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Inside Washington (08/10/2012)
  • WASHINGTON (8/13/12)—The Federal Housing Administration (FHA) is working hard to paint itself as a turnaround story, but its critics say that picture is deceptive. FHA has $3 billion surplus, an improving credit profile and will not require a government bailout this year, but the agency has attempted to raise capital through settlements with major banks, sales of severely delinquent loans and higher insurance premiums for new borrowers (American Banker Aug. 10). The agency's reserves are in decline, delinquencies are on the rise and only foreclosure delays by large mortgage servicers have helped it avoid paying out new claims, according to FHA data. A billion-dollar settlement with large banks over bad loans was the primary reason FHA avoided a government bailout this year, said Isaac Boltansky, a policy analyst at Compass Point Research & Trading …
  • WASHINGTON (8/13/12)--The Federal Deposit Insurance Corp. (FDIC) in July used authority found under the Financial Institutions, Reform, Recovery and Enforcement Act of 1989 to recoup losses--and help replenish the Deposit Insurance Fund--by going after affiliated institutions (American Banker Aug. 10). The FDIC last month announced the terms of an agreement with $456 million asset Union Bank in Kansas City, Mo. Under the agreement, Union Bank will pay FDIC 85% of the proceeds of the bank's sale to Arvest Bank in Fayetteville, Ark. The agreement serves as a warning that banks should confirm with the Federal Reserve whether they have less than a majority position, says James J. McAlpin Jr., a partner at Bryan Cave in Atlanta. Banks can take advance steps to release themselves from a controlling position, McAlpin said …
  • WASHINGTON (8/13/12)--Force-placed insurance allows insurers to collect premiums and banks to earn lucrative fees even though the loss rates on such coverage tend to be lower than standard homeowners coverage, consumer advocates said at a hearing held by the National Association of Insurance Commissioners Thursday. Force-placed insurance is a type of property insurance policy that banks purchase when mortgage borrowers stop paying for homeowners insurance (American Banker Aug. 10). Banks receive a portion of the premiums through commissions, reinsurance deals and other payments from the specialty carriers that offer it. The inflated fees of force-placed insurance don't justify the risks, testified Peter Kochenberger, executive director of the Insurance Law Center at the University of Connecticut Law School. If the fees were so lucrative, more companies would offer the insurance, said Kevin McKechnie, the executive director of the American Bankers Insurance Association. Only two major specialty insurers--Assurant and QBE--offer force-placed insurance …
  • WASHINGTON (8/13/12)--Liberal groups Thursday pressured the Obama administration to replace Edward DeMarco as acting head of the Federal Housing Finance Agency (FHFA). Housing activists and consumer groups also requested that the Justice Department further investigate the origins of the housing crisis. Criticism of DeMarco has increased since he announced that the FHFA will not allow principal write-downs on Fannie Mae and Freddie Mac mortgages (American Banker Aug. 10). Observers believe the president is unlikely to replace Demarco because he leads an independent agency and Senate Republicans would block any nominee to replace him. Activists said Demarco's replacement could be filled through a recess appointment. There has been little progress made in investigating the fraud and abuse that led to the 2008 housing crisis, activists said. A complete investigation is among the obstacles standing in the way of a robust economic recovery, said Brian Kettenring of the Campaign for a Fair Settlement …


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