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Inside Washington (08/14/2009)
* WASHINGTON (8/17/09)--The Federal Deposit Insurance Corp. (FDIC) is acting quickly to finalize rules governing private-equity ownership of banks while dealing with the expected failures of $25 billion asset Colonial Bank, $14 billion asset Guaranty Bank and $7 billion asset Corus Bank (American Banker Aug. 14). However, many private-equity investors have questioned the “restrictive” nature of FDIC proposals that could increase the FDIC’s resolution costs and limit the number of potential investors. Industry members have questioned the FDIC’s approach, saying it should complete its guidance before any transactions related to the three banks can take place. While some question the FDIC’s future willingness to negotiate separate deals with private-equity investors, others say the agency would have little choice but to cut separate deals with private-equity investors that wish to purchase portions of Colonial, Guaranty, or Corus. There is speculation that many have already bid on Guaranty … * WASHINGTON (8/17/09)--The Federal Home Loan banks (FHLBs) have taken issue with a report commissioned by the system's Office of Finance. The report indicates that the scattered nature of the FHLB system, which spans 12 districts nationwide, is harming the transparency and consistency of accounting within the system. While the report advocated “centralized management and control” of the FHLB system, FHLB Office on Finance CEO John Fisk said that the FHLBs could achieve the needed transparency and consistency “in a combined financial structure within the decentralized structure of the 12 home loan banks" (American Banker Aug. 14). Council of Federal Home Loan Banks President John von Seggern suggested that any decision related to centralization of the bank system should be made by the members ... * WASHINGTON (8/17/09)--As of July, Fannie Mae and Freddie Mac have refinanced almost 1.9 million loans through the Making Home Affordable Refinance Program (HARP), said the Federal Housing Finance Agency (FHFA). Under HARP, borrowers whose loan-to-value (LTV) ratio is 80% up to 105% are able to refinance without added mortgage insurance requirements. FHFA recently announced the expansion of HARP to allow borrowers with LTVs up to 125% to participate. Fannie Mae will begin accepting deliveries of refinanced loans with LTVs over 105% up to 125% as of Sept. 1. Freddie Mac will accept deliveries of these loans Oct. 1 ... * WASHINGTON (8/17/09)--Fannie Mae and Freddie Mac should engage in mortgage buyouts to avoid advancing unpaid interest to investors, which costs taxpayers, according to Ajay Rajadhyaksha, Barclays PLC analyst. About $600 billion of loans at the enterprises are 90 days or more delinquent, which equals $12 billion in interest if the rate is 6%, he said. However, the buyouts would erode the enterprises’ capital because they would write down the mortgages to discounted market prices (American Banker Aug. 13). The losses would force Fannie and Freddie to increase their use of a government backstop. But the buyouts could encourage Fannie and Freddie to modify their mortgages, said Chris Dickerson, deputy director for enterprise regulation at the Federal Housing Finance Agency. Arthur Frank, director of mortgage-backed securities research at Deutsche Bank Securities, said the savings on interest is small next to the amount lost in defaults ... * WASHINGTON (8/17/09)--Plans to overhaul the financial system are on track, according to Treasury Secretary Timothy Geithner. In an interview with The Wall Street Journal, he noted that the Obama administration also will not allow Wall Street to take on more risk than it can handle. The financial system is not reverting back to past practices. The administration “won’t let that happen,” Geithner said (The Wall Street Journal Aug. 14). Some large financial institutions, including Goldman Sachs, have recently recorded record profits. Achieving stability means that people can raise money, equity, and borrow more at lower rates, and it’s good that core parts of the nation’s financial system look profitable, Geithner said ... * WASHINGTON (8/17/09)--Joseph Murin, Ginnie Mae president, is set to step down this week to start a strategic advisory and consulting firm (Reuters Aug. 13). No successor has been named. The agency, the Government National Mortgage Association, guarantees investors payment of principal and interest on mortgage-backed securities that are backed by guaranteed or federally insured loans ...


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