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Inside Washington (04/14/2009)
* WASHINGTON (4/15/09)--Many homeowners are missing their mortgage payments because they are unemployed, according to a Boston Federal Reserve study (Reuters April 14). Job loss is more likely to cause borrowers to default than tough mortgage terms, the study indicated. Loan modifications may not help investors, either, according to Christopher Foote and Paul Willen, Boston Fed economists; Kristopher Gerardi, Atlanta Fed economist; and Lorenz Goette, University of Geneva professor ... * WASHINGTON (4/15/09)--Suspicious activity reports (SARs) have increased, and the spike may mean an increase in financial crime, according to some financial industry experts. Reports filed by depository institutions in 2008 jumped 13% compared with reports a year earlier (American Banker April 14). Financial institutions are reporting fraud and attempted fraud, said Peter Djinis, former Financial Crimes Enforcement Network (FinCEN) official. A Federal Bureau of Investigation report found that 63,173 SARs involving mortgage fraud were filed in the fiscal year ending Sept. 30. About 28,873 more were filed from October 2008 to February also. As more banks make modifications and work out loans, the more they are checking for fraud. They also fear regulatory criticism, observers said. Last week, the Federal Trade Commission, Treasury, Justice Department, FinCEN and the Department of Housing and Urban Development created a program to stop loan modification fraud ... * WASHINGTON (4/15/09)--The Federal Deposit Insurance Corp. (FDIC) has received about 400 comments from institutions and investors on its Legacy Loan program. Comments ranged from taxpayers’ letters saying they do not support the program, to banking industry representatives who suggested ways to make the program effective. Lawyers at Orrick, Herrington and Sutcliffe LLP suggested broadening the program to include all types of loans, including credit and corporate. Dr. Linus Wilson, a professor at the University of Louisiana at Lafayette, said his research indicates that “it is much better to buy toxic assets from troubled banks after troubled banks have entered a regime similar to receivership than before those bad assets are written down.” Under the current proposal, Wilson said he fears that only banks that sell the assets will be well-capitalized. “Only banks that are insolvent or are experiencing financial distress will see improved operating decisions and better lending incentives if they reduce the volatility of their assets. If this is the case, then U.S. taxpayers will bear the risk of huge losses without improving the incentives in troubled banks.” ... * WASHINGTON (4/15/09)--The Federal Deposit Insurance Corp. (FDIC’s) temporary debt guarantee coverage program has experienced an increase in participation by more than one-third in March. About 97 issuers were participating at the end of last month, compared with 73 in February. Outstanding debt guaranteed by the FDIC also increased 25% to $336 billion (American Banker April 14). The biggest jump in participation was in the category of institutions with assets of less than $10 billion ...


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