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Fed investigating mortgage malfeasance says Bernanke

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WASHINGTON (10/26/10)--“Federal banking agencies are working together to complete an in-depth review of practices at the largest mortgage servicing operations,” and are “looking intensively at the firms' policies, procedures, and internal controls related to foreclosures” to help “determine whether systematic weaknesses are leading to improper foreclosures,” Federal Reserve Chairman Ben Bernanke said on Monday. The Fed will likely make the preliminary results of the review available next month, and the Fed will “take violations of proper procedures seriously,” Bernanke added. Various federal agencies will evaluate the impact that the foreclosure-related problems could have on the real estate market and financial institutions, Bernanke said. Federal Deposit Insurance Corporation (FDIC) Chairman Sheila Bair in a separate speech backed up Bernanke’s comments, saying that the FDIC is working “to get to the bottom” of “concerns and claims that legal documents required for foreclosure have in some cases been improperly exercised – or ‘robo-signed’ – by mortgage servicers. The litigation generated by this issue could ultimately be very damaging to our housing markets if it ends up unduly prolonging those foreclosures that are necessary and justified,” Bair added. The House subcommittee on housing and community opportunity will also investigate potentially improper and illegal foreclosures on Nov. 18, Chairwoman Maxine Waters (D-Calif.) said this month. Waters has also promoted H.R. 3451, the Foreclosure Prevention and Sound Mortgage Servicing Act, a bill that would prohibit banks from initiating foreclosure proceedings without offering loss mitigation options to homeowners. A number of larger mortgage lenders have curtailed foreclosures or evictions in several states, and state officials nationwide are investigating claims of false mortgage documentation and verification that may have been used to justify hundreds of thousands of foreclosures. However, GMAC and Bank of America have recently signaled their intent to renew foreclosure processing. Credit Union National Association Chief Economist Bill Hampel has said that this temporary stall in foreclosure processing may aid credit unions by allowing them to get their own foreclosures off of their books quicker. Credit unions have seen limited increases in foreclosure-related activity due to the overall decline in the economy. However, the majority of credit unions were much more careful in their lending activities, and did not originate toxic mortgages nor engage in the subprime mortgage market. Bernanke made his remarks about the foreclosures at a joint Fed/FDIC conference highlighting policy-oriented research on U.S. housing and mortgage markets. Bernanke also touted the Mortgage Outreach and Research Effort (MORE), a program that combines the resources of 12 Fed banks and the Board of Governors to “promote fair and equal access to banking services and improve communities.” The Fed is also “conducting empirical research on mortgage and foreclosure related topics, and are reaching out to industry experts,” Bernanke added. For additional information on the MORE program, use the resource link.

Hyland NCUA intends comprehensive solution to corp. issues

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ALEXANDRIA, Va. (10/26/10)--The National Credit Union Administration’s (NCUA) corporate credit union resolution plan “represent(s) a comprehensive solution to the problems afflicting corporates” that puts consumers first and ensures that taxpayers will not have to pick up the tab, NCUA board member Gigi Hyland said on Monday. Speaking at the American Institute of Certified Public Accountants “Conference on Credit Unions,” Hyland said that “credit unions are paying the bill” as they work to resolve the credit union system’s “most significant financial and structural challenge.” The recent corporate troubles, started by a “perfect storm of over-concentration in private-label, mortgage-backed securities held by several large corporate credit unions,” will be partly resolved by the NCUA’s recent conservation of failed and troubled corporate credit unions, Hyland said. The NCUA “had to eliminate the threat of a liquidity event and provide a stable future for the system. Now credit unions can make a strategic business decision about how to get the services they need and what works for their credit union,” Hyland added. While credit unions do not have to make these business decisions immediately, Hyland said that credit unions “need to be engaged to begin thinking about the future and working on a transition strategy.” “Credit unions have options,” Hyland added. For the full NCUA release, use the resource link.

CUNA seeks extended escrow compliance deadline

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WASHINGTON (10/26/10)--The Credit Union National Association (CUNA) has requested that the Federal Reserve (Fed) give lenders an additional six to twelve months to comply with a proposed rule that would revise the escrow account requirements for “higher-priced,” first-lien “jumbo” mortgage loans. The compliance deadline extension, which would be effective after the Fed releases the final version of its rule in the Federal Register, would be “especially important for credit unions and others that rely on third parties, such as software vendors,” CUNA said. The extended implementation time “will be especially important at this time since lenders and their vendors are preparing for other changes, such as the disclosures changes required under the Mortgage Disclosure Improvement Act that will be effective as of Jan. 30, 2011,” CUNA added. “These third parties will need time to incorporate the necessary updates, complete the necessary testing, and then include this change into their regularly scheduled releases,” the comment letter said. Overall, CUNA added, the escrow provision would be helpful, as it would “relieve credit unions and other lenders from complying with the escrow account requirements for first-lien jumbo loans that are between 1.5 and 2.5 percentage points above the applicable average prime offer rate. The Fed rule would increase the annual percentage rate (APR) threshold used to determine whether an escrow account is required for property taxes and insurance for first-lien jumbo mortgages, which are defined as those exceeding the Freddie Mac and Fannie Mae conforming loan size thresholds. The escrow account requirement would apply to first-lien jumbo loans only if the loan APR is 2.5 percentage points or more above the applicable APOR, instead of the 1.5 percentage points as originally required by the current rules. For the full release, use the resource link.

Inside Washington (10/25/2010)

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* WASHINGTON (10/26/10)--Lawmakers, as well as bankers, are debating the limits on Elizabeth Warren’s authority as the administration official selected to launch the Consumer Financial Protection Bureau. President Obama appointed Warren as assistant to the president and special advisor to U.S. Treasury Secretary Timothy Geithner as a way to avoid the Senate confirmation battle likely to occur if she were named agency director (American Banker Oct. 25). Bankers and some lawmakers claim that since Warren is not a director, she only has the power to hire and is denied the ability to draft rules or proposals. But consumer advocates say bankers are "splitting hairs" and that Warren's influence is likely to be widely felt, even if the rules she helps draft cannot be issued until a permanent director is appointed. The Dodd-Frank law empowered the Treasury Department to create the agency, but only specifically mentioned hiring staff… * WASHINGTON (10/21/10)--Elizabeth Warren told reporters she expects to spend much of her time traveling outside Washington, D.C. to meet with representatives from financial institutions of all types to gather input on the role of the Consumer Financial Protection Bureau. The bureau recently established a 30,000-square-foot office in Washington, but Warren told reporters the agency is likely to outgrow that location as it hires 1,000 employees in its first year (American Banker Oct. 25). To date, Warren has met with large-bank executives, community bankers, private-equity investors with a major stake in financial services and technology firms… * ALEXANDRIA, Va. (10/26/10)—The NCUA on Monday amended its calendar for the month of November, moving the closed portion of their November monthly meeting to Wednesday, Nov. 17 at 10:00 AM E.T. The open portion of the meeting will take place on the following day at 9:00 AM E.T…