The federal regulator overseeing Fannie Mae and Freddie Mac hired a law firm specializing in litigation as the agency considers how to move forward with efforts to recoup billions of dollars on soured mortgage-backed securities purchased from banks and Wall Street firms. The Federal Housing Finance Agency, which in July issued 64 subpoenas to issuers of mortgage securities, bank servicing companies and other entities, is working with Quinn Emanuel Urquhart & Sullivan LLP, a Los Angeles-based firm that specializes in business litigation, to coordinate its investigations. In a statement, the FHFA said it is analyzing requested information and that "no decisions for future action have been made." Quinn Emanuel confirmed its hiring by FHFA but declined to comment further. Since the financial crisis, 400-lawyer Quinn Emanuel has avoided building a banking clientele, making it a top suitor for plaintiffs pursuing banks. The firm has represented MBIA Insurance Corp. in several lawsuits against top U.S. mortgage banks alleging that the insurer was fraudulently induced to cover losses on mortgage-backed securities. Those cases are ongoing. The FHFA hasn't disclosed the targets of its subpoenas, though some banks have acknowledged receiving them, including J.P. Morgan Chase & Co. The probe is focused on so-called private-label securities that were originated by mortgage companies, packaged by Wall Street firms and then sold to investors. The legal effort is separate from an ongoing probe of allegations that mortgage-company employees improperly signed hundreds of documents a day to quickly process foreclosures. But the fallout from that crisis has generated new concerns that bond investors might become more aggressive in getting out of soured mortgage deals. On Tuesday, Bank of America Corp. acknowledged receiving a letter from investors alleging that the bank didn't properly service bond deals worth $47 billion. Investors include Freddie Mac and the Federal Reserve Bank of New York. Bank of America Chief Executive Brian Moynihan said the bank would "diligently fight this." The FHFA's efforts could ultimately lead to a settlement that would avoid protracted legal battles, analysts said. "There's going to be much more incentive to negotiate seriously and quickly than if they had done this seven months ago, when people were blithely ignoring the fraud," says William K. Black, a former federal bank regulator who is now an associate professor at the University of Missouri-Kansas City School of Law. Estimates about banks' ultimate exposure vary considerably because it isn't clear how aggressively investors will pursue claims, or how successful they will be. Banks could face between $55 billion and $179 billion in repurchase demands from investors, according to Compass Point Research & Trading, a Washington boutique investment bank. Estimates from FBR Capital Markets say repurchase demands could be lower, between $24 billion and $51 billion. The FHFA subpoenas could mark the beginning of a new attempt to recover losses on soured mortgages from banks. http://online.wsj.com/article/SB10001424052702304011604575564631414300418.html I think the government is beginning to fight back...