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News of the Competition (07/10/2014)

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  • 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...

FOMC minutes: Bond-buying program to end by October

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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."

News of the Competition (07/09/2014)

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  • WASHINGTON (7/9/14)-- The U.S. Department of Justice has announced 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 ( CBSNews.com 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...

Consumer credit continues to advance in May

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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 ( Economy.com July 8).

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."

'Normal' housing market long ways off: Fannie Mae

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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.

Freddie Mac: Mortgage rates ease slightly

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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 ( Washington Post July 3).
 
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%.

Home finance delinquencies plummet 37%: Equifax

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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.)