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Agencies explain impact of SandP action on risk-based capital

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WASHINGTON (8/8/11)--After Standard & Poor’s (S&P) rating agency lowered the long-term rating of the U.S. government and federal agencies to AA+ from AAA, the federal credit union, bank, and thrift agencies issued guidance to their regulated financial institutions. The National Credit Union Administration, Federal Reserve Board, Federal Deposit Insurance Corp., and Office of the Comptroller of the Currency said:
* For risk-based capital purposes, the risk weights for U.S. Treasury securities and other securities issued or guaranteed by the U.S. government, government agencies, and government-sponsored entities will not change. * The treatment of Treasury securities and other securities issued or guaranteed by the U.S. government, government agencies, and government-sponsored entities under other federal banking agency regulations, including, for example, the Federal Reserve Board’s Regulation W, will also be unaffected.
The joint-agency announcement was spurred by the widely reported action by S&P, which cut the long-term U.S. credit rating by one rank. The agency said it made the cut because the recently approved deficit reduction plan didn’t do enough to re-insert stability in the country’s debt situation. MSNBC reported that while U.S. Treasury securities were once regarded as the safest investment in the world, they now will be rated lower than bonds issued by such countries as the United Kingdom, Germany, France and Canada. The deflated rating also could increase borrowing costs across the spectrum—for the U.S. government, for companies and for consumers.

Fannie Mae loses 2.9B in 2011 second quarter

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WASHINGTON (8/8/11)—Loan modifications contributed, in part, to Fannie Mae’s reported $2.9 billion in losses for the second quarter of 2011, but Chief Financial Officer (CFO) Susan McFarland said that the government-sponsored mortgage entity would continue to work with borrowers. Noting that the modifications should “benefit the housing market and reduce long-term credit losses,” the Fannie Mae CFO added that “while modifications contribute to credit related expenses, successful modifications reduce foreclosures and keep families in homes.” Modifications, repayment plans, and other foreclosure-avoidance measures have been worked out with more than 874,000 homeowners between Jan. 1, 2009 and June 30, 2011, Fannie Mae said. Fannie Mae in a Friday release said that the second quarter losses reflected $6.1 billion in credit-related expenses, the majority of which were related to assets that the company has held since before 2009. Continued weakness in housing and mortgage markets also contributed to the loss, Fannie Mae added. Fannie Mae purchased or guaranteed $306 billion in loans during the first half of 2011, helping to finance 1.238 million single-family conventional mortgages. It issued 43.2% of all mortgage-related securities in the secondary market during the second quarter, remaining the largest issuer of those types of securities. The mortgage entity said plans to borrow $5.1 billion from the U.S. Treasury to eliminate its net worth deficit. It has borrowed nearly $104 billion from the Treasury since the fourth quarter of 2008. For Fannie Mae’s full results for the second quarter of 2011, use the resource link.

CFPB nomination hearing mortgage comment due date rescheduled

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WASHINGTON (8/8/11)--Events surrounding two key Consumer Financial Protection Bureau (CFPB) issues, the congressional hearings on establishment of a director and the online comment period for a combined mortgage disclosure form, were both rescheduled last week. The Senate Banking Committee’s nomination hearing for Richard Cordray for the position of CFPB director is scheduled to take place the week of Sept. 6, possibly on Sept. 9. It was previously scheduled for Aug. 4. That nomination hearing, along with other Senate Banking and House Financial Services Committee hearings, was delayed last week as members of Congress left for their August recess. Some members of Congress returned for a late week vote to reauthorize funding for the Federal Aviation Administration, but the hearings were not rescheduled. The CFPB also extended the comment deadline for on the latest draft of its combined mortgage disclosure form to Aug. 10, from Aug. 8. This draft is the third of five planned versions of a combined form for Truth in Lending Act (TILA) and Real Estate Settlement Procedures Act (RESPA) disclosures. The CFPB plans to continue its revisions and release a single draft disclosure later in the year. The CFPB has specifically asked for comment on whether the form will help consumers understand closing costs associated with their loans. Credit unions can also comment on whether lenders and brokers will be able to clearly and easily explain the form to their customers, and can recommend any improvements that would clarify the form. The Credit Union National Association (CUNA), the leagues and credit unions have worked with the CFPB during the revision process, and CUNA has encouraged the CFPB to consider the needs of credit unions as it continues its work. For the latest CFPB release, use the resource link.

Bill would extend FHA max loan limit through 2013

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WASHINGTON (8/8/11)--A bill introduced last week would allow the Federal Housing Administration (FHA), Fannie Mae, Freddie Mac, and the Veterans Administration (VA) to guarantee mortgages up to $729,750, or 125% of local median prices for single family homes, through Dec. 31, 2013. Congress increased the loan limit for the FHA, Fannie, Freddie and the VA to its current amount in 2008. This extension is set to expire for the FHA, Fannie Mae and Freddie Mac on Sept. 30 and for the VA on Dec. 31. The new legislation is known as the Homeownership Affordability Act of 2011 and introduced by Sens. Robert Menendez (D-N.J.) and Johnny Isakson (R-Ga.). The bill is also co-sponsored by Sen. Dianne Feinstein (D-Calif.). A recent release said that if the higher limit is not extended, loans would be affected in 669 counties across 42 states, reducing loan limits by an average of more than $68,000 per county. The maximum guaranteed loan amountwould drop to $625,500, or 115% of local median home prices, the release added. “Allowing these limits to expire would be bad medicine for our economy at a time when we need a booster shot,” Menendez said. Isakson said he is “concerned that failing to extend these limits would make it even more difficult for the average homebuyer get a mortgage and buy a home when credit is already tight.” Members of Congress are scheduled to return to Washington when the August recess ends on Sept. 6.

2Q personal bankruptcies up 3.9

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WASHINGTON (8/8/11)--The amount of personal bankruptcy filings increased by 3.9% during the second quarter of 2011, the U.S. Court’s administrative office has reported. Moody's said that the second quarter personal filing increase is “consistent with seasonal norms” and noted that those filings “have not fallen in any second quarter since 1992.” Personal bankruptcy filings fell by 0.9% during the first quarter of 2011, but rose by 9.1% in the second quarter of 2010. Just over 1.47 million of the nearly 1.53 million bankruptcy petitions filed in the 12 months leading up to June 30 were personal filings. The June 30 total represents a 2.7% drop from the 1.57 million filings that were received during the previous year. The administrative office noted that this drop was not universal, as bankruptcy filings increased in 19 of 94 court districts, with the largest increases over the past year coming in southern Florida, as well as portions of Utah and California. Chapter 7 and Chapter 11 filings both fell during the year ended June 30. News Now last week reported that U.S. consumer bankruptcy filings decreased 18% nationwide between July 2010 and July 2011, representing the seventh consecutive month for which there were fewer bankruptcies in 2011 than during the previous year. For more details and News Now's prior coverage, use the resource links.

Inside Washington (08/05/2011)

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* WASHINGTON (8/8/11)--Treasury Secretary Timothy Geithner told President Barack Obama he will remain in his position, ending speculation he would step down (The New York Times Aug. 8). Geithner told White House officials several weeks ago he was considering stepping down following the debt-ceiling debate to spend more time with his family. Geithner said he would decide on his future after the administration reached a deal with Congress on the raising the U.S. debt ceiling. Obama signed the deb-ceiling legislation into law on Tuesday. The White House urged Geithner to stay on as Treasury secretary, citing the need for stability during a difficult economy and the prospect of a confrontation with Senate Republicans over the nomination of a new secretary …