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News of the Competition (4/24/15)

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  • SAN FRANCISCO (4/24/15)-- Wells Fargo has picked up three digital technology startup companies through its accelerator program that it hopes will help the big bank grapple with digital fraud detection, improve the customer experience and bolster cloud computing services ( American Banker April 22). The startups--Context 360, Motion Savvy and Bracket Computing--were picked from a field of 300 applicants vying to work with the massive financial institution through the accelerator program. Wells Fargo's decision to pair up with such technology firms is the latest example of banks looking to nonbank firms for help in competing in the digital world, according to American Banker . In fact, a recent paper from Gartner encouraged banks to consider bringing in experts in customer engagement from outside the financial services industry to help them improve their customer service ...

Seriously underwater homes rise, new-home sales tumble

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WASHINGTON (4/24/15)--For the first time since the second quarter of 2012, the share of seriously underwater homes increased in the first quarter, rising 0.4 percentage points from the fourth quarter, according to RealtyTrac's Home Equity and Underwater report ( April 23).

On an annual basis, however, the share of homes that are seriously underwater is down 4%.

"At the end of 2014, we saw the lowest share of seriously underwater properties since we began tracking such data, but in the first quarter, that share bumped up slightly as home-price appreciation continued to slow down in many markets," said Daren Blomquist, RealtyTrac vice president.

"Most of the seriously underwater homeowners are still stuck in their homes as short sales and other foreclosure alternatives lose momentum, tilting the national home-equity scales back slightly toward a higher share of negative equity," Blomquist added.

Meanwhile, after reports of positive gains in existing-home sales Wednesday, the Census Bureau said Thursday that new-home sales took a nosedive in March.

Sales toppled by 11.4% for the month after climbing by 5.6% in February. Though new-home sales still remain strong on an annual basis, posting a 19.4% year-over-year increase for the month ( April 23).

"The asymmetry between existing- and new-home sales in March is surprising, but not shocking, as potential homebuyers often turn to existing homes if they judge that new homes are overpriced," said Andres Carbacho-Burgos, Moody's analyst ( ). "Also, new-home sales had been increasing strongly in the past three months, drawing down the number of potential new-home buyers."

Home sales, prices, and purchase applications on upswing

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WASHINGTON (4/23/15)--Home prices, existing-home sales and purchase mortgage application activity recorded recent strong periods of growth, according to several reports related to the housing market released Wednesday.

Existing-home sales jumped 6.1% in March to 5.19 million annualized units sold, and on an annual basis climbed 10.4%, according to National Association of Realtors (NAR) data ( April 22).

Single-family home sales rose 5.5% and sit 10.9% higher on a year-over-year basis, while multifamily home sales posted an 11.1% jump from February and sit 7.1% higher annually.

"The share of first-time homebuyer purchases now exceeds 30% after being below that rate for most of the past two years," said Andres Carbacho-Burgos, Moody's analyst ( ). "Still, that share needs to be closer to 40% in order for a sustained recovery in total sales and the homeownership rate to take place."

Along with the uptick in sales, inventory continues to tighten, according to Moody's, a trend that has accelerated home-price appreciation.

In the Federal Housing Finance Agency's purchase-only house price index, released Wednesday, home prices rose 0.7% in February, climbing 5.4% on an annual basis.

The NAR data showed that, in March, prices rose 8.7% on a year-over-year basis, with the median existing single-family sales price climbing to $213,500.

Additional housing numbers:
  • The composite index for the Mortgage Bankers Association's mortgage applications survey rose 2.3% last week, with purchase applications posting a 5% increase;
  • Over the last month, purchase applications have jumped 14.4%, pushing them 10.5% above their year-ago levels; and
  • Mortgage rates dropped during the week, with the 30-year fixed-rate mortgage rate falling to 3.83% from 3.87%, and the five-year adjustable-rate mortgage rate climbing 7 basis points to 2.89%.

Bank card default rate jumps in March, overall default rate flat

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NEW YORK (4/22/15)--While overall consumer credit default rates remained flat in March, bank card default rates recorded the largest increase in five years, according to the S&P/Experian Consumer Credit Default Indices.

The bank card default rate rose 15 basis points to 2.99% for the month after climbing by 23 basis points in February, the largest two-month jump since April 2010.

The composite index, however, dropped to 1.05% in March, the first decline in defaults since July 2014.

"The increase in the bank card default rate over the last two months is the largest such jump in five years," said David M. Blitzer, managing director and chair of the Index Committee for the S&P Dow Jones Indices. "While bank card defaults spiked, default rates for first mortgages and autos were down in March and have shown no large increase since 2012."

Blitzer added that generous credit card limits might be behind the uptick in bank card defaults.

The auto loan default rate dropped 3 basis points to 1.03%, while the first mortgage default rate fell for a second straight month by 8 basis points to 0.92%. The second mortgage default rate fell by 16 basis points to 0.5%.

"Looking at the five cities tracked for the release, the only large move was an increase in Miami, which largely reversed the previous month's decline," Blitzer said. "Across the country, use of consumer and mortgage loans continued to expand."

Weak 1Q doesn't squash Fannie Mae's growth forecast

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WASHINGTON (4/21/15)--While the economy largely stalled in the first quarter, Fannie Mae maintains that the final nine months of the year will be marked by strong economic activity, and thus has decided not to alter its economic forecast for 2015.

The government-sponsored secondary mortgage giant attributed the weak growth in 1Q to West Coast port disruptions and challenging weather in the Northeast.

These factors led Fannie Mae to adjust its first-quarter growth performance but not its annual estimate of 2.8% growth.

Several months of weak consumer spending could force Fannie Mae to readjust those expectations as well, however.

"We have downsized our first-quarter economic growth expectations in light of several transitory factors that weighed on consumption, but our outlook is largely the same as what we forecasted in March," said Doug Duncan, Fannie Mae chief economist.

"Although some momentum was lost in the first quarter as consumers remained cautious in their spending, perhaps putting an emphasis on repairing their personal balance sheets and replenishing savings, we expect that consumer spending will catch up during the second quarter and continue in subsequent months," Duncan added.

The uptick in consumer spending will support Fannie Mae's forecast for 2.8% growth in 2015, Duncan said.

"We believe this momentum will carry over into the housing market as well, particularly if strong consumer income growth continues," he said.

Inflation ticks up in March, still relatively flat

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WASHINGTON (4/20/15)--For the second straight month in March the consumer price index (CPI) edged higher, but inflationary pressures have yet to gain real steam.

The CPI climbed 0.2% during the month, following up on February's 0.2% increase. On an annual basis, consumer prices are relatively unchanged.

"U.S. inflation is gradually moving in the right direction, but price pressures are tepid at best," said Ryan Sweet, Moody's analyst ( April 17). "Energy is no longer an enormous drag on the headline CPI, (and) rents are putting some upward pressure on the core index."

Rent prices climbed 0.3% in March, an acceleration from the 0.2% seen the prior month, while the rent of a primary residence rose 0.3% for the second straight month.

The energy CPI increased by 1.1% for the month, doubling up on the 1% gain seen in February, with energy commodities climbing 3.8% and gasoline prices jumping by 3.9%.

The gasoline CPI dropped by 18.7% in January.

"All told, the March CPI showed that the worst of disinflation has passed," Sweet said.

On an annual basis, CPI was down by 0.9% over the prior three months, an improvement from February's 3.9% decline and January's 5.1% setback.

Additional numbers:
  • Used-car and truck prices increased by 1.2%, while new-car prices climbed by 0.2%;
  • Food prices dropped by 0.2% during the month, reversing February's gains;
  • Apparel prices increased by 0.5% in March; and
  • Medical care service prices climbed by 0.4%.

Housing starts thaw, mortgage rates stand pat

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WASHINGTON (4/17/15)--Housing starts rebounded in March, but not nearly enough to reverse the losses seen over the past four months, according to numbers released by the Census Bureau Thursday.

Driven by single-family homes, housing starts rose by 2% from February, but sit 2.5% below levels seen last year at this time ( April 16).

Single-family starts climbed 4.4% for the month, but still fall 2.7% behind last year's pace, while multifamily starts dropped by 7.1% from February, and are down 4.7% on an annual basis.

"Although residential construction has started to regain some of the activity that was delayed by the winter snowstorms, the overall trend is still disappointing," said Andres Carbacho-Burgos, Moody's analyst ( "Multifamily permits and starts have regained their prerecession volume, but have leveled off and are even momentarily declining as builders wait for newly built apartments to be absorbed before starting new projects."

Housing permits were also mixed during the month.

Total housing permits fell 5.7% in March, but detached single-family homes experienced an increase of 2.1% from February, and sit 4.1% higher year-over-year.

Two- to four-unit structure permits plunged by 13.8% during the month however, as did structures with five or more units, by 16%.

Mortgage rates, meanwhile, inched up last week, with the 30-year fixed-rate mortgage rate climbing to 3.67% from 3.66%, according to Freddie Mac (MarketWatch April 16).

The 15-year fixed-rate mortgage rate edged up to 2.94% from 2.93%, while the five-year Treasury-indexed adjustable-rate mortgage rate climbed to 2.88% from 2.83%.