WASHINGTON (7/30/14)--When the Federal Open Market Committee (FOMC) wraps up its meeting today, most will be looking for clues about when, and by how much, the central bank will start raising short-term interest rates from their longstanding near-zero levels.
The Federal Reserve's monetary policy-making body, which met Tuesday and today, has pinned down interest rates over the past few years to invigorate the nation's lending ecosystem and, in turn, inject life into the economy.
But with the unemployment rate dropping closer to full employment, in addition to other recent improvements in the labor market, the Fed could consider raising rates sooner than anticipated.
With no change in the forecast, most analysts expect the FOMC to begin hiking short-term interest rates in the spring of next year, with the rate climbing to 1.25% by the end of 2015 and to 2.5% sometime in 2016 (MarketWatch July 29).
Fed Chair Janet Yellen has said, however, that unforeseen improvements to the economy in the short term could hasten the decision for the FOMC to raise rates.
But as Yellen has pegged housing as a critical marker for whether the economy is heading in the right direction, expectations will likely be subdued, as the housing market continues to struggle.
On Tuesday, the Commerce Department reported that homeownership in the United States, at 64.8%, fell to its lowest level since the third quarter of 1995.
Meanwhile, the Fed is widely expected to announce it will continue tapering quantitative easing and again slim down the bond-buying program--which it has employed alongside the low-interest rate environment as another tool to stimulate the economy--by another $10 billion.
NEW YORK CITY (7/30/14)--The Credit Union National Association's interim Chief Economist Mike Schenk appeared on the online investment show "TheStreet" Tuesday to discuss a recent surge in consumer confidence.
This week, the Conference Board reported that its Consumer Confidence Index skyrocketed to a seven-year high in July to a reading of 90.9 from 86.4.
Schenk told TheStreet host Joe Deaux that it's encouraging to see confidence indices on the mend, especially when consumer behavior matches that sentiment.
"I don't look at what people say they're going to do, or how they feel, but I look at how they're actually behaving," Schenk said. "As an economist at the Credit Union National Association we serve 100 million members throughout the United States . . . and I can tell you those folks are engaged.
"From a borrowing perspective, loan growth at credit unions is right around 10%. You've got to go back about a decade to see growth that high."
When consumer confidence and behavior are both on the upswing, Schenk said, it demonstrates that consumers are "ready, willing and able to spend, (and spend) on big ticket items. Without confidence, they're going to be a little more cautious, so that's really good news overall.
"It leads us to the conclusion that the economy will not only continue to grow at healthy rates, but likely grow at rates that are increasing over our forecast horizon."
Schenk slightly tempered his enthusiasm over the data, however, as the reading falls short of where confidence should be compared with previous recoveries.
"At this point in previous recoveries, for example, if you look at the past three recoveries, the reading would be well over 100," Schenk said. "So it's good that confidence is up and increasing, and I think it bodes well for economic output overall, but we have other measures of consumer confidence that really give me pause."
WASHINGTON (7/30/14 UPDATED 2:45 PM ET)--Citing "sufficient underlying strength in the broader economy to support ongoing improvement in labor market conditions," the Federal Open Market Committee announced Wednesday it will continue the pace of its quantitative easing program.
The announcement came at the conclusion of the FOMC's two-day policy meeting this week.
Beginning in August, the committee will add to its holdings of agency mortgage-backed securities at a pace of $10 billion per month rather than $15 billion per month, and will add to its holdings of longer-term Treasury securities at a pace of $15 billion per month rather than $20 billion per month.
Previously, the Federal Reserve's monetary policy-making body has been shaving down the amount of bonds and securities it has been buying over the last few months--purchases that have injected much-needed cash into the lending industry and subsequently the economy--by $10 billion every month (News Now June 18).
The committee said growth in economic activity rebounded in the second quarter. While the labor market conditions improved, with the unemployment rate declining further, a range indicators show that some labor resources remain underutilized the committee said.
Household spending appears to be rising moderately and business fixed investment is advancing, while the recovery in the housing sector remains slow. Fiscal policy is restraining economic growth, although the extent of restraint is diminishing. Inflation has moved somewhat closer to the committee's long-term objective. Longer-term inflation expectations have remained stable.
The Fed said it, "judges that the likelihood of inflation running persistently below 2 percent has diminished somewhat."
WASHINGTON (7/30/14)--This year's summer issue of the Federal Deposit Insurance Corp.'s (FDIC) Supervisory Insights includes an article that outlines various resources that can assist banks with meeting regulatory requirements and resources that could allow banks to cut down on expenses used to pay third-party consultants, an FDIC press release said. A second article, called "Matters Requiring Board Attention," highlights trends witnessed by examiners in well-rated banks since 2010. The publication also features a summary of recent regulatory developments. The full issue is available on www.fdic.gov...
WASHINGTON (7/29/14)--For the first time in four months pending-home sales have stepped back, dropping 1.1% in June, according to data released by the National Association of Realtors Monday.
The Northeast and South bore the brunt of declines, which were somewhat offset nationally by modest gains in pending sales in the Midwest and West. Overall, the national index sits 7.3% lower than levels seen this time last year (
The pullback is consistent with recent weaknesses in other housing indicators, such as new-home sales and mortgage purchase applications, according to Brent Campbell, Moody's analyst (
"The bounce-back from weather-related weakness in the spring provided some lift earlier in the year, but many potential homebuyers have yet to regain confidence lost during the depths of the recent housing crisis," Campbell said.
By region, pending-home sales fell in the Northeast by 2.9% and in the South by 2.4%. The Midwest posted a 1.1% gain and the West recorded a 0.2% uptick.
Across all regions, however, pending home sales are down on a year-over-year basis, with the West nearly 17% behind last year's pace.
ATLANTA (7/28/14)--Halfway through 2014, auto-loan balances have surged to $902.2 billion, an all-time high, according to the Equifax National Consumer Trends Report, released last week.
Total loan balances have jumped 10% since this time last year, while the total number of auto-loans outstanding climbed by 8.1 million to 64 million over that same stretch.
Meanwhile, serious delinquencies continue to hover near all-time lows, making up less than 1% of total outstanding balances for the third straight month.
"Auto lending continues to thrive, accounting for more than 50% of all new non-mortgage lending through April," said Dennis Carlson, Equifax deputy chief economist. "Lenders are responding to record-low delinquencies by offering great rates and terms, while consumers are responding to the improving economic conditions by making the decision to purchase newer vehicles."
Subprime lending also has swelled across all sectors this year, Carlson said, which could signal prosperous times ahead as a "fully functioning second-chance market is essential for a healthy economy."
Subprime borrowers, or those with credit scores of 640 or lower, made up 32% of all new auto loans originated over the last 12 months.
The total balance of subprime auto loans sits at $46.2 billion, an 8-year high and 28.2% of all new auto-loan balances.
WASHINGTON (7/25/14)--Sales of new single-family homes fell 8.1% in June to 406,000 annualized units, according to numbers released by the Commerce Department Thursday.
Sales are down 11.5% year-over-year, and the weak month means a second straight quarter of decline for new homes after an abysmal first quarter (
The Census Bureau also revised new-home sales in May substantially lower than the 504,000 annualized units that were initially reported by 12%, further undercutting the second-quarter's new-home sales performance.
"The June new-home report is unexpectedly weak," said Celia Chen, Moody's analyst (
). "Sales are down again in the second quarter and slack is creeping back into the market."
All U.S. regions witnessed a drop in sales in June, with the Northeast and South experiencing the steepest declines.
Meanwhile, inventory outpaced demand, as the number of new homes for sale climbed 3% in June. Median prices for new homes fell $3,100 as well, but prices still sit 5.3% higher than prices in June 2013.
WASHINGTON (7/24/14)--After a sharp drop earlier in the month, mortgage application activity has gained back some ground, as the composite index in the Mortgage Bankers Association's weekly survey gained 2.4% during the week that ended July 18 (
The rebound was driven in large part by refinance activity, which jumped 4.1% for the week, while purchase activity inched up 0.3%, redirecting a 7.6% stumble during the prior week.
Despite the modest gains, however, mortgage application activity has much work to do, as the four-week moving average for purchases has declined 3% and refinances have fallen 3.6%.
Further, refinancing activity sits 45% lower than levels seen at this time last year, while purchase activity is down 14.6% year-over-year.
"Despite last week's uptick, mortgage application activity remains quite subdued," said Gregory Bird, Moody's analyst (
), who added that because mortgage rates have been held down for so long, many consumers likely already have refinanced, "meaning the potential pool for further activity is probably small."
The contract rate for 30-year fixed-rate mortgages remained at 4.33% for the week; the 30-year fixed rate for jumbo mortgages dropped by 2 basis points; and the rate for five-year adjustable-rate mortgages climbed 4 basis points.
While purchase mortgage activity still hovers near a cyclical low, existing-home sales did tick up, according to numbers released Tuesday by the National Association of Realtors, which reported a 2.6% increase in sales in June.
But the slack in the market may be being picked up by those able to pay cash for homes, as now one-third of all home sales are paid for in cash.
"All-cash transactions ... are providing the impetus for overall sales activity to head higher, while first-time buyers remain on the sidelines for the most part," Bird said.
- ATLANTA (7/23/14)--Finding bitcoins can be tricky,
but a new and perhaps easier way to give and receive the digital currency recently has been developed: through Facebook.
BitPay, a Bitcoin-based payment gateway, recently launched the "Get Bits" Facebook app that will allow users to give or receive bitcoins to or from "friends" on the social networking site (
July 22). To gain access to bitcoin via Facebook, users must sign into their accounts and activate the application. Once logged in, users will be able to view which of their friends on Facebook also have activated the app and whether they are willing to help procure bitcoin by trade, gift or otherwise. "Because Bitcoin is one of the only forms of payment which cannot be fraudulently reversed, selling bitcoin usually requires some level of trust in the buyer," BitPay wrote on its online blog. "To deal with this, Get Bits (now) leverages the world's largest "web of trust," Facebook ...
NEW YORK (7/23/14)--National housing market numbers may have underwhelmed lately, but one bright spot has been mortgages approved by the U.S. Department of Veterans Affairs (VA), which offer attractive home loans to current and former military servicemembers.
Accounting for 8.1%, or $19.5 billion, of all mortgages issued in the first quarter, according to
Inside Mortgage Finance
, after jumping more than 25% in the last two years, VA mortgage loans' share of the market has reached a 20-year high (
"On Facebook, my friends have started posting: 'I got my VA loan, I got my house," Staff Sgt. Claude Hunter, told
. "Everybody is just ready. A lot of them have done their jobs overseas and are coming home."
VA mortgage benefits can be accessed by veterans, their surviving spouses, active military members and reservists who have served at least six years or who have been called up for 90 days.
The loans pose less risk to lenders, as the government promises to cover a portion of any losses, normally up to 25% of the loan amount.
Unlike the Federal Housing Administration, which will allow down payments of as little as 3.5%, the VA also doesn't levy monthly insurance premiums, and upfront cost can be combined with loan balances.
Hunter, for example, paid $219,000 for a four-bedroom home in May with VA mortgage financing, and he didn't have to make a down payment, according to
About 90% of VA mortgages don't require down payments.
Michael Litzner, real estate broker for Century 21 Homes, told
"It's really the only avenue out there for people who are completely cash-strapped to be able to get into a home."
WASHINGTON (7/22/14)--More than a high credit score or sizeable down payment, boasting a safe debt-to-income (DTI) ratio best positions a consumer for success when applying for a mortgage, a FICO survey has found (
The Washington Post
Nearly 60% of risk managers polled for the study said that when assessing a mortgage applicant, excessive DTI was their No. 1 concern. Having multiple credit applications out and poor credit scores came in second and third respectively, though DTI came in five times higher than any other response.
DTI ratios first compare a consumer's gross income with potential housing expenses, including principal payments, interest, taxes and insurance. The second piece of the ratio, called the back-end ratio, measures income against all other recurring monthly debt, such as housing expenses, credit cards, student loans and other personal loans.
Together, DTI helps elucidate whether the prospective home-buyer will have enough cash available, given other debt, to make mortgage payments each month.
Lenders prefer to see a housing-expense ratio, the first component, fall under 28%, according to
The Washington Post
. In May, the average borrower to obtain a mortgage through Freddie Mac and Fannie Mae held a housing-expense ratio of 22%.
Under federal qualified mortgage standards, the highest acceptable income-to-recurring debt ratio, or the back-end ratio, is about 43%.
The average back-end ratio for borrowers who secured a mortgage in May was 34%, according to Ellie Mae. The Federal Housing Administration reported the average denied applicant had a 47% back-end ratio.
A qualified mortgage is a type of loan that carries stable terms that are geared to ensure the borrower can afford pay off the loan.
WASHINGTON (7/21/14)--Concerned over what the future holds, consumer confidence dipped in July, as the overall index for Friday's University of Michigan consumer sentiment survey fell 1.2 points to 81.3.
While feelings over current financial situations slightly improved for consumers, pessimistic expectations for the next 12 months largely fueled the drop in the overall index with a 2.4-point pull back to 71.1.
"Respondents' assessment of their future financial prospects hit a four-month low, possibly reflecting worries that escalating conflicts in Ukraine and the Middle East could send shock waves through the U.S. economy in coming months," said Nate Kelley, Moody's analyst (
Consumers also forecasted a 3.3% increase in prices over the next 12 months, which is a slightly higher pace than was estimated in June. Shoppers believe prices over the next five years will climb 2.6% on average, which is 0.3% slower than last month's expectation.
Meanwhile, despite the survey, Moody's analysts believe sentiment may bounce back in future months, as upward pressure on wages appears to be mounting as the labor market tightens.
The National Federation of Independent Business' Small Business Optimism Index, Moody's reported, revealed that an increasingly larger share of firms expect they will boost compensation in the coming months, which should bolster confidence in personal finances, and subsequently overall sentiment (
- NEW YORK (7/21/14)--
After a sharp increase in value, the price of bitcoin plummeted last year, and a recent Bloomberg Global Poll of financial professionals found that the slide may only continue.
Of the 562 investors, analysts and traders polled, 55% said Bitcoin's virtual currency trades at unsustainable and bubble-like prices (
July 17). Fourteen percent said the currency is on the verge of another bubble, while 6% said no bubble is on the horizon. The bubble talk likely stems from yet another recent surge in the ever-volatile value of bitcoin. At the start of the year, the currency traded at $13, but has since risen to $625, according to
. Much of the gains were driven by companies who announced they will begin accepting the currency, such as Expedia Inc., Dish Network Corp. and Overstock.com Inc. of late. But finance-industry leaders continue to doubt the currency's longevity, with Jamie Dimon, CEO of JPMorgan Chase, and Warren Buffett, famed billionaire investor, both saying publicly that bitcoin won't last. . .
WASHINGTON (7/18/14)--Residential construction stumbled in June, as housing starts plummeted 9.3% from the prior month to their slowest pace in nine months, according to data released Thursday by the U.S. Commerce Department (
Single-family home starts dropped 9% to their lowest rate since late 2012, and multifamily construction starts dropped 10%, the second straight double-digit decline after a promising start to the year.
Overall, total housing starts sit 7.5% higher than levels seen a year ago at this time, but multifamily construction has almost entirely fueled those gains.
"The residential construction numbers are disappointing," said Celia Chen, Moody's analyst (
). "The April rebound has fast faded."
However, the step back in housing starts was concentrated in the South, the nation's largest region, with a 30% drop off month-over-month. Starts actually climbed in the Midwest and Northeast and gained modestly in the West.
Year-over-year, housing starts have swelled in the Midwest and Northeast by 80% and 22% respectively, with modest declines in the West and South.
The report perhaps also reveals the potential for the housing market to rebound in the coming months, as single-family housing permits jumped 2.6% in June, which is its second straight month of ascent.
On the heels of Wednesday's report from the National Association of Home Builders that home builder confidence is improving, rising permit numbers, which often mirror future construction conditions, could signal healthier times ahead.
WASHINGTON (7/17/14)--Mortgage applications fell during the week ending July 11, driven by a sizable drop in purchase applications, according to the Mortgage Bankers Association's (MBA) mortgage applications survey, released Wednesday.
Purchase applications sank 7.6% from the prior week to their slowest pace since February and sit 9.9% below levels seen last year at this time.
The MBA's composite index declined 3.6% and has reached its lowest mark since December 2000. Mortgage rates climbed narrowly by 1 basis point to 4.33%, but remain 3 points lower than rates seen a month ago.
"Housing demand from traditional homebuyers who purchase homes with credit remains weak on a historical basis," said Brent Campbell, Moody's analyst (
July 16). "Memories of the recent housing crash have encouraged more households to rent their dwellings instead of buy."
Perhaps reflecting a trend that consumers have become more mindful of debt, the mortgage default rate dropped for the eighth consecutive month in June, slipping to 0.89% from 0.92% in May, and 1.24% year-over-year, according to the S&P Experian Consumer Credit Default Indices (
July 15). Second-mortgage default rates remained at .57%.
A drop in purchase activity also seems in line with recent data from Veros Real Estate Solutions, which found that 80% of real estate markets throughout the United States are experiencing price appreciation, potentially signaling a still-tight supply of homes on the market.
But the housing tide could be changing.
Veros also reported that nationwide appreciation has slowed in recent months, based on the company's VeroFORECAST tool that predicts real estate trends for more than 1,000 counties and 340 metro areas.
Further, homebuilder confidence rebounded strongly this month, as the National Association of Home Builders composite index from Wednesday climbed 4 points to 53 from 49 in July, the highest it's been since January.
The future sales index in particular showed promising gains with a 6-point surge. All four regions in the United States saw improvements for future purchases this month, with confidence above 50 in all regions except the Northeast.
The government will release data on new housing construction today.
WASHINGTON (7/17/14)--Each of the 12 districts tracked by the Federal Reserve witnessed an expansion in economic activity over the last month, according to the Fed's Beige Book, which broadly summarizes economic conditions throughout the United States.
Moderate economic growth was seen in New York, Chicago, Minneapolis, Dallas and San Francisco, while the remaining districts reported a slower pace of expansion.
Tourism, which expanded in all districts, was one of the strongest areas in the report, with retail sales--driven by auto sales--and manufacturing also improving over the month.
"The Federal Reserve's July Beige Book report depicts an economy that has markedly improved since the previous report and is heading in the right direction," said Christopher Velarides, Moody's analyst (
Released Wednesday, the report is based on information collected before July 7.
Real estate activity varied across all districts, the report said, with many relaying low inventory and climbing home prices. Multifamily sales and leasing continued to surge, especially in New York and Dallas.
Further, loan volumes rose throughout the United States with increases reported by the majority of the Fed's districts. Credit quality nearly uniformly improved as well.
Labor market conditions also perked up, with all 12 districts citing slight to moderate growth in employment--though several districts had trouble finding workers for skilled positions.
While wages increased for positions where those skilled workers were needed wages remained modest for the majority of the country, the report said.
- WASHINGTON (7/16/14)--JPMorgan Chase and Goldman Sachs each reported higher-than-expected profits in the second quarter, with trading revenue for both exceeding analyst expectations.
JPMorgan recorded $6 billion in profit in the quarter, or $1.46 a share, while Goldman Sachs recorded $2.04 billion in profit, in addition to a 6% surge in revenue to $9.13 billion
for the quarter
The Wall Street Journal
July 15). Shares for each of the banks rose Tuesday, with JPMorgan posting a 3.9% jump in shares after the numbers were released, and Goldman reported a 1.2% increase. In a conference call, JPMorgan Chief Financial Officer Marianne Lake said higher levels of trading activity fueled the June gains, according to
The Wall Street Journal.
The earnings for JPMorgan also accounted for its legal expenses, which totaled $700 million in the second quarter, which equates to 13 cents per share ...
- WASHINGTON (7/16/14)--
The Federal Deposit Insurance Corp. Tuesday approved a
Notice of Proposed Rulemaking
(NPR) that would change the agency's risk-based deposit insurance assessment system to reflect changes in regulatory capital rules that are scheduled to go into effect for banks in 2015 and 2018.
The NPR would: revise the ratios and ratio thresholds related to capital evaluations; revise the assessment base calculation for custodial banks; and require that all highly complex institutions measure counterparty exposure for assessment purposes using the standardized approach in the regulatory capital rules. According to an FDIC release, the first provision applies to all institutions including those institutions under $1 billion in total assets; the second provision applies to all custodial banks including those institutions under $1 billion in total assets; and the third provision does not apply to institutions under $1 billion in total assets. Comments on the NPR are due 60 days following publication in the
Federal Register ...
WASHINGTON (7/16/14)--If the economy continues to exceed expectations, the Federal Reserve may inflate interest rates higher and sooner than previously planned, Janet Yellen, Federal Reserve chair, told the Senate Banking Committee Tuesday.
In her Semiannual Monetary Policy Report, Yellen said the economy continues to gain on the Fed's long-term objectives for maximum employment and price stability, which could signal that the time to roll back the various tools it has used to support the national economy, such as maintaining low short-term interest rates, is drawing near.
Yellen hedged, however, as she said if the economy were to instead weaken in the coming months, the timeline for such a move could likewise be prolonged.
"Further important progress has been made in restoring the economy to health and in strengthening the financial system," Yellen said. "Yet too many Americans remain unemployed, inflation remains below our longer-run objective, and not all the necessary financial reform initiatives have been completed."
For the rest of this year interest rates will remain low, Yellen said, as the economic recovery is "not yet complete."
"A high degree of monetary policy accommodation remains appropriate," Yellen said (
The Wall Street Journal
July 15). Most experts believe the Fed won't raise interest rates until early to middle 2015.
Nonfarm payroll employment averaged an increase of about 230,000 jobs per month through the first half of the year, a slight improvement over the pace seen in 2013, Yellen said.
Further, the unemployment rate has dropped nearly 1.5% over the last 12 months, and in June fell to 6.1%.
Yellen said even with the recent declines, "the unemployment rate remains above Federal Open Market Committee participants' estimates of its longer-run normal level."
The Fed chair also noted that the housing sector has stumbled of late.
"While this sector has recovered notably from its earlier trough, housing activity leveled off in the wake of last year's increase in mortgage rates, and readings this year have, overall, continued to be disappointing," Yellen said.
Yellen will deliver her remarks on the semiannual report to the House Financial Services Committee today.
WASHINGTON (7/15/14)--Mortgage rates for the past few years have remained at historically low levels, which has helped heal the housing market in the wake of the recession.
While low rates may have boosted lending, they also have kept prospective home sellers on the sidelines, as many have preferred not to trade in favorable rates on their current homes for inevitably higher rates on new homes.
"(Many homeowners) got the deal of the century," Glenn Kelman, CEO of the real estate brokerage firm Redfin, told
The Associated Press
. "I don't think in 100 years anyone will be lending money at 3.5%. How do you walk away from a deal like that?"
More than one-third of homeowners with mortgages pay less than 4%, according to CoreLogic, while the average new mortgage rate sits at 4.2%, meaning those who are enjoying the lower rates have much less incentive to sell and move.
In 2014, as many as 3.6 million homeowners will forego selling their homes because to do so would mean forfeiting lower mortgage rates, according to CoreLogic Chief Economist Mark Fleming.
Even for a house of the same size, those who sell and move are likely to pay up to 1 percentage point higher (
The Associated Press
Further, many who choose to move rent their old homes instead of selling them outright,
The Associated Press
reported, leaving even fewer homes available for sale and likely contributing to rising home prices.
- WASHINGTON (7/15/14)--After a lengthy and heated negotiation period, Citigroup and the U.S. Justice Department have come to an agreement that will require the big bank to pay $7 billion to resolve accusations that
it deceived investors about the quality of mortgage securities it was shopping around in the months leading up to the economic downturn in 2008--misdeeds Citibank has admitted to,
according to the Justice Department (
The Wall Street Journal
July 14). According to Attorney General Eric Holder, Citibank sold mortgage-backed securities rampant with defective loans, and concealed that information from investors. Before the recession, Citigroup employees knew that the loans they were offering contained "material defects," but sold them anyway, according to
The Wall Street Journal
. One Citigroup trader wrote an email, circulated internally, that said the bank "should start praying" because they knew the loans were going disintegrate. Of the total $7 billion settlement, $4 billion as a civil penalty will go to the Justice Department, $500 million will go to the Federal Deposit Insurance Corp. and several states, and $2.5 billion will be used for consumer relief ...
- CHICAGO (7/15/14)--
Illinois Attorney General Lisa Madigan filed lawsuits Monday targeting two companies she believes have been defrauding people with phony student loan consolidation or forgiveness programs
The Associated Press
July 14). The lawsuits allege the two companies have taken part in "deceptive practices," such as charging upfront fees for fake services or charging for services that under state law must be free. One company allegedly asks for an initial payment of $1,200 for phony services, while another has promoted a fictional "Obama forgiveness program" to attract people with student loan debt. Madigan said she will target other companies that employ similar practices aggressively ...
- WASHINGTON (7/14/14)--As Bitcoin grapples with the volatility of its digital currency, a tech-startup in Santa Monica, Calif., may have found a way to sidestep the problem and offer a more stable online "dollar" (
The Wall Street Journal
Realcoin soon will announce its own online money, called realcoins, which the outfit will back with a reserve of real dollars on a one-to-one basis. This mechanism, creators say, will hold down the volatility that Bitcoin has struggled with as it has grown internationally.
While the currency would be different from Bitcoin, it would rely on the same innovative blockchain-algorithm that validates digital coins by keeping track of a virtually unalterable sequence of time-stamped transactions used by Bitcoin. "Unfortunately, there has been confusion for people between the currency called Bitcoin and the technology called bitcoin, when they are distinctly different things," Realcoin CEO Reeve Collins told
The Wall Street Journal
. "(In effect) we are digitizing the dollar and giving that digital dollar access to the bitcoin blockchain"...
LOS ANGELES (7/14/14)--After months of sluggish activity, mortgage lending is starting to gain steam, according to numbers reported by
Inside Mortgage Finance
this week (
Los Angeles Times
Roughly $310 billion in mortgages were logged in the second quarter, about a 32% jump from the first quarter, according to the trade magazine.
With refinancing activity slowing in recent months, consumers finally appear to be taking advantage of rising, but still historically low interest rates and easing price inflation,
Chief Executive Guy Cecala told the
Los Angeles Times.
"We're not looking at a housing boom by historical standards," Cecala said. "But I think we're looking at a more sustainable housing market where more people are buying homes to live in, not just for investment purposes."
Climbing interest rates in 2013 pinned down the market through the end of last year, and unusually harsh winter weather in the beginning of 2014 plugged up the market as well, but as mortgage interest rates have paused and as inventory has steadily risen, mortgages have become more feasible for homebuyers, analysts say.
"I think people who had been hesitating about buying a home started feeling some incentives to move forward," Rick Sharga,
executive vice president, told the
Los Angeles times
NEW YORK (7/14/14)--A weak first half of 2014 hasn't clouded the economic picture for many economists, as a National Association of Business Economics survey has found that most believe the chances of the economy falling into another recession in the next two years is "extremely low."
About 60% of those polled said the odds of another recession occurring were less than 10%, despite the economy contracting nearly 3% in the first quarter and despite gross domestic product again expected to fall far short of forecasts in the second quarter (
"Notwithstanding the difficult start to the year, opinion is widespread that the economy is on solid footing," Timothy Gill, Outlook survey chair, told
However, economists believe second-quarter real personal consumption expenditures will climb only 2.3%, a drop from the 2.9% expected in June. Real exports are also expected to slow, with forecasts at 2.5% on an average annual basis compared with the 5.5% predicted in March.
Further, more than 50% of those polled said the Federal Reserve won't increase the federal funds rate until early 2015, in line with most expectations. Roughly 37% say the hike will come in the second quarter of next year, while 36% predict the rate hike in the second half of 2015.
WASHINGTON (7/11/14)--It's been widely reported that cash sales in the housing market have increased considerably in recent months, and one factor that may be driving the surge is the influx of foreign investment.
As home prices remain low--despite steady but slow price growth this year--and as wealth in some places in the international community has expanded, many foreign buyers are coming to the United States to purchase real estate as a home or investment.
Between April 2013 and March 2014, total sales to foreign buyers topped $92 billion, a $24 billion increase compared with the prior year, a 35% jump, according to the National Association of Realtors (NAR) 2014 Profile of International Home Buying Activity.
"We live in an international marketplace, so while all real estate is local, that does not mean that all property buyers are," said Steve Brown, NAR president and co-owner of Irongate Realtors. "Foreign buyers are being enticed to U.S. real estate because of what they recognize as attractive prices, economic stability and an incredibly opportunity for investment in the future."
Chinese nationals have particularly taken advantage of the market.
Nearly 1 in 4 dollars of foreign purchases come from Chinese buyers, according to NAR, and buying has risen more than 70% to $22 billion this year (
July 8). Further, nearly three-quarters of Chinese purchases were all-cash transactions.
But it's not only the Chinese that are gobbling up American real estate. About 28% of realtors reported working with international clients this year, with home buyers hailing from Canada, Mexico, India and the U.K.
Combined with China, those countries only made up 54% of international transactions, according to NAR.
About 39% of international buyers, meanwhile, said they intended to use the purchased property as their primary place of residence.
WASHINGTON (7/10/14)--If the U.S. economy sticks to its current pace of growth, the Federal Reserve will retire its asset-purchase program completely in October, according to the minutes from the Federal Open Market Committee's (FOMC) June meeting.
The bond-buying program, named quantitative easing, has been a critical tool employed by the monetary-policymaking body for the last few years that has injected much-needed cash into the economy.
But as the labor market and manufacturing have steadily improved, among other positive markers, the Fed feels it can soon shelve the stimulus tactic.
"While the current asset purchase program is not on a preset course, participants generally agreed that if the economy evolved as they anticipated, the program would likely be completed later this year," the minutes said.
With the plan to end quantitative easing all but set, the committee must now decide when to begin raising short-term interest rates that also have kept lending conditions light in recent years.
Most analysts, including the Credit Union National Association's interim Chief Economist Mike Schenk, believe the Fed won't begin hiking interest rates until early- to mid-2015.
As far as an exit strategy in terms of unloading its massive balance sheet as a result of the bond-buying program, the committee has many options, but the group has yet to reach a consensus on any of them.
"The overnight reserve-repurchase agreements, the term deposit facility, and interest on excess reserves have all been discussed as tools the Fed could use to tighten policy while holding a large balance sheet," Moody's analyst Ryan Sweet wrote (Economy.com July 9). "Policymakers may wait until they have a consensus on the entire plan rather than roll out a work in progress."
WASHINGTON (7/10/14)--Citigroup is preparing to fork over $7 billion to end a probe by the U.S. government into whether the big bank earned billions of dollars by defrauding investors with mortgage-backed security sales just before the housing bubble burst in 2008, Reuters reported Wednesday. The majority of the settlement would come in the form of cash, though several additional billions of dollars would be earmarked for struggling borrowers. The full settlement is expected to be announced by the bank and the U.S Department of Justice later this week. Wall Street analysts believe Citigroup, which is expected to post $3.4 billion in earnings in the second quarter, set aside $3 billion in reserves in advance of the settlement...
WASHINGTON (7/10/14)--Ginnie Mae is keeping a close eye on the outcome of congressional appropriations proceedings, as it's looking for funding to increase staff to keep pace with the growing number of mortgage-backed securities that it must monitor (National Mortgage News July 8). Over the last four years, mortgage-backed securities outstanding have jumped to $1.5 trillion from $1 trillion, but staff has remained "tiny," now with 110 full-time employees. In response, the White House has requested $6 million to be appropriated to Ginnie Mae for additional personnel funding. The increase would push personnel costs to $26 million for fiscal year 2014-15. While the House and Senate appropriations committees have not yet jumped on board with a White House proposal to pay for the additional personnel costs by charging Ginnie issuer/servicers a one-time commitment fee, the bodies have signaled they will increase staffing levels by $2 million in the House and $4.5 million in the Senate...
- WASHINGTON (7/9/14)--
The U.S. Department of Justice has
that SunTrust Mortgage Inc. agreed to a $320 million settlement intended to resolve Justice's criminal investigation of SunTrust's administration of the Home Affordable Modification Program (HAMP).
The settlement is divided as follows: the bank will pay up to $284 million in restitution to borrowers; $16 million in forfeiture, which will fund future law enforcement investigations into mortgage and Troubled Asset Relief Program-fund fraud; and $20 million to a grant administrator to fund housing counseling agencies and other consumer advocacy non-profits. Justice charges that SunTrust "misled numerous mortgage servicing customers" who sought mortgage relief through HAMP. Justice alleges that SunTrust made misrepresentations and omissions to borrowers in HAMP solicitations, and failed to process HAMP applications in a timely fashion. As a result of SunTrust's mismanagement of HAMP, thousands of homeowners who applied for a HAMP modification with SunTrust suffered serious financial harm, the department said in its release...
- WASHINGTON (7/9/14)--
Homeowners have pulled in $3.1 billion in cash from a recent federal settlement with a baker's dozen of big banks over alleged shoddy mortgage processing and wrongful foreclosure action, according to a report released by the Federal Reserve Monday
July 7). With individual settlement amounts awarded to about 4.2 million borrowers ranging from a few hundred dollars to $125,000, the Federal Reserve's report said 3.4 million homeowners already have cashed checks as of late April. The 13 banks involved in the settlement include Aurora, Bank of America, Citigroup, Goldman Sachs, HSBC, JPMorgan, MetLife Bank, Morgan Stanley, PNC Financial Services, Sovereign, SunTrust, U.S. Bank and Wells Fargo. The original $9.3 billion settlement requires the banks to pay $3.6 billion in cash as well as $5.7 billion in aid in the form of reduced mortgage loans...
WASHINGTON (7/9/14)--Total outstanding consumer credit climbed $19.6 billion in May, according to Federal Reserve data released Tuesday, a number that falls short of expectations, but still points to building consumer confidence, especially in making big-ticket purchases.
Within credit unions, nonrevolving credit, which is associated with purchasing larger items such as automobiles and homes, drove the gains, climbing to $236.5 billion from $232 billion in April.
Revolving credit, tied largely to credit cards, inched up to $42.8 billion from $42.2 billion in April for credit unions.
"Extremely low interest rates and easier access to credit are enticing consumers to finance large purchases such as education and vehicles," said Moody's analyst Andrew Davis (
The rise in total outstanding consumer credit in May falls far behind April's $26.1 billion surge and sits below the average increase over the last three months of $21.8 billion.
Further, revolving credit balances overall only gained $1.8 billion in May after an $8.8 billion boom in April.
"Revolving balances decelerated as consumers remain hesitant to take on higher-interest debt," Davis said. "It is encouraging that this segment added $1.8 billion in May, but the pace will have to pick up considerably to make up for the sluggish growth that has persisted throughout the recovery."
WASHINGTON (7/8/14)--The recovery of the housing market since the economic downturn in 2008 continues to merely plod along at a slow pace despite rebounding consumer sentiment, according to Fannie Mae's June 2014 National Housing Survey.
Barring several months of record-breaking numbers, Fannie Mae analysts don't expect the market to normalize until at least 2016.
"Since we began collecting monthly National Housing Survey data in June 2010, we've seen substantial progress in consumer home price expectations and other key attitudinal measures as the housing recovery gained its footing," said Doug Duncan, Fannie Mae senior vice president and chief economist. "Still, we do not expect to see 'normal' levels of new residential construction, in the region of 1.6 million new housing units per year, before the end of 2016.
"Such a feat would require a pace of growth in housing starts not seen in decades."
Consumer expectations for home price appreciation rose 2.4% in June, according to the data, which is a small step back compared with recent months. Further, those who expect mortgage rates to climb in the next year jumped 6% to 55% in June.
"The uptick this month in the share of consumers expecting mortgage rates to go up and the accompanying decline in home price expectations reflect the pause of activity in the housing market," said Duncan, who added that Fannie Mae now forecasts an annual decline in home sales due to the sluggish first four months of 2014.
"On the bright side, the share of employed consumers who expressed concerns about losing their job dropped to an all-time survey low in June, consistent with last week's upbeat jobs report," Duncan said.
That development could encourage prospective homebuyers to enter the market in the short-term and help offset the weak sales activity from earlier in the year, he said.
McLEAN, Va. (7/7/14)--Mortgage rates eased slightly lower heading into the extended July 4 weekend, but remained below year-ago rates, according to the latest data released Thursday by Freddie Mac.
"Mortgage rates were little changed from the previous week and remain below levels seen the same time last year, which should provide some help with homebuyer affordability in many markets," said Frank Nothaft, Freddie Mac vice president and chief economist. "Recent housing data was better with pending home sales up 6.1% in May, and overall construction spending showing a slight improvement with private residential spending now up 7.5% on yearly basis."
The 30-year fixed-rate average dropped to 4.12%, matching its lowest level of the year set in late May. The rate was 4.14% a week ago and 4.29% one year ago. Since starting the year at 4.53%, the 30-year fixed rate has fallen 41 basis points (
The 15-year fixed-rate average was unchanged from the previous week at 3.22%. It was 3.39% a year ago. The 15-year fixed rate is down 33 basis points from Jan 1.
Hybrid adjustable rate mortgages also held steady. The five-year ARM average was 2.98%, the same as a week ago and just the third time this year it has been below 3%. It was 3.1% a year ago.
The one-year ARM average fell to 2.38%. It was 2.4% a week ago.
Mortgage applications fell for a fifth time in six weeks, the Mortgage Bankers Association said Wednesday. The group's purchase measure decreased 0.7%, while the refinancing gauge advanced 0.1%.
ATLANTA (7/3/14)--The total balance of home finance delinquencies stands at $43.5 billion--a whopping 37% drop from the same period last year and a seven-year low, according to the latest Equifax National Consumer Credit Trends Report.
The home finance category includes first mortgage and home equity lines of credit.
"Households continue to improve their financial situation," said Dennis Carlson, Equifax deputy chief economist. "Delinquencies for nearly every credit sector are at the lowest point since prior to the Great Recession, with home finance leading the charge."
Year-over-year changes in home financing balances that are 30 or more days past due, measured as a percentage of outstanding balances, include:
- First mortgages dropped 29% to 4.6% from 6.4%;
- Home equity installment balances decreased 27% to 3.9% from 5.2%; and
- Home equity revolving credit declined 10% to 2.4% from 2.7%.
Equifax's report also found the total balance of first mortgages 90 or more days past due or in foreclosure is less than $230 billion--a six-year low at a drop of 30% from same time a year ago.
Of the severely delinquent home equity revolving credit balances, nearly 70% were originated in 2005 to 2007.
Bank-issued credit cards reached a six-year high with 11.3 million new cards issued year-to-date, a 17.2% increase from the same time a year ago. Total new credit originated in that same period is $57.1 billion--also a six-year high and a year-over-year increase of 24.4%.
New auto loans increased 5.6% from a year ago, resulting in an eight-year high of six million. With a 7.3% increase from the same period last year, the total balance of new loans is $120 billion.
Credit unions are seeing similar results with credit union loan portfolios increasing 1.2% in May--the fastest monthly increase in loan balances in nearly nine years, according to the Credit Union National Association's monthly survey of credit unions. (See related story: CU loan growth fastest since 2005, reveals MCUE survey.)
NEW YORK (7/2/14)--The U.S. auto market, after a strong post-recession recovery, could soon show signs of tapering, according to a new study from AlixPartners.
Since the industry's restructuring a few years ago, the U.S. auto market has been very strong, and automakers and suppliers alike have on average been enjoying ever higher revenues and strong, if flattening, profit margins. However, whereas some other forecasters see industry sales climbing quickly past 17 million units annually in coming years, the AlixPartners study forecasts industry sales in the United States of a more-modest 16.3 million units this year.
Among the reasons, says the study, are that, when taking into account "pulled-ahead" sales in the decade of the 2000s, the U.S. industry is actually on track to pass its long-term sales trend line this year--and that long-term, fundamental trends are, despite what some may think, still very meaningful in the auto industry.
The study also points out that the vehicle-renewal rate in the United States has been on a long-term decline, approaching replacement levels, and that vehicle-usage rates are also declining--both in part due to aging Baby Boomers on the one end and on the other younger Americans, whom AlixPartners has dubbed "Generation N," for neutral about driving. These factors have increased each year in recent years, says the study, even as the economy has improved.
Overarching all of this, the study also points to what might be a current "QE Bubble," or a liquidity bubble underpinned by the Federal Reserve's current quantitative-easing actions, a program many economists are predicting will begin unwinding in earnest starting next year--which would likely lead to an increase in interest rates.
If consumer interest rates were to rise 3 percentage points--about the normal historical increase when rates go up in a managed fashion after a prolonged downward trend--that would translate into $2,500 less purchasing power for car buyers, according to the study. If they were to rise 7 points, which is far less than the rise in the early 1980s recession, that would mean $5,250 less purchasing power.
WASHINGTON (7/1/14)--Pending home sales rose sharply in May, with lower mortgage rates and increased inventory accelerating, the National Association of Realtors (NAR) reported Monday. All four regions of the country saw increases in pending sales, with the Northeast and West experiencing the largest gains.
The Pending Home Sales Index, a forward-looking indicator based on contract signings, increased 6.1% to 103.9 in May from 97.9 in April, but still remains 5.2% below May 2013's 109.6 reading.
May's 6.1% increase was the largest month-over-month gain since April 2010, when the index increased 9.6% as first-time home buyers rushed to sign purchase contracts before a popular tax credit program ended.
Lawrence Yun, NAR chief economist, expects improving home sales in the second half of the year. "Sales should exceed an annual pace of five million homes in some of the upcoming months behind favorable mortgage rates, more inventory and improved job creation," he said. "However, second-half sales growth won't be enough to compensate for the sluggish first quarter and will likely fall below last year's total."
Despite the positive gains in signed contracts last month, Yun cautions that affordability and access to credit is still an area of concern for first-time home buyers, who accounted for only 27% of existing-home sales in May and typically carry student loan debt and lower credit scores.
"The flourishing stock market the last few years has propelled sales in the higher price brackets, while sales for homes under $250,000 are 10% behind last year's pace," Yun said. "Meanwhile, apartment rents are expected to rise 8% cumulatively over the next two years because of tight availability. Solid income growth and a slight easing in underwriting standards are needed to encourage first-time buyer participation, especially as renting becomes less affordable."
The index in the Northeast jumped 8.8% to 86.3 in May and is now 0.2% above a year ago. In the Midwest, the index rose 6.3% to 105.4 in May, but is still 6.6% below May 2013.
Pending home sales in the South advanced 4.4% to an index of 117.0 in May and is 2.9% below a year ago. The index in the West rose 7.6% in May to 95.4 but remains 11.1% below May 2013.