Receiving Wide Coverage ...
Qualified Mortgage Rules: Several news outlets (American Banker included) are out with a breakdown of what is in the Consumer Financial Protection Bureau's new mortgage standards, ahead of its press conference on the subject later today. Key points of the rules include prohibitions from offering mortgages with deceptive teaser rates or ones that require no documentation from borrowers, restrictions from charging borrowers excessive upfront points and fees and a somewhat unexpected safe harbor legal protection for prime qualified mortgage loans. Notably, to meet the much-anticipated QM standard, in most cases, borrowers' total debt payments can't exceed 43% of their pretax income. No minimum down payment has been set. Strict documentation of a borrower's ability to repay a loan must be maintained if a lender is to take advantage of the safe harbor.
Industry reaction to the standards should pop up in the news cycle throughout the day as banks have more time to analyze them, but for now, we at least know CFPB director Richard Cordray is pleased with the results. "I firmly believe that if the ability-to-repay rule we are announcing today existed a decade ago, many people…could have been spared the anguish of losing their homes and having their credit destroyed," he said in remarks distributed to reporters. Wall Street Journal, Washington Post, New York Times
Morgan Stanley Layoffs: Morgan Stanley is set to cut 1,600 jobs, including some high-paying senior positions, in its institutional securities group in an effort to cut expenses. The cuts, which follow the investment bank's elimination of 4,000 jobs last year and, as some analysts predict, could precede others, have raised questions about the firm's future. "In recent years, the fixed-income department has not been able to make enough money to cover the cost [of the capital it ties up]," writes Dealbook. "Whether the company can avoid shrinking further … and revive the fixed-income trading business will have significant ripple effects in the financial world." Financial Times, Reuters
Jack Lew, Treasury Secretary: Yesterday, word got out that President Obama is expected to nominate White House Chief of Staff Jack Lew to replace Timothy Geithner as Treasury Secretary. This news wasn't all that surprising, given Lew has largely been considered the front-runner for the position for some time now. This could be one reason why, aside from the obligatory analysis of Lew's credentials, a few personal profiles and some blogs pointing out that Republicans don't really like him, the biggest general reaction, for better or for worse, has regarded his signature, which some say is more of a "doodle" that would look rather funny on our dollar bills. (New York Magazine actually has a mock up version of what this would look like.) "Should I take Lew signature fervor as just another sign we don't know much about his views on the financial industry?" tweeted American Banker Hill reporter Victoria Finkle, who was able to dig up several things Lew as treasury secretary means to banks.