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Inside Washington (05/08/2008)

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* WASHINGTON (5/9/08)--Lenders need to expand their loan modification efforts, Treasury Department officials said during a private meeting with top lenders Tuesday. Attendees of the meeting talked about how to broaden loan modification criteria to include more borrowers. One proposal was to drop FICO scores. However, no proposal was finalized (American Banker May 8). One suggestion involved giving borrowers temporary approval for the modifications, with the opportunity for loan servicers to revise the approval later. Tuesday’s meeting was called by Treasury Secretary Henry Paulson as a follow-up to a meeting he held earlier with top mortgage lenders in April ... * NEW YORK (5/9/08)--The Federal Home Loan Bank (FHLB) of New York and Magyar Bank are providing $6 million to fund an initiative that aims to help homeowners in New Jersey facing foreclosure. The initiative, the Housing Assistance and Recovery Program (HARP), will purchase homes in foreclosure and lease them back to homeowners for a defined period of time. Homeowners will stay in the homes, pay rent, and have an opportunity to improve credit and re-purchase the property. Magyar Bank will provide 70% of the funding with FHLB funds. HARP was launched May 1 and will be used to immediately assist 15 families. Homeowners are eligible for the program if they complete a financial planning and education program ... * WASHINGTON (5/9/08)--The Securities and Exchange Commission (SEC) will begin requiring that investment banks on Wall Street disclose their liquidity and capital levels (Reuters May 8). The increased scrutiny comes after Bear Stearns Cos. nearly collapsed when its liquidity dropped in March. At a conference Wednesday, SEC Chairman Christopher Cox said the agency will not wait on new, internationally accepted standards for liquidity and capital ...

SBA Patriot Loans hit 135 in 10 months

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WASHINGTON (5/09/08)—The U.S. Small Business Administration (SBA) Thursday announced that in the 10 months since it has launched it Patriot Express Program, it has produced 1,304 guaranteed loans to the military community. More than 15% of the $135 million in loans were dispersed to military spouses. The SBA used the fact that May 9 marks National Military Spouse Day as its springboard for the announcement reminding service families of the program. Others eligible for the loans are veterans, service-disabled veterans, service members leaving active duty, Reservists and National Guard members, current spouses of any of the above, and the surviving spouse of a servicemember who died while serving or of a service-connected disability. Since June 2007, credit unions and other lenders could start submitting applications for funds under the SBA’s Patriot Express pilot program. The program features a streamlined loan product based on the agency's SBA Express Program, but with enhanced guaranty and interest rate features. The loans may be used for most business purposes and have been approved in all 50 states, the District of Columbia, the U.S. Virgin Islands, Puerto Rico and Guam. They currently range from $5,000 to $375,000 in individual loan amounts, but can be approved for up to $500,000.

House approves help to troubled borrowers

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WASHINGTON (5/09/08)—The House approved two housing measures Thursday including a major rescue bill (H.R. 3221) that would establish a $300 billion fund for mortgage insurance. The comprehensive measure combined a cluster of bills that have been wending their ways through the legislative process. They include:
*H.R. 5720, the Housing Assistance Tax Act of 2008; * H.R. 5830, the Federal Housing Administration Housing (FHA) and Homeowner Retention Act; * H.R. 1852, the Expanding American Homeownership Act of 2007; * H.R. 1427, the Federal Housing Finance Reform Act of 2007; and * H.R. 5579, the Emergency Mortgage Loan Modification Act of 2008.
Under provisions of the final bill, the mortgage insurance fund would be under the authority of the Department of Housing and Urban Development’s Federal Housing Administrating (FHA). It is expected to provide aid for approximately half a million borrowers struggling to hang onto their homes. The program would allow certain mortgage holders to get an FHA guarantee on a loan if they write down the principal amount. The other housing bill passed by the House yesterday was H.R. 5818, the Neighborhood Stabilization Act, which would provide states and cities with funds to help prevent rising foreclosures in neighborhoods. The bills now must go to the Senate for a vote. If passed by the Senate, they must be signed by the President to become law. However, the White House has made it clear that it has strong reservations about some provisions in the larger housing package.

HSA hearing coming

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WASHINGTON (5/09/08)—Rep. Pete Stark (D-Calif), chairman of a House Ways and Means subcommittee on health, has scheduled a hearing on Health Savings Accounts (HSAs) and high-deductible health plans (HDHPs). The hearing is scheduled for May 14. In a hearing notice, Stark noted that proponents of the savings plans argue that they help control overall health spending because individuals have a significant financial stake in the cost of their care. The Credit Union National Association (CUNA) supports the availability of HSAs for consumers and backs the expansion of these accounts. Noting that there are nearly seven million HSA account holders in the United States, CUNA believes HSAs are a way of providing credit union members with a means to build wealth while also better managing personal medical costs. CUNA also supports an aggressive effort to encourage credit unions to offer HSAs, as only about 600 credit unions currently offer these accounts. However, opponents of the accounts argue that they have the opposite of their intended effect. Stark noted an April 2008 Government Accountability Office (GAO) study that found, in part, that average HSA enrollees had incomes nearly three times the average income of other tax filers and that HSA contributions were almost twice that of withdrawals. “Simply stated, these policies are designed to help those who can afford to put money away to do so, but only serve to put health care further out of reach for those with high medical costs and/or modest incomes,” Stark said. He added his concern that “these plans may discourage consumers from seeking treatment and obtaining preventive care, and total health spending could even increase if people defer or delay needed preventive care or initial treatment.” An official witness list was not yet available.