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Inside Washington (08/04/2011)
* WASHINGTON (8/5/11)--The Department of Housing and Urban Development and Bank of America (BofA) have reached a settlement that releases the bank from liability for failing to adequately provide alternatives to foreclosure on 57,000 delinquent mortgages insured by the Federal Housing Authority. The agreement was reached separately from continuing settlement talks between Bank of America, state attorneys general and other regulators over alleged mortgage origination and servicing failures. Under the settlement, BofA will waive a minimum of $10 million in unpaid mortgage payments and reach out to each of the 57,000 delinquent borrowers for a possible loan modification, short sale or other foreclosure alternative. In agreeing to the settlement, HUD decided not to pursue steep monetary damages or admissions of error from BofA. Instead, BofA agreed to implement steps that in most cases it was supposed to have already taken under the terms of its government-guaranteed loans… * WASHINGTON (8/5/11)--The U.S. Small Business Administration (SBA) has announced the first 20 non-profit community organizations to receive financing under a new program. The Small Business Jobs Act of 2010 created The Intermediary Lending Program, which is intended to support businesses in underserved markets. The three-year pilot program provides direct loans to eligible non-profit intermediaries for the purpose of making small business loans of up to $200,000. The SBA said a goal over the next two years is to assess the intermediary model as an effective tool for increasing lower-dollar lending to small businesses and startups, particularly those in traditionally underserved communities … * WASHINGTON (8/5/11)--Although legislation to create a new mortgage finance system is unlikely, some industry representatives continued to urge the government to transition away from Fannie Mae and Freddie Mac at a Senate subcommittee hearing Wednesday (American Banker Aug. 3). Under one proposal, Fannie and Freddie would develop a subordinated bond structure, where private investors would take the first-loss position on the two government-sponsored enterprises’ bonds, either side-by-side or ahead of Fannie and Freddie. That approach likely would require the approval of the Federal Housing Finance Agency, which regulates Fannie and Freddie. Thomas Hamilton, managing director at Barclays Capital, said that he would like to see the size of mortgages that Fannie and Freddie guarantee lowered significantly over the next year and a half … * WASHINGTON (8/5/11)--“Too big to fail” financial players continue to harm the U.S. economy, according to several prominent economists who testified at a Senate Banking financial institutions subcommittee hearing Wednesday (American Banker Aug. 3). The presence of the largest players creates a “distorted economy” because small- and medium-sized lenders are starved for funds relative to big banks engaged in more speculative activities, said Joseph Stiglitz, an economist and professor at Columbia University Business School. As a result, larger institutions are able to get access to capital at lower costs, especially compared with community financially institution, said Stiglitz. With less government involvement, the private sector would bear the risk that U.S. taxpayers currently hold, said Paul Pfleiderer, a finance professor at Stanford University’s Graduate School of Business. With an implicit government guarantee, big financial players are more likely to take on more risk, with taxpayers inevitably left to bear the losses, according to economists …


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