Consumer finance chief touts enforcement powers (AP)

WASHINGTON – The government's new consumer finance watchdog agency is prepared to sue companies that offer unfair or deceptive mortgages and credit cards, its director said Tuesday.

Addressing a congressional panel, Consumer Financial Protection Bureau Director Richard Cordray defended his appointment to the post and assured critics that the agency will work with financial companies whenever possible.

But "we will not hesitate to use enforcement actions to right a wrong," Cordray told the Republican-controlled subcommittee of the House Oversight Committee.

Cordray was addressing Congress for the first time since his recess appointment by President Barack Obama earlier this month. He faces questions about the bureau's actions and the legitimacy of his appointment.

Republicans call the appointment illegal because the Senate technically was not in recess. Republicans were holding minutes-long sessions during their vacation to prevent the President from making any appointments.

The CFPB might lack credibility in part because it is run by a director whose "appointment was constitutionally questionable," said Rep. Patrick McHenry, R-N.C., chairman of the subcommittee.

McHenry is a major beneficiary of political donations from the payday lending industry, which will face much tighter oversight because of Cordray's appointment.

Cordray said that he is aware of objections to his appointment, but "I'm in the job, it's an important job, it's a big job, it commands all of my time and attention, and all I can do is try to carry out the responsibilities."

Oversight Committee Chairman Darrell Issa, R-Calif., asked whether the agency has made plans for what to do it Cordray's nomination is invalidated by a legal appeal.

"We have to carry out the intent of that law," Cordray replied. "Either we do or we don't. It seems to me that the right answer is that we do."

Senate Republicans had refused to confirm Cordray because many opposed the creation of the agency. They wanted it run by a bipartisan commission and pledged to block any nominee until the powers of the director were reduced.

Officials from the team that set up the agency, including Elizabeth Warren, now running for Senate from Massachusetts, had testified before Congress 11 times since the agency was created under the financial overhaul law in July 2010.

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Follow Daniel Wagner at www.twitter.com/wagnerreports.

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Personal finance gets engaging with new iPad app (Reuters)

TORONTO (Reuters) – Tired of overspending? Confused about where all the money is going? A new iPad app aims to help users manage their finances.

Mint, a web-based personal finance manager, released the iPad app last week. It provides a snapshot of a user's financial profile by aggregating and categorizing data from banking, credit and trading accounts, as well as information on loans, mortgages and assets.

The data is displayed in sleek graphs and charts, which provide insight into financial balances across accounts, remaining budget allocation and spending habits across categories such as food and dining, shopping, movies, and travel.

"Eating out and shopping are the two areas of discretionary expenses that people will cut back on first," said Aaron Forth, vice president and general manager of the Intuit Personal Finance Group, which owns Mint.

The technology also allows users to get more granular information on their spending. They can investigate, for example, how they are faring with their monthly budget, or which transactions resulted in an unusually high food and dining expenditures last month.

The new features include new ways of visualizing and interacting with the data, which Forth said is especially conducive to tablets.

The app also includes a newsfeed that notifies users when they have gone over their budget and provides other personalized reminders and financial tips.

Cash transactions can also be entered on the app, which uses GPS to automatically determine location and categorize the transaction. So, if you're standing in line at shop and enter a transaction, the app will pick up the location, according to Forth.

Forth recommends three steps to manage finances.

"Pay down your debt. Create an emergency fund, at least six months, and contribute to your 401K (pension plan)," he said.

One drawback of the app is that it is not possible to split transactions. Purchases in a department, whether it is food or clothing or books, are not attributed to a particular category.

Forth said the company is aware of the problem.

The iPad app comes almost three years after Mint launched the iPhone app in 2008. A similar app called PageOnce also allows users to track their finances and to pay bills through the app for a monthly fee.

iPhone and Android apps are also available but Mint only supports financial institutions within the United States and Canada only.

(Reporting by Natasha Baker; editing by Patricia Reaney)

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US mortgage finance head: shift risk from Treasury (AP)

By EMERY P. DALESIO, AP Business Writer Emery P. Dalesio, Ap Business Writer – Mon Sep 19, 3:25 pm ET

RALEIGH, N.C. – Government-controlled mortgage buyers Fannie Mae and Freddie Mac may reduce taxpayer risk by requiring more mortgage insurance from borrowers and charging lenders higher fees, steps that could increase borrowing costs, the head of their government caretaker agency said Monday.

Reshaping the mortgage giants three years after the federal government took over them over requires spreading lending risks, Federal Housing Finance Agency acting director Edward DeMarco said Monday at a mortgage conference in Raleigh.

The changes that could lead to higher costs for borrowers would be pursued gradually over time to avoid shocking the weak housing market, DeMarco said. But with Washington still unable to restructure Fannie and Freddie, the FHFA needed to act under its own statutory authority to ensure Fannie and Freddie continued to keep money flowing into financing home purchases, DeMarco said.

"We all knew that reforming the housing finance system was going to be difficult, but I think the general expectation was that more progress would have been made by now," DeMarco said.

Reducing the risk to taxpayers may mean private interests taking on more risk, perhaps by requiring more private mortgage insurance from borrowers and higher fees from lenders to guarantee loans, DeMarco said.

The federal government took control of the two massive mortgage buyers in 2008 to prevent their collapse as the housing market deteriorated. Bush administration officials said the action was needed to protect taxpayers and continue the availability of mortgages.

Fannie and Freddie buy home loans from banks and other lenders, package them into bonds with a guarantee against default, and sell them to investors around the world. The mortgage giants charge lenders a guarantee fee that covers projected credit losses from borrower defaults over the life of the loans. Fannie and Freddie will likely begin increasing those fees starting next year, DeMarco said.

President Barack Obama's deficit reduction package released Monday includes a proposal for Fannie and Freddie to increase guarantee fees by one-tenth of one percent for new mortgages, adding less than $15 a month to a typical $220,000 home loan. The administration said the increase would save the budget $28 billion over 10 years.

Changes in loan guarantee fees could vary based on the risk of loans and the borrower's location, with higher fees in states where it is more expensive and time-consuming for banks to foreclose on property, he said.

"These are steps we can take and we think that we're charged with taking that are supportive in that direction," DeMarco said in an interview with reporters after his talk. "Consumers will ultimately measure this by the price and availability of mortgage credit, and in a more macro sense ... whether there's a sense of stability or confidence in housing markets."

Talk of raising borrowing costs while home sales are slow is part of the dichotomy of expectations the housing finance agencies are facing, said Michael Lea, who directs real estate studies at the San Diego State University business school and a former chief economist at Freddie Mac. The FHFA can't afford to raise costs to borrowers now, but removing taxpayer support has to come eventually, he said.

"It's a tough situation because they get pressure from both sides on that," Lea said.

The FHFA's most pressing tasks include creating a framework allowing more borrowers who are underwater on their mortgages to refinance at rates now at levels not seen in decades. Few people are qualifying to refinance a home because they don't have the equity needed to refinance.

FHFA is considering expanding its Home Affordable Refinance Program to allow some borrowers whose mortgages are held by Fannie and Freddie to refinance into lower-rate loans even if they owe greater than 125 percent more than their home is worth, DeMarco said

The second key current priority is figuring out how Fannie and Freddie can resell thousands of government-owned foreclosures to improve returns to taxpayers and help boost falling home prices. A federal "request for information" seeking ideas closed last week resulted in nearly 4,000 proposals, many tailored to local economic conditions around the country. One of the ideas FHFA is considering is allowing previous homeowners to rent out the homes or for current renters to lease to own.

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Emery Dalesio can be reached at http://twitter.com/emerydalesio

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Citigroup's sale of consumer finance unit hits block: report (Reuters)

(Reuters) – Citigroup's (C.N) attempts to sell its CitiFinancial unit have hit a stumbling block as potential bidders remain uncertain about the unit's funding as a standalone business, the Financial Times reported, citing people familiar with the matter.

CitiFinancial, one of the largest U.S. consumer finance companies, was put up for sale as Citigroup tightened its focus on wealthier, more credit-worthy clients.

In March, Reuters reported the company might retain a stake in the unit and would offer partial financing to bidders, who included the Who's Who of the private equity world.

Potential buyers are waiting for reviews by credit rating agencies, which are expected to report on the units finances in next two weeks, the business daily reported.

Citi also plans to produce audited financial statements on the standalone unit and has not made it clear how large a funding gap it would be prepared to fill, the paper said.

Three groups remain in the sales process -- Blackstone, Carlyle, and Brysam Global Partners form one group, Apollo Management and JC Flowers form a second bidding group, while Centerbridge Capital Partners leads a third -- the Financial Times said.

Citigroup declined to comment.

The CitiFinancial business has a book value of about $2 billion, and comes with some $13 billion of assets.

Citigroup is looking to sell the business without taking losses, unlike insurer American International Group Inc (AIG.N), which last year sold its consumer finance business at a loss.

(Reporting by Jochelle Mendonca in Bangalore, editing by Bernard Orr)

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