Wall Street Journal
The Federal Housing Administration announced Monday its capital reserve ratio rose to 2.07% at the end of September, the first time it had climbed above 2% since the financial crisis. HUD Secretary Julián Castro hailed the FHA's return to financial health as a contributing factor to the current strength of the housing market. FHA's reserve ratio tanked during the financial crisis, as it provided financial backing for mortgages when other lenders wouldn't or couldn't. FHA had to get a $1.7 billion federal bailout as a result.
Coverage by American Banker and National Mortgage News looked at the FHA's potential plans for a cut to mortgage insurance premiums; Ed Golding, the FHA's deputy principal assistant secretary, on Monday said there are no such plans for the time being. If the FHA continues with that stance, it could further anger those in the industry, including lenders and real estate agents. The FHA needs to consider reducing premiums and taking other steps to make it easier for potential homebuyers to get a mortgage, said Brooke Anderson-Tompkins, chairwoman of the Community Mortgage Lenders of America.
David Stevens, president of the Mortgage Bankers Association, said it was too soon to make those kinds of moves, warning the reserve ratio can experience swings in either direction and one example does not make a trend.
The apparent heating-up of the bank M&A scene may continue, as many directors of small banks believe their institutions need to get bigger to survive.
More than 60% of directors and officers at banks believe their institutions need to hold at least $1 billion of assets to be competitive, according to a trade publication. That's up from 36% in 2012. The smaller the bank, the more prevalent is the mindset. More than 90% of officers and directors at banks with between $500 million and $1 billion of assets think they need to have at least $1 billion of assets to survive.
The financial services industry would be wise to use the utility industry as a guide for how to set up its infrastructure network, according to the chief information officer of the Federal Reserve. Utilities and financial services companies are similar in their infrastructure characteristics, but utilities may be ahead of the financial industry in terms of implementing risk standards, Margaret "Lyn" McDermid said at the Clearing House's yearly conference on emerging technologies and risk. Banks should therefore look at how utilities have enacted standards for building power plants.
The financial industry needs to have a similar level of resiliency as utilities, when it comes to building an adaptable, recoverable network as it constructs a financial grid. McDermid was previously CIO at the utility Dominion Resources.
Philip Vasan is leaving his post as the head of U.S. private banking at Credit Suisse. Vasan's move comes as Credit Suisse has worked out an arrangement for its private bankers to move over to Wells Fargo.
Here's another warning to the Fed, if it intends to keep interest rates near zero: The looming disaster for retirement will be made even worse if you postpone a rate hike yet again. A staggeringly high number of Americans near retirement have been forced to put their retirement savings in stocks, as they chase yield in an attempt to not outlive their retirement nest eggs, S&P Investment Advisory Services chairman Michael Thompson wrote in an op-ed. Typically, those near retirement have stashed their savings in safer Treasuries and corporate bonds.
The safe-route strategy has been rendered impossible, however, as rates hovering near zero has prevented those near retirement from generating adequate returns. But the Fed has created a situation that's going to be nearly impossible to rectify. Because when it does get around to raising rates, those near retirement will pile back into Treasuries. The Fed, at that point, will be unable to dictate the shape of the yield curve. The supply-demand imbalance will drive up prices and push down yields faster than the Fed can raise them.
New York Times
The war between banks and retailers over the use of PINs or signatures in EMV-card transactions isn't about improving security to fight fraud. It's about interchange fees. Because of "exorbitant" swipe fees and other liability costs, merchants will bear "more than 100% of the cost of fraud," Jared Scheeler, an owner of a Dickinson, N.D., convenience store, testified in front of the House Small Business Committee last month. (Scheeler apparently didn't explain the math behind his calculation of the total being more than 100%.)
Merchants paid $61 billion in interchange fees last year, compared to $30 billion in fraud losses, according to the Nilson Report.
The paper analyzes the recent performance of Manhattan's district attorney, Cyrus Vance, in light of two recent high-profile failures, the prosecutions of law firm Dewey & LeBoeuf (a case that Vance could still win) and the Chinatown thrift Abacus Federal Savings Bank. Vance's mortgage-fraud case against Abacus was "troubled from the start," the Times says. A New York state court jury acquitted the bank of all charges this summer. Vance had indicted Abacus' founder, Thomas Sung, on charges of mortgage fraud and grand larceny against Fannie Mae.
The main lawyer for Abacus accused Vance of caring "more about the press conference than the proof." Vance described his setbacks in the cases as bad timing or the result of judicial rulings that conflict with the law.
Lenders in Baltimore in 2013 made twice as many mortgage loans to whites than to blacks, according to a report by the National Community Reinvestment Coalition. Bankers blame the government for demanding stricter terms on the mortgages they make, which reduces the number of borrowers that qualify.
Education Management Corp., which runs the Art Institute of Philadelphia and other schools, will forgive about 80,000 student loans as part of an agreement with state prosecutors.