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TBTF Mega Banks Lowering Downpayments and Credit Standards to Keep High End Housing Market Going
TBTF Mega Banks Lowering Downpayments and Credit Standards to Keep High End Housing Market Going
What do you do when even wealthy people begin to face an increasingly hard time purchasing a home in a vertical market completely disconnected from income trends? You reduce downpayments and lower credit standards, of course.
Where have we seen this story before…
From the Wall Street Journal:
The nation’s largest bank by assets plans to announce Wednesday that it is lowering the minimum credit score and down payment it requires for mortgages as big as $3 million.
The New York firm’s moves follow similar steps at Bank of AmericaCorp., Wells Fargo & Co. and other banks on requirements for “jumbo” mortgages—those that exceed $417,000 in most parts of the country or $625,500 in pricier markets. At the same time, some big banks are backing away from smaller loans where they see higher regulatory costs and litigation risks.
Guess it’s gonna be shipping container apartments for everyone else.
Since the financial crisis, a recovery in the mortgage market has faced several challenges, but the jumbo market—popular with well-heeled borrowers—has bounced back along with sales of higher-priced homes. In the second quarter, overall jumbo originations rose to an eight-year high of $93 billion, up 58% from a year ago, according to a preliminary estimate from industry newsletter Inside Mortgage Finance.
By dollar volume, jumbo mortgages given out by lenders last year accounted for about 20% of all first-lien mortgages, used mostly to purchase or refinance a home, according to Inside Mortgage Finance. That is up from 5.5% in 2009. The last time jumbo mortgages accounted for a larger share was in 2005.
2005…got it.
For jumbo mortgages, J.P. Morgan plans to lower the minimum FICO credit scores it requires to 680 from 740 for loans on primary single-family purchases, second homes and certain refinances on those properties.
The increase in jumbo lending underscores a housing recovery concentrated in higher-priced homes. Sales of existing single-family homes priced between $750,000 and $1 million, for example, increased 21% in June from a year prior, according to the National Association of Realtors.
…click on the above link to read the rest of the article…
Obama Administration Finds New Way to Let Criminal Banks Avoid Consequences
Obama Administration Finds New Way to Let Criminal Banks Avoid Consequences
Three top Democrats are accusing the Department of Housing and Urban Development of quietly removing a key clause in its requirements for taxpayer-guaranteed mortgage insurance in order to spare two banks recently convicted of federal crimes from being frozen out of the lucrative market.
HUD’s action is the latest in a series of steps by federal agencies to eliminate real-world consequences for serial financial felons, even as the Obama administration has touted its efforts to hold banks accountable.
In this sense, the guilty plea has become as meaningless to banks as their other ways of resolving criminal charges: out-of-court settlements, or deferred prosecution agreements. “Too Big to Fail” has morphed into “Too Big to Jail” — and then again, into “Bank Lives Matter.”
Sens. Sherrod Brown and Elizabeth Warren and Rep. Maxine Waters fired off a letter to HUD on Tuesday, saying they believe that the timing of the change was designed to clear the way for two banks recently convicted of federal crimes — JPMorgan Chase and Citigroup — to continue to make Federal Housing Administration-insured loans. Last year, JPMorgan Chase wrote $1.67 billion in FHA loans, and Citi wrote $342 million, according to data from the Congressional Research Service.
On May 20 of this year, JPMorgan Chase and Citigroup both entered a guilty pleaon one felony count of conspiring to rig foreign currency exchange trades, the largest market on the globe.
Five days earlier, on May 15, HUD slipped a notice into the Federal Register, seeking to alter its standard loan-level certification form, known as HUD-92900-A. This form must be filled out for lenders to receive FHA insurance, which reimburses them if the homeowner falls into foreclosure.
…click on the above link to read the rest of the article…
Santa Cruz County Votes to Cease Doing Business with Five TBTF Mega Banks
Santa Cruz County Votes to Cease Doing Business with Five TBTF Mega Banks
This is impressive. Very, very impressive.
It appears that Ryan Coonerty, the Supervisor of the Third District of Santa Cruz County, wrote a letter back in June to the rest of the Board of Supervisors, in which he bravely pleaded the county cease business operations with five of the TBTF Wall Street Mega Banks. Why you ask? Well, because they are criminal felons. Considering Eric Holder refused to punish them (see: Cronyism Pays – Eric “Too Big to Jail” Holder Triumphantly Returns to His Prior Corporate Law Firm Job), someone has to take a stand.
Here are a few choice excerpts from the letter:
The banks have agreed to plead guilty to felony charges of conspiring to manipulate the price of U.S. dollars and euros exchanged in the foreign currency exchange spot market… The behavior of these banks is offensive and signals a Wall Street culture in which several big banks broke the law even after years of strong criticism and increased regulation following the economic crisis.
“There seems to be no limit to the greed in some our nation’s largest banks. I believe it is critical that the County only work with the most trustworthy institutions as we invest and protect the public’s tax dollars. Santa Cruz County should not be involved with those who rigged the world’s biggest financial markets.
It is important that we send a message that if you want to do business with the County, you need to play by the rules. Therefore I recommend that the Board direct that the County’s investment policy be modified to reflect that the County of Santa Cruz will not do new business with these felonious financial institutions for a period of five years and further that the County unwind existing relationships with these five banks to the greatest extent feasible.”
Incredibly, the board went ahead and voted in favor of Mr. Coonerty’s proposal. AllGov reports that:
…click on the above link to read the rest of the article…
Why We Are All Now Cypriots-to-bein the New Age of Bail-Ins
Why We Are All Now Cypriots-to-bein the New Age of Bail-Ins
According to the mostly ignored and hardly covered piece of newsfrom a couple of weeks ago, it turns out that 11 of the 28 European Union countries have been scolded by the European Commission for failing to implement a new set of rules intended to prop up failed banks. Known as the Bank Recovery and Resolution Directive (BRRD), the stated purpose of the newly required rules is to purportedly protect taxpayers from having to cover the losses of any possible future bank failures, similar to the failures that occurred back in 2008. Taking the place of the more conventional taxpayer-funded “bail-outs,” banks would see their losses recapitalized with the newly-minted practice of the “bail-in.”
A bail-in, in case you aren’t familiar with it, is the emerging alternative to the well-known bail-out. Back in 2008 when a slew of “too big to fail” (TBTF) banks crumbled due to $147 barrels of oil and the bursting of the housing bubble, the entire financial system was put at risk and was deemed to be in need of a rescue. What occurred was an influx of money from outside sources to cover the bank losses, one example being the $700 billion life-line from the US government (which essentially means from the US taxpayer). This is known as a bail-out.
This differs from what occurred with the Cypriot banking system back in 2013, of which has since come to be known as a bail-in. In short, due to Cyprus’ insolvent banking system, all banks in the country were shut down under the “bank holiday” rubric, to go along with withdrawals being limited, if not completely cut off. Upon cessation of the bank holiday measures, it was announced by officials that all bank accounts in excess of €100,000 would have their balances reduced by 47.5% (also known as a “haircut”). As the practice now goes, confiscated bail-in funds are used to recapitalize failed banks, and the depositors who had their balances reduced essentially become owners of a bank that no one has much of an interest in owning.
…click on the above link to read the rest of the article…
