News
Melvin Watt, Federal Housing Finance Agency chief, has announced a program offering more reassurances to mortgage banks that fear they could suffer unpredictable losses on the loans they sell to the government. The housing finance agency intends to relax the agreements that determine when Fannie and Freddie may require banks to buy back bad loans. Under the new program, the agencies would only demand buybacks when there is a pattern of misrepresentations and inaccuracies in the loans. The move is intended to reassure banks that have had to pay tens of billions of dollars to settle legal cases arising from the housing boom and bust and buy back bad loans sold to Fannie and Freddie.
The Boston Fed discussed new approaches to income inequality at a conference earlier this week. At the event, Federal Reserve Chair Janet Yellen expressed concern about the rapidly increasing wealth of the richest Americans at a time when living standards for most Americans remained stagnant. Eric Rosengren, the Boston Fed president, discussed its Working Cities Challenge program, which challenged officials, nonprofits and business leaders in Massachusetts cities to collaborate on three-year plans to help transform their neighborhoods. The conference focused on the systemic causes of inequality, tracing the effects of educational disparities, declining civic collaboration and racial bias.
In an op-ed, Senate Banking Committee Ranking Member Mike Crapo (R-Idaho) urged regulatory reform to reduce the burden on small banks. "Institutions are faced with a choice: shift resources around to accommodate regulatory compliance, or pass the compliance cost on to consumers. Whether the bank decides to close a local branch or stop offering free checking accounts, consumers lose in either scenario," Crapo wrote. Crapo called on regulators to hold a series of outreach meetings with community bankers around the country leading up to regulators' upcoming review of burdensome banking regulations. Crapo also urged the appointing of a director of the review process who could overrule the objections of individual agencies and resolve interagency disputes.
Rose Wageman, executive vice president and chief lending officer at First Eagle Bank, was profiled by Illinois Real Estate Journal earlier this month. Wageman noted that last year was a record year for First Eagle, with loan growth up 30%. "We do a lot of construction lending and the market is hot right now,” she said. “Projects are selling out very quickly at every price point. Lots of builders are coming back into the market. When I drive through some neighborhoods, it seems there are new projects on every block... The best part of my job is working with customers, many of whom have been clients for 20-plus years,” Wageman said.
Broadway Financial Corporation, parent of Broadway Federal Bank, f.s.b., has advanced its recapitalization effort by raising additional common equity and extending the maturity of its floating rate junior subordinated debentures. The sale raised about $9.7 million of new equity capital from investors led by an entity affiliated with Gapstow Capital Partners. The company’s remaining debt now consists solely of $5.1 million of junior subordinated debentures. “In conjunction with the improvements in the quality and performance of our loan portfolio, we are now able to devote our attention to producing profitable growth and enhancing operations for our investors,” said Broadway Financial CEO Wayne-Kent Bradshaw.
With the rise of 24-hour media coverage and unpredictable user-generated content, damage control has become increasingly difficult for companies. The public generally blames companies for their failings, but do not feel sorry for companies when they are victims -- even if they were harmed by criminals, as during the Target breach. Daniel Diermeier of the Harris School of Public Policy writes that rather than hoping for sympathy, companies should play the role of heroes who come to the rescue of the perceived victims -- their customers. Diermeier also advocates institutionalizing the function of reputation management by empowering a chief reputation officer or a corporate reputation council.
Urban Partnership Bank officials have announced that the bank has passed a lending milestone, exceeding $200 million in total loans since the bank began lending in 2012. Overall, UPB has made 243 new loans in less than three years, creating or retaining approximately 2,400 new jobs in urban communities. Over 50 percent of the loans support small businesses, nonprofits and affordable housing opportunities in Chicago’s South Side. "These milestones underscore the continuing growth of the bank’s small business and commercial real estate lending and our ongoing commitment to create economic development opportunities that build vibrant urban communities and reinvigorate peoples’ lives,” said William Farrow, president and CEO of UPB.
CDFI loan fund Partners for the Common Good seeks a chief lending and credit officer to oversee PCG’s lending and loan participation initiatives, playing a key role in cultivating institutional investor participants and new lending partners. This is a senior position which oversees a portfolio manager and team of underwriting consultants.
Community financial institutions saw a 26 percent increase in the number of hours and employees required to meet regulatory compliance demands in the third quarter of 2014, according to data released by compliance management systems provider Continuity Control. The average community bank needed to devote 653 additional hours, or the equivalent of 1.86 full-time employees, to manage the 82 new regulatory changes added in the third quarter. To meet those needs, the average institution had to spend an additional $45,264 on compliance. Industry insiders speculated the new regulations, including the Qualified Mortgage Rule, would result in a tapering of mortgage lending.
Thousands of Americans who lost their homes in the housing bust now face more unpleasant fallout as debt collectors chase them down for the money they still owe. By now, banks have usually sold the houses. But the proceeds of those sales were often not enough to cover the amount of the loan, plus penalties, legal bills and fees. Now, Fannie Mae and Freddie Mac, as well as other mortgage players, are increasingly pressing borrowers to pay. Before the housing bubble, banks often refrained from seeking deficiency judgments, which were seen as costly and bad publicity. But the housing crisis saddled lenders with more than $1 trillion of foreclosed loans, leading to unprecedented losses. Now, some large lenders want their money back.