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Fannie And Freddie – Newly Implemented Independent Dispute Resolution

February 5, 2016

Authors

Jason Stavely and Chris Dueringer

Fannie And Freddie – Newly Implemented Independent Dispute Resolution

February 5, 2016

by: Jason Stavely and Chris Dueringer

On February 2, 2016, Freddie Mac and Fannie Mae took another step towards helping sellers of loans manage risk more effectively, and in turn, strengthen the home lending system.

Through concurrently released announcements, Freddie Mac and Fannie Mae, at the direction of the Federal Housing Finance Agency (FHFA), jointly announced the Independent Dispute Resolution (IDR) process. Freddie Mac’s Bulletin 2016-1 explains that the IDR process provides sellers of loans an opportunity to request a neutral third party arbitrator to settle disputes regarding alleged loan-level origination defects. This announcement marks the completion of the selling representation and warranty framework, which was first introduced on September 11, 2012 in Bulletin 2012-18.

Each referenced Freddie Mac Bulletin includes updates to the Single-Family Seller/Servicer Guide, which contains Freddie Mac’s selling and servicing requirements. Similarly, Fannie Mae concurrently distributes these statements as Announcements, which update the Fannie Mae Selling Guide. Beginning with Read More

TARP CPP Securities and the Bank Holding Company Act

July 23, 2012

Authors

Robert Klingler and Jonathan Hightower

TARP CPP Securities and the Bank Holding Company Act

July 23, 2012

by: Robert Klingler and Jonathan Hightower

In connection with the contemplated pooled auction of TARP CPP securities, Treasury has explicitly reminded potential participants that purchasers are responsible for compliance with the Bank Holding Company Act of 1956, as amended.  The Form of Bid Letter includes a representation that each bidder is “aware of the potential implications of a purchase of any CPP securities under the Bank Holding Company Act, in particular, with respect to holding certain percentages of “voting securities” or more than one third of a financial institutions total equity.”

These statements have led to a number of questions regarding the impact of the Bank Holding Company Act vis-a-vis the TARP CPP securities.

We understand that the Federal Reserve Board is considering providing updated guidance specific to the CPP securities, but the contents of that guidance have not been finalized.

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TARP CPP Auctions: Round 4 Announced

July 13, 2012

Authors

Robert Klingler

TARP CPP Auctions: Round 4 Announced

July 13, 2012

by: Robert Klingler

On July 9, 2012, the U.S. Treasury announced its intent to commence the fourth round of individual auctions of TARP CPP securities, commencing July 23, 2012.  In this fourth round, Treasury has identified 12 institutions holding a total of approximately $346 million of TARP CPP securities.

Specifically, the fourth round will include:

  • First Western Financial, a privately traded bank holding company in Denver, Colorado, with approximately $21 million in TARP CPP securities (preferred stock).
  • CBS Banc-Corp, a privately traded bank holding company in Russellville, Alabama, with approximately $26 million in TARP CPP securities (preferred stock).
  • Exchange Bank, a privately traded bank in Santa Rosa, California, with approximately $47 million in TARP CPP securities (noncumulative preferred stock).
  • Market Street Bancshares, a subchapter S bank holding company in Mount Vernon, Illinois, with approximately $21 million in TARP CPP securities (subordinated debt).
  • Fidelity Financial Corp, a privately traded bank holding company
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TARP CPP Auctions: The First Three Rounds and What’s Next

June 28, 2012

Authors

Robert Klingler

TARP CPP Auctions: The First Three Rounds and What’s Next

June 28, 2012

by: Robert Klingler

On June 27, 2012, Treasury completed its third round of individual auctions for TARP CPP banks, further solidifying the $19 billion positive return recognized by Treasury on the TARP CPP program.  As discussed further below, this third round also brought the best results to Treasury.

Summary results (along with links to the Treasury Press Releases announcing pricing) are presented below:

  • Round 1 – 6 Institutions – $411 Million Liquidation – $367 Million Gross Proceeds – 10.6% Discount
  • Round 2 – 7 Institutions – $281 Million Liquidation – $249 Million Gross Proceeds – 11.3% Discount
  • Round 3 – 7 Institutions – $224 Million Liquidation – $208 Million Gross Proceeds – 7.5% Discount

Treasury also stated that it intends to announce additional individual auctions of TARP CPP stock, with those auctions taking place in late July and including investments in privately held institutions.  Treasury confirmed that it

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Treasury Confirms TARP Exit Plan(s)

May 4, 2012

Authors

Robert Klingler

Treasury Confirms TARP Exit Plan(s)

May 4, 2012

by: Robert Klingler

On May 3, the Treasury Department announced (via blog post) its intentions with regard to the 343 banks that remain in the TARP Capital Purchase Program.  Specifically, Treasury identified three approaches: (1) allow repayments over the next 12-18 months; (2) limited restructurings in the context of mergers or capital raises; and (3) auctioned sales of the TARP securities, either for individual banks or in pools.  These intentions are flexible and sufficiently vague to allow Treasury to moderate from these plans, particularly if political pressures necessitate.  However, they also provide a road map (at least a current road map) of the path that Treasury anticipates using.

Treasury invested a total of $245 billion under the TARP bank programs, and has already recovered $264 billion through repayments and other income.  This represents a $19 billion positive return, without providing any value to the remaining investments.  Every additional dollar recovered is

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Treasury Announces Results of First TARP Auctions

March 29, 2012

Authors

Robert Klingler

Treasury Announces Results of First TARP Auctions

March 29, 2012

by: Robert Klingler

On March 29, 2012, the Treasury announced the pricing of the public offerings of TARP preferred stock in six banks.  In aggregate, the Treasury took a 12% discount to move the TARP investments off the books of the Treasury, selling preferred stock with an aggregate liquidation value of $411 million for $362 million.

While Treasury took a loss on these six investments (at least partially because of Treasury’s desire to go ahead and move the investments rather than hold them for future payment), it is important to remember that the total TARP CPP portfolio has already returned a profit to taxpayers.  Including the results of these auctions, Treasury has recovered $260 billion from repayments, dividends, interest and other income, compared to the $245 billion initially invested.

Details of each of the six auctions are provided below.

  • Banner Corporation, Walla Walla, WA – Auction proceeds of $108 million against
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Treasury Commences Auction of TARP Preferred Stock of Six Institutions

March 26, 2012

Authors

Robert Klingler

Treasury Commences Auction of TARP Preferred Stock of Six Institutions

March 26, 2012

by: Robert Klingler

As it had previously indicated, on March 26, 2012, the Treasury Department announced the commencement of a modified dutch auction for the sale of the preferred stock it holds in six institutions:

The link to each institution takes you to the preliminary prospectus on file with the SEC.

MainSource and Wilshire have both indicated that they have received regulatory approvals to submit one or more bids in the auction, while Banner, First Financial, Seacost and WSFS have each indicated that they do not intend to bid in their respective auctions.

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Treasury Announces First TARP Auctions

March 15, 2012

Authors

Robert Klingler

Treasury Announces First TARP Auctions

March 15, 2012

by: Robert Klingler

On March 14, 2012, Treasury issued a press release announcing its intent to sell the preferred TARP CPP interests in six financial institutions on or about March 26, 2012.  Specifically, the Treasury plans to sell its preferred stock positions in Walla Walla, Wash.-based Banner Corp., Charleston, S.C.-based First Financial Holdings Inc., Greensburg, Ind.-based MainSource Financial Group Inc., Stuart, Fla.-based Seacoast Banking Corp. of Florida, Los Angeles-based Wilshire Bancorp Inc. and Wilmington, Del.-based WSFS Financial Corp.

Consistent with prior discussions, Treasury is commencing activities to exit the federal government’s involvement in the TARP CPP program, with an initial focus on large investments in relatively healthy, public institutions.  The Treasury’s results in this initial round of auctions is likely to influence policy and expectations going forward.  If Treasury is only able to get 70 to 80 cents on the dollar in the auctions for these relatively healthy and public institutions, its

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Treasury Updates TARP Missed Dividend Report

March 12, 2012

Authors

Robert Klingler

Treasury Updates TARP Missed Dividend Report

March 12, 2012

by: Robert Klingler

On March 12, 2012, Treasury released its February 2012 Dividends and Interest Report providing an updated look at the status of TARP CPP funds, including the first update following the February 2012 dividend due date under the terms of the TARP CPP investments.  As of February 29, 2012, there were 163 TARP recipients that had missed at least one dividend payment (excluding any TARP recipients that have filed bankruptcy or who have been placed into receivership).

As a result of the missed dividends, Treasury has appointed a total of 13 directors to eight different institutions.  In addition, the Treasury has appointed observers to an additional 39 institutions.

Although the Treasury has the right, under the terms of the TARP investments, to appoint two directors once a TARP recipient misses six dividend payments, Treasury has focused its efforts on the largest recipients.  This likely partially reflects that it is not

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Stealth FAQ Updates from Treasury and the FDIC

February 28, 2012

Authors

Robert Klingler

Stealth FAQ Updates from Treasury and the FDIC

February 28, 2012

by: Robert Klingler

Over the last several months, we have become aware of a number of changes to various regulator’s frequently asked questions.  These changes are frequently made without any public announcement, and, in some cases, without any notation that the FAQ’s have been modified at all.  Frequently, banks are made only made aware of the change when they (a) aren’t aware of the initial FAQ, and (b) subsequently ask the question and are directed to the FAQ.

On November 1, 2011, the FDIC updated its Frequently Asked Questions regarding the “High-Rate Area” exception to the market rate caps for less than well-capitalized institutions.  Previously, institutions relying on a “high-rate area” designation had to re-apply every calendar year to maintain the designation.  However, late in 2011, the FDIC determined that institutions that had received a high-rate determination from the FDIC would no longer be required to submit an annual high-rate determination request. 

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