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GDP increase of 4.2% reverses Q1 decline

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WASHINGTON (8/29/14)--Gross domestic product expanded at a 4.2% on an annualized basis, according to the Bureau of Economic Analysis (BEA), an upward revision of the BEA's previously reported 4% growth and a reversal of the 2.1% decline in the first quarter.
 
Consumer spending made the largest contribution adding 1.7 percentage points to the expansion. Inventory investment, exports and fixed investment were also sources of growth ( Economy.com Aug. 28). Inflation accelerated in the second quarter, led by food and energy prices. Real disposable income growth accelerated.
 
The biggest drag on growth came from imports, which reduced growth by 1.7%.
 
Revisions were positive with growth revised up, particularly from final sales. Profits rose 8% (not annualized) mostly reversing the first-quarter decline. Gross domestic income surged 4.7% after falling 0.8% in the first quarter.
 
Final sales, which exclude the support to GDP from inventories, were weaker, rising 2.8%. That increase follows decline of 1%, which was the largest drop since the first quarter of 2009.
 
The personal consumption expenditures index showed inflation accelerated in the second quarter. It rose 2.3% in the quarter, up from 1.4% the prior three months. Excluding food and energy, inflation rose 2%, up from 1.2% the prior quarter. Neither figure was revised.

News of the Competition (08/29/2014)

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  • WASHINGTON (8/29/14)--Second-quarter results reflect a stronger banking industry and stronger community banks in particular, according to Federal Deposit Insurance Corp. (FDIC) Chair Martin J. Gruenberg. The FDIC reported Thursday that the commercial banks and savings institutions it insures posted aggregate net income of $40.2 billion in the second quarter, up 5.3% from a year earlier . In its last quarterly banking profile, the FDIC added a section on community banks, which make up 93% of all FDIC-insured institutions. The $4.9 billion second-quarter net income at community banks was up $166 million, or 3.5%, over last year. The report also found that community bank loan balances increased faster than the industry as a whole and that they account for 45% of small loans to businesses ...

Refis push mortgage applications up 2.8%: MBA

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WASHINGTON (8/28/14)--Mortgage applications increased 2.8% from one week earlier, according to data from the Mortgage Bankers Association's (MBA) weekly mortgage applications survey for the week ending Aug. 22. 
 
MBA's market composite index, a measure of mortgage loan application volume, increased 2.8% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the index rose 2% compared with the previous week.

The refinance index increased 3% from the previous week, while the seasonally adjusted purchase index gained 3% from one week earlier. The unadjusted purchase index increased 1% compared with the previous week and was 11% lower than the same week one year ago.
 
The refinance share of mortgage activity rose to 56% of total applications, the highest level since March 2014, from 55% the previous week. The adjustable-rate mortgage (ARM) share of activity remained unchanged at 8% of total applications.
 
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 4.28% from 4.29%, with points decreasing to 0.25 from 0.26 (including the origination fee) for 80% loan-to-value ratio (LTV) loans.
 
For 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,000), the average contract rate ticked up to 4.22% from 4.18%, with points increasing to 0.28 from 0.23 (including the origination fee) for 80% LTV loans.
 
The average contract interest rate for 30-year fixed-rate mortgages backed by the Federal Housing Administration fell to 3.98%, the lowest since June 2013, from 3.99%. Fifteen-year fixed-rate mortgages saw the average contract interest rate jump to 3.47% from 3.44%.
 
The average contract interest rate for 5/1 ARMs remained unchanged at 3.10%, with points increasing to 0.52 from 0.44 (including the origination fee) for 80% LTV loans.

News of the Competition (08/27/2014)

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  • WASHINGTON (8/27/14)--Citigroup Global Markets Inc. was fined $1.85 million by the Financial Industry Regulatory Authority (FINRA) Tuesday for three years of faulty execution and supervisory deficiencies involving transactions of non-convertible preferred securities. FINRA also ordered Citigroup to pay more than $638,000 in restitution, plus interest, to affected customers. In more than 14,800 transactions, Citigroup failed to incorporate the National Best Bid and Offer (NBBO) to ensure customers received a purchase or sale price that was as favorable as possible under the then-current market conditions. In another 7,200 cases, Citigroup priced transactions inferior to NBBO because its proprietary BondsDirect order execution system used faulty pricing logic. "Citigroup lacked the necessary systems and supervision to ensure that it provided customers with the executions they deserved and, as a result, customers were receiving inferior prices for more than three years," said Thomas Gira, FINRA executive vice president/head of market regulation. FINRA also found that Citigroup's supervisory system and written procedures for best execution in non-convertible preferred securities were deficient. In concluding this settlement, Citigroup neither admitted nor denied the charges but consented to the entry of FINRA's findings ...

Aug. consumer confidence highest since 2007

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NEW YORK (8/27/14)--Experiencing its fourth consecutive monthly increase, the Conference Board Consumer Confidence Index for August hit its highest mark since October 2007.
 
The index rose 2.1 points to 92.4 from a revised 90.3 in July. The present situation index increased to 94.6 from 87.9, while the expectations index edged down to 90.9 from 91.9 in July.
 
"Consumer confidence increased for the fourth consecutive month as improving business conditions and robust job growth helped boost consumers' spirits," said Lynn Franco, director of economic indicators at the Conference Board.
 
"Looking ahead, consumers were marginally less optimistic about the short-term outlook compared to July, primarily due to concerns about their earnings," Franco said, adding, "Overall, however, they remain quite positive about the short-term outlooks for the economy and labor market."
 
Consumers' assessment of the job market was more positive, with an increase to 18.2% from 15.6% of those stating jobs are "plentiful."  Respondents claiming jobs are "hard to get" declined marginally to 30.6% from 30.9%.
 
"Aside from the glowing review offered by consumers of the job market, the share of negative responses is trending at recovery lows in nearly every survey segment," noted Moody's analysts (Economy.com Aug. 26). "Fewer consumers think business conditions are bad, and few think they will get worse."
 
Despite a relatively bright path ahead, consumers are giving a chilly reception to the idea of purchasing homes, major appliances or a car within the next six months. Moody's noted that a "huge upswing in consumer spending" shouldn't be expected.

Moderation seen in housing price recovery, reports note

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WASHINGTON (8/27/14)--The increase in home prices has slowed, leading to a moderate housing market, according to numbers released Tuesday.
 
The S&P/Case-Shiller Index reported a slowdown in U.S. home prices year-over-year. June's 1% increase in the 20-city composite index pushed the annual price growth to 8.1%, the slimmest year-over-year result since January 2013 (MarketWatch Aug. 26).
 
Heavy demand from investors has slowed, and traditional mortgage-based homebuyers have yet to re-enter the market in full force, noted Moody's analysts (Economy.com Aug. 26).
 
Slower home-price growth, along with reports of a positive outlook among homebuilders, is a good sign of a more normal housing sector, David Blitzer, index committee chairman at S&P Dow Jones Indices, told MarketWatch.
 
Meanwhile, the Federal Housing Finance Agency (FHFA) announced that U.S. house prices rose 0.8% in the second quarter, according to its purchase-only, seasonally adjusted House Price Index (HPI). This is the 12th consecutive quarterly price increase in the HPI.
 
FHFA calculates HPI with home sales price information from mortgages sold to or guaranteed by Fannie Mae and Freddie Mac. Compared with the second quarter of last year, house prices rose 5.2%, and FHFA's seasonally adjusted monthly index for June was up 0.4% from May, marking seven consecutive monthly increases.
 
"The extraordinary price appreciation observed over the last few spring seasons was not evident in the second quarter of this year. However, house price appreciation for the nation as a whole remained positive," said FHFA Principal Economist Andrew Leventis. "FHFA's data indicate that house price appreciation in the quarter was near or below the baseline rate of inflation in most states."
 
Only 14 states are recording year-over-year growth above the national average of 5.2%, while 20 states are experiencing less than 3% appreciation. Most of the markets that are outperforming are the ones that suffered the most from the housing bubble such as Nevada, California, Arizona, Florida, Georgia and Michigan, said analysts from Moody's (Economy.com Aug. 26).

July's new-home sales come in flat

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WASHINGTON (8/26/14)--July sales of new single-family homes slipped 2.4% from June--a greater drop than expected by economic forecasters--according to figures released Monday by the U.S. Census Bureau and the Department of Housing and Urban Development.
 
The seasonally adjusted rate of 412,000 rests below June's revised number of 422,000, but it still sits 12.3% higher than last July.
 
New-home sales are trending flat, said analysts at Moody's (Economy.com Aug. 25), as over a longer time period, sales have largely fallen between 400,000 and 450,000 annualized units since the beginning of 2013.
 
The number of available new homes is the highest since mid-2010, which should ease the pressure on supply shortfalls. For context, at 205,000, this level is still lower than any period since the late 1960s except during the Great Recession and its aftermath, Moody's noted.
 
Financing challenges for first-time homebuyers also are slowing new-home sales, with mortgage credit still tight and income growth limited.
 
The trade-up market is better, Moody's said, with the share of homes sold in the $300,000 or more category rising steadily.
 
The median sales price of new homes sold in July was $269,800--up 3% year over year. With an adjusted estimate of new houses for sale, there is a six-month supply at the current sales rate.
 
"While housing data is likely to remain choppy over the coming months, with affordability remaining high, mortgage rates extremely low, and labor market activity accelerating, we expect the housing market trajectory to continue gradually improving," said Gennadiy Goldberg, U.S. strategist at TD Securities (MarketWatch Aug. 25).

Yellen: Interest rate-hike timing in FOMC spotlight

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JACKSON HOLE, Wyo. (8/25/14)--With the end of the Federal Reserve's economy-stimulating bond-purchase program in sight, the decision by the Federal Open Market Committee (FOMC) on when to raise interest rates is now squarely in the spotlight.

Fed Chair Janet Yellen traveled to Jackson Hole, Wyo., Friday to address the Federal Reserve Bank of Kansas City, and in her remarks said that while progress has certainly been made in recovering from the financial crisis, not all indicators yet signal that it would be prudent to raise interest rates in the short term.

The labor market has shown signs of improvement, but "the assessment of labor market slack is rarely simple and has been especially challenging recently," Yellen said in prepared remarks.

She added: "Estimates of slack necessitates difficult judgments about the magnitudes of the cyclical and structural influences affecting labor market variables, including labor force participation, the extent of part-time employment for economic reasons, and labor market flows, such as the pace of hires and quits."

Once the FOMC does have a handle on the labor market, as well as the rest of the indicators it looks to in gauging the economy, should the economy continue to improve, a rate hike could come sooner than has widely been anticipated, Yellen warned.

But despite the recent favorable labor market numbers, a rate hike in the near future doesn't appear to be likely. Yellen said the majority of the committee believes the slack in the labor market is still "significant" and that the FOMC likely will keep rates close to zero for a "considerable time" after quantitative easing sunsets, now expected in October (MarketWatch Aug. 22).

Most analysts believe the Fed won't begin raising rates until mid-2015, or later.

News of the Competition (08/25/2014)

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  • WASHINGTON (8/25/14)--Poor reputations continue to dog the big banks that helped fuel the housing market crash in 2008, as in order to remain competitive in recruiting top talent for junior analyst positions, many of the largest institutions have been forced to raise their salaries of late (The Wall Street Journal Aug. 22). Goldman Sachs, JPMorgan Chase, Citigroup, Bank of America and Morgan Stanley, among others, have raised or are considering bumping up salaries by anywhere between 20% to 25%, The Journal reported, not only to repair the reputational damage from the financial crisis, but also to make up for the apparent long and stressful hours of working at an investment bank. Junior analysts will now earn about $85,000 on average, before bonuses, up from $70,000...

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 ( Reuters.com 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 Bankrate.com 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% ( Economy.com 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 ( Housingwire.com Aug. 21).

"Muted inflation readings and ongoing tensions in hotspots around the globe helped fuel demand for bonds, pushing mortgage rates lower," Bankrate.com 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 ( Economy.com 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 ( Economy.com 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.

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 ( Economy.com 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 ( Economy.com ). "Import prices fell and producer prices barely rose in July, differing from the generally strong readings this year."

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 ( Economy.com 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 ( Economy.com ). 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 ( Economy.com ). "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."

News of the Competition (08/19/2014)

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  • WASHINGTON (8/19/14)-- National banks and federal savings associations received additional guidance earlier this month on the application of consumer protection requirements, as well as safe and sound banking practices, to consumer debt-sale arrangements with third parties. Banks may pursue collections of delinquent accounts either by handling the collections internally, by using third parties as agents in collecting the debt, or by selling the debt to third-party debt buyers for a fee. This guidance ( Bulletin 2014-37 ) focuses on the third option. The new guidance establishes requirements to: notify consumers that their debt has been sold, the dollar amount of the debt transferred, and the name and address of the debt buyer;  perform due diligence on the debt buyer down to the consumer complaint level; and provide the debt buyer with the signed debt contract and a detailed payment history. The OCC guidance also requires sale contracts to include minimum-service-level agreements that apply whether or not debt buyers conduct the collection activities or hire some other collection agent ...

Homebuilder confidence continues to climb

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WASHINGTON (8/19/14)--Despite months of weak housing market numbers, homebuilder sentiment continues to improve, as the National Association of Home Builders' (NAHB) housing market index climbed 2 points this month, pushing the gauge of homebuilder confidence to its highest mark in six months ( Economy.com Aug. 18).

The overall composite index rose to 55 from 53, though the regional splits weren't entirely uniform.

The Northeast and Midwest regions experienced gains, with the Midwest posting a record-high 13-point increase, while the South and West both took modest steps back.

"Today's report was another positive data point for the U.S. housing market, amidst a slow rebound from the depths of this past winter and early spring," said Gregory Bird, Moody's analyst ( Economy.com Aug. 18). "The NAHB composite index has risen by 10 points in the last three months, signaling that the summer has brought about a significant change in the psyche of homebuilders."

However, while the traffic of potential buyers index also gained 3 points, the index still sits below 50, meaning that the majority of homebuilders feel that demand for housing will remain subdued in the coming months, Moody's said.

Further, both the current and future home-sales gauges climbed 2 points since the last report, but unfortunately, Moody's said, this development has not mirrored mortgage application activity, which has remained very soft throughout the year.

"Either the buyers (who) homebuilders are interacting with are planning to use cash for their acquisition or these prospective buyers are not following through with their perceived interest by applying for a mortgage," Bird said.

Ballooning down payments squeeze 1st-time homebuyers

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WASHINGTON (8/18/14)--Hamstrung by student debt and competition from real estate investment firms that have gobbled up affordable homes, first-time homebuyers now face yet another obstacle to breaking into the housing market: Forking over larger down payments.

The median down payment on the most affordable properties climbed to $9,840 in 2013, compared with $6,037 in 2007, according to data from Redfin Corp. ( Bloomberg.com Aug. 14).

Further, median down payments for the cheapest homes in 2013 were 7.5% of the sales price, compared with 3.1% of the sales price in 2006.

"The numbers tell the story of why we have millions of potential homeowners who are renters or living with their parents," Susan Wachter, finance professor at the University of Pennsylvania, told Bloomberg.com . "What has changed is the ability to become an owner. And that's changed through a down payment that's more than doubled."

Another factor contributing to the rise in down payments is that the Federal Housing Administration has raised its mortgage-insurance premiums, stopping potential homebuyers from considering government-backed loans to finance their home purchases, according to Bloomberg.com .

Additionally, as large investors have grabbed up cheaper properties at a fast clip since the recession with the hope of flipping them or renting them, the inventory of homes from which first homebuyers can pick has dwindled, leaving more first-time buyers on the sidelines.

"If higher down payments persist, we will have a millennial generation that's missing in action in homeownership," Wachter told Bloomberg.com .

FHLB Atlanta joins Mortgage Partnership Finance program

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ATLANTA (8/18/14)--The Federal Home Loan Bank (FHLB) of Atlanta has joined the Mortgage Partnership Finance (MPF) program that allows its banks, credit unions and other members to sell fixed-rate, conforming mortgages on the secondary market.

The FHLB Atlanta became the 10th regional bank in the FHLB system to participate in MPF's "Xtra" product, in which home loans made by members of a participating FHLB are bundled and sold to Fannie Mae ( Reuters Aug. 14).

"With MPF Xtra, our shareholders, regardless of their size, can offer their customers the same competitively-priced loans and keep the option to sell or retain the servicing of those loans," FHLB Atlanta Executive Vice President/Chief Business Officer Robert Dozier said in a statement.

The other FHLBs in the MPF program are Boston, Chicago, Dallas, Des Moines, New York, Pittsburgh, San Francisco, Seattle and Topeka, Kan.

News of the Competition (08/18/2014)

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  • WASHINGTON (8/18/14)-- On Friday, t he Federal Reserve Board and the Federal Deposit Insurance Corp. provided additional guidance to 117 banks with less than $100 billion in nonbank assets as they prepare to resubmit resolution plans for a second time. The plans must outline the company's strategy for rapid and orderly resolution under the U.S. Bankruptcy Code in the event of material financial distress or failure of the company. Among the guidelines: A covered company must not rely on the provision of extraordinary support by the United States or any other government to the covered company or its subsidiaries to prevent the failure of the covered company. Thirty-one of the firms are required to file a full resolution plan that takes into account obstacles such as global issues, financial market utility interconnections, and funding and liquidity. Twenty-five firms with less complex U.S. operations can file tailored plans, use the model template issued by the agencies or follow previously released guidelines. Lastly, 61 firms with limited U.S. operations may focus on material changes to their initial plans. The second plans are due to the agencies on or before Dec. 31 ...

U.S. household debt drops $18B in Q2

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WASHINGTON (8/15/14)--Household debt across the nation dropped for the first time in a year in the second quarter, according to numbers released by the Federal Reserve Bank of New York.

The gap in borrowing, which fell by $18 billion between April and June to $11.63 trillion overall, was fueled by a 14-year low in new mortgage loans (The Wall Street Journal Aug. 14).

Total new loans, including refinancings and home sales, sank to $286 billion, the lowest total since 2000 and less than half of the $589 billion of debt issued last year at this time.  

Auto lending, meanwhile, continues to thrive as total loan balances climbed for the 13th straight quarter, The Wall Street Journal reported.

Further, new-auto loans in the second quarter jumped to their highest level in eight years, with balances climbing by $30 billion to $8.09 trillion.

Though auto-loan delinquencies have remained low, however, analysts caution that lenders are loosening underwriting guidelines, which could lead to defaults down the road, The Wall Street Journal reported.

Subprime auto loans also have become popular of late, especially with auto-finance companies within car companies, and not necessarily at traditional financial institutions, according to The Journal.

Student loans have ballooned to $1.12 trillion, rising by $7 billion in the second quarter, The Journal said, while credit card debt increased by $10 billion up to $669 billion and seriously overdue debt levels in the United States fell to 4.5%, the lowest percentage since the housing crash.

News of the Competition(7)

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  • WASHINGTON (8/14/14)--Move over Square, Amazon has entered the mobile-payments market. On Wednesday, the online-shopping giant announced a new service called Amazon Local Register that will allow businesses to accept credit card and debit card transactions with their smartphones or tablets ( The Wall Street Journal Aug. 13). The company hopes to quickly gobble up market share in the mobile-payments industry by undercutting competitors with hard-to-beat pricing. According to The Wall Street Journal , users who sign up prior to Oct. 31 will receive a promotional-transaction rate of 1.7% on all transactions until Jan. 1, 2016. Currently, Square charges businesses using its mobile-payment equipment 2.75% per payment. PayPal, who also owns a share of the market, charges 2.7%. While Square has grown substantially since introducing its technology into the market, the company has yet to amass broad profit, in large part due to its thin margins, The Wall Street Journal reported...

Housing on mend, work still to be done: HUD

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WASHINGTON (8/14/14)--The housing market has taken positive steps of late, but more work needs to be done as the economy continues its recovery. That according to the Obama administration's July Housing Scorecard, released Tuesday by the U.S. Department of Housing and Urban Development (HUD).

Progress such as rising existing-home sales and fewer foreclosure starts and completions have materialized, but new-home sales and a slowing of house-price appreciation nationwide has given pause to officials.

Existing-home sales, including single-family homes, townhouses and condos, sold at a pace of 5.04 million annualized units in June, the fastest pace since October and 2.6% higher than May, HUD reported.

Foreclosures, meanwhile, dropped 4% in June and have fallen 18% below levels seen a year ago.

On the other hand, June was the fifth-straight month of slower year-over-year home-price appreciation, while new-home sales declined a drastic 8.1% from May, 11.5% below the pace of sales seen a year ago during the month.

"The market indicators for the housing market recovery were mixed in July as foreclosure filings continue to improve, but home sales, particularly for new homes, showed unexpected weakness," said Katherine O'Regan, assistant secretary for policy development and research for HUD.

"Home prices, while still increasing, are doing so at slower rates," O'Regan added. "Indications are that continued improvements in the economy, such as the July employment report which marked the sixth straight month that more than 200,000 jobs have been added, along with slowly easing mortgage credit, will keep the U.S. housing market on the path to recovery."

Job openings jump in June

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WASHINGTON (8/13/14)--Job openings in June climbed to their highest rate since before the recession, rising to 3.3% and pushing the total number of job openings in the United States up to 4.67 million, with nearly 100,000 jobs opening up from May, according to numbers from the U.S. Department of Labor ( Economy.com Aug. 12).

The increase continues the trend seen since the beginning of the year, as job openings have expanded by 800,000 so far in 2014.

Openings also have swelled by 18% since June of last year, with an 18% surge in private-sector openings. Meanwhile, the number of job seekers per opening dropped to 2-to-1 from 2.1-to-1 ( MarketWatch Aug. 12).

"The job market continued its slow improvement in June and net job gains from the (survey) show a similar sized gain, as did the nonfarm payroll survey," said Marisa Di Natale, Moody's analyst ( Economy.com ). "Job openings have increased significantly over the past six months, though hiring has increased at about one-third of that pace."

The hiring rate increased 3.5% in June, back to the level it had achieved in April, according to the government, with overall hires rising to 4.8 million through the month.

While job openings have regained pre-recession levels, hires only have risen by about 250,000 since the beginning of 2014 and fall well short of their pre-crash numbers.

The number of people who quit their jobs has climbed in the past three months as well, but the "quit rate," which can illustrate worker confidence in the job market, has remained relatively flat since the beginning of the year.

News of the Competition (08/13/2014)

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  • WASHINGTON (8/13/14)--U.S. bank profits are soaring near record levels, with lending to businesses and individuals coming in at the fastest rate since before the housing collapse in 2008, The Wall Street Journal reported (Aug. 12). In the second quarter, banks recorded $40.24 billion in net income, the second-most lucrative profit total in nearly 25 years, according to data from SNL Financial. The most recent quarter's numbers arrive just under the record set in the first quarter of last year of $40.36 billion, according to The Wall Street Journal . This despite bank executives decrying recently that regulation has hampered business. According to The Wall Street Journal , some credit the fact that banks are putting less money aside to cover soured loans as one of the main reasons profits have swelled of late ...
     
  • WASHINGTON (8/13/14)-- The Office of the Comptroller of the Currency (OCC) issued a final rule that increases by 14.5% the OCC's semiannual assessment on national banks and federal savings associations that have more than $40 billion in assets . The effective increase for an individual bank will range from 0.32% to 14%, depending on its total assets. The final rule does not increase assessments for community banks. The rule applies to assessments due Sept. 30 ...

Small-biz owner optimism continues climb

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PRINCETON, N.J. (8/12/14)--Small-business owners in the United States continue to feel more optimistic in the wake of the housing crash of 2008, but optimism remains well below pre-recession levels, a recent poll has found.

In its quarterly survey of small-business owners, conducted last month, the Wells Fargo/Gallup Small Business Index registered 49, a 4-point improvement since the beginning of the year ( Gallup.com Aug. 7).

The Present Situation component, which gauges how small-business owners currently feel about their situations, sits at 18--the highest it's been since the third quarter of 2008.

Gallup listed several factors that are contributing to the improvements in the small-business optimism indices, including more revenue, better cash flow and easier access to credit over the past 12 months.
Though, challenges still remain for small-business owners.

Among those polled, owners said attracting customers was the "most important challenge" at 13% of responses, with government regulation, financial stability and the economy all tied for second place at 11% each.

Meanwhile, the modest improvements in optimism for small businesses was perhaps echoed by a recent report from Newtek Business Services that found that small-business lending volumes fueled an increase to its overall Small Business Authority Index.

Annually, the overall index, which tracks a variety of small business indicators, was up 7.07% in June.

"We finally are seeing a small lift in new business formations," said Barry Sloane, Newtek president/CEO and chairman. "If and when hiring activity starts to increase, we would foresee a more robust small business economy, which would be great for all of our independent business owners and operators."

HuffPost: Bank profits 5x higher than fines since crash

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WASHINGTON (8/11/14)--When Bank of America hands over a reported $17 billion to the U.S. Justice Department, the forfeiture will bring the total paid by big banks in the aftermath of the housing crash they're largely held responsible for causing up to about $128 billion, The Huffington Post reported Friday.

That number, however, pales in comparison to the $503 billion the Federal Deposit Insurance Corp. says many of those same banks have earned in profits over the last five years.

Further, while Bank of America's bottom line will suffer a blow--the settlement amount is more than double the bank's profits over the last 12 months--federal regulators agreed last week to allow the big bank to raise its dividend, which certainly will soften the pain.

According to Yahoo! Finance, Bank of America's shares rose 2.4% after the announcement of the quarterly dividend increase.

"Clearly $17 billion is not going to break the bank," Huffington Post said of settlement amount, a record in the history of corporate America.

Nor has the nearly $62 billion Bank of America has forked over in total since 2008 to resolve investigations and accusations of selling toxic mortgage securities and defrauding consumers leading up to the recession.

News of the Competition (08/11/2014)

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  • WASHINGTON (8/11/14)-- The mortgage arm of Fifth Third Bank, a regional banking corporation located in Cincinnati, has agreed to pay $1.5 million to settle allegations of engaging in a pattern of discrimination based on disability or the receipt of public assistance ; infractions that are in violation of the Fair Housing Act and the Equal Credit Opportunity Act ( Housingwire.com Aug. 8). In addition to the dollar amount, the bank also will maintain revised lending policies and conduct employee training related to its underwriting practices. "Today's announcement holds lending institutions accountable for their actions, and is a reminder that every American has the right to apply for a home loan and live in the community of their choice," said Gustavo Velazquez, assistant secretary of the U.S. Housing and Urban Development's Office of Fair Housing and Equal Opportunity...

Delinquent mortgages down as job market bolsters

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WASHINGTON (8/11/14)--Seriously delinquent mortgages have dropped to their lowest number since 2008, a development that has coincided with continued improvements to the job market, which added more than 200,000 workers for the sixth straight month in July, according to statistics from the Labor Department ( Bloomberg.com Aug. 7).

Mortgage delinquencies, or those more than 90 days behind in payments, or in the foreclosure process, sank to 4.8% of loans in the second quarter, more than a 1% decline year-over-year, according to the Mortgage Bankers Association (MBA).

The last time the mortgage delinquencies occupied so little of all U.S. mortgages was in 2008, when it stood at 4.5%.

Some analysts believe the improved labor market, which now posts a 6.2% unemployment rate, is helping strengthen the housing numbers.

"The stronger job market means fewer people are going delinquent at the beginning of the process," Michael Fratantoni, MBA chief economist, told Bloomberg. "The stronger housing market means if someone becomes delinquent, they're able to sell the home before late-stage delinquency or the loan goes in the foreclosure process."

In addition to the job-adds, unemployment claims fell below 300,000 earlier this month, according to government data, posting the fourth week of declines in the last five weeks as of Aug. 2 ( Economy.com Aug. 7).

Continuing claims, or those who have filed for unemployment benefits for at least a second straight week, also fell by 24,000.

"Unemployment insurance claims suggest that the pace of layoffs has normalized and is back to what it was prior to the economy's weakening in 2007," said Marisa Di Natale, Moody's analyst ( Economy.com ). "Monthly job growth has been above 200,000 in eight of the past 10 months, and with these healthy gains has come a reduction in the unemployment rate of a full percentage point."

Consumers still hesitant to pay with plastic: Fed report

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WASHINGTON (8/8/14)--In line with overall trends, consumer credit at credit unions climbed $5 billion in June from the prior month, with nonrevolving loans driving the majority of the gains and credit card debt only picking up slowly.

Nonrevolving credit, which is tied to more substantial items such as homes or automobiles, jumped $4.5 billion up to $241 billion. Revolving credit, largely associated with credit card usage, edged up by $500 million in June to $43.3 billion total outstanding for credit unions.

"Revolving credit balances are growing at a tepid pace and will continue to do so in the near term," said Andrew Davis, Moody's analyst ( Economy.com Aug. 7). "However, continued labor market improvement will help drive growth in the coming quarters. Consumer confidence will grow as the job market strengthens, and appetite for revolving credit will slowly begin to rise."

Consumer credit across all categories of institutions expanded by $17.3 billion in June, just short of expectations, according to Moody's analysts.

Again big-ticket items fueled the increase, as $16.3 billion of that total came in the form of nonrevolving loans.

"The release of pent-up vehicle demand is benefiting nonrevolving balance growth," Davis said. "Vehicle sales have held above 15 million units SAAR since April, and student loan demand continues to swell."

News of the Competition(6)

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  • NEW YORK (8/8/14)--After several rejected settlement offers that were deemed insufficient by the U.S. Justice Department, Bank of America has finally agreed to pay an amount acceptable to the government to settle investigations into its shoddy mortgage practices leading up to the housing crash in 2008 ( The New York Times Aug. 7). Reportedly, the big bank will pay $16 billion to resolve the probe, which would be the largest settlement in history for a corporation in the United States. In late July, a representative of the bank called the Justice Department offering $9 billion in cash and more than $7 billion in relief funds for consumers, The New York Times reported. The total exceeds the multibillion dollar settlements recently paid by JPMorgan Chase and Citigroup, both of which were also accused by the government of defrauding consumers and knowingly selling unfit mortgage securities...

Mortgage apps up, but purchase activity still weak: MBA

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WASHINGTON (8/7/14)--Mortgage application activity picked up during the week that ended Aug. 1, the Mortgage Bankers Association reported in its weekly applications survey Wednesday.

The composite index climbed 1.6%, driven by a 3.8% leap in refinancing activity. Purchase applications, however, dropped 1.3% and continue the weak pace they have logged throughout most of this year ( Economy.com Aug. 6).

Averaged over the last four weeks, refinance activity has climbed 2%, but falls 41% lower than last year at this time. Refinances now make up 55% of all applications.

Purchase applications are down 5.7% over the past month and sit 14.6% lower year-over-year.

"As we enter August, applications for home purchase mortgages remain historically low, with no sign of the measurable rebound expected by most at the beginning of the year," said Moody's analyst Gregory Bird ( Economy.com ). He added, "Meanwhile, refinancing remains lackluster, near a six-year low."

Mortgage interest rates for 30-year fixed-rate conforming mortgages edged up 2 basis points for the week to 4.35%, which is 26 basis points below levels seen a year ago.

The 30-year jumbo mortgage rate increased 4 basis points to 4.26%, while the five-year adjustable-rate mortgage rate inched up by 1 basis point to 3.32%.

News of the Competition (08/07/2014)

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  • NEW YORK (8/7/14)-- On Tuesday, the Federal Reserve and the Federal Deposit Insurance Corp. (FDIC) publicly criticized the plans big banks have made to wind down their operations in case their businesses fail, calling the so-called living wills "not credible" ( The New York Times Aug. 6). Creation of the plans were set in motion thanks to the U.S. government's mandate, in the aftermath of the financial crisis, that banks must overhaul the way they descend into bankruptcy so that their insolvencies don't create havoc in the economy. In response to the insufficient plans submitted, the two federal regulators have sent letters to 11 banks, including JPMorgan Chase and Goldman Sachs, highlighting the problems they've found in the living wills. "The plans provide no credible or clear path through bankruptcy that doesn't require unrealistic assumptions and indirect public support," said Thomas H. Hoenig, FDIC vice chairman ( The New York Times ). The banks have until 2015 to make improvements to their living wills ...

Reporting rental payments could improve credit scores

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DENVER (8/6/14)--Renters could see their credit scores climb immediately if more property managers begin submitting their rental payment history to credit bureaus, analysis by TransUnion and Experian has found.

Especially if the consumers are considered subprime.

Eight of 10 subprime consumers, or those considered to be a higher risk to lenders, saw credit scores increase just one month after starting a new apartment lease, TransUnion's analysis revealed, and nearly 41% watched their VantageScore jump 10 points or more.

"Despite millions more renters (than in the past), most rental payment histories are not provided to credit bureaus, and renters looking to improve their credit standing cannot do so," said Tim Martin, TransUnion executive vice president, who said that the number of renters in the United States has increased by 5 million since 2007.

For the overall population of renters, about two-thirds experienced a positive or neutral change to their VantageScore credit score when their payment history was submitted after renting for just one month. Two in 10 renters experienced a 10-point jump.

"We believe reporting rental payment performance is simply the right thing to do for apartment residents and the apartment rental industry," Martin said. "Renters will be able to build positive credit history, gain access to more financial products and, most importantly, help them recover from the housing market crash."

Further, property owners will gain certainty about residents' payment history, Martin added.

Experian, a California-based information services provider, recently completed a similar analysis of how reporting rental payments can improve the financial health of subprime consumers who have positive rental-payment histories, and found comparable results.

Among the findings:
  • Ninety-five percent of participants experienced an increase or no change to their credit score after their rental-payment history was reported, with subprime and nonprime residents experiencing the greatest improvements;
     
  • Nineteen percent of participants who were considered subprime at the outset of the study jumped at least one risk segment higher after payment history was reported; and
     
  • The average increase in VantageScore credit score was 29 points.

FHFA: MBS issuance lowest since 2000

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WASHINGTON (8/6/14)--The number of government-sponsored mortgage bonds issued in the beginning of 2014 fell to its lowest level since 2000, the Federal Housing Finance Agency (FHFA) reported Tuesday, with the share of securities sold by Fannie Mae and Freddie Mac also falling ( Politico Aug. 5).

As interest rates have started to edge up, fewer borrowers are refinancing their mortgages because there is less financial incentive to do so, Politico reported. In turn, mortgage bond activity has been tamped down.

Freddie Mac and Fannie Mae leaders continue to urge borrowers who qualify to utilize the government-backed refinancing programs, but their work only has made a small dent, as the sluggish housing market, anchored by a dearth of first-time homebuyers, has tripped up business, Politico noted.

About $196 billion in total mortgage-backed securities were sold in the first quarter, according to the FHFA, including bonds issued by Ginnie Mae. Fannie Mae and Freddie Mac now account for 70% of all mortgage-bond issuances, down from 74% at the end of 2013.

Meanwhile, to recoup mounting losses but avoid burdening taxpayers, the two investment giants may have to rely more on the fees they collect from buying loans and selling mortgage-backed securities.

News of the Competition(5)

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  • WASHINGTON (8/6/14)-- About 1 in 4 U.S. banks say they relaxed mortgage-lending requirements during the second quarter, which is the largest percentage of lenders to ease standards in a quarter since before the housing crash ( The Wall Street Journal Aug. 5). Further, senior loan officers in the Federal Reserve's quarterly survey, released this week, report that nearly half of all large banks and foreign institutions feel lending standards are the loosest they've been for riskier loans to companies with noninvestment-grade, or junk-credit ratings in about a decade. This development follows a recent warning from the Office of the Comptroller of the Currency, which earlier this year cited that underwriting standards at banks had begun to erode for high-yielding loans issued to below-investment-grade firms, The Wall Street Journal reported...

FHA credit score requirements may be loosening

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LOS ANGELES (8/5/14)--The Federal Housing Administration (FHA) has relaxed its credit score requirements this year, which could spur on home sales in the coming months, the Los Angeles Times reported last week.

Further, Freddie Mac and Fannie Mae, the Federal Government's two mortgage-investment giants, may soon follow suit.

Leading the charge, the FHA has allowed the average FICO credit score of consumers who have been approved for home loans to drop steadily throughout 2014, according to recent numbers from Ellie Mae (Los Angeles Times Aug. 3).

While lenders look at more than credit scores when assessing a home-loan applicant, experts say high credit score requirements play a large role in keeping many out of the housing market.

There are many people out there who are creditworthy and should be eligible to purchase a home, Phil Bracken, chairman and founder of the nonprofit affordable housing organization America's Homeowner Alliance, told the Los Angeles Times.

The homeownership rate now sits at 64.8%, the lowest it has been since 1995, the Times reported. For those under 35, the rate has declined even further, with only 36.2% of that demographic owning a home.

However, while Fannie Mae and Freddie Mac continue to maintain stringent credit score standards--the average score in June was 755--Mel Watt, the Federal Housing Finance Agency's new director and the head of the two agencies, appears interested in amending those requirements.

Watt recently reached out to lenders to ask for their advice on setting Freddie and Fannie's fees, including fees related to credit scores, the Los Angeles Times reported. 

Unemployment increases in July, job growth slows

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NEW YORK (8/4/14)--The U.S. Labor Department reported 209,000 net new jobs Friday; however unemployment rate rose slightly to 6.2% as more workers joined the labor force ( Washington Post Aug. 1).

The number of new entrants to the job market continues to exceed the number of jobs created. Labor force entry is a positive sign of more confidence in the labor market. However, the participation rate increased to 62.9% from 62.8% but remains low ( Moody's Aug. 1).
 
The net employment gain for May was also revised higher, to 229,000 from 224,000. Thus, the three-month average of 245,000 is consistent with a steadily improving labor market that is generating more than enough jobs to keep pace with growth in the working-age population.
 
As expected, the strong pace of job creation in June was not sustained in July, primarily because service industries added somewhat fewer workers. Despite the somewhat weaker pace, the recent trend in job creation points to a steadily improving labor market with gains broad-based across industries. Job gains have exceeded 200,000 monthly for six consecutive months.
 
The quality of new jobs has improved in recent months as well, with the lowest-paying industries such as leisure/hospitality, retail and temporary help accounting for one-quarter of net new jobs, down from about a half in the first quarter and last half of 2013.

FHFA: Mortgage rates down

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WASHINGTON (8/1/14)--Interest rates on mortgages decreased from May to June nationwide, according to an index of new mortgage contracts from the Federal Housing Finance Agency (FHFA).
 
The National Average Contract Mortgage Rate for the Purchase of Previously Occupied Homes by Combined Lenders index was 4.08% for loans closed in late June. The index is calculated using FHFA's Monthly Interest Rate Survey.  The contract rate on the composite of all mortgage loans was 4.09% in June, a decrease from 4.13% in May.
 
Interest rates are typically locked in 30 to 45 days before a loan is closed.  Consequently, the June index reflects market rates from mid-to-late May. The effective interest rate was 4.24 percent in June, down 4 basis points from 4.28 percent in May. The effective interest rate accounts for the addition of initial fees and charges over the life of the mortgage.
 
FHFA's interest rate survey shows the average interest rate on conventional, 30-year, fixed-rate mortgages of $417,000 or less was 4.34 in June, a decrease of 3 basis points. The average loan amount for all loans was $292,200 in June, up $9,600 from $282,600 in May.