September 19, 2008

Work Continues on Loan Limit Issue

NRMLA continues to be engaged with the Department of Housing and Urban Development and industry stakeholders in the interpretation and implementation of H.R. 3221 Housing and Economic recover Act (HERA).

The question on HECM loan limits is being evaluated at the highest levels of the Bush Administration. There is a debate on the interpretation of the housing legislation with regard to the limit being at a flat $417,000 or it being $417,000 with high cost area exceptions up to $625,000 or a third scenario of a flat limit of $625,000.

Needless to say, this is our highest priority and we are devoting our full attention to it as it gets attention at the highest echelons of the Administration.

We understand that some members received a communication from U.S. Senator Barbara Boxer’s (D-CA) office stating the limit is $625,000.

In fact, a final decision has not been made yet and we believe the Senator’s office, upon receiving clarification that a final decision has not yet been made, pulled this letter from their web site.

NRMLA President Meets With Fed Officials

NRMLA President Peter Bell met in Minneapolis with officials from the 12 regional Federal Reserve Banks to give a general overview of reverse mortgages and an industry update. The September 17th meeting gave Bell an opportunity to meet with economists and other influential staff.

NRMLA has met previously with staff attorneys from the Fed’s Washington, DC headquarters to provide valuable background information as more of the agency’s examiners review depository institutions that originate reverse mortgages.


Paulson and Bernanke Swoop to Rescue Financial Markets

In an unprecedented series of actions from the U.S. Treasury Department, the U.S. Federal Reserve and the U.S. Securities and Exchange Commission over the last 24 hours, the administration has announced plans to purchase illiquid assets from financial institutions.

It also promised to buy up Fannie Mae and Freddie Mac Debt, it will launch an initiative to lend to banks for the purchase of commercial paper, created a fund geared at insuring money market mutual funds and banned short selling on 799 financial stocks.

After a meeting with Congressional leaders, and Fed Chairman Ben Bernanke on Thursday night, Treasury Secretary Henry Paulson said he is working on legislation that would allow the removal of illiquid assets from the balance sheets of financial institutions.

The Treasury Secretary pledged to continue working closely with Congress on a proposal, but warned that that systemic risks in markets need to be dealt with.

The U.S. Securities and Exchange Commission enforced a temporary ban Friday on the short selling of 799 financial stocks in an effort to calm investor fear and markets in general. The ban is in place until 11:59 p.m. EDT on Oct. 2, and can be extended 10 days or beyond if deemed necessary.

The move follows similar actions in the UK late Thursday evening. Meanwhile, Australia said it plans to institute a similar rule on Monday. Hours later, in an effort to continue bolstering investor confidence, the U.S. Treasury announced on Friday that it is launching an Exchange Stabilization Fund worth up to $50 billion geared at insuring money market mutual fund holding assets. The insurance program triggers when the net asset value for a money market mutual fund falls under $1.

Following the announcement a Treasury official told reporters that the action is geared to providing the same confidence that the FDIC does in ensuring bank deposits.

The money market is a critical part of the financial system, said the spokesperson.
In an announcement made on Friday, the U.S. Federal Reserve announced its intentions to purchase federal agency discount notes from primary dealers and launch an initiative allowing banks to borrow money for the purchase of asset-backed commercial paper.

The bank loan includes a non-recourse lending at the primary credit rate for the purchase of "high-quality" ABCP. Under the provision, the Fed will be able to purchase debt from Fannie

Mae and Freddie Mac.

In an interview with Bloomberg Television on Friday, U.S. House Financial Services Chairman Barney Frank said that government buying up illiquid assets would help boost market psychology. Although the lawmaker stressed the need for better rules on leverage and disclosure practices, Frank said the costs of not acting would be much worse than the double digit billions it would cost government to aid the markets.

By Erik Kevin Franco©CEP News Ltd. 2008