Showing posts with label Would. Show all posts
Showing posts with label Would. Show all posts
Sunday, March 4, 2012
Wednesday, February 22, 2012
Thursday, February 2, 2012
Exclusive: Mortgage deal would give states enforcement clout (Reuters)
(Reuters) – A proposed settlement to resolve mortgage abuses by top U.S. banks will give states broad authority to punish firms that mistreat borrowers in the future, according to documents seen by Reuters on Wednesday.
Under the settlement, which states are currently reviewing to decide whether they will join, the states and a separate "monitoring committee" will have the authority to go to court to enforce the terms and seek penalties of up to $5 million per violation.
A strong enforcement mechanism could help the states and the Obama administration sell the deal to the public, after left-leaning activist groups have questioned whether the negotiations were too lenient on the banks.
Negotiations between state and federal officials to resolve allegations of misconduct in servicing home loans have stretched into their second year.
The delay is partly due to some states trying to extract a bigger settlement from the banks and to reserve their ability to file more mortgage-related suits in the future.
However, the deal now looks imminent.
States have just a few more days to make a decision on whether they will sign on. And U.S. Housing and Urban Development Secretary Shaun Donovan said during a White House briefing on Wednesday that a final legal settlement will be reached "in the coming days."
The settlement, expected to be filed as a consent judgment in federal court in Washington, D.C., will last for 3-1/2 years, according to documents laying out the pending deal's enforcement terms.
Joseph Smith, the banking commissioner in North Carolina, is expected to serve as the monitor on the settlement, people familiar with the matter told Reuters on Monday.
In exchange for up to $25 billion, much in the form of cutting mortgage debt for distressed homeowners, the banks will resolve state and federal lawsuits about servicing misconduct and faulty foreclosures, and some lawsuits about how they made the loans.
Banks have been accused of robo-signing documents and other sloppy paperwork in unlawfully rushing to deal with a flood of foreclosures triggered by the 2007-2009 financial crisis.
The core group of banks involved in settlement talks are Bank of America Corp, Wells Fargo & Co, JPMorgan Chase & Co, Citigroup Inc. and Ally Financial Inc.
The final value of the settlement will depend on which states it includes, and could drop sharply if states like California, one of the hardest hit by the foreclosure crisis, do not join.
On Wednesday, Oregon Attorney General John Kroger said his state will join the settlement. He said Oregon can expect to receive around $30 million from the settlement, and its distressed homeowners can expect around $100 million to $200 million in relief.
The mortgage settlement is just one piece of a larger plan that the Obama administration hopes will get relief to home buyers and help boost the economy. Also on Wednesday, the Obama administration introduced a $5 billion to $10 billion package to help homeowners refinance their loans.
GIVING THE STATES SOME MUSCLE
Some states have raised concerns that banks have not adequately followed through on prior settlements, a concern that has pushed government negotiators to establish more forceful enforcement mechanisms in this deal than have been used in the past.
"I'd like to see very detailed, specific regulations on mortgage servicers and what they can and cannot do," said Max Gardner, a nationally known consumer bankruptcy attorney in Shelby, North Carolina. "Not just the proverbial 'we will obey the law from now on.'"
The enforcement terms mark progress in states' ability to directly monitor mortgage servicing at national banks. For decades, big banks fought state efforts to enforce consumer protection laws by arguing that national banking laws pre-empted their authority.
Under the settlement, the banks will set up internal quality control groups to assess their mortgage servicing units' compliance with the terms of the agreement, and turn over quarterly reports to the monitor about servicing complaints.
If the monitor concludes the group "did not correctly implement" the reviews, the monitor can have a third party review the work.
If the monitor finds information that a servicer "may be engaged in a pattern of noncompliance," he can undertake a more thorough review, and impose even tougher standards.
Servicer compliance will be measured through detailed information about unlawful foreclosure sales and incorrect denials of loan modifications, according to the documents.
If the servicer continues to violate any of the terms, any of the states or a monitoring committee can go to court and seek penalties of up to $1 million for the first "uncured" violation and up to $5 million for a second.
Servicers will pick up the tab for the monitor, the documents said.
The monitoring committee is comprised of representatives of state attorneys general, the U.S. Justice Department, and the U.S. Department of Housing and Urban Development, who will review the work of the monitor.
The document says that all the terms are subject to approval by federal banking regulators.
(Reporting By Rick Rothacker in Charlotte and Aruna Viswanatha in Washington, D.C.; Editing by Tim Dobbyn)
Tuesday, November 22, 2011
A GOP debt plan would hit some popular tax breaks (AP)
By STEPHEN OHLEMACHER, Associated Press Stephen Ohlemacher, Associated Press – Fri Nov 18, 12:40 am ET
WASHINGTON – Millions of taxpayers who take advantage of deductions for mortgage interest, charitable donations and state and local taxes would be targeted for potential tax hikes under a GOP plan to raise taxes by $290 billion over the next decade to help reduce the nation's deficit.
Some workers could also see their employer-provided health benefits taxed for the first time, though aides cautioned that the proposal is still fluid.
The plan by Sen. Pat Toomey, R-Pa., who serves on the 12-member debt supercommittee, would raise revenue by limiting the tax breaks enjoyed by people who itemize their deductions, in exchange for lower overall tax rates for families at every income level. Taxpayers who already take the standard deduction instead of itemizing — about two-thirds of filers — could see tax cuts. The one-third of taxpayers who itemize their deductions might find themselves paying more.
The top income tax rate would fall from 35 percent to 28 percent, and the bottom rate would drop from 10 percent to 8 percent. The rates between would be reduced as well.
About 50 million households itemized their deductions in 2009, according to the nonpartisan Joint Committee on Taxation. About 35 million households claimed the mortgage interest deduction, and 36 million deducted charitable donations. Nearly 41 million claimed deductions for paying state and local taxes.
A GOP congressional aide said the plan is designed to raise taxes on households in the top two tax brackets. That would affect individuals making more than $174,400 and married couples making more than $212,300.
Some Republicans say the plan offers a potential breakthrough in deficit-reduction talks that have stalled over GOP opposition to tax hikes and Democrats' objection to cuts in benefit programs without significant revenue increases.
Democratic and Republican members of the supercommittee met separately Thursday, with no sign of progress on a deal.
Republicans are becoming increasingly divided over the issue of raising taxes. A growing number of Republicans in Congress say they would support a tax reform package that increases revenues, if it is coupled with significant spending cuts, enough to reduce the deficit by about $4 trillion over the next decade.
The so-called "go big" strategy has been endorsed by a bipartisan group of about 150 lawmakers from the House and Senate. A rival group of 72 House Republicans sent a letter to the supercommittee Thursday, urging members to oppose any tax increases.
"We must recognize that increasing the tax burden on American businesses and citizens, especially during a fragile recovery, is irresponsible and dangerous to the health of the United States," said the letter, circulated by Rep. Patrick McHenry, R-N.C.
Democrats, meanwhile, have panned Toomey's plan, saying the rate reductions would cut taxes for the wealthy so much that taxes on the middle class would have to be raised. They also argue that Toomey's plan would generate less revenue than advertised.
They note that Toomey's plan assumes that tax cuts enacted under former President George W. Bush, and extended through 2012 under President Barack Obama, would continue. Toomey's plan would then cut the tax rates even more.
Republicans say Toomey's tax overhaul plan would increase tax revenue by $250 billion over the next decade. An additional $40 billion would be raised by using a new measure of inflation to adjust the tax brackets each year. Annual adjustments to the tax brackets would be smaller, resulting in more people jumping into higher tax brackets as their incomes rise.
The supercommittee has a Wednesday deadline to come up with a plan to reduce government borrowing by at least $1.2 trillion over the next decade. If the panel fails, $1.2 trillion in automatic spending cuts to domestic and military programs would take effect in 2013.
Some details of Toomey's plan remain in flux, in part because he is open to changes to help forge an agreement, said the GOP aide, who spoke on condition of anonymity to discuss private negotiations. The aide confirmed that Toomey's plan is closely modeled after a proposal by three experts at the National Bureau of Economic Research, a private research organization perhaps best known for deciding when recessions begin and end.
The three experts are Martin Feldstein, a Harvard University professor who was President Ronald Regan's chief economic adviser; Maya MacGuineas, president of the Committee for a Responsible Federal Budget; and Daniel Feenberg, a research associate at the bureau.
Under their plan, the tax benefits from itemizing deductions and excluding employer-provided health insurance from taxable income would be limited to 2 percent of taxpayer's adjusted gross income.
That means if a taxpayer has an adjusted gross income of $50,000, deductions and exemptions could reduce his or her tax bill by a maximum of $1,000.
Taxpayers who face limits on their tax breaks could opt to take the standard deduction instead. Currently, about one-third of tax filers itemize their deductions. The rest claim the standard deduction, which in 2011 is $5,800 for individuals and $11,600 for married couples filing jointly.
The plan envisions millions of additional taxpayers switching to the standard deduction, which would simplify their returns, MacGuineas said.
Policymakers across the political spectrum agree the federal tax code is too complicated, and most agree on a basic formula for simplifying it: Reduce tax breaks and use the additional revenue to lower the overall tax rates for everyone.
There is little agreement, however, on which tax breaks to target.
Toomey's plan attempts to sidestep debates over which tax breaks to target and instead proposes to limit taxpayers' overall ability to reduce their tax bills.
"This is a far more practical way to start to scale back the influence and costs of tax expenditures in the code by kind of glopping them together and capping them," MacGuineas said. "You're not picking the winners and losers."
Sunday, October 2, 2011
What Would Have Been Good for B of A Would Have Been Good for the US of A (The Motley Fool)
His predecessor made mistakes. But the new guy has run the place long enough to have made a difference. Yet people are frustrated after months of stagnation -- and his last-ditch speech didn't help.
President Barack Obama? Sure. But the description also applies to Bank of America (NYSE: BAC - News) CEO Brian Moynihan.
As both B of A and the country continue to flail, the parallels are instructive.
What would have been good for Bank of America over the past three years would have been good for America, too.
Four days after Obama gave his speech to Congress in September, Moynihan stood before investors with his own slideshow version.
Moynihan's speech can be paraphrased as follows: Please, please, please don't think of mortgages. Of B of A's six divisions, Moynihan kept saying, five of them are making money.
Yet investors focus on the $838 billion in mortgages for which the bank still has exposure via the "representations and warranties" it made before 2008.
To address this "legacy mortgage crisis which started late in '06," as Moynihan calls it, B of A has shelled out $12 billion and socked away $18 billion in reserves.
Investors, though, worry that these mortgages -- and government investigations into how B of A has dispatched some of them -- will continue to consume capital and time, sucking growth from the rest of the bank.
B of A is slashing its jobs and shuffling key remaining people around. But "the mortgage business continues to hold the company's progress back," Moynihan admitted.
That's the case for the nation, too. Between 2000 and 2007, American mortgage balances doubled, from $4.8 trillion to $10.5 trillion. Since then, the figure has fallen. But it's down to only $10 trillion.
Obama can wax poetic about building schools and hiring teachers all he likes. But these distractions won't vanquish the debt that is smothering the growth we need to pay for these things.
Even if "only" $2 trillion of that extra mortgage debt was wasted money, it would cost Americans at least $125 billion a year, every year, for 30 years, to pay it off. That's heavy de-stimulus working against the borrowed cash that Obama wants to keep injecting into the economy.
How did B of A get all those mortgages, anyway? This story has a lesson for the American economy, too, as well as America's response to the financial crisis.
Much of the bank's "legacy" comes from its purchase of Countrywide Financial in 2008. When B of A bought Countrywide, it knew that the California-based mortgage lender faced losses from the bubble.
Yet Bank of America thought those liabilities were contained and controllable. It miscalculated. Rather than bringing Countrywide up, B of A is dragged down by Countrywide's dead weight.
In retrospect, it would have been better for B of A to wait for Countrywide to go bankrupt. Countrywide's bondholders and uninsured lenders would have taken their warranted losses.
With these creditors absorbing the hit, B of A would have had freedom to buy the good parts of Countrywide. B of A would have had cash left over, too, to reduce the debt that Countrywide's mortgage borrowers owed, putting a cap on future losses.
Perhaps most important, B of A would have avoided an incalculable hit to its reputation.
This situation is what bankruptcy is for. Bankruptcy segregates future losses and parcels them off to the people and institutions who signed up to bear those losses. The uncertainty surrounding those losses can't harm good businesses' growth.
Just as B of A took on liabilities that it could have avoided, America did the same. Beginning with its rescue of Bear Stearns' creditors in March 2008 and culminating in the Troubled Asset Relief Program and other rescues that began seven months later, America has taken on burdens that should have stayed within the financial system.
By guaranteeing bondholders and uninsured lenders at firms -- not just B of A, but AIG (NYSE: AIG - News) and others, too -- America curtailed Americans' flexibility to reduce their mortgage balances.
Financial-industry bankruptcies would have forced private lenders to take their losses, allowing private borrowers to reduce their debt. Both sides of the ledger would have balanced -- and losses would have remained within the private sector (although the government still would have had to provide liquidity backstops in the panic).
Taxpayers may think that their TARP "investments" have turned a profit. But those "profits" sowed economic malaise by locking borrowers into unaffordable debt.
We all pay -- even the rescued. B of A has benefited from the Federal Reserve's 0% interest rates, which allow lots of people to pretend to be solvent and keep paying their debt.
But, as Moynihan said, low interest rates are "not favorable to banking." The Fed's new "Twist" -- forcing long-term interest rates down -- will further torture large banks' profits.
Just as unfavorable is "the unprecedented time of low growth in this country, and it's been going on for quite a while," Moynihan noted.
Long term, too, just as B of A could never jump in and save Countrywide today, weak countries can't bail out weak banks.
Moody's downgraded B of A in mid-September because the ratings agency thinks the bank is less likely to get a bailout, if necessary, in a future crisis. The stock price is around $6.20, little more than half what it was at the beginning of the quarter.
Even at this late date, Moynihan could try to throw Countrywide into bankruptcy, as he intimated at his presentation. If it's not too late for such a move, private creditors would take their losses, and B of A would move forward. Imagine that.
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