Starting Oct. 27, these companies must settle or reduce a customers’ credit card or other unsecured debit before collecting a fee.

The new rule does not cover non-profit firms, “but does cover companies that falsely claim non-profit status,” the FTC said.

Over the past decade, the FTC and state law enforcement agencies have brought a combined 259 cases against debt relief providers for using deceptive and abusive practices,

The advance fee ban carries specific requirements for debt relief providers or counselors. They cannot collect payment until:

• the debt relief service successfully renegotiates, settles, reduces, or otherwise changes the terms of at least one of the consumer’s debts;
• there is a written settlement agreement, debt management plan, or other agreement between the consumer and the creditor, and the consumer has agreed to it; and
• the consumer has made at least one payment to the creditor as a result of the agreement negotiated by the debt relief provider.

“At the FTC we strive every day to make sure America’s middle class families get straight deals for their dollars,” said FTC Chairman Jon Leibowitz. “This rule will stop companies who offer consumers false promises of reducing credit card debts by half or more in exchange for large, up-front fees. Too many of these companies pick the last dollar out of consumers’ pockets – and far from leaving them better off, push them deeper into debt, even bankruptcy.”

Three other telemarketing sales rule provisions take effect on September 27, 2010. Those provisions will:

• require debt relief companies to make specific disclosures to consumers;
• prohibit them from making misrepresentations; and
• extend the Telemarketing Sales Rule to cover calls consumers make to these firms in response to debt relief advertising.

Here’s the FTC fact sheet on the new advance-fee rule.

For its quarter ended June 30, the transactions processing giant exceeded analysts’ expectations of 93 cents per share.

Revenue jumped 23 percent to $2.03 billion from $1.65 billion a year ago. Total processed transactions totaled 11.7 billion, a 14 percent increase over the prior year.

But uncertainty dominates the outlook for Visa and smaller competitor MasterCard as first-ever regulator oversight of “interchange fees” looms under a provision of the recently-enacted Wall Street reform bill.

The Federal Reserve will now determine if those fees charged merchants for every debit card transactions – and whose costs are passed on to consumers – are “reasonable and proportional.” Banks will assume most of the regulatory scrutiny under the new law, but Visa and MasterCard is expected to feel an indirect impact.

“It goes without saying, the United States debit market will undergo changes following implementation of the Wall Street Reform and Consumer Protection Act next year,” said Joseph Saunders, Visa’s chairman and CEO. “While it is too early to fully and accurately gauge the impact of the legislation, Visa has demonstrated an ability to manage our business through periods of change.”

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The Mortgage Bankers Association update on their two key indices painted a mixed picture for the still sluggish housing market.

The MBA’s seasonally adjusted purchase index nudged upward to its highest level since the end of June.

But its refinance index decreased 5.9 percent from the previous week. The refinance share of mortgage activity decreased to 78.0 percent of total applications, down from 79.4 percent the previous week.

Meanwhile, interest rates on long-term mortgages are still in a historically-low range.

The average contract interest rate for 30-year fixed-rate mortgages increased to 4.69 percent, from 4.59 percent last week, the MBA said.  The average contract interest rate for 15-year fixed-rate mortgages increased to 4.12 percent from 4.05 percent.

On Monday, housing market observers desperate for some positive news got a glimmer of hope. The Commerce Department reported that newly built, single-family homes rose 23.6 percent to a seasonally adjusted annual rate of 330,000 units in June

However, analysts expressed caution against expectations of a turnaround. The June new home sales figure represented a 24 percent jump from a May – when new home sales are dismal following the April 30 expiration of homebuyer tax credits.

The National Association of Home Builders was nonetheless encouraged by the June sales figure.

“It’s worth noting that some of the new-home sales in June were due to move-up buyers who were able to sell their previous home to a tax-credit-eligible buyer while that program was active,” said NAHB Chief Economist David Crowe. “Also, while sales activity is still far from robust, it has picked up some momentum as positive factors such as historic low mortgage rates, great selection and attractive prices help draw potential home buyers back to the market.”

The administration has been under pressure from Republicans and some Democrats to overhaul Fannie and Freddie, which combined have siphoned $145 billion in bailouts – an amount that could reach $300 billion by some estimates.

Republicans have denounced the Wall Street financial reform bill signed by President Obama this month for leaving out any plan for restructuring Fannie and Freddie. Republican leaders have been pushing for phasing out the two government-sponsored entities, and shifting most of mortgage financing to the private sector.

But Fannie and Freddie have been under U.S. conservatorship since September 2008, in the wake of massive losses tied to acquisitions of private-label and subprime-mortgage backed securities. Those faltering mortgages backed by Fannie and Freddie fueled the housing bubble and subsequent financial crisis.

The Congressional mission of both companies is to maintain liquidity for the vital housing industry, ensuring the lenders can continue to finance mortgage loans.

The current sluggish state of the housing market is holding back a faster pace of economic recovery.

The Obama Administration will host an Aug. 17 “Conference on the Future of Housing Finance” at the U.S. Treasury Department in Washington, D.C. The event will bring together leading “academic experts, consumer and community organizations, industry groups, market participants, and other stakeholders for an open discussion about housing finance reform.”

“Work on this issue is well under way, as the Obama Administration continues to develop a comprehensive reform proposal for delivery to Congress by January 2011,” said Jeffrey A. Goldstein, Under Secretary for Domestic Finance at the U.S. Treasury Department.

But abrupt change or an uncertain reform process could be more damaging to an already fragile recover, Goldstein said.

“Continuing to provide financial support to Fannie Mae and Freddie Mac was the right decision then for the mortgage market and for our economic recovery – and it has played a critical role in stabilizing the housing industry during a period of crisis,” Goldstein said.

Read Goldstein’s blog post.

Under the settlements, the marketers are now banned from peddling such programs in the future.

The FTC actions are part of a larger crackdown by federal authorities against deceptive mortgage modification promotions that prey on desperate homeowners facing foreclosure.

In the case of the Federal Loan Modification Center, Steven Oscherowitz was accused by the FTC of charging consumers up to $3,000, “much of which they required up-font, but…often failed to live to the promised results, the FTC said.

The order imposes an $11.5 million judgment against Oscherowitz, which represents the amount consumers paid to the defendants while he was involved in the alleged scheme

In the case of Loss Mitigation Services, defendants Dean Shafer, Marion Anthony “Tony” Perry, and Bernadette Perry, also known as Bernadette Carr and Bernadette Carr-Perry, settled allegations that they “falsely promised that a loan modification was assured or virtually assured if consumers paid an advance fee of up to $5,500, the FTC said.

Shafer and the Perrys, who were principals of Loss Mitigation Services, Inc. (LMS) and Synergy Financial Management Corporation – doing business as Direct Lender or DirectLender.com (Direct Lender) – also allegedly misrepresented that the companies were a department of, or affiliated with, the consumer’s lender or mortgage servicer, the FTC said.

In the case of Hope Now Modifications, brothers Salvatore and Nicholas Puglia, doing business as Hope Now Modifications LLC, and Hope Now Financial Services Corporation, settled FTC charges that they “falsely claimed that they could obtain mortgage loan modifications in all or virtually all cases and would refund consumers’ money if they failed,” the FTC said.

The federal agency also charged that Hope Now Modifications falsely claimed an affiliation with, or was part of, the HOPE NOW Alliance, a free federal homeowner assistance program.

Read the FTC’s news release on these actions.

Regulators expect bank failures to peak before year’s end, but still surpass last year’s total of 140.

The seven closures announced Friday by the Federal Deposit Insurance Corp. cost the agency’s insurance fund a total of $431 million, as banks in Florida, Georgia, Kansas, Minnesota, Nevada, Oregon and South Carolina were the latest to sustain crippling loan losses from residential and commercial real estate.

Of the seven, the largest single cost to the FDIC’s insurance fund at $242 million came from the closure of Crescent Bank and Trust Company, of Jasper, Georgia. The FDIC and Renasant Bank entered into a loss-share transaction on $617.4 million of Crescent Bank and Trust Company’s assets. Crescent reported a total of $1.01 billion.

Here’s a recap of the most recent bank closures:

• Home Valley Bank, Cave Junction, OR with $251.80 million in total assets and $229.6 million in total deposits was closed. South Valley Bank & Trust, Klamath Falls, OR has agreed to assume all deposits.
• SouthwestUSA Bank, Las Vegas, NV with $214.0 million in total assets and $186.7 million in total deposits was closed. Plaza Bank, Irvine, CA has agreed to assume all deposits, excluding certain brokered deposits.
• Community Security Bank, New Prague, MN with $108.0 million in total assets and $99.7 million in total deposits was closed. Roundbank, Waseca, MN has agreed to assume all deposits.
• Thunder Bank, Sylvan Grove, KS with $32.6 million in total assets and $28.5 million in total deposits was closed. The Bennington State Bank, Salina, KS has agreed to assume all deposits, excluding certain brokered deposits.
• Williamsburg First National Bank, Kingstree, SC with $139.3 million in total assets and $134.3 million in total deposits was closed. First Citizens Bank and Trust Company, Inc., Columbia, SC has agreed to assume all deposits, excluding certain brokered deposits.
• Crescent Bank and Trust Company, Jasper, GA with $1.01 billion in total assets and $965.7 million in total deposits was closed. The Renasant Bank, Tupelo, MS has agreed to assume all deposits, excluding certain brokered deposits.
• Sterling Bank, Lantana, FL with $407.9 million in total assets and $372.4 million in total deposits was closed. IBERIABANK, Lafayette, LA has agreed to assume all deposits, excluding certain brokered deposits. 

Per share income was 84 cents, compared to 9 cents last year. Analysts were expecting 77 cents a share for the top credit card issuer by purchases.

American Express said its net income and billings were at or near pre-recession levels.  

Net revenue increased 13 percent in the second quarter to $6.86 billion.

Total card spending rose 16 percent to $175.3 billion. Individual card members spent an average of $3,288, an increase of 21 percent from a year earlier.

Spending jumped across all card segments, with the largest increases coming from corporate cards, cards issued by bank partners, charge cards and premium co-brand products where many card holders tend to pay in full each month.

Helping its solid results is a significant rebound in loan losses.

Consolidated provisions for losses totaled $652 million, compared to $1.6 billion in the year-ago period, reflecting improvement in credit quality for the charge and credit card portfolios.

In June, American Express had the lowest 30-day delinquency rate among the biggest U.S. credit-card issuers.

While spending among its affluent consumers and businesses remains strong, “today’s cardmembers are borrowing less and paying down more of their outstanding debt,” said Kenneth I. Chenault, chairman and chief executive officer.

That has led to lower-interest revenue.

“We remain focused on charge – or pay-in-full – products, fee-based revenues, and on expanding our high quality cardmember base. In all, these factors have helped to improve our risk profile during the past year,” Chenault said.

The 30-year fixed-rate mortgage averaged 4.56 percent, down from last week when it averaged 4.57 percent. Last year at this time, the 30-year loan averaged 5.20 percent.

The 15-year fixed-rate mortgage this week averaged 4.03 percent, down from last week when it averaged 4.06 percent. A year ago at this time, the 15-year averaged 4.68 percent.

Both set new lows based on Freddie Mac’s records. The mortgage-finance giant first started tracking the 30-year fixed mortgage rate in 1971; the 15-year rate in 1991.

“The decline in mortgages rates over the past few weeks echoes the recent signs of weakening confidence in the strength of the economy, particularly the housing and consumer sectors. For example, homebuilder confidence declined in July to lows not seen since April 2009,” said Frank Nothaft, vice president and chief economist, Freddie Mac.

The 1-year Treasury-indexed adjustable rate mortgage averaged 3.70 percent this week, down from last week when it averaged 3.74 percent. At this time last year, the 1-year ARM averaged 4.77 percent.

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Currently, the alternative program is voluntary, leaving the decision up to the mortgage servicer.

The reiterated position by the Special Inspector General for the Troubled Asset Relief Program, TARP, came in a quarterly update released today on bailout efforts. The inspector general, Neil Barofsky, was nominated by President Bush in November 2008, and confirmed by the Senate. 

Barofsky’s report concluded that U.S. taxpayers’ support of the financial system – most of it targeting the housing market through mortgage guarantees– soared $700 billion in the last year to about $3.7 trillion.

The findings by Barofsky, whose position is known as  SIGTARP, also questioned the overall effectiveness of the administration’s mortgage relief effort, Home Affordable Modification Program, which is costing about $50 billion in incentives to lenders.

U.S. Treasury and Housing officials last month issued new directives to HAMP servicers on the Principal Reduction Alternative, or PRA. The program is intended for struggling borrowers whose homes are worth significantly less than the remaining balance on first-lien mortgage loans

However, the decision to provide the write-downs is up to the mortgage servicer, even if HAMP screenings and modification trial results determine that principal reductions would best serve a particular borrower’s needs.

Treasury officials have already passed on reconsidering the voluntary nature of the program, citing concerns that such a move would spark more cases of strategic defaults, or borrowers “walking away” from their mortgages despite the ability to make the monthly payments.

Treasury also feared that servicers would opt out of HAMP entirely to avoid mandatory principal reductions. Officials also expected objections from responsible borrowers who believe their tax dollars are subsidizing principal reductions, even when investors would not otherwise offer the benefit.

“Although each of these issues is important, and, in the final analysis, it is up to Treasury to weigh the competing interests involved, SIGTARP remains concerned that Treasury may be overestimating the problems with a mandatory (principal reduction program) and discounting the problems with a voluntary one,” Barofsky wrote in his report.

Barofsky contends that Treasury already has safeguards in place to prevent or minimize cases of “moral hazard,” or the mind-set that leads to more instances of strategic defaults. HAMP administrators have implemented stringent financial screenings and income verification guidelines.

The Treasury’s argument “presumes that potential strategic defaulters can bypass safeguards and are willing to commit a federal crime by knowingly executing a false hardship affidavit…” Barofsky’s report said.

“To be clear, SIGTARP is not discounting moral hazard risks generally, but merely pointing out, as emphasized in prior quarterly reports, that Treasury has already jumped into the deep end of the moral hazard pool through TARP in general,” the inspector general’s report said. “Any incremental moral hazard implicated by making principal reductions for homeowners mandatory pales in comparison to the moral hazard caused by TARP assistance to Wall Street, particularly when the difference here might be between a successful HAMP and an unsuccessful HAMP.”

See the TARP inspector general’s report.

The June report concedes that “cancellations continue to rise as servicers comply with Treasury” guidelines to determine whether homeowners in trials can be upgraded to permanent status.

About 45 percent of homeowners in canceled trials entered an alternative modification program, based on data from the eight largest participants in the Obama Administration’s Home Affordable Modification Program, HAMP.

Fewer than 2 percent of homeowners in canceled trials went to foreclosure sale, the report states.

But the latest monthly update is another remainder of HAMP’s futile attempts to help desperate borrowers and alleviate a persistent foreclosure crisis. The number of foreclosure notices may increase in coming months as the number of homeowners who have cancelled out of modification trials surpassed 520,000, or about 41 percent of all trails started.

In comparison, 389,198 borrowers have been approved for the full five-year program, or about 30 percent of all trials started. Homeowners in permanent modifications see a median payment reduction of 36 percent, or more than $500 per month.

The U.S. Department of Housing and Urban Development and the U.S. Treasury today also released its July Scorecard on housing market initiatives.

Here are the highlights:

• Since April of 2009, record low mortgage rates have helped more than 7.2 million homeowners to refinance, resulting in more stable home prices and $12.9 billion in total borrower savings.
• Over twice as many homeowners were helped compared to foreclosure completions: Nearly three million borrowers have received restructured mortgages since April 2009, outpacing the 1.24 million foreclosure completions for the same period.  As more families are able to remain in their homes, household assets continue to rise with $1.1 trillion in home equity gained since April 2009.
• Servicers report the number of homeowners receiving restructured mortgages has increased to a new total of 2.95 million, including more than 1.2 million homeowners under HAMP trial modifications and nearly 400,000 benefiting from FHA loss mitigation activities. However, cancellations from HAMP trial plans remain high as many borrowers who received temporary modifications were not able to meet eligibility requirements such as verifying their income and successfully making trial payments.
• Also included in the Scorecard is HUD’s Neighborhood Stabilization Program (NSP), a $6 billion effort to help local jurisdictions address the foreclosure crisis by allowing grantees to acquire foreclosed homes and repair, redevelop, rent or sell them to low and moderate income households. Nearly $2 billion in Recovery Act funds were awarded in the second round of NSP grants.

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