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News of the Competition(8)

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  • WASHINGTON (8/22/14)-- Big banks are being verbally warned by U.S. regulators to shore up their abilities to assess risk and identify weaknesses they might have in their operations, according to Reuters' sources ( Aug. 21). While the sources declined to name which banks have been spoken to, many banks have started to respond to the added pressure by hiring people who have experience in governance and analytics, Reuters reported. Despite their direct involvement in causing the housing market and the overall economy to topple in 2008, the world's largest banks have only grown larger since the financial crisis, and now operate "even more separate entities involved in a dizzying web of credit obligations and trading positions," according to Reuters. Without an ability to assess the broad scope of their trading activities, regulators and the banking industry may not be able to foresee large-scale threats to the nation's financial system down the road, Reuters said...
  • WASHINGTON (8/22/14)--A day after some details of a large Bank of America settlement with the U.S. Department of Justice were made public--like its almost $17 billion price tag and the fact that it stemmed from the bank's sales of mortgage-backed securities leading up to the financial crisis in 2008--the Department of Housing and Urban Development has announced specifics of how a portion of the settlement will be used for consumer relief. The $7 billion in consumer relief will focus on areas that were hardest hit during the housing crisis. Consumer relief will take various forms including loan modification for distressed borrowers, including FHA-insured borrowers, and new loans to credit worthy borrowers struggling to get a loan in hardest hit areas, borrowers who lost homes to foreclosure or short sales, and moderate income first-time homebuyers. Bank of America will also make donations to community development funds, legal aid organizations and housing counseling agencies to assist individuals with foreclosure prevention and to support community reinvestment and neighborhood stabilization. They will also provide financing for affordable rental housing with a focus on family housing in high-cost areas. An independent monitor will be appointed to ensure compliance with the terms of the agreement...

Reports stack up on uniform drop in mortgage rates

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WASHINGTON (8/22/14)--Several firms that track U.S. mortgage interest rates all reported this week that rates are sliding, with many relaying that mortgage rates have hit their low points for 2014.

The 30-year fixed mortgage rate listed by fell to 4.24%, which is a 14-month low, while the 30-year fixed rate from the Mortgage Bankers Association's mortgage applications survey recorded a 6 basis-point drop to 4.29% ( Aug. 20).

Freddie Mac recorded a 4.10% rate for 30-year fixed rates, also a low for the year and down from 4.58% at this time last year ( Aug. 21).

"Muted inflation readings and ongoing tensions in hotspots around the globe helped fuel demand for bonds, pushing mortgage rates lower," said. "Mortgage rates are closely related to yields on long-term government bonds. Any time there is a reason for nervousness among investors, their movement into the perceived safe haven of bonds is good news for mortgage rates."

The average 15-year fixed mortgage rate edged down to 3.37%, according to Bankrate's numbers, while the jumbo 30-year fixed mortgage rate dropped to 4.29%. Freddie Mac and MBA reported declining rates for those mortgage types as well.

In addition to lower mortgage rates, the National Association of Realtors reported Thursday that existing home sales sped up in July.

Sales climbed 2.4% for the month to 5.15 million annualized units, the first time since the fall of last year that sales have exceeded the 5.1 million mark ( Aug. 21).

Further, single-family sales led the way over condominium sales, although overall sales still sit 4.3% below numbers seen this time last year.

Home-price appreciation also has started to pick up again, Moody's reported, with the median existing-home price climbing 4.9% in July after a slowdown in June.

Credit delinquency remains at record low: Experian

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NEW YORK (8/21/14)--The national consumer credit default rate edged down 1 basis point in July, according to the S&P/Experian Consumer Credit Default index, keeping credit defaults across the United States at historically low levels.

The national composite index recorded a rate of 1.01% in July, the lowest in more than 10 years of the index's history, according to Experian.

Further, mortgage defaults fell to 0.88%, auto-loan defaults remained unchanged at 0.96% and bank card defaults sank by 16 basis points to 2.86%.

"Mortgage default rates have been trending down while auto and bank cards are a bit higher than their historical lows set in April and March," said David M. Blitzer, managing director and chair of the S&P Dow Jones Indices index committee.

Household debt increased in the second quarter, driven largely by mortgages, Blitzer added, while non-housing debt also rose slightly.  

Broken down into several major cities, Los Angeles watched its overall default rate drop to the lowest level on record at 0.66%, Dallas experienced a 7-point decline, and Chicago and Miami posted their lowest default rates since 2006.

"All five cities--Chicago, Dallas, Los Angeles, Miami and New York--remain below default rates seen a year ago," Blitzer said.

FOMC minutes: Fed not yet ready to hike interest rates

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WASHINGTON (8/21/14)--Unemployment and inflation are nearing the levels at which the Federal Open Market Committee (FOMC) has said could lead to changes in its monetary policy, but the majority of the group continues to believe interest rates should remain at their near-zero levels, according to the July 29-30 meeting minutes, released Wednesday by the Federal Reserve.

While the committee did not come to consensus on the overall health of the job market, consistent with previous policy decisions, the FOMC again reduced the number of asset purchases by $10 billion during the meeting.

The quantitative easing program, which the Fed has used over the past few years to pump money into the lending market, is expected to end in October.

Despite the looming end to the stimulus program, however, many still expect the Fed to keep interest rates at their near-zero levels well into 2015.

"We believe the Fed will begin normalizing interest rates next fall and allow the balance sheet to begin deflating shortly after," said Ryan Sweet, Moody's analyst ( Aug. 20). "The practice of 'gradualism' in monetary policy, whereby changes to the policy rate during an easing or tightening cycle tend to come in a series of small and relatively predictable steps, will characterize the initial stage of the Fed's tightening cycle. However, policymakers may have to get more aggressive quickly."

Philadelphia Fed President Charles Plosser, the lone dissenter in a 9-1 vote to maintain the policy of slowly peeling back stimulus money from the economy, believes that the rest of the committee has not adequately acknowledged the full improvements the economy has made of late.

If the economy continues to strengthen and the FOMC has to raise rates earlier than is now widely expected, Plosser said, such a move could volatilely disrupt financial markets and the economy in general.

The next FOMC meeting is scheduled for Sept. 16-17.

News of the Competition (08/20/2014)

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  • WASHINGTON (8/20/14)-- The Financial Industry Regulatory Authority (FINRA) has filed a complaint against Wedbush Securities Inc., a Los Angeles-based securities and investment firm, for systemic supervisory and anti-money laundering violations . FINRA believes that Wedbush, one of the largest market access providers in the United States, negligently allowed direct market access and sponsored access to broker-dealers and non-registered market participants from January 2008 to August 2013 because it did not provide enough resources to ensure the integrity of the system. The oversight allowed market-access customers to pour into U.S. exchanges where they could make "thousands of potentially manipulative wash trades and other potentially manipulative trades," according to FINRA ...

Housing starts swell in July

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WASHINGTON (8/20/14)--Housing starts jumped 15.7% in July up to 1.093 million annualized units, pushing starts 21.7% higher year-over-year, according to numbers released by the Commerce Department Tuesday.

While multifamily home starts have remained strong throughout 2014, singly-family starts also contributed to the surge in July, climbing 8% for the month ( Aug. 19).

"This was a good month, but we are not out of the woods yet," said economists from IHS Global Insight ( MarketWatch Aug. 19).

Still, multifamily starts led the way, increasing 33% in July and reaching their highest mark since 2005.

All regions except the Midwest experienced gains in starts, according to Moody's, with a solid rebound in the South, which had seen starts fall flat in June ( ). The Northeast and West posted strong numbers, but largely they were concentrated in multifamily starts.

Meanwhile, both house completions and permits for new houses also improved, the latter likely signaling that companies are planning to build in the near future.

Now at a nine-month high, permits jumped 8.1% from June and sit 7.7% higher year-over-year.

Completions of privately owned housing units climbed 4% to 841,000, a gain almost entirely driven by single-family housing units.

However, "the single-family market is progressing much more slowly, with permits running at only one-half their 2000 pace," said Gregory Bird, Moody's analyst ( ). "Rental housing in benefiting from droves of young adults forming households as the economy has improved, preferring the flexibility of renting and lacking the financial wherewithal to become a homebuyer."

Consumer inflation tapers after spring surge

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WASHINGTON (8/20/14)--After climbing briskly from April to June, the consumer price index edged up 0.1% in July, according to the Labor Department.

The slowdown was fueled by a 0.3% drop in the energy index, with all energy categories falling, including gasoline, electricity, fuel oil and natural gas ( Aug. 19).

Tepid inflation growth, for some, reinforces a widely held view that the Federal Reserve won't begin raising short-term interest rates, which it has kept low to stimulate the economy, until inflation normalizes sometime next year.

"This latest inflation reading confirms our view that the Fed will wait until mid-2015 for a liftoff," Gregory Daco, Oxford Economics lead U.S. economist, told MarketWatch (Aug. 19).

Both headline and core inflation now sit at about 2% on a year-over-year basis, according to Moody's.

Consumer prices have advanced for nine straight months, but July's reading was the weakest since February.

Food and beverage prices rose 0.4% after a 0.1% gain in June and sit 2.6% higher year-over-year. Medical care, apparel and new-vehicle prices also all ticked up.

Used vehicles, tobacco, airline fares and household furnishings, however, all reported weak months.

"A sustained pickup in consumer prices is facing challenges because fresh weakness in the global economy is exerting deflationary pressures," said Arijit Dutta, Moody's analyst ( ). "Import prices fell and producer prices barely rose in July, differing from the generally strong readings this year."