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News of the Competition (06/20/2014)
  • WASHINGTON (6/20/14)--SunTrust is expected to pay the Federal Housing Administration $418 million in a move that will nudge the federal mortgage insurance agency's balance sheet toward the black (American Banker June 18). The sum would bolster the White House's fiscal year 2015 prediction that the FHA will have a $7.8 million surplus by the end of September. The payment is part of a $1 billion settlement with federal agencies to settle alleged violations of the False Claims Act. American Banker has reported that some of the $418 million earmarked for the FHA might, in turn, go to the U.S. Department of Veterans Affairs and the Rural Housing Service. Of the rest of the $1 billion in settlements, $500 million has been set aside for consumer relief and $50 million will finance additional cash penalties. Last year, the FHA received $1.7 billion in emergency funding from the U.S. Treasury, though it was not expected to need a cash injection this year, according Banker. The federal agency also received almost $1 billion from Bank of America in a similar settlement. The Justice Department said that SunTrust admitted that it lacked a quality control program, and that half of the FHA-backed loans it originated did not adhere to agency guidelines--and that the bank also failed to report to the Housing and Urban Develop Agency that it had detected faulty loans. The Atlanta-based bank said that it had already set aside reserves for the settlement and claims to have improved its underwriting process and internal oversight...
  • WASHINGTON (6/20/14)--Dozens of U.S. House members--both Republicans and Democrats--are appealing to the White House to nominate a Federal Reserve Board member with community banking experience (American Banker June 18). The 87 members who signed the letter were organized by Reps. Sean Duffy (R-Wisc.) and Ed Perlmutter (D-Colo.). The letter stated that "it's in the Federal Reserve's best interest to have a representative who understands the unique needs and perspectives of community banks when key economic and regulatory decisions are being debated." Recently, the Senate confirmed two members to the board--Stanley Fischer, who now serves as vice chairman, and Lael Brainard. It also recommended incumbent Gov. Jerome Powell for a new term. American Banker reported that observers believe the recent departures of former Govs. Elizabeth Duke and Sarah Bloom Raskin have created a dearth of institutional knowledge of community banking. A bipartisan coalition of senators introduced legislation in April, which would require that at least one Federal Reserve Governor have community banking or supervision experience. That bill, which was written by Sen. David Vitter (R-La.) and co-sponsored by six of his Republican colleagues and two Democrats, has been referred to the Senate Banking Committee...
     
  • NEW YORK (6/20/14)--Banking giants U.S. Bank, Wells Fargo and Citigroup have been targeted with lawsuits this week for their roles as trustees on mortgage-backed securities that were sold under their supervision in the years leading up to the financial crisis of 2008 (Wall Street Journal June 18). BlackRock Inc. and Pacific Investment Management Co., investment firms with billions at stake on the securities, claim the banks breached their duty to the bondholders by allegedly not forcing lenders and bond issuers to repurchase loans that did not meet the quality standards described to buyers when the securities were sold. Wells Fargo, Citigroup, HSBC Holdings and Bank of New York Mellon oversaw 2,000 bond issuances between 2004 and 2008. The investment companies are seeking damages for losses on the bonds surpassing $250 billion, according to a Wall Street Journal source...


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