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Inside Washington (11/30/2007)

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* WASHINGTON (12/3/07)--Senate Banking Committee Chairman Christopher Dodd (D-Conn.) was scheduled to introduce a bill that would not only restrict commercial ownership of industrial loan companies (ILCs), but stop the activities of those that are currently commercially owned (American Banker Nov. 30). Dodd’s bill is tougher than ILC legislation that passed through the House in May, with the exception that his bill would allow automakers to own ILCs. However, the bill is still in draft stages and must be approved by lawmakers such as Sen. Robert Bennett (R-Utah), a strong supporter of ILCs. Dodd’s bill comes just one month before a moratorium on ILC applications, imposed by the Federal Deposit Insurance Corp., is set to expire. FDIC Chairman Sheila Bair said the moratorium already has been extended for 18 months and will not be lengthened again …

Faster loan modifications gets House panel look

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WASHINGTON (12/3/07)—The House Financial Services Committee announced it will take an overall look at recent proposal to improve the pace and volume of subprime mortgage loan modifications that are meant to help troubled borrowers hang onto to their homes purchased with hybrid ARMs and other nontraditional loans. The committee intends to examine whether the current approach by mortgage servicers and lenders to look at loans on a case-by-case basis may be slowing the pace and limiting the number of loan workout agreements. The Dec. 6 hearing is entitled “Accelerating Loan Modifications, Improving Foreclosure Prevention and Enhancing Enforcement.” The hearing will also address specific issues arising from House consideration of H.R. 3915, the Mortgage Reform and Anti-Predatory Lending Act, which was Nov. 16. According to a committee release, the lawmakers will focus in particular on:
* A proposal to provide a safe harbor from legal liability for mortgage market participants who modify mortgage loans according to certain criteria; and * A proposal to add civil monetary penalties for a “pattern and practice” of violations of the bill’s basic lending standards.
The committee had not yet announced its scheduled witnesses.

White House calls subprime rule talk premature

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WASHINGTON (12/3/07)—The White House Friday said it was working closely with the private sector and the mortgage industry to find ways to help people keep their homes through the current upheavals in the mortgage and housing markets, but added it is too early to discuss possible initiatives to address the crisis. Reuters reported Friday that when White House spokesman Scott Stanzel was pressed by reporters on the subject, he answered that talk about any news steps would be “premature” at this time. The article noted that in August the Bush administration announced a series of initiatives geared toward helping homeowners avoid defaulting on “risky mortgages” and that economists are increasingly concerned about the impact of the subprime mortgage crisis on the broader U.S. economy. The White House acknowledged last week when it released the most current economic forecasts that the decline in housing had been "more pronounced" than expected. The forecast had cut projections for the U.S. gross domestic product growth for the coming year to 2.8% from the 3.1% estimated in June.

House subcommittee looks at Californias bleak subprime picture

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WASHINGTON (12/3/07)—The Federal Deposit Insurance Corp. (FDIC) chairman’s special advisor for policy was one of 21 witnesses scheduled to testify on three panels during Friday’s House subcommittee field hearing in California on foreclosure prevention. The FDIC’s Mike Krimminger noted in his prepared testimony that California’s exposure to subprime mortgages is particularly significant and the approaching rate resets for subprime hybrid ARM loans is introducing “additional uncertainty for California homeowners, lenders, and the public.” The hearing was conducted by the House Financial Services subcommittee on housing and community opportunity. Krimminger testified that California’s subprime mortgage problems already have spread to cause other problems, such as a decline in the state’s employment levels, spurred in part by a 16% drop in construction employment as of the third quarter of this year. The non-depository finance and services sector also experienced a decline of 3% from a year ago. Krimminger split subprime loan portfolios into three groups, identifying: a small subset of loans that can be expected to perform after reset without modification; loans that became past due under the starter rate and probably cannot repay even if they are modified; and loans that have remained current prior to reset, but will likely not remain so after reset without modification. Based on FDIC calculations, he said, perhaps more than 1.5 million hybrid loans totaling $330 billion are scheduled for their first rate reset between September of this year and December 2008. H e said “the vast majority of these loans” remain current and fewer than 350,000 are 60 days or more past due. “A key issue is how to address the mortgage loans for owner occupied properties where the borrowers are current on their payments but will not be able to maintain the payments following reset. If servicers do nothing and allow all of these loans to reset to the full contract rate, the result will be the eventual default and foreclosure on hundreds of thousands of additional loans.” The FDIC official reiterated Chairman Sheila Bair’s recommendation that servicers take a “systematic and streamlined approach” to restructuring loans into fixed-rate loans at the introductory rate. He also took on what he called “misconceptions” regarding restructuring loans. For Krimminger’s complete testimony and that of other witnesses, use the resource link below.