REMARKS BY HUD SECRETARY STEVE PRESTON DURING MEDIA TELECONFERENCE CALL TO DISCUSS FHASECURE EXPANSION AND PENDING CONGRESSIONAL LEGISLATION

Good morning. Thank you for phoning in. I wanted to join FHA Commissioner Brian Montgomery to talk about the next phase of FHASecure and discuss housing legislation pending before Congress.
As you know, in response to the housing crisis, FHA has expanded its mission to help more Americans facing foreclosure refinance into safer, more affordable mortgages. In late August 2007, President Bush introduced a new product called FHASecure for homeowners who were unable to make their mortgage payments after their interest rate reset. Since then, more than 260,000 families have refinanced with FHA. Hundreds of thousands more will refinance with FHA by the end of the year.
Starting on July 14th, FHASecure will begin to provide additional assistance to subprime borrowers with adjustable rate mortgages, and help to restore liquidity and stability to the markets. It will assist families who have missed up to three
monthly mortgage payments over the previous 12 months or have experienced temporary economic hardship, such as loss of overtime or medical needs, as well as those who were affected by payment shock. The expansion will also encourage lenders to voluntarily write down outstanding subprime mortgage principal.
We estimate this plan will help an additional 100,000 families refinance into more affordable FHA-insured loans by the end of the year.
The combination of all efforts under FHASecure will help a total of 500,000 families by year's end. Our monthly refinancings this fiscal year are already more than five times the level of 2006. It is clear people are coming to us as their solution for the future.
As part of this expansion, we are instituting a fairer, more flexible premium pricing structure at FHA. Like any other insurance company, FHA will begin pricing the insurance premiums for these borrowers according to their credit risk. This will eliminate a pricing inequity that treats applicants with a low risk of default the same as those with a high risk of default.
Risk-based pricing will benefit many borrowers, especially lower-income American families. In FHA's portfolio, families with the lower incomes actually have higher FICO scores. These are hard-working American families who live within their means and pay their bills on time. Pricing mechanisms should reflect that fact.
The bill currently moving through the Senate would place a moratorium on risk-based pricing. That would be a big mistake. FHA will have to increase premiums across the board on all borrowers or, alternatively, seek taxpayer funds in October to cover potential losses, or cut back on the program at the very time we are an island of hope for hundreds of thousands of Americans.
In addition to a possible moratorium on risk-based pricing, Congress may require FHA to accept mortgage insurance loans with seller-funded down payment assistance. The option for FHA not to insure such mortgages would be removed. This would not only be costly for FHA but could be expensive for taxpayers, too. Even if FHA raised premiums to a max of 2.25 percent upfront for all borrowers across the board, it would still need to seek an appropriation to cover the losses caused this practice.
We have issued a regulation to address seller-funded down payments. We are in a comment period right now, and I intend to look hard at those comments. Therefore, I do not want to discuss this matter in great detail. The comments are important to us and we will look at them carefully. But the reason for our efforts to regulate in this area is that FHA-backed mortgages with seller-funded down payments go into foreclosure at three times the rate of FHA's remaining portfolio. Because of a lack of equity, losses on these seller-funded down payment mortgages are significantly greater. We remain solvent and in good shape today. But no insurance company can continue to absorb losses of this magnitude.
At the end of the day, I hope reason will prevail. FHA is more important to the mortgage market now than it has been for many years. FHA's volume and market share continue to grow every month. I hope final legislation from Congress would put forward actions that can keep FHA solvent, self-financing, and responsibly able to help homeowners. Taxpayers should not have to absorb preventable, foreseeable losses.
We are looking for the Congress to pass responsible legislation that will help FHA continue to provide stability for the housing market and provide government-backed mortgages for low-and-moderate income families.
Thank you.

Posted Anthony Landaeta
http//anthonylandaeta.blogspot .com/

Bank Of America Completes Countrywide Financial Purchase

Bank of America Corp. has completed its purchase of Countrywide Financial Corp. The company says it will focus on responsible home lending. Bank of America also will assist new and existing customers with selecting the right products to meet their needs."Mortgages are one of the three main cornerstone consumer financial products, along with deposits and credit cards," says Kenneth D. Lewis, Bank of America chairman and chief executive officer. "This purchase significantly increases Bank of America's market share in consumer real estate, and as our companies combine, we believe Bank of America will benefit from excellent systems and a broad distribution network that will offer more ways to meet our customers' credit needs."Bank of America plans to offer the following types of first-lien mortgages: conforming loans underwritten to standard guidelines of government-sponsored enterprises and the government, including FHA and VA loans and other loans designed for low- and moderate- income borrowers; nonconforming loans with terms expected to produce no greater risk of default than conforming loans; interest-only fixed-rate and adjustable-rate mortgages (ARMs) that are subject to a 10-year minimum interest-only period, which lessens the possibility of short-term payment shock; and fixed-period ARMs that provide borrowers low initial rates with the security of fixed payments, subject to protections against steep increases in payment amounts.The company will continue its long-established policy of not originating subprime mortgages. As announced previously, Bank of America will discontinue certain nontraditional mortgages - including option-ARM loans. It also will significantly curtail some other nontraditional mortgages, such as certain low-documentation loans, and will implement enhanced borrower protections over time as part of the transition process.

WA Fines Countrywide, Seeks To Revoke Company's License

Gov. Chris Gregoire, D-Wash., says that the state of Washington plans to fine Countrywide Home Loans $1 million for discriminatory lending. In addition, the company will be required to pay more than $5 million in back assessments the company failed to pay. The state is seeking to revoke Countrywide's license to do business in Washington for its alleged illegal activity."The allegation that Countrywide preyed on minority borrowers is extremely troubling to me," Gregoire says. "And I hope to learn eventually just how much this may have contributed to foreclosures in our state. The allegation offers evidence that Countrywide engaged in a pattern to target minority groups and engage in predatory practices."The state's Department of Financial Institutions (DFI) is required to examine every home lender licensed in the state of Washington, the governor's office explains. The agency conducted its fair lending examination of Countrywide last year.At that time, DFI looked at roughly 600 individual loan files and uncovered evidence that Countrywide engaged in discriminatory lending that targeted Washington's minority communities. The agency also found significant underreporting of loans during its investigation.DFI sent Countrywide a statement of charges on June 23, notifying the company of the fine and the back assessments the state plans to pursue. The investigation continues.Source: Office Of Gov. Chris Gregoire

CA AG Sues Countrywide For Mortgage Deception

California Attorney General Edmund G. Brown Jr. has sued Countrywide Financial, its chief executive, Angelo Mozilo, and its president, David Sambol, for allegedly engaging in deceptive advertising and unfair competition by pushing homeowners into mass-produced, risky loans for the sole purpose of reselling the mortgages on the secondary market."Countrywide exploited the American Dream of homeownership and then sold its mortgages for huge profits on the secondary market," Brown states. "The company sold ever-increasing numbers of complex and risky home loans, as quickly as possible. Countrywide was, in essence, a mass-production loan factory, producing ever-increasing streams of debt without regard for borrowers. Today’s lawsuit seeks relief for Californians who were ripped off by Countrywide’s deceptive scheme.”Brown alleges that Countrywide Financial used deceptive tactics to push homeowners into complicated, risky, and expensive loans so that the company could sell as many loans as possible to third-party investors. According to the lawsuit, the company marketed complex and difficult-to-understand loans with very low initial or “teaser” interest rates or payments.Despite receiving numerous complaints from borrowers claiming that they did not understand their loan terms, Countrywide ignored loan officers' deceptive practices and loose underwriting standards, according to Brown’s office. Countrywide also pushed its borrowers to serially refinance, repeatedly urging borrowers to obtain home loans to pay off their current debt.The case is People v. Countrywide, Los Angeles Superior Court case number LC081846.Source: Office Of California Attorney General Edmund G. Brown Jr.

Iran Warns West May Face 'Done Deal' on Nukes if Country Is Provoked

Wednesday, June 25, 2008

Associated Press

posted by http//anthonylandaeta.blogspot.com/

TEHRAN, Iran — Iran's powerful parliament speaker on Wednesday warned that the West could face a "done deal" if it provokes Iran, in a rare hint by an Iranian official that Tehran could build nuclear weapons if attacked.
Iran's leaders have long been adamant that the country's nuclear program is and will always be aimed only at generating electricity. Ali Larijani did not directly contradict that stance, but his veiled warning comes amid increased Iranian fears that the U.S. or its ally Israel could strike its nuclear facilities.
Earlier this month, Israel sent warplanes and other aircraft on a major exercise in the eastern Mediterranean that U.S. officials said was a message to Iran — a show of force as well as practice in the operations needed for a long-range strike mission.
Larijani, who was once Iran's top nuclear negotiator with the West, made the comments in a speech to parliament aired on state TV and radio.
He pointed to recent comments by Mohamed ElBaradei, the U.N. nuclear watchdog chief, who said in an interview last week that a military strike on Iran could turn the Mideast into a "ball of fire" and "prompt Iran, even if it didn't produce a nuclear weapon today, to resort to an emergency plan to produce a nuclear weapon."

"Take Mr. ElBaradei's warnings seriously," Larijani said, addressing the West.
"Don't provoke Iran otherwise you will face a done deal that will block the path of your return to a compromise with Iran," Larijani told an open session of the parliament broadcast live on state radio Wednesday.
The phrase he used in Farsi, "amal-e anjam shodeh," means literally "an accomplished act" or "fait accompli."
Larijani also warned that a "short opportunity is left" for a deal with Iran over its nuclear program.
The West is taking a carrot and stick approach with Iran, trying to push it to suspend uranium enrichment, a process that can produce either fuel for a nuclear reactor or the material for a warhead. Top Western powers have put forward a package of economic incentives for Iran to halt enrichment, while threatening an increase in sanctions.
Iran has yet to reply to the package, insisting it will never suspend enrichment but also mentioning some common ground with its own proposals for a resolution to the standoff.
The U.S. and some of its allies accuse Iran of seeking to build a nuclear bomb. Iran has always said it will never do so — and Iran's supreme leader Ayatollah Ali Khamenei has ruled it out, calling nuclear weapons un-Islamic.
Larijani is a member of the powerful Supreme National Security Council and is close is close to Khamenei. He was careful not to directly state that the country could change its intentions. His vague hint now that Iran could do so appeared aimed at signalling the possible consequences of military action and pressing the West to reach a negotiated solution.
One hard-line newspaper was more overt about the possibility, though it too stopped short of directly threatening a move to build a weapon.
The daily Kayhan said in an editorial that even if Iran's nuclear facilities are destroyed in a strike, they could be rebuilt "within a short period of time, but with the difference that it (a military strike) may prompt a fundamental reconsideration in intentions."
Meanwhile, a top commander of the elite Revolutionary Guards on Wednesday warned that an attack on Iran would draw the U.S. into "a new tragedy."
"If you want to move towards Iran, make sure you will bring artificial legs and walking sticks because you will not have any legs to return on should you come," the television quoted Mohammad Hejazi, a top Guards figure, as saying.
Iran has spread its nuclear facilities over various parts of the large country and has built key portions underground to protect if from possible Israeli or American airstrikes.
In 1981, Israeli jets bombed Iraq's Osirak nuclear facility in an attempt to end then-Iraqi leader Saddam Hussein's nuclear program. Last September, Israel bombed a facility in Syria that U.S. officials have said was a nuclear reactor being constructed with North Korean assistance, a claim denied by Damascus and Pyongyang.

Closing the book on Countrywide

Shareholders of the mortgage lender are expected to approve the sale to Bank of America Wednesday. But it remains to be seen if the deal will pan out for BofA.

NEW YORK (CNNMoney.com) -- Time will tell if Bank of America's purchase of Countrywide Financial Corp. winds up being a bargain or a boondoggle.
Shareholders of the troubled mortgage lender are widely expected to approve Bank of America's (BAC, Fortune 500) all-stock offer at a meeting this Wednesday, effectively removing the final hurdle to the deal and ending Countrywide's days as an independent. Bank of America has said a deal is likely to close in the third quarter, which begins next Tuesday.
But lately, some analysts have suggested that Bank of America may suffer a classic case of buyer's remorse once it absorbs Countrywide's (CFC, Fortune 500) $95 billion loan portfolio.
Last week, equity analysts at Standard & Poor's slashed their rating of Bank of America stock to "sell" from "hold." They fear the Charlotte, N.C.-based bank may be underestimating the impact of rising consumer defaults and delinquencies at Countrywide, especially with option adjustable rate mortgages (ARM).
Last month, Paul Miller, an analyst with Friedman, Billings, Ramsey & Co., warned that Bank of America's purchase could prompt it to take anywhere between $20 billion to $30 billion in writedowns.
"BAC [Bank of America] should completely walk away from the CFC [Countrywide] deal, as CFC's loan portfolio will prove a drag on earnings and could force BAC to raise additional capital," Miller wrote in a note.
Countrywide, the nation's largest mortgage lender, clearly is struggling. The company has reported losses in its last three quarters due to soaring mortgage delinquencies and defaults by borrowers. The stock plunged from about $30 per share last August to less than $6 a share just before BofA announced the deal.
Bank of America's concerns, however, don't just end at Countrywide's balance sheet.
The Senate Ethics Committee is looking into charges that top lawmakers including Senate Banking Committee Chairman Christopher J. Dodd, D-Conn. and Sen. Kent Conrad, D-N.D. got deals on their mortgages through a program for friends of Countrywide CEO and co-founder Angelo Mozilo.
Mozilo, who grew Countrywide from its modest beginnings, will leave the company but will still receive $10 million in stock from Bank of America. That's on top of the $115 million he stood to gain after the deal was announced. He later forfeited $37.5 million in payments tied to the deal.
Countrywide has also become the target of numerous government investigations so far this year, including the state of Florida and the U.S. Trustee's office, a division of the Justice Department. Both are looking into the company's lending practices. And that's not to mention the glut of lawsuits brought by borrowers.
Some analysts think Bank of America most likely took litigation expenses into account when it drafted its offer for Countrywide though.
Still, Bank of America is also going to need to drastically cut back its combined mortgage operations once the deal is done.
To that end, the company has hinted that job cuts lay ahead, saying in January that it planned to trim 11% of the combined mortgage companies' expenses.
"It will be a long time before they need people on the servicing side and they probably will cut a substantial amount on the mortgage origination side," said Malcolm Polley, president and chief investment officer at Stewart Capital Advisors in Pittsburgh, which owns approximately 23,000 shares of Bank of America.
Long-term benefits
When Bank of America first proposed the deal back in January, Wall Street was evenly split about its merits.
Some analysts speculated that the company offered too high an asking price -- the deal originally valued Countrywide at just over $4 billion and is now worth about $2.8 billion as BofA shares have fallen along with the broader financial sector in the past few months.
In addition, the deal would mean that Bank of America, which had largely avoided the subprime mess unlike many of its peers, would now be exposed to Countrywide's risky mortgage portfolio.
Others cheered the tie-up, noting it put Bank of America in a position to expand its already vast footprint in the financial services sector, by making it the nation's biggest mortgage lender and loan servicer.
And some large institutional shareholders in Countrywide, such as the Monaco-based hedge fund SRM Global went so far as to attack top Countrywide management, claiming that the buyout price of $4 billion was not high enough.
So is Bank of America getting Countrywide on the cheap?
Despite all the doubts regarding the deal, Bank of America's management has stood firmly by the transaction since it was first announced.
"I think it could be a combination that really turns out to be very good strategically," said Bank of America chairman and CEO Kenneth Lewis earlier this month at an investor conference.
Lewis added that if his company correctly estimated the number of markdowns they would have to take, the acquisition "could be a very compelling financial transaction."
But if Bank of America expects any payoff from the Countrywide deal, it should be patient, noted David George, senior research analyst at Robert W. Baird & Co. Inc.
When the housing market finally turns around -- and most analysts expect it will at some point -- Bank of America will have a nice head start with Countrywide's well-trained sales staff and mortgage lending technology platform.
"Over the near term, I think the Countrywide deal adds increased credit risk to BofA's balance sheet," said George. "Longer term, it could be a positive transaction."

Ranieri's Bank Shuts Mortgage-Fund Unit (Franklin Bank)

By Ari Levy
June 12 (Bloomberg) -- Franklin Bank Corp., the Texas bank led by founder Lewis Ranieri, is closing its unit that provides financing to mortgage bankers, according to a person familiar with the situation.
The Houston-based company is ``substantially exiting'' the so-called warehouse-lending business, firing most of its 20 employees, said the person, who asked not to be identified because the move hasn't been announced. Franklin can't sell the loans to securities firms, the person said.
With Franklin's departure, the number of banks providing funding for mortgage bankers has dwindled to 12 from about 75 two years ago, said David Lykken, head of Austin, Texas-based Mortgage Banking Solutions. Among those, only half are taking applications, he said.
``This is alarming for the mortgage industry,'' said Lykken, whose firm is a consultant to banks and brokers. ``It is right now the weakest link.''
The closure signals that Ranieri's bet on the beleaguered housing market may be faltering. Ranieri, who formed the bank in 2002, became chief executive officer of Franklin last month after an internal probe found accounting errors related to real-estate loans. Spokeswoman Karen Farwell declined to comment for this story.
Franklin fell 5 cents to 89 cents at 4:24 p.m. New York time on the Nasdaq Stock Market. The shares have tumbled 94 percent in the past year as losses on loans to homebuilders mounted.
Buying Mortgages
Apart from Franklin, Ranieri, 61, is buying residential mortgages amid the worst housing crisis since the Great Depression. Selene Residential Mortgage Opportunity Fund LP, whose managing partners include Ranieri, raised $151 million from investors as of April 15, according to a regulatory filing. The firm plans to raise $1 billion to buy and refinance delinquent mortgages, said David Creamer, another managing partner, in an interview last month.
Ranieri's banking history dates back to the 1960s at New York's Salomon Brothers Inc. As vice chairman, he later helped turn Salomon into the most profitable firm on Wall Street by packaging mortgages to sell as securities.
More than 100 lenders have been forced to close, halt operations or sell themselves since the beginning of last year as home prices plunged and foreclosures rose to a record.
Washington Mutual Inc., Impac Mortgage Holdings Inc. NovaStar Financial Inc. and Regions Financial Corp. are among those that closed their warehouse-lending units. Banks that would purchase the mortgages are now buying only the safest loans, like those generated by government-sponsored Fannie Mae and Freddie Mac.
National City Corp, Ohio's largest bank, and Dallas-based Coamerica Inc. are still in the warehouse-lending business.
To contact the reporter on this story: Ari Levy in San Francisco at alevy5@bloomberg.net.
Posted by Anthony Landaeta Jr 06/12/08 http://anthonylandaeta.blogspot.com/