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Sweet Partial Victory: Bankers were mostly happy with a revision that softens the criteria for qualified residential mortgages. A provision of the Dodd-Frank Act requires banks and other lenders to retain 5% credit risk of loans they sell on the secondary market that don't fit QRM requirements. However, regulators revised the definition of the QRM exemption and it is so broad that 98% of loans last year would have been covered, the Wall Street Journal said.

The original proposal, which drew widespread criticism, would have limited the QRM exemption to loans with a 20% downpayment and a maximum 80% loan-to-value ratio. Additionally, it set maximum debt-to-income ratio for QRMs at 36%. Under the revised proposal, QRMs would be more aligned with the qualified mortgage rule finalized by the Consumer Financial Protection Bureau in January. The new proposal removed the downpayment requirement and increased the debt-to-income ratio to 43%.

The new plan drew some criticism. Daniel Gallagher, a Securities and Exchange Commission commissioner, called the proposed exemption "unrealistic and dangerously broad," the Journal reported. The paper's Heard on the Street section argued that regulators "may once again be putting hopes for short-term economic gain ahead of the need to build a safer housing market." However, those in the banking industry praised the announcement. David Stevens, head of the Mortgage Bankers Association, argued the original plan would have "unduly constrained the availability of mortgage credit for many borrowers," according to the Washington Post.

Still, the fight is far from over for bankers. The new proposal also asks for comments on restricting the QRM criteria to mortgages with a maximum 70% loan-to-value ratio and increasing the downpayment requirement to 30%. Experts predict the final rule would "strike a middle path" between proposals of a zero downpayment and 30%, with the rule settling at 10%, the Washington Post said. Wall Street Journal, Financial Times, New York Times, Washington Post, American Banker

Meeting of the Minds: Switzerland and the U.S. are reportedly close to an agreement that would end a longtime dispute over how to punish Swiss banks for helping American tax evaders. Under the settlement, banks could secure deferred prosecution agreements in exchange for admitting to wrongdoing, providing account holder information and paying penalties, according to the New York Times, citing an unnamed Justice Department official. U.S. authorities could collect more than $1 billion in fines, the Journal said. Final details of the settlement could be released as soon as next week, FT reported. Settling the dispute was praised by the Swiss Bankers Association, which said the agreement "enables all banks in Switzerland to settle their U.S. past quickly and conclusively and creates the necessary legal certainty," according to FT. Wall Street Journal, Financial Times, New York Times

Please Believe Me: Bank of England Governor Mark Carney tried to convince skeptics that he would not follow the U.S. in curbing stimulus efforts, and that the bank would keep interest rates low. Earlier this month he indicated that rates would stay at 0.5% until unemployment fell from the current 7.8% to 7% or for up to three years, causing some to worry that rates would rise sooner than previously expected. But in his speech Wednesday to the owners of small- and medium-sized businesses, Carney said that the bank would not increase rates until "jobs, incomes and spending are recovering at a sustainable pace," according to the New York Times. However, the Financial Times' reported that Carney failed to convince some. Market expectations regarding when the next rate increase would happen remained unchanged from before the speech. Financial Times, New York Times

Hiring Practices: JPMorgan Chase has created a task force to look into its hiring practices in Asia, the Wall Street Journal said. An internal review has found that the hiring of dozens of employees need additional investigation and revealed documents that tie names of new hires with specific deals, the Financial Times said.

Wall Street Journal

Janet Yellen, the Federal Reserve's vice chairman, "sees herself as the underdog" when it comes to taking the top spot at the Fed, the Journal said, citing unnamed sources. So far there has been a contentious public debate about who should take over for Chairman Ben Bernanke, which has made Yellen "uncomfortable," the paper wrote. Lawrence Summers, who previously was the head of the White House National Economic Council under Obama, is also widely seen as a contender for the job. Obama is expected to announce his selection after Congress returns from recess.

Ally Financial expects to submit to the Fed next week a revised capital plan, which includes seeking approval to buy back $5.9 billion of preferred shares from the Treasury Department. The government-owned auto lender announced a plan earlier this month that includes several steps for exiting the Troubled Asset Relief Program. Ally is required to resubmit its capital plan after failing a stress test earlier this year. It expects to improve capital levels through a private placement of $1 billion in common stock.

Questions continue to linger about Nasdaq's trading outage last week. The Securities Information Processor, the industry group that oversees the Nasdaq data feed, will meet next week to review the breakdown and discuss measures that could prevent future problems. The Securities and Exchange Commission also previously announced it would meet to discuss the outage.

Rules from the Department of Health and Human Services will require insurers participating in the new health-insurance exchanges to accept several forms of payment, including cashier's checks, money orders and prepaid cards, from uninsured Americans. However, the administration won't require insurers to accept automatic monthly payments from debit and credit cards. There previously were some questions about how consumers without bank accounts would be able to pay for health care premiums since Obamacare allows insurance companies to decide what forms of payment to take.

A former Citigroup trader based in Tokyo is cooperating with authorities in a probe over banks allegedly manipulating the London interbank offered rate. The Serious Fraud Office in the U.K. has obtained a letter which Tom Hayes sent to Citigroup human resource executives shortly after he was fired. The correspondence indicates his actions were similar to those of other executives at the company. Prosecutors in the U.S. and the U.K. have charged Hayes with trying to influence rates, claiming that he was a key player in a group of corrupt traders and brokers. U.S. and U.K. regulators are investigating up to a dozen banks in the probe and are examining whether senior executives knew about or participated in such activities.

Washington Post

The number of Americans signing agreements to buy homes dipped slightly last month but still remained near a more than six-year high, suggesting that increasing mortgage rates haven't deeply affected sales yet. The seasonally adjusted index for pending home sales fell 1.3% to 109.5, according to the National Association of Realtors. The reading in May of 111.3 was the highest since December 2006.

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