Banks sending letters to homeowners offering relief

Welcome to the morning roundup. Here's a look at what's news in banking and finance this morning.

Settlement relief coming. Thousands of people around the country are getting unsolicited letters from their mortgage servicers offering to cut principal and drop their interest rates, the Cleveland Plain Dealer reports, among the first signs of what banks involved in a $25 billion settlement are doing to fulfill their obligations. The offers are surprising many Ohioans.

BofA to grill Paulson. Bank of America wealth management advisers will get the chance to question struggling hedge fund manager John Paulson today, the Wall Street Journal says. They'll be asking why his fund has underperformed, which led to Citigroup announcing it would stop investing with the fund.

Mid-size banks get more time. Regulators are planning to give mid-size banks ($10 billion to $50 billion in assets) more time to comply with rules requiring annual internal stress tests, Bloomberg reports. This is a separate rule than the one requiring the Federal Reserve to stress test the country's largest banks.

M&T deal is rare. M&T Bank Corp.'s bid to buy Hudson City Bancorp Inc. will create a dominant Northeastern bank, and is a bit of a rarity in a depressed bank deal market, MarketWatch says. Mergers are down by more than a quarter this year.