Sorry, I could not read the content fromt this page.
Showing posts with label panel. Show all posts
Showing posts with label panel. Show all posts
Sunday, March 31, 2013
Tuesday, June 21, 2011
House panel to vote on covered bond bill (Reuters)
WASHINGTON (Reuters) – A House of Representatives committee on Wednesday plans to vote on a bill aimed at creating a market for covered bonds, an alternative to the mortgage securities at the center of the housing crisis.
Covered bonds, which are seen as more conducive to financial stability because they force the issuer to hold some of the risk, are widely used in Europe but have never gained a foothold in the United States.
The House Financial Services Committee will meet at 10 a.m. (1400 GMT) on Wednesday to debate legislation to "establish a framework that allows U.S. financial institutions to issue covered bonds," the panel said in a statement on Tuesday.
Analysts say covered bonds would help mitigate some of the financial risks from securitization.
In the current U.S. mortgage system, lenders sell many of the loans they make to Fannie Mae and Freddie Mac, the government-controlled entities that are the two biggest U.S. providers of home financing, which then repackage them as securities for investors.
The sale of loans allows lenders to raise more capital, but it also relieves them of any risk in the loans that they originally made.
In covered bonds, the loans underlying the bonds would remain on the bond issuer's balance sheet.
But few believe use of covered bonds would grow quickly enough to become a substantial source of funding for the multi-trillion-dollar U.S. housing market.
There are also a number of unresolved issues surrounding the new type of bond. The Federal Deposit Insurance Corporation has warned that a covered bond system could put its bank deposit insurance fund at increased risk for losses, because investors would have seniority over the agency in the event of default.
Despite such hurdles, it is widely acknowledged that the U.S. system of funding mortgages requires an overhaul, even if there is very little agreement on how to do it.
Two years into a recovery from the deepest recession in generations, the housing market remains mired in a rut, with some analysts arguing the sector has already slipped into a renewed period of contraction.
Sales of existing homes fell 3.8 percent in May to a six-month low, a trade group reported on Tuesday. It was the second straight month of declines.
(Reporting by Pedro Nicolaci da Costa; Editing by Leslie Adler)
Wednesday, May 4, 2011
House panel OKs new way to fund home mortgages (Reuters)
By Corbett B. Daly Corbett B. Daly – Tue May 3, 3:27 pm ET
WASHINGTON (Reuters) – A bill to create a new market for financing mortgages that would help wean the $10.6 trillion mortgage market off government support advanced in the House of Representatives on Tuesday.
The House Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises approved the legislation on a voice vote.
The bill, which the White House supports, would have to be approved by the full committee, the full House and the Senate before being sent to President Barack Obama for his signature into law.
The bill aims to establish a market for covered bonds, which are securities issued by banks and backed by pools of loans.
The loans underlying the covered bonds would remain on the issuer's balance sheet. That is different from the current U.S. mortgage system, in which lenders sell many of the loans they make to government-sponsored Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB), which then repackage them as securities for investors.
The panel's chairman, New Jersey Republican Representative Scott Garrett, hopes to reduce the role of Fannie Mae and Freddie Mac with a covered bond market.
"Covered bonds will serve not as a replacement" to existing credit markets but should function as "an additional arrow in the quiver" for funding home mortgages, Garrett said ahead of the vote on his legislation.
Senator Charles Schumer, a New York Democrat, said in March he was considering introducing a version of Garrett's bill in the Senate.
Representative Carolyn Maloney, a New York Democrat, backed Garrett's bill as one way to help the U.S. mortgage market on the margins, though she cautioned that it is not a panacea.
"Why not give it a chance?" Maloney said, adding that she considers covered bonds "a strong tool we could use to help ... our housing market rebound."
The government seized Fannie Mae and Freddie Mac in 2008 as losses on the loans they held spiraled.
The government, through Fannie Mae, Freddie Mac and the Federal Housing Administration, now backs almost nine in 10 new mortgages.
In Europe, covered bonds have long been in use. But they have failed to catch on in the United States.
In a covered bond system, banks can borrow against the value of the underlying mortgages to obtain fresh capital to extend further loans. The bond investors have the right to those underlying assets in the case of a bank default.
The Federal Deposit Insurance Corporation has warned that a covered bond system could put its bank deposit insurance fund at increased risk for losses because the investors would have seniority over the agency in the event of default.
Treasury Secretary Timothy Geithner has said the FDIC's concerns are legitimate and would have to be worked out.
"For this to work, you would be putting the taxpayer in some sense behind private investors, and that has its own consequences, but that is something we can work through and I think it can play a greater role in our system," Geithner said in March.
The White House and Congress are in the midst of a major policy debate on how to overhaul the finance system for buying U.S. homes, which collapsed in 2008.
The Obama administration in February announced several steps to make government-backed mortgages more expensive in a bid to lure private capital back to the mortgage market.
It also announced plans to phase-out Fannie Mae and Freddie Mac over time and presented Congress with three options for replacing them long-term.
(Reporting by Corbett B. Daly, Editing by Dan Grebler)
Monday, April 18, 2011
Credit raters triggered financial crisis: panel (Reuters)
By Rachelle Younglai and Sarah N. Lynch Rachelle Younglai And Sarah N. Lynch – Thu Apr 14, 8:00 am ET
WASHINGTON (Reuters) – Moody's Corp and Standard and Poor's triggered the worst financial crisis in decades when they were forced to downgrade the inflated ratings they slapped on complex mortgage-backed securities, a U.S. congressional report concluded on Wednesday.
In one of the most stark condemnations of the credit rating agencies, a Senate investigations panel said the agencies continued to give top ratings to mortgage-backed securities months after the housing market started to collapse.
The agencies then unleashed on the financial system a flood of downgrades in July 2007, the panel said.
"Perhaps more than any other single event, the sudden mass downgrades of (residential mortgage-backed securities) and (collateralized debt obligation) ratings were the immediate trigger for the financial crisis," the staff for Senators Carl Levin and Tom Coburn wrote in their report.
The findings come after the Senate's Permanent Subcommittee on Investigations spent two years poring over countless documents and holding hearings on the causes of the crisis. The probe only focused on the two largest rating agencies; it did not study Fitch Ratings.
The report calls for radical reforms to the industry that are authorized in last year's Dodd-Frank financial reform law, but may not be realized.
Dodd-Frank did little to change what some say is an inherent conflict of interest in credit raters' business model, in which the raters are paid by the companies whose products they rate.
The panel's suggested reforms include having the U.S. Securities and Exchange Commission rank the credit raters, based on the accuracy of their ratings.
"WATCHING A HURRICANE"
The Senate panel released internal documents showing how Moody's and S&P failed to heed their own internal warnings about the deteriorating mortgage market.
Emails in 2006 and early 2007 show employees were aware of housing market troubles, well before the massive downgrades in July 2007.
"This is like watching a hurricane from FL (Florida) moving up the coast slowly toward us. Not sure if we will get hit in full or get trounced a bit or escape without severe damage ..." one S&P employee wrote in response to an article on the mortgage mess.
Senate investigators concluded that had Moody's and S&P heeded their own warnings, they might have issued more conservative ratings for the securities linked to shoddy mortgages.
"The problem, however, was that neither company had a financial incentive to assign tougher credit ratings to the very securities that for a short while increased their revenues, boosted their stock prices, and expanded their executive compensation," the report said.
Edward Sweeney, a spokesman for S&P, said in a statement on Wednesday that the Dodd-Frank Act, coupled with the company's own internal reforms, have significantly strengthened the oversight of the industry. He added that the 2007 and 2008 downgrades "reflected the unprecedented deterioration in credit quality, but were not a cause of it."
Michael Adler, a spokesman for Moody's, declined to comment ahead of the report's release.
NO REAL CHANGES YET SEEN
The SEC has been grappling with how to clamp down on the conflicts of interest embedded in the so-called "issuer-paid" model. Congress contemplated radical reforms for the agencies during the drafting of the Dodd-Frank law but in the end passed a sweeping financial regulation bill without them.
Wednesday's report includes emails from employees at both companies that illustrate the pressure that raters came under from investment banks.
An August 2006 email reveals the frustration that at least one S&P employee felt about the dependence of his employer on the issuers of structured finance products, going so far as to describe the rating agencies as having "a kind of Stockholm syndrome" -- the phenomenon in which a captive begins to identify with the captor.
The SEC did take some steps to address conflicts of interest at rating agencies in the past few years.
Although the Dodd-Frank law directs the SEC to write numerous additional regulations for raters, most have yet to be proposed.
And one key rule that did go into effect last July, subjecting credit raters to increased liability, was suspended after credit raters' refusal to include their ratings for asset-backed securities led to a freeze in the secondary market.
The reform has not been reinstated.
(With additional reporting by Kim Dixon; Editing by Steve Orlofsky)
Monday, April 4, 2011
House panel head sees May vote on Fannie, Freddie (Reuters)
By Corbett B. Daly Corbett B. Daly – Thu Mar 31, 6:15 pm ET
WASHINGTON (Reuters) – The House Financial Services Committee plans to vote in early May on a bill to wind down Fannie Mae and Freddie Mac within five years, Representative Spencer Bachus, the panel's chair, said on Thursday.
That move would mark another shift in strategy among House Republicans about what to do with the two largest providers of funding for the $10.6 trillion U.S. residential mortgage market.
House Republicans earlier this week introduced a series of more targeted measures aimed at reducing the influence of the two firms without shutting them down entirely.
"We may let the other bills catch up ... but there is no reason not to vote" on this wider bill, Bachus told Reuters, adding, "We don't need a hearing on the comprehensive bill" before voting on it.
The comprehensive bill that would shut the two firms down within five years was introduced earlier this month by Texas Representative Jeb Hensarling, the fourth highest-ranking Republican in the House of Representatives,
The series of eight narrowly crafted bills unveiled earlier this week is designed to garner broader support than would likely be won with more sweeping legislation to shut down the government-controlled firms, particularly in the Democrat-led Senate.
Representative Scott Garrett, the New Jersey Republican who heads the subcommittee overseeing Fannie Mae and Freddie Mac, is leading the charge for the more targeted approach.
Included in the basket of bills are measures that would speed up the wind-down of the mortgage portfolios held by Fannie Mae and Freddie Mac, eliminate their affordable housing goals and raise the fees they charge to guarantee mortgages in an effort to make private capital more attractive.
Garrett has scheduled an April 5 vote in the subcommittee on his suite of bills, but the full committee would vote on Hensarling's bill first, sometime after lawmakers return from Easter recess in early May, Bachus said.
Any measure would have to be approved by the full committee, then the full House and the Senate before it could be sent to President Barack Obama to be signed into law.
Arizona Senator John McCain, meanwhile, reintroduced on Thursday his companion version of the Hensarling bill. McCain introduced a nearly identical measure last year that was defeated on the Senate floor as part of last year's rewrite of the rules of Wall Street.
McCain's bill faces a steeper climb this time around. Alabama Senator Richard Shelby, a fierce critic of Fannie Mae and Freddie Mac and a co-sponsor of McCain's bill last year, now wants to slow things down.
"Before we discuss solutions, I think ... we should first clearly identify the problems we're trying to solve," Shelby said earlier this week, calling for a "time-consuming" study of the issues.
And Senate Banking Committee Chairman Tim Johnson, a South Dakota Democrat, said his panel would move slowly on any changes to Fannie Mae and Freddie Mac.
Representative Barney Frank, who headed the House panel for four years until Republicans took control of the House in January, called the two-pronged approach "chaos."
"It's an effort to deal with the fact that they made a set of unrealistic promises that they cannot deliver on and they are trying to get out from under them," Frank told Reuters, referring to repeated Republican criticism of him for not including Fannie Mae and Freddie Mac as part of last year's overhaul of Wall Street.
House Republicans "don't have the votes, I believe, for the Hensarling bill," said Frank.
Bachus promised to count his supporters before calling a vote.
(Reporting by Corbett B. Daly; Editing by Leslie Adler)
Thursday, March 10, 2011
House panel OKs bill to kill Obama mortgage plan (Reuters)
By Corbett B. Daly Corbett B. Daly – Wed Mar 9, 8:53 pm ET
WASHINGTON (Reuters) – Republicans in the U.S. House of Representatives on Tuesday took a step toward killing President Barack Obama's signature foreclosure prevention program, though the move will likely be blocked by the Senate.
The House Financial Services Committee voted 32-23 to shutter the Home Affordable Modification Program, which aims to help struggling borrowers win lower mortgage payments. The full Republican-controlled House is expected to follow suit next week.
The program, which offers incentives for lenders to modify loans, was launched to great fanfare in the spring of 2009. The Obama administration had hoped it would permanently lower mortgage payments for 3 million to 4 million homeowners.
To date, however, only about 500,000 borrowers have received permanent loan modifications, and the program has been widely criticized as ineffective.
Republicans argue the program, which is currently scheduled to accept new borrowers through next year, is a waste of taxpayer money amid soaring U.S. budget deficits.
"If you can't get rid of programs that number one, aren't working, aren't effective ... what hope do we have" of reducing government spending, Republican Representative Jeb Hensarling asked.
About $30 billion has been set aside for the program from the government's $700 billion financial rescue fund, but only about $1 billion of that has been spent so far.
Democrats admit the program is falling short of its original goals, but defend it as a useful tool when so many borrowers are in need. With Democrats in control of the Senate, the measure to shut down HAMP is likely to founder.
PART OF WIDER EFFORT
The committee also voted to kill an additional $1 billion slated to go to the Neighborhood Stabilization Program, which provides money for state and local governments to help clean up blighted properties and redevelop them. The bill is expected to face a vote in the full House next week.
In all, House Republicans plan to pass four bills targeting Obama administration housing programs, all of which are expected to die in the Senate.
The House on Thursday is set to vote on a bill to repeal a program that lets borrowers owing more than their homes are worth refinance into government-backed mortgages.
On Friday, it is expected to vote on legislation to end a program that would extend loans unemployed borrowers to help them make mortgage payments for up to two years.
Analysts say the votes are an effort by Republicans, who won control of the House with an anti-bailout, anti-deficit message, to score political points.
"They are doing this for the base," said Larry Sabato, director of the University of Virginia's Center for Politics.
While HAMP has seen few loan terms changed, loan modifications may rise if government officials and the largest U.S. banks reach a settlement over accusations that many lenders improperly foreclosed on thousands of borrowers.
Major U.S. banks, including Bank of America, JPMorgan Chase and Wells Fargo, have been asked to forgive some of the amount owed on troubled mortgages in a 27-page proposal sent to them by state attorneys general and federal agencies last week.
A number of House Republicans, including panel chair Spencer Bachus, said they have "significant concerns" about the financial market impact of the proposed settlement.
(Reporting by Corbett B. Daly; Editing by Gary Crosse)
Subscribe to:
Posts (Atom)