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STORIES:
Regulators
Investigate SunTrust Bank for Fraud - (www.teribuhl.com)
A mid-size bank touted as a growth stock by analyst this year is under SEC
investigation for selling billions of Alt-A loans labeled as Prime loans to
Fannie Mae. I reported on the SEC investigation into SunTrust Bank today at Growth
Capitalist. According to whistleblowers, Atlanta-based SunTrust took
advantage of a Fannie Mae program designed for the bank’s best of the best
borrowers. They called it the Agency Shortcut Mortgage. In 2006, with pressure
to keep earnings up as banks like Countrywide were laps head in earnings from
resi mortgage origination, borrowers with good credit scores became a target
for fraud by SunTrust. The bank needed high credit scores to get entry into the
Agency Shortcut Mortgage program but after that SunTrust staff could manipulate
the income and assets of the borrowers and force the GSE program to buy the
loan. The whistleblower complaint alleges SunTrust did this in the billions
from 06 to early 08.
Hurricane
Sandy Sets the Stage for Insurance Battles - (www.thestreet.com) The pain following Hurricane Sandy is just beginning as millions of
policyholders discover their insurance will not cover a majority of the damage
done by the storm. Most of the destruction from the super storm has been caused
not by hurricane winds, but by severe flooding from the tidal surge. But
traditional homeowner policies do not cover floods. Flood insurance needs to be
purchased separately from the government's National Flood Insurance Program. This
may come as a rude shock to victims of the disaster, as it did years ago to the
victims of the devastating Hurricane Katrina. At the time, hundreds of
policyowners dragged insurance carriers to court, arguing that their policy
covered damage caused by wind and that the damage to their homes from the
catastophic flood was really nothing more than that caused by "wind-driven
rain." =Unfortunately, the law came firmly on the side of the carriers.
Courts ruled that so long as the damage is caused by flooding, whether by wind
or not, insurers were not liable. Despite the experience of Katrina and
numerous examples of widespread devastation caused by floods, less than 15% of
homeowners nationwide have taken up flood insurance, according to industry
data.
U.S.
Offers Mortgage Relief to Homeowners Hurt by Sandy - (www.bloomberg.com) The U.S. Department of Housing and Urban Development has ordered a
90-day moratorium on foreclosures for homeowners with federally insured
mortgages in four states recovering from superstorm Sandy. The agency is also
allowing officials in Rhode Island, Connecticut, New York, and New Jersey to
re-allocate federal housing funds toward services for survivors of the
disaster. “Families who may have been forced from their homes need to know that
help is available to begin the rebuilding process,” said HUD Secretary Shaun
Donovan, who visited storm victims who live in public housing in New York over
the weekend. Through the Federal Housing Administration, an arm of HUD,
residents of the four states also can obtain as much as 100 percent financing
to rebuild their houses or purchase new homes.
EU to predict dire 2013 for Spain: report - (www.reuters.com) The European Commission is to forecast Spain's economy will be almost as
dire next year as this, a newspaper said on Tuesday, raising the pressure for a euro zone bailout and undermining government promises
that 2012 will mark the low point. Neither the Commission nor Spain's economy
ministry would confirm the report in El Pais that Brussels will predict an
improvement only in 2014 when it officially announces its autumn forecasts on
Wednesday. Prime Minister Mariano Rajoy said Spain would return to
growth in 2014, the same year forecast by the Commission according to El Pais,
which cited a draft document.
Iceland Sees Bubble Threat From Foreign Cash: Mortgages - (www.bloomberg.com) Iceland’s lawmakers are searching for ways to keep their economy from
lurching into another asset bubble as offshore investors forced to keep their
money in the country channel it into the housing market. Apartment prices have
soared 17 percent since April 2010 and are now just 1.7 percent below the
pre-crisis peak in March 2008, Statistics Iceland estimates. The boom stems from
currency restrictions imposed in 2008 to prevent the collapse of the Krona
after the country’s biggest banks defaulted on $85 billion of debt. While those
controls helped cauterize a capital exodus and propel a recovery, it left about
$8 billion in offshore kronur that can only flow into Icelandic assets,
inflating demand for housing and mortgage bonds. The government is now seeking
to correct the imbalances, which risk plunging the island into yet another
boom-bust cycle just four years after the banking industry dragged the economy
through its worst
recession since World War II.
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