramatically based on the unique needs of any given property." HUD also ruled that U.S. Bank was not responsible for an additional 275 properties named in the complaint since the bank's role in those properties was solely that of trustee. NFHA filed similar complaints against Bank of America and Wells Fargo alleging racial discrimination in REO properties in 2012 along with the complaint against U.S. Bank. Wells Fargo settled in 2013 for $42 million, which provided millions of dollars in grants to NFHA and its affiliates. HUD is still investigating NFHA's complaint against Bank of America. In May 2015, NFHA filed a complaint with HUD against Fannie Mae following a five-year investigation that encompassed 34 cities and 2,100 REO properties owned by the government-sponsored enterprise. at complaint alleges that Fannie Mae was less diligent about maintaining REO properties in minority-dominated neighborhoods than in mostly white communities. e case is still pending. FREDDIE MAC'S RISK SHARING INITIATIVES PICK UP STEAM AS 2016 BEGINS Freddie Mac's highly successful Structured Agency Credit Risk (STACR) program, through which the Enterprise transfers a portion of credit risk on single-family mortgage loans to investors in the private market, has priced its first debt notes offering of 2016 at $996 million, according to an announcement from Freddie Mac on Wednesday. e latest STACR offering (STACR-2016 DNA1) is the first of eight that Freddie Mac plans to issue in the first 10 months of 2016. is offering includes a reference pool of single-family mortgage loans recently acquired by Freddie Mac, and the aggregate unpaid principal balance of the loans exceeds $35.7 billion. "We are quickly starting off the year with an issuance and expect to have eight STACR offerings through October as reflected in our published deal calendar," said Mike Reynolds, VP of Freddie Mac Credit Risk Transfer. "With current market conditions we are pleased to sell a billion dollars of credit bonds and believe it reflects investors' positive view of the company's credit fundamentals." e offering is scheduled to settle on or around January 21, 2016. Freddie Mac was the first agency to market credit risk transfer transactions through STACR, Whole Loan Security (WLS), and Agency Credit Insurance Structure (ACIS) programs. In two and a half years since the first STACR offering in mid-2013, Freddie Mac's investor base has grown to include approximately 190 unique investors, which includes reinsurers. rough the three programs, Freddie Mac has succeeded in the transferring of a substantial portion of credit risk on more than $385 billion of UPB in single-family mortgages backed by the Enterprise. Fannie Mae has followed its fellow GSE's lead in risk sharing with two programs of its own starting with the Connecticut Avenue Securities (CAS) series in September 2013 and the Credit Insurance Risk Transfer (CIRT) program in 2014. rough the CAS series, Fannie Mae has sold more than $12.4 billion in securities to private investors, which covers $438 billion worth of mortgage loans. "With current market conditions we are pleased to sell a billion dollars of credit bonds and believe it reflects investors' positive view of the company's credit fundamentals." –Freddie Mac

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