News

Borrowing for College Just Got Slightly Cheaper - The Washington Post

Starting Monday, the government will charge families less to borrow money for college as newly lowered interest rates on federal student loans take effect, the Washington Post reported. The annual rate change is pegged to the Treasury Department’s auction of 10-year notes in early May. Based on the rate of the note, plus a fixed margin, the interest on student loans can rise or fall from one year to the next. And for the past two years, rates have climbed. This year, families will get a reprieve. For the 2019-2020 academic year, undergraduate students will pay 4.53 percent in interest on new Stafford loans, down from 5.05 percent. Graduate students will see the interest rate on new Direct loans decline from 6.6 percent to 6.08 percent. And parents who take on federal debt to help their children pursue a degree can expect to pay 7.08 percent instead of 7.60 percent. There is no telling whether interest rates will continue to decline or rise, but Congress set a ceiling to prevent federal student loans from becoming too costly. The interest on undergraduate loans can never go higher than 8.25 percent. Graduate loans are capped at 9.5 percent, while the limit on PLUS loans — for eligible parents as well as graduate and professional students — is 10.5 percent.


Five Years After Crude’s Collapse, Shale Patch Still Struggles - Bloomberg

It has been five years since crude started a precipitous drop that eventually saw it hit a low of $26 a barrel. While prices have recovered some of the lost ground, shale producers are still feeling the pain, Bloomberg News reported. Oil’s 76 percent collapse from almost $108 a barrel in June 2014 was the worst plunge since the financial crisis of 2008. In 2014, oil and gas companies made up almost 11 percent of the S&P 500 Index. Now, that’s just over 5 percent as some investors appear to have given up on the sector. Shareholder antipathy stems at least in part from questions over the profitability of shale drilling. While the five big, publicly traded integrated major producers — BP Plc, Chevron Corp., Exxon Mobil Corp., Royal Dutch Shell Plc and Total SA — resumed generating free cash flow as a group in 2017, independent U.S. drillers only became cash-flow-positive (based on an average of 12 such companies compiled by Bloomberg) in 2018 — and they were back in the red in the first quarter of 2019.


Fed Stress Tests Find Top Banks Are Strong, Setting Stage for Wave of Payouts - ABI

The Federal Reserve said yesterday that its annual tests of the financial strength of the 18 largest banks in the U.S. revealed that each had enough capital to justify paying some of it out to shareholders, the New York Times reported. There was one caveat to the Fed’s across-the-board thumbs-up: The central bank said it found weaknesses in how Credit Suisse was measuring potential losses, and the Fed therefore capped the amount of money the Swiss bank could return to its investors until it corrected the problem. The Fed’s “stress tests” examine how the largest banks would fare in a severe economic downturn or a sudden shock to the global financial markets. After a two-part evaluation, banks either receive permission to return capital — via repurchasing their own shares, paying dividends or other means — or are prohibited from doing so until they fortify their capital cushions or strengthen their management. Within minutes of the Fed releasing the test results, the country’s four largest banks — Bank of America, Citigroup, JPMorgan Chase and Wells Fargo — announced that they could repurchase a total of about $105 billion of their own shares. The four banks also said they would increase their dividends.


Consumer Advocates: Bankruptcy Law Governing Payment of Debt Is Squeezing the Most Vulnerable - ABI

Federal lawmakers passed a law more than a decade ago that required more people in bankruptcy to pay off some debt before getting a fresh start. However, some consumer advocates say that the rule has disproportionately squeezed money from disabled veterans, retired people and the unemployed, who have had to dip into pensions and public-assistance income to pay back debt through a much more arduous bankruptcy process, WSJ Pro Bankruptcy reported. Lawmakers held a hearing yesterday on a proposal that would change one piece of the 2005 rule by enabling more veterans to keep disability payments and get through bankruptcy faster. “There’s been long-simmering frustration over this — that veterans or state pension employees or railroad workers are treated worse than other people,” said Edward Boltz, a North Carolina lawyer and a member of ABI's Commission on Consumer Bankruptcy. More than 80 percent of teachers and other government workers in Ohio, Massachusetts and Nevada, for example, work in positions that draw public-pension money for retirement compensation instead of Social Security payments. Retired railroad workers receive money from a separate government agency. The rule also affects the country’s disabled military veterans, whose payments from the Department of Veterans Affairs and Defense Department are more likely to be diverted to pay creditors if they file for bankruptcy protection. A 2017 study found that veterans — a group that faces higher rates of homelessness, mental health problems and debt from medical expenses deriving from combat-related injuries — are twice as likely to file for bankruptcy protection.


Trump Signs Executive Order to Tackle Lack of Affordable Housing - ABI

President Donald Trump signed an executive order yesterday that establishes a White House Council tasked with identifying and removing barriers hindering the development of affordable housing, HousingWire.com reported. In effect, he is “tearing down red tape in order to build more affordable housing,” a White House release said. The council will comprise members of eight federal agencies and be chaired by Department of Housing and Urban Development Secretary Ben Carson. Its creation will “streamline interagency processes and deliver results even faster,” the White House said. This will require the council to meet with state and local leaders to identify issues impeding the development of affordable housing, and to assess the impact of state, federal and local regulations on the cost of such development. Among the specific issues the council will aim to tackle include ways to cut excessive costs in order to spur construction.


Agencies Issue Final Amendments to Regulation CC Regarding Funds Availability - CFPB

WASHINGTON, D.C. – The Consumer Financial Protection Bureau and the Federal Reserve Board today jointly published amendments to Regulation CC that implement a statutory requirement to adjust for inflation the amount of funds depository institutions must make available to their customers. The amendments apply in circumstances ranging from next business day withdrawal of certain check deposits to setting the threshold amount for determining whether an account has been repeatedly withdrawn. Regulation CC implements the Expedited Funds Availability Act of 1987 (EFA Act). The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) amended the EFA Act to grant the Bureau and the Board joint rulemaking authority for funds-availability schedules, disclosure policies, payment of interest, and other EFA Act provisions implemented by Regulation CC.


FTC Announces Final Rule Implementing Law Providing Free Credit Monitoring - FTC

The Federal Trade Commission has finalized the rule implementing a 2018 law that requires the nationwide consumer reporting agencies (CRAs) to provide free electronic credit monitoring services for active duty military consumers. The Free Electronic Credit Monitoring for Active Duty Military Rule, which will be published in the Federal Register shortly, implements legislation included in the 2018 Economic Growth, Regulatory Relief, and Consumer Protection Act, which amended the Fair Credit Reporting Act (FCRA) by requiring CRAs to notify active duty military consumers about any “material” additions or modifications to their credit files.


Married to Debt: Couples are Taking Out Loans to Pay for Their Weddings - ABI

Demand among Americans, who are already holding record levels of debt, for help financing weddings are giving rise to an industry of personal loans marketed specifically to brides and grooms, the Washington Post reported. Online lenders say they are issuing up to four times as many “wedding loans” as they did a year ago, as they look to reach a fast-growing demographic: Couples who are picking up the tab for their own nuptials, either by choice or by necessity. Financial technology companies with snappy names like Prosper, Upstart and Earnest are promoting wedding-specific loans with interest rates as high as 30 percent to cash-strapped couples. The loans are often marketed as a way to fund extras like custom calligraphy, doughnut displays and “Instagram-worthy” venues, though some borrowers say they rely on the loans to fund their entire wedding. “People are carrying more debt, they want to get married but don’t have the funds to do so,” said David Green, chief product officer at Earnest, a San Francisco-based online lender. “These loans are a way to thread the needle.”


Investors Are Buying More of the U.S. Housing Market Than Ever Before - ABI

Investor purchases of U.S. homes have climbed to an all-time high, a sign that rising home prices have done little to dampen demand for flipping homes or turning them into single-family rentals, the Wall Street Journal reported. Big private-equity firms, real-estate speculators and others that buy properties comprised more than 11 percent of U.S. home purchasers in 2018, according to data released yesterday by CoreLogic Inc. The investor purchases are the highest on record and nearly twice the levels before the 2008 housing crash. The investor interest poses a challenge for millennials and other first-time buyers who are increasingly looking to buy starter homes and are forced to compete with deep-pocketed cash buyers. Big commercial property owners like Blackstone Group LP and Starwood Capital Group began buying thousands of homes out of foreclosure during the housing bust. Many economists credit investors with helping to stabilize the housing market in 2011 and 2012 by buying with cash when prices were low and mortgage credit froze. But analysts expected those purchases to slow, as the market rebounded and properties could no longer be had for fire-sale prices. Instead, demand for properties has intensified. While these purchases dipped slightly when the market started to recover in 2015 and 2016, they have rebounded to surpass the previous peak of six years ago.


Big Banks Face Less Stress in This Year’s Fed Tests - ABI

The Federal Reserve is scheduled to release results of annual stress tests for big banks in two parts, one today, and the other on Thursday, June 27. The firms could have an easier time with the exams because the Fed for this year overhauled several components, including a test of how firms would fare under a hypothetical doomsday scenario, the Wall Street Journal reported. Each year, banks subject their balance sheets to doomsday scenarios envisioned by the Fed. This year, the central bank’s “severely adverse” scenario would see unemployment rising by more than 6 percentage points to 10 percent, with U.S. stocks declining by 50 percent and major stresses in the corporate lending and real-estate markets. After the Fed publishes the scenarios, banks run their own tests, which helps them determine how much capital they can return to shareholders while still remaining sufficiently capitalized under the hypothetical crisis. Eighteen banks, including JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc. and Goldman Sachs Group Inc. will take the stress tests this year, compared with 35 last year. The Fed allowed firms with assets generally between $100 billion and $250 billion to skip this year’s tests under a new biennial schedule for those firms.