Archive Links

Consumer Archive
CU System Archive
Market Archive
Products Archive
Washington Archive
150x172_CUEffect.jpg
Contacts
LISA MCCUEVICE PRESIDENT OF COMMUNICATIONS
EDITOR-IN-CHIEF
MICHELLE WILLITSManaging Editor
RON JOOSSASSISTANT EDITOR
ALEX MCVEIGHSTAFF NEWSWRITER
TOM SAKASHSTAFF NEWSWRITER

Market Archive

Market

Second-quarter Growth At 2.5%

 Permanent link
WASHINGTON (9/27/13)--The U.S. economy in the second quarter grew at a quicker pace than in first quarter, with business and government spending strengthening. That indicates the economy was persevering through higher taxes and federal budget cuts (Bloomberg.com and The Wall Street Journal Sept. 26).
 
U.S. gross domestic product--the widest gauge of all goods and services the economy produces--increased at a 2.5% seasonally adjusted annual rate in the quarter. Economists had forecast a 2.8% second-quarter pace, the Journal said. 
 
Larger increases in worker pay and hiring are necessary to bolster consumer spending--the biggest component of the U.S. economy--because escalating mortgage rates now are holding back the housing recovery, Bloomberg said. 
 
Although the economy has been improving slowly and steadily, its momentum has not sufficiently accelerated, Gennadiy Goldberg, a strategist at TD Securities USA LLC in New York, told Bloomberg.
 
The Federal Reserve would like to see the economy show more robust growth before it winds down its quantitative easing monetary policy, according to the Fed, said the Journal.

Pending Home Sales Decline As Rates Go Up

 Permanent link
WASHINGTON (9/27/13)--U.S. pending home sales declined in August, while mortgage interest rates in the month continued to rise, two separate reports indicated.

Pending home sales slowed in August, with tight inventory conditions, higher interest rates, rising home prices and continuing restrictive mortgage credit impacting the market, according to the National Association of Realtors (NAR). 
 
The Pending Home Sales Index, a forward-looking indicator based on contract signings, eased 1.6% to 107.7 in August from a downwardly revised 109.4 in July, but remains 5.8% above August 2012 when it was 101.8. The data reflect contracts but not closings. Pending sales have been above year-ago levels for the past 28 months.  
 
The decline was expected following elevated levels of closed existing-home sales at the end of summer, said Lawrence Yun, NAR chief economist. "Sharply rising mortgage interest rates in the spring motivated buyers to make purchase decisions, culminating in a six-and-a-half-year peak for sales that were finalized last month," he explained. "Moving forward, we expect lower levels of existing-home sales, but tight inventory in many markets will continue to push up home prices in the months ahead."  
 
Meanwhile, interest rates on mortgages continued their upward trend. Contract mortgage interest rates increased 0.25% from July to August, according to a Federal Housing Finance Agency (FHFA) index of new mortgage contracts.
 
The National Average Contract Mortgage Rate Index for previously occupied homes sales by combined lenders was 4.26% for loans closed in late August. The index is calculated using FHFA's Monthly Interest Rate Survey. The contract rate on the composite of all mortgage loans was 4.25%, up 25 basis points from 4% in July.
 
Interest rates are typically locked in 30-45 days before a loan is closed. Consequently, August
data reflect market rates from mid-to-late July.

W.Va. In $8M Settlement With Big Banks On Card Protection Programs

 Permanent link
CHARLESTON, W.Va. (9/26/13)--West Virginia Attorney General Patrick Morrisey Tuesday announced that four large banking companies will pay the state $1.95 million each--or $7.8 million total--to settle lawsuits alleging the companies' credit card protection programs violated West Virginia law.

The settlements were reached three months after the West Virginia Supreme Court of Appeals ruled in the case State ex rel. Discover Financial Services Inc. vs. Neibert that the Office of the Attorney General had the authority to use special assistant attorneys general in certain cases. The four financial institutions--Bank of America Corp., JP Morgan Chase & Co., Citibank/Citigroup Inc., and GE Money Bank--were parties in that case.

The banks engaged in misleading and deceptive tactics to enroll customers in payment protection programs, which involved fees of typically 89 cents per $100 credit card balance and collectively netted millions of dollars for the banks over a period of several years, according to the complaint filed by the office.

The complaint said bank representatives would ask new cardholders whether they were interested in entering a program that would cover minimum monthly payments in the event of a major life change, such as loss of income, spouse or other event. If cardholders even expressed "interest," they were automatically enrolled in the program without being given an opportunity to review its terms and conditions, including the fee structure, what the program would offer and how benefits would be determined. The banks denied the allegations.

The office did not settle with Discover Financial Services, HSBC Card Services or World Financial Network Bank. Claims against those institutions will continue, said Morrissey.

Under the terms of the settlement and the office's agreement with the governor and the state legislature, the settlement monies will help ensure the state's Consumer Protection Division has three years of operating revenue. The remainder will be returned to the legislature.

Mortgage Applications Up, New-home Sales Rebound

 Permanent link
WASHINGTON (9/26/13)--U.S. mortgage applications rose last week, and new-home sales increased in August, according to two separate reports.

Mortgage applications increased 5.5% from one week earlier, according to the Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey for the week ending Sept. 20.
 
MBA's Market Composite Index, a measure of mortgage loan application volume, rose 5.5% on a seasonally adjusted basis from one week earlier. Unadjusted, the index gained 5%.
 
The seasonally adjusted Purchase Index rose 7%. The unadjusted Purchase Index went up 5%, compared with the previous week, and was 7% higher than the same week one year ago. The Purchase Index was at its highest level since July.
 
The Refinance Index increased 5%. The refinance share of mortgage activity was unchanged at 61% of total applications. The adjustable-rate mortgage share of activity was unchanged at 7% of total applications.
 
In a related matter, sales of new U.S. homes bounced back in August, following the weakest two months this year--indicating that consumers continue to purchase homes despite higher borrowing costs (The Wall Street Journal and Bloomberg.com Sept. 25).   

Sales rose 7.9% to a 421,000 annualized pace, after a 399,000 rate in July, the Commerce Department said Wednesday. 
 
The housing recovery will slide to some extent because the rise in mortgage costs is a substantial factor in decisions to purchase homes, Russell Price, a senior economist at American Financial Inc. in Detroit, told Bloomberg. However, tight inventories still will provide an opportunity on the supply side for builders to continue constructing more homes, he added.

FHFA: House Prices Up 1% In July

 Permanent link
WASHINGTON (9/25/13)--U.S. house price appreciation continued in July, rising 1% on a seasonally adjusted basis from June, according to the Federal Housing Finance Agency monthly House Price Index (HPI).
 
The July HPI change marks the 18th consecutive monthly price increase in the purchase-only, seasonally adjusted index. The previously reported 0.7% increase in June remained unchanged.
 
The HPI is calculated using home sales price information from mortgages either sold to or guaranteed by Fannie Mae and Freddie Mac. Compared with July 2012, house prices were up 8.8% in July. The U.S. index is 9.6% below its April 2007 peak and is roughly the same as the March 2005 index level.
 
Seasonally adjusted monthly price changes from June to July ranged from a 0.7% decline in the East South Central Census division, to a 2.2% rise in the Pacific division. The 12-month changes ranged from a 3.8% gain in the East South Central division to a 20.8% jump in the Pacific division. To see the FHFA report, use the link.
 
In a related matter, the Standard & Poor's/Case-Shiller index of property values in 20 U.S. cities  rose in the 12 months ending in July. The increase is the most in more than seven years, and helps bolster homeowners' equity (MarketWatch, Bloomberg.com and Moody's Economy.com Sept. 24).         
 
The index rose 12.4%--the largest year-to year gain since February 2006.
 
Advances in stock and home values are adding to household wealth that in turn is boosting consumer spending, which comprises 70% of the U.S. economy, Bloomberg said.  
 
See related News Now story, "Mortgages In Ark., Okla., Texas CUs Top $3.3B."

Moody's: U.S. Business Confidence Brightens

 Permanent link
NEW YORK (9/24/13)--U.S. business sentiment took a positive turn last week, according to Moody's Analytics Survey of Business Confidence.
 
Nearly all of the questions posed in the survey received improved responses for the week ended Sept. 20 (Moody's Economy.com Sept. 23).
 
Two-thirds of survey respondents said they believe the economy's outlook heading into next year will improve. 
 
Those expectations are stronger than businesses' assessments of current conditions--which has been a positive leading indicator historically, Moody's said.  
 
Equipment and software investment remain strong, but hiring and demand for office space continue to remain weak.
 
In total, business sentiment is consonant with an economy that is growing at a level near its potential, Moody's said. Growing political acrimony in Washington concerning the federal budget deficit and issues with the Treasury debt ceiling have not harmed business confidence this year, but the situation warrants ongoing scrutiny, Moody's concluded.

Existing-home Sales Rise 1.7% In August

 Permanent link
WASHINGTON (9/23/13)--U.S. existing-home sales increased in August and reached the highest level in six-and-a-half years, while the median price shows nine consecutive months of double-digit year-over-year increases, according to the National Association of Realtors (NAR).
 
Total existing-home sales--which are completed transactions that include single-family homes, townhomes, condominiums and co-ops--rose 1.7% to a seasonally adjusted annual rate of 5.48 million in August from 5.39 million in July. August sales are 13.2% higher than the 4.84 million-unit level in August 2012.
 
Sales are at the highest pace since February 2007--when they hit 5.79 million--and have remained above year-ago levels for the past 26 months.
 
The market may be experiencing a temporary peak, said Lawrence Yun, NAR chief economist.
 
"Rising mortgage interest rates pushed more buyers to close deals, but monthly sales are likely to be uneven in the months ahead from several market frictions," he said. "Tight inventory is limiting choices in many areas, higher mortgage interest rates mean affordability isn't as favorable as it was, and restrictive mortgage lending standards are keeping some otherwise qualified buyers from completing a purchase." 

Jobless Claims Remain Near Six-year Low

 Permanent link
WASHINGTON (9/20/13)--Initial claims for U.S. unemployment benefits last week remained near a six-year low, although tallies may be skewed because of ongoing reporting irregularities caused by computer-system conversion problems in California and Nevada (The Wall Street Journal, Bloomberg.com and Moody's Economy.com Sept. 19).
 
Claims rose 15,000--to 309,000--for the week ended Sept. 14 from one week earlier, the Labor Department said Thursday. Economists had forecast an increase to 330,000, according to a Bloomberg survey.  
 
Fewer job cuts going forward could pave the way for bigger job gains in hiring and an expansion of consumer spending, which constitutes 70% of the U.S. economy, Bloomberg said.
 
The labor market is definitely improving, meaning initial jobless claims appear to be influenced by more than just processing problems, Brian Jones, senior U.S. economist at Societe Generale in New York, told Bloomberg.
 
Meanwhile, continuing claims for unemployment benefits dropped 28,000 for the week ended Sept. 7--a 481,000 decline year over year.

Report: Fannie Mae Overpays Servicers By $89M

 Permanent link
WASHINGTON (9/20/13)--Fannie Mae overpaid its servicers by about $89 million in 2012 because a manual review by a third-party vendor resulted in accounting errors, according to an inspector general's report issued Wednesday.
 
Fannie also incorrectly denied $27 million in reimbursements last year, said the Office of the Inspector General (IG) for the Federal Housing Finance Agency (National Mortgage News Sept. 19).
 
The IG's office blamed erroneous reviews by auditing firm Accenture for the overpayment.
 
However, the FHFA is conducting its own review and has disagreed with the methodology used by the IG. FHFA said payment errors' total was "substantially less" than what was reported by the IG. FHFA did not provide an estimate of the alternative amount, said National Mortgage News.
 
Errors generally happen when there are limited reviews, inconsistency in applying guidelines, complexity or a big amount of servicer claims, the publication said.

CUs Will See More Confident Members With Fed Decision on QE3

 Permanent link
MADISON, Wis., and WASHINGTON (9/19/13)--The Federal Reserve monetary policymakers' decision not to reduce the purchases of $85 billion a month in Treasury bonds and mortgage backed securities isn't a surprise, and may result in more confidence about the economy among credit union members, said a Credit Union National Association senior economist.

"The Fed's decision to maintain current bond purchase volumes wasn't terribly surprising," said Mike Schenk, CUNA vice president of economics and statistics.
 
He was referring to Wednesday's decision by the Federal Open Market Committee, the Fed's monetary policymaking body, to maintain the level of purchases in its quantitative easing program and to keep the targeted federal funds rate in the 0% to 0.25% range. Many had expected the Fed to announce after the FOMC's two-day meeting that it would start token tapering of the bond buying, but that did not happen.

"The backdrop of still-weak labor markets, low current inflation and no big inflation increases on the horizon gave the Fed all the excuse it really needed to maintain its current bond-buying activities," Schenk said. "Add to that nearly complete dysfunction on Capitol Hill as we approach critical decisions on the debt ceiling, budget and looming additional cuts in government spending, and the case becomes that much stronger," he said.

He noted the "market's immediate and harsh reaction after [Fed Chairman Ben Bernanke's] May comments that perhaps-the-Fed-might-be-thinking-of-possibly-someday-maybe-dialing-back-but-not-stopping was certainly a key factor.
 
"In any case, the Fed's 'no-slow' announcement signals additional stimulus--at least for the near term--which will keep long rates low all else equal, energize equity markets and help to stabilize emerging market currencies," Schenk said.
 
"For credit unions the result will be members that are more confident (at least marginally), housing and autos that are marginally more affordable and by extension marginally higher demand for loans, relative to where we would be if tapering actually started," he said. "The announcement isn't a game-changer but will undoubtedly help to provide needed support."

In its announcement, the FOMC said that although market conditions have improved somewhat, the "unemployment rate remains elevated: and that it would "await more evidence that progress will be sustained before adjusting the pace of its purchases."

The FOMC said it "expects that, with appropriate policy accommodation, economic growth will pick up from its recent pace and the unemployment rate will gradually decline toward levels the committee judges consistent with its dual mandate" of fostering maximum employment and price stability.

It "sees the downside risks to the outlook for the economy and the labor market as having diminished, on net, since last fall, but the tightening of financial conditions observed in recent months, if sustained, could slow the pace of improvement in the economy and labor market."

The statement noted the committee "recognizes that inflation persistently below its 2% objective could pose risks to economic performance, but it anticipates that inflation will move back toward its objective over the medium term."

The FOMC will continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month.  It also will continue reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction.

"Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative, which in turn 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 in its statement.

"In judging when to moderate the pace of asset purchases, the committee will, at its coming meetings, assess whether incoming information continues to support the committee's expectation of ongoing improvement in labor market conditions and inflation moving back toward its longer-run objective," the committee said, cautioning that "asset purchases are not on a preset course, and the committee's decisions about their pace will remain contingent on" its economic outlook as well as its assessment of the likely efficacy and costs of such purchases."

The committee also "reaffirmed" its view that a "highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens."

In keeping the federal funds rate at 0% to 0.25%, the committee "currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6.5%, inflation between one and two years ahead is projected to be no more than a half percentage point above the committee's 2% longer-run goal, and longer-term inflation expectations continue to be well anchored."

In determining how long to maintain that highly accommodative stance, the FOMC will consider other market information and when it decides to remove the policy accommodation, it will "take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2%."

Voting for the FOMC monetary policy action were: Fed Chairman Ben S. Bernanke; Vice Chairman William C. Dudley; James Bullard; Charles L. Evans; Jerome H. Powell; Eric S. Rosengren; Jeremy C. Stein; Daniel K. Tarullo; and Janet L. Yellen.

Voting against the action was Esther L. George, who was concerned that the continued high level of monetary accommodation increased the risks of future economic and financial imbalances and, over time, could cause an increase in long-term inflation expectations.

For the full FOMC statement, use the link.

Catalyst: 'Monetary Cocaine' Withdrawal And Rising Rates

 Permanent link
PLANO, Texas (9/18/13)--Interest rates have been rising, and the value of credit union bond portfolios has been falling. But people have been talking about the inevitability of higher interest rates for so long that, for many, calling this a trend seems like just another false alarm, said Catalyst Corporate FCU.
 
"There are those who believe concerns over increasing interest rates are overblown, that the economy is not strong enough to sustain increases, and that long-term rates are bound to fall again," said Tim McWilliams, Catalyst senior investment officer and a registered representative for CU Investment Solutions LLC, in Catalyst's press release.
 
"Whether interest rates rise now, in six months or in a year, if a credit union has bought long-term fixed-rate bonds, it is vulnerable to a potential continued rise in interest rates," he said.
 
Richard Fisher, president of the Dallas Federal Reserve, described the current monetary environment as a market is on "monetary cocaine." The reference alludes to the Federal Reserve's $1 trillion-plus stimulus to the economy through monthly large-scale asset purchases in its quantitative easing program. When asked about the impact of rising bond yields on the economy, Fisher responded that policymakers could not let the markets dictate monetary policy.
 
"The Federal Reserve has been buying $85 billion a month in longer duration treasuries and mortgage-backed securities," said McWilliams. "These purchases have kept long-term interest rates at historically low levels, helping to revitalize the housing market and other sectors that rely on housing."
 
With the Fed saying it is 'broadly comfortable' with beginning to taper these purchases, many economists believe the Fed will decide to reduce the pace of the bond purchases as early as this month.  Its Federal Open Market Committee has been meeting Tuesday and today to determine the next step. (News Now will provide an update this afternoon on FOMC's statement after the meeting.)
 
"The mere hint of the Fed removing that stimulus has caused the rate on 10-year treasuries to rise from 1.62% on May 2 to the current yield of 2.9%," McWilliams said. "Whether the Fed begins to taper in September is anyone's guess. The Fed has made it clear it wants to end quantitative easing; it's just a matter of how much [the committee] will taper and how quickly."
 
Credit unions are prudent to consider whether the market has become "addicted" to low long-term interest rates, he said, adding, "If so, how bad will the withdrawal symptoms get? And without the Fed buying bonds, where will a free market reset long-term interest rates?" he asked.
 
Analyzing rising rate scenarios in a credit union's asset liability management model is the first step in positioning its balance sheet to respond to these withdrawal symptoms, said McWilliams. The second step is analyzing the credit union's investment portfolio to determine if portfolio strategy or individual holdings are putting the credit union at risk.
 
"Does your credit union have a properly diversified portfolio? Does it have a mixture of both long-term and short-term bonds? Does utilizing a larger portion of adjustable-rate securities to hedge your fixed-rate holdings make sense?"

McWilliams asked. "These are questions that credit union senior management needs to be asking now. It's time to reevaluate your balance sheet and investment portfolio and determine the potential implications."

Home Market Index Steady At Highest Level Since 2005

 Permanent link
WASHINGTON (9/18/13)--U.S. home-builder confidence in September is at the highest level in eight years, indicating that housing should remain positive for the U.S. economy, even though new signs have surfaced that show the housing market is losing some momentum (Bloomberg.com, The Wall Street Journal and Moody's Economy.com Sept. 17).
 
The National Association of Home Builders (NAHB)/Wells Fargo confidence index remained at 58 this month--the same as in August--matching the best reading since November 2005, NAHB said Tuesday.
 
Readings greater than 50 indicate more builders see conditions as good than poor.
 
Although work orders received during the past few months will likely maintain gains in construction, more rapid growth in hiring and wages are necessary to prompt larger increases in consumer demand, Bloomberg said. 
 
The headwinds of tight credit, declining amounts of lots for development and rising labor costs are causing consumers to take a wait-and-see attitude, following a strong buildup of consumer confidence during the past year, David Crowe, NAHB chief economist said in a statement.

NEW: Fed Doesn't Reduce QE3 Spending, Maintains Interest Rates

 Permanent link
WASHINGTON (9/18/13, updated 2:50 p.m. ET)--The Federal Reserve's policymakers today again decided not to reduce its quantitative easing policy of buying $85 billion in Treasury bonds and mortgage backed securities, saying that although market conditions have improved somewhat, the "unemployment rate remains elevated." Instead, the Federal Open Market Committee "decided to await more evidence that progress will be sustained before adjusting the pace of its purchases."

The FOMC also decided to keep the targeted federal funds rate in the 0% to 0.25% range. Many had expected the Fed to announce today a token tapering of the bond buying, but others had said recent economic reports that were lower than expected would be a factor.

"Information received since the FOMC met in July suggests that economic activity has been expanding at a moderate pace," said FOMC's statement today, at the end of its two-day meeting.

"Some indicators of labor market conditions have shown further improvement in recent months, but the unemployment rate remains elevated. Household spending and business fixed investment advanced, and the housing sector has been strengthening, but mortgage rates have risen further and fiscal policy is restraining economic growth. Apart from fluctuations due to changes in energy prices, inflation has been running below the committee's longer-run objective, but longer-term inflation expectations have remained stable," the committee said.

The FOMC said it "expects that, with appropriate policy accommodation, economic growth will pick up from its recent pace and the unemployment rate will gradually decline toward levels the committee judges consistent with its dual mandate" of fostering maximum employment and price stability. It "sees the downside risks to the outlook for the economy and the labor market as having diminished, on net, since last fall, but the tightening of financial conditions observed in recent months, if sustained, could slow the pace of improvement in the economy and labor market."

It noted the committee "recognizes that inflation persistently below its 2% objective could pose risks to economic performance, but it anticipates that inflation will move back toward its objective over the medium term."

Although it sees the improvement in economic activity and labor market conditions since it began its asset purchase program a year ago, the committee said it will continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month.  It also will continue reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction.
 
"Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative, which in turn 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," said the FOMC statement.

"In judging when to moderate the pace of asset purchases, the committee will, at its coming meetings, assess whether incoming information continues to support the committee's expectation of ongoing improvement in labor market conditions and inflation moving back toward its longer-run objective," the committee said, cautioning that "asset purchases are not on a preset course, and the committee's decisions about their pace will remain contingent on" its economic outlook as well as its assessment of the likely efficacy and costs of such purchases."

The committee also "reaffirmed" its view that a "highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens."

In keeping the federal funds rate at 0% to 0.25%, the committee "currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6.5%, inflation between one and two years ahead is projected to be no more than a half percentage point above the committee's 2% longer-run goal, and longer-term inflation expectations continue to be well anchored."

In determining how long to maintain that highly accommodative stance, the FOMC will consider other market information and when it decides to remove the policy accommodation, it will "take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2%."

Voting for the FOMC monetary policy action were: Fed Chairman Ben S. Bernanke; Vice Chairman William C. Dudley; James Bullard; Charles L. Evans; Jerome H. Powell; Eric S. Rosengren; Jeremy C. Stein; Daniel K. Tarullo; and Janet L. Yellen. Voting against the action was Esther L. George, who was concerned that the continued high level of monetary accommodation increased the risks of future economic and financial imbalances and, over time, could cause an increase in long-term inflation expectations.
 
For the full statement, use the link.

FDIC Shutters Two Banks(1)

 Permanent link
WASHINGTON (9/17/13)--Two banks closed Friday, which brings this year's total of failed U.S. banks to 22, the Federal Deposit Insurance Corp. announced Friday.

First National Bank, Edinburg, Texas, was closed and assumed by PlainsCapital Bank, Dallas. Also, The Community Bank, Bridgeport, Conn., was closed by The Connecticut Department of Banking, which appointed the FDIC as receiver.
 
As of June 30, the two banks had roughly $3.1 billion in total assets and $2.3 billion in total deposits.
 
The cost to the Deposit Insurance Fund will be $645 million, FDIC estimated. 
 
So far in 2013, the National Credit Union Administration has closed 12 credit unions.

Will Fed Begin QE3 Tapering This Week? CUNA Analysis In Bankrate.com

 Permanent link
WASHINGTON (9/17/13)--Five years after the nation's financial crisis began, the Federal Reserve was preparing for its policymakers' meeting this week, with the nation waiting to see if it will announce the beginning of the wind-down of its quantitative easing (QE3) policy.  Credit Union National Association Chief Economist Bill Hampel provided some analysis for Bankrate.com Monday on the impact any easing would have on mortgage interest rates.
 
The Federal Open Market Committee, the fed's monetary policymaking group that sets interest rates and determines how much bonds to buy and when, began its two-day meeting today and is expected to announce Wednesday whether it will start scaling back its $85 billion per month bond-buying program, known as QE3.
 
Each month it buys Treasury securities and mortgage-backed securities to inject cash into the banking system to keep interest rates in the low 0% to 0.25% range, said Bankrate.com.
 
"We've seen already a [one percentage point] increase in 30-year fixed mortgage rates since the announcement of the tapering," Hampel told the publication. "My expectation is that they won't go up too much more in the near term unless [the Fed] were to dramatically speed up the tapering," he said.
 
The mortgage rates reflect a belief that the Fed will phase out its bond purchases gradually, over a period of at least six months, Hampel added.
 
The expectation that the Fed would reduce the bond buying rose in May when Fed Chairman Ben Bernanke in a congressional hearing indicated the purchases could be reduced as early as in the next few FOMC meetings.
 
Some expect the reductions will start as early as this week, but others say that some recent economic reports such as home sales don't indicate as good an outlook for the economy, which could dampen any reduction.
 
The FOMC will make any announcement in its post-meeting statement Wednesday afternoon. Watch News Now for updates on the statement.

August Retail Sales In U.S. Below Forecasts

 Permanent link
WASHINGTON (9/16/13)--U.S. retail sales increased less than forecast in August, with the biggest part of the economy unable to get on track, indicating ongoing slow expansion (The Wall Street Journal, Bloomberg.com and Moody's Economy.com Sept. 13).
 
Sales rose a seasonally adjusted 0.2% last month--the smallest in four months--from July, and less than the 0.5% predicted by economists in a Bloomberg survey. 
 
Sales excluding autos increased 0.1%.
 
Limited employment gains, higher payroll taxes and muted income growth are dampening consumer moods about spending, which constitutes roughly 70% of the U.S. economy, Bloomberg said. 
 
Although Americans are continuing retail shopping "slowly but surely," there needs to be increases in income and job growth to significantly boost consumer spending, Eugenio Alerman, a senior consultant at Wells Fargo Securities LLC in Charlotte, N.C., told Bloomberg.

Jobless Claims Stats Impacted By Reporting Anomaly

 Permanent link
WASHINGTON (9/13/13)--Initial U.S. claims for unemployment benefits plunged steeply last week to the lowest level since April 2006--mostly because work on computer systems resulted in under-reporting in two states, a government official said (The Wall Street Journal, Bloomberg.com and Moody's Economy.com  Sept. 12).  
 
Claims declined 31,000--to 292,000 for the week ended Sept. 7, the Labor Department said Thursday.
 
When the two states transitioned to new computer systems they failed to report all of their claims because the applications either did not get processed or were not received, said a Labor Department analyst, who declined to name the states, citing department policy. One state was large and the other was small, the analyst said.    
 
The week's decline was not a true sign of a healing labor market, and revised estimates in the next few weeks should correct the data, he added. Also, a shorter work week due to the Labor   Day holiday may have been a factor in the lower claims figure, the analyst said.
 
Meanwhile, continuing claims for unemployment benefits dropped 73,000--to 2.87 million--for the week ended Aug. 31.

Consumer Comfort Picks Up After Four-week Drop

 Permanent link
NEW YORK (9/13/13)--Consumer confidence in the U.S. stabilized last week--even though Americans' views  on the economy dimmed--after declining for four consecutive weeks, according to the Bloomberg Consumer Comfort Index  (Bloomberg.com and Moody's Economy.com Sept. 12). 
 
The index climbed to -32.1 for the week ended Sept. 8, from -32.3 the previous week. 
 
Although households' assessment of the economy was the lowest since mid-May, another component of the index, which is a gauge of whether this is a good time to make purchases, improved for the first time in the past five weeks, Bloomberg said.
 
However, the improved view of the buying climate was mostly mitigated by negative views about personal finances, Moody's said.
 
Americans remain wary of the job creation pace and wage gains, said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. Therefore, they are looking for a long-awaited pickup in growth during the second half of the year.
 
In the meantime, consumers have taken on a "wait-and-see attitude," he concluded.

Mortgage Applications Dropped 13.5% Last Week

 Permanent link
WASHINGTON (9/12/13)--U.S. mortgage applications for the week ending Sept. 6 decreased 13.5% from the previous week, according to the Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey. The week's results included an adjustment for the Labor Day holiday.  
 
The Market Composite Index, a measure of mortgage loan application volume, dropped 13.5% on a seasonally adjusted basis. On an unadjusted basis, the Index fell 23%. The Refinance Index declined 20%. It fell 71% from its recent peak the week of May 3, and is at the lowest level since June 2009.
 
The seasonally adjusted Purchase Index declined 3% from one week earlier. The unadjusted index decreased 14%, compared with the previous week, and was 7% higher than the same week one year ago.
 
The refinance share of mortgage activity dropped to 57% of total applications from 61% the previous week and is at its lowest level since April 2010.
 
The adjustable-rate mortgage share of activity was unchanged at 7% of total applications. The Home Affordable Refinance Program share of refinance applications was unchanged from the prior week at 38%.

Drop In Job Openings Signals Struggle In Labor Market

 Permanent link
WASHINGTON (9/12/13)--Job openings in July totaled 3.69 million, an 180,000 drop from a downwardly revised 3.87 million openings in June. July's total was the lowest level in six months, said the Labor Department Tuesday.

The data, coupled with reports last week indicating slower growth in payrolls than expected for August, signal uneven progress in the labor market, which is struggling to gain momentum as third quarter begins, said Bloomberg.com (Sept. 10).

Job openings dropped in construction, retail and health industries and in government agencies, but rose in manufacturing and the accommodation and food services.

In the 12 months ending in July, nearly 1.9 million jobs were created, representing 52.1 million hires and 50.2 million separations, said Bloomberg. The figures mean that 3.1 people applied for every job opening, an increase from the 1.8 who applied per position when the recession began in December 2007.

July dismissals--excluding retirements and those who left their job voluntarily--totaled 1.5 million, a decline from June's 1.6 million, said the report. Another 2.27 million people quit their jobs in July, up from 2.21 million who quit in June.

FHLB Of Chicago Will Issue Ginnie Mae Securities

 Permanent link
CHICAGO and WASHINGTON (9/11/13)--The Federal Home Loan Bank of Chicago and the Government National Mortgage Association (Ginnie Mae) Tuesday announced the bank will issue securities guaranteed by Ginnie Mae and backed by mortgages originated by member financial institutions.
 
The new conduit product, called "MPF Government Mortgage-Backed Securities (MBS)," will provide mortgage lenders, particularly smaller institutions that currently lack direct access to the secondary mortgage market, a new option when creating mortgage products for their home-buying customers.
 
Lenders can choose whether to retain or release servicing on the government loans they originate and will have a channel for selling their loans that removes hurdles low-volume originators face in today's competitive market, said the bank and Ginnie Mae.
 
MPF Government MBS will initially be available to eligible participating members of the Federal Home Loan Bank of Chicago in Illinois and Wisconsin before being rolled out more broadly next year.
 
The bank provides the administrative and operational support for the program, which allows participating members of the Federal Home Loan Bank System to sell fixed-rate, conventional conforming loans into the secondary mortgage market.
 
With the new authority granted by its regulator, the Federal Housing Finance Agency, the bank will purchase government-insured loans, hold these loans on-balance sheet, and pool them into guaranteed Ginnie Mae securities that may then be sold to investors. Ginnie Mae guarantees more than $1.4 trillion of MBS and most of government loans are placed in Ginnie Mae MBS.

Recession's Cost: $50K-$120K Per Household

 Permanent link
DALLAS (9/11/13)--The Great Recession cost each U.S. household between $50,000 and $120,000, or the equivalent of 40% to 90% of one year's economic output, according to a study released by the Federal Reserve Bank of Dallas (MarketWatch Sept. 10).       
 
In total, that constitutes a $6 trillion to $14 trillion output loss--a combination of lost wealth, such as the lost value of a house, and decreases in current wage income and discounted future wage income from unemployment.
 
Other effects are more difficult to measure: extended unemployment, reduced opportunity and increased government presence in the economy, the Dallas Fed noted.
 
"The crisis consumed an enormous sum of financial and housing wealth. U.S. household net worth plunged $16 trillion, or 24%, from third quarter 2007 to first quarter 2009," said the Dallas Fed. "In addition, it wiped out a huge amount of 'human capital,' both current wage income and discounted future wage income; that is, a household's expectation of potential earning power.
 
"If the effects of the crisis are permanent, the path of consumption observed since 2007 suggests that the cost of the crisis may be more than double the $6 trillion to $14 trillion estimate," the study added.
 
One of the unintended consequences of the crisis is a substantial loss of faith in the U.S. capitalist economic system and government institutions. The U.S. dropped to 18th place in 2012 from second place in 2000, according to the Fraser Institute's Index of Economic Freedom global ranking. That lower ranking indicated prevalent "perceptions of less-secure property rights, bigger government, increased regulation of business and favoritism accorded to special interests," the study said.
 
To read the Dallas Fed study, use the link.

Consumer Credit Increases 4.5% In July, CUs See Rise

 Permanent link
WASHINGTON (9/10/13)--U.S. consumer credit increased a seasonally adjusted 4.5% or $10.4 billion in July, for a total of $2.852 trillion borrowed during the month, according to the Federal Reserve's Consumer Credit report. Money borrowed from credit unions totaled $254.7 billion.
 
The Fed report was released Monday afternoon.
 
Underlying trends lifting consumer credit stayed the same--demand for auto and student loans continue to push up credit balances. However, households remain reluctant to add to their credit card debt, said Moody's Economy.com (Sept. 9).   
 
At credit unions, borrowing climbed by $3.1 billion from the $251.6 billion in June.
 
Overall U.S. revolving credit, which includes credit card spending, declined at an annual rate of 2.5%--or $1.8 billion--in July to $849.8 billion from $851.6 billion in June. 
 
Credit unions' revolving credit rose slightly to $40.6 billion from $40.1 billion in June.
 
Nonrevolving credit--such as loans for cars, mobile homes and college tuition--rose at annual rate of 7.5%--or $12.3 billion--to about $1.993 trillion in July from roughly $1.982 trillion in June.
 
Credit unions issued $214.1 billion in nonrevolving loans in July, up from $211.5 billion in June.

U.S. Payrolls Rose Less Than Forecast In August

 Permanent link
WASHINGTON (9/9/13)--U.S. company payrolls rose less than forecast in August, and gains in the prior two months were downwardly revised, signaling that firms are taking a cautious route in hiring, while they wait for consumer demand to increase (Bloomberg.com, The Wall Street journal and Moody's Economy.com  Sept. 6).
 
Employers added 169,000 workers last month, following a downwardly revised 104,000 gain (from 162,000) in July, and 172,000 (from 188,000) in June, the Labor Department said Friday.
 
Meanwhile, the national unemployment rate dipped to 7.3% in August--the lowest since December 2008--from 7.4% in July.
 
However, that unemployment-rate decline happened while the labor force and household employment both shrank, Moody's said. 
 
In August, the private sector added 152,000 jobs in August, while the government increased jobs by 17,000, the Journal said.

CUNA Sees JPMorgan Student Loan Exit As CU Opportunity

 Permanent link
New York City (9/6/13)--JPMorgan Chase said it will stop taking student loan applications after Oct. 12 and exit the student loan business (Fox Business, Reuters), thereby eliminating a significant player in the competition for private student loans.

"As banks exit student loans, more and more credit unions are getting involved in student loans," noted Paul Gentile, of the Credit Union National Association, after the global firm's announcement.

CUNA figures show that credit unions have $2.2 billion in private student loans.

"There has been fantastic growth in the area recently," Gentile said, "For the first six months of 2013, credit union private student lending is up 26%. And some 617 credit unions offer their members private student loans."

Gentile underscored that credit unions offer low-cost private student loans and have a long track record of low default rates compared to other providers.

"Credit unions work to ensure their members fully understand the commitment of a student loan and many credit union programs require students to pay a small good faith payment while students are in school, rather than deferring all payments until graduation. This builds financial awareness and ensures that student understands their obligation."  Gentile is CUNA executive vice president of strategic communications and engagement.

Reuters reported that JPMorgan Chase student loan portfolio equaled $11 billion at the end of June this year, and said that was less than 0.5% of JPMorgan's $2.44 trillion of assets.

Last year, the bank limited its education loan program by making such loans available only to existing Chase customers.

Reuters quoted one of the bank's executives as saying that by dropping its student lending operation, the bank can redeploy those resources and also focus on its top priority, identified as strengthening the regulatory control environment.

Federal regulators early this year ordered JPMorgan to bolster its risk controls and beef up anti-money laundering standards.

U.S. Jobless Claims Fall In Latest Report

 Permanent link
WASHINGTON (9/6/13)--Initial claims for U.S. unemployment benefits declined last week--hitting a five-and-a-half-year low--an indication the labor market is slowly healing as job layoffs continue to abate (MarketWatch, Bloomberg.com  and Moody's Economy.com Sept. 5).
 
Claims fell 9,000--to 323,000--for the week ended Aug. 31, the lowest level since 2007, the Labor Department said Thursday.
 
Meanwhile, continuing claims for unemployment benefits dropped 43,000--to 2.951 million--for the week ended Aug. 24.
 
Because employers are slowing the pace of job cuts, the labor market is being readied for hiring increases to meet any growth in demand, with the effects of higher payroll taxes and federal budget cuts dissipating, Bloomberg said.
 
Rising personal incomes and employment growth will help uphold consumer spending--which constitutes 70% of the U.S. economy, Bloomberg added.  
 
Although there has been substantial progress in claims reduction, more progress is needed with the hiring side of the equation, Yelena Shulyatyeva, an economist at BNP Paribas in New York, told Bloomberg.

Beige Book: Economy Expanding At 'Modest To Moderate Pace'

 Permanent link
WASHINGTON (9/5/13)--The U.S. economy in the past several weeks has continued to expand  at a "modest to moderate pace" during the reporting period of early July through late August, according to the Federal Reserve's Beige Book, an informal scan of the nation's 12 Fed Districts.
 
The expansion was buoyed by rising consumer spending in most districts. Some districts said that back-to-school sales added to overall consumer spending growth. Retail sales increased moderately in the Boston, Kansas City and Dallas districts. Sales were mixed in New York, and  grew more modestly in Atlanta, Chicago, Minneapolis, San Francisco and St. Louis.
 
In regard to banking and finance, lending activity weakened slightly and several districts reported less-favorable conditions than in the prior reporting period. No better than modest growth was reported in most districts. Slower loan growth than in the prior period was reported in the Atlanta, Chicago, San Francisco and St. Louis districts. Kansas City reported a decrease in lending--a reversal from slight growth in the early summer.

Also, lending standards were mostly unchanged, while credit quality improved across all districts.
 
Hiring held steady or increased slightly in most districts for most industries and occupations. Wage pressures stayed modest overall, with Atlanta, Boston, Cleveland, Dallas, Philadelphia and San Francisco reporting mostly subdued wage pressures.
 
Activity in residential real estate markets increased moderately increased, with the pace of sales of single-family homes continuing to rise in most districts. Demand for nonresidential real estate increased overall.
 
To read the full Fed report, use the link.

FHFA Releases 2014 Calendar For House Price Indices

 Permanent link
WASHINGTON (9/5/13)--The Federal Housing Finance Agency (FHFA) Wednesday released its 2014 schedule for monthly House Price Index (HPI) announcements.
 
The HPI is meant to be a broad measure of the movement of single-family house prices that credit unions and all interested parties may use as an indicator of house price trends at various geographic levels. Because of the breadth of the sample, it provides more information than is available in other house price indexes. Housing economists can use it for estimating changes in the rates of mortgage defaults, prepayments and housing affordability in specific geographic areas.

The HPI includes house price figures for the nine Census Bureau divisions, for the 50 states and the District of Columbia, and for Metropolitan Statistical Areas and Divisions. The FHFA says the HPI is based on data from more than 49 million transactions over the past 38 years.
 
The indices will be released at 9 a.m. (ET) on the following dates next year:
  • Jan. 23, the Monthly Index;
  • Feb. 25, both the Quarterly Index and Monthly Index;
  • March 25, the Monthly Index;
  • April 22, Monthly Index;
  • May 27, both the Quarterly Index and Monthly Index;
  • June 24, Monthly Index;
  • July 22, Monthly Index;
  • Aug. 26, both the Quarterly Index and Monthly Index;
  • Sept. 23, Monthly Index;
  • Oct. 23, Monthly Index;
  • Nov. 25, Quarterly and Monthly Index; and
  • Dec. 23, Monthly Index.

U.S. Manufacturing In August Hits Two-Year High

 Permanent link
WASHINGTON (9/4/13)--U.S. manufacturing expanded in August at it quickest pace in more  than two years, heightening expectations for more rapid overall growth in the U.S. economy in the second half of 2013, according to the Institute for Supply Management's (ISM) manufacturing index (The New York Times, The Wall Street Journal and Bloomberg.com  Sept. 3).
 
The index rose to 55.7 in August from 55.4 in July, ISM said. A reading above 50 is a sign of expansion in the manufacturing sector. August's uptick was the third consecutive monthly expansion, and the index reading was the highest of the year.
 
Also, new orders recorded their best level in more than two years, with that sub-index surging to 63.2 from 58.3. However, the employment sub-index dipped to 53.3 from 54.5
 
Government-spending cuts and eroding global demand have hurt manufacturing this year, causing the sector to contract in May, the Times said.
 
However, substantial rises in activity in July and August are enhancing economists' outlooks that companies producing U.S. goods are gaining traction as the year goes on, the Times added.

U.S. Consumers Spent More In July

 Permanent link
WASHINGTON (9/3/13)--Consumer spending in the U.S. inched up in July amid slowing income growth and tame inflation (The New York Times and The Wall Street Journal Aug. 30). 
 
Consumer spending--which is a gauge of how much consumers spend on everything from household cleaners to cars--rose 0.1% in July from June, the Commerce Department said Friday. That follows a robust 0.6% spending increase in June.
 
Personal income increased 0.1%--a decline from June's 0.3% gain and the slowest pace since April.

The report is a harbinger that consumers may be reducing expenditures after more robust spending increases earlier this year--although they are not curbing spending altogether, the Journal said.

Consumer Sentiment Drops Slightly In August

 Permanent link
ANN ARBOR, Mich. (9/3/13)--U.S. consumer confidence fell in August from a six-year high amid rising interest rates and escalating tensions in the Middle East (Bloomberg.com and Moody's Economy.com Aug. 30).   
 
The Thomson Reuters/University of Michigan Consumer Confidence Index declined to 82.1--a four-month low--from 85.1 in July, which was the highest level since July 2007.
 
Higher mortgage interest rates could stymie growth in the housing market, and political upheaval in Egypt and the specter of possible U.S. military intervention in Syria is creating the prospect of more expensive fuel prices, Bloomberg said.
 
However, rising home values could increase personal wealth and help mitigate the decline in consumer confidence, Bloomberg added.
 
In a related matter, the Bloomberg Consumer Comfort Index dropped to -31.7 for the week ended Aug. 25--the lowest reading since April 7. It was -38.8 the previous week (Bloomberg.com and Moody's Economy.com Aug. 29).
 
The measure has declined 8.2 points since reaching a more-than five-year high three weeks ago.