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Inside Washington (12/23/2010)
* WASHINGTON (12/28/10)--Citing the cost to taxpayers of taking over Fannie Mae and Freddie Mac and structural weaknesses of those government-sponsored institutions, the Congressional Budget Office (CBO) Wednesday released a study offering three alternative approaches for the future of the secondary mortgage market (American Banker Dec. 23). The study also reviewed the developments that led to the 2008 conservatorships of Freddie and Fannie. The report said because of their size and interconnectedness with other financial institutions, Freddie and Fannie posed “substantial systemic risk,” meaning that their failure could impose high costs on the financial system and the economy. The three alternatives for the future structure of the secondary market include: a hybrid public/private model in which the government would help ensure a steady supply of mortgage financing by providing explicit guarantees on privately issued mortgages or mortgage-backed securities (MBS) that met certain qualifications; a fully public model in which a federal entity would guarantee qualifying mortgages or MBSs; or an entirely private model with no special federal backing for the secondary mortgage market. For the report, use the link … * WASHINGTON (12/28/10)--The Treasury Department has updated the online resource center for the Small Business Lending Fund (SBLF) (American BankerDec. 23). Enacted into law as part of the Small Business Jobs Act of 2010, the SBLF encourages lending to small businesses by providing Tier 1 capital to qualified community banks with assets of less than $10 billion. Through the SBLF, community banks and small businesses can work together to help create jobs and promote economic growth in local communities across the nation. The SBLF, a pool of $30 billion, aims to stimulate small business lending by providing capital to participating community banks. The dividend rate on SBLF funding will be reduced as a participating community bank increases its lending to small businesses. The initial dividend rate will be, at most, 5%. If a bank’s small business lending increases by 10% or more, then the rate will fall to as low as 1%. Banks that expand their lending by amounts less than 10% can benefit from rates set between 2% and 4%. If lending does not increase in the first two years, however, the rate will rise to 7%. After 4 ½ years, the rate will increase to 9% if the bank has not already repaid the SBLF funding … * WASHINGTON (12/28/10)--The Federal Housing Finance Agency (FHFA) issued three final rules on Wednesday, including one that requires Fannie Mae and Freddie Mac to reduce the size of their portfolios by 10% annually. Under the second rule Fannie, Freddie and the Federal Home Loan Banks will each be required to promote diversity and the inclusion of women, minorities and disabled persons by establishing an Office of Minority and Women Inclusion. The third rule requires the FHFA to establish housing goals for bank purchases of mortgages. The Fannie Mae/Freddie Mac portfolio rule is unchanged from the FHFA's interim final rule that went into effect on Jan. 30, 2009. Under the rule, Fannie and Freddie may each hold mortgage assets up to $900 billion, but starting at the end of this year, they must reduce their portfolio holdings by 10% annually until they each reach $250 billion …


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