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Inside Washington (06/17/2009)
* WASHINGTON (6/18/09)--Rep. Luis Gutierrez (D-Ill.) has introduced legislation that would change how the Federal Deposit Insurance Corp. can charge assessments. Currently, the FDIC bases the assessments on domestic deposits. Gutierrez’s bill would require the FDIC to charge premiums based on an institution’s assets (American Banker June 17). The bill would retain the increased deposit insurance limit of $250,000 per account. Gutierrez said his legislation aims to end the idea that some institutions are “too big to fail.” The congressman, who chairs the House Financial Services financial institutions subcommittee, said the legislation could be added to the Financial Services Committee’s regulatory restructuring plan ... * WASHINGTON (6/18/09)--A watchdog report released Tuesday by the U.S. Treasury Office of the Inspector General indicates that the Office of Thrift Supervision (OTS) was too lenient in dealing with Downey Financial Corp. The Newport Beach, Calif.-based savings and loan failed in November after significant mortgage losses. The report said the OTS issued warnings from 2002 to 2005 about Downey’s adjustable rate mortgages, but did not order Downey to limit its exposure to them (Reuters June 16). The OTS should have been more “forceful” and limited the mortgages’ concentrations at Downey, according to the report. It also said OTS agrees with the inspector’s recommendations ... * WASHINGTON (6/18/09)--Reverse mortgage lenders say they are preparing for a pullback in the industry as stricter eligibility requirements loom. Shaun Donovan, Department of Housing and Urban Development (HUD) secretary, said the government may need to be tougher on slowing the growth of reserve mortgage loans as home prices drop. Reverse mortgages could be the next subprime mortgage product, said Comptroller of the Currency John Dugan said in a speech at a banking industry conference (American Banker June 16). If HUD changes eligibility requirements, fewer borrowers will qualify for the loans, according to David Cesario, executive vice president of 1st Reverse Financial Services LLC. Last year, a housing bill capped origination fees on the loans at 2% for the first $200,000 and 1% for the balance beyond that amount. Congress approved a higher limit in February--$625,000--which expanded eligibility requirements. That figure is an increase from $417,000. HUD has asked Congress for $798 million to boost its loss reserves for the Federal Housing Administration’s Home Equity Conversion Mortgage program. The program allows borrowers age 62 and older to convert their home equity into monthly payments or a line of credit. The loan is repaid when the home is sold ...


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