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Inside Washington (04/12/2011)
* WASHINGTON (4/13/11)--The proposed settlement sought by the 50 state attorneys general and a host of federal agencies with the top five mortgage firms could create “unintended negative consequences” for housing and financial markets and extend the foreclosure crisis, according to a study by three economists (American Banker April 12). The study said the settlement would drive up the number of defaults and servicing costs; slow down new home construction and consumer spending; and increase mortgage rates by 20 to 45 basis points per year. Under the settlement, servicers must add new requirements to mortgage documentation, interaction with borrowers, relationships with active military personnel, loan modifications, principal reductions, bankruptcy proceedings, short sales and technology systems. These changes would be cost prohibitive, driving up servicing costs, defaults and foreclosure inventory, said the study. The study, commissioned by the financial services industry, was conducted by Charles Calomiris, a professor of financial institutions at Columbia Business School; Eric Higgins, a professor of finance at Kansas State University; and Joseph Mason, the chair of banking at Louisiana State University and a senior fellow at the Wharton School … * WASHINGTON 4/13/11--The fiscal budget negotiated between lawmakers and the Obama administration late Friday includes annual audits of the Consumer Financial Protection Bureau (CFPB) by both the private sector and the Government Accountability Office (American Banker April 12). The audits will “monitor [the CFPB’s] impact on the economy, including its impact on jobs, by examining whether sound cost-benefit analyses are being used with rulemakings,” according to a summary provided in a blog post by House Speaker John Boehner (R-Ohio). In another blog post, the White House said it avoided Republican efforts to limit funding for the establishment of the CFPB. “They also wanted to limit funding for the establishment of the new Consumer Financial Protection Bureau and block the Environmental Protection Agency from enforcing clean air and water rules,” the White House blog post said. “While we made significant cuts, we just couldn't afford to cut these important programs that are critical to our nation” …


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