Tag Archives: Treasury


Administration Announces Refinance Program for Underwater Borrowers

It’s official. The Federal Housing Finance Agency (FHFA) unveiled a new, revamped government mortgage refinancing program Monday.

The initiative involves a series of rule changes to the Home Affordable Refinance Program (HARP) to allow more underwater homeowners to reduce their mortgage debt by taking advantage of today’s rock-bottom interest rates.
Mortgages backed by Fannie Mae and Freddie Mac, and originally sold to the GSEs on or before May 31, 2009 are eligible for the program.

Under the revised HARP guidelines, the 125 percent loan-to-value (LTV) ceiling has been eliminated. Previously, only borrowers who owed up to 25 percent more than their home was worth could participate in HARP. That limitation has now been removed. The program will continue to be available to borrowers with LTV ratios above 80 percent.

The new program enhancements address several other key aspects of HARP that industry participants say have restricted its impact, including eliminating certain risk-based fees for borrowers who refinance into shorter-term mortgages and lowering fees for other borrowers, as well as allowing mortgage insurers to automatically transfer coverage from the original loan to the new loan.

In addition, Fannie Mae and Freddie Mac have done away with the requirement for a new property appraisal where there is a reliable AVM (automated valuation model) estimate already provided by the GSEs, and they’ve agreed to waive certain representations and warranties on loans refinanced through the program.

Not only are loans eligible for HARP considered “seasoned loans,” but a refinance helps borrowers strengthen their household finances, reducing the risk they pose to the GSEs. Thus, FHFA feels reps and warranties are not necessary for some of these loans.

With Monday’s announcement, the end date for HARP has been extended from June 30, 2012 to December 31, 2013.
The GSEs will release program instructions to lenders by the middle of next month, and FHFA expects some lenders will be ready to accept applications by December 1.

Since HARP was rolled out in early 2009, approximately 1 million homeowners have refinanced their mortgage loans through the program. FHFA estimates that with the revised guidelines, another 1 million will be able to take advantage of the program.

To qualify, borrowers must be current on their mortgage payments, but government officials believe by opening HARP up to more homeowners with higher thresholds of negative equity, it will help to prevent foreclosures by erasing the primary motivation behind strategic defaults.

Economists at the University of Chicago Booth School of Business estimate that roughly 35 percent of mortgage defaults are strategic. Numerous industry studies have found that homeowners who owe significantly more than their home is worth are more likely to throw in the towel and walk away from their mortgage debt even if they have the ability to continue making their payments.

“We anticipate that the package of improvements being made to HARP will reduce the Enterprises credit risk, bring greater stability to mortgage markets, and reduce foreclosure risks,” FHFA stated in its announcement Monday.
Fannie Mae and Freddie Mac also released statements in response to the announcement.

Michael J. Williams, Fannie Mae’s president and CEO, called the program a “welcome development.”
“By removing some of the impediments to refinance, lenders can more easily participate in the program allowing more eligible homeowners to take advantage of the low interest rates,” Williams stated.

Charles E. Haldeman, Jr., CEO of Freddie Mac said, “These changes mark another step on the road to recovery for the nation’s housing market.”

Article is from DSnews.com.


Execs of TARP-Supported Bank Charged with Hiding Millions in Losses

A federal grand jury in San Francisco has indicted two former bank executives of the now-defunct United Commercial Bank for misrepresenting loan losses to federal agencies as the bank took money from taxpayers through the Troubled Asset Relief Program (TARP). Specifically, the charges include conspiracy to commit securities fraud, securities fraud, falsifying corporate books and records, and lying to auditors.

United Commercial Bank was headquartered in San Francisco, with branch offices throughout the United States as well as in China and Taiwan. Its holding company, UCBH Holdings, Inc., was publicly traded on NASDAQ.

The defendants charged are Ebrahim Shabudin, who served as United Commercial Bank’s chief credit officer and chief operating officer from September 2008 through April 2009, and Thomas Yu, the bank’s manager of credit risk and portfolio management from June 2008 through June 2009.

The indictment, which was unsealed Tuesday, charges that between 2004 and 2007, the bank’s loan portfolio increased from approximately $4.4 billion to more than $8 billion.

By September 2008, the bank’s loan portfolio faced growing losses. In November 2008, the bank received approximately $298 million from TARP.

The indictment alleges that beginning in September 2008, Shabudin and Yu, along with others, used fraudulent accounting maneuvers and techniques to hide the bank’s true financial condition from the U.S. Department of Treasury, investors, depositors, regulators, and the bank’s independent auditor.

“Shabudin and Yu are the first senior executives of a TARP bank charged in connection with a scheme to defraud investors, which included the Treasury, and by extension the American taxpayer, Christy L. Romero, acting Special Inspector General for the Troubled Asset Relief Program (SIGTARP) said in a statement.

Romero continued, “The bank failed and all of the $298 million in TARP funds are lost. SIGTARP will tirelessly work with its law enforcement partners to root out fraud at TARP banks.”

After the bank failed in November 2009, the FDIC became the receiver and, to date, has paid out approximately $397 million as a result of the seizure. The indictment estimates total losses to the FDIC will be approximately $2.5 billion, and further alleges that none of the TARP funds have been repaid. United Commercial Bank was the first TARP recipient bank to fail.

Shabudin was arrested Saturday. Yu surrendered in court Tuesday morning. Both defendants made their initial appearances in federal court in San Francisco Tuesday and were released on $500,000 secured bonds. The defendants’ next scheduled appearance is on October 20, 2011.

The Securities and Exchange Commission (SEC) filed separate civil charges Tuesday accusing Shabudin, Yu, and United Commercial Bank’s former CEO Thomas Wu of misleading investors about the bank’s mounting loan losses.

The SEC’s complaint alleges that the three executives deliberately concealed losses from auditors, causing the bank’s public holding company UCBH Holdings Inc. to understate 2008 operating losses by at least $65 million, or approximately 50 percent.

The SEC says Wu “was considered a rising star in the banking industry,” sitting at the helm of the first U.S. bank to acquire a bank in the People’s Republic of China, but by 2009, Wu found himself at the helm of a bank on the brink of failure.

“Today’s charges reflect an all too familiar pattern – corporate executives once seen as rising stars embrace deception to avoid losses and conceal negative news, with investors and the FDIC insurance fund left to pick up the pieces. But accountability for these executives begins today,” said Robert Khuzami, director of the SEC’s enforcement division.

Article is from DSnews.com.