HSBC's Asian Hiring Probed; Courts Hear Home Trickery Cases

Receiving Wide Coverage ...

Asian Hiring Probe: HSBC is the latest bank to be probed over potential conflicts in hiring candidates referred by or related to high-ranking government officials in Asia. The Securities and Exchange Commission is investigating HSBC and "multiple financial institutions" for their hiring practices, HSBC said during its earnings report. JPMorgan Chase was investigated, starting in 2013, for hiring the children of Chinese officials, in exchange for allegedly receiving preferential treatment on deals.

The SEC inquiries submitted to HSBC were very recent and HSBC is cooperating, CEO Stuart Gulliver said Monday. Also revealed in HSBC's earnings release, an independent monitor has told the bank that it has "significant concerns" about HSBC's effort to install a program for financial-crimes compliance, namely the pace of its progress. HSBC agreed in 2012 to implement such a program as part of a deferred prosecution agreement for alleged money laundering for drug cartels and transferring funds for Iran.

As for its fourth-quarter earnings, HSBC reported a $1.33 billion net loss because of lower revenue in Asia, and higher provisions to cover nonperforming energy loans in the U.S. and in other regions.

Wall Street Journal

Bank of America will introduce a new mortgage product Monday that requires a downpayment as low as 3%, and does not require Federal Housing Administration private mortgage insurance. The mortgage would be cheaper than FHA mortgages; oh by the way, the FHA has pounded B of A (and other lenders) with billions of dollars of fines in recent years for what banks have called minor errors.

"We think there are still a lot of uncertainties out there in working with FHA," said Steve Boland, a B of A managing director.

Who said banks' don't carry a grudge?

B of A developed the new mortgage product in partnership with Freddie Mac and Self-Help Ventures Fund, a Durham, N.C., nonprofit that's also a backer of Self-Help Federal Credit Union. Fannie introduced a low-down-payment mortgage product in December 2014, but the GSE acknowledged last week that the product has been a disappointment, according to American Banker's sister publication, National Mortgage News.

Financial Times

Higher dividends this year or share buybacks from the largest banks may be a pipe dream. This year's round of stress tests will likely produce higher projected losses, based on the new models the Fed will use.

Deutsche Bank analyst Matt O'Connor believes banks' payout ratios will be restrained this year and may be further reduced, based on market troubles. It's all based on fear that the largest banks, despite massive new piles of capital, still aren't strong enough to withstand a global financial meltdown.

A slowing economy can take a big bite out of the earnings of subprime lenders. The stocks of OneMain Holdings and Santander Consumer USA are down 52% and 43%, respectively, over the past three months. Both have been hurt by higher rates of charge-offs and loan delinquencies.

New York Times

Court cases are piling up from homeowners who were tricked into buying homes they couldn't afford in the first place, and who now can't afford to make needed repairs, according to a review of court records by the New York Times. Harbour Portfolio Advisors in Dallas is one of several companies that bought vacant or decrepit homes during the financial crisis, then resold them to subprime borrowers with high-interest-rate financing. Harbour buys many of its properties from Fannie Mae.

Many of the homes that Harbour bought in Detroit and Akron, Ohio, and then resold, have been condemned or demolished. Harbour says it's not responsible for renovating the homes it sells under contract for deeds, and its business model is to buy "unproductive residential properties" and then resell them to buyers who can make them productive again.

Washington Post

Why has the effort to unwind Fannie Mae and Freddie Mac stalled? One good explanation is $245.8 billion. That's the amount the two government-sponsored enterprises have sent the U.S. Treasury since their federal bailout; it's far more than the $187 billion cost of the bailout itself.

Which helps explain why the effort to kill Fannie and Freddie has gone nowhere, even in light of regulators' warnings, most recently by Mel Watt, that it's getting riskier to keep them under government conservatorship. Watt, the director of the Federal Housing Finance Agency, didn't call for recapitalizing the GSEs, but said something must be done before they run out of capital.

There's no need to worry about the U.S. Marshal's office making an unsolicited visit to your residence, placing you in cuffs and hauling you down to the local FBI office. Houston resident Paul Aker was arrested not for failing to pay his $1,500 student loan, but for failing to appear in court.