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Credit card originations lead new credit growth in 2014: Equifax

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ATLANTA (4/29/14)--General-purpose credit cards, such as VISA or MasterCard, lead new credit origination growth this year, according to Equifax's National Consumer Trends Report, released Monday.

Credit unions and other institutions that distribute the cards saw a 28.5% increase in January year-over-year--to $19.5 billion from $15.2 billion--while auto loan originations climbed 19.8% to $34.3 billion from $28.6 billion over that time.

Auto loans continue to lead the way overall in total loan origination dollars.

Revolving home equity loans, meanwhile, experienced an 18.4% jump in growth to $7.3 billion from $6.2 billion.

"Spring is here and consumers' desire for credit appears to be rising alongside the mercury," said Amy Crews Cutts, Equifax chief economist. "Despite the relatively low numbers of new and used vehicles sold in January, auto originations were up nearly 20% from the same time last year. This suggests that consumers are responding positively to the generous terms and greater credit availability in the auto space."

With both credit card and home equity loan originations sharply increasing over the past year, it signals "that not only are consumers interested in credit, but that banks are more willing to offer it," Crews Cutts said.

About 1.8 million auto loans were originated in January, an eight-year high and a 4.7% increase year-over-year. The total balance of auto loans outstanding for March rose 10.3% from levels last year.

The total number of credit card loans outstanding sits higher than $320 million, the highest since September 2009. The total aggregate credit card limit for credit cards also sits at a 4 1/2-year high, at more than $2.5 trillion.

Consumer sentiment cheery in April with 4-point gain

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WASHINGTON (4/28/14)--Consumer sentiment surpassed even the bright expectations economists had forecasted for April, as the University of Michigan Consumer Sentiment Survey Index, released Friday, rose to 84.1 from 80 this month, nearly full 2 points higher than most had estimated ( Economy.com April 25).

Fueled by consumers' more confident assessments of their current finances and a belief that the upward trend in the economy can be sustained over the next year, the reading is the highest in nine months.

An uptick in hours worked also appears to have bolstered the data, with the average work week inching up to 34.5 hours-per from 34.3.

"Consumers felt better in April than even our optimistic projection would have suggested," wrote Moody's analyst Nate Kelley.

The subcomponent that tracks current economic conditions climbed 3 points in April to 98.7, the highest reading since the economic downturn in 2008. This number also comfortably exceeded expectations.

The economic outlook subindex jumped 4.7 points to 74.7 as well.

Shoppers, meanwhile, believe prices will rise 3.2% over the next 12 months and increase by an average of 2.9% over the next five years; about the same expectations consumers held last month.

Save for any unforeseen circumstances, Moody's analysts expect sentiment to continue this upward march in the coming months.

Home loan demand weakest in 14 years

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WASHINGTON (4/28/14)--As the final punctuation mark on a week full of disappointing housing reports, Inside Mortgage Finance , a trade magazine, reported at the end of last week that mortgage lending had fallen to its slowest pace in 14 years.

Even during the weakest moments of the financial crisis, lenders were busier than they are now ( Los Angeles Times April 25).

With $235 billion in mortgage loans originated in the first quarter, or 58% less than the same quarter in 2013, and 23% less than the final quarter of last year, economists are seeing a consistent downward trend of housing demand in the market ( Wall Street Journal April 24).

"A strong housing rebound is an important component of most forecasts that suggest that GDP growth will be stronger than the economy's 'potential' rate over the next two years," Eric Rosengren, Boston Fed president, said in the Wall Street Journal.

The overall decline in loan demand has been fueled in large part by the pull back in refinancing, which has fallen 75% in the first quarter year-over-year.

But applications for purchase mortgages also fell last week to levels 18% below last year at this time, even though the average loan amount has climbed to a record high of $280,500, according to the Mortgage Bankers Association.  

Economists also pin the weak housing market on the many consumers who still either can't borrow to buy homes because of high debt, damaged credit or too little income, according to the Wall Street Journal.

Meanwhile, the average 30-year fixed mortgage rate has climbed to 4.5% as of two weeks ago, almost a full point higher than May of last year.

Stan Humphries, Zillow Inc. chief economist, said in the Wall Street Journal that those still-historically low rates are becoming less useful for potential homebuyers because housing prices continue to move higher.

Durable goods post biggest jump in 4 months

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WASHINGTON (4/25/14)--Orders for durable goods--such as computers, automobiles and heavy machinery--climbed 2.6% in March, the biggest increase since November ( MarketWatch April 24).

Potentially signaling an emergence from winter's grasp, every major big-ticket category witnessed an increase, according to numbers released by the Commerce Department Thursday.

Total shipments for durable goods ticked up 1.1%, inventories increased by 0.5% and core capital orders gained 2.2%, according to Moody's ( Economy.com April 24).

"(These) durable figures are yet one more data point suggesting a healthy pick-up in growth is in store for the second quarter," Avery Shenfield, CIBC World Markets chief economist, told MarketWatch.

Transportation goods saw healthy gains, increasing 4% overall with a huge boost from non-defense aircraft, which rose 8.6%. Orders from Boeing far outpaced numbers seen in March 2013.

Automobiles, which experienced a modest 0.4% increase in growth, surpassed an annualized pace of 12 million units in March, perhaps signaling that demand will recover in coming months after a weak fall season, according to Moody's analysts.

Computers and electronic parts also posted healthy numbers with a 5.7% jump in March.

Meanwhile, the general upward trend in durable goods has economists projecting an even stronger second quarter, according to a recent MarketWatch consensus . Experts forecast a 3.5% increase in growth between April and June, up from previous expectations of just 1%.

Housing picture fading: New-home sales, mortgage apps fall

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WASHINGTON (4/24/14)--A day after the release of a disappointing existing-home sales report, the housing market took another hit Wednesday, as the U.S. Commerce Department said new-home sales plunged 14.5% in March, the slowest pace since July (MarketWatch April 23).

At a seasonally adjusted rate of 384,000 sales, three of the four U.S. regions experienced declines, a trend of weak housing demand that appears to be concerning to economists, who had forecasted a sales rate of 450,000 for March.

What's more, the Mortgage Bankers Association released its weekly mortgage applications survey Wednesday, revealing a composite index for mortgage applications that had fallen 3.3% for the week ending April 18.

Refinance activity has dropped by 10.4% over the past month and sits 70% lower than last year's levels, while purchase applications also fall 16.5% lower year-over year.
Moody's analysts don't envision purchase application demand to accelerate much in the short-term either.

"Up until (Wednesday's) report, new-home sales had been reasonably stable for six months following a soft patch last summer," Joshua Shapiro, MFR chief economist, told MarketWatch. "Mortgage applications for home purchase remain lower, suggesting that higher interest rates and earlier price increases are having an impact on individual demand for homes."

With a confidence interval of plus-or-minus 12.9% tied to the March new-home sales numbers, analysts caution taking too much stock in the reported numbers for just this one month, according to MarketWatch.

In addition to rising mortgage rates and the uptick in home prices, analysts attribute the sluggish housing market numbers to a tighter housing inventory and perhaps even lingering effects of the harsh winter weather. 

Another explanation could be the hesitation by consumers to even attempt to enter the housing market.

According to a survey from loanDepot, an Irvine, Calif.-based lender, 53% "would-be borrowers" said securing a loan today is more difficult than it was a year ago (National Mortgage News April 22).

That despite the fact that the approval rate for mortgage applications climbed over 55% last year.

Further, 56% of consumers who want to buy a home won't even check whether they would qualify for loans because they fear rejection, according to the survey.

Lenders have eased credit score requirements needed to secure a loan, but consumers largely haven't taken notice, according to the National Mortgage News story. Half of the more than 1,000 consumers polled "lack knowledge of what minimum credit score lenders generally require for most loans," and 40% of those interested in buying homes opted to forego the purchase entirely because they lacked that knowledge.

Existing-home sales stagnate as prices climb

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WASHINGTON (4/23/14)--Existing-home sales continue to flounder, as levels in March fell to 4.59 million annualized units, a 0.2% drop from February. Houses are selling at their slowest pace since June 2012 and sit 7.5% lower than levels last year (Economy.com April 22).

Perhaps contributing to the lull are the healthy gains in housing prices, measured by the Federal Housing Finance Agency, which reported Tuesday a 0.6% jump in February's purchase-only house price index.

While prices are down from mid-2013 levels, prices have climbed 6.9% higher than those seen in February 2013.

Improving credit conditions--thanks to the higher credit scores of mortgage borrowers--and a tight supply of housing are driving the strong growth in housing prices, Moody's analysts said.

Analysts also said that while supply conditions are tight, they also appear to be loosening, with home inventories increasing by 4% in March, a trend that could re-energize the sluggish home-sale numbers.

"The best that can be said of the March existing-home sales report is that sales were flat after a six-month streak of weakness," said Celia Chen, Moody's analyst.

Piling on to the unimpressive housing sales data, meanwhile, Fannie Mae and Freddie Mac economists decided this week to reconsider their expectations for the housing market in 2014. Fannie Mae cut down its new-home construction outlook, and Freddie Mac darkened its forecast on home sales (MarketWatch April 22).

There could be hope for homebuyers, however. Despite the rise in housing prices, MarketWatch reported mortgage rates have been declining in recent weeks and remain relatively low, which could leave open the door later this year for a rebound in sales.

Median home prices came in at $198,500 in March, a 7.9% jump year-over-year.

News of the Competition

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  • Apple is reportedly scouting for senior payments industry executives to lead a foundling product and business development project to build an electronic payments system (AppleInsider April 21). Although in the early stages, Apple's "ambitions are very, very serious," the publication noted. Apple's payment system would likely leverage the millions of iTunes accounts, backed by credit cards, and turn iPhones into mobile wallets that could be used at physical checkout counters. Earlier this year it filed a patent for a touchless e-wallet. And, according to an April 21 Re/code article, PayPal has been talking to Apple about white-labeling part of its payment service--including fraud detection and back-end infrastructure ...

News of the Competition (04/22/2014)

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  • SALT LAKE CITY (4/22/14)--Pew Charitable Trusts released a study that shows what states have the highest and lowest payday loan rates ( Salt Lake Tribune via Associated Press April 20).  Idaho was identified as having the highest interest rates for payday loans at 582%, followed by South Dakota and Wisconsin, both at 574%,  Nevada at 521%, Delaware at 517%, and Utah at 474%. The study found rates were highest in the states that impose no legal limits on them. Among states with storefront payday lenders, the lowest average interest charged was in Colorado at 129%, hitting its legal limit; then Oregon at 156% and Maine at 217%. The report states that 15 states either ban payday loans or cap interest rates at 36%. None of those states have any storefront lenders ...

Conference Board numbers bode well for summer

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WASHINGTON (4/22/14)--The Conference Board Leading Economic Index (LEI), which broadly gauges the economic outlook for the next three to six months, jumped 0.8% in March, exceeding analyst expectations and building on the 0.5% upward movement seen in February ( Economy.com April 21).

Financial components--such as the interest-rate spread and credit index--and average weekly manufacturing hours led the gains. Lower consumer expectations and weaker building permit numbers held the index back from an even stronger showing. 

Six out of the 10 components rose, according to Moody's.

"The LEI rose sharply again, the third consecutive monthly increase," said Ataman Ozyildrim, economist, The Conference Board ( PR Newswire April 21). "After a winter pause, the leading indicators are gaining momentum and economic growth is gaining traction ... For the first time in many months, the consumer outlook is much less negative."

The improved LEI also suggests accelerated growth for the remainder of the spring and the summer, added Ken Goldstein, economist with The Conference Board.

Further, the coincident indicator, which tracks nonfarm payrolls, industrial production, personal income and trade sales, climbed 0.2%, after a 0.4% increase in February. 

"The economy is picking up momentum after a slow start and a weak first quarter," Stuart Hoffman, PNC Financial Services Group Inc. chief economist, told Bloomberg (April 21). "There's definitely more going up then down."

News of the Competition

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  • NEW YORK (4/21/14)--Former Federal Deposit Insurance Corp. Chairman Sheila Bair, speaking last week at the Museum of American Finance here, said the country's recent economic crisis would not have been as severe if big institutional investors had better fiscal skills in the basic core principles of economics, such as buyer beware and understanding risk (American Banker April 17). Bair said that institutional investors didn't do their homework and didn't price the risks they were taking appropriately.  Then they were surprised when the market soured, she said.  Bair singled out Citigroup, an entity she has said in the past should have been allowed to fail during the crisis, in her critique of private investors that otherwise avoided naming names. Bair, who now serves as a senior advisor to the nonprofit Pew Charitable Trusts, also discussed banks--saying they should have higher capital requirements to put more "skin in the game" ...

Market roundup: 30-year mortgage rate falls to 4.27%

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WASHINGTON (4/21/14)--The average mortgage rate for 30-year loans sank to 4.27% from 4.34% last week, according to mortgage buyer Freddie Mac, while average 15-year loan rates dropped to 3.33% from 3.38% (USAToday.com April 17).

Despite this second straight week of declines, rates still remain about a point higher than levels realized last year when rates had fallen to record lows on the heels of the economic downturn.

The average rate for one-year adjustable-rate mortgages climbed to 2.44% from 2.41%, while the average five-year adjustable-rate mortgage fell to 3.03% from 3.09%.

Analysts believe the overall increase in mortgage rates may be fueled by the Federal Reserve's decision to taper quantitative easing and reduce its levels of bond purchasing--the central bank's method of driving down rates to stimulate the economy.

New Federal Open Market Committee Chair Janet Yellen announced last week, meanwhile, that the Fed's policymaking body would again reduce its purchasing program this month by $10 billion, and that, barring any unforeseen setbacks, it would continue to reduce purchasing in the coming months.  

In other market news, RealtyTrac reported last week that 17% of all residential properties in the U.S. were "seriously underwater" in the first quarter of this year, a 2% decrease from the final quarter in 2013 (Housingwire.com April 16).

That means 9.1 million homeowners across the country owe at least 25% more on their houses than their current market values. Year-over-year, the number of seriously underwater homes is down about 9% this quarter, as 10.9 million properties fell into this category last year at this time.

While equity overall is rising, home price appreciation has lagged, likely meaning that many homeowners in the U.S. still have a long road ahead before attaining positive equity, said Daren Blomquist, RealtyTrac vice president.

Elsewhere, the Labor Department reported last week that median weekly wages expanded faster this past quarter than any other time in the past four years (MarketWatch April 17).

The 2.7% growth rate, seasonally adjusted, was the strongest seen since the end of 2009.

Jobless claims level off, remain at 7-year low

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WASHINGTON (4/18/14)--After initial jobless claims fell to a 7-year low last week, claims inched up by 2,000 this week to 304,000, according to numbers released by the Labor Department Thursday (Economy.com April 17).

Though, with analysts actually expecting a higher increase in claims, the data supports a pervading belief that, while still fairly weak, the job market is strengthening.

"Claims are suggesting a net pick-up in employment relative to last year's average," Jim O'Sullivan, High Frequency Economics' U.S. chief economist wrote (MarketWatch.com April 17).

Added analysts from RDQ Economics: "The jobless claims data also suggest the labor market may be making progress toward the Fed's labor market objective more quickly than many policymakers expect."

The four-week moving average fell to 312,000 from 316,750, and continuing claims for those who apply for unemployment benefits for at least a second straight week fell 11,000 to 2.74 million for the week ending April 5.

Analysts say the data also shows a downward trend in the rate of layoffs, compounding stats from the Bureau of Labor Statistics that revealed that the layoff-rate sits at an all-time low for the survey used, which dates back to 2000 (Economy.com April 17).

The number of hires continues to rise, but only at a slow pace, as they have only reached mid-2008 levels.

Moody's analysts expect the unemployment rate to bottom at 6.3% at year's end, with monthly job gains above 250,000 per month by that point and just below 300,000 per month by the middle of 2015.

Credit default rates drop across U.S. in March: Experian

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NEW YORK CITY (4/18/14)--Credit throughout the U.S. appears to be on the mend, as credit default numbers across the board dropped in March, according to the S&P/Experian Consumer Credit Default Indices (Experian.com April 15).

The composite index, which comprises all credit types, recorded its lowest post-recession rate last month at 1.2%. First mortgage default rates fell to 1.3%, the lowest since September 2006, and second-mortgage defaults fell to 0.6%.

Both auto loan and bank card credit default rates experienced historic lows in March as well, at 0.99% and 2.73% respectively.

"Along with signs that the economy is improving, consumer credit default rates continue to gradually decline," said David M. Blitzer, S&P Dow Jones Indices Index Committee chair and managing director.

The indices also track five major metropolitan statistical areas: New York, Chicago, Dallas, Los Angeles and Miami. All five saw decreases in credit default rates and have seen substantial improvements over levels in March of last year.  

Improvements in consumer confidence and the labor market, as well as a boost in retail sales, may have driven the decline. Default rates have fallen to pre-recession levels, the report said.

Rising levels of auto and student loans, meanwhile, could lead to higher levels of default in the near future, according to Experian.com.

News of the Competition (04/18/2014)

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  • WASHINGTON (4/18/14)--The U.S. Securities and Exchange Commission has posted a nine-page document meant to give Wall Street firms a blueprint for preparing to address examiners questions about how the firms detect and prevent cyber attacks (Reuters April 16). The document suggest firms should be ready to list when they detected malware, any "denial of service" attacks they've been victim to, or if they have had a network breach since January 2013. By making its examiner questionnaire public, the SEC gives up on the element of surprise that examiners sometimes like to use. The decision instead gives SEC-registered financial firms what the article calls "a rare chance" to prepare. Cybersecurity has been a hot policy topic for a dozen or more years but has come under heightened scrutiny in the wake of recent attacks on major companies, such as Target Corp. and the Neiman Marcus Group ...
  • BENTONVILLE, Ark. (4/18/14)--Wal-Mart is launching a new service that it claims will reduce the fees consumers pay for money transfers (BusinessInsider, Reuters April 17). Called Walmart-2-Walmart and expected to launch next week, Wal-Mart said Thursday that Euronet Worldwide Inc. would run the service through its Ria Money Transfer subsidiary. BusinessInsider reported that Walmart-2-Walmart cusomters will be about to make a $50 transfer for $4.50 and a transfer of up to $900 for a $9.50 fee. The publication said that a $900 transfer could cost as much as $76 elsewhere.  After Wal-Mart broke its news, the shares of Western Union shares dropped 4%,  those of MoneyGram International Inc. were down by 15.6%, and Euronet was up 4.4%, Reuters said ...

CardHub: Credit card rates, fees inch higher

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WASHINGTON (4/17/14)--Interest rates on credit cards were 2.12% higher in the first quarter of 2014 compared with the same time last year, according to the most recent Credit Card Landscape Report from CardHub.
 
For those with excellent credit, interest rates were 12.86%--a 0.55% increase compared with last year. Rates for good-credit scores were 17.35%, a gain of 1.64% over last year.
 
Rates dipped only slightly for secured credit cards--0.27%--from the fourth quarter of 2013 to the first quarter of this year. The largest relative drop was -6.73% to 21.07% for fair-credit scores during the same period.
 
At credit unions, platinum credit cards came in at 9.07% and reward cards 9.87%, according to this week's rate data from Informa Research Services.
 
CardHub, which monitors more than 1,000 credit card offers daily, noted that cash advance fees rose to $12.31--more than 10% year-over-year.
 
The average maximum late fee was $33.64--an increase of 0.54% compared with last year and well above the credit union maximum of late fees for platinum cards ($25.83) and rewards cards ($22.74).
 
CardHub surmised that the 62% year-over-year increase in complaints about identity theft and fraud could be attributed to the data security breaches at retailers such as Target and Neiman Marcus.

Nearly all 12 districts saw improvements in economy: Beige Book

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WASHINGTON (4/17/14)--Economic activity improved almost uniformly throughout the U.S. from mid-February through March, according to the Beige Book, a wide-ranging summary of economic conditions across the country published by the Federal Reserve.

Ten out of 12 districts saw improvement, the summary said, with declines in overall conditions only reported in Cleveland and St. Louis. The districts that saw gains, meanwhile, realized mostly "modest to moderate" progress.

Boston, Philadelphia, Richmond, Va., Atlanta, Minneapolis, Kansas City, Mo., Dallas and San Francisco all reported modest and moderate gains, while Chicago also said economic growth had picked up.

New York and Philadelphia each rebounded from weather-driven struggles that buried them earlier in the year.

"Loan demand strengthened since the previous Beige Book," the summary said. "Credit quality improved in the Philadelphia, Cleveland, Richmond and Kansas City Districts. New York and Dallas reported especially strong increases."

Many of the districts that stumbled through the early months of the year in terms of home sales and mortgage borrowing cited the inclement weather as the main obstacle as well.
St. Louis was the only district to report a decrease in loan growth.

New York and Dallas both indicated strong increases in credit quality, while credit standards appear to be loosening in Atlanta.

Further, the majority of districts experienced mixed or declining residential borrowing, while Dallas and San Francisco reported slight growth.

For real estate and construction, reports varied.

Home sales strengthened in Kansas City, single-family home sales stayed healthy in Dallas, and real estate appeared improved in Richmond.

Chicago reported declines in home sales, again listing weather as the main driver of the step-back, and New York housing markets continued to be mixed.

The report said auto sales, transportation, manufacturing and financial services all improved, along with improvements in labor market conditions.

News of the Competition(3)

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WASHINGTON (4/17/14)--The Federal Housing Finance Agency Office of the Inspector General released a report this week that reveals a 30% increase in lending at the 12 regional Home Loan Banks, to $492 billion between March 2013 and December 2013. The rise was driven largely by a borrowing surge by the nation's four largest banks as they raise funds to buy assets that meet new liquidity requirements, the report said (Bloomberg April 16). The advances were made to JPMorgan, Bank of America Corp., Wells Fargo & Co. and Citigroup Inc. Basel III rules, which were adopted in the U.S. last year, set capital standards that spell out for banks how much capital they must have against investments in specific financial products.  The IG's report questioned whether such a concentration of Home Loan Bank lending could put safety and soundness at risk.  It also asked whether it is an appropriate use of resources for the HLB system--created to support housing finance--to be providing funds so banks for banks to meet Basel III standards ...

Consumer prices in March outpace previous 2 months

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WASHINGTON (4/16/14)--The consumer price index climbed 0.2% in March, outpacing the 0.1% rates posted in January and February and outperforming analyst expectations for the month, based on the numbers released Tuesday by the Labor Department ( Economy.com April 15).

A slower decline in energy prices, in addition to mounting food prices, buoyed the higher rate of headline inflation, Moody's analysts said. The core CPI, which excludes food and energy prices, also rose 0.2%.  

Analysts also have commented that while inflation remains weak, inflation pressure could be building.

"On a three- and six-month basis, prices are creeping higher, which is something to keep an eye on, but with wage growth still modest and lots of retail competition, inflation should remain in check for now," Jennifer Lee, BMO Capital Markets senior economist, told MarketWatch (April 15).

Food and beverage prices increased 0.4% in March, which matched February's strong performance, with meat, dairy, poultry and cereal prices also holding on to strong gains. Overall, food prices rose 1.7% over the past 12 months.

A rebound in farm prices may be fueling the recent uptick in food prices, according to Moody's.

Gasoline prices also have taken off in the past two months, but still sit below prices seen this time last year.

Inflation remains well below the thresholds tied to Federal Reserve policy, likely meaning the Federal Open Market Committee is still a ways away from making any changes to monetary policy in the short-term, Moody's analysts said.

News of the Competition(2)

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  • WASHINGTON (4/16/14)--The Basel Committee on Banking Supervision has approved new rules for "systemically important" banks --those identified as having the potential to impact the global economy by their actions. The rules will dictate how much business such institutions could do with each other and also refine an existing cap on how much they can do with any single counterparty ( Bloomberg April 15). The intent is to limit the extent of the damage a single failure can cause--to the economy and to other lenders. In a statement on its website, the committee said the limits, effective Jan. 1, 2019, "can directly contribute toward the reduction of system-wide contagion risk," i.e., another global meltdown. It noted that the rule builds on one the committee issued in March 2013 ...
  • LUND, Sweden (4/16/14)--In an indication that--for better or worse--innovations in the payments system may be limited only by human imagination, an April 15 article in TechWeekEurope UK reported that a student at Lund University here invented a payment system that uses scans of the vein pattern of a user's hands to authenticate a transaction. Fredrik Leifland calls his system Quixter and said he came up with the idea two years ago when standing in a slow line waiting to pay for a purchase. The article says Quixter is currently set up in 15 businesses around the university, and that more than 1,600 people have signed on ...

Home buying picture rosy with arrival of spring, Freddie Mac says

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WASHINGTON (4/15/14)--Home purchases will bloom in the coming months, while refinances will continue to wilt, Freddie Mac economists projected in a blog post last week.

In the first quarter of 2013, 71% of mortgage originations came in the form of refinances, according to Freddie Mac, but that number dropped to 51% by the end of 2013. The Mortgage Bankers Association (MBA) reported last week that refinances stood at a five-and-a-half-year low ( News Now April 10).

Picking up the slack, home purchases sprouted by 20% last year, and that may only have been the beginning.

"Looking forward, our Chief Economist Frank Nothaft anticipates that more than 50% of the mortgage market will be originations for home purchases by the end of 2014," the blog post said ( FreddieMac.com April 10). "A purchase dominated market hasn't happened in 14 years--not since 2000."

In addition to higher numbers of home purchases, the housing market in general appears to be gaining strength.

Homes sales have risen 13% since they reached their lowest point during the recession. Freddie Mac expects home sales to increase about 3% this year.

Housing starts, or houses on which construction has started, also have increased, up 50% since their trough during the economic downturn. Analysts expect nearly 20% growth in this sector in 2014.

Finally, housing prices have climbed 16% since reaching their bottom, and will continue to move higher by about 5% over 2014. Though, house prices remain below their 2006 peak levels.

Meanwhile, mortgage originations in general could drop to historically low levels this year, as the MBA pulled down its initial 2014 forecast Friday, now predicting the slowest year in 14 years for the industry ( American Banker April 11).

If the association's experts are correct, the $1.065 trillion in single-family loans would be a 39% decrease from 2013.

"You would have to bank on a really big second half of the year for originations to come in at the 2013 level," Joel Kan, MBA director of economic forecasting, told American Banker.

News of the Competition(1)

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  • LONDON (4/15/14)--Facebook is seeking regulatory approval in Ireland to be allowed to launch financial services that would enable people to make payments and store money through the online social networking website ( Financial Times via MarketWatch April 14).  Beyond that, it is reported that Facebook is also looking to partner with online money transfer businesses in London. Facebook did not comment ...
  • GRAND RAPIDS and MUSKEGON, Mich. (4/15/14)--In Michigan, where the Michigan Invests Locally Exemption Act allows individual unaccredited investors to invest into a new or existing business--although with a $10,000 cap that does not apply to accredited investors--crowdfunding advocates are putting together a conference in each of these cities to educate interested parties about how the practice works now that it is legal in the state. The duo of conferences is being dubbed CrowdCon. They will outline for participants everything from legal considerations, to ways to promote a campaign for a small business, to raising capital, to the role financial institutions can take in the Crowdfunding process ( MiBiz April 14). A group that is organizing one of the conferences says it hopes the event encourages West Michigan's small businesses to keep crowdfunding in mind as a way to raise capital ...

March retail sales flourish

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WASHINGTON (4/15/14)--Retail sales numbers jumped 1.1% in March, a gain not seen since the fall of 2012, Moody's reported Monday. Analysts had forecasted a 0.8% increase, but thanks to a surge in auto sales, numbers exceeded expectations ( Economy.com April 14).

In addition to auto sales, many other segments of the market saw improvements, including general merchandise and building supplies. Gasoline and electronics sales reported some of the only declines ( MarketWatch April 14).

Excluding auto sales, which by itself saw a 3.1% climb from February's numbers, retail sales ramped up by 0.7%, which also is the biggest step increase since February 2013.

Without the sizable drop in gas station numbers, sales ticked up 1.4%, which is the largest increase in four years, according to Moody's.

"U.S. consumers are back in the game after the weather-induced slump in spending in earlier months," said Milan Mulraine, TD Securities economist in the MarketWatch article, adding that the overall tone of the report had been "unambiguously constructive."

Over the last year, retail sales have swelled by 3.8%, with strong gains expected to continue this year as the winter weather dismounts.

A combination of record-high stock prices and improving housing prices is helping push the sales upswing, while pent-up demand for items such as automobiles also has contributed.

"As long as interest rates remain contained and events overseas do not disrupt economic activity, confidence will rise and more pent-up demand will be released," said Moody's in its analysis. "Gradually increasing access to credit will be another support."

Despite March uptick, quarterly foreclosure numbers bright

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IRVINE, Calif. (4/14/14)--Despite an uptick in March, foreclosure activity across the country has fallen to its lowest level since 2007, according to RealtyTrac's U.S. Foreclosure Market Report, released Thursday.

At the end of the first quarter, which ended in March, about 340,000 properties had been hit with foreclosure filings, a 3% drop from the previous quarter and a 23% decrease from last year at this time ( RealtyTrac April 10).

One in every 385 housing units in the U.S. had a foreclosure filing--either default notices, scheduled auctions or bank repossessions--in the first quarter.

The increase in foreclosure activity in March was driven in large part by a 7% upswing in foreclosure starts, or the initial step in a foreclosure process, and a 6% jump in scheduled foreclosure auctions.

Even with the increase, however, March still represented the 42nd straight month that foreclosure activity in the U.S. had decreased compared with levels the year prior.

Meanwhile, as the nation's foreclosure numbers are dropping, several states have seen climbing foreclosure activity of late.

Nearly 30 states saw increases in foreclosure auctions, and 19 states watched foreclosure starts push higher.

Florida, Maryland and Nevada sit one, two and three respectively as the states with the highest foreclosure activity in the country.

"Now that the foreclosure deluge has dried up, banks are turning their attention back to properties that have been sitting in foreclosure limbo for some time," said Daren Blomquist, RealtyTrac vice president, in a press release. "This is most evident in judicial foreclosure states that were more likely to have impediments in the foreclosure process.

"Banks will also now be able to devote more resources to dealing with the lingering inventory of nearly half a million already-foreclosed homes that still need to be sold," Blomquist added.

Consumers most optimistic since July, survey finds

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WASHINGTON (4/14/14)--As perhaps another indication that winter's grip on the economy is loosening, consumer sentiment climbed by 2.6 points in April to 82.6, the highest reading since July, according to the University of Michigan Consumer Sentiment Index ( Economy.com April 11).

In addition to improving weather conditions, encouraging numbers in the labor market also may be fueling a rosier perception of the economy in the months to come.

Buyers felt more optimistic about their current financial situations, with the subindex gaining 1.4 points to 97.1 in April, the highest reading since the end of last year.

The economic outlook subcomponent that tracks shopper sentiment also picked up more than three points, rising to 73.3, which is the highest level seen since August.

"In general, confidence continues to hold up fairly well," said Jim O'Sullivan, chief U.S. economist at High Frequency Economics ( MarketWatch April 11). "While not especially strong, the resilience in confidence was one of the reasons we did not believe the sharp slowing in many growth indicators at the start of the year reflected fundamental deterioration."

Consumers also see prices climbing 3.1% over the next 12 months, the survey found, a decrease from March's reading of a 3.2% increase. They also believe prices will increase an average of 3% per year for the next five years, which sits a bit higher than the 2.9% consumers projected in March, according to Moody's.

Jobless claims dip to 7-year low

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WASHINGTON (4/11/14)--Claims for unemployment insurance fell 32,000 to 300,000 for the week ending April 5 according to Thursday's numbers from the Labor Department, perhaps pinning culpability for the recent sluggish job market squarely on the unusually harsh winter weather (Economy.com April 10).

The 300,000 jobless claims are the lowest amount in almost seven years.

"(The report) provides further support for the argument that the mid-winter slowdown was a byproduct of the unusually harsh weather that gripped much of the country," Jim Baird, chief investment officer of Plante Moran Financial Advisors, told MarketWatch in an article Thursday. "The return of warmer temperatures with the arrival of spring has brought with it better data."

The four-week moving average for jobless claims dropped to 316,500 from 321,000.
Continuing claims fell 62,000 to 2.776 million for the week ending March 29, and the insured unemployment rate fell to 2.1% from 2.2%, rounding out stronger job growth across the board.

But to really ignite the job market, analysts say, hiring levels must climb.

With corporate balance sheets positioned to sustain thicker payrolls this year, clearer direction in U.S. monetary policy, and a forecast of stronger final sales, those hiring waves could break soon, according to Moody's.

Forward guidance changing as economy heals: FOMC minutes

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WASHINGTON (4/10/14)--It appears the Federal Open Market Committee (FOMC), which released minutes Wednesday from its two-day meeting March 18-19, isn't chomping at the bit to raise the federal interest rate.

Despite unemployment numbers nearing levels at which the FOMC had said could trigger increases to that rate, a lack of confidence in the overall health of the economy could force the committee to hold off.

In light of this, broad support was shown during the meeting for altering the committee's approach in the way it would make policy decisions moving forward.

Previously, the Federal Reserve's monetary policymaking body expressed that once the national unemployment rate dropped below 6.5%, the federal interest rate would begin to climb.

But pulling back on that strategy, which Janet Yellen, newly seated chair of the committee, indicated would likely be the case in the short-term, formalized a shift to a qualitative, rather than a quantitative, approach to guidance.

"This change in our guidance does not indicate any change in the committee's policy intentions as set forth in its recent statements," Yellen said in a press conference after last month's meeting. "(But) rather the change is meant to clarify how the committee anticipates policy evolving after the unemployment rate declines below 6.5%."

While the FOMC may hesitate to raise the federal interest rate, it appears it will stick with the ongoing wind-down of asset purchases, a practice it has maintained since the outset of the recession in an attempt to stimulate the economy.

Yellen said the Fed will buy $55 billion in securities next month, down $10 billion from the current rate. The FOMC has said it will drop that number every time the body meets.

"If incoming information broadly supports the committee's expectation of ongoing improvement in labor markets and inflation moving back over time toward its longer run objective, the committee will likely continue to reduce the pace of asset purchases in measured steps at future meetings," Yellen said.

Refis tumble in April mortgage application survey

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WASHINGTON (4/10/14)--While home purchases edged higher for the fourth straight week, overall mortgage application activity dropped last week, with a tumble in refinance applications leading the way, according to the Mortgage Bankers Association's mortgage applications survey, released Wednesday.

Falling 4.9%, refinance activity now sits at a five-and-a-half-year low ( Economy.com April 9).

On the four-week moving average for refinances, activity sunk by 9% over the past month, and sits 67% lower than levels a year ago. Refinance applications now make up 51% of all applications and 43% of prospective loan volume.

Purchase applications have jumped 6.9% over the last four weeks, though they still come in 15.6% under levels at this time last year.

Additional numbers:
  • Contract rates for 30-year fixed-rate conforming mortgages stood unchanged at 4.56%;
     
  • Contract rates for 30-year fixed-rate jumbo mortgages climbed by 3 basis points to 4.49%; and
     
  • Five-year adjustable-rate mortgage rates increased 1 basis point higher to 3.26%, which is 68 points higher than the prior year's numbers.

Small biz. sentiment rebounds in March

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WASHINGTON (4/9/14)--After a disappointing February, small business sentiment rebounded in March, as the National Federation of Independent Business' Small Business Optimism Index gained 2 points, pulling it up to 93.4 (Economy.com April 8).

An expectation that sales numbers will brighten over the next six months drove the improvement, analysts said.

While March's number erases much of the 2.7-point decline seen in February, and sits 3.9 points higher year-over-year, it still fails to breach the 95-point ceiling that has capped the index since the start of the recovery (NFIB.com April 8).

Current sales and earnings trends still are lagging, the index found, pinning down hope from businesses for continued recovery in the coming months--especially considering the tight credit environment.

A net 6% of businesses said sales have deteriorated over the past three months, and 24% said earnings have fallen over that same stretch.

Additionally, fewer companies said they plan to hire new employees in the next six months, though business leaders added that they do plan to raise compensation for existing workers.

Those heftier paychecks could boost consumer spending, which could translate to stronger days ahead for the construction industry, compounding the recent trend of rising revenues for construction businesses.

Construction companies are among the few operations to see such gains of late.  

Still, only a net 18% of companies said they feel the economy will deteriorate over the next six months, which falls low on the subcomponent's range, according to Economy.com.

Feb. consumer credit exceeds expectations

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WASHINGTON (4/8/14)--Driven by big-ticket purchases, consumer credit climbed by $16.5 billion in February, exceeding expectations of a $14 billion increase for the month (Economy.com April 7).

Households have kept credit cards tucked away of late, however, as revolving credit balances fell $2.4 billion for the month, according to Federal Reserve data released Monday.  

The upswing in consumer credit balances, especially in nonrevolving credit such as student and auto loans, is likely fueled by improvements in the job market, housing prices and stocks. The low-interest rate environment, among other factors, has enticed consumers to make larger purchases, such as on vehicles or education, analysts said.

Those nonrevolving loans jumped $18.9 billion for February, the largest step up since February 2013. Loan levels have not decreased since August 2011.

Analysts expect this trend to continue, thanks to additional growth in auto and student loans.

With revolving credit slowing for the second straight month, it appears consumers are still hesitant to shoulder higher levels of credit card debt.

That type of credit should rebound as the job market continues to realize gains and the harsh winter weather continues to recede, according to Economy.com.

Credit unions' overall amount of credit remained steady. The 8.8% decrease in revolving credit was offset by the 8.8% increase in nonrevolving credit.

Credit card use rises, while balances fall

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WASHINGTON (4/7/14)--While consumers have racked up higher credit card bills lately, they've also paid those balances down at a higher rate, according to the American Bankers Association's Credit Card Market Monitor, released last week.

Ending balances dropped by nearly 5% in the third quarter of last year, while credit card purchases generally grew, the report found.

"This suggests that consumers aren't just using their credit cards more, they are also more likely to pay off their monthly balance," said Kenneth J. Clayton, ABA's Card Policy Council executive director ( American Bankers Association April 2). "As a result, the amount consumers are paying in interest as a share of their outstanding credit card balance declined for the 13th consecutive quarter."

The report also found credit card users are spending more on discretionary goods and services, or the nonessentials, as discretionary spending levels jumped 3.5% year-over-year. Nondiscretionary spending climbed 1.4% as well.  

"(Consumers are) less concerned with the direction of the economy and their ability to keep debt at manageable levels," Clayton said. "Whether this trend will continue remains to be seen."

Credit cards tied to reward programs saw a 7.8% increase year-over-year, the report revealed, perhaps in part explaining the uptick in overall credit card spending. Clayton noted that increases in both spending and reward card use is beneficial for retailers and the broader economy.

BofA faces $800M CFPB settlement for card practices

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WASHINGTON (4/7/14)--Bank of America Corp. and the Consumer Financial Protection Bureau are in discussions for an $800 million settlement regarding add-on products sold to credit card holders.
 
The settlement is related to allegations that the bank pressed its cardholders to sign up for products that would protect them from identity theft or cancel their debt if they lost their job. The CFPB alleged Bank of America--as well as Capital One, Discover, American Express and JP Morgan Chase and Co.--misled consumers about the value of the products and marketed them in a deceptive manner ( The Wall Street Journal April 4).
 
It would be the largest settlement to date, with much of the money going back to consumers. Litigation and criticism from regulators led Bank of America to halt selling "Credit Protection Plus" and "Credit Protection Deluxe" to new customers in 2012.
 
This is the most recent settlement for Bank of America regarding investigations into its past business operations. It recently agreed to pay $9.5 billion to settle mortgage claims with Fannie Mae and Freddie Mac. The state of New York received $15 million to settle a civil lawsuit by New York state Attorney General Eric Schneiderman related to Bank of America's purchase of Merrill Lynch & Co. during the financial crisis.
 
In both settlements, Bank of America neither admitted nor denied the allegations.

Jobless claims up but stick near post-recession low

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WASHINGTON (4/4/14)--Jobless claims for the week ending March 29 climbed by 16,000 to a seasonally adjusted 326,000--the highest levels recorded for March--according to Labor Department numbers released Thursday.

Despite a soft end to the month, the four-week moving average of 319,500 still hovers near a post-recession low (Economy.com April 3).

"The trend of improving claims appears to be continuing after the early 2014 run-up," said Jennifer Lee, BMO Capital Markets senior economist (MarketWatch April 3).

If the steady, lower jobless-claim numbers are in fact a signal of sustainable improvements in the workforce, a strong jobs report scheduled for release later this week could strengthen the notion.

Economists, however, predict 200,000 jobs have been added in March, only a slight uptick from the mild gains made in February. 

Continuing claims, which tracks those who claim unemployment benefits for at least a second straight week, rose by 22,000 to 2.84 million for the week ending March 22.

Despite uninspiring additional job numbers, the job market may still be rebounding, as employers announced the fewest first-quarter job cuts in 19 years, according to Challenger, Gray and Christmas Inc., a global outplacement consultancy organization.

The first quarter closed at 34,399 jobs cuts for March, which is the second lowest total for one month since January 2013.

More than 41,000 job cuts had been planned for March. The entire quarter saw 121,341 job cuts, a 16% decrease from the same quarter in 2013.

"The first quarter typically experiences some of the heaviest job cutting of the year," said John A. Challenger, CEO of Challenger Gray and Christmas, adding, "Employers are well below (average) this year, suggesting that layoffs continue to decline in a recovery that is approaching its five-year anniversary."

Mortgage applications take step back, survey says

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WASHINGTON (4/3/14)--Mortgage applications decreased 1.2% for the week ending March 28, while the unadjusted purchase index increased 1%, according to a survey released Wednesday by the Mortgage Bankers Association.

While the increase in purchase mortgages could signal a migration towards higher concentrations of home purchases, purchase applications still fell 17% lower than the prior year's numbers.

Overall, the unadjusted market composite index, which measures mortgage loan application volume, fell by 1% for the week ending March 28, while the refinance index also came down 3%.

That lower share of refinance activity, which now sits at 53% of all applications, witnessed its eighth straight week of decline.

Adjustable-rate mortgages, which have claimed higher levels of loan concentrations of late thanks to lower rates, remained unchanged at 8% of total loan applications.

Interest rates for mortgages, meanwhile, stayed fairly calm.

The average interest rate for 30-year fixed-rate mortgages for homes worth $417,000 or less stood pat at 4.56%. Mortgage interest rates tied to jumbo loans for homes in the same value bracket increased slightly to 4.46% from 4.45%.

Additional interest-rates:
  • Rates for FHA-backed 30-year fixed-rate mortgages increased to 4.21% from 4.16%;
     
  • Contract interest rates for 15-year fixed-rate mortgages remained at 3.62%; and
     
  • Contract interest rates for 5/1 ARMs moved up to 3.25% from 3.22%.

CoreLogic: Feb. home prices up 12.2% over last year

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WASHINGTON (4/2/14)--Home prices in February came in strong, according to the CoreLogic Home Price Index (HPI) released Tuesday, revealing a 12.2% increase in prices compared with the prior year, and a 0.8% jump from January numbers.

Without distressed sales in the mix, home prices still showed marked improvement from last year, as prices jumped 10.7% nationally and 0.9% in February from January.

CoreLogic expects home prices will rise 10.5% higher in March compared with March 2013 prices as well, with a monthly increase of 0.5% from February to March. 

"As the spring home-buying season kicks off, house price appreciation continues to be strong," said CoreLogic Chief Economist Mark Fleming. "Although prices should remain strong in the near-term due to a short supply of homes on the market, price increases should moderate over the next year as home equity releases pent-up supply."

Fourteen states experienced double-digit, year-over-year growth for February compared with 2013, with Colorado, Nebraska, North Dakota, Texas and the District of Columbia all surpassing new home price highs. Further, 22 states came within 10% of their own price peaks, according to CoreLogic.

No state witnessed home-price depreciation in February.

Analysts at Moody's attribute the stronger home prices to looser credit market conditions, the fact that the demand for housing is still outgaining construction, and a reduction in average household debt, among other factors (Economy.com April 1).

Though, because the availability of rental units is likely to grow substantially in the coming months because of the forecasted surge in construction--leading to less single-family homes being placed on a diluted rental market--analysts expect price growth to flatten after this year.

Yellen: Fed's 'extraordinary' commitment still needed

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WASHINGTON (4/1/14)--Citing "considerable slack" in the economy and job market, Federal Reserve Chair Janet Yellen defended the central bank's easy-money policies on Monday, in her first public speech since becoming Fed chair two months ago.
 
"I think this extraordinary commitment is still needed and will be for some time, and I believe that view is widely shared by my fellow policymakers at the Fed," Yellen said in remarks at the 2014 National Interagency Community Reinvestment Conference in Chicago ( Reuters March 31).
 
The "scars from the Great Recession remain, and reaching our goals will take time," she said. "The recovery still feels like a recession to many Americans, and it also looks that way in some economic statistics." At 6.7%, the national unemployment rate is still higher than it was at any time during the 2001 recession, she noted.
 
Though some economists believe the labor market remains tight, Yellen believes otherwise. Worker compensation shows no evidence of rising and the unexpectedly large proportion of part-time workers and long-term unemployed could draw people back into the labor market, or better-paying jobs, she said.
 
She cited three workers who either lost their jobs or absorbed sharp pay cuts when the recession hit, including one who "scrambled for odd jobs and temporary work."