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WASHINGTON – President-elect Barack Obama signaled Sunday he will move urgently and aggressively to rescue the plunging economy, demanding swift passage by Congress of a massive two-year spending and tax-cutting recovery program. "We're out with the dithering, we're in with a bang," a top Obama aide said.

Obama's plans, outlined by his transition team on television talk shows, could put aside his campaign pledge to repeal a Bush tax cut for the wealthy. With the downturn in the economy, those tax cuts may remain in place until they are scheduled to die in 2011, said William M. Daley, an economic adviser. "That looks more likely than not," he said.

Obama aides called on lawmakers to pass, by the Jan. 20 inauguration, legislation that meets Obama's two-year goal of saving or creating 2.5 million jobs. Democratic congressional leaders said they would get to work when Congress convenes Jan. 6.

Though Obama aides declined to discuss a total cost, it probably would far exceed the $175 billion he proposed during the campaign. Some economists and lawmakers have argued for a two-year plan as large as $700 billion, equal to the Wall Street bailout Congress approved last month.

"I don't know what the exact number is, but it's going to be a big number. It has to be," said Obama economic adviser Austan Goolsbee.

With the wounded economy worsening, the Obama team's new assertiveness was a recognition he needed to soothe financial markets with signs of leadership. It also foreshadowed a more hands-on role by Obama to influence congressional action during the final weeks of the transition.

Obama will introduce his economic team on Monday, including Timothy Geithner as treasury secretary and Lawrence Summers as head of the National Economic Council. Obama also has settled on New Mexico Gov. Bill Richardson as his commerce secretary.

"We don't have time to waste here," Obama senior adviser David Axelrod said. "We want to hit the ground running on January 20th." Echoing that, the second-ranking House Democrat, Rep. Steny Hoyer of Maryland, said, "We expect to have during the first couple of weeks of January a package for the president's consideration when he takes office."

Added Goolsbee: "We're out with the dithering. We're in with a bang."

Obama's team didn't limit itself to the long-term economic recovery.

Axelrod warned automakers, seeking billions in government help to stave off collapse, to devise a plan to retool and restructure by next month. Otherwise, he said, "there is very little taxpayers can do to help them."

Axelrod couldn't resist taking a jab at the Big Three executives, who left Congress empty-handed last week after flying into Washington in corporate jets and pleading for money. "I hope that they will come back to Washington in early December — on commercial flights — with a plan," he said.

The emphasis on the economy began Saturday when Obama outlined the framework of a plan to save or create 2.5 million jobs by the end of 2010. The scope of the recovery package is far more ambitious than what Obama had spelled out during his presidential campaign, when he proposed $175 billion of spending and tax-cutting stimulus. The new one will be significantly larger and would incorporate his campaign ideas for new jobs in environmentally friendly technologies — the "green economy." It also would include his proposals for tax relief for middle- and lower-income workers.

But there were no plans to balance the tax cuts with an immediate tax increase on the wealthy. During the campaign, Obama said he would pay for increased tax relief by raising taxes on people making more than $250,000.

"There won't be any tax increases in the January package," said one Obama aide, who spoke on condition of anonymity because the details of the Obama package have not been fleshed out.

Obama could delay any tax increase to 2011, when current Bush administration tax cuts expire.

House Republican leader John Boehner of Ohio urged Obama to make that explicit. "Why wouldn't we have the president-elect say, `I am not going to raise taxes on any American in my first two years in office?'"

In a sign of where the congressional debate might lead, Boehner called for lowering capital gains and corporate income taxes.

Some economists have endorsed spending up to $600 billion to revive the economy. Sen. Charles Schumer, D-N.Y., and former labor Secretary Robert Reich, a member of Obama's economic advisory board, both suggested $500 billion to $700 billion.

"I don't know what the number is going to be, but it's going to be a big number," Goolsbee said. "It has to be. The point is to, kind of, get people back on track and startle the thing into submission."

While Obama in the weekend Democratic radio address said his plan "will mean 2.5 million more jobs by January of 2011," aides said the figure was a net sum of jobs created and jobs saved that would otherwise disappear without government help.

The adviser who spoke on condition of anonymity said the plan would likely slow down job losses in 2009, but that new jobs probably would not be evident until 2010.

Obama's plan is both an economic and a political blueprint. By not including tax increases, he silences one potential Republican objection to his plan. If successful, the scope of his plan would set the stage for his other legislative goals, including expanded health care, permanent changes in tax rates and a comprehensive overhaul of energy policy.

"This package is designed to be a down payment to get his entire agenda started," the aide said.

Axelrod appeared on "Fox News Sunday" and ABC's "This Week." Schumer was on ABC, Hoyer and Boehner on Fox and Goolsbee was interviewed on "Face the Nation" on CBS. Reich appeared on "Late Edition" on CNN.

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Posted by Kathy Norman on November 23rd, 2008 4:50 PMLeave a Comment

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November 23rd, 2008 4:48 PM

WASHINGTON (Reuters) – Speaker of the U.S. House of Representatives Nancy Pelosi said on Sunday that Congress could put together an economic stimulus package of several hundred billion dollars that should also contain tax cuts.

In a recorded interview with CBS' "Face the Nation" that was aired on Sunday, Pelosi, a California Democrat, said the package should be aimed at creating jobs immediately and include investments for future growth. Pelosi said several economists have called for a package in the hundreds of billions of dollars.

When asked if that would be the case for the stimulus package lawmakers are contemplating, Pelosi said: "It could be, if it also contained a tax cut. Something of several hundred billion would have to be some investment into the future, plus creating jobs immediately, and a tax cut." (Reporting by Donna Smith and Randall Mikkelsen; Editing by Doina Chiacu)

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Posted by Kathy Norman on November 23rd, 2008 4:48 PMLeave a Comment

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Mortgage brokers face industry upheaval

By Kevin Drawbaugh 06/04/2008 WASHINGTON (Reuters) –

Mortgage broker Richard Hobson was astonished when he set up shop in Seattle last year after learning his trade in the tightly regulated UK market.

It was obvious, he says, that a real estate disaster was brewing. "The mortgage industry here has been an eye opener for me. I am surprised about how lax the system was and is."

But it doesn't take a newcomer to see that the U.S. mortgage brokerage business is facing big changes as a regulatory backlash follows an historic housing market bust.

Congress and the Bush administration are pursuing reform proposals on how brokers qualify to do business; how they get paid; and how much information they share with borrowers.

The full Senate is expected to take up legislation this month that was approved in May by a 19-2 vote in the Senate Banking Committee.

The bill would impose national minimum standards over the existing patchwork of state systems for licensing mortgage brokers and lenders.

To get a license, brokers and lenders would have to be fingerprinted, undergo background checks, prove their record is clean, pass an exam and meet other requirements.

The national licensing provision, part of a broader housing bill expected to win Senate approval, was co-authored by Republican Sen. Mel Martinez of Florida, a former secretary of the U.S. Department of Housing and Urban Development (HUD).

"When you see an industry that's so unregulated that someone can actually steal money from their purported client, something's wrong," he told Reuters in an interview.

The House of Representatives approved a bill in November to require licensing of mortgage brokers and bank loan officers.

And the Bush administration in March called for "strong nationwide licensing standards" for mortgage brokers, stiffer federal and state oversight of all mortgage originators and better disclosure of loan terms to borrowers.


"We absolutely feel that better disclosure and better regulation are important. We're working with everyone we can," says George Hanzimanolis, president of the National Association of Mortgage Brokers.

The association's Web site appeals to members for support, warning that "the mortgage broker industry is being attacked on every front. ... Our industry will be unrecognizable if changes policymakers have proposed are made final."

With more than 50,000 firms and 400,000 employees, mortgage brokers are mostly independent contractors who act as middle-men between mortgage borrowers and lenders.

In 2005, they originated 25 percent of U.S. prime mortgages and about 60 percent of subprime mortgages, according to the Government Accountability Office, a research arm of Congress.

More recently, the industry has suffered as housing has slumped, particularly in states where home prices soared the most a few years ago, such as Florida, Nevada and California.

Hanzimanolis says the association is generally supportive of national licensing standards, as long as they don't unfairly single out brokers and are uniform for brokers, bankers, credit unions and other lenders.

"You're going to see a much more professional industry in the next year and ... going forward," he says.

Changes being considered in America resemble steps taken recently in Britain, where the business still has problems, but where regulators have been cracking down for several years.

Hobson, for instance, had to pass three exams to get his mortgage broker license in Britain, which a few years ago put the business under the national Financial Services Authority.

There is no national oversight in America, where the states oversee brokers. Even though Washington state's standards -- one exam and required continuing education including an ethics course --- are tougher than many, Hobson says the Washington test was "very, very easy" compared to the UK exams.

In Nevada, a mortgage broker's license can be had by submitting valid identification, financial records and some other supporting documents. No exam or study course is needed. Annual renewals do require some continuing education.


Beyond licensing, critics have accused brokers of unfairly steering some borrowers into mortgages they cannot afford and taking excessive fees, known as yield-spread premiums, from lenders for pushing higher-rate loans. The Center for Responsible Lending, an advocacy group, calls yield-spread premiums "a kickback to brokers" that should be banned.

Hanzimanolis calls such criticism "sensationalism" while adding that there should be more disclosure on compensation.

He says his industry alone is not to blame for the housing market crisis. "Mortgage brokers don't design the products ... We don't underwrite," Hanzimanolis says. "All we do is offer the products that Wall Street and the bankers design."

HUD last month released a study criticizing the complexity of buying a home and finding that loans from mortgage brokers typically cost more than loans directly from lenders.

"This report demonstrates once and for all that the process consumers endure when they buy their homes is entirely too confusing," says Roy Bernardi, acting secretary at HUD.

HUD in March proposed requiring lenders to disclose more about mortgage closing costs and payments to mortgage brokers. The proposal is a milder version of one made in 2002 by Martinez when he was running HUD. His successor, Alphonso Jackson, dropped it in 2004, in the face of industry opposition.

That was about the same time that Britain began toughening oversight of the mortgage industry -- a job still under way.

The UK's financial watchdog, the Financial Services Authority (FSA), last month warned mortgage brokers they should inform clients if a better loan deal could be had by borrowing directly from a bank, instead of using an intermediary.

Most UK mortgages are sold through intermediaries, with brokerages accounting for over 70 percent of the 2007 total. Britain has about 7,000 mortgage intermediary firms.

The FSA's mortgage brokerage oversight system mandates disclosure of basic information in standard format, requires assessment of borrowers' ability to repay, and focuses on consumer fairness.

"I hope the U.S. mortgage industry takes steps ... similar to the UK. It is in the client's best interest," says Hobson, the transplanted mortgage broker.

(Reporting by Kevin Drawbaugh; Editing by Tim Dobbyn)

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Posted by Kathy Norman on June 4th, 2008 9:59 AMLeave a Comment

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Washington Report: Overhauling Real Estate Appraisals

June 2, 2008

By Kenneth R. Harney

One of the country's top financial regulators threw a hand grenade last week at Fannie Mae's and Freddie Mac's controversial plan to radically overhaul real estate appraisals.

Mortgage industry groups in Washington think the regulator -- Comptroller of the Currency John Dugan -- scored a direct hit.

Dugan sent a sharply-worded 12-page letter to Fannie and Freddie's regulator - the Office of Federal Housing Enterprise Oversight (OFHEO) -- effectively warning it to pull the plug on the appraisal changes or face litigation and possibly Congressional action.

The appraisal plan, unveiled in March, was itself a legal settlement among Fannie Mae, Freddie Mac and New York Attorney General Andrew Cuomo. The plan would force lenders to stop using in-house staff appraisers or appraisers affiliated with management companies in which the lenders have financial interests.

It would also prohibit all mortgage brokers from selecting appraisers for home mortgage valuation assignments.

Cuomo extracted the settlement from Fannie and Freddie after threatening an investigation of both companies' appraisal practices. Rather than submit to subpoenas of staff and documents, the two companies agreed to far-reaching changes in their appraisal rules - essentially dictated by Cuomo -- that would affect all banks and lenders seeking to sell Fannie and Freddie mortgages.

OFHEO signed onto the agreement as well.

Mortgage groups immediately criticized the settlement as unfairly intrusive and harmful to long-standing, legitimate business relationships between appraisers and lenders.

Dugan, the principal supervisor of thousands of national banks, told OFHEO in his letter that provisions of the National Bank Act would prevent this de facto regulation from being applied to, or enforced against any of the institutions regulated by his agency.

We see no legal basis, he added, for delegating regulatory authority to the New York Attorney General. Other officials hinted that Dugan's letter could be the basis for future suits to block the appraisal plan from taking effect as scheduled next January 1.

Steve O'Connor, senior vice president for government affairs for the Mortgage Bankers Association of America, called Dugan's letter significant and a powerful statement that could help derail the plan.

In the meantime, Cuomo, Fannie and Freddie are saying little publicly about Dugan's warning. Cuomo's office said it is thoughtfully considering all criticism from the industry and government agencies.

But no one expects Cuomo to back down.

Where's this all headed? Probably to federal court. And maybe to Congress, where legislation already is pending that would reform appraisal standards for all lenders, and impose stiff penalties on banks, mortgage companies and brokers who interfere -- or attempt to interfere -- with appraisals.

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Posted by Kathy Norman on June 2nd, 2008 6:57 AMLeave a Comment

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By Patrick Rucker Tue May 20, 10:54 PM ET

WASHINGTON (Reuters) - The U.S. Senate Banking Committee approved legislation on Tuesday that could save a half million homeowners from foreclosure and help stabilize the nation's rattled housing market.

Under the plan, lenders who agree to erase a large share of the original loan amount could win a government guarantee on future mortgage payments. The bill would also create a stronger regulator for mortgage-finance companies Fannie Mae and Freddie Mac.

Both the Senate bill and a similar plan passed by the House of Representatives earlier this month would create a fund under the Federal Housing Administration to allow distressed homeowners to refinance into government-guaranteed loans.

Congress is trying to stem a wave of foreclosures estimated at about 1.4 million this year with home prices falling and many borrowers unable to make payments on costly mortgages taken out before the real estate bubble burst.

Senate Republicans and the White House had worried a new FHA program would put taxpayers on the hook for failing loans. But under the compromise bill passed by the Senate panel, Fannie Mae and Freddie Mac will absorb loan losses.

The bill that cleared the Senate committee on Tuesday now must go before the full Senate for a vote. If approved, lawmakers will need to hammer out a compromise between the competing House and Senate versions.

Rep. Barney Frank, chairman of the House Financial Services Committee and the author of the House legislation, said he had questions about how the Senate plan would fund mortgage rescues. But he said he expects lawmakers from both chambers to agree on a bill that can go to President George W. Bush.

Democratic Sen. Christopher Dodd of Connecticut, chairman of the Senate panel, has said he hopes to see the mortgage rescue package reach Bush by July 4.

While the White House had threatened to veto the House bill, it said it will take a close look at the Senate version.

"I don't believe the president will veto this," Sen. Richard Shelby of Alabama, the top Republican on the banking panel, told reporters after the vote.


The foreclosure prevention plan that cleared the House could assist about 500,000 borrowers at a cost to taxpayers of about $1.7 billion, according to the nonpartisan Congressional Budget Office.

The White House objected specifically to the cost of the House plan and Shelby demanded that its sponsors find a way to fund it without tapping governmen coffers.

After weeks of haggling, Shelby and Dodd agreed to scale back the FHA refinancing fund so it would cost only about $500 million. Dodd said the bill would still help a similar number of homeowners as the House version.

The Senate bill would cover the cost of the program by diverting money from an affordable housing trust fund to be set up under Fannie Mae and Freddie Mac.

Under the trust fund proposal, the two companies would contribute a share of their profits to create a pot of money for housing advocacy groups to expand affordable housing.

The affordable housing trust fund was a key element in the housing rescue package authored by Frank, who said he was concerned about the Senate plan to divert those funds.

"A fight is brewing on the affordable housing trust fund," the Massachusetts Democrat said. "That would be one of the most contentious issues between us ... So we will deal with that."

Freddie Mac's chief financial officer said the company is "generally supportive" of the legislation.

Speaking at a Lehman Brothers conference in London via Webcast, Buddy Piszel said, however, that the new regulator for Freddie Mac and Fannie Mae should maintain the companies' funding flexibility as they are the main sources of stability in "the worst housing downturn anyone has ever seen."

A spokesman for Fannie Mae said the company was concerned that the legislation might put a crimp in its ability to invest in the nation's housing market.

(Additional reporting by Kevin Drawbaugh in Washington and Lynn Adler in New York; Editing by Dan Grebler)

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Posted by Kathy Norman on May 21st, 2008 7:56 AMLeave a Comment

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