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Consumer income rising, but spending flat

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WASHINGTON (6/27/14)--Income growth climbed 0.4% and wage growth ticked up as well, according to numbers released by the Commerce Department Thursday.

But Americans appear to be stashing away the extra cash, as consumer spending fell 0.1%, after adjusting for inflation, and the savings rate jumped to 4.8%.

The savings rate, up from 4.5% in April, reached its highest mark since August ( June 26).

Rising prices may also have tamped down spending, as consumer costs climbed 0.2%, with energy goods and services rising 0.8%.

"Weakness in real spending is likely in part a consequence of a recent pickup in inflation," BNP Paribas said in a research note ( MarketWatch June 26).

Income growth was driven by dividend income, while no other segment stood out, according to Moody's.

The modest increase in consumer spending, meanwhile, was fueled by purchases of durable goods, such as new cars and trucks, while service spending stagnated with a 0.1% upturn.

Further, the Bureau of Economic Analysis announced Wednesday--in its second revision of the numbers--that the economy severely contracted by 2.9% in the first quarter, with healthcare spending plunging considerably.

Moody's analyst Scott Hoyt said Thursday: "The revision puts spending on a weaker trajectory, but also means that saving is higher than previously thought, potentially allowing for more growth."

Still, the recent spending data have led forecasters to revise their expectations for the economy in the second quarter. Analysts now expect the economy to expand 3.6% from April to June, down from 3.8%, according to a survey conducted by MarketWatch.

Others, however, have predicted that the economy will not even reach 3% growth.

News of the Competition (06/27/2014)

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  • WASHINGTON (6/27/14)-- Information to evaluate the "individual systemic footprint" of 33 large U.S. bank holding companies is now available from the Federal Reserve Board. In announcing the availability Thursday, the Fed said the year-end 2013 data cover five categories often used when considering the potential systemic risk of a banking organization: size; interconnectedness; complexity; substitutability, which is a measure of how easily a firm's activities can be replaced by another firm; and cross-jurisdictional activity, which includes foreign liabilities and claims. Going forward, this information will be published on an annual basis, always reflecting the previous calendar year. The Fed instructs: To access the data, search for an individual holding company on the National Information Center website, , recall its regulatory reporting forms, and download the Banking Organization Systemic Risk Report (FR Y-15)...
  • WASHINGTON (6/27/14)--Banks have taken on greater lending risk of late, and the trend has one top U.S. regulator concerned. In a report released Wednesday, the Office of the Comptroller of the Currency (OCC) pinpointed high-yield loans to speculative borrowers and indirect auto loans as the two places where banks have lowered their lending standards ( The Wall Street Journal June 25). Calling it an "erosion in underwriting standards," the office said that credit risk is again mounting on the heels of improved credit quality nationwide. Further, covenant-lite leveraged loans that give banks very little protection grew to $258 billion last year, which nearly surpasses the total amount issued between 1997 and 2012. The concern is that the previous crisis is not always the best indicator of what issues may happen next, Darrin Benhart, deputy comptroller for credit and market risk, told reporters during a conference call ( The Wall Street Journal ). Benhart added that the OCC will ratchet up scrutiny of bank activity in these areas...

Mortgage apps continue disappointing run: MBA

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WASHINGTON (6/26/14)--Mortgage application activity continues to slide, as the Mortgage Bankers Association (MBA) reported in its weekly survey that its composite index slipped by 1% for the week ending June 20.

Within the overall index, purchase application activity has fallen seven out of the last nine weeks ( June 25).

"Three full weeks into June and mortgage application activity is showing no signs of the significant rebound expected by most at the beginning of the year," said Gregory Bird, Moody's analyst ( ), adding that purchase applications are historically low.

Averaged over the last four weeks, refinance activity was largely unchanged but fell 56% behind the pace seen last year at this time. Purchase applications dropped 2% over the past month and fell 16% year-over-year.

Refinance activity, which constituted 52% of all applications, declined 0.9% for the week.

As for mortgage rates, the 30-year fixed-rate fell 3 basis points (bp) to 4.33%, which is 13 points lower than last year at this time. Jumbo 30-year fixed-rate mortgage rates declined 4 bp to 4.28%, while the five-year adjustable rate mortgage rate climbed 3 points, ending the week at 3.23%, according to .

Moody's further reported Wednesday that the MBA also announced that it has trimmed its purchase originations forecast for the year and lowered expectations for 2015.

Apparently, the weakness in the housing market is being driven by the absence of first-time homebuyers, with that segment making up only 27% of all buyers in May, according to a report by the National Association of Realtors released earlier this week ( ). 

Historically, first-time home buyers make up 40% of the market, the report said.

On 3rd thought, GDP crumbles in Q1

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WASHINGTON (6/26/14)--Real gross domestic product (GDP) officially flopped in the first quarter with a 2.9% tumble, according to a second revision of the quarter by the U.S. Bureau of Economic Analysis, released Wednesday.

The agency's initial estimate was a 0.1% increase, followed last month by a revised 1% contraction.

"The first quarter was a disaster for the U.S. economy, as it contracted severely," said Scott Hoyt, Moody's analyst ( June 25). "Fortunately most of the decline was because of factors that were either temporary or onetime events."

The nearly 3% pull-back marked the largest drop since 2009 and the largest during a period of prolonged economic expansion since the tail end of World War II ( MarketWatch June 25).

Hoyt said the drop was fueled by severe winter weather, the expiration of the U.S. emergency unemployment program, slower inventory accumulation and a temporary poor economic period overseas.

The lack of consumer spending also played a key role in the contraction, especially in health-related spending, which sank by $6.4 billion instead of swelling by $39.9 billion, as the government had anticipated.

Weak inventory investment and final sales totals also dragged down the economy in the first quarter.

Gross domestic income, another marker of the health of the economy, shrank 2.6% after a 2.6% jump in the fourth quarter of 2013. 

Moving forward, as the second quarter comes to a close, the impact of these factors should fade and the economy should rebound, Hoyt said, adding that real GDP growth now hovers above 3%.

Many economists expect the economy to grow by 3.6% in the second quarter, according to MarketWatch.

"Since the recovery began five years ago, real GDP has grown about 2% per year," Hoyt said. "Growth should accelerate to above 3% for the remainder of the year and through much of 2015. Although the economy hit a deep pothole in the first quarter, this outlook remains intact."

Despite modest income growth, June consumer confidence jumps

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WASHINGTON (6/25/14)--Consumer confidence has climbed to its highest level since 2008, according to the Conference Board, which reported Tuesday that its overall gauge of consumer confidence rose 3 points to 85.2 in June.

Shoppers also feel better about their present financial situations, as the present situation survey component climbed nearly 5 points to its highest rate in more than six years.

Further, nearly one-quarter of consumers said they believe business conditions are "good," while the percentage of respondents who believe conditions are unfavorable for business dropped 1.8%.

"Many times these types of swings in the Conference Board measure are associated with a stronger labor market, but in this case, buyers indicated more enthusiasm over current business conditions, which is the conduit by which a stronger labor market will evolve," said Nate Kelley, Moody's analyst ( June 24). also reported this week that its financial security index had rebounded in June as well. (See related story: Half of Americans have little to no emergency savings: Bankrate.)

Despite the improvement in consumer confidence, however, feelings over income prospects have stagnated. From the survey, 72% of people expect their income to remain flat over the next six months, while those who believe their incomes will rise dropped more than 2 percentage points.

The Bureau of Economic Analysis reported Tuesday that personal income actually inched up 0.8% in the first quarter, with income climbing in 46 states. Year-over-year, personal income rose 3.5% in the quarter.

Earnings made up about half of the increase in personal income, with particularly strong quarters recorded for professional services, construction and finance.

Income growth was also spurred by the expansion of Medicaid and the rollout of the Affordable Care Act, which added $22.3 billion to the overall income total.

"As special factors wane and job growth continues to pick up, growth in nominal incomes will be more than double its first quarter rate by the end of the summer," said Marisa Di Natale, Moody's analyst.

New-home sales post huge May after prices slow in April

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WASHINGTON (6/25/14)--New single-family home sales soared above expectations in May, rising 18.6% from April levels and posting their quickest pace since mid-2008, according U.S. Census Bureau numbers released Tuesday.

While new-home sales numbers are volatile, and often revised, analysts still put at least some stock in the initial reading of a 504,000 annual rate gain, as recent months have produced much weaker results ( June 24).

The largest jump came in the Northeast, which saw its sales skyrocket by 54.5% after a dismal start to the year. The region has increased its new-home sales pace by 36.6% since this time last year.

In the South and West, sales have jumped 12% and 33% year-over-year respectively, with the Midwest as the only region not to post healthy gains.

While inventories of new single-family homes climbed 17% in May year-over-year, inventories were left unchanged from April, pushing down supply, tightening the market and pressing upward on home prices, which according to several other reports released Tuesday, had slowed in April.

Among those reports, the Federal Housing Finance Agency reported Tuesday that four of nine census regions posted declines in home prices in April, when sales activity had bottomed out after a sluggish first quarter.

Annual increases recorded by the S&P/Case-Shiller Home Price index slowed in April by nearly 2 percentage points as well.

But with the uptick in sales in May, the median sales price for a new single-family home jumped 7% year-over-year to $282,000, according to Moody's.

Though, "the share of homes sold above the median price has increased 2 percentage points since last May, which accounts for some of the increase in the media house price," Moody's analyst Celia Chen said (

News of the Competition (06/25/2014)

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  • NEW YORK (6/25/14)--Boost Mobile, a popular prepaid cell phone retailer owned by Sprint, is looking to break into an entirely different market: prepaid cards. In an attempt to leverage its strong ties to low-income communities, which rely heavily on prepaid cell phone services, Boost is hoping its longstanding relationship will give them the leg-up in a market dominated by the likes of Green Dot, NetSpend and American Express (American Banker June 23). The basic product will feature international money transfers, bill pay and an ability to add minutes to the customer's mobile phone plan. Boost then hopes those who enroll in the program, which is being released nationwide, will graduate to a more extensive version that will include a reloadable prepaid card that enables direct deposit, free person-to-person mobile payments and mobile check deposit, among other services, according to American Banker. Boost Mobile customers also can access their funds instantly through their cell phones, unlike other products on the market …

Existing-home sales rebound in May

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WASHINGTON (6/24/14)--Existing-home sales bounced back in May, jumping 4.9% from April to 4.89 million annualized units sold. The surge surpassed expectations and is the strongest month-over-month gain since August 2011 ( June 23).

Despite the jump, however, sales still fall 5% behind levels seen in May of last year.

Signals of an improving housing market are materializing, said Moody's analyst Eric Tannenbaum ( ), but the pace remains below the more than 5-million unit pace seen in May 2013.

Single-family home sales paved the way for the month with a 5.7% increase, with sales activity especially fervent in the Midwest. The pace of sales of condos/co-ops did not change.

Meanwhile, the number of homes for sale climbed 6% year-over-year, which has slightly slowed home-price appreciation. Home prices rose 5.1% year-over-year in May, compared with the 12% climb between May of 2012 and 2013.

But prices are still rising as sales outpaced inventory expansion, keeping the market tighter.

Distressed home sales are becoming less and less of a factor in determining home prices as well, as the National Association of Realtors reported that sales of distressed homes dropped to 11% from 18% year-over-year in May. 

Rhode Island unemployment tops in U.S. at 8%-plus

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WASHINGTON (6/23/14)--Rhode Island tops an economic data category that no state ever wants to lead: unemployment.
At 8.2%, the Ocean State posted the only 8%-plus unemployment rate in the U.S. in May, according to state and regional U.S. Labor Department numbers released Friday.
But while the news may not be welcome in Rhode Island, for the rest of the country, the fact that only one state is still stuck above 8% may signal that the labor market is improving.
Said Alexander Miron, a Moody's analyst ( June 20): Although hiring slowed in the South and West, employment in each region is on track for a strong (second) quarter. More improvement in the pace of hiring became visible in the Northeast, which is snapping back from rough winter weather.
Only one state over the last 12 months has watched its unemployment numbers rise, according to the Labor Department, as Alabama's jobless rate climbed to 6.8% from 6.4% year-over-year.
After Rhode Island, Nevada, Mississippi and Kentucky recorded the next-highest unemployment rates in the country, at 7.9% for Nevada and 7.7% for Mississippi and Kentucky.
The lowest unemployment rate in the U.S. can be found in North Dakota, where over the last year the rate has fallen to 2.6% from 3%.
On North Dakota's heels, Vermont's unemployment came in at 3.3%, and Utah, South Dakota and Nebraska all recorded 3.6% unemployment.
States that experienced the biggest drops in unemployment from April to May were Illinois, Massachusetts, California, Montana and Utah.
The national unemployment rate sits at 6.3%.
"Twenty states had unemployed rate decreases from April," the Labor Department press release said. "Sixteen states had increases and 14 states and the District of Columbia had no change."

Foreclosure activity sinks to post-recession low: RealtyTrac

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WASHINGTON (6/20/14)--Foreclosure filings dropped by 5.2% in May, the second straight month of decline and a new post-recession low, according to RealtyTrac numbers ( June 19).

Starts, lender repossessions and scheduled auctions--the three types of foreclosure activities--all fell in May, led by states that benefit from foreclosure processes that take less time to complete, according to Moody's analysts.

"The number of households becoming delinquent on their mortgages continues to decline as house prices trend higher and the labor market heals," said Brent Campbell, Moody's analyst ( "Fewer homeowners find themselves underwater or unable to meet their monthly mortgage payments. Aside from the distressed properties that are still moving through the foreclosure process in the judicial states, foreclosure filings continue to broadly head lower."

Specifically, starts sank by 5.9%, foreclosure auctions fell 4.4% and bank repossessions slipped 5.6%.

Florida experienced the highest rate of foreclosures, Maryland placed second and Nevada came in third.

National foreclosure inventories, meanwhile, fell 2.8% in May, and sit 19% lower than levels seen last year at this time.

Jobless claims still floundering

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WASHINGTON (6/20/14)--The number of U.S. citizens seeking unemployment insurance continues to rest at a post-recession low, as initial jobless claims fell by 6,000 to 312,000 for the week ending June 14, the Labor Department reported Thursday (MarketWatch June 19).

Averaged over the month to smooth out any spikes, jobless claims slipped by 3,750, also near a post-housing-bust low.

Marisa Di Natale, a Moody's analyst, said that despite some choppiness over the past couple of weeks surrounding the Memorial Day holiday, jobless claims continue their downward path and are about as low as they have been since the recession ended ( June 19).  With the four-week moving average also dropping, this suggests that the pace of job growth, which has been above 200,000 in each of the last four months, held steady or improved slightly in June, Di Natale added.
Continuing claims, or those to receive unemployment benefits for at least a second straight week, fell by a seasonally adjusted 54,000 for the week that ended June 7.

News of the Competition (06/20/2014)

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  • WASHINGTON (6/20/14)--SunTrust is expected to pay the Federal Housing Administration $418 million in a move that will nudge the federal mortgage insurance agency's balance sheet toward the black (American Banker June 18). The sum would bolster the White House's fiscal year 2015 prediction that the FHA will have a $7.8 million surplus by the end of September. The payment is part of a $1 billion settlement with federal agencies to settle alleged violations of the False Claims Act. American Banker has reported that some of the $418 million earmarked for the FHA might, in turn, go to the U.S. Department of Veterans Affairs and the Rural Housing Service. Of the rest of the $1 billion in settlements, $500 million has been set aside for consumer relief and $50 million will finance additional cash penalties. Last year, the FHA received $1.7 billion in emergency funding from the U.S. Treasury, though it was not expected to need a cash injection this year, according Banker. The federal agency also received almost $1 billion from Bank of America in a similar settlement. The Justice Department said that SunTrust admitted that it lacked a quality control program, and that half of the FHA-backed loans it originated did not adhere to agency guidelines--and that the bank also failed to report to the Housing and Urban Develop Agency that it had detected faulty loans. The Atlanta-based bank said that it had already set aside reserves for the settlement and claims to have improved its underwriting process and internal oversight...
  • WASHINGTON (6/20/14)--Dozens of U.S. House members--both Republicans and Democrats--are appealing to the White House to nominate a Federal Reserve Board member with community banking experience (American Banker June 18). The 87 members who signed the letter were organized by Reps. Sean Duffy (R-Wisc.) and Ed Perlmutter (D-Colo.). The letter stated that "it's in the Federal Reserve's best interest to have a representative who understands the unique needs and perspectives of community banks when key economic and regulatory decisions are being debated." Recently, the Senate confirmed two members to the board--Stanley Fischer, who now serves as vice chairman, and Lael Brainard. It also recommended incumbent Gov. Jerome Powell for a new term. American Banker reported that observers believe the recent departures of former Govs. Elizabeth Duke and Sarah Bloom Raskin have created a dearth of institutional knowledge of community banking. A bipartisan coalition of senators introduced legislation in April, which would require that at least one Federal Reserve Governor have community banking or supervision experience. That bill, which was written by Sen. David Vitter (R-La.) and co-sponsored by six of his Republican colleagues and two Democrats, has been referred to the Senate Banking Committee...
  • NEW YORK (6/20/14)--Banking giants U.S. Bank, Wells Fargo and Citigroup have been targeted with lawsuits this week for their roles as trustees on mortgage-backed securities that were sold under their supervision in the years leading up to the financial crisis of 2008 (Wall Street Journal June 18). BlackRock Inc. and Pacific Investment Management Co., investment firms with billions at stake on the securities, claim the banks breached their duty to the bondholders by allegedly not forcing lenders and bond issuers to repurchase loans that did not meet the quality standards described to buyers when the securities were sold. Wells Fargo, Citigroup, HSBC Holdings and Bank of New York Mellon oversaw 2,000 bond issuances between 2004 and 2008. The investment companies are seeking damages for losses on the bonds surpassing $250 billion, according to a Wall Street Journal source...

News of the Competition (06/19/2014)

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  • JACKSON, Miss. (6/19/14)--Mississippi Attorney General Jim Hood has sued credit report publisher Experian Information Solutions, accusing the company of violating consumer protection laws (American Banker June 17). The top state prosecutor claims that Experian knowingly included faulty data in its reports, which illegally hindered the creditworthiness of millions of Americans. The complaint also alleges that the company provides no meaningful process for consumers to ask the company to revise erroneous information. Hood's office accused the company of systematically ruling in favor of the bank or debt collector that reported the debt and attempting to sell consumers products when they call to protest. It also alleges that the company mistakenly cited consumers' inclusion on a federal terrorism watch list. The litigation, initially filed in a state courthouse in Biloxi, Miss., was last week transferred to a federal court in the state, with  allegations pertaining to the Fair Credit Reporting Act. American Banker described the case as the first significant legal action by a state against a credit bureau in years and said that it could encourage other states and federal agencies to also sue Experian. The company has claimed that, to the best of its knowledge, it complies with data protection requirements, but warned its investors earlier this year that the Consumer Financial Protection Bureau and its counterpart in Britain could have an effect on the company's business model ...
  • WILMINGTON, Del. (6/19/14)--Subscriber's to Suze Orman's prepaid debit card, Approved, have been informed that it will no longer work as of July 1, according to a letter from her business partner, Bancorp Bank (New York Times June 17). The company has encouraged cardholders to spend the money on their cards before the end of the month. Orman, a celebrity financial adviser, introduced Approved in 2012. Users paid a $3 monthly fee in order to use it. She had previously stated that she was proud of the fact that TransUnion, a major credit bureau, had agreed to examine data from her cards, claiming it was unfair that those who borrowed money on credit cards were rewarded under the current credit-scoring system. According to one Approved customer who spoke to the New York Times, a Bancorp representative said that Orman would address cardholders after the venture is wound-up in July. American Banker reported June 17 that the card might have failed because the monthly fee might not have been enough to cover costs of operation. Another recent high profile prepaid card to have failed recently was the Karadashian Card, which was shut down after consumers complained that they were charged up to a year's worth of monthly fees up front. Another celebrity prepaid card, Russell Simmons' Rush Card, has actually succeeded in the long run, and is now expanding into payroll services ...

While FOMC holds down rates, CU 'lending boom' will roll on

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MADISON, Wis. (6/19/14)--In addition to thinning out its bond-purchasing program by another $10 billion, the Federal Open Market Committee (FOMC) also announced Wednesday it will continue to hold the federal funds rate at near-zero levels.

Further, once the stimulus purchasing program sunsets later this year, the Federal Reserve's monetary policy-making body said it likely will continue to pin interest rates down until the economy strengthens.

For credit unions, the ongoing low-interest rate environment should boost their bottom lines, according to Steve Rick, Credit Union National Association (CUNA) senior economist.

The FOMC's "dot-plot indicates the target Fed funds interest rate is expected to be 1.25% by the end of 2015; 2.5% by the end of 2016; and 3.75% by the end of 2017," Rick told News Now, adding, "This will allow credit unions to roll over and re-price their assets at a similar pace to the re-pricing of their liabilities, limiting their interest rate exposure.

"CUNA expects interest rates in 2018 will 'normalize' at levels below previous plateaus due to lower real interest rates and lower expected inflation."

Rick added that the low interest rates expected for the remainder of this year will "keep the lending boom rolling along" for credit unions.

Credit union loan balances are rising at a seasonally adjusted 10% annual rate, Rick said, which is the fastest it's climbed since the summer of 2005.

Strong job creation, improved consumer balance sheets, rising consumer confidence, faster membership growth, competitive loan pricing and post-great-recession pent up demand for durable goods are a few of the factors driving the recent surge in credit union lending, CUNA's senior economist added.

"Credit union lending appears to be firing on all cylinders as some loan categories that were previously declining are now posting positive growth rates," Rick said. "For example, home-equity loan balances declined over the last three years due to households paying down debt, debtors rolling their home equity loan balance into their first mortgage refinance and the reduction of available home equity as home prices fell. 

"But now home equity loan balances are rising at a seasonally adjusted annual rate of 8%.  Faster loan growth will have a positive effect on credit union earnings this year as asset yields head up, improving net interest margins and ultimately the bottom line, net income."

FOMC to mull post-QE exit strategy

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WASHINGTON (6/18/14)--When the Federal Open Market Committee (FOMC) concludes its two-day meeting today, the easy prediction is that it will announce a plan to shave yet another $10 billion off of its quantitative easing program.

The tougher task, analysts believe, is guessing what the Federal Reserve's monetary policy-making body will have decided, if anything, about what to do once that bond-buying program is completely phased out, almost a certain inflection point for the economy.

Both raising short-term interest rates from their near-zero levels and drawing down the Fed's now massive portfolio are on the table, but the timing and the pace of both moves remain up for debate.

The Fed won't maintain near-zero interest rates as the economy strengthens, nor will it maintain a $4.5 trillion balance sheet, Alan Blinder, economics professor at Princeton University and former vice chair of the Federal Reserve, told MarketWatch Monday.

The kicker is that the mere suggestion by the committee of one strategy or another can send waves through the market, meaning, no matter the FOMC's plan, it's likely the majority of the group will keep any decision as quiet as possible.

But there are serious disagreements among the FOMC, Binder told MarketWatch, adding that, without naming names, there are a number of members who don't hesitate to publicize their disagreements.

The backdrop for these decisions by the FOMC, in addition to updating its economic forecast and offering up new interest-rate projections this week, will be the state of the economy, which sputtered in the first quarter.

The committee will have to weigh the 1% contraction the economy experienced in the first quarter, headlined by an anemic housing market, and at the same time consider the 3-plus percent rebound in growth expected for the second quarter.

News of the Competition (06/18/2014)

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  • WASHINGTON (6/18/14)--The U.S. Justice Department turned down a $4 billion settlement offer from Citigroup last week, as the federal agency doesn't believe the amount adequately covers the damage inflicted by the big bank's alleged shoddy mortgage-lending practices that preceded the 2008 economic downturn (Forbes June 13). Government negotiators are seeking closer to $10 billion, according to reports, to recoup at least 10% of the $91 billion Citi sold in mortgage-backed securities leading up to the recession. Should Citi agree to pay $10 billion, it would be the second 11-figure settlement from a big bank in the last year, as JPMorgan Chase agreed to pay $13 billion in November to settle a dispute over its own mortgage-lending practices...
  • LAS VEGAS (6/18/14)--A pot industry payment processor, formerly called GreenHouse Payment Solutions, has joined up with two card-payment companies in order to equip marijuana dispensaries with the means to accept debit and credit cards, according to a GreenHouse press release. Combining the expertise of Advanced Content Services, Inc., and SinglePoint, Inc., the reconfigured and renamed GreenStar Payment Solutions, Inc. will allow marijuana businesses to cut down on non-cash payments, with the intention of improving convenience and reducing concerns about safety for both dispensaries and their customers, according to the release. GreenStar will hold its first official board meeting in Denver next month...

NEW: FOMC continues taper, hints at post-QE moves

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WASHINGTON (6/18/14 UPDATED p.m. 2:35 p.m. ET)--All along, the Federal Open Market Committee (FOMC) has said tapering its monthly bond-purchasing program is not on a set course, but despite a weak first quarter for the U.S. economy, the committee announced today it will continue to reduce its quantitative easing (QE) program by $10 billion.

The announcement came at the conclusion of the FOMC's two-day policy meeting this week.

The committee added that if the labor market continues its upward trend and if inflation continues to rise closer to the FOMC's longer-run objective of 2%, it will likely again taper asset purchases at its next policy meeting.

"The committee will closely monitor incoming information on economic and financial developments in coming months and will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until the outlook for the labor market has improved substantially," the FOMC said.

The Federal Reserve's monetary policy-making body has been shaving down the amount of bonds and securities it has been buying over the last few months--purchases that have injected much-needed cash into the lending industry and subsequently the economy--by $10 billion every month.

With this most recent reduction, the Federal Reserve will purchase agency mortgage-backed securities at a rate of $15 billion per month, and Treasury securities at $20 billion per month.

Once the program sunsets, the committee must then turn to the decision of when, and by how much it should raise short-term interest rates that concurrently have helped lift up lending over the past few years.

FOMC members said in the statement that it will be appropriate to hold down the federal funds rate at near-zero levels for quite a while after the asset purchase program ends, especially if inflation fails to reach the committee's preferred 2% goal.

"The committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the committee views as normal in the long run," the committee said.

The committee also must craft a plan to disperse the trillions of dollars it has amassed through the bond-buying program. Though, the committee appears comfortable with its balance sheet for now, as it also said that its holdings of longer-term securities will help maintain downward pressure on interest rates, support mortgage markets, and help make broader financial conditions more accommodative.

"In turn (this) should promote a stronger economic recovery and help to ensure that inflation, over time, is at the rate most consistent with the committee's dual mandate," the committee said.

The FOMC hosts eight policy-making meetings every year. The next meeting will take place July 29-30. Meeting minutes are released three weeks after the conclusion of a meeting.

Homebuilder outlook rallies in June

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WASHINGTON (6/17/14)--For the first time this year, homebuilder confidence is on the upswing, according to the June National Association of Home Builders' (NAHB) housing market index, released Monday.

All three subcomponents in June increased, with the composite index jumping to 49 from 45 and current sales surging by 6 points ( June 16).

However, the index--which gauges overall confidence among homebuilders--still falls below 50, indicating high levels of pessimism within the homebuilding market.

"Consumers are still hesitant, and are waiting for clear signals of a full-fledged economic recovery before making a home purchase," David Crowe, NAHB's chief economist, told MarketWatch (June 16). "Builders are reacting accordingly, and are moving cautiously in adding inventory."

The West region saw the strongest rebound, climbing nine points in June after an abysmal start to the year, according to Moody's analysts.

The only region not to post strong gains in builder confidence was the Northeast, where the index dropped even further to 33 from 35.

"Since the NAHB's composite index generally tracks single-family housing starts, (the positive report) increases the chance that single-family residential construction will hasten as we enter the summer," said Gregory Bird, Moody's Analyst ( ). "However, this is no slam dunk, as the headline number remains below 50, albeit barely, signaling that on net more builders view single-family housing market conditions as poor than good."

Mortgage rates to rise for HAMP holders

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WASHINGTON (6/17/14)--Homeowners who received loan modifications on their mortgages to reduce their monthly payments after the housing bubble burst in 2008 will soon see those mortgage payments begin to climb ( June 13).
About 30,000 homeowners who modified their mortgages through the government-operated Home Affordable Modification Program (HAMP) will see their rates and payments begin to tick up this year as the initial five-year terms draw to an end.
Payments for more than 290,000 homeowners will follow suit next year.
When the loan modification program was being designed, many forecasters predicted a quicker recovery for the economy than what has occurred, so the terms, which in some cases knocked mortgage rates down to 2% annually, carried five-year terms.
Once the five-year term ends, rates can only rise 1% every year until they have returned to the average market rate at the time of the modification.
As part of the program, the Treasury requires mortgage lenders to send notice to borrowers that their rates are going to step up at least four months prior to the increases. 
Second notices are also required 60 to 75 days before the rates reset, according to .

Consumer sentiment slips to 3-month low

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WASHINGTON (6/16/14)--Confidence among consumers dipped in early June to its lowest point in three months, according to the University of Michigan and Thomson Reuters Consumer Sentiment Survey ( MarketWatch June 13).

The survey's consumer confidence index dropped to 81.2 from May's last reading of 81.9, a number well below what analysts had expected for the beginning of the month.

Despite the slip in survey numbers, buyers reported feeling rosier about their current financial situations.

"Continued improvement in labor market conditions and the ongoing wealth effect from rising equities and home prices should continue to make consumers more comfortable in purchasing big ticket items over the coming months," Gennadiy Goldberg, U.S. strategist from TD Securities told MarketWatch.

Long-term optimism has waned, however, as expectations have grown dim for the economy in the coming months, according to one subindex in the survey.

Moody's analysts said that tensions overseas between Russia and Ukraine, in addition to the recent outbreaks of violence in Iraq, may be hurting confidence ( June 13).

Shoppers expect prices to rise 3% over the next year, according to , a drop from May's expectations of 3.3%.

Five-year projections for inflation rose, however, to 2.9%, from 2.8% in May.

News of the Competition (06/13/2014)

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  • CHICAGO (6/13/14)--On June 10, the Federal Deposit Insurance Corp. filed suit against JPMorgan Chase & Co. and BMO Harris Bank to claim $265 million in federal tax refunds owed to failed FBOP Corp. banks ( Crain's Chicago Business June 12). The Oak Park, Ill.-based bank was seized by the FDIC in 2009 with most of the assets and deposits--with the exception of the tax refunds--being sold to U.S. Bank in Minneapolis. With a $246 million loan, JPMorgan was the biggest lender to FBOP, which at its peak held more than $19 billion in assets. Prior to its closure, FBOP was sued by BMO Harris to recover a $43 million loan. JPMorgan and BMO Harris want to recoup some of what they are owed with FBOP's tax refund. The FDIC estimates that the FBOP bank failure cost the insurance fund $2.5 billion ...

Driven by autos, May retail sales accelerate

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WASHINGTON (6/13/14)--Retail sales only climbed 0.3% in May, but as April's numbers were revised significantly higher, May's increase appears a little stronger ( June 12).
Auto sales continue to lead the way--including a double-digit jump from auto dealers--pushing retail growth overall 4.3% higher than May 2013.  
Though, without autos in the mix, sales were up only 0.1%, as modest declines were common throughout the rest of the market. Aside from vehicles, building material sales were the only other bright spot.
"Overall sales have been up more than 4% from a year earlier for three straight months for the first time since last summer," said Scott Hoyt, Moody's analyst ( ). "Sales have clearly regained the momentum they lost during the winter."
Meanwhile, consumers are using credit cards to make their purchases at a higher rate than they were last year, according to numbers released by First Data Corp. Thursday.
Spending with credit cards swelled 4.2% year-over-year in April and increased 1.7% between April and May. Overall, retail purchases in May experienced its best month since last year, driven by a 6.7% jump in credit card spending on building materials and supplies ( ATM Marketplace June 11).
"Credit card spending growth continued to be strong and led all other payment types," said Krish Mantripragada, senior vice president of information and analytics for First Data. "The surge in spending growth at hotel and travel merchants, building material and home furnishing merchants--where credit is the primary payment tool--was a major driver supported by easing lending standards and payroll growth."

Foreclosures fall to 8-year low in May: RealtyTrac

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IRVINE, Calif. (6/12/14)--Foreclosure activity in the U.S. sank to an eight-year low in May, according to RealtyTrac, a leading housing market data firm, as lenders have reclaimed fewer and fewer homes with every passing month ( June 10).

Nearly 110,000 properties across the country toiled in the foreclosure process last month, according to the numbers, which is a 5% decline from the previous month, and 26% below levels seen in May of last year.

May also represented the 44th straight month in which foreclosure activity had fallen on a year-over-year basis. Foreclosure activity encompasses foreclosure notices, scheduled auctions and bank repossessions.

"This is showing that foreclosures are fading further into the rear-view mirror in most places," Daren Blomquist, RealtyTrac vice president told Reuters. "This is good news for the housing market."

Institutions reclaimed 28,373 properties in May, a 6% drop from April and the lowest number since July 2007, according to RealtyTrac. Repossessions have plummeted 27% year-over-year as well.

Foreclosure starts fell 10% between April and May, and have dropped 32% year-over-year. Starts now sit at their lowest mark since December 2005.

Florida continues to post the highest rate of foreclosures, with one in every 436 homes somewhere in the process, followed by Maryland, Nevada and Illinois.

Blomquist said he believes foreclosures will continue to decline through the fall.

Meanwhile, mortgage applications swelled for the week ending June 6, according to numbers by the Mortgage Bankers Associations' mortgage application survey, with purchase activity rising 9.3% and refinancing 11%.

Though, analysts say the climb was largely influenced by a slow prior week due to Memorial Day.

During Memorial Day week, purchase and refinance activity dropped sharply at 14% and 13% respectively. Both categories remain historically low, according to Moody's ( June 11).

Consumers lukewarm about homes in a stalled economy: Fannie Mae

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WASHINGTON (6/11/14)--Consumers continue to doubt that the economy is pointed in the right direction, while stagnant household income appears to be a roadblock for improvements in the housing marketing, according to data from Fannie Mae's May 2014 National Housing Survey ( MarketWatch June 9).

The percentage of people who believe the economy is trending downward remained at 57% last month, according to the survey. And the percentage of those who reported a significantly higher income than last year dropped four points to 21%.

Despite a more positive sentiment about the housing recovery of late, homebuyers and sellers have still largely been vacant from the market for this time of year.

"Consumers' lukewarm income expectations and reticence about the economy seem to be holding back housing demand," said Doug Duncan, Fannie Mae chief economist and senior vice president ( MarketWatch ). "This year's spring and summer home buying season has gotten off to a slow start, even as mortgage rates have trended lower over the past two months."

Duncan added that national housing data reveal that the economy remains the chief concern for consumers who don't believe it's the right time to put their homes on the market.

While the housing market has showed some signs of improvement, 2014 looks like it will fall short of the sales rate achieved last year, Fannie Mae's chief economist said.

Additional survey highlights:
  • Those who believe home prices will rise in the next 12 months fell to 48%, while those who believe home prices will decrease jumped 7%;
  • Respondents who believe mortgage rates will increase in the 12 months dropped to 49%;
  • Those who believe it's a good time to buy a house fell to 68%, a slight decline, while those who believe it's a good time to sell a house rose to 43%, a new high for the survey;
  • Those who say the economy is improving increased 3% from last month to 38%; and
  • Those who expect their personal financial situation to get better over the next year fell slightly to 42%.

Jobs number grows, quality in question

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WASHINGTON (6/11/14)--Though the U.S. economy has just about recouped all the jobs it lost after the economic downturn, questions remain about the quality of the jobs that have been returned.

About 138.46 million citizens were employed last month, according to numbers released by the Labor Department last week, just edging out the 138.37 million Americans who were employed in January 2008, the most ever ( MarketWatch June 10).

But in addition to the fact that the percentage of people who have jobs has fallen nearly 5% since 2008, it may also be concerning to learn just what types of jobs have been brought back in recent years.

According to Labor Department numbers, it seems as if the economy is replacing high-paying jobs with low-paying jobs, as the average wage has dropped to $24.38 an hour.

Manufacturing and construction jobs, which boast above-average pay scales, have fallen by 2.3% since 2008, while other high-paying jobs such as those in wholesale trade, the financial sector, government and information services have also fallen short of returning to pre-recession levels, according to MarketWatch.

All told, the United States offers 4 million fewer well-paying jobs than it did in January 2008.

Industries that have seen rising job numbers in recent years were health care, food preparation, white-collar professional and business services, and education.

While some of these industries can offer high pay, Labor Department numbers show that the economy has failed to add 3 million of these types of jobs that pay more than the average hourly wage.

Business economists forecast robust 3.5% growth in Q2

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WASHINGTON (6/10/14)--After a first quarter that saw the U.S. economy contract by 1%, economic growth should mount in the second quarter and consistently build on those gains for the rest of 2014, according to a survey by the National Association of Business Economists ( The New York Times June 9).

The survey polled 47 economists from businesses, trade associations and academia from May 8 to 21.

Likely to drive those forecasted improvements are steady inclines in job growth and accelerated consumer spending.

Respondents also largely agreed that the Federal Reserve will completely phase out its bond-buying program--which it has employed for the past few years to spur the economy by holding down lending rates--by the end of this year, likely another sign of a strengthening economy.

Economists predict gross domestic product to expand 3.5% in the second quarter and stick above 3% for the rest of the year. The weak first quarter, anchored by the unusually harsh winter weather, has caused experts to recast their predictions for the year however.

Overall, respondents said growth will climb only 2.5% this year rather than the 2.8% that had been expected.

The Fed is a bit more optimistic, as the nation's monetary policy-making body believes growth can reach 3% by year's end, but the Federal Open Market Committee, which makes decisions for the Fed, could revise that expectation later this month during its first meeting since reports that the economy contracted in the first quarter were released.

Economists also appear to have brighter expectations for hiring, according to the poll. Expectations are that employers will add an average of 209,000 jobs per month for the rest of 2014, up from March's forecast of 188,000.

The increase in job growth, then, should lead to higher levels of consumer spending. Economists said they believe spending will climb 2.9% this year, the strongest rate since 2006.

Jobs climb again in May; unemployment stuck at 6.3%

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WASHINGTON (6/9/14)--The economy added 217,000 workers in May, a pull-back from April's strong gain of 282,000 jobs, but still another marker of a growing labor market during a year averaging 200,000 new jobs every month, according to numbers released by the Labor Department last week.

Despite the steady climb, however, the unemployment rate did not flinch and stands at 6.3%.

The Labor Department also reported last week a jump of about 8,000 unemployment insurance claims, but despite the increase claims remain low overall ( June 5).

"Pretty much right on the head with all forecasts," said Christopher Vecchio, currency analyst ( MarketWatch June 6). "A solid report all around. Not overtly positive, but still positive."

The latest rise in employment pushes the economy back over its pre-recession peak from January 2008, though questions still remain about the quality of jobs being added.

The gains were driven by three industries, business/professional services, education/healthcare and leisure/hospitality, and "while the first two create many quality jobs, leisure/hospitality jobs are among the lowest paying," said Moody's analysts.

Further, while the economy may have added enough jobs to meet its pre-recession peak, in order to accommodate the number of workers who have joined the market since then, it would require almost a doubling of the recent numbers.   

Meanwhile, average hourly pay for workers inched up by 0.15%, or a 2.39% improvement year-over-year, and the average number of hours per work week remained at 33.7 for hourly workers, and 34.5 for all workers.

Consumer credit surges at CUs: Fed report

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WASHINGTON (6/9/14)--Overall outstanding consumer credit at credit unions spiked in April, climbing to $275 billion from $269.9 billion in March--the largest leap since the middle of last year--according to the Federal Reserve's consumer credit report, released Friday. 

While revolving loans, consisting mostly of credit card use, remained relatively flat for credit unions, nonrevolving credit--more associated with financing big-ticket items--swelled by $4.8 billion month-to-month to $232.7 billion.

Across all lending institutions in the United States, demand for credit rose by $26.8 billion in April, which is the largest step up since December 2010. The majority of the increase was driven by an $18 billion climb in nonrevolving balances, mirroring the trend for credit unions.

Revolving credit balances also recorded a post-recession high with an $8.8 billion jump.

"Improvement in the job market, house prices and stocks have consumers feeling more confident," said Andrew Davis, Moody's analyst ( June 6). "In turn, consumers are taking advantage of extremely low interest rates and easier access to credit to finance big-ticket items such as education and vehicles."

Underwater borrowers drying off as home-equity rises

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WASHINGTON (6/6/14)--The number of homeowners grappling with underwater mortgages has fallen to levels not seen since late 2009, according data released Thursday by CoreLogic.

More than 3.5 million homeowners have recaptured equity in their properties over the past year, with about 6.3 million homes still considered underwater--meaning the amount owed on the property is worth more than the property itself--down from 9.8 million year-over-year ( MarketWatch June 5).

Further, CoreLogic analysts expect 1.2 million more homes to surface above negative equity in the next 12 months, assuming home prices gain 5%, as the Irvine, Calif.-based firm has predicted.

Home prices are up 10.5% year-over-year, according to CoreLogic.

"Prices continue to rise across most of the country and significantly fewer borrowers are underwater today compared (with) last year," Anand Nallathambi, CoreLogic CEO, told MarketWatch .

But while the number of homeowners underwater continues to evaporate, nearly one-fourth of all 43 million mortgaged homes nationwide are still considered under-equitied--meaning they possess less than 20% of equity in their homes.

The positive trend in home-equity hasn't been evenly distributed throughout the country either, as five states account for nearly one-third of all negative equity, including several that were hit the hardest when the housing bubble burst.

The states were Nevada, Arizona, Illinois, Florida and Mississippi.

News of the Competition (06/06/2014)

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  • LOS ANGELES (6/6/14)-- The city of Los Angeles has filed a lawsuit against JPMorgan Chase alleging the bank saddled minorities with risky mortgages and then reaped the profits from their inevitable foreclosures ( Forbes June 5).  Some believe the suit could ultimately rake billions away from the bank in settlements, just as suits against other big banks have led to massive payouts for similar discriminatory lending practices. This suit alleges JPMorgan has conducted these predatory lending practices--imposing different terms or conditions on a discriminatory basis--since at least 2004. The suit also alleges that after the economic downturn in 2008, according to Forbes , the big bank then began refusing to hand over mortgages to minorities, or offering them with higher rates than the borrowers should have received. . .

Strong consumer lending driven by auto sector

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ATLANTA (6/5/14)--In alignment with the recent surge in auto sales, the automotive lending sector continues to post big numbers this year, according to the Equifax National Consumer Credit Trends Report, released this week.

Total outstanding loan balances for autos rose to $884 billion in April, a record high and a 10.8% climb year-over-year.

Nearly $70 billion in new credit had been issued by February, which is a 13% jump annually as well, and only 1% of total current outstanding balances for autos are considered seriously delinquent.

"The boom in auto purchases ended in 2004, and people are now thinking about replacing their jalopies as the average car on the road today is over 11.4 years old, and the financing terms are favorable for those with decent credit histories," said Amy Crews Cutts, Equifax chief economist.

While by no means as strongly as autos, mortgages also appear to be trending higher this year, the report found.

First mortgages posted an increase of 2.7% in April year-over-year, while delinquencies plummeted 24% over that same stretch.

New home-equity revolving credit also posted five-year highs in February--both in total new credit and total number of loans.

Finally, the total balance of home-equity installment loans dropped 13.3% year-over-year; the total number of home-equity installment loans outstanding sank 11% over the same period; and the total balance of severely delinquent home-equity installment loans sits at a five-year low, decreasing 35% from levels seen a year ago.

Economy growing slow and steady: Beige Book

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NEW YORK (6/5/14)--Though at a "moderate to modest" pace, economic activity picked up in all 12 Federal Reserve districts between April and mid-May, according to the Federal Reserve's Beige Book, released Wednesday.

The report, compiled by the Federal Bank of New York between April 7 and May 23, amasses information on the economy nationwide to offer a snapshot of current conditions.

Improvements were led by the auto industry, as "increasingly strong" new vehicle sales were reported by more than half of the districts, while the rest reported at least steady sales. Demand for used vehicles waned by comparison.

Consumer spending also climbed in nearly all 12 districts--though by varying degrees--tourism numbers spiked, and non-auto retail sales grew moderately.

"As the weather has improved, industries that require foot traffic, such as retail and auto sales, have been showing noticeable improvement," wrote Christopher Velarides, Moody's analyst ( June 4).

Low housing inventories suppressed sales in the real estate market, while home prices again stepped up throughout most of the United States. Condo and apartment rental markets boomed, and multifamily or apartment construction also is gathering momentum.

Lending throughout the country also gained steam, with about two-thirds of the districts relaying an uptick in loan demand. And while credit standards stood pat, credit delinquency rates and quality improved.

The labor market also broadened, as hiring was stronger for this period throughout the country, with several districts even reporting shortages of skilled workers. Wages have remained flat, however.

Manufacturing activity picked up, including at a notably strong pace in many districts along the East Coast, St. Louis and Kansas City, Mo.

Lot shortage could inflate homebuilding costs

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WASHINGTON (6/4/14)--Smaller homebuilders are finding fewer and fewer parcels on which to erect new houses, possibly leading to higher new home prices for those in the market, a survey by the National Association of Home Builders (NAHB) has found.

According to the survey, 59% of builders reported a "low" or "very low" supply of developed lots in their markets. A developed lot allows builders to begin construction immediately.

That short supply could drive up the cost to build and, in turn, buy new homes.

"Builders price homes based on what they are going to have to pay for all the ingredients," David Crowe, NAHB chief economist, told MarketWatch (June 3). "If they are starting to pay more for lots, they are going to pass that on right away."

Further, builders said that prices for the two most desirable lots, called "A" and "B" lots, have risen higher than levels seen a year ago.

Crowe attributes the shortage to the fact that many developers didn't keep faith that demand for new homes would return after the recession, so they have failed to develop lots over the past several years. And those who did want to develop had difficulty finding financing.

But while the survey tracked mostly smaller homebuilders, the 10 largest players in the industry, which make up about a quarter of all home construction in the United States, could be faring better.

For example, Toll Brothers reported owning or controlling more than 50,000 home sites at the end of April, an 11.5% jump from last year.

Meanwhile, of the 387 respondents to the NAHB survey, most build less than 25 homes per year. And nearly 90% of them said that national builders buying lots have a "significantly" or "somewhat" negative impact on price or the availability of lots, according to MarketWatch.

New autos rev up U.S. automakers' sales

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WASHINGTON (6/4/14)--Auto sales ramped up in May to 16.8 million units sold--an 800,000-unit increase from April and the fastest pace since 2007--according to numbers released by AutoData Tuesday.

Chrysler, Toyota and Nissan all enjoyed year-over-year sales growth near 20% year-over-year, and even an embattled GM, which has been ravaged by a spate of recent recalls, saw sales climb 12% annually.

Hyundai, Honda and Ford experienced single digit gains.

Sales for the month may have received a boost from the benefit of a fifth weekend in May, in addition to the sales events that always mark Memorial Day to attract consumers.

Moody's analysts said that warmer spring weather and the success of several new vehicle models fueled sales as well ( June 3).

Several manufacturers did not fare as well in May, however, including Volkswagen and Volvo, which each saw year-over-year sales diminish.

Even more than cars, light-truck sales experienced the strongest gains and imports in general made up 22% of sales in May.  

"The strong pace of sales is not sustainable, but reflects, to a large extent, the release of pent-up demand," said Sophia Koropeckyj, Moody's analyst. "Moody's analytics expects vehicle sales to continue their upward path, however. In 2015, sales are expected to average 17 million units."

Millennials struggle to buy homes, despite preference to own

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NEW YORK (6/3/14)--Despite an overwhelming preference to buy, only 36% of those in the U.S. under the age of 35 are homeowners, the lowest number since 1982, according to recent data from the Census Bureau ( June 2).

A recent survey by Fannie Mae found that nearly 90% of millennials, or those born between the early 1980s and early 2000s, would rather buy a home than rent.

But because of high levels of student loans, tight lending standards, recent upticks in home prices and a leaner housing inventory, millennials largely haven't been able to scrub clean their credit or save enough for a down payment to make a purchase.

"When we surveyed millennials, they cited several barriers to homeownership, especially access to financing," Steve Deggendorf, Fannie Mae senior director, told .

While the ability to buy a home appears to be lagging, the interest in doing so remains strong, according to the Fannie Mae survey.

Nearly 60% of "younger renters" said they would rather own a home than rent. And more than 85% of "younger owners" said they'd prefer to continue to own a home.

Perhaps contributing to the dearth of young homeowners is that many potential homebuyers are wary of securing a mortgage.

In a survey released Monday by the National Foundation for Credit Counseling, 1 in 5 respondents said they don't believe taking out a mortgage is worth the risk.

Another factor perhaps keeping young people out of the housing market is their lack of confidence in being approved for a mortgage.

The Fannie Mae survey found that younger renters continue to be pessimistic about their chances of securing a mortgage, likely stemming from the fact that many are still paying off student loans.

That pessimism only climbed as income levels among those surveyed fell.

Further, the majority of younger renters reported not having enough cash or assets to cover even a 5% down payment plus closing costs on a starter home.

In the face of these obstacles, though, the majority of younger renters said that purchasing a home is still in their plans, with roughly half reporting that they plan to buy the next time they move.

News of the Competition (06/03/2014)

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  • SAN FRANCISCO (6/3/14)-- Jim Smith, executive vice president and head of the digital channels group at Wells Fargo, has created a Big Data Lab at the bank . It will be used for the study of emerging technology and data science and of ways to drive customer experience, prevent fraud and develop customer insights ( American Banker June 2). Smith said that although he has been at Wells Fargo as part of its Internet banking group for 20 years, he believes there is a lot more that can be done with mobile banking and with all the information companies now have on their customers.  In 2013, Wells Fargo had a number of digital accomplishments. Among them, a redesign of its website, the launch of a service that allows check deposit via smartphones, and the addition of a person-to-person nationwide payments system for mobile devices, which uses and email address or mobile phone number. The areas that Wells' team thinks will be hottest over the next five years all relate to mobile technology, according to Smith ...
  • WASHINGTON (6/3/14)-- The Federal Deposit Insurance Corp.'s Quarterly Banking Profile for the first quarter of this year, released last week, included something new--a section focused exclusively on the 6,234 smaller banks that control just 14% of industry assets . Agency officials said the small-bank section will be a permanent feature going forward. The quarterly report will still contain the comprehensive data on all 6,730 banks, but Diane Ellis, who directs the FDIC's insurance and research division, said that when the data is presented only as a whole, the numbers for smaller institutions sometimes get obscured by changes and trends at the biggest banks ( American Banker June 2). For instance, community banks were hurt like everyone else by lower mortgage revenues caused in part by a refinancing slowdown, but because their business is more "relationship-based" than is that of larger brethren, small institutions showed higher loan-balance growth, net interest-income gains and lending margins. Community banks' total loan growth was nearly double that of the industry as a whole, when compared with 12 months earlier ...

Drivers hit the gas for higher loan terms, payments: Experian

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COSTA MESA, Calif. (6/3/14)--While the housing market has remained sluggish in recent months, auto loans have boomed, as buyers borrowed at a record pace in the first quarter, according to a report by Experian Automotive ( June 2).

The average monthly payment on a car loan jumped to $474 during the quarter, an all-time high, while the percentage of long-term loans with payment terms between six and seven years is also the highest it's ever been.

Nearly a quarter of all auto loans now fall into the long-term category.

"I'm not surprised consumers are borrowing more or taking out longer auto loans," said Melinda Zabritski of Experian Automotive ( ). "With relatively low interest rates, buyers are more comfortable taking out longer loans so they can keep their monthly payment as low as possible."

Also to post record highs for the quarter: the total amount of auto loans in the United States ($100.7 billion); the average length of loan term (5 1/2 years); and the average auto loan amount, which climbed $964 to $27,612.

"Consumers are really relying on financing as the price of new vehicles continues to move higher," Zabritski said.

Consumers may be more willing to take out longer-term loans because they're confident they'll hold on to the vehicle longer than they have in the past. The average length of ownership, according to IHS Automotive, has risen to six years and one month, which is nearly two years longer than levels seen a decade ago.

Meanwhile, increases in automobile prices have driven consumers to pursue leases where monthly payments tend to be lower over several years as well (

For example, the average monthly payment for those buying a Honda Civic in the first quarter was $347, according to Experian's numbers. The average monthly lease payment for a Civic was $251, nearly a $100 drop-off. 

HELOCs coming back in style

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WASHINGTON (6/2/14)--Home-equity lines of credit, which allow homeowners in need of cash to borrow against the value of their properties, jumped 8% in the first quarter year-over-year, perhaps signaling a revival of a common practice used before the housing bubble burst in 2008.

According to Inside Mortgage Finance , $13 billion of home equity was extended in the first three months of the year--the bulk of which were home-equity lines of credit, or HELOCs--which is the highest mark since 2009 ( The Wall Street Journal May 30).

HELOCs differ from home-equity loans in that HELOCs allow borrowers to pull money away from their homes as needed, whereas the loans are packaged in lump sums.

While the recent surge pales in comparison to the $113 billion extended in the third quarter of 2006, rising rates of HELOCs might be a prelude to softer credit conditions and a strengthening housing market.

Climbing average home prices and still historically low mortgage interest rates are likely driving the resurgence.

"We're seeing much more aggressive marketing campaigns (for HELOCs) by banks in locations where home prices have risen," Amy Crews Cutts, Equifax chief economist, told The Wall Street Journal , adding that she expects HELOC originations to continue to gain popularity in the coming months.

Unlike before the recession, however, lenders only appear to be handing out HELOCs to borrowers with upstanding credit, and particularly only in locations where home prices have appreciated, according to Keith Gumbinger, vice president of , a mortgage information site ( The Wall Street Journal ).

When the housing market soared before the bust, consumers looking to remodel homes, buy cars or boats, travel or pay for college tuition often borrowed up to 100% of their home's value, expecting that the price tags on their homes would continue to balloon.

But the recession dashed the hopes of many homeowners' chances of repaying the debt, and subsequently ravaged the bottom lines of the lenders who authorized the loans.

While home-equity loans appear to be once again in vogue, lenders have thus far taken a cautious approach.

"Relative to where they were, lenders are still very conservative," Gumbinger said. "Will the excess of yesterday return? Only time will tell."