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Goldman Going Robo: Goldman Sachs Group will buy Austin, Texas-based Honest Dollar, an online retirement-savings startup. Honest Dollar, which launched in 2015 and raised $3 million in seed funding, targets small-business employees and self-employed individuals who don't have access to traditional employer-sponsored savings plans. The company offers investment portfolios with average expense ratios of 0.1% a year and charges companies a flat monthly fee of $8 to $10 an employee. It is among a growing number of start-up and traditional asset management companies responding to a federal government push to make these plans available.
The purchase, expected to close in July, represents an expansion of the online lending business Goldman launched last year. Goldman has been developing its own credit-oriented business to make small business loans, and recently invested in start-ups Digital Asset Holdings and Circle Internet Financial, which use bitcoin. The deal also comes at a time when other large financial firms have acquired online providers of various products, including BlackRock’s acquisition last year of FutureAdvisor, which provides automated investment advice, and JPMorgan Chase & Co.’s announced partnership with OnDeck Capital, which makes online loans to small businesses.
Wall Street Journal
In a move reminiscent of pre-financial crisis days, JPMorgan Chase & Co. is preparing a deal entirely backed by bank-owned mortgages, the first of its kind since the crash. The New York bank looks to sell securities that would pass along most of the credit risk on $1.9 billion of mortgages. The deal is an attempt to resurrect a debt market the government, through Fannie Mae and Freddie Mac, has largely taken over since the crisis. There are more than 6,000 mortgages, both new and refinances, in the mix, the majority of which conform to the underwriting standards of the government-sponsored Fannie and Freddie, and most were made to individuals with high credit scores. JPMorgan is expected to price the deal in the next two weeks.
Concerns are rising over the number of delinquencies in subprime U.S. car loans, which reached their highest levels in nearly two decades, according to a Fitch Ratings report. The rate of these poor-quality loans overdue by 60 days or more increased to 5.16% in February, the highest rate of default since October 1996, when they were at 5.96%. Sharp origination growth, increased competition and weaker underwriting standards during the past three years “have all contributed to the weaker performance of the past year,” said the Fitch Ratings report. While Fitch expects both subprime and prime car loans will improve in performance this spring, due to tax refunds, these seasonal benefits will be tempered by weakening loan quality and a projected softening in the wholesale car market.
New York Times
Banks, credit unions and new alternative lenders are offering programs with more options for home buyers to lower downpayments. Borrowers often can put down 10% and avoid the added cost of mortgage insurance, generally ranging from 0.3% to more than 1% of the annual loan amount. Usually home buyers pay the mortgage insurance unless they offer a 20% downpayment. According to Inside Mortgage Finance, last year about 65% of all home buyers, or 1.9 million borrowers, put down less than 20% on a new home.
Bank of America, for example, has a program, in partnership with Freddie Mac and a group called Self-Help, that avoids insurance altogether and permits downpayments as low as 3%. Among of its restrictive factors: families in the New York area generally cannot earn more than $80,700, and the mortgage amount cannot exceed $417,000. At Kansas-based CommunityAmerica Credit Union, borrowers have several options to avoid mortgage insurance, including one which requires 10% down, or a plan where the initial mortgage is for 80% of the purchase price and they take a second loan for up to 15%. But generally borrowers under these program pay higher interest rates.