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Inside Washington (04/23/2010)
* WASHINGTON (4/23/10)--Credit ratings agencies suspected as early as 2006 that the top ratings given to mortgage-backed securities were flawed, but they failed to take action, according to Sen. Carl Levin (D-Mich.), the chairman of the Senate Permanent Subcommittee on Investigations. Levin told reporters that Standard & Poor’s Rating Services, Moody’s and Fitch Ratings downplayed the riskiness of toxic securities because they failed to reevaluate their ratings--which later worsened the financial crisis (American Banker April 23). Levin was slated to hold a hearing Friday on the topic. He also released a report with e-mails and other documents from the three credit agencies. His report indicates that the agencies suspected as early as 2004 that mortgage fraud, rising housing prices and loose underwriting was undermining their credit models. By 2006, Moody’s and Standard and Poor’s revised their rating models to more accurately account for risk, but didn’t apply those models to existing securities until mid-2007, when thousands were downgraded. The downgrade was likely an “immediate trigger” of the 2008 financial crisis, Levin said ... * WASHINGTON (4/23/10)--The Treasury Department is threatening to cut back incentive payments--or in some cases, deny them--to mortgage servicers who are not modifying loans according to the administration’s guidelines for the Home Affordable Modification Program (HAMP). The department said it has documented cases where servicers wrongly foreclosed on properties or denied modifications before reviewing a borrowers for HAMP (American Banker April 23). HAMP is voluntary, and pays $1,000 for each completed permanent modification for a delinquent borrower and $500 for each modification given to a current borrower. Servicer payments have totaled $68.4 million so far, and 109 servicers are participating. The violations Treasury has found seem to do with communications with borrowers about their rights regarding foreclosure, said Meg Reilly, Treasury spokesperson. By March 31 of this year, about 230,801 borrowers had received permanent modifications, and more than one million were in trial modifications. When HAMP was introduced in 2009, Treasury said it would help three to four million borrowers avoid foreclosure by reducing monthly payments ... * WASHINGTON (4/26/10)--The Supreme Court ruled Wednesday in a 7-2 opinion that makes it easier for consumers to sue collectors who send collection notices in error. The High Court ruled that collectors can’t protect themselves from such lawsuits by simply stating they made an error when issuing the notice. AT issue were the actions of a law firm, Carlisle, McNellie, Rini, Kramer & Ulrich Co. that sent foreclosure proceedings on behalf of Countrywide Home Loans Inc. by mistake. A homeowner sued the firm, saying it violated the Fair Debt Collection Practices Act (American Banker April 23). The case will return to a lower court ...


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