Posts Tagged ‘mortgage texas’

Geithner Talks GSE Options, But Action Waits

Wednesday, March 24th, 2010

American Banker  |  Wednesday, March 24, 2010
By Donna Borak
 
WASHINGTON — Though Treasury Secretary Tim Geithner said Tuesday that reforming the government-sponsored enterprises should not take years to accomplish, a House Financial Services Committee hearing made it clear the issue is unlikely to be addressed anytime soon.

Geithner offered no specifics on the future of Fannie Mae and Freddie Mac. Instead, he broadly endorsed some kind of government role in the housing market, even while he appeared uncertain how expansive it should be.

He also rejected the past GSE model, declaring that it was a partial cause of the current crisis and saying a total revamp is necessary.

“There is a quite strong economic case, quite strong public policy case for preserving [and] designing some form of guarantee by the government to help facilitate a stable housing finance market,” Geithner said. “But it can’t be the one we have today. It can’t be the one we lived with over the last decade. It’s going to be significantly different.”

Geithner’s timetable for reform appeared to be a long one. He repeatedly made it clear that the administration was only starting to examine the issue, and no concrete reform plan was in the offing.

“Realistically, it’s going to take several months to do a careful exploration of the problems, solutions, alternative models, and to try to shape legislation that could command consensus,” Geithner said. “But I don’t see why this should take years. There’s a huge compelling need to make sure we can design the successor system, and it’s very hard … for anybody to argue that we can live the with the system as it is now indefinitely in the future.”

House Financial Services Committee Chairman Barney Frank agreed that the effort had just started. “I stress this is the beginning of this process,” he said.

That left many Republicans outraged. Several GOP lawmakers noted that it has been a year and a half since the government seized the GSEs — and said that to start work on a plan now was far too late. “It’s unacceptable that more than 18 months after the GSEs were placed in conservatorship that the Treasury Department still does not have a plan for Fannie and Freddie,” said Rep. Spencer Bachus, the panel’s lead Republican. “Without reform, the bailouts will not stop, the housing market will not find its footing, and the American economy will not recover.”

Rep. Bill Posey, R-Fla., appeared frustrated, telling Geithner, “We can’t wait forever to find out” about the administration’s plan.

Geithner attempted to reassure lawmakers that the administration did not intend to drag the process out. He insisted it had been busy responding to the financial crisis, and that it has to be careful that whatever plan it develops will not upset the still-fragile housing markets. The administration plans to publish a list of questions by April 15 seeking comment on the right role for the government in the housing finance system.

But Geithner also ruled out several alternatives that have been offered on the future of the GSEs. For example, he rejected both nationalizing Fannie and Freddie or splitting them into several smaller entities.

“I think the two options you laid out at the beginning — full nationalization or creating a whole new class of GSEs to compete with each other — those do not look like appealing options to me,” Geithner said in response to questions from Bachus.

He also appeared to reject an idea being pushed by the Federal Home Loan banks to recreate Fannie and Freddie in the Home Loan banks’ image. Unlike Fannie and Freddie, which were public companies that answered to shareholders but were chartered by the government, the 12 Home Loan banks are cooperatives owned by their member institutions.

Rep. Mike Castle, R-Del., noting that the Home Loan banks have fared better than Fannie or Freddie, asked Geithner if it was worth considering using them as a guide. “Using the Federal Home Loan bank model, is that something you could actually substitute for all this in terms of what we’re doing or not doing as far as the future’s concerned?” Castle asked. “They don’t seem to have had the problems that the other GSEs have had.”

Geithner responded that the Home Loan bank system “is not without challenge today.” Still, he maintained that the Home Loan banks must be included in any revamp of the housing finance system. “When you look at the housing finance markets and reform of the GSEs, you have to look at the FHLB structure as well to make sure that it can play the role it’s designed to play, again, without leaving us with too much risk in the future that the government’s going to have to come in, to step in, to underwrite those losses,” he said.

Geithner did say he would consider a model offered by former Treasury Secretary Henry Paulson to regulate the GSEs like public utilities.

But Democrats rejected attempts by Republicans to unwind Fannie and Freddie before a replacement system is in place. “You can’t really tear down the old jail until you’ve built the new one,” Frank said. “We will simultaneously, I hope, be figuring out how best to wind down Fannie Mae and Freddie Mac and make sure that before that is completed, we are ready to replace the functions they are now performing in the economy without leaving this great vacancy.”

In September 2008, the government seized Fannie and Freddie and kept them afloat with $127 billion in federal aid. Reversing its original plan, the Obama administration pledged late last year to cover unlimited losses through 2012 for the enterprises, removing the earlier cap of $400 billion.

Republicans accused the administration of propping up the GSEs for its own purposes, including using them to support a program designed to increase loan modifications. “It appears to many of us … that what we now have is the GSEs are essentially an instrumentality of the administration to fund taxpayer funds to a failed foreclosure mitigation plan, with nothing else in sight,” said Rep. Jeb Hensarling, R-Texas.

Rep. Randy Neugebauer, R-Texas, warned that the longer a new plan for Fannie and Freddie is delayed, the more dependent the housing market will become on a nationalized Fannie and Freddie, echoing a point made by many analysts.

“It’s kind of like a muscle,” Neugebauer said. “The doctors tell you the longer that you don’t use a muscle and you keep your arm in a sling, which is where we got the housing finance market today, … the harder it is to rehabilitate that arm once you take it out of the sling.”

Geithner said the administration was conscious of the need to act but said doing so too quickly could make things worse. “We do not want these markets dependent excessively on government support in the future,” he said.

But he warned that in areas like housing that have been so badly damaged, “that process of repair is going to take a long time.”

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How Key Issues May Play Out in Reg Reform Debate

Friday, February 19th, 2010

American Banker  |  Friday, February 19, 2010

By Stacy Kaper  

WASHINGTON — With Congress set to return to work on Monday, Senate Banking Committee Chairman Chris Dodd is pushing an ambitious agenda in an attempt to build momentum behind a regulatory reform bill.

The Connecticut Democrat is hoping to introduce a revised bill next week, and hold a panel vote during the first week in March.

Yet the fate and makeup of a revised reform bill is unclear. With that in mind, we offer the following frequently asked questions.

Is anything actually settled yet?
So far the most set part of the legislation appears to be language to strengthen the government’s resolution powers over institutions whose failure would pose a risk to the economy. Sen. Bob Corker, the only Republican still willing to negotiate with Dodd on reform at the moment, has been hammering out resolution authority with Sen. Mark Warner.

Essentially, the two want to ensure that a systemically important firm must first exhaust bankruptcy proceedings if it appears ready to fail, but allow the government some leeway to seize and dismantle a firm if it must do so to protect the economy. The bill is likely to make it extremely difficult — if not outright impossible — for the government to keep any failing firm afloat, including not allowing it to place a systemic company into conservatorship.

Are there any issues with that?
Getting into bankruptcy rules gets tricky, because that is the purview of the Senate Judiciary Committee, not the banking panel. There’s also a question of how the government would pay to resolve a failing big firm. The House reform bill would create an industry fund ahead of time, while the Senate bill is unlikely to follow suit.

What about the systemic-risk council?
The New York Times caused a few waves when it reported that Dodd is leaning toward letting the Treasury Department oversee a council designed to oversee systemically important firms. The Connecticut Democrat told the paper that the Treasury secretary could serve as chairman of the council, while the chairman of the Federal Reserve Board would serve as vice chairman.

What’s that really mean?
Not much. Dodd has long made it clear that he favors a systemic-risk council over giving greater authority to a regulator like the Fed. Most observers presumed the Treasury would be the logical choice to lead it. The more important question is who enforces what the council recommends. The most likely candidate is whatever primary regulator already oversees the firm.

What about the Fed?
There are a lot of moving pieces here and one big mystery is how far the Senate will go toward stripping the central bank of its power. Dodd’s original bill called for eliminating the Fed’s supervisory authority and leaving it focused solely on monetary policy — a position the Fed and the Obama administration adamantly oppose.

One potential compromise is to let the Fed have an active role in regulating just the most significant systemically important firms, instead of all bank holding companies and state-chartered member banks. This would greatly reduce the number of companies the Fed oversees, yet still let the central bank have some direct window into the largest firms. It is unclear if anyone — the administration, the Fed or the Banking Committee — likes this idea, however.

Who would regulate the rest of the bank holding companies?
The betting right now would suggest that the Federal Deposit Insurance Corp. would regulate all state-chartered banks and their holding companies, while an empowered Office of the Comptroller of the Currency would oversee all federally chartered banks and their holding companies. The Fed would either be left with just the systemically significant firms, or potentially lose any role in supervision.

What about strengthening consumer powers?
For right now, that issue is tabled. Corker, in agreeing to work with Dodd, said the other issues should be worked out first, which is still happening. How much progress the two will make before next week is anyone’s guess, but they are both traveling together on a trip to Central America as part of their work on the Senate Foreign Relations Committee. In theory, they could work a lot out over a plate of pupusas.

Sen. Richard Shelby, the panel’s lead Republican, however, is working on his own substitute legislation. How either bill will resolve the issue is unclear.

Dodd is likely to propose an independent division within a bank regulator but Republicans are concerned over how much power it should have.

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HUD Issues Clarification On RESPA FAQ #8 – Written List of Providers

Wednesday, December 30th, 2009

Due to additional information received from the industry and a review of settlement service and title practices, the following question replaces the previous GFE-Written List of Providers Question 8:

8)         Q:  In some cases, law or local custom may require, or consumers may prefer, to have one provider conduct the settlement and another provider perform the remainder of the services included within the “Title Services and Lender’s Title Insurance” category on the GFE (Block 4 on page 2).  How should the fees and providers for these services be listed on the GFE, the Written List of Service Providers, and the comparison table on page 3 of the HUD-1 (page 2 of the HUD-1A)?

A:  The preferred method of disclosing the GFE Block 4 charges on the Written List of Service Providers is to list a set of single providers where each is capable of coordinating or performing all of the services provided within the “Title Services and lender’s title insurance” category.  Due to a wide variety of practices across the country, an alternate option is explained below that allows for the separate identification of providers to conduct settlement (or closing) and providers of lender’s title insurance and the related services on the Written List of Providers and the HUD-1/1A.

GFE

  • In all cases, the GFE shall be completed with the total estimated fees for “Title Services and Lender’s Title Insurance” combined in Block 4.  Provider names are not listed on the GFE.

Written List of Providers

  • For Block 4, the loan originator may separate the services in the Written List of Providers to show providers that conduct settlements (or closings) separately from providers of lender’s title insurance and the related services
  • If Block 4 services are separated on the Written List of Providers, the associated estimated fee for the component service must be listed next to the header for the list of providers of that service
  • The sum of the estimated fees for the two services must equal the amount in Block 4
  • Only two (2) categories of service providers may be listed:  providers that conduct settlements (or closings) and providers of lender’s title insurance and the related services

HUD-1 page 3, HUD-1A page 2

  • If the consumer chooses neither service provider from the list:
    • The lump sum of Block 4 would be placed in “Charges that Can Change”
      • Both service providers should be listed in the blank for service provider names, for example: XYZ Settlement Services/ABC Title Agency
      • If the consumer chooses a provider of one of the services from the list:
        • The service provider that was chosen from the Written List would be included in “Charges That in Total Cannot Increase More than 10%” with the associated estimated fee from the Written List of Providers in the GFE column and the actual fees for that service from that provider in the HUD-1 column.  The service performed by the provider not chosen from the Written List of Providers would be listed in the “Charges that can Change Section” with the associated estimated and actual fees.
          • The total of the estimated fees in the GFE column (from both tolerance sections) must equal the amount in Block 4 of the GFE
          • The total of the actual fees in the HUD-1 column (from both tolerance sections) must equal the total of all “Title services and lender’s title insurance” actual charges
          • If the consumer chooses the providers of both services from the Written List:
            • The Block 4 total is listed in the “Charges That in Total Cannot Increase More than 10%” column.
              • Both service providers should be listed in the blank for service provider names, for example: XYZ Settlement Services/ABC Title Agency
              • The total estimated and actual fees for both providers would be listed in the respective GFE and HUD-1 columns.

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HUD issues new FAQs: Attorney points out inconsistencies

Wednesday, November 25th, 2009

The Department of Housing and Urban Development (HUD) has issued numerous revisions to its frequently asked questions (FAQ) report, which it created to address the hundreds of questions industry members have been wrestling with since HUD issued the RESPA final rule in November 2008. Initially released by HUD on Aug. 13, the first FAQ contained 89 questions that spanned 15 pages. Since then, HUD has added 164 more questions spanning 51 pages and sources have indicated they expect even more from HUD all the way into April 2010.

The FAQs specifically address questions surrounding the new Good Faith Estimate (GFE) and HUD-1 Settlement Statement, with the most recent draft issued on Nov. 19, which includes nine new FAQs. Just two days prior, HUD released an FAQ with 13 new questions. Many people are sitting on the edges of their seats waiting for their questions to be included with the periodically released revisions, while others scrutinize HUD’s answers and attempt to implement any changes into their systems to reflect the new guidance before the nearing Jan. 1 implementation deadline.

This report is addressing the Nov. 17 FAQ release, listing all the new FAQs issued on this date, plus a close look at some of the problems one attorney thinks some of the new FAQs might cause.

Can I change the font size?

According to Howard Lax, a partner with Mich.-based Lipson, Neilson, Cole, Seltzer & Garin PC, there are many places throughout the rule in which HUD hasn’t provided enough guidance. He worries that this will lead to inconsistencies on how various lenders and closing agents will fill out and interpret the line items.

These predicted inconsistencies are contradictory to one of HUD’s original reasons for issuing the RESPA final rule, which is to provide clarity and standardization throughout the industry for consumers, Lax said. HUD has indicated that other reasons for creating the new forms is to save the consumer money, provide an easier way for the consumer to shop for a loan and to avoid significant differences in settlement costs between the GFE and HUD-1.

One inconsistency Lax refers to is the point size of the form. HUD says the following in an FAQ: “The Rule does not state a minimum font size that may be used on the GFE, HUD-1 or HUD-1A.”

Why does the point size matter?

“It defeats the whole purpose of the disclosure in the first place,” Lax said. “It’s supposed to be clear. I think that you will have some that will be unreadable. The print will be so small, that the consumer won’t be able to read it.”

Lax added that with the number of services some loan originators will “stuff” into Block 3 on Page 2 of the GFE, “Required services that we select,” many will have to decrease the point size of the GFE font in order to keep the form to HUD’s mandated three pages. He is concerned that with a smaller point size than the current 9 point that the form has, some consumers, especially senior citizens, will confuse matching the fees to the correct service.

HUD’s early advice to add lines to the GFE would result in narrowing the spacing between lines. The choice HUD had was to either 1) allow for an attachment to the GFE or an additional page to list all of the services and fees, or 2) give the loan originator free range on the point size, with the danger that some may make it unreadable, Lax said.

 

HUD also permits loan originators to create more columns in Blocks 3 and 6 of the GFE. According to Lax, this advice comes too late to change loan origination software and forms now being printed and shipped to loan originators.

 

“I do not see how this is going to prevent our clients from going to 6 point print or smaller in the form,” he added.

 

What can I put on lines 104 and 105 of the HUD-1?

In another FAQ, HUD says lines 104 and 105 on the HUD-1 should be used to disclose “additional items owed by the borrower that are not on the GFE and items paid by the seller prior to settlement and being reimbursed to the seller from the borrower at settlement.” According to Lax, HUD should have restricted this statement to include a caveat that says, “according to the terms in the purchase agreement.”

“It’s a wild card type of thing,” Lax said. “HUD’s answer is open-ended. It says that basically, anything that you want to put in the 100 section, you can stick in the 100 section. If you have additional items that aren’t in the GFE, such as taxes, then they can probably go in this 100 series, rather than in the 210 section.”

Examples of fees that would be listed on lines 104 and 105 are the cost of a home inspection, or a situation where the buyer has agreed to reimburse the seller for a carpet that the seller installed.

According to Lax, the issue here is that by opening up these lines to anything, it will make the use of the form inconsistent.

“Part of the reason for having a HUD-1 in the first place was so that you have consistent settlement statements,” Lax commented. “You have consistency so that the consumer, if he knows there is a certain charge, would see it in a certain place. We are losing that consistency by the way HUD is giving us instruction in the FAQs to create certain wild cards.”

Lax said he recommends that HUD limit the purpose of lines 104 and 105.

“The purpose of that section is the gross amount due to the borrower: the contract sale price, the cost of personal property and the total of the settlement charges. It’s designed to be a broad-based general summary of the cost of the home before you have credits and debits and HUD isn’t using it for that,” he said.

Can I attach additional pages to the GFE?

Lax pointed out another FAQ that needs further clarification. HUD answers the following question on Page 9 of its FAQ report.

“May additional pages be added to the GFE to allow for all charges to be shown? If so, is it an addendum or an extension of page 2?”

HUD’s answer: “No. Additional pages or addendums may not be added to the GFE. The standardized GFE form set forth in Appendix C to the Rule is the required GFE form and must be provided exactly as specified, except that Blocks 3, 6 and 11 on Page 2 may be adapted to use in particular loan situations, so that additional lines may be inserted there, and unused lines may be deleted.”

Sources have indicated that in a live educational presentation, Ivy Jackson, director of the Office of RESPA and Interstate Land Sales at HUD, said you can add a page to the GFE in a situation where the lender or broker would like to include a statement explaining to the borrow why certain fees, which may be paid by the seller in a particular transaction, are listed as buyer-paid fees on the GFE. This is unconfirmed and HUD has not yet responded to RESPA News for clarification.

According to Lax, regardless of Jackson’s statement, the FAQ is contradicting other HUD guidance, because HUD mandates that you add a list of settlement services providers for the consumer. To clarify, Lax said what he believes HUD doesn’t want you to do is make references back and forth between pages on the GFE and other information provided in addition to the GFE.

“In other words, you are going to give them lists of providers, but you are not going to have references back and forth between the lists and the GFE and vice versa. You’re not going to write on the GFE, ‘see attached sheet’ and you’re not going to have on the list, ‘see Block so and so for fees,’” Lax noted. “You are also not going to help consumers to shop for settlement service providers by placing contact information and fees in your lists of available service providers.”

Who needs to keep information to justify changed circumstance?

In the Nov. 17 FAQ report, HUD added the following to its “changed circumstances” section:

“If there is a changed circumstance, do the mortgage broker and the lender both need to retain documentation of the reasons for any revised GFE?”

HUD’s answer: “Yes. If there is a changed circumstance resulting in a revised GFE, loan originators (mortgage brokers and lenders) both must retain documentation of the reasons for providing the revised GFE for no less than 3 years after settlement.”

According to Lax, this is unnecessary redundancy and contradictory to the rule itself.

“Only the party that’s issuing the revised GFE should be responsible for justifying that decision,” Lax opined. “I think it’s equally poor for HUD to impute knowledge of the broker to the lender and vice versa, because you’ve only got three days from the date that either one learns of the changed circumstances to issue the revised GFE.”

Lax added that in the rule, there is no requirement that both the lender and broker have to keep the GFE.

“If there are changed circumstances, either the broker or the lender can issue a revised GFE, but only one of them has to keep it — whoever issues it. HUD is not only adding the rule, they’ve only added half way. They’re saying both the lender and broker have to keep all of the information that would justify the changed circumstance, but they’re not saying you both have to keep the GFE,” Lax noted.

Another FAQ Lax commented on was regarding where to put homeowners association (HOA) transfer fees. According to HUD, the charge for this fee will not be disclosed on the GFE, unless it is a service required by the loan originator. The charge for the HOA transfer fee may be shown on a blank line in the 1300 series on the HUD-1.

According to Lax, this will “blindside” the buyer at the closing and could end up in a transaction that doesn’t close or an unhappy consumer. Lax said because this fee, which can sometimes be substantial, will not be disclosed on the GFE, by the time the consumer gets to the closing table, it’s going to be too late for the consumer to discuss this fee with the seller

Full list of new FAQs included in HUD’s Nov. 17 release:

Q. What is the minimum font size that may be used on the GFE, HUD-1 or HUD-1A?

A. The Rule does not state a minimum font size that may be used on the GFE, HUD-1 or HUD-1A.

Q. May additional pages be added to the GFE to allow for all charges to be shown? If so, is it an addendum or an extension of page 2?

A. No. Additional pages or addendums may not be added to the GFE. The standardized GFE form set forth in Appendix C to the Rule is the required GFE form and must be provided exactly as specified, except that Blocks 3, 6, and 11 on Page 2 may be adapted to use in particular loan situations, so that additional lines may be inserted there, and unused lines may be deleted. Lines may be added to Blocks 3, 6 and 11 vertically and horizontally.

Q. If a loan originator permits a borrower to shop for “Title services and lender’s title insurance,” should the “written list” consider “Title services and lender’s title insurance” one service or would all of the sub-services (such as conducting the settlement) be listed as separate services?

A. “Title services and lender’s title insurance” is a category that comprises services within the defined term “title service,” including conducting the settlement. Sub-services included within “Title service and lender’s title insurance” may not be listed as separate services on the “written list.”

Q. If there is a changed circumstance, do the mortgage broker and the lender both need to retain documentation of the reasons for any revised GFE?

A. Yes. If there is a changed circumstance resulting in a revised GFE, loan originators (mortgage brokers and lenders) both must retain documentation of the reasons for providing the revised GFE for no less than 3 years after settlement.

Q. If the borrower selects a service provider that was not selected or identified by the loan originator, is this considered a changed circumstance?

A. No, if the borrower selects a service provider that was not selected or identified by the loan originator it is not considered a changed circumstance.

Q. If the borrower initially selects a service provider not on the loan originator’s written list, but then chooses to use a service provider identified by the loan originator, is this a changed circumstance?

A. No. If the borrower initially selects a service provider not on the loan originator’s written list, but then chooses a service provider identified by the loan originator, this is not considered a changed circumstance.

Q. If a settlement agent revises a HUD-1 to cure a technical error or to reflect a tolerance cure, may the settlement agent mark the HUD-1 as “Amended” to distinguish from the original HUD-1?

A. Yes. If a settlement agent revises a HUD-1 to cure a technical error or to reflect a tolerance cure, the settlement agent may mark the HUD-1 as “Amended” to distinguish it from the original HUD-1.

Q. May a credit for a tolerance cure be listed on Page 1 of the HUD-1?

A. The cure for a potential tolerance violation may be listed as a credit to the borrower on Page 1 of the HUD-1 with a description of the service(s) the credit is applied to. If the tolerance cure is applied to the overall tolerance category “Charges That in Total Cannot Increase More Than 10%,” the tolerance cure credit may be listed as a “lump sum” amount on a blank line in Lines 204 thru 209 with a description of the tolerance category cure. The comparison chart on Page 3 of the HUD-1 should reflect the credit given for that service to cure the potential tolerance violation in the appropriate tolerance category.

Q. What are examples of charges that would be listed in Line 104 and Line 105 on the HUD-1?

A. Lines 104 and 105 on the HUD-1 are for additional items owed by the borrower that are not on the GFE and items paid by the seller prior to settlement and being reimbursed to the seller from the borrower at settlement.

Q. May a real estate agent rebate a portion of the agent’s commission to the borrower? If so, how should the rebate be listed on the HUD-1?

A. Yes, real estate agents may rebate a portion of the agent’s commission to the borrower in a real estate transaction. The rebate must be listed as a credit on Page 1 of the HUD-1 in Lines 204-209 and the name of the party giving the credit must be identified. Real estate agent or broker commission rebates to borrowers do not violate Section 8 of RESPA as long as no part of the commission rebate is tied to a referral of business.

Q. If the settlement agent hires or pays a third party to facilitate electronic filing, where would that charge be shown on the HUD-1?

A: If the settlement agent uses a third party to facilitate electronic filing and the third party is not a governmental entity, the service to facilitate electronic filing is considered an administrative or processing fee included in the charge for “title services” in Line 1101 on the HUD-1.

Q.  If it is required by state or local law for a seller to pay a portion of the total charge for transfer taxes, on what line should the seller’s charge be listed on the HUD-1?

A. If it is required by state law for a seller to pay a portion of the total charge for transfer taxes and therefore not on the GFE, the seller’s charge should be listed as a charge in the seller’s column in Lines 1204 and 1205 on the HUD-1, and the total charges for transfer taxes should be itemized to the left of those columns (see HUD FAQ report for example).

Q. Where should the charge for the Homeowners Association (HOA) transfer fee be disclosed on the GFE and HUD-1?

A. The charge for the HOA transfer fee, unless it is a service required by the loan originator, need not be disclosed on the GFE. The charge for the HOA transfer fee may be shown on a blank line in the 1300 series on the HUD-1.

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FTC Extends Enforcement Deadline for Identity Theft Red Flags Rule

Monday, November 2nd, 2009

At the request of Members of Congress, the Federal Trade Commission is delaying enforcement of the “Red Flags” Rule until June 1, 2010, for financial institutions and creditors subject to enforcement by the FTC.

The Rule was promulgated under the Fair and Accurate Credit Transactions Act, in which Congress directed the Commission and other agencies to develop regulations requiring “creditors” and “financial institutions” to address the risk of identity theft. The resulting Red Flags Rule requires all such entities that have “covered accounts” to develop and implement written identity theft prevention programs to help identify, detect, and respond to patterns, practices, or specific activities – known as “red flags” – that could indicate identity theft.

The Commission previously delayed the enforcement of the Rule for entities under its jurisdiction until November 1, 2009. The Commission staff has continued to provide guidance to entities within its jurisdiction, both through materials posted on the dedicated Red Flags Rule Web site (www.ftc.gov/redflagsrule), and in speeches and participation in seminars, conferences and other training events to numerous groups. The Commission also published a compliance guide for business, and created a template that enables low risk entities to create an identity theft program with an easy-to-use online form. FTC staff has published numerous general and industry-specific articles, released a video explaining the Rule, and continues to respond to inquiries from the public. To assist further with compliance, FTC staff has worked with a number of trade associations that have chosen to develop model policies or specialized guidance for their members.

On October 30, 2009, the U.S. District Court for the District of Columbia ruled that the FTC may not apply the Red Flags Rule to attorneys. Today’s announcement that the Commission will delay enforcement of the Rule until June 1, 2010, does not affect the separate timeline of that proceeding and any possible appeals. Nor does it affect other federal agencies’ ongoing enforcement for financial institutions and creditors subject to their oversight.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,700 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.

MEDIA CONTACT:

Office of Public Affairs
202-326-2180

 (Red Flags October 09)

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TAMP Convention Pictures

Sunday, October 4th, 2009

 

   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
 
   
   
   
   
   
   
   
   
   
 
   
   
   
   
   

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New Life for the First-Time Credit?

Sunday, September 27th, 2009

By Kenneth R. Harney
Saturday, September 26, 2009

Will Congress extend the wildly popular $8,000 home-buyer tax credit beyond its Nov. 30 expiration date?

That’s a question generating huge pressure on Capitol Hill from would-be buyers who haven’t found the right house, realty agents, builders, lenders and squads of lobbyists working on their behalf.

Here’s the first hint of an answer: On Sept. 17, the leadership of Congress’s primary tax-writing committee introduced a tax credit bill that’s likely to zip through the House and quickly move to the Senate. House Ways and Means Committee Chairman Charles B. Rangel (D-N.Y.) sponsored the bipartisan Service Members Homeownership Tax Act (H.R. 3590), which would extend the credit 12 months for thousands of military, Foreign Service and intelligence agency personnel who have been posted abroad in 2009.

Rangel’s bill, with 29 co-sponsors, would keep the credit alive through Nov. 30, 2010, for service members who had at least 90 days of overseas duty assignments in 2009 and who otherwise meet the eligibility tests for the credit. The bill would also prohibit the Internal Revenue Service from “recapturing” the $8,000 credit when service members are forced to sell or rent out their houses because they are ordered to deploy to a different duty station.

Under the rules of the program, buyers who obtain the credit must use their houses as a principal residence for 36 months or repay the credit to the IRS. As a result of the 36-month rule, many military and diplomatic employees have been hesitant to buy a house and claim the credit, or are worried that their absence from the country could force them to repay the money.

For example, the spouse of a Foreign Service officer posted to the Philippines this summer for a two-year assignment wrote to Rep. Earl Blumenauer (D-Ore.) to alert him to a flaw in the tax-credit program. The Oregon couple bought their first home earlier this year, encouraged by affordable prices and the $8,000 credit. But having now been posted abroad, they cannot claim to occupy the house as their principal residence. Under current rules, they even face recapture of the full credit.

Blumenauer, who is a member of the Ways and Means Committee, said, “It is absurd that thousands of Americans serving our country, away from friends and family, must choose between their service work and homeownership.” He wrote corrective legislative language that ultimately was incorporated into Rangel’s tax bill.

Though nothing is guaranteed on Capitol Hill, legislation eliminating tax penalties on the military during wartime looks like a good bet for early passage in both houses. Equally significant: It now appears likely that there will be an $8,000 tax credit available a year from now — at least for some purchasers. That raises the question: Why not leave it in place for all first-time buyers?

There’s growing support for that on both sides of the Capitol, but there are also some complicating issues. In the Senate, the most outspoken advocate for months has been a Republican, Sen. Johnny Isakson of Georgia, a former real estate broker. He wants not only to extend the credit to Dec. 1, 2010, but to raise the maximum to $15,000, and make it available to all home buyers next year.

But recently, key Senate Democrats produced their own version of an extension, limited to six months, retaining the ceiling at $8,000 and targeting only first-time purchasers. The bill’s primary sponsor is Sen. Benjamin Cardin (D-Md.). Democratic co-sponsors include Majority Leader Harry M. Reid of Nevada and Debbie Stabenow of Michigan. Republicans John Ensign of Nevada and Isakson have signed on as well.

In a statement, Cardin raised what may prove to be the crucial issue affecting the scope and duration of any credit extension: cost. “A six-month extension is a fiscally responsible way to provide adequate time to nudge even more prospective homebuyers off the sidelines,” he said.

Estimates of the revenue costs of the current credit vary widely, from $3 billion to $8 billion and higher. How do you pay for any extension without worsening the budget deficit? The new Rangel bill includes an answer: You raise taxes somewhere else — you “pay as you go.” The Rangel bill pays for most of the service members’ credit extension by increasing IRS penalties on taxpayers who fail to file partnership or “S” corporation returns.

This would raise an estimated $327 million over the next 10 years. Where and how to raise taxes to cover the far larger cost of a six-month or 12-month extension of the current tax credit could prove much more controversial.

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