Compliance & Regulation

Senate Banking Committee Chairman Christopher J. Dodd, D-Conn., says he is working on legislation to prevent an "unprecedented" wave of subprime foreclosures and to give homeowners a grace period so they can get back on their feet."This is a homeownership crisis of unprecedented proportions," Sen. Dodd told a group of mayors. He is planning to hold hearings soon, possibly in two weeks. The committee chairman indicated that the legislation might include a rescue fund. "That is a possibility, but it would have to be paid back," he told reporters. Sen. Dodd also told reporters that he wants to move quickly on GSE legislation to strengthen regulation of Fannie Mae and Freddie Mac and pass a bill in the next two months. He said the Senate government-sponsored enterprise bill will be a "little different" from the House bill. And he declined to take a position on raising the GSE loan limits. "I have to be careful about jumping into that," Sen. Dodd said after speaking to the mayors. "I want to talk with my colleagues first."

President Bush did not mention Hurricane Katrina in his State of the Union speech, or the rebuilding efforts along the Gulf Coast, which is still recovering from devastating hurricanes in 2005."It is a glaring omission," said Sen. Mary Landrieu, D-La. "Much of the vast devastation left by Katrina and Rita remains, and the job of recovery is far from finished." The National Housing Conference also urged the Bush administration not to forget about Katrina and the recovery efforts. "The government's job is far from over in assisting the rebuilding and meeting the housing and other basic needs of displaced Gulf Coast families. The area needs increased leadership and resources now more than ever," NHC president and chief executive Conrad Egan said.

Wolters Kluwer Financial Services, Minneapolis, and Regulatory Counsel Group, an Atlanta-based provider of regulatory compliance services for mortgage lenders, have announced that RCG will resell the Wolters Kluwer StateLink Web-based compliance tool to its customers.The companies said StateLink provides quick online access to regulatory information on various topics relating to first and closed-end second mortgages for all 51 U.S. jurisdictions, updated continually by Wolters Kluwer attorneys and analysts. "After extensive research, RCG chose to offer StateLink based on its succinct and detailed information, easy-to-navigate format, and the responsiveness of the StateLink support team," said RCG president Scott Scher. The companies can be found online at http://www.wolterskluwer.com and http://www.regulatorycounsel.com.

Senate Banking Committee Democrats are warning the Bush administration not to shortchange the Department of Housing and Development's budget as they finalize the president's fiscal year 2008 budget proposal."[W]e urge you to fully fund the nation's core housing and community development programs," says a letter signed by 10 committee Democrats, including the chairman, Sen. Christopher J. Dodd of Connecticut. The Jan. 19 letter to President Bush contends that the administration's fiscal 2007 budget request for public housing was inadequate and funded only 76% of the required amount. The Democrats also ask for full funding of the HOME and Community Development Block Grant programs. "HOME and CDBG are important, flexible programs through which communities are able to build housing for people across the income spectrum, provide rental assistance, rehabilitate housing and public facilities, and provide homeownership opportunities," the letter says.

The Federal Deposit Insurance Corp. has issued a reminder that it will not tolerate predatory lending and said it expects banks that engage in subprime lending to treat their borrowers fairly and make "responsibly underwritten" and priced loans.In a letter to FDIC-supervised banks, the agency warns that its examiners will take appropriate action if they spot lenders inducing borrowers to repeatedly refinance loans, making unaffordable loans based on the value of the property as opposed to the ability of the borrower to repay, or concealing the true nature of a loan from unsuspecting or unsophisticated borrowers. The FDIC letter consolidates previous agency pronouncements on predatory lending in a single document. "This policy statement describes certain characteristics of predatory lending and reaffirms the FDIC's position that such activities are inconsistent with safe and sound lending and undermine individual, family and community well-being," the Jan. 22 letter says.

Paul Lumley has been named executive director of the National American Indian Housing Council.Mr. Lumley has been the senior tribal liaison in the Office of the Deputy Undersecretary of Defense for the Department of Defense's Installations and Environment Program since July 2004. He spent 17 years with the Columbia River Inter-Tribal Fish Commission before transferring to the DoD, the NAIHC said. Mr. Lumley is a member of the Yakama Nation. The NAIHC can be found online at http://www.naihc.net.

Standard & Poor's has changed its outlook on the Seattle Federal Home Loan Bank from "negative" to "stable" in response to an announcement that the Federal Housing Finance Board has terminated a supervisory agreement the regulator imposed on the bank two years ago.The Seattle FHLBank got into trouble because of its mortgage purchase program, and the credit rating agency commented that its turnaround efforts have been successful so far and that the bank's profitability should improve over the next several years. "We believe the Finance Board's termination of the written agreement reflects the significant progress the FHLB-Seattle has made in readjusting its business mix and risk management practices, as well as in strengthening its capitalization," S&P said. The rating agency also reaffirmed the Seattle bank's AA+/1A-1+ counterparty credit rating. The Seattle bank can be found online at http://www.fhlbsea.com.

Illinois Gov. Rod R. Blagojevich has directed the Illinois Department of Financial and Professional Regulations to immediately suspend the Illinois Predatory Lending Database Pilot Program, also known as H.B. 4050.Gov. Blagojevich said the law, designed to curb predatory lending practices (especially in areas with high residential foreclosure rates), "has created uncertainty for lenders, limiting their interest in offering products to consumers." The governor said he was halting the program "until we can find a system that effectively fights predatory lending and protects homebuyers." A recent report from the University of Illinois Urbana-Champaign showed that housing sales in the housing bill ZIP codes have dropped by nearly half from the level recorded last fall. Comparable ZIP codes in which the pilot program is not being applied have seen a decline of only 20%. The report also said the pilot program does not offer borrowers additional consumer protections.

The Office of Federal Housing Enterprise Oversight is facing a potential $7.5 million budget shortfall if Congress does not provide additional funding in the next continuing resolution."That will cause us some significant issues if we cannot get an increase in appropriations," OFHEO Director James Lockhart told reporters recently. OFHEO's budget is "frozen" at $60 million under the current continuing resolution that expires Feb. 15. OFHEO is working with the White House and Congress to get additional funds included in the next CR, which is expected to fund the federal government through Sept. 30 (the end of fiscal year 2007). The agency that supervises Fannie Mae and Freddie Mac was expecting a $2 million increase in fiscal 2007 to continue to expand its staff and system capabilities. OFHEO also says it needs an additional $5.5 million to cover its litigation expenses in pursuing claims against former top executives of the two government-sponsored enterprises. OFHEO can be found at http://www.ofheo.gov.

The Federal Housing Finance Board is moving ahead with a new process for appointing outside directors to the boards of the 12 Federal Home Loan Banks that is designed to be a merit-based system aimed at avoiding political interference.Effective immediately, the new procedures allow the individual FHLBanks to identify two candidates for each public interest director seat and submit their names and qualifications to the Finance Board for approval. The Finance Board reserves the right to approve one candidate or reject both under an interim rule approved Jan. 18. "The process of initially identifying such persons and ascertaining their willingness to serve is best executed by each individual bank," Finance Board Chairman Ronald Rosenfeld said. It is understood that this process is widely supported by the FHLBanks and banking trade groups that represent members of the banks. The Bush administration has blocked appointments for the past three years, and there are currently 57 vacant public interest director seats.