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Consumer Confidence Is a Sales Wild Card
Automotive News (08/31/11) Henry, Jim

According to TransUnion Corp., the availability of credit, pent-up demand and the likely hike of incentives are expected to increase car sales in the next few months, as long as consumer confidence stays on an even level. Experian reported an 18 percent increase in nonprime borrowers of new vehicles financed in the second quarter, evidence that points to credit loosening. Peter Turek, automotive vice president in the financial services unit of TransUnion, also predicts more incentive spending. U.S consumer confidence is at its lowest level since April 2009, as reported by research group Conference Board. However, TransUnion reports while there may be a decrease in consumer confidence, consumers have been paying their bills more conscientiously. Delinquencies on auto loans and leases are at a seven-month low. Turek noted that the loans that are on the books are really good, as lenders have tightened their lending standards, “putting in new things like additional verification of income, better underwriting standards.” With this combination, Turek predicts auto sales will increase, especially since they won’t be hampered by credit availability.

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Inside the Beltway
The Regulator Who Could Block Mortgage Refi Plan
MarketWatch (08/31/11) Orol, Ronald and Greg Robb

A possible White House plan to help the millions of Americans underwater on their mortgages refinance with government backing will need the support of the Federal Housing Finance Agency (FHFA). However, some say that the independent regulator’s acting director Edward DeMarco could block the plan. During his tenure at the FHFA, DeMarco has sought to limit Fannie Mae’s and Freddie Mac’s burden to taxpayers, and the administration’s plan would likely increase taxpayers’ expenditures. “DeMarco might not want to do it so, the question is, can the White House require him and FHFA to do it?” asked Michael Stegman, director of policy and housing at the John D. and Catherine T. MacArthur Foundation. “If [DeMarco] sees that the program would result in losing money and reducing revenues, he may say we’re better off where we are and not go through this.” Without the FHFA’s support, the president’s only alternative would be proposing legislation – which many see as unlikely. Because the president’s plan would likely encompass mortgage backed securities, which Fannie Mae and Freddie Mac guarantee, private investors could lose billions of dollars. Republicans in Congress would likely raise concerns that investors would be discouraged from returning to the mortgage backed securities market.

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Ginnie Mae Allows Buyouts After Trial Payment Plans
DSNews.com (08/30/11) Franks, Krista

Servicers may now buy out loans at the end of a successful trial payment plan instead of having to wait until a borrower has missed three payments, according to a new rule announced by Ginnie Mae regarding delinquent loan buyouts. The rule follows Federal Housing Administration (FHA) guidelines, effective Oct. 1, that will require most loans to undergo a trial payment plan of three to four months before a loan modification becomes permanent. Under the new rule, the trial period must successfully be completed before a loan can be returned to the Ginnie Mae pool. The servicer will be responsible for the full principal and interest as long as the loan remains in the pool. The trial period helps mitigate the losses for the servicer because they are able to receive partial payments, rather than no payment.

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National and State News
NY Delegates Respond to AG's Removal from Settlement Committee
DSNews.com (08/30/11) Franks, Krista

Twenty-one New York lawmakers sent a letter to Iowa Attorney General Tom Miller expressing concern over Miller’s decision to remove New York Attorney General Eric Schneiderman from the committee negotiating the nationwide foreclosure settlement with major mortgage servicers. Miller has stated that his decision was based on Schneiderman “actively working to undermine” the committee. However, in their letter, New York delegates stated that his removal was an “attempt to banish opposition rather than address varying viewpoints [which] undermines both the validity of the process and any settlements reached by the committee.” The delegates noted that this may cause other attorneys general to choose silence over voicing valid concerns over fear that they would also be removed. In addition, they requested an explanation of how New York, as one of the top states for suspected mortgage fraud and the third largest state in the country, will be protected in these negotiations that will have a large impact on them.

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As Visa Pushes One Form of Disposable Data, Discover Ditches Another
American Banker (09/01/11) Wolfe, Daniel

While Visa Inc. has begun promoting its one-time-use card data for security, Discover Financial Services is phasing out a similar technology. The primary difference between the two types of dynamic data is that the system Visa supports is used at the point of sale, adding steps for merchants, and the one Discover is discontinuing is used online, adding steps for consumers. Beginning Sept. 8, Discover will no longer allow its customers to generate disposable card numbers for online payments -- which enabled consumers to not share their regular card account. "Given the existing security measures taken today by Discover and all credit card companies, we felt that [Secure Online Account Numbers] were no longer needed to keep cardmembers’ accounts secure," said Discover spokeswoman Laura Gingiss. Disposable numbers generated before Sept.8 will be able to be used until the customer's plastic card expires. Visa has been outspoken in its support of EMV, a secure-card standard that is common in other countries. In the U.S., contactless cards already use what Visa calls a dynamic Card Verification Value, which provides added protections against thieves because it cannot be reused after it has authorized a legitimate payment. However, contact EMV and contactless cards do not improve security for online transactions unless a consumer buys special add-on hardware. Discover is not the only payment company to stop using disposable account numbers online. PayPal discontinued them last year, and American Express Co. discontinued them in 2004. Although those companies have moved away from single-use account numbers, the threats to online shoppers have remained. "Dynamic data is absolutely the way to go, both online and offline, because the risks are significant in both spots," said Julie Conroy McNelley, a senior risk and fraud analyst at Aite Group LLC. But despite the risks, "it actually doesn't surprise me that we're seeing another company get rid of single-use cards," she continued. Disposable card numbers are "clunky, from a consumer's perspective." In addition, many consumers are satisfied with zero-liability promises, so they do not feel they need to add other layers of security.

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Robo-Signing Redux: Servicers Still Fabricating Foreclosures
Berry, Kate (08/31/11) American Banker

Documents recently submitted as evidence to foreclose has led to more criticism of bank procedures regarding so-called robo-signing. These documents have been backdated to support companies’ right to foreclose. However, banks have stated that creating documents that memorialize actions that should have occurred years before is routine business practice, a claim that has been endorsed by several courts. Other criticized practices include a bank employee assigning mortgages from the Mortgage Electronic Registration System (MERS) registry for a bond issue completed years earlier on behalf of a company that is no longer in existence. Banks insist that this practice is a “routine and fully authorized assignment of the note” on behalf of the company and its “successors.” Additionally, banks have pointed out that some states allow for after-the-fact documentation of previous transfers. Securitization and plaintiff attorneys have offered different perspectives in regards to securitization agreements, “most of which require the actual note, mortgage and intervening assignments to be transferred to a trust before a closing date.” Securitization attorneys insist that banks have latitude on the delivery of assignments in trust agreements. Plaintiff’s attorneys, however, believe that mortgage lenders did not properly track or record documents in their rush to securitize large amounts of mortgages. Banks continue to argue that while paperwork errors may exist, it doesn’t change the fact that the borrower is in default.

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Federal Student Loans Increased in Last Year, But Caused Grad Student Woes
New York Daily News (08/31/11) Chatzky, Jean

Federal student loans are an area affected by the immediate spending cuts in the recently passed debt deal. While funding for Pell grants – given to low-income students – increased, federal subsidized student loans for graduate and professional students were cut. In the 2009-2010 academic school year, approximately 1.4 million borrowers took out Graduate Subsidized Stafford Loans, which don’t accrue interest while they’re in school, according to Patrick Kandianis, co-founder of SimpleTuition.com. These loans will no longer be available to graduate students as of July 1, 2012, which means that these students will only be able to take out unsubsidized, interest-accruing loans. Payment incentives are another area that will be cut July 1, according to Heather Jarvis, student loan expert of AskHeatherJarvis.com. Borrowers will no longer be given the discount that rebates half of the one percent loan origination fee for paying their first 12 payments on time. The 0.25 percent interest rate reduction for setting up automatic loan payment account withdrawals, however, is still in effect. This is likely not the end of cuts in financial aid, as Congress is set to propose more cuts in the coming months.

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Bank of America to Exit Another Line
The Wall Street Journal (09/01/11) Fitzpatrick, Dan

Bank of America reportedly is selling off its correspondent mortgage business in an effort to strengthen its portfolio and become more nimble. The move follows Bank of America’s exit from the wholesale business and end of offering reverse mortgages. Correspondents fund loans and sell them to larger lenders such as Bank of America, which used the correspondent channel to build origination volume, resell loans and then service them. According to Inside Mortgage Finance, loans purchased from correspondents accounted for 47 percent of Bank of America's mortgage originations, or $27.4 billion, in the first quarter of 2011. In that period, Bank of America had a 24.3 percent share of the correspondent market, second only to Wells Fargo & Co. "It is a huge retreat," said Guy Cecala, publisher of Inside Mortgage Finance. "Exiting correspondent altogether will reduce their volume significantly."

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95th AFSA Annual Meeting

September 1, 2011

Forward To A Colleague

Wells Fargo Preferred Capital
Allied Solutions
Carleton, Inc
Counselor Library
Balboa Insurance
GoldPoint Systems
Life of the South
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