Federal Reserve Chair Janet Yellen had a clear message for the Trump administration Friday in what could be her final Jackson Hole speech: Undoing the hard work of overhauling the financial system after the financial crisis could have dangerous consequences. In her keynote address Friday at the high-profile Jackson Hole conference in the Grand Teton mountains of Wyoming, Yellen was not holding back — in a way suggesting she is not holding her breath for a reappointment from President Donald Trump. Yellen's term as Fed chair expires in February, and Trump is widely expected to nominate Gary Cohn, the former Goldman Sachs president who now leads Trump's National Economic Council, to replace her.
JPMorgan Chase Bank and Dallas debt collector Real Time Resolutions have agreed to pay $4.3 million to resolve a proposed class action by homeowners alleging that the firms tried to collect mortgage debt that was not legally enforceable. The settlement will reimburse thousands of California homeowners who received allegedly deceptive collection letters from Chase and Real Time Resolutions and hundreds who paid on debt that they allegedly had no legal obligation to pay.
Banks are scaling back on lending to Americans with the lowest credit scores, according to a study from TransUnion.
Lenders processed fewer new personal loans, auto loans, and credit cards for subprime borrowers year-on-year in Q2 for the first time since 2012. Lenders tightened their standards after the housing crisis a decade ago following several years of reckless lending to subprime borrowers. As the economy rebounded, they opened up access to the subprime part of the market. This new study shows that the trend is turning again. But now is not a comparable time period to the financial crisis, said Ezra Becker, the senior vice president of research and consulting at TransUnion. It would be alarming and a sign of another credit downturn if lenders pulled back on their underwriting and delinquencies still continued rising, Becker said. "Delinquency levels are still far below historical norms," he told Business Insider.
The U.S. Chamber of Commerce is asking the Securities and Exchange Commission to block a new rule that would require auditors to tell investors more about what they find when they audit a company’s books, the Wall Street Journal reported today. The business group urged the SEC to reject the central provisions of the new rule, which would require auditors to tell investors about “critical audit matters” — any especially challenging or complex areas of a company’s finances that force an auditor to make tough judgment calls. The Public Company Accounting Oversight Board (PCAOB), the government’s auditing regulator, approved the new rule in June. It is intended to give investors more information by expanding the auditor’s report, the letter included in every company’s annual report in which the auditor weighs in on the accuracy of the company’s financial statements. The auditor’s up-or-down ruling on the company’s numbers would be retained in the revamped report, but disclosures would be added on “critical audit matters” and on how long an auditor has worked for a company. The PCAOB’s rule is subject to ratification by the SEC, and the chamber’s Center for Capital Markets Competitiveness wants the SEC to decline to do so.
U.S. consumers ramped up spending last month, supported by low unemployment, rising confidence and a sense their personal finances have been repaired a decade after the housing crisis spurred a mission to pare back debt, the Wall Street Journal reported today. But there is a catch: Households are again running up debt, and they are saving less, which could constrain spending in the future. Sales at U.S. retailers rose a larger-than-expected 0.6 percent in July, the biggest monthly gain since December, the Commerce Department said yesterday. Americans spent more for cars, furniture, home-improvement supplies and, more than anything, online goods, including purchases during Amazon.com Inc.’s annual “Prime Day” event. Retail sales in June were also far higher than previously reported.
The Consumer Financial Protection Bureau (CFPB) yesterday released a new report finding that nearly half of student loan borrowers leave school owing at least $20,000 – double the share of borrowers a decade ago, according to a press release. The Bureau also found that more borrowers are taking out student loans later in life, and fewer borrowers are paying down their student debt in five years. A separate CFPB report found that record student debt and associated borrower stress is spurring more employers to offer student loan repayment benefits to their employees. The Article cites: CFPB Data Point: Student Loan Repayment Report.
Mortgage delinquencies are continuing to fall, hitting a new low in the second quarter, a report from TransUnion, one of the three largest credit reporting agencies in the U.S., showed, HousingWire.com reported yesterday. This confirms Tuesday’s report from S&P Dow Jones Indices and Experian, which showed that the average mortgage default rate hit its lowest level in a decade. Experian is also one of the nation’s largest credit reporting agencies, explaining the similar findings in both reports. TransUnion’s report showed that mortgage delinquency rates dropped below 2 percent for the first time in nearly 10 years as it hit 1.93 percent in the second quarter. This is down 16.5 percent from the second quarter of 2016, when it decreased to 2.3 percent.
Loan defaults in a popular program meant to finance energy-saving home upgrades have increased substantially, despite lenders’ claims that few borrowers have missed payments, the Wall Street Journal reported today. The small, high-interest-rate loans were made as part of the Property Assessed Clean Energy program (PACE), a nationwide initiative designed to help people afford solar panels, energy-efficient air-conditioners and other “green” appliances. PACE loans are among the fastest-growing types of loans in the U.S. Private lenders in the PACE program have told Wall Street investors, as well as local and federal government officials, that borrower defaults are rare and that no homeowners have gone into foreclosure as a result of the program, according to investors and public officials. But a Wall Street Journal analysis of tax data in 40 counties in California — by far the biggest market for PACE loans — shows that defaults have jumped over the last year. Roughly 1,100 borrowers have missed two consecutive payments this year through the tax year that ended June 30, compared with 245 over the previous year. That means they are in default, and could potentially have their homes auctioned off by local governments within five years.
Household debt hit a new record high in the second quarter of 2017, and credit card delinquencies are on the rise, according to a new report from the Federal Reserve Bank of New York on Tuesday, the Washington Examiner reported. The report marked the first time since 2009, when the country was still reeling from the financial crisis, that the economy saw a year-over-year rise in people falling behind on credit card payments. Total household debt rose $114 billion in the second quarter to $12.84 trillion, according to the report, eclipsing the previous all-time peak set in the first quarter. Researchers at the New York Fed noted that, unlike in 2008 when the level of debt first approached $13 trillion, there isn't a lot of questionable mortgage debt this time around. The release also showed aggregate student debt flat at $1.34 billion, and that the delinquency rate for student loans rose to 11.2 percent in the quarter.
Investors are snapping up a new type of security sold by Fannie Mae and Freddie Mac, increasingly assuming the risks of mortgage defaults from taxpayers and powering a quiet transformation of the housing giants after almost a decade of government control, the Wall Street Journal reported today. Fannie and Freddie have sold roughly $48 billion of the securities since 2013 to a broadening group of buyers including asset managers and insurance companies. Sales are expected to reach a fresh high of $15 billion this year, up from the previous record $13 billion last year, according to JPMorgan Securities. The sales mark an early step toward reducing the government’s role in the $14.4 trillion U.S. mortgage market. The amount of mortgage debt funneled through Fannie and Freddie and other taxpayer-backed entities roughly doubled after the financial crisis, to around 70 percent.