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Inside Washington (10/05/2011)
* WASHINGTON (10/6/11)--Although U.S. banks have limited direct exposure to debt from troubled nations such as Greece, Portugal and Ireland, a default by any country in the Euro zone would damage the U.S. economy, Federal Reserve Board Chairman Ben Bernanke told the Joint Economic Committee. “It is difficult to judge how much these financial strains have affected U.S. economic activity thus far, but there seems little doubt that they have hurt household and business confidence, and that they pose ongoing risks to growth,” Bernanke said. European leaders need to address the sources of the fiscal problems that have slowed the process of finding solutions, Bernanke said. He is not only concerned about direct exposure, but about the broader resolution of sovereign debt issues and European banking issues that have created uncertainty and volatility in financial markets … * WASHINGTON (10/6/11)--Federal Reserve Board Governor Sarah Bloom Raskin called for changes in mortgage servicing agreements to allow for more loan modifications. The inadequacies of servicing contracts have contributed to the slow pace of mortgage workouts and repeated breakdowns in the foreclosure process, Raskin told a Maryland State Bar Association conference “The standard servicing contract provides disincentives for servicers to act in the best interests of investors and borrowers,” she said. “This misalignment of incentives has more profound consequences when defaults are high.” She suggested that compensation structure for servicers should include incentives to execute payment processing more efficiently on performing mortgages, and to carry out effective loss mitigation on delinquent loans. Pooling and serving agreements should be amended or renegotiated to facilitate more workouts and to clarify the situations in which loan modifications and other mitigation strategies should be pursued, she said …


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