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Fannie Mae CEO Timothy Mayopoulos has provided new details on regulators’ plans to boost mortgage lending, expanding on Federal Housing Finance Agency Director Melvin Watt’s comments that Fannie and Freddie would back loans with down payments as low as 3 percent of the home's value. Mayopoulos expects Fannie’s low-down-payment mortgages to cost the borrower less than Federal Housing Administration loans. But he also said Fannie’s loans would require private mortgage insurance on top of the down payment, which could limit the size of the program. It is not clear whether private mortgage insurers will want to take on the riskier loans. The program could also introduce higher default rates, since the 20 percent down payment has previously acted to filter applicants who were likely to default.
Boyd “Bo” Megginson has been named the new Vice President for Business Lending Services at United Bank. Megginson will drive business development efforts for the bank with an emphasis on small business lending. He brings more than 20 years of business consulting experience to the position. “[Megginson] understands the challenges businesses face when getting started and when looking to expand... our clients will appreciate the consultative approach he brings to business development," said United Bank President and CEO Robert Jones.
Carver Bancorp, Inc., the holding company for Carver Federal Savings Bank, has announced that the OCC has lifted a cease and desist order issued by the Office of Thrift Supervision. The OCC also no longer holds the bank in “troubled condition." “We are extremely pleased with the OCC’s decision to lift the cease and desist order," said Deborah C. Wright, Carver’s Chairman and CEO. "This action reflects the effectiveness of our board and management team’s extensive effort to restore the bank to financial health... Since our $55 million capital raise in 2011, our management team has worked tirelessly to reduce problem assets and enhance bank operations. As a result, our credit ratios are now approaching industry norms.”
A new working paper on CDFI job metrics from CDFI network OFN recommends increased rigor and standardization of collection practices. The report includes findings from Create Jobs for USA, an initiative by OFN and Starbucks to support CDFIs' job creation activity. The authors hope the report will be a step forward in building a consensus among CDFIs about how job metrics ought to be collected, processed and reported. Among the report's recommendations are formalizing data collection policies and data point definitions, including quality control measures. The report also encourages clear, detailed and timely data collection forms for borrowers and proposes standardized definitions of job metric terminology and measures.
Treasurers for state and local governments are expanding their roles in experimental policies aimed at helping low- and moderate-income families. San Francisco treasurer Jose Cisneros' Bank On initiative gives poor people low-cost bank accounts and has been replicated in more than 100 cities, helping people on the financial fringes access financial services and develop credit histories. In 2010, Cisneros also started Kindergarten to College, an initiative that automatically opened a bank account with $50 for every kindergartner in public schools, a program later emulated in Nevada by Treasurer Kate Marshall. The city pays for the administration and initial deposits, while corporate, foundation and private donations provide matching money to encourage saving.
The CFPB is facing a balancing act as it attempts to expand the massive Home Mortgage Disclosure Act (HMDA) mortgage database. The Dodd-Frank Act requires the CFPB to expand data requirements, but the agency went beyond what was suggested by the law, proposing to add fields for home equity lines of credit, reverse mortgages and multi-family properties. Now, lenders are protesting that the CFPB went too far, while consumer advocates argue it hasn't gone far enough. The proposal was designed to make lenders provide more details on why a loan was accepted or rejected and disclose more information on the loan, including the age and credit score of homebuyers, the property value and details on the interest rate.
A new report finds a number of problematic trends in the online payday loan market including consumer harassment, threats, dissemination of personal information, fraud, unauthorized accessing of checking accounts and automated payments that do not reduce loan principal. Pew found that many online loans are designed to promote renewals and long-term indebtedness. Thirty percent of online payday loan borrowers report being threatened by a lender or debt collector. Thirty-two percent of borrowers reported unauthorized withdrawals and 20 percent received a loan or product they did not authorize. Nine in 10 payday loan complaints to the Better Business Bureau are made against online lenders, although online loans account for only about one-third of the market.
Two Indian tribes with online lending operations have dropped a lawsuit filed against New York State, abandoning an effort to block the state from restricting their businesses. New York’s top banking regulator, Benjamin Lawsky, last year urged banks in his state to stop processing payments for lenders that violate the state’s cap on interest rates. The Oklahoma-based Otoe Missouria Tribe and Michigan-based Lac Vieux Desert Band of Lake Superior Chippewa Indians responded with a federal lawsuit against the state, arguing the state's campaign was trampling on their rights as sovereign tribes. But the tribes suffered a setback when a federal appeals court denied an injunction that would have barred New York from restricting tribal lending during litigation.
A national survey of unbanked and underbanked households found that 7.7 percent of households in the US were unbanked in 2013 — nearly 9.6 million households. Twenty percent of households were underbanked. The unbanked rate peaked in 2011, when the percentage of households without a bank account hit 8.2 percent. Compared to 2011, households in 2013 had slightly higher levels of employment and income and were slightly older and better educated. Employment was the single largest determinant of banking status; among households that recently became unbanked, 34.1 percent had experienced either a significant income loss or a job loss. Among households that recently became banked, 19.4 percent reported that a new job motivated them to open an account.
The Federal Reserve has announced it will end its bond-purchase program, ending a quantitative easing experiment that stirred debate even as the central bank said it accomplished its goal of reducing unemployment. The move is a vote of confidence in the U.S. economy, which many economists peg to have grown at an annual pace near 3% or more in the third quarter. Officials will now turn their attention to determining when to start raising interest rates. The Fed has plans to maintain its current level of bond holdings until after it starts raising rates. Eventually, officials expect to reduce the holdings by letting securities mature without reinvesting the proceeds.