The Treasury Department kicks off Friday with some good news, as the department distributes $486m in American Recovery and Reinvestment Act funding for job creation and the promotion of affordable housing.

"Today's announcement of housing funds demonstrates how the Recovery Act is putting our nation on the path to economic stability, one community at a time," says Treasury deputy secretary Neal Wolin in a statement. "This initiative will help spur construction and development, create much needed jobs, and increase the availability of affordable housing for families around the country."

Friday's distributions to state housing agencies come as the fourth round of funds within a program designed to jump start the development or renovation of qualified affordable housing across the country. Under the program, state housing agencies that meet certain eligibility requirements will receive funding to construct affordable housing developments.

The Treasury distributed: $36m in Alabama; $29m in Arkansas; $34m in Connecticut; $76m in Georgia; $114m in Louisiana; $44m in Maryland; $51m in Massachusetts; $16m in Montana; $17m in New Hampshire; $38m in New Mexico; $20m to the Virgin Islands; and $10m to Vermont.

The downturn in the US housing market necessitated the program, Treasury said. The department noted that the US labor and housing crises show an historic link. Housing starts fell nearly 80% from their peak level at the beginning of 2006, which in turn has led to severe job losses in the residential building, according to the department.

"Such losses not only indicate significant problems in the residential construction sector, but also suggest that the need for affordable housing has risen markedly during the recession," Treasury said.

Another important link between unemployment and the housing market, noted in a July securitization report out of Deutsche Bank, sees unemployment spike along with rising mortgage delinquencies and plunging home prices.

The Deutsche report notes that, while mortgage delinquencies and particularly subprime delinequencies began increasing in early 2006 due to factors other than unemployment (loose underwriting standards, fraud, etc.), the deterioration in the labor markets furthered hampered recovery in mortgage credit performance.

Write to Diana Golobay.

Federal Reserve Governor Elizabeth Duke called on minority-owned banks to analyze their ability to access capital from an “unemotional” perspective before deciding to apply for or repay funds received for the federal government’s Troubled Asset Relief Program (TARP).

Duke, herself a community banker early in her career, made the comments in a speech at the Minority Depository Institutions National Conference 2009 Conference in Chicago Thursday.

“Once you repay the TARP investment, it likely will not be available again. So, please, before you make your decision, take one more unemotional run through your projections, your assumptions, and your ‘what-ifs,’ and make sure you are comfortable with your decision,” Duke told the audience. “And if you have already received TARP capital, consider holding it in reserve for a little longer, at least until conditions are more favorable.”

Duke added she sympathized with smaller banks that she said have been unfairly included with larger financial institutions in the public’s anger towards the industry.

“Community bankers are angry, too,” she said. “They are angry because they did not ask for or receive any bailouts. They did not make the subprime loans. They did not get the big bonuses. And they are still making every good loan they can find. But regardless of their innocence, they are paying the price for public anger at banks and are being vilified and stigmatized.”

Moving forward, Duke said the Federal Reserve will focus its regulatory efforts on monitoring liquidity and capital planning, as well as compensation management systems that that promote excessive risk-taking.

Duke also addressed Partnership for Progress, a Fed program that provides technical assistance and support for minority-owned and new banks, and each Fed district has a specific person assigned to the program to work with the institutions, saying the program has already yielded positive results.

Write to Austin Kilgore.

The House Finance Services Committee today heard testimony on HR 3068, the TARP for Main Street Act of 2009.

The bill, by the committee's chairman Barney Frank, D-Mass., reinvests $6.5bn of Troubled Asset Relief Funds to housing and homeownership efforts.

It allocates $1bn to build affordable housing, $1.5bn for the US Department of Housing and Urban Development (HUD) to distribute to state and local government for the redevelopment of abandoned and foreclosed homes, $2bn in "emergency mortgage relief," and $2bn to HUD to stabilize multi-family properties that are in default or foreclosure or have recently been foreclosed, to help tenants stay in multi-family dwellings.

The funds would come from funds generated by TARP investments. The US Treasury Department disbursed $399bn of the total $700bn TARP funds as of June 30, according to prepared remarks by Gary Engel, director of financial management and assurance at the US Government Accountability Office. Engel noted the Treasury has received approximately $6.7bn in dividend payments on preferred stock acquired through the Capital Purchase Program. It also received back $70.1bn from 32 institutions that repurchased stock.

Proponents of HR 3068 see these funds as an opportunity to invest in housing across the US.

William Apgar, senior advisor for mortgage finance to HUD secretary Shaun Donovan, voiced his support for the bill in prepared remarks. In particular, HUD supports the funds the bill puts in the hands of state and local governments to rehabilitate foreclosed properties through the Neighborhood Stabilization Program.

"Communities in every corner of the US are suffering from the impact of high rates of foreclosure and abandoned property," Apgar said. "Many homeowners are facing foreclosure because they can no longer afford the payments on their homes either because their monthly payments have increased dramatically or they have lost employment."

But the bill is drawing criticism from across the aisle.

Rep. Spencer Bachus, R-Ala., in a statement on the bill, criticizes the $1.5bn that would go toward the Neighborhood Stabilization Program, which he says could be accessed by the community group ACORN. Bachus, ranking member on the House Financial Services Committee, said the group is "notorious" for its efforts to commit voter fraud and more funds available to the group would undermine the administration's efforts for transparency and flexibility o the Treasury Department to strengthen the financial system.

"One of the best things we can do to stabilize the credit markets and promote long-term economic growth is to restore fiscal discipline and stop the reckless government spending," he said. "As institutions begin to pay back their TARP assistance, we need to end the bailouts and return that money to the taxpayers thereby reducing the deficit."

Write to Diana Golobay.

Rep. Barney Frank, D-Mass., on Wednesday introduced HR 3126, a House bill that would enact President Obama’s plan to create the Consumer Financial Protection Agency (CFPA).

Proponents said in establishing the CFPA, HR 3126 — The Consumer Financial Protection Agency Act of 2009 — strengthens protection for consumers who purchase financial products like mortgages, credit cards and other loans from banks and non-bank financial institutions.

“Recent reports about the lack of mortgage modifications and increases in various fees only reinforce the need for this bill, which is already very clear,” Frank said in a statement released by House Committee on Financial Services, which he chairs. “I am confident that we will produce a bill that will provide greater consumer protections while in no way burdening the legitimate activities of responsible banking.”

House Speaker Nancy Pelosi, D-Calif., said the act will help curb abusive lending practices.

“The financial crisis exposed consumer safety as a major gap in our system of financial regulation. Unscrupulous providers peddled exotic and risky, and sometimes fraudulent, financial products that consumers often didn't understand. We now know that these risky practices contributed to record foreclosures, a financial crisis of unprecedented proportions, and a recession we're still recovering from,” Pelosi said in a statement released by her office. “This is the right thing to do for all the consumers who lost their homes and who were subject to abusive mortgage lending and credit card practices.”

The Financial Services Roundtable has criticized the proposed agency, because, the group said in a statement, it would separate regulation of financial products from the regulation of financial institutions.

“The Consumer Financial Protection Agency would actually harm consumers by increasing the cost of financial products, and reducing the availability of credit and consumer choices,” the Roundtable President and CEO Steve Bartlett said in the statement. “This would further create a patchwork of 50 state regimes, which will stifle innovation and increase confusion to the consumer.”

The bill faces opposition on both sides of the aisle, on concerns the proposed agency would only create a new layer of bureaucracy without providing real regulation, and that it might take too much power away from the Federal Trade Commission (FTC).

"We need smarter regulation, not just more regulation," Texas Rep. Jeb Hensarling, the ranking Republican on the House subcommittee on financial institutions and consumer credit, told The Los Angeles Times. “The legislation essentially says that when it comes to financial products, if we will only yield our freedoms, if we will only yield our consumer choices, if we will only yield our market-driven innovations to a group of unelected philosopher kings, they will undoubtedly rule us with wisdom and justice. Forgive me, I do not buy it.”

Frank was joined by 12 other House Democrats as co-signers of the bill, but Rep. John Dingell, D-Mich., told The Washington Times he was skeptical of the plan because it would diminish the FTC’s power.

“I am not of the view that maybe we want FTC to lose that [consumer protection] jurisdiction,” he said. “Maybe we want FTC to be around to provide minor dampening of the rascality that's going to continue to occur in the financial services industry.”

Write to Austin Kilgore.

The Federal Housing Finance Agency (FHFA) released its first 5-year strategic plan to tackle a market riddled with collapsed home prices and increased foreclosures.

It's the first such strategic plan formed since its creation a year ago by the Housing and economic Recovery Act (HERA) of 2008.

“Safe and sound housing government-sponsored enterprises (GSEs) will better contribute to stabilizing the mortgage markets by further reducing foreclosures and assisting borrowers who are at risk of losing their homes,” said James Lockhart, director of FHFA, in the plan.

Refinancing mortgages will become a priority. As the plan points out, the GSEs Freddie Mac (FRE: 0.00 N/A) and Fannie Mae (FNM: 0.00 N/A) participate in the Home Affordable Refinance Program (HARP), which permits refinancing for an estimated 4-5m people whose loans are owned or guaranteed by the GSEs. The refinance option may allow borrowers that currently owe between 80% and 125% of the value of their home to refinance their mortgages.

The FHFA will monitor a variety of issues such as executive compensation and disclosure at the GSEs. It also plans to conserve assets of the GSEs and will monitor business decisions that will hopefully reduce debt. Fannie and Freddie currently hold $1.8trn in debt, according to the FHFA.

As part of the FHFA's plans to distribute informed and accurate market intelligence, it will expand its quarterly Housing Price Index (HPI). By producing median HPI and providing analysis of an expanded geographic coverage, FHFA said it will allow market participants to make the most informed decisions.

Write to Jon Prior.

Average mortgage rates across the board sunk to a six-week low for the week ending July 9, according to a weekly survey released today by mortgage giant Freddie Mac (FRE: 0.00 N/A).

The average 30-year fixed mortgage rate dropped to 5.2% with an average 0.7 point, down from 5.32% from the previous week.

15-year FRMs averaged 4.69% with an average 0.7 point, slipping from 4.77% last week.

Five-year adjustable-rate mortgages (ARMs) also fell to 4.82% with an average 0.6 point from 4.88% a week ago. One-year ARMs mirrored the five-year, dipping to 4.82% with an average 0.6 point, dropping from 4.94% from last week.

The drop in the rates stems from a weakened labor market, said Frank Nothaft, vice president and chief economist of Freddie Mac, in the report.

Nothaft pointed to the 467,000 jobs lost in June, more than the market consensus, and the unemployment rate, which rose to 9.5%, the highest since August 1983.

A separate survey by Bankrate.com echoed the slide in mortgage rates. The 30-year FRMs fell to 5.59%. The average rate for 15-year FRMs fell to 4.93%, and 5-year ARMs dropped to 5.05%.

"The decline in mortgage rates happened alongside a slump in the price of crude oil," says Bankrate.com's Holden Lewis in weekly commentary on interest rates.

Lewis adds: "Both interest rates and oil prices can be seen as indicators that the economy continues to stumble, like a drunk trying to find his way out of a dark, unfamiliar saloon.

Write to Jon Prior.