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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 ...

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.

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 ...

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).

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.

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).