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Some Don’t Like It Hot: The Bank of England has a real estate problem it is trying – sort of. In the U.K., so-called buy-to-let mortgages have become a hit commodity. The loans are used to buy homes that the owner intends to rent, and recently buy-to-let mortgages have come to account for a majority of post-crisis net new mortgage lending. While a hot real estate market alone isn’t cause for concern, what’s troubling the central bank is roughly a quarter of the U.K.’s lenders were using less demanding underwriting standards when making the loans. And that’s simply because they wanted a piece of the pie. But adding to the Bank of England’s concerns is that the market could prove volatile: Since the mortgage holders don’t live in the properties they buy, there’s a chance they could choose to sell when interest rates go up and better profits can be earned elsewhere. And that could create major issues for home prices. So what’s the central bank doing to stop this problem? Well, nothing. It said Tuesday that it won’t introduce any restrictions yet, such as a maximum loan-to-value ratio, likely because the move would affect many smaller, “challenger” banks that rely on these loans. The central bank proposed new lending standards that would include assessing whether landlords could cover mortgage payments with their rental income and determining other sources of personal income. And the central bank announced it would increase the size of the capital buffers required of banks. By March of next year, banks will need to set aside 0.5% of assets as weighted by risk, and that figure will gradually go up to 1% over time.
Wall Street Journal
Nationstar Mortgage Holdings is looking to rebrand itself as “Mr. Cooper” this summer, following other companies that made a name for themselves in servicing foreclosures. The rebranding reflects the changing market these firms face. While at the height of the recession nearly 10% of mortgages were 90 or more days past due, today that figures rests just above 3%. As a result, there’s less need for these companies' foreclosure-oriented services, making it necessary to branch into other areas. The name changes make it easier to distance themselves from their previous identities. Already, Auction.com rebranded as Ten-X, and Altisource Portfolio Solutions took over rental data company RentRange and investment website Investability. So why Nationstar’s somewhat unusual choice for a name? That relates to the company’s desire to make an emotional connection with consumers.
The monitor that oversees HSBC’s anti-money laundering settlement may have uncovered numerous potential lapses. The lapses include loans made to companies exporting miniskirts to Iran and candy to Syria, in defiance of sanctions. The bank also allegedly let a man who brought in thousands of dollars in cash in a bag open an account in Mexico. The findings could make matters difficult for the bank, which agreed to a then-record $1.9 billion settlement with the Justice Department in 2012. At that time, HSBC was being held accountable for very similar actions: not spotting laundered drug trafficking funds in Mexico and not flagging transactions related to countries under economic sanctions. The monitor’s report did not detail the lapses, but nonetheless the situation suggests that HSBC may be struggling to sort out its handling of anti-money laundering concerns. The Justice Department, per the settlement, will review HSBC’s compliance after the five-year deferred-prosecution agreement is up and determine then whether the company cleaned up its act enough to evade prosecution. If matters are especially grim, HSBC could even lose its U.S. banking license.
Oil companies have seen cash flows from banks dry up amid concerns over the lack of profitability in the energy industry. Many oil companies in Europe and the U.S. are in the midst of their biannual review of loans with banks, which will determine whether they can continue to drill and to create new projects. Most of the companies have suggested that they expect their credit lines will go down following the review. It’s not hard to see why: Some banks have gone so far as to bring in corporate restructuring experts to look over the oil explorers’ balance sheets, spending and assets. It’s a stark turnaround from when oil fetched a price over $100 per barrel and banks were hungry to serve the industry. But the net debt of publicly listed oil and gas companies has ballooned to $549 billion in 2015. Some oil companies could take drastic measures, such as a fire sale of assets, following the reviews if results are not in their favor.
Bank of America is looking to steer clear of controversy when it comes to the fierce debate over whether the U.K. should remain a member of the European Union. The company has even asked employees not to use the word “Brexit,” the nickname for the potential British departure from the EU. Overall, the bank told its managers to neither attempt to influence opinions on the matter nor to engage in campaigning. The U.K. is set to vote in June on the matter. BofA also reportedly reversed course in terms of its company-level opinion on the matter – choosing not to donate to the campaign for keeping the U.K. in the EU. Other American banks, including Goldman Sachs and JPMorgan Chase, have lobbied against a Brexit explicitly. Still, BofA may find itself in a tricky situation like those other U.S. banks if a Brexit comes to fruition, as it woul need to reevaluate its London operations.
Charlotte Observer: Bank of America’s retired CEO Hugh McColl Jr. is not afraid of wading into political waters himself and ruffling some feathers along the way. The 80-year-old former bank chief took North Carolina state lawmakers to task for its new statewide discrimination law that disallowed cities from creating protections for LGBT citizens against discrimination and requires transgender individuals to use the bathroom of their gender assigned at birth. McColl called the bill “inappropriate, unnecessary legislation that will hurt North Carolina,” the paper said. McColl’s no stranger to the concerns of the LGBT community. When chief of NationsBank, the company unveiled domestic-partner benefits, which were available with San Francisco-based BankAmerica. The two companies would later merge to form Bank of America. Other prominent businesspeople across the country, such as Apple CEO Tim Cook, and companies, such as American Airlines, have also decried the bill.