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Senate Banking Committee leaders Tim Johnson (D-S.D.) and Mike Crapo (R-Idaho) have announced an agreement on legislation to wind down government-owned mortgage financiers Fannie Mae and Freddie Mac. Under the plan the financiers would be replaced with a new government reinsurer called the Federal Mortgage Insurance Corp. The senators also plan to replace affordable housing goals that Congress had given Fannie Mae and Freddie Mac with new housing-related funds to ensure the availability of affordable rental properties. To create space for community banks in the system, the senators said they would seek to establish a "mutual cooperative jointly owned by small lenders" to offer a cash window for eligible loans while allowing the institutions to retain mortgage servicing rights.
First Bancshares based in Hattiesburg, Miss., has agreed to buy BCB Holding in Mobile, Ala. First Bancshares will pay about $6.6 million for BCB, assuming BCB's debt and preferred stock issued to the Treasury Department. BCB, the parent of Bay Bank, has four branches and about $80 million in assets. "We are extremely excited and look forward to welcoming Bay Bank to our team," Hoppy Cole, First Bancshares' president and chief executive, said. "We believe it is a great combination of two service oriented community banks and by joining forces, we will improve our market presence in the Mobile area."
Chicago-based First American Bank surprised banking analysts with an unusally public debit card fraud announcement released after 18 days of frustration. Their investigation began Feb. 10, when the bank received 11 fraud complaints in one day from checking account cardholders. First American determined that the customers had all experienced fraud right after using their debit cards in Chicago taxis. The bank started shutting down debit cards, issuing new ones and informing customers. At the same time, the bank was trying to get MasterCard and Bank of America to shut down card acceptance in cabs, stop the breach or at least explain what it knew about the problem, but made little headway.
Kat Taylor, CEO of One PacificCoast Bank, sat down for a wide-ranging video interview with Forbes Magazine on the state of socially and environmentally-responsible CDFI banks and B-corps. One PacificCoast Bank pursues economic justice and environmental sustainability along with profitability. "We wanted banking to be based on relationships and to produce social justice and environmental well-being at the same time that it's financially sustainable so that it can persist and grow bigger, serving more people and achieving more mission."
Dealstruck is among a new group of alternative lenders offering a middle path between banks and cash advance lenders. The latest upstarts combine digital innovation and efficiency with true term loans akin to bank loans. Their rates are higher than those charged by banks but lower than those charged by short-term alternative lenders. Dealstruck uses a peer-to-peer model in which wealthy investors put up the capital for individual loans, lowering the lender's cost of capital by freeing them from raising money. The lender also offers lower rates by targeting midprime or near-prime borrowers and lending larger amounts for longer terms. Dealstruck’s interest rates range from 8 to 24 percent for loans of up to $250,000 that can stretch for three years.
A crop of new lenders is jumping into the subprime personal-loan market, wooing consumers with flawed credit. Among these firms is FreedomPlus, a lender which targets people with credit scores between 600 and 700. It offers loans up to $35,000, to be repaid over two to five years at rates ranging from 7.49% to 36%. Randy Green, a U.S. Air Force paramedic benefitted from the service. He lacked a long credit record, making it difficult to get a personal loan. So he borrowed on credit cards, paying interest rates upward of 20%. FreedomPlus stepped in with more favorable terms, lending $4,000 to be repaid over three years at an annual rate of 18%. "We see the term ["subprime"] as derogatory," said FreedomPlus President Joseph Toms said. Instead, he calls the market "emerging prime."
President Obama's latest budget contains a few surprises for bankers. First, the budget predicts that the Federal Housing Administration, which announced in September it would need a $1.7 billion bailout, will have a positive year-end capital reserve of $7.8 billion and require no more transfers from Treasury. The proposal also includes new funds for housing, with $1 billion in spending to capitalize the National Housing Trust Fund. The affordable rental and housing program has been in turmoil due to the conservatorship of Fannie Mae and Freddie Mac. This $1 billion allocation would "jumpstart" the fund. The Securities and Exchange Commission and the Commodity Futures Trading Commission also saw a bump in funding. But perhaps most controversial is the administration's call for a new "financial crisis responsibility fee" on the biggest banks to help pay down the Troubled Asset Relief Program.
The newly released White House budget for FY 2015 contains $225 million in total CDFI Fund program funding, $1 million less than FY 2014's approved funding level. Of that total, $151 million has been set aside as CDFI financial assistance funding, up from $146 million in the final FY 2014 budget. Funding for the Bank Enterprise Award was absent from the budget. In FY 2013 and 2014, that award received $18 million in total funding. The White House has also proposed a $13 million increase in Healthy Foods Financing Initiative funding to $35 million. Funding for the CDFI Fund's Native Initiatives remained steady at $15 million.
Urban Partnership Bank's plan to close a South Shore branch has left neighbors concerned about the developer's plans for the location. Neighbors said they were enthused when the developer initially proposed bringing Chipotle or Potbelly to the site, but felt let down when the developer revealed a proposal to bring in a drive-through-only McDonald’s instead. Urban Partnership plans to maintain some presence at the site with an ATM or banking kiosk. “We thought everyone would benefit if it was redeveloped and some much-needed retail was brought to that location,” said Brian Berg, a spokesman for the bank. In order to ease the transition, the bank is holding a series of training events for customers who want to learn more about online banking.
A new paper form the Mercatus Center at George Mason University finds that the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 has significantly affected small banks and their customers. In a survey distributed to 200 small banks, a large majority of respondents viewed Dodd-Frank as more burdensome than the Bank Secrecy Act. Participating banks reported compliance costs had substantially increased in the wake of new regulations as banks hired new compliance personnel or increased their reliance on outside experts. The survey also indicated the increased regulatory burdens will cause small banks to reconsider their product and service offerings, including the possibility of discontinuing residential mortgages and overdraft protection.