Iowa Regulators Close Bank, Citing Fraud

WASHINGTON - A $114 million-asset bank based in Carlisle, Iowa, was shut down Friday amid allegations of fraud.Iowa regulators closed Hartford-Carlisle Savings Bank after a November examination revealed $12 million in apparent losses from fraudulent loans allegedly made by the bank's president, according to a state press release. It was the first federally insured depository institution to fail in 2000.

The Federal Deposit Insurance Corp. - the bank's receiver and its primary federal regulator - predicted the loss would cost the federal insurance funds $18 million to $25 million, or 16% to 22% of the failed bank's assets, a higher loss than usual. About $15.9 million of the bank's $68.5 million of deposits were uninsured, including $11.7 million owned by the local government and schools.

Hartford-Carlisle's three offices were expected to reopen Jan. 15 as branches of Citizens Bank, a newly chartered institution. The new bank paid a premium of $5.5 million for the failed bank's insured deposits and t $3.9 million of its assets. Citizens' holding company, Spectrum Bancorp, outbid nine other bidders.

- Scott Barancik

Washington Bill Would Crimp Data Sharing

WASHINGTON - A financial privacy bill introduced in Washington State last week would require banks to get a customer's written permission before sharing his or her personal information with affiliates or third parties.The bill, authored by Democratic state Rep. Jim Kastama and co-sponsored by 11 other lawmakers, would impose far tougher data-sharing restrictions on banks than under federal law.

The bill would apply not only to banks and thrifts but also to credit unions, brokerages, and insurance companies. All banks doing business in Washington State would have to comply, no matter what their charter.

Bank customers would have the right to review any information about them that was shared with other firms, and to dispute alleged inaccuracies. Consumers would also have the right to sue for actual damages under the bill, which would be folded into the state's consumer protection statute.

The federal financial reform law enacted in November lets customers block banks from sharing information with third parties, but only if they assert that right. The new law does not let customers restrict the sharing of data with bank affiliates.

U.S. Rep. Jay Inslee, D-Wash., an advocate of more financial privacy, appeared at a Jan. 14 press conference announcing the bill. A spokeswoman said Rep. Inslee has not decided whether to endorse it.

- Scott Barancik

Fannie to Detail Automatic Underwriting Criteria

DALLAS - Fannie Mae said it would disclose the criteria its automated underwriting software uses to evaluate loan applications.In a press statement, the government-sponsored secondary marketer said that in coming months it will release a new version of Desktop Underwriter that will give lenders "specific feedback on the more challenging loans."

"We'll provide lenders with the factors that went into the decision, which ones were a problem, and why," said Fannie's chairman, Franklin D. Raines.

Speaking at a National Association of Home Builders convention last week, Mr. Raines listed 14 factors that Fannie's software considers when underwriting a loan. He said the three most important ones are the amount of equity in the home and the borrower's credit history and liquid reserves.

"We don't look at race, gender, or any other factor prohibited by fair lending laws," he said, referring to charges that the use of automated underwriting has led to discrimination.

In the same speech, Mr. Raines called for a "mortgage consumer bill of rights," which would include the right to know the true cost of a mortgage. To that end, he said, Fannie will launch an on-line service in April that will enable homebuyers to calculate and compare the cost of various mortgage products on the market.

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