Suspend the Rules and Pass the Bill, HR. 2056, with An Amendment
(The amendment strikes all after the enacting clause and inserts a new text)
112TH CONGRESS
1ST SESSION H. R. 2056
To instruct the Inspector General of the Federal Deposit Insurance Corporation to study the impact of insured depository institution failures, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
MAY 31, 2011
Mr. WESTMORELAND (for himself, Mr. DAVID SCOTT of Georgia, Mr. BROUN of Georgia, Mr. GARY G. MILLER of California, Mr. POSEY, Mr. MARCHANT, and Mr. MACK) introduced the following bill; which was referred to the Committee on Financial Services
A BILL
To instruct the Inspector General of the Federal Deposit
Insurance Corporation to study the impact of insured
depository institution failures, and for other purposes.
Security officials are warning the leaders of major Wall Street banks that al Qaeda terrorists in Yemen may be trying to plan attacks against those financial institutions or their leading executives.
Intelligence officials stress the threats are general in
Intelligence analysts added they have a general but growing concern that operatives in Yemen may again try to send package bombs or biological or chemical agents through the mail to Wall Street bankers.
In recent weeks, the FBI‘ Joint Terrorism Task Force and NYPD officials have been briefing bank executives and their security departments on the nature of the threat information. Much of it gleaned from al Qaeda writings like ‘Inspire’ magazine that recently warned of attacks targeting financial institutions.
The latest “Inspire” issue also made reference to trying to use Anthrax in an attack, officials said.
Sample Letter Sent to Public Companies on Accounting and Disclosure Issues Related to Potential Risks and Costs Associated with Mortgage and Foreclosure-Related Activities or Exposures
In October 2010, the Division of Corporation Finance sent the following illustrative letter to certain public companies as a reminder of their disclosure obligations to consider in their upcoming Form 10-Qs and subsequent filings, in light of continued concerns about potential risks and costs associated with mortgage and foreclosure-related activities or exposures.
October 2010
Name
Chief Financial Officer
ABC Company
Address
Dear Chief Financial Officer:
The purpose of this letter is to remind you of disclosure obligations that you should consider for your upcoming Form 10-Q and subsequent filings in light of continued concerns about potential risks and costs associated with mortgage and foreclosure-related activities or exposures.
Items that should be considered include, without limitation, the impact of various representations and warranties regarding mortgages made to purchasers of the mortgages (or to purchasers of mortgage-backed securities) including to the government-sponsored entities (GSEs), private-label mortgage-backed security (MBS) investors, financial guarantors and other whole loan purchasers. While not an exhaustive list, these representations and warranties may include the following:
ownership of the loan;
validity of the lien securing the loan;
the absence of delinquent taxes or liens against the property;
the process used to select the loan for inclusion in a transaction;
the loan’s compliance with any applicable loan criteria established by the buyer, including underwriting standards;
delivery of all required documents to the trust; and
the loan’s compliance with applicable federal, state and local laws.
In addition, we understand that some issuers are undertaking reviews of their loan documentation and foreclosure practices, and, in some cases, have suspended foreclosures pending completion of such reviews.
Item 303 of Regulation S-K requires you to discuss, in your Management’s Discussion and Analysis of your Forms 10-Q or Form 10-K, any known trends or any known demands, commitments, events or uncertainties that you reasonably expect to have a material favorable or unfavorable impact on your results of operations, liquidity, and capital resources. Item 103 of Regulation S-K requires disclosure of legal proceedings, including proceedings known to be contemplated by governmental authorities. Item 1 of Part II of Form 10-Q requires you to address legal proceedings when they first become a reportable event and in subsequent quarters when there have been material developments.
In addition, ASC Subtopic 450-20 (SFAS 5) requires you to establish accruals for litigation and other contingencies when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. When a loss is not both probable and estimable, an accrual is not recorded, but disclosure of the contingency is required to be made when there is at least a reasonable possibility that a loss or an additional loss has been incurred. The disclosure should indicate the nature of the contingency and give an estimate of the possible loss or range of loss or state that such an estimate cannot be made. Rule 10-01(a)(5) of Regulation S-X requires the disclosure of material contingencies in interim financial statements.
As appropriate, you should provide clear and transparent disclosure regarding your obligations relating to the various representations and warranties that you made in connection with your securitization activities and whole loan sales. In addition, you should discuss any implications of any foreclosure review, including potential delays in completing foreclosures, if applicable. These disclosures should address your role as an originator, securitizer, servicer, and investor, as applicable. Depending on your circumstances, please consider the following points as you prepare your Form 10-Q and subsequent filings:
Risks and uncertainties associated with potentially higher repurchase requests as a result of any foreclosure review process and any changes to the methodology or processes you use to estimate any repurchase reserve;
Litigation risks and uncertainties related to any known or alleged defects in the securitization process, including any potential defects in mortgage documentation or in the assignment of the mortgages;
Litigation risks and uncertainties related to any known or alleged breach of the pooling and servicing criteria, including any potential defects in the foreclosure process;
Risks and uncertainties associated with any agreements or understandings, including for indemnification and settlement, with title, mortgage, and bond insurers regarding coverage;
Potential effects of defects in the securitization process or improper application of the pooling and servicing criteria on the valuation and any possible impairment of your mortgage servicing rights (MSR);
Potential effects of defects in the securitization process or improper application of the pooling and servicing criteria on the recognition or impairment of servicing advances, and related effects to your liquidity; and
Potential effects of changes in the timing of sales of loans, other real estate owned, and mortgage-backed securities resulting from such issues to your liquidity and any related effects on the valuation and impairment of these assets.
In addition, if you have established a reserve relating to representations and warranties attributable to loans that you have sold, you should consider providing a roll-forward of this reserve presenting separate amounts for increases in the reserve due to changes in estimate and new loan sales and decreases attributable to utilizations/realization of losses.
This is not an exhaustive list of the disclosures you should consider. It is your responsibility to determine the disclosures that should be provided in your particular circumstances.
Some of these issues are not limited to financial institutions that sold or securitized mortgages or mortgage-backed securities. Issuers that engage in mortgage servicing, title insurance, mortgage insurance, and other activities relating to residential mortgages should also consider the impact of these and similar issues for their disclosures.
California Democratic Congressional Delegation Urges Bank Investigations
October 5, 2010
Washington, D.C. – Today, California Democratic Congressional Delegation (CDCD) members sent a letter to Attorney General Holder, Federal Reserve Chair Bernanke, and Comptroller of the Currency Walsh requesting investigations into systemic wrongdoing by financial institutions in their handling of delinquent mortgages, mortgage modifications, and foreclosures. Delegation members have received thousands of complaints from their constituents, which appear to outline a clear pattern of misconduct on the part of lenders and servicers. Recent press accounts have also reinforced the view that these institutions are routinely failing to respond in a timely manner, misplacing requested documents, and misleading both borrowers and the government about loan modifications, forbearances, and other housing related applications.
“It’s clear that even after promising to work with borrowers, and receiving government incentives to do so, financial institutions are simply stringing the American people along,” noted Delegation Chair, Rep. Zoe Lofgren. “After reviewing thousands of complaints from our constituents, it appears that we aren’t dealing with isolated incidents and that a pattern of misconduct and obstruction is present.”
Dear Attorney General Holder, Chairman Bernanke and Comptroller Dugan, As members of the California Democratic Congressional Delegation, we urge you and your respective agencies to investigate possible violations of law or regulations by financial institutions in their handling of delinquent mortgages, mortgage modifications, and foreclosures.
Over the last few years, thousands of our constituents have reported that many financial institutions, despite good faith efforts on the part of most homeowners to work out reasonable loan modifications or simply seek forbearance of foreclosure, routinely fail to respond in a timely manner, misplace requested documents, and send mixed signals about the requirements that need to be met to avoid foreclosures. We are particularly perplexed by this apparent pattern in light of the many incentives Congress and the Obama Administration have offered to servicers and lenders to avoid foreclosures where financially viable, including subsidies and loan guarantees from taxpayers. Avoidable foreclosures end up being unnecessarily costly for homeowners, lenders and servicers, and our housing market, whose health is essential to our economic recovery.
The apparent pattern reported by our constituents leads us to conclude that their problems are not just personal anecdotes anymore. Recent reports that Ally Financial (formerly GMAC) and JP Morgan may have approved thousands of unwarranted foreclosures only amplify our concerns that systemic problems exist in the ways many financial institutions have dealt with homeowners who are seeking to avoid foreclosures.
who are seeking to avoid foreclosures. We are now in the third year of the worst housing crisis we have seen in decades. Far too many families in California, and across the country, continue to lose their homes. While Congress and the Obama Administration have taken steps to help mitigate the housing problem, this devastation has persisted and, in fact, worsened as the country’s unemployment rate increased. We have heard numerous stories of financial institutions being uncooperative at best or misleading and acting in bad faith at worst. These heartbreaking stories are commonplace, persisting across the state and across lenders and servicers. As you can see from the attached document, which highlights examples of casework throughout California, it appears that banks have repeatedly misled and obstructed homeowners from receiving the help Congress and the Administration have sought to provide.
The excuses we have heard from financial institutions are simply not credible three years into this crisis. People in our districts are hurting. We have tried to help them in the face of the many challenges they have faced in their dealings with financial institutions. It is time that banks are held accountable for their practices that have left too many homeowners without real help.
Sincerely,
Zoe Lofgren
The California Democratic Congressional Delegation consists of 34 Democratic members of the U.S. House of Representatives from California. This group outnumbers all other state House delegations – Republicans and Democrats combined.
Los Angeles to Pull Investments from Foreclosure-Heavy Financial Firms
Monday, March 8th, 2010, 2:59 pm by JON PRIOR
As the distressed housing market in the City Of Angels continues to grow, the entity that oversees operations, the City of Los Angeles, is its pulling investments and deposits out of financial institutions it deems are not cooperating with local, state and national foreclosure prevention efforts.
The Los Angeles City Council instructed the city attorney to draft a new ordinance, called the Responsible Banking Initiative, that would require banks looking to do business with the city to submit a report on investments in local communities. The “report cards” would give insight to policy makers on the bank’s investment in the city. The city currently holds almost $30bn in investments, including savings and pension funds.
According to the real estate data provider, RealtyTrac, the Los Angeles metropolitan statistical area (MSA) had the 32nd highest foreclosure rate in the country in 2009 as foreclosures remained concentrated the sand states. There, one in every 25 homes received a foreclosure filing, a 37% increase from 2008. California leads all states with the most permanent modifications under the Home Affordable Modification Program (HAMP), according to the US Treasury Department.
The motion was introduced by Councilmember Richard Alarcón. His original proposal came in February 2009. It pertained to bank cooperation with foreclosure prevention, but after a hearing in September, the council widened the scope. Before the city makes an investment, it would examine bank location in the city, how many small business loans are offered and whether or not the bank re-negotiates on foreclosures.
“The City of Los Angeles has an obligation to ensure that not only are our taxpayers dollars spent properly, but that they are also invested in a way that gives the greatest benefit to our City, and the report card created by the Responsible Banking Initiative will give us the information we need so we can invest smarter,” said Councilmember Richard Alarcón. “A slightly lower interest rate isn’t much of a deal, if the same bank is taking advantage of homeowners, refusing to issue small business loans or not opening branches or ATMs in low-income areas.”
Los Angeles would be the biggest city in the US to create reporting requirements for banks looking to do business with the city.
Recent Comments