By Ed Zwirn
“While the ASF and SIFMA agree that a comprehensive review of accounting standards in these areas is appropriate, the groups are concerned that the proposed changes may impair securitization market activity by making it more difficult and expensive to finance mortgage, automobile, credit card, student loan and other forms of consumer and business debt,” the two groups said in a joint statement.
“Over-consolidation of the special purpose entities used in securitization accounting can be just as confusing to users of financial statements as under-consolidation,” the groups stated.
ASF Executive Director George Miller told the Senate Banking Committee last week that transactions “potentially affected” by the accounting change would include $7.2 trillion of mortgage-related securities, $2.5 trillion of other asset-backed securities, and $816 billion of asset-backed commercial paper.
“Although we cannot presently estimate which or how many of these transactions would be affected by the proposed changes, consolidation of even a significant fraction would be a momentous change, with significant market consequences,” he said.
“We are very concerned that FASB's current course of action… may have serious and unintended consequences,” he said, adding that “a 60-day public comment period does not provide adequate time to consider the proposed revisions and other possible alternatives.”
According to the exposure draft, the revised statements would be effective for companies with fiscal years starting after Nov. 15, 2009. The disclosures required under FIN 46R would be effective for financial statements issued as of Dec. 31, 2008.
The 60-day comment period ends Nov. 15.
Source
Wednesday, October 8, 2008
Monday, October 6, 2008
ASF, SIFMA Oppose 'Q' Elimination
By Ed Zwirn
The ink is barely dry on the Financial Accounting Standards Board's proposal to eliminate the use of the qualified special purpose entity as a means of segregating assets off balance sheet, but industry critics are already appealing to Congress in an effort to avoid the measure.
FASB in April agreed as part of these rewrites to eliminate QSPEs, an accounting device that has come under much criticism over the past several years, with critics saying the practice has contributed to corporate scandals such as Enron by allowing losing or volatile positions to be obscured.
FASB Chairman Robert Herz himself has placed his full clout behind the proposed elimination of the ‘Q' as part of the board's rewrite of FAS 140 and FIN 46R, connecting QSPEs to the sub-prime mortgage crisis and stating pointedly that the vehicles into which riskier loans had been packaged were “ticking time bombs.”
Now, with the Sept. 15 release of the exposure draft containing this rewrite a fait accompli, the American Securitization Forum and the Securities Industry and Financial Markets Association, which had written to FASB in July seeking delay, are continuing their opposition. Continued...
The ink is barely dry on the Financial Accounting Standards Board's proposal to eliminate the use of the qualified special purpose entity as a means of segregating assets off balance sheet, but industry critics are already appealing to Congress in an effort to avoid the measure.
FASB in April agreed as part of these rewrites to eliminate QSPEs, an accounting device that has come under much criticism over the past several years, with critics saying the practice has contributed to corporate scandals such as Enron by allowing losing or volatile positions to be obscured.
FASB Chairman Robert Herz himself has placed his full clout behind the proposed elimination of the ‘Q' as part of the board's rewrite of FAS 140 and FIN 46R, connecting QSPEs to the sub-prime mortgage crisis and stating pointedly that the vehicles into which riskier loans had been packaged were “ticking time bombs.”
Now, with the Sept. 15 release of the exposure draft containing this rewrite a fait accompli, the American Securitization Forum and the Securities Industry and Financial Markets Association, which had written to FASB in July seeking delay, are continuing their opposition. Continued...
Sunday, October 5, 2008
Equifax Double-Reports Student Loan, Still Hasn't Corrected It 12 Attempts Later
Here's the letter, which we're printing in part to publicize Equifax's negligence but also as a guide for others who face a similar problem:
"My name is [redacted] and I write this letter to each representative at once so that the issues of the past two years can be remedied and that the buck can, hopefully, stop being passed in regards to the gross errors on my credit report. I am not some typical, ranting customer who has an axe to grind, but rather someone who has had his Federal Student Loan credit falsely reported since July of 2006.
Just so we are all on the same page, I have filed 12 disputes online with Equifax and have called both Equifax and the Direct Loan Servicing Center 14 times (all documented) since July of 2006.
The issue is that my Federal Student Loan balance of $28,455 is being reported twice on my Equifax credit report. The initial account was opened in 09/2000 and then later consolidated in 07/06. However, rather than the balance for the 09/00 account being reduced to $0.00 and the status appearing as “consolidated”, the balance remained. The $28,455 balance also appears, as expected, on the 07/06 account.
Again, the issue is simply that my pre-consolidation account from 09/00 still has a balance of $28,455 as does my post-consolidation account from 07/06. This appears on my Equifax credit report as though I have a total balance owed to the Direct Loan Servicing Center of $56,910 between two accounts.
The Direct Loan Servicing Center has repeatedly verified that I only have one account with a balance, the 07/06 account, and that my only debt to them is $28,455. This was done by Brian Cornia at DL on 05/08/08 and previously by Stephanie (of Team 2) on 01/29/08.
So what exactly is the problem? After 12 online (and phone) disputes to Equifax and 14 calls (and faxes) to the Direct Loan Servicing Center, each party seems to blame the other. Direct Loans claims repeatedly that they are sending the correct information to Equifax, however, as seen in my credit report (below) from 24/Sep/2008, this is still not the case (this full credit report will also be faxed in full, this can be seen on pages 4 and 5)."
It may very well be that Direct Loan Servicing Center is dropping the ball on this, but we feel it's ultimately Equifax's responsibility to ensure the accuracy of the data that it collects, places a value on, and then sells for profit to other companies. By misreporting David's credit history and failing to fix it for 26 months now, they're doing persistent damage to his credit history, and not providing a very reliable service to their own customers either.
Source
I agree that it is Equifax's responsibility.
"My name is [redacted] and I write this letter to each representative at once so that the issues of the past two years can be remedied and that the buck can, hopefully, stop being passed in regards to the gross errors on my credit report. I am not some typical, ranting customer who has an axe to grind, but rather someone who has had his Federal Student Loan credit falsely reported since July of 2006.
Just so we are all on the same page, I have filed 12 disputes online with Equifax and have called both Equifax and the Direct Loan Servicing Center 14 times (all documented) since July of 2006.
The issue is that my Federal Student Loan balance of $28,455 is being reported twice on my Equifax credit report. The initial account was opened in 09/2000 and then later consolidated in 07/06. However, rather than the balance for the 09/00 account being reduced to $0.00 and the status appearing as “consolidated”, the balance remained. The $28,455 balance also appears, as expected, on the 07/06 account.
Again, the issue is simply that my pre-consolidation account from 09/00 still has a balance of $28,455 as does my post-consolidation account from 07/06. This appears on my Equifax credit report as though I have a total balance owed to the Direct Loan Servicing Center of $56,910 between two accounts.
The Direct Loan Servicing Center has repeatedly verified that I only have one account with a balance, the 07/06 account, and that my only debt to them is $28,455. This was done by Brian Cornia at DL on 05/08/08 and previously by Stephanie (of Team 2) on 01/29/08.
So what exactly is the problem? After 12 online (and phone) disputes to Equifax and 14 calls (and faxes) to the Direct Loan Servicing Center, each party seems to blame the other. Direct Loans claims repeatedly that they are sending the correct information to Equifax, however, as seen in my credit report (below) from 24/Sep/2008, this is still not the case (this full credit report will also be faxed in full, this can be seen on pages 4 and 5)."
It may very well be that Direct Loan Servicing Center is dropping the ball on this, but we feel it's ultimately Equifax's responsibility to ensure the accuracy of the data that it collects, places a value on, and then sells for profit to other companies. By misreporting David's credit history and failing to fix it for 26 months now, they're doing persistent damage to his credit history, and not providing a very reliable service to their own customers either.
Source
I agree that it is Equifax's responsibility.
Saturday, October 4, 2008
Equifax Double-Reports Student Loan, Still Hasn't Corrected It 12 Attempts Later
"David" can't get Equifax to correct his credit report. Since 2006, he's been trying to get them to remove a misreported student loan, and they've repeatedly ignored him or said it's not their fault. Because of this, David's credit report says he owes a total of $56,910 in student loans, instead of the accurate $28,455.
"So what exactly is the problem? After 12 online (and phone) disputes to Equifax and 14 calls (and faxes) to the Direct Loan Servicing Center, each party seems to blame the other."
David is fed up with being given the runaround. He's drafted a very clear letter and faxed it not only to Equifax and the Direct Loan Servicing Center, but also:
* U.S. Department of Education Federal Studen Aid Ombudsman
* Nationwide Consumer Rights
* National Association of Consumer Advocates
* The Consumerist
Continued...
"So what exactly is the problem? After 12 online (and phone) disputes to Equifax and 14 calls (and faxes) to the Direct Loan Servicing Center, each party seems to blame the other."
David is fed up with being given the runaround. He's drafted a very clear letter and faxed it not only to Equifax and the Direct Loan Servicing Center, but also:
* U.S. Department of Education Federal Studen Aid Ombudsman
* Nationwide Consumer Rights
* National Association of Consumer Advocates
* The Consumerist
Continued...
Friday, October 3, 2008
State loan agency MOHELA suffers first operating loss
by Christopher Tritto and Kelsey Volkmann
For the first time in its nearly 30-year history, the Missouri Higher Education Loan Authority (MOHELA) has suffered an annual operating loss.
The state-chartered student loan agency lost $2.2 million in fiscal 2008, according to a preliminary financial report Ray Bayer, MOHELA’s executive director, presented to the agency’s board Friday.
The authority is feeling the squeeze of the credit crunch and the fallout from the auction-rate securities meltdown in February.
MOHELA also transferred $233.8 million to the controversial Lewis and Clark Discovery Initiative, a fund Gov. Matt Blunt created to devote some of the money that had been slated for loans toward the construction of campus buildings instead.
The payment was part of an agreement that calls for the authority to transfer $350 million over the next six years to the state college construction program. In June, the authority had to delay payment to the fund due to concerns the payment would strain the authority's weakened financial position.
Still, the agency was able to provide borrower benefits totaling $13.25 million in fiscal 2008 to students attending more than 150 colleges, universities and vocational schools. The agency, which has $5 billion in assets, also cut general and administrative expenses last year by $4.68 million.
In February, the authority suspended its loan consolidation and private lending services in the midst of the auction-rate securities debacle.
MOHELA issued bonds to raise money to buy student loans from originating banks to provide lower-cost services and most often, sold those bonds in the form of auction-rate securities, which treat long-term debt like short-term holdings. Every week to 35 days, holders of those securities sold them in bank-managed auctions that reset the interest rates on the securities for new buyers.
Roughly 70 percent, or $3.6 billion, of MOHELA's $5.1 billion loan portfolio is traded through auction-rate securities.
The difficulty can be traced back to the national subprime mortgage fiasco and the credit crunch it triggered last fall. That mess began spilling over into the student loan industry as wary investors lost confidence in asset-backed securities -- even those outside the mortgage market.
Then the $330 billion market collapsed in February when investors became alarmed at the prospects of corporate borrowers covering debt service on the securities.
And things aren’t going to get better any time sooner, MOHELA predicts in its latest report. It expects the environment is going to get tougher going forward as the entire student loan industry is suffering, potentially making it more difficult and expensive for Missouri students to finance their college educations.
Source
For the first time in its nearly 30-year history, the Missouri Higher Education Loan Authority (MOHELA) has suffered an annual operating loss.
The state-chartered student loan agency lost $2.2 million in fiscal 2008, according to a preliminary financial report Ray Bayer, MOHELA’s executive director, presented to the agency’s board Friday.
The authority is feeling the squeeze of the credit crunch and the fallout from the auction-rate securities meltdown in February.
MOHELA also transferred $233.8 million to the controversial Lewis and Clark Discovery Initiative, a fund Gov. Matt Blunt created to devote some of the money that had been slated for loans toward the construction of campus buildings instead.
The payment was part of an agreement that calls for the authority to transfer $350 million over the next six years to the state college construction program. In June, the authority had to delay payment to the fund due to concerns the payment would strain the authority's weakened financial position.
Still, the agency was able to provide borrower benefits totaling $13.25 million in fiscal 2008 to students attending more than 150 colleges, universities and vocational schools. The agency, which has $5 billion in assets, also cut general and administrative expenses last year by $4.68 million.
In February, the authority suspended its loan consolidation and private lending services in the midst of the auction-rate securities debacle.
MOHELA issued bonds to raise money to buy student loans from originating banks to provide lower-cost services and most often, sold those bonds in the form of auction-rate securities, which treat long-term debt like short-term holdings. Every week to 35 days, holders of those securities sold them in bank-managed auctions that reset the interest rates on the securities for new buyers.
Roughly 70 percent, or $3.6 billion, of MOHELA's $5.1 billion loan portfolio is traded through auction-rate securities.
The difficulty can be traced back to the national subprime mortgage fiasco and the credit crunch it triggered last fall. That mess began spilling over into the student loan industry as wary investors lost confidence in asset-backed securities -- even those outside the mortgage market.
Then the $330 billion market collapsed in February when investors became alarmed at the prospects of corporate borrowers covering debt service on the securities.
And things aren’t going to get better any time sooner, MOHELA predicts in its latest report. It expects the environment is going to get tougher going forward as the entire student loan industry is suffering, potentially making it more difficult and expensive for Missouri students to finance their college educations.
Source
Thursday, October 2, 2008
Some examples of how to react to the crisis
BY KARIN PRICE MUELLER
PROFILE No. 4
Married couple, both 70, both retired. Income of $25,000 a year from Social Security and $80,000 a year from a pension. They have no primary mortgage, but owe $50,000 in home equity and $12,000 in credit cards. They have $500,000 in retirement accounts and $300,000 in three savings accounts, but only one is FDIC-insured. They have two grown kids with three grandchildren.
What they should do: "If their IRAs are invested in bank accounts, the FDIC coverage is only for $250,000 per IRA, so they may want to review that," Fraasa says. "If the IRA is mostly in bonds, which are up now, they may want to consider reallocating into some equities over the next 6 months to take advantage of the lower prices."
What they shouldn't do: Leave their cash accounts as is. "They should put the savings into three accounts: one in his name, one in her name and one joint," Lynch says. "This will allow the accounts to be insured up to $300,000 if the bank is FDIC insured."
Source
PROFILE No. 4
Married couple, both 70, both retired. Income of $25,000 a year from Social Security and $80,000 a year from a pension. They have no primary mortgage, but owe $50,000 in home equity and $12,000 in credit cards. They have $500,000 in retirement accounts and $300,000 in three savings accounts, but only one is FDIC-insured. They have two grown kids with three grandchildren.
What they should do: "If their IRAs are invested in bank accounts, the FDIC coverage is only for $250,000 per IRA, so they may want to review that," Fraasa says. "If the IRA is mostly in bonds, which are up now, they may want to consider reallocating into some equities over the next 6 months to take advantage of the lower prices."
What they shouldn't do: Leave their cash accounts as is. "They should put the savings into three accounts: one in his name, one in her name and one joint," Lynch says. "This will allow the accounts to be insured up to $300,000 if the bank is FDIC insured."
Source
Wednesday, October 1, 2008
Some examples of how to react to the crisis
BY KARIN PRICE MUELLER
PROFILE No. 3
Married couple, age 55, both work with total income of $150,000 a year and two kids, ages 19 and 16. They owe $75,000 on their mortgage. They plan to pay in full for college using 529 plans (balance: $100,000) and their home-equity line of credit. They would like to retire at age 60, and they contribute the max to their 401(k) plans and IRAs. The wife's company is talking about layoffs and she fears she won't get another job.
What they should do: "See if the bank will increase the line of credit to whatever is the maximum," Lynch says. "Always have access to the money in your home, especially if you think you may lose your job, because once you lose your job, it will be more difficult to get any bank to be willing to get you money." They should also establish an emergency fund worth $60,000.
What they shouldn't do: Sell out of everything. "Most people add risk by selling at the wrong time," Fraasa said. "If they are not very well-diversified, they need to consider making those changes now and position themselves for the long-term."
BY KARIN PRICE MUELLER
PROFILE No. 3
Married couple, age 55, both work with total income of $150,000 a year and two kids, ages 19 and 16. They owe $75,000 on their mortgage. They plan to pay in full for college using 529 plans (balance: $100,000) and their home-equity line of credit. They would like to retire at age 60, and they contribute the max to their 401(k) plans and IRAs. The wife's company is talking about layoffs and she fears she won't get another job.
What they should do: "See if the bank will increase the line of credit to whatever is the maximum," Lynch says. "Always have access to the money in your home, especially if you think you may lose your job, because once you lose your job, it will be more difficult to get any bank to be willing to get you money." They should also establish an emergency fund worth $60,000.
What they shouldn't do: Sell out of everything. "Most people add risk by selling at the wrong time," Fraasa said. "If they are not very well-diversified, they need to consider making those changes now and position themselves for the long-term."
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