News

Federal Government Has Dramatically Expanded Exposure to Risky Mortgages - ABI

The federal government has dramatically expanded its exposure to risky mortgages, as federal officials over the past four years took steps that cleared the way for companies to issue loans that many borrowers might not be able to repay, the Washington Post reported. Now, Fannie Mae, Freddie Mac and the Federal Housing Administration guarantee almost $7 trillion in mortgage-related debt, 33 percent more than before the housing crisis, according to company and government data. Because these entities are run or backstopped by the U.S. government, a large increase in loan defaults could cost taxpayers hundreds of billions of dollars. This risk is the direct result of pressure from the lending industry, consumer groups and political appointees, who lobbied for the government to intervene when homeownership rates fell several years ago. Starting in the Obama administration, numerous government officials obliged, mistakenly expecting that the private market ultimately would take over. In 2019, there is more government-backed housing debt than at any other point in U.S. history, according to data from the Urban Institute. Taxpayers are shouldering much of the risk, while a growing number of homeowners face debt payments that amount to nearly half of their monthly income, a threshold many experts consider too steep. Roughly 30 percent of the loans Fannie Mae guaranteed last year exceeded this level, up from 14 percent in 2016, according to Urban Institute data. At the FHA, 57 percent of the loans it insured breached the high-risk echelon, jumping from 38 percent two years earlier. ABI


Fed Adds $63.5 Billion to Financial System in Repo Transaction - ABI

The Federal Reserve Bank of New York added $63.5 billion to the financial system yesterday, using the market for repurchase agreements, or repo, to relieve funding pressure in money markets, the Wall Street Journal reported. Banks asked for $63.5 billion in overnight reserves, all of which the Fed accepted, offering collateral in the form of U.S. Treasury and mortgage securities. In the repo market, borrowers seeking cash offer lenders collateral in the form of safe securities — frequently Treasury bonds — in exchange for a short-term loan. The term of these loans can be as short as overnight. The Fed began offering repo loans two weeks ago after a shortage of available cash in the financial system led repo rates to climb as financial companies scrambled for overnight funding. The actions marked the first time since the financial crisis that the Fed had taken such actions. ABI


Millennials More likely to Report Losing Money to Fraud than Older Generations, New FTC Data Spotlig

Millennials are 25 percent more likely to report that they have lost money to fraud than consumers aged 40 and over, according to a new Federal Trade Commission analysis of consumer complaint data.   The FTC’s latest Consumer Protection Data Spotlight shows that millennials—those ages 20-39—are twice as likely to report losing money to online shopping fraud than those 40 and over. Online shopping fraud reports include complaints about items that are never delivered or are not as they were advertised. Millennials reported losing $71 million to online shopping fraud—out of the nearly $450 million they reported losing to all types of fraud—in the last two years. Federal Trade Commission


Zillow: Over half of renters blame student debt for delay in buying a home - HousingWire

In a paper released at the beginning of this year, the Federal Reserve estimated that about 20% of the decline in homeownership among young adults could be attributed to increased student loan debts since 2005. Based on the 2019 Zillow Group Report on Consumer Housing Trends released on Monday, that percentage may be a little low.  The report surveyed 13,000 U.S. household decision-makers about their homes, including how they search for them, pay for them and what challenges they encounter along the way. Among these findings, there was a recurrent topic of debt holding back potential buyers. From medical and credit card debt to student loans, an increasing amount of Americans are putting off buying a home. HousingWire


U.S. Income Inequality Has Never Been Greater, Census Data Shows - ABI

Income inequality in the United States has hit its highest level since the Census Bureau started tracking it more than five decades ago, according to data released yesterday, even as the nation’s poverty and unemployment rates are at historic lows, the Washington Post reported. The gulf is starkest in wealthy regions along both coasts such as New York, Connecticut, California and Washington, D.C., as well as in areas with widespread poverty, such as Puerto Rico and Louisiana. Equality was highest in Utah, Alaska and Iowa. And while the nation is in the midst of its longest economic expansion, nine states saw spikes in inequality from 2017 to 2018: Alabama, Arkansas, California, Kansas, Nebraska, New Hampshire, New Mexico, Texas and Virginia. ABI


U.S. consumers’ access to credit may be worse than previously thought: Fed study - Reuters

As many as 60 million Americans tend to have a hard time qualifying for credit cards and other loans, making it more difficult for them to recover from financial setbacks, according to a report released on Tuesday by the New York Federal Reserve.   The findings show that the number of Americans who cannot easily access loans may be twice as many as previously estimated, when people who cannot easily qualify for loans because of blemishes in their credit histories are taken into account. Reuters


Struggling Farmers See Bright Spot in Solar - ABI

U.S. farmers are embracing an alternative means of turning sunlight into revenue during a sharp downturn in crop prices: solar power, the Wall Street Journal reported. Solar panels are being installed across the Farm Belt for personal and external use on land where growers are struggling to make ends meet. The tit-for-tat tariffs applied by the U.S. and China to each other’s goods have cut demand for American crops. Futures prices for corn, soybeans and wheat are all trading around their lowest levels since 2010. Making matters worse, record spring rainfall left many farmers no time to plant a decent crop. Farmers have two options for adding solar power on their farms: lease land for energy companies to generate power to funnel electricity into the grid, as the Nielsens are doing; or install their own solar panels to cut their electricity bills. Both methods can amount to more than $1,000 a month in improved margins, according to farmers and renewable-energy advocates. ABI


Measuring the Effects of Loan Forgiveness - Inside Higher Ed

The impact of student loan forgiveness goes far beyond a reduced debt balance for borrowers, according to a new study.   Researchers from Harvard Business School, Indiana University and Georgia State University examined the effects of debt cancellation for borrowers whose private student loans were tossed out in court after their creditor, National Collegiate Student Loan Trusts, couldn’t prove the chain of title. In recent years, judges have tossed out numerous lawsuits against student borrowers because National Collegiate couldn't establish in documents that the company actually owned the debt. Inside Higher Ed


Over 200 Organizations Call for Protection From Debt Collection Industry - ValueWalk

Late yesterday, a coalition of 232 nonprofit organizations from all 50 states and the District of Columbia sent a letter to the Consumer Financial Protection Bureau (CFPB) in response to its proposal that protects abusive debt collectors more than consumers. Instead of giving the debt collection industry more weapons to harass and abuse consumers, the coalition urges the consumer bureau to limit the number of phone calls per week, require consent of the person before sending emails or text messages, allow people to opt-out of electronic messages, hold debt collection attorneys responsible for misrepresentations, and prohibit the collection of “zombie debt.” ValueWalk


Wall Street May Get $40 Billion Reprieve from Regulators - ABI

Wall Street could soon get a key victory as regulators are considering ripping up a rule that’s forced banks to set aside billions of dollars for swaps trades, Bloomberg News reported. At issue is a requirement approved during the Obama administration that’s made lenders post tens of billions in margin when engaging in derivatives transactions with their own affiliates. Industry lobbyists have long argued that the demand, which came out of the 2010 Dodd-Frank Act, is redundant and puts U.S. banks at a competitive disadvantage to overseas rivals. The Federal Deposit Insurance Corp. will hold a public meeting today to propose eliminating the margin requirement. Other agencies, including the Federal Reserve and the Office of the Comptroller of the Currency, are also expected to recommend scrapping the rule, said the people who asked not to be named the proposal hasn’t been publicly disclosed. The FDIC announced last week that its board would meet Sept. 17 to vote on a swap margin proposal without providing any further details. The margin demand, implemented in 2015, has tied up $39.4 billion, according to industry estimates. That’s prompted major swap dealers, such as Goldman Sachs Group Inc., JPMorgan Chase & Co. and Citigroup Inc., to make the rule’s elimination a lobbying priority. It would likely be months before regulators scrap the margin requirement. That’s because once the FDIC and other agencies issue their proposals, the public will have an opportunity to submit comments before a final rule could be put in place. ABI