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Fed Beige Book notes improved housing banking conditions

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WASHINGTON (3/1/12)--Overall economic activity, fueled by improvements in manufacturing and consumer spending, continued to increase at a "modest to moderate pace" in January and early February, according to the Fed's Beige Book, released Wednesday. However, the report mentioned that producers could be preparing to pass along higher input costs to consumers.

The Beige Book reflects information collected in the Fed's 12 districts on or before Feb. 17 and was summarized by the St. Louis Fed.

"Manufacturing continued to expand at a steady pace across the nation, with many districts reporting increases in new orders, shipments or production and several districts indicating gains in capital spending, especially in auto-related industries," said the report. "Reports of consumer spending were generally positive" except for seasonal items. The sales outlook  for the near future  was "mostly optimistic."

The residential real estate market conditions improved somewhat in most districts, with several reporting increased home sales and increased construction of homes.  Hiring rose slighting in several districts. Commercial real estate markets displayed positive results in some districts, as leasing showed overall improvement, said the report, most notably in Minneapolis, Richmond, Chicago and Dallas.

Reports on banking conditions were "generally positive across districts," said the Fed.  "Lending increased to varying degree in the New York, Philadelphia, Richmond, Chicago, Dallas and San Francisco Districts" but was little changed in St. Louis and Kansas City and weak or soft in Richmond and Atlanta.

Demand for business credit was "flat to slightly higher" in Cleveland, Richmond, San Francisco and among some large banks in Atlanta.  Dallas reported strength in middle-market and large corporate lending, and Chicago reported business loan growth as continuing at a moderate pace.

Consumer loan demand saw little change in New York and San Francisco; Cleveland and Atlanta reported increased auto lending; Kansas City reported slightly weaker consumer installment lending; and St. Louis ranged from moderately weaker to unchanged, said the report. Demand for residential mortgage loans rose in New York, Richmond and Kansas City.

"Overall lending standards remained restrictive in San Francisco and Richmond and were largely unchanged in St. Louis and Kansas City. Lending standards tightened further for commercial borrowers in New York. Credit conditions in Chicago improved slightly, while quality improved in Philadelphia and Kansas City.  Delinquencies were steady or declined in Cleveland. Mortgage delinquencies were steady in the New York District but delinquencies decreased in other loan categories," said the Fed.

The Beige Book also noted that of the districts reporting on hiring, most indicated a slight increase, especially in manufacturing. Of those districts commenting on wages, upward pressures appeared limited.

News of the Competition (02/29/2012)

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MADISON, Wis. (3/1/12)

  • Although banks' technology to detect credit card fraud is quite advanced, the same high level of technology doesn't apply to identify money laundering (American Banker Feb. 28). Anti-money laundering technology is dependent on static items such as country blacklists and criminal watch lists and therefore is rules-based and backward-looking, the Banker said. The amount of money annually laundered is estimated to be $3 trillion--roughly the same size as the total U.S. budget. Although enforcement actions are increasing, the more complex ways consumers bank nowadays have exacerbated the difficulty of detecting money laundering, the Banker said. Money launderers now have more opportunities to conduct illegal operations because of the increased volume and speed of money flow in automated clearinghouse transfers, electronic banking and always-on consumer connections, the Banker said …
  • Legal bills for mortgage-servicing problems have already cost SunTrust Banks Inc. more than $150 million, on top of hundreds of millions of dollars the bank lost following its repurchases of bad mortgages (American Banker Feb. 28). Because of damage incurred by exposure to the Florida real estate market, SunTrust lost roughly $700 million on mortgages last year, the Banker said. Also, estimated costs for a potential mortgage-related settlement with state attorneys general caused Suntrust to accrue $120 million in the fourth quarter, the publication said …
  • JPMorgan Chase & Co. has a plan to generate more than $24 billion per year in net income--up from $18 billion in 2011, Doug Braunstein, JPMorgan's chief financial officer, said Tuesday at the company's annual investor day (American Banker Feb. 28). The goal of bolstering profits by one-third will be realized by obtaining more wealthy clients, building fewer retail branches and expanding in foreign countries, the company said. The company is being forced to adjust its strategy because of a slow economy and higher regulatory costs, said JPMorgan Chairman and CEO Jamie Dimon …

Market News (02/29/2012)

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MADISON, Wis. (3/1/12)

  • The U.S. economy grew more than expected in the fourth quarter because companies restocked their inventories in anticipation of increased consumer demand (The Wall Street Journal and Bloomberg.com Feb. 29). Gross domestic product--which is the widest gauge of all the goods and services produced in an economy--increased at an inflation-adjusted annual rate of 3% in the quarter--the most since the second quarter of 2010, the Commerce Department said Wednesday. Economists had forecast a 2.7% rise, according to a Dow Jones Newswires survey. Consumer spending--which constitutes 70% of the U.S. economy--rose 2.3% in the fourth quarter--the most growth in three quarters, the Commerce Department said. The economy appears to be growing at a consistent, although modest, pace, Richard DeKaser, deputy chief economist at Parthenon Group LLC in Boston, told Bloomberg. The fourth-quarter increase was bolstered somewhat by inventory building, but the economy is returning to a 2.5% pace of growth seen before the economy went off course at about this time last year, he added …
  • The Mortgage Bankers Association (MBA) said U.S. mortgage applications decreased 3% for the week ended Feb. 24 from one week earlier. According to MBA's Market Composite index, part of MBA's Weekly Mortgage Applications Survey, on an unadjusted basis, the index declined 9.4%. The refinance share of mortgage activity dropped to 77.9% of total applications from 80.1% the previous week. That is the lowest refinance share since Dec.  2 and the first time the measure has fallen below 80% since Dec. 9, 2011. The adjustable-rate mortgage (ARM) share of activity fell to 5% of total applications from 5.3% the previous week. "Mortgage rates remained near survey lows last week, but refinance volume fell slightly," said Michael Fratantoni, MBA vice president of research and economics. "According to survey participants, more than 20% of refinance applications were for Home Affordable Refinance Program (HARP) loans. The HARP share of total refinance applications has increased the past month.  Purchase application volume increased during the week, but remains within the narrow and anemic range of activity we have seen since the expiration of the homebuyer tax credit in May 2010."  For the MBA report, use the link …
  • In a sign that manufacturers are leading the economic expansion, U.S. business activity increased more than predicted in February to the fastest pace in nearly a year, according to the Institute for Supply Management- Chicago Inc. (Bloomberg.com Feb. 29). The institute Wednesday said its business barometer rose to a 10-month high of 64 from 60.2 in January. Readings above 50 indicate growth. Economists had predicted the gauge would hit 61 last month, according to a Bloomberg News survey. The factory-led expansion is being driven by continued inventory rebuilding, sustained business investment in equipment and a pickup in auto sales, Bloomberg said …

News of the Competition (02/28/2012)

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MADISON, Wis. (2/29/12)

  • Bank of America Corp. (BofA) enacted "unnecessary and burdensome" requirements on borrowers who were dependent on disability income to qualify for hone loans, the Department of Housing and Urban Development (HUD) alleged Monday (American Banker Feb. 27). HUD claims BofA improperly required some disabled borrowers to produce doctors' statements to become qualified, according to the compliant, which was referred to the Justice Department. It is illegal--per the Fair Housing Act--for a lender to use different application or qualification criteria for people with disabilities than it does for other borrowers. It also is unlawful--except in limited circumstances--to inquire about the nature or severity of a disability …
  • A federal appeals court Monday ruled that an $8.5 billion settlement reached among mortgage-backed securities investors and the Bank of New York should be a matter for the state court, rather than federal court (American Banker Feb. 27). Bank of New York served as trustee of the securities on behalf of investors such as Black Rock Inc. and the Federal Reserve Bank of New York. The settlement was originally reached in June and must be approved by a judge. Other investors whose bonds are part of the settlement opposed it and were looking for the judge to decide whether the settlement is fair and reasonable, the Banker said. Those investors won a ruling in October by a federal judge, but on Monday the U.S. Court of Appeals for the Second Circuit dismissed the appeal, saying it lacked jurisdiction, and remanded the case back to the New York Supreme Court …

Market News (02/28/2012)

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MADISON, Wis. (2/29/12)

  • Federal Housing Administration (FHA)-backed mortgages are about to become more costly. FHA mortgages typically allow for a smaller down payment and less strict requirements than traditional mortgages (The New York Times Feb. 27). However, FHA announced Monday that it would increase two types of fees that borrowers have to pay to bolster the agency's reserves--which have steeply declined during the housing crisis. The move also aims to entice private lenders to reinvest in the troubled market, the Times said. Whether higher costs will roll back demand for those mortgages is uncertain, because many borrowers have no other options, the Times said. As other lenders made their requirements more stringent after the real estate market collapse in 2008, more potential homebuyers have been looking to FHA for loans, the Times said …
  • Private research group The Conference Board said its Consumer Confidence Index in February rose to its highest level in a year--since a reading of 72 in February 2011 (The New York Times Feb. 28). The index shot up to 70.8 from 61.5 in January. Analysts had forecast a reading this month of 63. The current index level is close to levels that indicate a steady economy. An index reading of 90 indicates a healthy economy. The index is closely monitored because consumer confidence constitutes most U.S. economic activity. The index dropped to an all-time low of 25.3 in February 2009 and has slowly risen since then. Despite ongoing escalation of gas prices, consumers are more upbeat about the short-term outlook for job prospects, their own financial situations and the economy, Lynn Franco, director of the Conference Board Consumer Research Center, said in a statement …

Market News (02/27/2012)

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MADISON, Wis. (2/28/12)

  • Pending sales on existing homes climbed 2% in January, according to the National Association of Realtors. Compared with a year earlier, January pending home sales increased 10.3%. The increase was more than forecast and followed a 1.9% decrease in December, which was smaller than previously estimated (Bloomberg News Feb. 27). The median forecast of 44 economists surveyed by Bloomberg called for a 1% rise in January. Pending home sales are considered a leading indicator because they are a measure of contract signings. The improvement in the housing market is being driven by affordability, according to Sean Incremona, a senior economist at 4Cast Inc. …
  • While business confidence has fully recovered from summer concerns over European debt and the U.S. Treasury debt ceiling, the global mood remains subdued and cautious, according to Moody's Analytics Survey of Business Confidence. Global economic growth is tepid, and continues to expand at the low end of its potential, Moody's said. Businesses are upbeat when responding to broader questions about economic conditions, the outlook and strength of sales, but remain less enthusiastic about hiring and investment. U.S. and Japanese businesses are the most pessimistic respondents; Chinese and South American businesses are the most positive. The recent increase of oil prices has yet have an impact on prices …

News of the Competition (02/27/2012)

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MADISON, Wis. (2/28/12)

  • The Federal Deposit Insurance Corp. (FDIC) has initiated enforcement action against American Express over late fees the company levied against credit card customers. Customers were charged incorrect fees on cards with revolving credit (The Wall Street Journal Feb. 27).  The FDIC and Utah Department of Financial (DFI) Institutions are reviewing the card practices of American Express's Centurion Bank, which offers cards that allow customers to carry a balance, the company said in its annual report filed with the U.S. Securities and Exchange Commission. The FDIC also has provided information to the Consumer Financial Protection Bureau (CFPB), the filing said. The FDIC said it "appears likely" the CFPB and Utah DFI also will take actions, which could include civil fines, against Centurion Bank. New rules on credit card late fees were part of the Credit Card Accountability, Responsibility and Disclosure Act of 2009. For revolving credit cards, late fees are limited to $25 for a first offense and up to $35 for a second late charge within a six-month period. Late fees are limited to 3% of an amount due for charge-card products. American Express was applying the late-fee structure for "pay-in-full" products to cards with revolving credit …
  • Bank of America (BofA), Charlotte, N.C., will freeze its defined benefit pension plans, effective June 30. All eligible U.S. employees at the bank will move to a single defined contribution plan while retaining all the pension plan benefits earned up to June 30 (American Banker Feb. 27). The company also announced that it will contribute an additional 2% to 3% of employees' salaries to the company's 401(k) plan in addition to its existing matching contribution of up to 5%. As of Sept. 30, BofA had defined benefit assets of $14.3 billion and defined contribution assets of $18.5 billion …

News of the Competition (02/24/2012)

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MADISON, Wis. (2/27/12)

  • Bank of America (BofA) Thursday announced it will no longer sell new mortgages to government-sponsored enterprise (GSE) Fannie Mae (The New York Times Feb. 23). The move highlights tensions in a struggle between two of the huge players in the home loan market over billions of dollars in losses from the housing crisis, the Times said. This most recent development represents a substantial intensification in the lengthy legal battle about how many defaulted mortgages BofA will need to repurchase from Fannie because the original loans did not conform to required underwriting standards, market experts said. Fannie backs roughly 40% of all U.S mortgages. In its role as one of the biggest GSEs, Fannie takes mortgage loans from financial institutions and bundles them into securities that can be sold to investors or held on their own balance sheet, the Times said ...
  • In July, MasterCard Inc. will begin charging a new acquirer licensing fee, the company said Thursday (American Banker Feb. 23). The move is in advance of a new rule  prohibiting network routing exclusivity on debit cards--a component of an amendment  to the Dodd-Frank Act, which  is scheduled to take effect April 1. The new fee and a new third-party processor registration fee were mentioned Thursday in a Barclays note to investors, the Banker said  ...
  • U.S. banks looking to shed real-estate owned properties have to make hard decisions and choose among options such as selling them to investors, auctioning them off or making improvements to the homes before unloading them (American Banker Feb. 23). Beyond those decisions, the bottom-line priority is to avoid eroding property values from their already low 25% to 30% discounts, the Banker said. Currently, there are 2.2 million properties in foreclosure and another 1.8 million borrowers who are 90 days or more delinquent on their mortgages, according to Lender Processing Services. For a revival in the housing  market--and hence the economy--to occur, it is crucial to reduce the backlog of foreclosures, the Banker said …
  • Smaller banking companies are taking up the slack caused when some of the largest U.S. mortgage lenders closed major production channels or else closed entirely (American Banker  Feb. 23). In the fourth quarter, 11 of the 21 holding companies that upped their share of mortgage originations the most from the previous year had less than $10 billion in assets, according to regulatory financial reports …

Market News (02/24/2012)

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MADISON, Wis. (2/27/12)

  • Sales of new U.S. homes declined in January after hitting a one-year high in December, indicating the housing market is stabilizing and more consumers bought previously owned homes amid economic uncertainty (The Wall Street Journal, Bloomberg.com and Moody's Economy.com  Feb. 24). New-home sales fell 0.9% last month to a seasonally adjusted rate of 321,000, the Commerce Department said Friday. Sales are up 3.5% year-over-year. Months of supply have declined to 5.6--the lowest since early 2006. Although home sales are low, the combination of an improving labor market and economy are helping sales get better, Patrick Newport, an economist at IHS Global Insight in Lexington, Mass., told Bloomberg. Also, the median price of a new home was $217,000 in January--down 9.6% from January 2011. Although price declines make homes more affordable, they also have the negative impact of eroding people's net worth and making them feel poorer and less apt to spend money, the Journal said …
  • With people becoming more hopeful about economic growth, U.S. consumer confidence unexpectedly increased in February, according to the Thomson Reuters/University of Michigan Consumer Sentiment Index (Bloomberg.com and Moody's Economy.com Feb. 24). The index increased to 75.3 from 75 in January. Economists had forecast a 73 reading for February, according to a Bloomberg News survey. For the five-year period before the 18-month-long recession that ended in June 2009, the gauge averaged a reading of 89, Bloomberg said. Positive factors bolstering consumer sentiment are fewer job cuts, rallying stock prices and faster payroll growth. However, escalating gasoline prices could dampen further gains in consumer confidence, Bloomberg said …

News of the Competition (02/23/2012)

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MADISON, Wis. (2/24/12)

  • Five of six U.S. Federal Home Loan Banks (FHLB) that reported quarterly earnings Wednesday saw their profits decline during the fourth quarter mostly because of weak demand for loans (American Banker Feb. 22). Only the FHLB of Boston saw its quarterly profit rise from the prior year--although that was mainly due to a much lower impairment charge on mortgage-backed securities, the Banker said. The other banks that reported earnings Wednesday were the FHLBs of Atlanta, Dallas, Des Moines, Pittsburgh and Seattle. Several others reported annual results, but did not specify quarterly numbers, the Banker said …
  • Plaintiffs in a force-placed insurance case against Wells Fargo & Co. and QBE Insurance Inc. have been granted class-action status by a federal judge--a move that could allow high-stakes litigation regarding alleged industry kickbacks (American Banker Feb. 22). Force-placed hazard insurance is meant to protect creditors if an uninsured borrower's property is damaged. The ruling made Tuesday by Judge Robert Scola Jr. of the U.S. District Court for the Southern District of Florida heightens banks' susceptibility to legal attacks because of their purchase of force-placed insurance on behalf of borrowers whose homeowner policies have lapsed, the Banker said …
  • Bank of America (BofA) will close two of its Massachusetts branches June 1 as a component of a more comprehensive plan to eliminate 750 of its 5,700 U.S. branches during the next few years (American Banker Feb. 22). BofA holds the No.1 market share in the state, garnering more than 23% of Massachusetts' deposits in its more than 275 branches. Also, during the next month, People's United Financial Inc., based in Bridgeport, Conn., will close 15 of its 372 branches this year, including three in Massachusetts that overlap with other branches, the Boston Globe said Wednesday …

Market News (02/23/2012)

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MADISON, Wis. (2/24/12)

  • Initial U.S. claims for unemployment benefits held steady last week at a four-year low, and the four-week moving average of claims fell to its lowest level in four years, indicating the labor mark is continuing its gradual improvement (The Wall Street Journal, The New York Times and Bloomberg.com Feb. 23). Claims remained unchanged at 351,000 for the week ended Feb. 18 from the prior week, the Labor Department said Thursday. The four-week moving average of initial claims dropped steeply by 7,000--to 359,000--the lowest level since March 22, 2008. That average has stayed below the 400,000 level since early November--a good signal because economists say that claims must consistently stay below that mark for the economy to add jobs, the Journal said. There has been ongoing strength in the labor market in the past few months, Guy Berger, an economist at RBS Securities Inc. in Stamford, Conn., told Bloomberg. February should be another solid month for payroll growth if there aren't any surprises, he added. In a related matter, mass layoff events--layoffs involving at least 50 workers from a single establishment--rose by 50--to 1,434 in January from 1,384 in December, according to the Bureau of Labor Statistics (Moody's Economy.com Feb. 23). Those layoffs involved 129,920 employees in January, which is 15,728 fewer than in December …
  • U.S. consumer comfort rose last week to the highest level since April 2008 because more consumers had a positive view of their finances, according to the Bloomberg Consumer Comfort Index (Bloomberg.com and Moody's Economy.com Feb. 23). The index increased to -38.4 for the week ended Feb. 19--its fifth consecutive weekly gain--from -39.8 the prior week. Last week was the second consecutive week the index was above -40, which is the level associated with recessions and their aftermath. Homeowners, households and men with yearly incomes of more than $50,000 were the most positive they've been in more than a year, Bloomberg said …
  • Construction hiring in the U.S. is rebounding because consumers are investing in home renovation amid indications that the severest of housing market declines may have ended (Bloomberg.com Feb. 22). In December, the number of people working in residential home remodeling rose 5.8% to 250,700 from a year earlier, according to preliminary data compiled by the Bureau of Labor Statistics and released Feb. 3. That constitutes the highest growth for those jobs--which makes up roughly 5% of construction employment--since December 2006 before the collapse of the housing market, Bloomberg said …

News of the Competition (02/22/2012)

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MADISON, Wis. (2/23/12)

  • Legislation that would share more of Maryland's banking business with community banks is being considered this week by the Maryland Senate and House (Washington Business Journal Feb. 21 and loansafe.org Feb. 22). If passed, the Lend Local Act of 2012 would require the state treasurer to give a preference to financial institutions with less than $5 billion in total assets and that commit to small-business lending when Maryland awards state banking business. Supporters of the bill say it would channel more of the state's deposits to local financial institutions that would, in turn, lend the money to the state's small businesses, the Journal said. That move would help small businesses that are experiencing difficulty in obtaining loans--which has prevented those businesses from growing and hiring more workers, supporters said. The Maryland Bankers Association opposes the bill, saying it does nothing to alleviate a more urgent issue for banks--simplifying the state's procurement process so smaller financial institutions can more easily compete for state business, the Journal said …
  • The social network Facebook Inc. is on a fast track to become a player in the payments business. It received 15% of its $3.7 billion in revenue in 2011 from payments, according to its S-1 filing this month (American Banker Feb. 21).  Facebook said its next move is to obtain money transmitter licenses to circumvent any regulatory repercussions. However, Facebook already has licenses in at least 15 states that allow the company to handle transactions and to possibly convert its digital currency--Facebook Credits--into some form that would allow it to more directly compete with financial institutions, according to the Banker ...
  • Wells Fargo Co. could be a potential buyer, should there be a breakup of Ally Financial Inc.--Chrysler's former auto finance division--which is now majority-owned by the U.S. government after Ally received $17 billion in federal assistance in 2008 and 2009 (American Banker Feb. 21). If Ally breaks itself up, the sales price is estimated to be $68 billion, and Wells Fargo is "one of the few large banks" that could afford to purchase Ally, according to a research note written Tuesday by analysts at Keefe, Bruyette & Woods Inc. Other possible buyers interested in part or all of Ally Financial could include Capital One Financial Corp., Huntington Bancshares Inc., JPMorgan Chase & Co. and KBW, the note said  …

Market News (02/22/2012)

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MADISON, Wis. (2/23/12)

  • Newtek Business Services, The Small Business Authority, announced the release of the  Small Business (SB) Authority Index for January, which shows minimal growth in the small-business economy. The index reached 110.09 points last month--up 0.24% from December. The growth was led by Newtek's proprietary merchant processing volume, which was up 7.23%, as well as the ADP National Employment Report, which had a 2% increase. "Our index improved modestly in the month of January," said Newtek President/CEO Barry Sloane. "There was continued improvement in consumer spending, but slightly less than in December. In addition, we noticed an increase in personal income, which will be good for the continuation of this trend. Working against this continuation will be the increase in the cost of gasoline, which could eat into consumer spending. We see modest improvement in job creation and see sub 200,000 employment increases monthly for the near future. All in all, we see tepid growth in the small-business economy fueled by monetary and government stimulus which when it stops, will leave our markets without a natural impetus for further growth," Sloane added. Newtek, a CUNA Strategic Services Provider, backs the increase in credit unions' member business lending (MBL) to 27.5% of total assets from 12.25%. Newtek took part in the Credit Union National Association's  MBL Hike the Hill event earlier this month  …
  • U.S. mortgage application volume decreased 4.5% for the week ended Feb. 17 from one week earlier, according to the Market Composite Index, released Wednesday by the Mortgage Bankers Association (MBA). The index is part of  MBA's Weekly Mortgage Applications Survey. On an unadjusted basis, the index declined 3.6%. The Refinance Index dropped 4.8%. The seasonally adjusted Purchase Index fell 2.9%. The unadjusted Purchase Index increased 1.4% and was 9.2% lower than the same week one year ago. In January, among refinance borrowers, 57.2% of applications were for fixed-rate 30-year loans, 24.4% for 15-year fixed loans, and 5.5% for adjustable-rate mortgages (ARMs). The share of refinance applications for fixed-rate mortgages with amortization schedules other than 15-year and 30-year terms was 12.9% of all refinance applications. The share for 30-year fixed, 15-year fixed and ARMs rose from the previous month while the "other" fixed category shares fell from last month. For the MBA report, use the link …
  • U.S. existing-home sales rose in January, marking three gains in the past four months, while inventories continued to improve, according to the National Association of Realtors (NAR). Total existing home sales--which are completed transactions that include single-family homes, townhomes, condominiums and co-ops--increased 4.3% to a seasonally adjusted annual rate of 4.57 million in January from a downwardly revised 4.38 million-unit pace in December. Sales for January are 0.7% above a spike to 4.54 million in January 2011.Lawrence Yun, NAR chief economist, said strong gains in contract activity in recent months show buyers are responding to very favorable market conditions. "The uptrend in home sales is in line with all of the underlying fundamentals--pent-up household formation, record-low mortgage interest rates, bargain home prices, sustained job creation and rising rents," Yun said.  For the NAR report, use the link ...

News of the Competition (02/21/2012)

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MADISON, Wis. (2/22/12)

  • Homeowners and housing advocates are dubious that new rules unveiled this week by government officials for how financial institutions treat millions of people facing foreclosure will actually provide borrowers with one person to help them out of maze-like mortgage troubles (The New York Times Feb. 20). The promise of a single contact point to avoid time-consuming searches for the right representative or being shuffled around and asked to produce the same documents again and again, is a key part of the $26 billion settlement reached earlier this month. It involves the federal government, state attorneys general and the five largest U.S. mortgage servicers. However, last April the mortgage industry made many of the same promises under a consent order with the Office of the Comptroller of the Currency. Since that time, there has not been much improvement, say consumer representatives. Loan files continue to be passed around from one agent to another, even if one point of contact is assigned to a case, and numerous phone calls go unreturned, they added ...
  • The Securities and Exchange Commission (SEC) has warned Alexander Rekeda, a former prime architect of the structured finance boom, that it is contemplating civil charges alleging he misled investors in a mortgage bond deal that failed, said sources familiar with the matter (The Wall Street Journal Feb. 21). In October, the SEC warned Rekeda--who led Japanese bank Mizuho Financial Group Inc. into the then-popular business of U.S. subprime debt in 2006--that he faces potential charges, according to a regulatory filing. Rekeda was served a Wells notice--a letter that usually gives the recipient a final chance to convince the SEC not to file an enforcement action, the Times said …

Market News (02/21/2012)

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MADISON, Wis. (2/22/12)

  • The Federal Reserve Bank of Chicago's National Activity Index--a monthly index designed to gauge overall economic activity and related inflationary pressure--declined to 0.22 in January from an upwardly revised 0.54--originally 0.17--in December (Moody's Economy.com Feb. 21). The three-month moving average for the index climbed to 0.14 from 0.06. The index is at its highest level since March, indicating the recent broad improvement in the U.S. economy, Moody's said. With the dormant U.S. economy beginning to pick up, the probability of another U.S. recession has dropped to 20%, the index indicates …
  • Business confidence worldwide has completely rebounded from the downturn it took last summer in the wake of the European debt crisis and the political upheaval about raising the Treasury debt ceiling, according to Moody's Analytics Survey of Business Confidence (Moody's Economy.com Feb. 21). Businesses are positive about current economic conditions, with responses generally as strong as they have been in the 10-year history of the survey, Moody's said. However, businesses are more pessimistic when answering specific questions regarding hiring. Also, pricing pressures have lessened, with an uncommonly small percentage of businesses indicating they are raising their prices, Moody's said …
  • Moody's Commercial Mortgage-Backed Securities (CMBS) Delinquency Tracker indicated that the 60-day-plus delinquency rate for loans within U.S. commercial mortgage-backed conduit/fusion securities inched down to 9.3% in January from 9.32% in December (Moody's Economy.com Feb. 21). For the past 13 consecutive months, the delinquency rate has been above 9%. The total outstanding balance of delinquent loans fell $800 million in January to $53.6 billion. While $6.4 billion in loans were newly delinquent, $7.2 billion of loans were resolved. Delinquency rates declined across four of the five core property types, with retail the only sector in which delinquency rates increased ...

News of the Competition (02/17/2012)

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MADISON, Wis. (2/21/12)

  • Although Capital One Financial Corp. previously said it would accept Federal Home Loan (FHA) applications with minimum FICO scores of 580, it still is not originating such loans (American Banker Feb. 16). Capital One had given verbal assurances five months ago to the Federal Reserve and consumer groups that it would accept FHA applications with low credit scores. Capital One is working to implement the infrastructure to make these loans, Tatiana Stead, a Capital One spokeswoman, told the Banker. The company should have systems to make the loans up and running by the end of the first quarter, she added …
  • Wells Fargo & Co. announced record growth for its Global Remittance Services, the company said in a press release Thursday. Wells Fargo reported year-over-year remittance transaction volume growth of 27% and dollar-value growth of 28% from 2010 to 2011. "The addition of 17 remittance network members and 8,200 payout locations combined with our cross-sell focus in the legacy Wachovia markets in the East Coast has had a significant impact on our growth," said Daniel Ayala, executive vice president and head of Wells Fargo Global Remittance Services. Value remitted in 2011 totaled more than $1.8 billion to 15 countries. The Wells Fargo distribution includes more than 35,800 remittance payout locations with 43 remittance network companies in 15 countries, including: Mexico, Guatemala, El Salvador, Honduras, Nicaragua, Dominican Republic, Colombia, Ecuador, Peru, Bolivia, Argentina, the Philippines, India, Vietnam and China …

Market News (02/17/2012)

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MADISON, Wis. (2/21/12)

  • The probability that the U.S. will be in recession in six months fell to 26% in January from 29% in December, according to a gauge implemented and monitored by Moody's Economy.com (Feb. 17). The probability was lowered because of a healing labor market, an increase in housing permits and higher equity prices, Moody's said. The January drop is the fourth consecutive monthly decline, placing its fourth-quarter average at 34%. Although the economy is improving, threats such as escalating energy prices and an unresolved European sovereign debt crisis, still remain, Moody's said. In a related matter, the Conference Board Index of Leading Indicators climbed  0.4% in January, constituting the fourth consecutive monthly gain (Moody's Economy.com Feb. 17). Last month's results were consistent with expectations and indicate economic growth will be ongoing throughout the first half of this year …                                        
  • U.S. consumer prices increased in January, propelled by higher costs for clothes, food, gas and rent--suggesting new inflation pressures (The Wall Street Journal, The New York Times and Bloomberg.com Feb. 17). The consumer price index (CPI)--which measures how much consumers pay for goods and services--rose a seasonally adjusted 0.2% last month from December and 2.9% year over year, the Labor Department said Friday. Generally, price increases were across the board. Core prices--excluding volatile energy  and food costs--rose 0.2% in January from December. The country has experienced an inflation peak, Jeremy Lawson, a senior U.S. economist at BNP Paribas in New York, told  Bloomberg. The labor market still has a reasonable amount of slack, he added …
  • Starbuck Coffee  Co.'s three-month-old loan fund, created to make loans to small businesses, has raised more than $2 million in small-dollar donations from customers  since its Nov. 1 inception  (American Banker Feb. 16). Starbucks created the fund in partnership with community development financial institutions (CDFIs), including community development credit unions. The Starbuck's foundation seeded the fund with $5 million and has asked its customers to supplement it with donations of as little as $5 online or at checkout. The money Starbucks collects is distributed to lenders through a Philadelphia-based organization--the Opportunity Finance Network--which represents CDFIs …

News of the Competition (02/16/2012)

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MADSION, Wis. (2/17/12)

  • To settle claims that its mortgage unit improperly originated Federal Housing Administration (FHA) claims, Citigroup Inc. agreed Wednesday to pay out $158.3 million (American Banker Feb. 15). The development is a reminder that the $25 billion national mortgage settlement that Citigroup joined last week with the four other biggest U.S. mortgage servicers in a deal to cover abusive mortgage practices does not absolve banks from other mortgage-related claims, the Banker said. The complaint was made in a lawsuit filed by Preet Bharara, the U.S. attorney for the Southern District of New York; Helen Kanovsky, general counsel for the Department of Housing and Urban Development (HUD); and HUD Inspector General David A. Montoya. It alleged that the bank's CitiMortgage unit certified to HUD that loans were eligible for FHA mortgage insurance "when in fact they were not," the release from Bharara's office said. CitiMortgage also admitted that HUD sustained losses on loans that defaulted and that should not have been made ...

Market News (02/16/2012)

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MADISON, Wis. (2/17/12)

  • Refinancing borrowers overwhelmingly chose fixed-rate mortgages in the fourth quarter, according to Freddie Mac (Washington Business Journal Feb. 14). Of the borrowers, 95% preferred fixed-rate loans regardless of whether the original loan was a fixed-rate mortgage or an adjustable-rate mortgage. Also, a rising percentage of refinancing borrowers elected to shorten their loan terms during the fourth quarter, Freddie said. For the borrowers who paid off a 30-year fixed-rate loan, 43% chose a 15-year or 20-year loan--which is the highest percentage since first quarter 2003, Freddie added. Meanwhile, during the fourth quarter, 58% of borrowers who had a hybrid adjustable-rate mortgage, transitioned to a fixed-rate loan. The other 42% opted to refinance into the same type of product they originally had, Freddie said …
  • Initial claims for U.S. unemployment benefits dropped to the lowest level in nearly four years, indicating the lethargic job market is steadily improving (The New York Times, The Wall Street Journal and Bloomberg.com Feb. 16). Claims fell 13,000--to 348,000--the Labor Department said Thursday. The ongoing decline in claims is a sign that firms are laying off fewer workers and that hiring is on the rise, the Times said, adding that when claims are consistently below the 375,000 level it generally means that hiring is robust enough to lower the unemployment rate. The slowdown in claims is positive news for consumers, indicating better income growth and likely improving confidence, which will bolster spending, Sal Guatieri, a senior economist at BMO Capital Markers in Toronto, told Bloomberg ...
  • For the fourth consecutive week, U.S. consumer confidence increased--reaching the highest level in more than a year during the week ended Feb. 14, according to the Bloomberg Consumer Comfort Index (Bloomberg.com Feb. 16). The index climbed to -39.8 from -41.7 the prior week--only the third time since April 2008 that the gauge has risen above -40, a reading consonant with recessions or their aftermath. The monthly expectations gauge in February rose to a 12-month high of -7. Also, sentiment for those who were jobless was the strongest since April 2008--indicating news of fewer job cuts and payroll gains is improving the outlook of households that have not yet seen benefits from the economic recovery, Bloomberg said …
  • Sparked by warmer weather, construction began on more homes than expected in January, adding to evidence that the U.S. residential real estate market is steadying (Bloomberg.com and Moody's Economy.com Feb. 16). Housing starts increased 1.5% to an annualized rate of 699,000 from a 689,000 pace in December, the Commerce Department said Thursday. Analysts had predicted a gain to 675,000, according to a Bloomberg News survey. Building permits--a proxy for future construction--also rose to 676,000, which is a month-over-month gain of 0.7% and a year-over-year gain of 19% …

Delinquencies foreclosures decline says reports

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WASHINGTON (2/17/12)--Delinquency rates for mortgage loans and foreclosure actions were down during the fourth quarter 2011, according to the Mortgage Bankers Association (MBA) National Delinquency Survey released Thursday.

The delinquency rate for mortgage loans on one-to-four-unit residential properties dropped to a seasonally adjusted rate of 7.58% of all loans outstanding. That is a decrease of 41 basis points from the third quarter of 2011, and a decline of 67 basis points from one year earlier, MBA said. The delinquency rate includes loans at least one payment past due, but does not include loans in the process of foreclosure.

The serious delinquency rate--the percentage of loans that are 90 days or more past due or in the process of foreclosure--was 7.73%, a decrease of 16 basis points from third quarter, and a decrease of 87 basis points from the fourth quarter of last year.

Also, the percentage of loans on which foreclosure actions were initiated during the third quarter was 0.99%--down nine basis points from the prior quarter and down 28 basis points from one year earlier. The percentage of loans in the foreclosure process at the end of the fourth quarter was 4.38%, down five basis points from the third quarter and 26 basis points lower than one year ago.

Foreclosure activity in the earliest stages is now 22% lower than year-ago levels, said RealtyTrac, a website for foreclosure listings (Moody's Economy.com Feb. 16).

The combined percentage of loans in foreclosure or at least one payment past due was 12.63% on a non-seasonally adjusted basis, a 10 basis-point decrease from last quarter and 107 basis points lower than a year ago.

"Mortgage performance continued to improve in the fourth quarter, reflecting the improvement we saw in the job market and broader economy," said Jay Brinkmann, MBA chief economist and senior vice president for research and education. "The total delinquency rate and foreclosure starts rate decreased and are back down to levels from three years ago. A major reason is that the loans that are seriously delinquent are predominantly made up of loans originated prior to 2008 and this pool is steadily growing smaller as a percent of total loans outstanding.

"In addition, employment is the key driver of mortgage performance, and the mortgage delinquency rate is actually falling faster than the unemployment rate is declining," he added.

To read the MBA release, use the link.

FOMC minutes for January note split on QE3

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WASHINGTON (2/16/12)--Members of the Federal Reserve's monetary policymaking group were split on whether to introduce another round of qualitative easing through bond purchases, according to the minutes of the Federal Open Market Committee's (FOMC) Jan. 24-25 meeting.

"A few members observed that, in their judgment, current and prospective economic conditions--including elevated unemployment and inflation at or below the committee's objective--could warrant the initiation of additional securities purchases before long," said the minutes.

However, others indicated that "such a policy action could become necessary if the economy lost momentum or if inflation seemed likely to remain below its mandate-consistent rate of 2% over the medium run," the minutes continued.  One committee member anticipated that a pre-emptive tightening of monetary policy would be necessary before the end of 2014 to keep inflation close to 2%.

For most committee members, the "current outlook--for a moderate pace of economic recovery with the unemployment rate declining only gradually and inflation subdued--warranted exceptionally low levels of the federal funds rate at least until 2014," said the minutes.

Five participants viewed the appropriate policy firming as beginning during 2015, while six indicated that "first increase in the federal funds rate would not be warranted until 2015 or 2016. As a result, those 11 participants anticipated that the appropriate federal funds rate at the end of 2014 would be 1% or lower. Those who saw the first increase occurring in 2015 reported that they anticipated the appropriate federal funds rate would be 1/2% at the end of that year."

Some assessments of appropriate monetary policy incorporated additional purchases of longer-term securities in 2012, and a number of participants indicated that they remained open to a consideration of additional asset purchases if the economic outlook deteriorated. "All but one of the committee members" continued to expect the FOMC would carry out the normalization of the balance sheet according to the principles approved at the June 2011 FOMC meeting, said the minutes.

At that meeting,  the committee had decided  that "prior to the first increase in the federal funds rate, the committee would likely cease investing some or all payments on securities holdings in the System Open Market Account (SOMA), and it would likely begin sales of agency securities from SOMA sometime after the first rate increase," the minutes said.

The Jan. 24-25 meeting was the first meeting in which members of the committee published their own projections for the federal funds target interest rate.

To review the minutes, use the link.

Market News (02/15/2012)

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MADISON, Wis. (2/16/12)

  • The Mortgage Bankers Association (MBA) said U.S. mortgage applications declined 1% for the week ended Feb. 10 from one week earlier, according to its Market Composite Index, which is part of its Weekly Mortgage Applications Survey. The average loan size in the U.S. in January 2012 was $226,000. Average loan size has been increasing in recent months, up from $225,000 in December and up from $207,000 in January 2011. The District of Columbia has the highest average loan size in the nation at $375,000 while Indiana had the lowest average loan size at $143,000. Across the country, the average loan size was $217,000 for home purchase applications and $228,000 for refinances in January. On an unadjusted basis, the index was essentially unchanged from the previous week. The Refinance Index increased 0.8% to its highest level since Aug. 8. The seasonally adjusted Purchase Index decreased 8.4%. The unadjusted Purchase Index declined 3.3% and was 7.6% lower than the same week one year ago. For the MBA report, use the link …
  • U.S. factories' output increased last month, and December was the best month for growth in five years, the Federal Reserve said Tuesday (The New York Times Feb. 15). Industrial production was unchanged in January, as a gain of 0.7% in manufacturing was offset by declines in mining and utilities, according to the Federal Reserve's report on Industrial Production and Capacity Utilization. Within manufacturing, the index for motor vehicles and parts jumped 6.8% and the index for other manufacturing industries increased 0.3%. The output of utilities fell 2.5%, as demand for heating was held down by temperatures that moved above seasonal norms; the output of mines declined 1.8%. Total industrial production is now reported to have advanced 1% in December; the initial estimate had been an increase of 0.4%. This upward revision reflected higher output for many manufacturing and mining industries. At 95.9% of its 2007 average, total industrial production in January was 3.4% above its level of a year earlier. The capacity utilization rate for total industry decreased to 78.5%, a rate 1.8 percentage points below its long-run (1972--2011) average. For the Fed release, use the link … 

News of the Competition (02/15/2012)

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MADISON, Wis. (2/16/12)

  • U.S. marketplace interest in buying and selling prepaid card portfolios is being sparked by the emergence of several new prepaid debit card programs and the expanding national distribution of major prepaid card brands (American Banker  Feb. 14). Six prepaid card programs will be sold this year, with roughly $2 billion in assets, Robert Hammer, chairman and CEO of R.K. Hammer, predicted in a Monday press release. In contrast to credit card portfolios whose value are based on the total assets, the value of prepaid card portfolios is based on the total number of accounts and fee structures, Hammer said. Also, more credit card portfolio sales are likely this year compared with last year because of record-low credit card charge-off rates and an improving economy, Hammer said …
  • PayPal Inc., a provider of general-purpose reloadable prepaid debit cards, Tuesday announced that NetSpend Holdings Inc. will distribute and process payments for a new PayPal Prepaid MasterCard (American Banker Feb 14). PayPal's timing for introducing the new card is perfect because the number of unbanked U.S. customers using prepaid cards is on the rise, industry analyst Todd Ablowitz, president of Double Diamond Group LLC, told the Banker. Users of the new card do not need to have a PayPal account, although having one affords access to more benefits, the publication said …

News of the Competition (02/14/2012)

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MADISON, Wis. (2/15/12)

  • Several U.S. community banks still are concerned about the safety of the mobile banking channel, as they confront a mobile-banking-adoption deficit because of larger financial institution   competitors (American Banker Feb. 13). Despite rapid mobile banking adoption in the banking industry, technology providers and analysts indicate there are hazards to mobile banking--including new malware strains and hardware liabilities such as lost or stolen devices, the Banker said. Mobile devices are lagging in regard to security and anti-virus technology, in part because there haven't been sufficient attacks yet to necessitate large scale development of preventative technology, Aaron MacPherson, IDS Financial Insights practice director, told the publication. However, attacks on mobile banking and the consequent development of preventative measures also will grow over time, he added …
  • Security flaws inherent in Google's mobile wallet may become an obstacle to widespread adoption of this type of product--not just Google's--by consumers and financial institutions (American Banker Feb. 13). Last week, security firm zvelo Inc. demonstrated how easy--under certain conditions--it is to extract personal identification number (PIN) codes from Google Wallet-equipped phones, and showed how to access funds loaded to the mobile wallet's prepaid account while deleting the user's PIN in the process. Privacy and security are essential to the success of a mobile wallet product, Denee Carrington, senior analyst for Forrester Research Inc. told the Banker. Google wallet is a virtual wallet that stores consumers' payment cards, offers, and more on their phones and online ...
  • At present, one man has the responsibility of making sure that the largest U.S. mortgage servicers comply with last week's $26 billion mortgage settlement (American Banker Feb. 13).  Joseph A. Smith Jr., North Carolina's banking commissioner, is in control of ensuring that Bank of America Corp., Citigroup Inc., JP Morgan Chase & Co., Wells Fargo & Co. and Ally Financial Inc. implement new servicing standards and take other steps required by the settlement. As the independent monitor of the settlement, Smith will regularly publish reports that will list banks that fail to comply with those responsibilities. A proposed settlement between federal and state governments and the five biggest mortgage servicers allows the banks to determine which borrowers qualify for relief and what actions will be taken (News Now Feb. 8). The settlement requires banks to pay cash penalties, send checks of roughly $2,000 to homeowners impacted by improper foreclosures and adjust loans for nearly one million homeowners ...
  • The Federal Reserve Tuesday announced its approval of the notice by Capital One Financial Corporation, McLean, Va. (Capital One), to acquire ING Bank, fsb, Wilmington, Del., and thereby indirectly acquire shares of ShareBuilder Advisors, LLC and ING Direct Investing, Inc., both of Seattle, Wash. The Fed's action, previously twice delayed, directed Capital One to take specific steps to ensure that its risk-management functions, including compliance, are commensurate with its new size and complexity.The Fed noted that Capital One is the 24th largest depository organization in the U.S. measured by asset size, with total consolidated assets of about $200 billion, and the eighth largest measured by deposits, controlling deposits of roughly $127 billion, which represents about 1.4% of total deposits of insured depository institutions in the U.S. … 

Market News (02/14/2012)

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MADISON, Wis. (2/15/12)

  • U.S. retail sales increased less than anticipated in January because auto sales unexpectedly declined, indicating consumers remain wary of an economy that still is unstable (The Wall Street Journal, Bloomberg.com and The New York Times Feb. 14). Retail sales rose 0.4% last month from December, the Commerce Department said Tuesday. Economists had forecast a 0.9% gain in a Dow Jones Newswires survey and a 0.7% rise in a Reuters' poll. Core retail sales--which exclude autos, building materials and gasoline--climbed 0.7% last month. Many companies--such as Target Corp. and Limited Brands Inc.--provided incentives to entice shoppers back after holiday sales idled, Bloomberg said. Consumers are being cautious, Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia told Bloomberg. Strong retailer discounting and steep price reductions have been evident so far this year, which augers poorly for retailers' margins, he added. In a related matter, the International Council of Shopping Centers chain store sales index remained consonant with modest spending growth for the week ended Feb. 12, falling 2% and reversing the prior week's 1.8% gain (Moody's Economy.com Feb. 14) …
  • Business inventories in the U.S. in December increased less than sales, indicating companies may continue to restock shelves and warehouses early this year (Bloomberg.com and Moody's Economy.com Feb. 14). The 0.4% gain in inventories followed a 0.3% increase in November, the Commerce Department said Tuesday. As an increase in hiring bolsters purchases, inventory replenishment--which helped the U.S economy expand in the fourth quarter of 2011 at the fastest pace in more than a year--may extend into 2012, Bloomberg said. The inventory-to-sales ratio inched down to 1.26 from 1.27 in November, intimating businesses are doing a good job managing lean inventories, Moody's said …
  • In January, for the fifth consecutive month, U.S. small business confidence rose. However, the improvement was barely discernible as the National Federation of Independent Business (NFIB) Index edged up to 93.9 from 93.8 in December (Moody's Economy.com Feb. 14). A bigger percentage of small businesses had a job opening to fill, while more establishments anticipated increased sales during the next six months, NFIB said. However, perceptions of the economy still are muted and hiring intentions moderated in January, NFIB said …

News of the Competition (02/13/2012)

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MADISON, Wis. (2/14/12)

  • The Federal Deposit Insurance Corp. (FDIC) announced two bank closures Friday for a total of nine closures so far in 2012. There were 92 bank closures in 2011. The FDIC estimates the most recent failures will cost its Deposit Insurance Fund about $51.3 million. SCB Bank, Shelbyville, Ind., had assets of $182.6 million, assumed by First Merchants Bank, Muncie, Ind. Charter National Bank and Trust, Hoffman Estates, Ill., had $93.9 million in assets, assumed by Barrington Bank & Trust Co., Barrington, Ill. The closures were the first in 2012 in each state …
  • Large banks submitted comment letters claiming that proposed changes to federal regulations aimed at decreasing banks' dependence on credit ratings could overemphasize capital requirements, fail to accurately reflect risk sensitivity and impair U.S. banks' ability to compete. The Dodd-Frank Act requires regulators to shed reliance on credit ratings related to capital (American Banker Feb. 10). The banks' comment letters claimed the proposed rules may conflict with Basel II requirements. Although the rules exclude small bankers, one banking leader told the Banker the final rule on alternatives to credit ratings might also influence the approach taken in developing rules for community banks.  Regulators worked on the proposed rule for a year …
  • Bank of America must turn over documents for two collateralized loan obligations (CLOs) under subpoenas from the office of the Massachusetts Secretary of the Commonwealth. Its securities division is investigating the CLOs to decide whether assets were intentionally overstated when they were presented to investors (American Banker Feb. 10). Bank of America sold the CLOs of LCM VII LLC and Bryn Mawr CLO II in 2007 to investors who eventually had losses of $150 million. In January, an arbitration panel ordered Bank of America to pay $1.1 million to an investor for losses on one of the CLOs. The Banker reported an expert witness for the arbitration panel testified the loans' value had already dropped when they were transferred to the securitization trust at their original price, meaning the CLO was experiencing losses before sales to investors began …
  • Regional banks' mortgage experiences echo the big bank issues that are dominating national headlines, said American Banker (Feb. 10). Regional banks must cope with elevated levels of delinquent loans, yet many banks delay foreclosure actions because they fear adding more homes to a declining real estate market could drop purchase prices below the levels used when setting aside reserves to cover losses. Profits from mortgage operations that are thriving today may be used to cover payments to Fannie Mae and Freddie Mac for slipshod compliance and underwriting during the mortgage boom. Regional banks are also concerned about the possibility of government charges for foreclosure abuses, which recently led to a $25 billion settlement between state and federal authorities and the five largest banks, said the Banker

Market News (02/13/2012)

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MADISON, Wis. (2/14/12)

  • Housing prices will continue a slight slide in 2012 before beginning to recover in 2013, a Federal Reserve Bank of Philadelphia survey predicts. Survey responses from 24 economic and financial experts projected that median estimates for six house-price indices would decrease between 0.1% and 0.5% during the current year (American Banker Feb. 10). Survey respondents select an index and then predict its price shift. Eleven respondents saw the U.S. national Standard & Poor's/Case-Shiller index declining 0.3% in 2012 before rising 1.5% in 2012. Another six experts foresaw the U.S. Federal Housing Finance Agency  index declining 0.1% this year but growing 2% in 2012 …
  • Construction of apartment buildings, townhouses and other multifamily units will represent the biggest segment of the U.S. building industry this year, based on predictions from two  economists. Michelle Meyer of Bank of America projected construction would begin on 260,000 multifamily units in 2012 for a 45% increase from 2011, while Celia Chen of Moody's Analytics expects a jump of 74% to 310,000 construction starts (Bloomberg.com, Feb. 13). The projections suggest the highest level of construction activity since 2008 and position the housing sector to contribute to overall U.S. economic growth. The Banker reported that higher demand for multifamily dwellings reflects the shift from owning to renting due to high levels of foreclosures …

News of the Competition (02/10/2012)

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MADISON, Wis. (2/13/12)

  • Federal and state officials are making it clear there's more legal action looming for banks involved in the $25 billion foreclosure settlement announced this week. The settlement addresses many robo-signing issues, but preserves federal and state officials' ability to pursue criminal suits as well as individuals' rights to file suits or participate in class action lawsuits (American Banker Feb. 9). President Barack Obama noted the mortgage fraud task force highlighted in his State of the Union address will still pursue investigations of mortgage packaging and selling practices. One analyst told the Banker that ongoing litigation could badger banks for a decade …
  • The $25 billion foreclosure settlement is more a pest than a menace to the five participating banks. Bank of America, JP Morgan Chase, Wells Fargo, Ally Financial and Citigroup all claim they can cover their share of penalties with cash currently held in reserves (American Banker Feb. 9). Some penalties can be addressed with "soft money" by shifting reserves designated to cover mortgage losses to pay for the settlement's requirements for mortgage refinancing and principal reductions in the next three years. The Banker reported that all five banks say the settlement will not impact future profitability or financial result …
  • The Federal Reserve Board will fine the parent firms of the five banks involved in the foreclosure settlement a combined $776.5 million for failing to provide proper oversight of subsidiaries. Bank of America will pay $175.5 million; JP Morgan Chase, $106.5 million; Wells Fargo, $87 million; Citigroup, $22 million; and Ally Financial, $17 million (American Banker Feb. 9). The Federal Reserve said it will levy fines against another six institutions that earlier received enforcement actions for foreclosure practices, although the amount will not be disclosed until a later date …
  • Visa's debit profits are slackening due to regulations enacted Oct. 1 to cap debit card interchange fees at 24 cents per transaction, roughly half the amount retailers previously paid to financial institutions. Visa's U.S. debit payments volume increased roughly 5% in its fiscal first quarter, which compares to 16% growth in the same period one year earlier. Visa blamed the slowing pace on debit card issuers opting to pull back on marketing and rewards for debit transactions as well as slower growth in PIN-based transactions (American Banker Feb. 9). New debit interchange rules also compel financial institutions to have relationships with at least two processing networks for debit transactions by April 1 to offer alternatives to merchants and spur competition. Visa plans to introduce an incentive plan to persuade merchants to use its network …

Market News (02/10/2012)

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MADISON, Wis. (2/13/12)

  • Rising oil prices along with imported cars and airplanes helped boost the U.S. trade deficit to its highest level in six months in December. U.S. Commerce Department figures revealed the December trade deficit for international goods and services rose 3.7% to $48.8 billion, compared to $47.1 billion in November (Moody's Economy.com, Feb. 10). Earlier surveys of economists projected a gap of $48.5 billion. Rising consumer demand fueled the increase (Bloomberg.com, Feb. 10). The trade deficit with China lessened in December to $23.1 billion from $26.9 billion, but increased 8.2% for the year overall to a record $295.5 billion. America's trade deficit for all of 2011 increased 12% to $558 billion, the highest gap since 2008. U.S. exports increased by 14.5% in 2011, compared to 16.7% growth in 2010. President Obama has set a goal of 15% annual growth in exports by 2015 …
  • Rising gasoline prices are straining household funds, prompting a greater-than-predicted decrease in U.S. consumer confidence in February's preliminary results (Bloomberg.com Feb. 10). The University of Michigan consumer sentiment index declined 2.5 points to 72.5, ending a series of five consecutive increases (Moody's Economy.com Feb. 10). Consumers are also concerned about potential tax increases if the U.S. Congress does not extend the payroll tax reduction. Seasonal adjustments can impact the index, which has fallen in February each year since 2000. Consumers' expectations about inflation predicted a decrease from 3.3% to 3.2% in one year, but foresaw an increase from 2.7% to 2.9% for a five-year period …

News of the Competition (02/09/2012)

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MADISON, Wis. (2/10/12)

  • California and New York have agreed to join a roughly $26 billion foreclosure settlement between federal and state governments and five of the nation's largest banks (The Associated Press Feb. 9). The attorneys general of the two states reportedly delayed signing on to the deal to force banks to make greater concessions. The settlement requires banks to pay cash penalties, send checks of roughly $2,000 to homeowners impacted by improper foreclosures and adjust loans for nearly one million homeowners. Oklahoma was the only state that refused to join the settlement, which prevents participating states from pursuing civil charges for foreclosure abuses (NPR.org Feb. 9). State and federal authorities may still file criminal charges. Bank of America, JP Morgan Chase, Wells Fargo, Citigroup and Ally Financial have three years to fulfill the deal's terms. Nine additional mortgage servicers could join the settlement to increase its total impact to $30 billion or more (The New York Times Feb. 8) …
  • Roughly 80% of U.S. banks that received prompt corrective action orders from 2007 to 2011 eventually failed. Trepp LLC data shows about 1,400 separate depository institutions received safety and soundness mandates during the five-year period, with 300 receiving more than one action (American Banker Feb. 8). As of the end of June 2011, 280 had failed, 150 saw special regulatory mandates end and 920 were subject to outstanding actions. Outcomes appeared to shift in the last nine months of 2011, when 60 bank failures were outweighed by 70 institutions that saw enforcement actions terminated. The Banker reports Trepp forecast 310 bank seizures in 2012 and 2013 if a modest recession continues, but reduces that projection to 160 if the economy shows modest growth …
  • Discover Financial Services has promised $10 million in funding during the next five years to help high school students enroll in personal finance courses. Discover's Pathway to Financial Success program funds the Council for Economic Education's high school financial education curriculum and offers grants for financial resources and training directly to schools (American Banker Feb. 8). A National Endowment for Financial Education poll recently reported that 84% of high school students believe they need more instruction on financial management …
  • Borrowers who use the telephone to apply for mortgage refinancing at Bank of America (BofA) may be told to expect a 60- to 90-day wait for a response (American Banker Feb. 8). BofA stated the delay was imposed due to a flood of refinancing applications, as well as the need to expand back-office staffing to process refinancing applications expected from the newest version of the federal Home Affordable Refinance Program. Callers who have existing relationships with the bank or applicants who visit the branch can expect prompt attention …
  • Developing mobile applications that take advantage of tablet devices' larger touchscreens will help financial institutions retain young, affluent consumers, a new study says. Javelin Strategy & Research used online surveys to develop "Mobile Banking, Smartphone and Table Forecast 2011-2016" and describes tablet apps as the "next frontier" (American Banker Feb. 8). The report discusses the need to enable consumers to manage both credit and debit transactions via tablets. By year-end, Javelin predicts 17% of consumers, or 34 million, will own mobile devices, a number expected to jump to 40% by 2016.  Large banks currently have the highest penetration among consumers who use mobile banking, serving 37% of survey participants …
  • Texas banks are holding out for twice their book value in merger and acquisition discussions with larger banks seeking to expand their presence in markets such as Houston and Dallas (American Banker Feb. 8). In contrast, the Banker reports buyers are offering post-recession prices in the range of 1.5 times book value. The standoff has slowed the pace of Texas bank deals, with the only 2012 deal to date announced by Prosperity Bancshares Inc. of Houston, which plans to acquire Bank Arlington at about 131% of book value. Publicly traded Texas banks have a median price-to-tangible-book-value of 1.84% …

Market News (02/09/2012)

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MADISON, Wis. (2/10/12)

  • First-time claims for unemployment insurance fell last week, hinting the job market might be gathering momentum. The U.S. Labor Department reported that claims decreased by 15,000--to 358,000--in the week ended Feb. 4. The four-week moving average of first-time claims also declined to 366,240--its lowest level since April 2008. Employers hired an additional 603,000 workers in the past three months, contributing to a 0.4% drop in the unemployment rate to 8.3% (Bloomberg.com  Feb. 9). Earlier this week, Federal Reserve Chairman Ben S. Bernanke reminded federal lawmakers that unemployment figures omit people without jobs who have given up on finding work …
  • Higher employment levels and a stock market rally are credited for boosting consumer confidence to its highest level in a year for the week ended Feb. 4 (Bloomberg.com Feb. 9). The Bloomberg Consumer Comfort Index increased to -41.7 from -44.8 one week earlier. Confidence climbed to a four-year high among political independents, considered a pivotal factor in presidential elections. Increasing gasoline costs could drag down American consumers' spirits but have been offset so far by lower gas and home heating oil prices, Bloomberg reported …

News of the Competition (02/08/2012)

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MADISON, Wis. (2/9/12)

  • New York Attorney General Eric Schneiderman indefinitely postponed a conference call to reporters who expected him to address the pending $25 billion foreclosure settlement with banks. Schneiderman previously criticized the settlement, which requires banks to pay cash penalties and offer assistance worth $17 billion to troubled homeowners (American Banker Feb. 7). It is unknown whether New York is among the 40 states that signed the agreement as of Monday evening …
  • Apple continues to develop a payment system aimed at taking advantage of the iPhone's uniform operating system and relatively stable hardware to sidestep the limitations of near-field communication (NFC) technology currently used by Google Wallet and other Android-based systems. Google Wallet requires consumers to have an NFC-equipped smartphone with Android software, while the merchant must have a terminal with the appropriate hardware. Android devices vary in both hardware and operating systems, which are often customized by specific carriers, making it difficult to standardize payment systems (American Banker Feb. 7). Apple and other vendors continue to develop relatively low-cost platforms to experiment with enabling payments via iPhone through the use of chip- and PIN-based transactions, plastic cards or merchant readers …

Market

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MADISON, Wis. (2/9/12)

  • Mortgage loan application volume rose 7.5% for the week ended Feb. 3, compared with one week earlier, according to the Market Composite Index. The index is based on the Mortgage Bankers Association's Weekly Mortgage Applications Survey. The refinance share of mortgage activity increased to 80.5% of total applications, up from 80% the previous week. The adjustable-rate mortgage portion increased to 6.0% from 5.6% of applications. The average contract interest rate for several types of mortgage loans fell to the lowest rate in the history of the survey, including 30-year fixed-rate mortgages with conforming loan balances, which decreased to 4.05%; 30-year fixed-rate mortgages with jumbo loan balances greater than $417,500 at 4.29%; 30-year fixed-rate mortgages backed by the Federal Houisng Administration at 3.89%; and 15-year fixed-rate mortgages at 3.33% …
  • Federal Reserve Chairman Ben S. Bernanke told the Senate Budget Committee the labor market participation rate shows the job market remains sickly despite indicators of economic improvement. The participation rate, which measures working-age people who are currently in the labor force, fell to a 29-year low of 63.7% in January 2012. Bernanke said the drop in the participation rate reflects people leaving the workforce because they cannot find jobs as well as those taking part-time jobs because full-time work is unavailable (Bloomberg.com, Feb. 7). In comparison, the unemployment rate measures only people actively seeking work. Bernanke also urged lawmakers to decrease the long-term budget deficit …

Market News (02/07/2012)

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MADISON, Wis. (2/8/12)

  • A proposed settlement between federal and state governments and the five biggest mortgage servicers raises questions about how it will be enacted as well as the potential for new litigation. Details are still being finalized on the roughly $25 billion deal, with the final amount to be impacted by whether California agrees to participate. The proposed deal allows the banks to determine which borrowers qualify for relief and what actions will be taken. Among the questions yet to be answered is the formula that will be used to credit banks for this relief. Current reports say the deal would not prevent individual borrowers from filing suit or protect servicers from securitization claims or lawsuits from private label investors (American Banker Feb. 7). Servicers participating in the settlement are Ally Financial, Bank of America, Citigroup, JP Morgan Chase and Wells Fargo …
  • Purchases for Super Bowl parties helped the International Council of Shopping Centers (ICSC) chain store sales index rise 1.8% for the latest week despite a 4-cent-per-gallon gasoline price increase and warm weather that undermined winter clearance sales. The chain store snapshot put year-over-year growth at 3.5%, which compares to 3.9% the previous week (Moody's Economy.com Feb. 7). Consumers remain cautious, with only slight growth in confidence due to ongoing worries about high unemployment and declining home prices. The ICSC forecasts modest growth of 3% to 5% for February, which includes a sales boost from cooler winter weather forecast for later this month …
  • Job openings increased to reflect labor market growth in the Job Openings and Labor Turnover Survey (JOLTS) for December. Job openings expanded at a rate of 2.5% to reach 3.4 million as of Dec. 31, equaling the three-year high achieved in September. Job openings rose in both the public and private sectors, although public sector openings accounted for the largest share of the increase. Growth in job openings is seen as a forerunner to broader hiring improvement (Moody's Economy.com Feb. 7). JOLTS showed measured but steady job creation overall for fourth quarter 2011. Currently 3.88 workers exist for every job opening …

News of the Competition (02/07/2012)

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MADISON, Wis. (2/8/12)

  • Bank of America Corp. appears to have halted efforts to find a buyer for MBNA Europe, its credit card business serving the United Kingdom and Ireland (American Banker Feb. 7). A source acquainted with the proposed sale told Dow Jones Newswires it would not proceed. Bank of America refused comment, but the Banker pointed to a report that indicated European regulators' new capital requirements make MBNA Europe less appealing to prospective buyers. MBNA Europe's activities include a joint venture with Virgin Money, with Virgin-branded credit cards comprising 35% of total loans …
  • Poor timing appears to be slowing the pace of leveraged loan deals. The market for leveraged loans appeared ready for rejuvenation in January as worries about Europe's sovereign debt situation eased, with some observers putting spreads at roughly 75 basis points (American Banker Feb. 7). This scenario would typically appeal to borrowers, but high levels of refinancing in 2011 had already allowed them to adjust current maturities. That leaves leveraged buyouts and mergers and acquisitions, which have a lead time of several months, as the source of potential new deals …
  • DocX has been indicted on 136 counts of forgery by a Missouri grand jury in a rare criminal action related to improper handling of documents used in home foreclosures. DocX, part of Lender Processing Services, Jacksonville, Fla., was one of the largest providers of foreclosure services to major banks and other lenders. Lorraine O. Brown, DocX founder and former president, was indicted on the same counts. The indictment claims that using mass-produced fraudulent signatures on notarized real estate documents, a practice known as robo-signing, constitutes forgery (The New York Times Feb. 6). The documents listed in the indictment are deeds of release filed with the Boone County recorder of deeds to remove previous claims. The case will be prosecuted by Missouri Attorney General Chris Koster. Lender Processing closed the DocX unit in 2010. Most cases related to fraudulent foreclosure practices have been civil suits …
  • A lawsuit filed by New York's attorney general claims Bank of America, JP Morgan Chase and Wells Fargo committed deceit and fraud by filing inaccurate court documents that misrepresented the banks' authority in foreclosure actions. Inaccuracies in court documents were linked to the use of Mortgage Electronic Registration Systems Inc. (MERS), which banks created to eliminate the need to record transactions in county records offices when packaging and selling mortgages as securities (Wall Street Journal Feb. 3). The electronic registry's operator, MERSCORP Inc. of Virginia, is also named in the lawsuit, which says MERS makes it difficult for consumers to use property records to learn who owns their mortgage so they can respond to foreclosure proceedings or prove inaccuracies. Banks allegedly used MERS to save more than $2 billion in recording fees …

dont use News of the Competition

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MADISON, Wis. (2/8/12)

*Bank of America Corp. appears to have halted efforts to find a buyer for MBNA Europe, its credit card business serving the United Kingdom and Ireland (American Banker Feb. 7). A source acquainted with the proposed sale told Dow Jones Newswires it would not proceed. Bank of America refused comment, but the Banker pointed to a report that indicated European regulators' new capital requirements make MBNA Europe less appealing to prospective buyers. MBNA Europe's activities include a joint venture with Virgin Money, with Virgin-branded credit cards comprising 35% of total loans …

*Poor timing appears to be slowing the pace of leveraged loan deals. The market for leveraged loans appeared ready for rejuvenation in January as worries about Europe's sovereign debt situation eased, with some observers putting spreads at roughly 75 basis points (American Banker Feb. 7). This scenario would typically appeal to borrowers, but high levels of refinancing in 2011 had already allowed them to adjust current maturities. That leaves leveraged buyouts and mergers and acquisitions, which have a lead time of several months, as the source of potential new deals …

*DocX has been indicted on 136 counts of forgery by a Missouri grand jury in a rare criminal action related to improper handling of documents used in home foreclosures. DocX, part of Lender Processing Services, Jacksonville, Fla., was one of the largest providers of foreclosure services to major banks and other lenders. Lorraine O. Brown, DocX founder and former president, was indicted on the same counts. The indictment claims that using mass-produced fraudulent signatures on notarized real estate documents, a practice known as robo-signing, constitutes forgery (The New York Times Feb. 6). The documents listed in the indictment are deeds of release filed with the Boone County recorder of deeds to remove previous claims. The case will be prosecuted by Missouri Attorney General Chris Koster. Lender Processing closed the DocX unit in 2010. Most cases related to fraudulent foreclosure practices have been civil suits …

*A lawsuit filed by New York's attorney general claims Bank of America, JP Morgan Chase and Wells Fargo committed deceit and fraud by filing inaccurate court documents that misrepresented the banks' authority in foreclosure actions. Inaccuracies in court documents were linked to the use of Mortgage Electronic Registration Systems Inc. (MERS), which banks created to eliminate the need to record transactions in county records offices when packaging and selling mortgages as securities (Wall Street Journal Feb. 3). The electronic registry's operator, MERSCORP Inc. of Virginia, is also named in the lawsuit, which says MERS makes it difficult for consumers to use property records to learn who owns their mortgage so they can respond to foreclosure proceedings or prove inaccuracies. Banks allegedly used MERS to save more than $2 billion in recording fees …

dont use Market News

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MADISON, Wis. (2/8/12)

*A proposed settlement between federal and state governments and the five biggest mortgage servicers raises questions about how it will be enacted as well as the potential for new litigation. Details are still being finalized on the roughly $25 billion deal, with the final amount to be impacted by whether California agrees to participate. The proposed deal allows the banks to determine which borrowers qualify for relief and what actions will be taken. Among the questions yet to be answered is the formula that will be used to credit banks for this relief. Current reports say the deal would not prevent individual borrowers from filing suit or protect servicers from securitization claims or lawsuits from private label investors (American Banker Feb. 7). Servicers participating in the settlement are Ally Financial, Bank of America, Citigroup, JP Morgan Chase and Wells Fargo …

*Purchases for Super Bowl parties helped the International Council of Shopping Centers (ICSC) chain store sales index rise 1.8% for the latest week despite a 4-cent-per-gallon gasoline price increase and warm weather that undermined winter clearance sales. The chain store snapshot put year-over-year growth at 3.5%, which compares to 3.9% the previous week (Moody's Economy.com Feb. 7). Consumers remain cautious, with only slight growth in confidence due to ongoing worries about high unemployment and declining home prices. The ICSC forecasts modest growth of 3% to 5% for February, which includes a sales boost from cooler winter weather forecast for later this month…

*Job openings increased to reflect labor market growth in the Job Openings and Labor Turnover Survey (JOLTS) for December. Job openings expanded at a rate of 2.5% to reach 3.4 million as of Dec. 31, equaling the three-year high achieved in September. Job openings rose in both the public and private sectors, although public sector openings accounted for the largest share of the increase. Growth in job openings is seen as a forerunner to broader hiring improvement (Moody's Economy.com Feb. 7). JOLTS showed measured but steady job creation overall for fourth quarter 2011. Currently 3.88 workers exist for every job opening …

Market News (02/06/2012)

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MADISON, Wis. (2/7/12) 

  • Business confidence lags behind improved economic data recently reported in the U.S. and Asia (Moody's Economy.com Feb. 6). The Moody's Analytics Survey of Business Confidence revealed businesses worldwide remain leery about economic prospects, with U.S. and Japanese businesses showing the greatest anxiety. Respondents were optimistic about current business conditions yet lacked confidence on questions related to hiring, office space needs and investments. Moody's said economic growth is likely to lack momentum until businesses become more upbeat about the economy …
  • State attorneys general have until Monday to decide whether to participate in a $25 billion foreclosure deal that would settle U.S. and state claims against Ally Financial, Bank of America, Citigroup, JP Morgan Chase and Wells Fargo. The deal awaits the approval of the state of California, which has the most homeowners who owe more than the current value of their property (The Wall Street Journal Feb. 6). Participating banks must pay cash penalties and provide $17 billion in principal reductions and other assistance for distressed homeowners. The amount of the deal could grow if more banks sign on. Negotiations have continued for more than a year …
  • German Chancellor Angela Merkel and French President Nicolas Sarkozy suggested financial aid intended to help Greece make debt payments should be set aside in a separate account. Following a joint Cabinet meeting in Paris, Merkel and Sarkozy indicated that keeping aid funds separate would soothe worried creditors (Bloomberg.com Feb. 6). Greece is seeking a second bailout worth $171 billion from the European Commission, the European Central Bank and the International Monetary Fund. Approval is contingent upon getting Greece's major political parties to agree to new austerity measures. Without the aid package, Greece is expected to default on a 14.5 billion-euro bond payment due March 20 …

News of the Competition (02/06/2012)

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MADISON, Wis. (2/7/12)

  • JP Morgan Chase & Co. tentatively agreed to resolve an overdraft-fee class-action lawsuit by paying $110 million, or 22% of the $500 million in earnings allegedly produced by wrongful practices. The suit claims Chase processed debit card transactions based on highest-to-lowest transaction balances, rather than the order they occurred, to boost overdraft fees charged to customers. The U.S. District Court for the Southern District of Florida case involves Chase and 30 other banks (American Banker Feb. 6). Chase claimed customers sought the high-to-low approach but received nearly 10,000 complaints each month about overdraft fees …
  • More small- to mid-sized mortgage firms are pondering the benefits of retaining mortgage servicing rights (MSRs) rather than settling for below-value servicing-released premiums (SRPs)  (American Banker Feb. 6). Big banks often pay SRPs between 50 and 110 basis points, or roughly two to three times the servicing fee. One broker told the Banker the real value of MSRs is four to five times the servicing fee. Using subservicing firms can help reduce the start-up costs linked to mortgage servicing ….
  • General Motors Co. hopes to achieve annual net income of $10 billion in coming years by increasing its profit margin from the current 6% to a goal of 10%. The automaker is expected to report 2011 net income of about $8 billion on Feb. 16 based on North American profits as well as growing business in China (The Wall Street Journal Feb. 6). GM declared bankruptcy in 2009 but has since added 13,000 U.S. jobs and plans to reopen a plant in Spring Hill, Tenn. The U.S. government still owns 26% of GM's stock, which will gain value as profits increase …

News of the Competition (02/03/2012)

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MADISON, Wis. (2/6/12)

  • Federal regulators issued fewer banking enforcement actions in 2011 than the previous year, leaving many in the industry to debate whether that is a good thing (American Banker Feb. 2). Last year, the number of cease-and-desist orders and consent orders dropped 33% from a year earlier to 286; the issuing of prompt corrective actions fell 32% to 50; and regulators reduced new formal and written agreements by 57% to 166, according to Trepp LLC data. A natural improvement will occur whether the banks police themselves or regulators force them to do it, Kevin Jacques, a finance professor at Baldwin-Wallace College in Berea, Ohio, told the Banker
  • Concerns are being raised about whether federal regulators will be able to consistently apply stress-test rules to the largest U.S. banks because of the huge number of stress-test requirements (American Banker Feb. 2). The Federal Reserve Board currently conducts stress tests for big financial firms. However, the Federal Reserve is required to perform new tests on bank holding companies with more than $50 billion in assets under the Dodd-Frank law. Firms of that size must develop their own criteria for a separate set of company-run tests. Also, the law stipulates smaller firms--subsidiaries and holding companies with more than $10 billion of assets--perform internal stress tests based on criteria formed by their primary regulator. Consequently, the Federal Reserve, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. all have issued their own proposals, creating worries about potential inconsistencies, the Banker said …
  • The S-1 filing for Facebook's initial public offering (IPO) last week indicated the social media site generated roughly $557 million in revenue for its payments business in 2011, or 15% of its  total  revenues  (American Banker Feb. 2). Facebook's overall revenue last year was $3.7 billion. Advertising created the rest of its revenue.  Facebook's payments revenues were five times what it garnered in 2010, with $105 million. Those escalating revenues resulted from the sale of Facebook Credits--a digital currency for 10 cents apiece. Users can exchange the credits to obtain digital items to display on their Facebook pages or to make upgrades to games played on the site. Facebook's digital currency could soon threaten banks' foothold as the social media giant heads into traditional channels, the Banker said …

Market News (02/03/2012)

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MADISON, Wis. (2/6/12)

  • The national unemployment rate dropped to 8.3% in January from 8.5% in December, and U.S. nonfarm payrolls added 243,000 jobs last month--the second consecutive month of better-than-expected gains (The New York Times, The Wall Street Journal and Bloomberg.com Feb. 5). The reduction in the unemployment rate and the number of jobless people--down to 12.758 million--is the strongest sign the economic recovery is spreading to the labor market, the Times said. Rising confidence among private companies powered the job growth last month, with the private sector adding 257,000 jobs to mitigate the 14,000 job cuts by the public sector--federal and local governments, the Journal said. In a related matter, the U.S. Monster Employment Index--which measures help-wanted ads placed online by U.S. employers--declined by 5% in January to a level of 133 from 140 in December. Although the drop takes the index to its lowest level since February 2010, some of the fall-off appears related to the typical slump in recruiting that occurs between November and January, Moody's said (Moody's Economy.com Feb. 3) ...
  • The U.S. future inflation gauge rose to 101.2 in January from December's revised 98.9--originally 98.6--which constitutes the largest one-month gain in more than a year, according to the Economic Cycle Research Institute (ECRI) (Moody's Economy.com Feb. 3). However the index's overall level remains low and is consonant with the consensus opinion that inflation in the U.S. has peaked, ECRI said. Also, the ECRI Weekly Leading Index--which measures economic growth--increased to 123.1 for the week ended Jan. 27 from a revised 122.7 the prior week. The smoothed annualized growth rate saw its rate of decline drop to 5.2% from 6.6% the prior week. Both gauges indicate the economic recovery is picking up steam and weathering the European debt crisis, ECRI said (Moody's Economy.com Feb. 3) …
  • U.S. service industries grew in January at the fastest pace in nearly a year, highlighting strength in the largest sector of the economy, according to the Institute for Supply Management's nonmanufacturing index (Bloomberg.com and Moody's Economy.com Feb. 3). The index rose to 56.8 from 53 in December. Also, for a second consecutive month, U.S. factory orders increased in December, signaling that manufacturing will further strengthen (Bloomberg.com and Moody's Economy.com Feb. 3). Orders rose 1.1%, following a 2.2% November gain that was larger than originally estimated, the Commerce Department said Friday. Hours worked per week rose to the highest level in 14 years, indicating U.S. industry must replace outdated equipment and rebuild inventories, Bloomberg said …

News of the Competition (02/02/2012)

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MADISON, Wis. (2/3/12)

  • Rates for 30-year, fixed-rate mortgages fell this week to the lowest level on record in the wake of the Obama administration's announcement of procedures to make it easier for homeowners to refinance and shrink their monthly mortgage payments (Bloomberg.com Feb. 2). The average rate dropped to 3.87%--the lowest on record going back to 1971--in the week ended Feb. 2 from 3.98% the prior week, Freddie Mac said Thursday. Also, the average 15-year, fixed-rate mortgage decreased to 3.14% from 3.24% …
  • Federal regulators downgraded banks' supervisory ratings twice as frequently as state regulators did, according to a new study that analyzed data from 15 years of state-chartered bank examinations (American Banker Feb. 2). The study also found that after federal exams, state banks reported higher levels of regulatory capital, more nonperforming loans and lower returns on assets. Moreover, states with more lax supervision relative to federal regulators had a higher rate of bank failures and more banks on the Federal Deposit Insurance Corp.'s problem list. Report researchers say this result could be partly because state banking departments may cater to banks in their state because they depend on the fees these banks pay--"regulatory capture" ….
  • CitiMortgage on Wednesday told its loan brokers that it will discontinue table funding loans next week while it prepares to leave the market (American Banker Feb. 1). Most mortgage workers in the wholesale division will be absorbed into the firm, a spokesman for the mortgage unit of the sixth biggest U.S. residential wholesaler, told the Banker. The company will honor rate locks that come in by this Wednesday. Table funding is a lending method employed when a loan originator does not have access to the money necessary to make loans and then holds them until it has enough to sell on the secondary market. As a result, the originator forms a relationship with a lender who provides the funds for closing and immediately takes an assignment of the loan ...

Market News (02/02/2012)

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MADISON, Wis. (2/3/12)

  • Initial U.S. claims for unemployment benefits declined last week, indicating that the labor market is continuing on its upward trend that began in the fall (The Wall Street Journal and Bloomberg.com Feb. 2). Claims fell 12,000--to 367,000--for the week ended Jan. 28, the Labor Department said Thursday. Companies are reducing the pace of job cuts as the world's biggest economy gains momentum--a requisite step to garner larger employment gains, Bloomberg said. However, continuing labor market improvement remains tenuous with economic growth expected to slow early this year and stay modest for the remainder of 2012, the Journal said. In a related matter, U.S. employers announced 53,486 job cuts in January--the highest total since September 2011--and a 39% increase from January 2011, according to the Challenger Report by Challenger, Gray and Christmas Inc. (Moody's Economy.com Feb. 2). January generally is a month of heavy job cuts, Moody's said …
  • Buoyed by an increased appetite for discounted merchandise and better spending confidence, several U.S. retailers Thursday reported solid January sales (The Wall Street Journal Feb. 2). The 20 retailers tracked by Thomson Reuters recorded 4.2% growth is same store sales last month, when 2% was forecast--compared with 4.8% the same time last year. Costco Wholesale Corp. and Target Inc. posted robust gains, while Macy's Inc. fell short of expectations, the Journal said. For most retailers, January is the final month of the fourth quarter and the lightest month for that period. However, merchants often reveal in January how well their merchandise clearances performed and provide an initial reading on how well spring products introduced during the month are doing, the Journal said …
  • For the second consecutive week, U.S. consumer confidence improved, with citizens less dour about the prospects for the economy, according to the Bloomberg Consumer Comfort Index (Bloomberg.com and Moody's Economy.com Feb. 2). The index rose to -44.8 for the week ended Jan. 29 from -46.4 the prior week. Also, a gauge of consumers' views of the state of the economy climbed to its highest level since June. However, despite gauging a slow improvement in the fundamentals in the economy, the index has not significantly changed since 2008--indicating consumers continue to remain cautious, Moody's said …

News of the Competition (02/01/2012)

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MADISON, Wis. (2/2/12)

  • Credit card issuers are bolstering their profits by recovering bad loans--which were once deemed uncollectible--through means such as sales of claims to collection agencies and court judgments against debtors (American Banker Jan. 31). That recovery is becoming more and more of a factor for the industry to return to pre-recession loss rates, the Banker said. However, because the huge amount of charge-off paper is aging, it will make it more difficult to make good on those claims, the publication added. At some of the biggest card issuers, recoveries have gained or held steady. The value of card loans written off as uncollectible by Discover Financial Services decreased by half to $550 million in the third quarter of 2011from roughly $1.1 billion in the second quarter of 2010, said regulatory financial reports …
  • Worries about Visa Inc.'s cost to merchants and small financial institutions for implementing its new digital wallet have arisen. However, Joe Saunders, Visa chairman and CEO, downplayed those concerns Tuesday at the card company's annual meeting of shareholders (American Banker Jan. 31). Visa is developing "V.me," a digital payments service that the firm said will include mobile point-of-sale capabilities and simplified one-click shopping. Several attendees at the meeting were concerned about costs because many merchants will need to modernize their card readers to process payments made with customers' mobile phones, the Banker said …
  • To maintain a leadership role in the ongoing battle against cyber-thieves, Bank of America joined a new anti-phishing coalition this week (American Banker Jan. 31). Those thieves often target online and mobile banking users. The new coalition, named Domain-based Message Authentication, Reporting and Conformance (DMARC), is striving to create a uniform mechanism--building on existing e-mail authentication standards PKIM and SPF--for verifying that an e-mail sent really is from the entity it claims to be. The group has 15 corporate members, including Microsoft, Google and Yahoo …

Market News (02/01/2012)

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MADISON, Wis. (2/2/12)

  • Mortgage loan application volume decreased 2.9% for the week ended Jan. 27 from one week earlier, according to the Market Composite Index released Wednesday by the Mortgage Bankers Association (MBA). The index is part of MBA's Weekly Mortgage Applications Survey. "The Federal Reserve surprised the market last week by indicating that short-term rates were likely to stay at their current low levels until the end of 2014," said Michael Fratantoni, MBA vice president of research and economics. "Longer-term treasury rates dropped in response, and mortgage rates for the week were down slightly as a result. Although total application volume dropped on an adjusted basis relative to last week, refinance volume remains high, with survey participants reporting that the expanded Home Affordable Refinance Program contributed to roughly 10% of their refinance activity." The refinance share of mortgage activity declined to 80% of total applications from 81.3%. The adjustable-rate mortgage share of activity increased to 5.6% from 5.3% of total applications. The Refinance Index dropped 3.6%. The seasonally adjusted Purchase Index fell 1.7%. The unadjusted Purchase Index rose 17.1% and was 4.3% lower than the same week one year ago. For the MBA report, use the link …
  • U.S. construction spending increased in December at the fastest pace in four months, indicating the industry is steadying (Bloomberg.com and Moody's Economy.com Feb. 1). Spending rose 1.5%--the largest gain since August--and is 4.3% above its December 2010 level, the Commerce Department said Wednesday. The housing industry, which has struggled since it sparked the recession in 2007, is picking up momentum because builders are starting apartment-construction projects that may bolster the industry, Bloomberg said.  However, declining government spending may mitigate progress in the entire construction industry, Bloomberg said. Because of the continuing shift to renting from owning, multifamily construction will continue to grow--particularly because of the lack of supply in the market, Michelle Meyers, a senior U.S. economist at Bank of America Corp. in New York told Bloomberg  …
  • Private companies in the U.S. added 170,000 workers in January because of increases in services and small-business hiring, according to a private report by Automatic Data Processing Inc. (ADP) that compiles payroll information (The Wall Street Journal and Bloomberg.com Feb. 1). The gain was consistent with expectations  of economists in a  Dow Jones Newswires survey, the Journal said, and follows a revised 292,000 gain--originally 325,000--in December. Service sector jobs saw a 152,000 increase in January, and factory jobs rose 10,000. The ADP report indicated large businesses with 500 or more employees added only 3,000 employees last month. Medium-size businesses added 72,000 workers, while small businesses--which employ fewer than 50 workers--hired 95,000 employees …