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Inside Washington (10/28/2008)

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* WASHINGTON (10/29/08)--The International Association of Deposit Insurers says it hopes a three-day meeting hosted by the Federal Deposit Insurance Corp. will help finalize guidelines to help countries establish standardized deposit insurance systems (American Banker Oct. 28). The meeting starts Wednesday. About 90 government representatives will attend and will focus on finalizing proposed guidelines that were issued in February. Raising or waiving limits on insurance coverage, expanding coverage to credit derivatives and expanding coverage to keep consumers from escaping to money market funds also could be discussed ... * WASHINGTON (10/29/08)--The Federal Housing Finance Agency (FHFA) became official Monday. The agency integrates the Federal Home Loan Banks, the Office of Federal Housing Enterprise Oversight, the Federal Housing Finance Board, and the Department of Housing and Urban Development’s government-sponsored enterprise mission team. The FHFA oversees Fannie Mae and Freddie Mac. The agency also announced the appointments of Edward DeMarco, senior deputy director, chief operating officer and deputy director for Housing Mission and Goals; Stephen Cross, deputy director of the Division of Federal Home Loan Bank Regulation; Chris Dickerson, deputy director of the Division of Enterprise Regulation; and David Lee, the Federal Housing Finance Board’s director of the office of management, as the FHFA’s chief administrative officer ... * WASHINGTON (10/29/08)--Observers speculate that the Treasury may need more than $700 billion for its rescue package. The department already has earmarked $250 billion for banks and the remaining $450 billion to purchase troubled assets (American Banker Oct. 28). David Nason, assistant treasury secretary for financial institutions, said Monday in an interview with CNBC that the department may have to take equity stakes in insurance companies or automakers. The original intent of the Treasury’s plan was to purchase troubled assets. The $700 billion may go mostly into capital, and it’s unknown how active the asset program would be, according to Bert Ely, an independent analyst based in Alexandria, Va. The Treasury remains committed to the asset program, Nason said Monday, but it has not yet released complete details on it ... * WASHINGTON (10/29/08)--According to New York Gov. David Paterson, congressional leaders should include state officials on the two panels overseeing the Treasury Department’s $700 billion financial rescue program. The representatives could provide valuable input, he said in a letter to Senate and House leaders (American Banker Oct. 28). One panel has yet to be formed, while the other will be chaired by Federal Reserve Board Chairman Ben Bernanke. Paterson plans to call for state participation at a Wednesday House hearing ...

CUNA supports Treasury Fin. Lit. Honor Roll

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WASHINGTON (10/29/08)—Efforts to improve Americans financial literacy are always relevant, and their importance just increases during troubled economic times such as the country currently faces, wrote the Credit Union National Association (CUNA) in a letter to the U.S. Treasury Dept. CUNA comments focused on a proposed Treasury program to establish what it has labeled it Workplace Financial Honor Roll, intended to encourage employers to implement efforts that will enhance employee financial knowledge, CUNA told the Treasury that it supports such a program as a means to reach an important goal of expanding current financial education efforts to reach more Americans. CUNA wrote, “We believe that targeting those at the workplace can be an important means to reach a sector of the public that may otherwise be inaccessible. “ However, CUNA expressed concern regarding the financial and resource requirements the program is likely to place on participating organizations. “Having several concerns about the feasibility of implementing such programs, we ask that the Office of Financial Education offer guidance on establishing and maintaining such programs with minimal costs to the organization,” the CUNA letter said. Additionally, CUNA sought suggestions on how and organization could effectively reach employees, as well as encourage participation in the program. Use the resource link below to read CUNA’s complete comment.

HUD revises FHA-lender bankruptcy advice

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WASHINGTON (10/29/08)—The U.S. Department of Housing and Urban Development (HUD) has changed its rules to allow Federal Housing Administration (FHA) loss mitigation while a borrower is in bankruptcy. In an Oct. 17 letter to all FHA-approved lenders, HUD’s Brian Montgomery, assistant secretary for housing-federal housing commissioner, wrote that effective immediately mortgagees must:
* Upon receipt of notice of a bankruptcy filing, send information to debtor’s counsel indicating that loss mitigation may be available making sure to copy the bankruptcy trustee on all such communications; and * Provide instruction sufficient to facilitate workout discussions including documentation requirements, timeframes and servicer contact information.
Providing such information to debtor's counsel concerning loss mitigation options can be accomplished without requiring relief from the automatic stay and in the case of a Chapter 7 bankruptcy, without requiring reaffirmation of the debt. The advisory negates earlier Mortgagee Letter 2000-05, which generally prohibited mortgagees from offering loss mitigation to a borrower in bankruptcy. That guidance. Montgomery wrote, was based on HUD’s desire not to influence mortgagees to take any action that would be considered by the Bankruptcy Court as a violation of the automatic stay. However, the HUD letter said that its recent discussion with mortgage industry and bankruptcy experts shows that contact with debtor’s counsel or a bankruptcy trustee does not constitute a violation of the automatic stay. Further, waiting until a bankruptcy is discharged or dismissed before offering loss mitigation may be injurious to the interests of the borrower, the mortgagee and the FHA insurance funds. The new advisory should provide some help to those facing foreclosure because of the mortgage market meltdown. Many mortgage lenders, using information required to file a bankruptcy petition, have been able to complete a loss mitigation evaluation before the bankruptcy plan is confirmed and have offered a pre-approved loan modification agreement, according to HUD. “For those mortgagors that sought bankruptcy protection solely to avoid foreclosure of their homes, this solution allowed the mortgagor to have the bankruptcy dismissed and begin fresh with a mortgage obligation that is both current and with payments that the mortgagor can afford. “For those mortgagors with other financial problems, the resolution of the mortgage problem will put them in a better position to resolve the remaining financial issues,” the Montgomery letter pointed out. The lender should communicate through a borrower’s bankruptcy counsel. However, the letter noted that in cases where a borrower has filed for bankruptcy without an attorney, the lender may provide mitigation information directly to the borrower, with a copy to the bankruptcy trustee. The communication to the borrower must not infer that it is in any way an attempt to collect a debt. Mortgagees must consult their legal counsel for appropriate language, HUD advised.