Regulator Says Banks Slow to Buy Back Bad Loans

From the Associated Press:

A federal regulator is criticizing banks for failing to take back bad mortgages sold to giant mortgage buyers Fannie Mae and Freddie Mac.

Edward DeMarco, acting director of the Federal Housing Finance Agency, says in testimony prepared for a House subcommittee hearing Thursday that the two government-controlled companies had tried to send more than $11 billion in bad loans back to lenders as of this summer, but have met resistance.

A third of those requests have been outstanding for at least three months. DeMarco said delays by lenders in repurchasing these loans are a "significant concern."

Investors who buy loans from banks have the right to force lenders to repurchase them if they later discover fraudulent statements on loan applications.

Fannie and Freddie buy mortgages and package them into securities with a guarantee against default. They have ensured that millions of Americans can get home loans — even after the housing market collapsed.

Congress Presses IRS to Ease Tax Preparer Regulations

Thirty-one members of the House of Representatives have reportedly signed a letter urging Treasury Secretary Geithner to ease up on tax preparer regulations. The members of Congress, including nine members of the tax-writing House Ways and Means Committee, are hoping to exempt non-signing tax preparers at CPA firms from registration requirements. They have also requested a delay in the IRS’ plans to launch a nationwide examination of tax preparers.

Web CPA reports:

The group, led by Brad Sherman, D-Calif., and Michael Conaway, R- Texas, said the IRS should modify its proposal. “We believe that the IRS has neither demonstrated the need for extending the non-signing preparer requirements to CPA firms nor that its proposed testing program merits shifting IRS resources away from other mission-critical programs,” they wrote. “We believe that any testing program should be deferred until the IRS has performed an adequate study to determine the level of return preparation problems caused by a lack of preparer competence and whether testing would have a meaningful effect on reducing those problems.”

The letter argues that requiring IRS registration of non-signing preparers who work for CPA firms is unnecessary because state boards of accountancy already regulate CPA firms and individual CPAs, and because the IRS would be able to monitor the quality of the CPA firms’ work through the preparer tax identification numbers of the CPAs who sign the tax returns.

The PTIN numbers will be assigned by the IRS when the CPAs register and will have to be included on all the tax returns they sign. The IRS has already excluded CPAs from the proposal’s examination and continuing professional education requirements because they are regulated by the state accountancy boards and Treasury Circular 230, the rules governing practice before the IRS, so there is “strong justification for not expanding the PTIN requirement beyond signing preparers in CPA firms with no adverse effect to the public.”

Read more here

Dodd to Offer Financial Regulation Bill Without G.O.P.

Fearing that reform was taking to long to come to fruition, Senator Christopher J. Dodd - chairman of the Senate Banking Committee – announced that he would unveil his own financial overhaul plan on Monday. However, what makes this announcement even more surprising is Dodd’s intention to unveil his plan was without negotiation with other members of the Republican party.

Mr. Dodd suggested that he was acting out of a sense of urgency. The House adopted a regulatory overhaul — a priority of the Obama administration — in December on a largely party-line vote. But bipartisan negotiations in the Senate have repeatedly faltered over several critical points, notably the creation of a consumer financial protection agency to regulate mortgages, credit cards and other products.

In an unusual turn, Senator Richard C. Shelby of Alabama, the ranking Republican on the Banking Committee, has found himself largely shut out of the negotiations, while another Republican, Senator Bob Corker of Tennessee, has been directly negotiating with Mr. Dodd.

At a news conference later Thursday morning, Mr. Corker called Mr. Dodd’s plan to proceed with a bill without further negotiations “very disappointing.”

Continue reading at NY Times.com…

20 Ways House, Senate Financial Reforms Differ

When the U.S Senate resumes this month they plan on getting right to work on financial regulation reform. However, according this Reuters.com article the legislation they are going to be considering will differ greatly from the bill that was approved by the House of Representatives. Reuters identified a list of the top 20 differences, which you can view below.

Resolution Fund

House bill creates $200-billion fund to help pay for Federal Deposit Insurance Corp (FDIC) actions to dismantle insolvent, non-bank financial firms.

The fund gets $150 billion from fees paid by firms with more than $50 billion in assets. Fee threshold for hedge funds is $10 billion. The fund can get $50 billion more if needed from Treasury borrowings.

Senate Banking Committee Chairman Christopher Dodd's bill, main vehicle for reform in Senate, covers FDIC actions with after-the-fact fees on firms with assets topping $10 billion.

Secured Creditor Haircut

In House bill, secured creditors in FDIC resolution actions may have up to 10 percent of their claims treated as unsecured claims. Dodd bill does not contain this so-called "haircut" provision.

FDIC Emergency Action

House bill allows FDIC to guarantee debts of solvent firms up to $500 billion, with approval of new systemic risk council, Treasury, president.

Dodd bill allows FDIC to guarantee debts of firms in receivership, with approvals from senior officials.

Continue reading at Reuters.com…

House Panel Votes to Give SEC More Money, Power

In the latest move to end corruption on Wall Street, the House of Representatives Financial Services Committee voted this morning to give more power and funding to Federal regulators. They hope the additional funds will help agents prevent future abuses, such as the high profile Bernie Madoff scandal. Check out the following coverage of the new legislation courtesy of the Associated Press.

The 41-28 vote was the panel's latest move to try to rein in abuses on Wall Street. It would give the Securities and Exchange Commission new enforcement powers, including the ability to offer bounty money to tipsters on fraud cases and the power to bar violators of the law from employment in any securities-related industry.

The bill also would double the SEC's budget in the next five years.

Rep. Paul Kanjorski sponsored the legislation after leading the panel's investigation into the government's failure to uncover Madoff's massive fraud scheme for nearly two decades. Madoff was sentenced in June to 150 years in prison.

"In the last five years, there's been a significant change and a greater sophistication in the financial service industry than has ever happened in the history of mankind," said Kanjorski, a Pennsylvania Democrat. "So we're going to have to change fast."

The proposal was part of a broader effort by the committee to tighten rules governing financial institutions after last year's market crisis. The full House was expected to vote on the bill and related proposals in early December.