Posts Tagged ‘Federal Reserve’

Is Student Loan Debt Stifling the Economy?

August 11th, 2016 Comments off

Heavy_book_bag__123rf.com__credit postedDailyBusinessNewsMHProNewsThe U. S. Census Bureau reports nearly 15 percent of Americans, some 47 million, live below the poverty line;14 percent of households have a negative net worth, according to what bloomberg tells MHProNews. Forty-three percent of those with negative net worth are college graduates, one in eight has a graduate degree.

The combination of student debt–racked up when the housing bubble burst and people who could not find work, borrowed and returned to school—and credit card debt comprise the majority of Americans’ indebtedness. Consumers have become better at managing their credit card debt, and banks have pulled in the reins on handing them out, as the credit card debt is down 14 percent from 2008.

However, student loan debt climbed from $590 billion in mid 2008 to $1.26 trillion currently, which correlates with the 43 percent of those with negative net worth who are college graduates., Fourteen percent of U. S. households have credit card debt of over $10,000. A New York Federal Reserve report states U. S. households are $12.3 trillion in debt, up 10 percent from 2013 but 3.1 percent below the peak in 2008.

Housing debt has seen the greatest improvement since the recession. It’s over $1 trillion below its peak. Mortgages do not play a significant role, as only 19 percent of homeowners have negative net worth, compared to 75 percent of those with positive net worth.

The average age of those with negative net worth is 43, while it is 51 for the positive net worth clan. The average income of those in the minus category is $39,077, indicating the range goes from the very poor to the middle of the middle class.

Those with negative net worth are comprised of three equal subsections: One third are in the hole up to $12,500, mostly credit card debt; the second third owe up to $47,500, net of their assets; and the final third owe a net of $47,500+. The last two are dominated by student debt.

The worry,” says Ben Steverman, “ especially in an era of stagnant wages, is that there might never be enough income, or enough time, to pay off those debts and start building real wealth.” ##

(Image–Heavy book bag)

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The Dodd-Frank Legacy: Billions Spent, More Designated, Questionable Gains

July 21st, 2016 Comments off

Dodd_Frank___bloombergbusinessweek___credit postedDailyBusinessNewsMHProNewsSix years after passing the Dodd-Frank Act, which was designed to avert another financial crisis, the American Action Forum (AAF) asserts Dodd-Frank has imposed over $36 billion in final rule costs plus 73 million paperwork hours. That is an increase from last year’s $24 billion in final rule costs and 61 million paperwork hours. The costs average out to $112 per person, or $310 per household. Based on agency figures, for purposes of documentation, “It would take 36,950 employees working full-time (2,000 hours annually) to complete a single year of the law’s paperwork,” reports AAF.

Making matters worse, there remain 61 regulations under Dodd-Frank that have yet to be implemented. For an economy still trying to recover from the Great Recession, the law has resulted in a 14.5 percent decline in revolving consumer credit.

On a chart examining costs of imposing Dodd-Frank over the six years since it was first voted in, year one was under $1 billion, but mushroomed to over $4 billion the next year, hitting $8 billion in year three, $6 billion in the fourth year, slipping to about $5 billion the following year, and shooting up to $10.4 billion of economic burdens in the sixth year.


The 533 final rule documents produced by Dodd-Frank have slowly declined since year two, but 61 rulemakings remain to be implemented which could add another $3.3 billion to the cost of Dodd-Frank plus almost a million paperwork hours. The most prominent is the Requirements for Systemically Important Financial Institutions (SIFIs) at $1.5 billion. Proposed last year by the Federal Reserve, its goal is to improve capital standards at the largest, interconnected financial institutions.

The second rule, and second largest, at $1.3 billion in costs, requiring 242,321 paperwork hours, is the Disclosure of Payments by Resource Extraction Issuers. It requires companies “to provide information on payments to foreign governments and corporations on the commercial development of oil, natural gas, or minerals.” Expected to be complete by June 2016, the SEC continues to work on this rule.

The third rule, banning arbitration agreements from particular consumer financial products has created controversy, remains under comment with no date for finalization. Its cost is set at $379.7 million, requiring 500 paperwork hours.

The fourth proposed rule, from the SEC, Security-based Swap Repositories, is estimated to cost some $104 million with over 676,000 paperwork hours notched. The final rule of these five, SEC’s other Swap Repository rule, would mandate new record keeping and reporting requirements on repositories to share specific date with regulators. It would cost an estimated $103.8 million and require 36,120 paperwork hours, involving SEC employees monitoring swap information.

Some of the remaining federal rulemakings related to Dodd-Frank are shown below with their expected completion dates (some are overdue), although many are so complicated it may take years to finalize.

Rule Expected Publication Date
Incentive-Based Compensation Agreements May 2016
Annual Stress Test May 2016
Clearing Requirement May 2016
CFPB’s Arbitration Rule May 2016
Margin Requirements for Swap Entities May 2016
Incentive Compensation May 2016
Resource Extraction Issuers June 2016
Amendments to Regulations X and Z July 2016
Regulatory Capital Rules October 2016
Reporting of Proxy Votes April 2017
End-User Exception April 2017
Stress Tests for Large Investment Firms April 2017
Pay Versus Performance April 2017
Disclosure of Hedging by Officers and Directors May 2017
Covered Broker Dealer Provisions N/A

Finally, one of Dodd-Frank’s main objectives was to prevent the “Too Big to Fail” phenomenon, but as the graph below shows, the five largest commercial banks have enjoyed slow but steady growth in the years since the housing bubble.


However, as MHProNews has learned, it is not the actual growth that matters, but how that growth affects the market’s structure. The top five banks have been responsible for a majority of that market in 13 out of the 23 quarters that Dodd-Frank has been in effect.

While a straight line cannot be drawn that directly connects the six-year-old regulations to increased concentration of the banking industry, the data certainly indicate that Dodd-Frank contributed to what it had intended to prevent at a cost of $36 billion and 73 million paperwork burdensome hours.

AAF concludes: “As time passes, the law becomes more expensive as regulatory agencies like CFPB and FHFA grow with the mission to implement burdensome rules. Meanwhile, small financial services firms continue to struggle as the law restricts the availability of financial products. With dozens of regulations still left to implement, one can only expect the costs to continue to rise.”

As MHProNews knows, Dodd-Frank is directly responsible for impeding the financing of manufactured homes, especially low cost homes. ##

(Graphs and chart credit: American Action Forum;

Dodd-Frank’s breezy banner:bloombergbusinessweek)

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Bill would Eliminate CFPB Czar, Clarify and Funnel Funding

June 6th, 2016 Comments off

house_____financialservices_dot_house_dot_gov__creditAn appropriations bill approved by the House Financial Services and General Government Appropriations Subcommittee of the House Appropriations Committee would seriously alter the workings of the Consumer Financial Protection Bureau in two ways, a move opponents of Dodd-Frank/CFPB would welcome.

Firstly, the agency would be funded through the annual Congressional appropriations process instead of through the Federal Reserve, as mpamag tells MHProNews. Funds would be requested through the Fed, but it must notify Congress of its intent, and include the amount requested, what it is for and how it will protect consumers.

Secondly, the all-powerful single director would be replaced with a five member board of directors appointed by the president.

In addition, according to CFPB monitor, another provision disallows CFPB’s funds from being used to regulate pre-dispute arbitration agreements. The agency would have to research arbitration agreements before issuing rules regarding them. Rules thus issued would have no force until the research was completed. ##

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Two-thirds of Americans do not Have $1,000 for Emergency

May 19th, 2016 Comments off

forbes creditIn an indication that Americans’ financial condition remains as precarious as ever, despite the “recovery” from the Great Recession, a survey conducted by the Associated Press-NORC Center for Public Affairs Research revealed 75 percent of people in households making less than $50,000 would have trouble coming up with $1,000 in an emergency. Even with income rising to between $50,000 and $100,000, 67 percent still would be hard pressed to cover a $1,000 bill, according to breitbart.

Even people in the top 20 percent, those earning over $100,000, would be a little stretched to produce $1,000 on the spot, as MHProNews understands.

Although two-thirds of Americans say they are secure in their finances, a majority of our fellow citizens could not easily cover an unexpected bill of $1,000. A third said they would have to borrow the money or pay with a credit card, while 13 percent would skip paying other bills and 11 percent said they would not pay the bill.

The AP-NORC study correlates with 2015 Federal Reserve research that indicated 47 percent of Americans could not immediately cover a $400 debt.

Extending out to retirement savings, 54 percent of working Americans say they are not sure they will have enough savings to retire when they want to; only 14 percent have enough to retire when they want.

In the same survey, 46 percent of workers say their incomes have not risen in five years, and 16 percent say they have experienced salary cuts, while costs for food, housing and insurance have increased.

William R. Emmons, a senior economic adviser at the Center for Household Financial Stability at the Federal Reserve Bank of St. Louis,said, “Many families are still struggling with debt from the housing bubble and borrowing boom. And the recent economic stresses make it much more likely families are going to be fighting basic financial issues.” ##

(Image credit: forbes)

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As More People Live on the Edge, Payday Lenders Provide Valuable Service

May 14th, 2016 Comments off

payday_loans___istockphoto___creditAccording to Neal Gabler, writing an article entitled The Secret Shame of Middle-class Americans in the May issue of The Atlantic, a Federal Reserve study from a year ago reports that nearly half of Americans would be hard-pressed to come up with $400 in an emergency—and he includes himself in that category. He says bad credit is pervasive, eleven percent of the U. S. adult population are credit invisible and 56 percent have credit scores below 700.

Incomes are not keeping up with the cost of living, especially in health care and education, causing more people to live on the edge. William M. Isaac tells MHProNews in americanbanker the payday lenders provide an essential service, and the Consumer Financial Protection Bureau’s (CFPB) upcoming rules on short-term lending could have unintended consequences for millions of people facing financial emergencies.

The CFPB is proposing lenders do an ability-to-pay assessment because of concern over improperly formulated credit contracts that could lead to the loss of a car, or creation of a cycle of debt.

However, the CFPB may exempt some loans from closer scrutiny if the payment is no more than 5% of gross income. But Isaac points out gross income does not take into account household expenses, other debt or other monthly expenses. He suggests using the Credit Card Act of 2009, whereby lenders have to utilize “reasonable written policies and procedures to consider the consumer’s ability to make the required minimum payments under the terms of the account based on a consumer’s income or assets and a consumer’s current obligations.”

Without access to some form of emergency credit, consumers could lose their cars, jobs and essential services. But noting the advance of big data innovation and machine learning technologies, Isaac is certain that more credit products will be geared toward the nonprime customer market, a demographic that seems to be growing.

In the worst case scenario that might result from payday lenders being driven out of business, MHProNews understands people who cannot obtain legal credit may turn to criminal behavior. ##

(Photo credit: istockphoto)

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Challenges to CFPB Constitutionality could Create Financial Havoc?

April 28th, 2016 Comments off

consumer_financial_protection_bureausteve rhode slas get oug of debt org__kicks_aWriting in nationalmortgagenews, Craig Nazzaro says there are two significant court cases now challenging the authority and structure of the Consumer Financial Protection Bureau (CFPB), both of which would have been avoided had the agency been established with a five-member commission to operate it, not a czar, and with congressional oversight. The current director, Richard Cordray, has been accused of being heavy-handed in some of his rulings, as MHProNews has observed.

Its funding comes through the Federal Reserve at the request of the director, not Congress. The director is appointed by the president and confirmed by the Senate for a five-year term, and can only be removed by the president for just cause.

PHH Mortgage is challenging CFPB’s authority, and that of Director Cordray, while also appealing a $109 million judgment by the agency for kickbacks it received. As MHProNews reported April 14, 2016, that amount was reduced by an administrative law judge to $6.5 million, although PHH received a stay on that fine.

In the second case, a District Court judge ruled the CFPB does not have authority over a for-profit college accreditor it had sued.

PHH Attorney Ted Olson, noting the agency lacks the checks and balances that is the backbone of the U. S. constitution, said, “The separation of powers is what protects our liberties as individuals in this country.”

Legal experts have considered the effect of removing the “just cause” provision as a means for replacing the CFPB’s director with whomever and whenever the current administration decides.

More confounding would be if the court decides the agency is unconstitutional. “What happens with all the rules the bureau promulgated? Untold sums have been spent on industry compliance with the CFPB’s rules. Would those rules still apply? What about the enforcement actions that have already been finalized or the monies paid out under various consent orders?,” writes Nazzaro.

While lawmakers continue to attempt to reform the structure and accountability of the CFPB, a ruling in the PHH case is expected by the end of summer. Likely, the case will work its way through the D. C. Circuit Court and end up on appeal before the Supreme Court. ##

(Editor’s Note: The author Craig Nazzaro, writing in NMN, shared his take on this topic, which our Matthew Silver has correctly covered.  This should NOT be construed to imply that MHProNews agress with that assessment.

This publisher has editorially stated for some time that on the face of it, the MLO rule at a minimum clearly seems to violate the 1st Amendment rights of free speech that every American has.  To try to restrict free speech in the fashion the CFPB does is, to this editor’s mind, unconstitutional.  At association meetings, this editor has shared that point publicly. MHProNews believes the facts prove that the industry, MH home owners and the home buying public will all be better off when the principles found in HR 650/S 682 are enacted into law, or are voluntarily implemented by the CFPB.)

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Buffett’s Berkshire Hathaway Stake in Wells Fargo nears Ten Percent

April 1st, 2016 Comments off

warren buffett track record business insider artAs Warren Buffett’s Berkshire Hathaway approaches ten percent ownership in Wells Fargo & Co., mostly through several of Berkshire’s subsidiaries, he will have to pass a Federal Reserve review if he intends to acquire more than the 9.9 percent he currently controls, about 506 million shares valued at $24 billion, as of 12-31 2016.

At the end of 2009, Berkshire had a 6.7 stake in Wells Fargo but that has grown through additional stock purchases. Almost all of the shares were acquired at an average price of $25.46 per share, reports newsmax to MHProNews.

Long limiting the ties between non-financial companies and banks, the federal government requires regulators to track and review who controls the nation’s lenders. However, investors can make pledges that they do not want to control or influence management, as Buffett did in the 1990s when he went over the ten percent line in ownership of American Express. As of 12-31, 2106, Berkshire’s stake in AmEx totaled about 16 percent.

A long-time investor in Wells Fargo, Berkshire got close to ten percent ownership in 2007, and although it continued buying stock the next two years, ownership fell as the bank issued billions of dollars in equity to fund the takeover of Wachovia Bank, and then rebuild capital after a government bailout during the financial crisis.

In addition to utilities, retailers, manufacturers and the BNSF railroad, MHProNews knows Berkshire owns Clayton Homes, Vanderbilt Mortgage and Finance, 21st Mortgage Corp., and a host of other MH-related companies, including building supply. ##

(Photo credit: businessinsider-Warren Buffett)

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House Committee Seeks to Repeal Volcker Rule and CFPB

February 25th, 2016 Comments off

house_financial_services_committee__facebook creditJeb_Hensarling wikipediaAccording to, Republicans on the House Financial Services Committee have set their sights for 2016 on repealing the Volcker Rule and the perpetually funded Consumer Financial Protection Bureau (CFPB).

The Volcker Rule is named after Paul Volcker, the former Federal Reserve Chairman who was appointed by President Obama to oversee the economic recovery following the housing meltdown in 2008. Volcker said, “for banks to engage in high-risk speculation created an unacceptable level of systemic risk,” and could jeopardize the entire financial system, according to wikipedia.

Republican members of the Financial Services Committee said it reduces the liquidity of fixed income assets, and restricts the amount of capital available in the market. Further, they say the CFPB has too much power for an unelected regulatory body. The agency “has been granted a great deal of power over the financial institutions of the nation. They have the ability to cry foul on any consumer-credit product and then outlaw it completely,” says atr.

Also, the CFPB is not subject to congressional appropriations but instead is under the auspices of the Federal Reserve, and while it has been collecting personal information including credit histories, age and gender of mortgage applicants, the Government Accountability Office (GAO) tells MHProNews the “CFPB lacks written procedures…for a number of processes, including data intake and information security risk assessments.” ##

(Photo credit: wikipediacommons–Rep. Jeb Hensarling, Chairman, House Financial Services Committee)

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Baby Boomers Take it on the Chin for High Home Prices

December 4th, 2015 Comments off

baby_boomers____howstuffworksBaby Boomers are not downsizing fast enough, and by not putting their homes on the market, they are creating the inventory shortage that is driving up prices, making it tougher on would-be first-time homebuyers. This is clogging up the “whole chain of homes sales,” according to Sean Becketti, a chief economist at Freddie Mac speaking to realtytoday. Hey, blame it on the Bossa Nova.

They appear to be staying in the family home longer than previous generations,” he wrote in a new outlook report, “and the imbalance between housing demand and supply continues to boost prices.

A Federal Reserve survey of consumer finances from 2013 reveals 55 and older households control two-thirds of all home equity with a value of $8 trillion.

Patrick Simmons of Fannie Mae says there is scant evidence Boomers are leaving their “empty of nesters” homes, noting between 2010 and 2013 the number of Boomer apartment rentals remained static.

While Lawrence Yun, Chief Economist for the National Association of Realtors (NAR) points to the effects of the housing bust and recession, David Crowe, of the National Association of Home Builders (NAHB) says there’s a loopback effect of Boomers discouraged by the high prices so they sit tight.

But Simmons notes it is only temporary, as MHProNews understands. The 32 million homes now in Boomer hands will begin changing hands as they age and move on. Says Simmons, “Their actions will reverberate through the housing market.##

(Photo credit: howstuffworks–Baby Boomer couple)

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Data Confirms Dodd-Frank Regulations Impede Manufactured Home Loans

September 28th, 2015 Comments off

MH two story for sale   greg vote getty images creditThe Manufactured Housing Institute (MHI) informs MHProNews that data regarding lending at 7,000 financial institutions and covering nearly 10 million mortgage applications and six million loan originations reveals manufactured home lenders are not making HOEPA (Home Ownership and Equity Protection Act) loans because of the increased liability and burdensome rules of smaller loans, like many MH loans.

Opponents of the Preserving Access to Manufactured Housing Act have been arguing that consumers will lose the HOEPA high cost protection if the legislation passes, when in fact lenders simply are not making loans and are leaving the market and consumers are the ones hurt the most since Dodd-Frank took effect.

A report from the Federal Reserve 2014 Home Mortgage Disclosure Act (HMDA) data describes the decrease in MH loans, saying it is “a precipitous drop in the number of loans originated in 2014 at the HOEPA price threshold, whereas, for 2013 – before the new threshold rules took effect – no such discontinuity was evident. This pattern suggests that HOEPA discouraged lending above the price thresholds.

Many retirees, veterans and working families are unable to obtain financing to purchase manufactured homes; and those who may want to sell their MH see their home values decline because potential buyers cannot find appropriate financing as lenders no longer offer suitable loan products, resulting in home owners selling for cash at a substantially reduced price.

These federal government policies are destroying family net worth and harming the ability of credit-worthy families to achieve the American dream of homeownership,” says MHI.

The Preserving Access to Manufactured Housing Act (H. R. 650), which has already passed the House of Representatives, will restore financing options for MH buyers and provide core consumer protections against predatory lending.

In the Senate, the measure (S. 682) is included in a larger financial regulatory relief package that was passed by the Senate Banking Committee (S. 1484) and the Senate Appropriations Committee.

The MHI urges you to contact your members of Congress and remind them of the importance to their constituents of the Preserving Access to Manufactured Housing Act. Click here to send them an email. ##

(Photo credit: Getty Images/Greg Vote–manufactured home for sale)

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