April 12, 2016
Tuesday’s Regulatory & Legislative Roundup
- The S. Department of Housing & Urban Development released guidance on discrimination against tenants with criminal records, aimed at helping protect those individuals from such discrimination.
- The S. Department of Housing & Urban Development released additional fair housing tools for local governments and public housing agencies after the release of an assessment tool for states and insular areas.
- The New York City Council passed two affordable housing plans, Mandatory Inclusionary Housing and Zoning for Quality and Affordability, in hopes of preserving affordable housing by reducing barriers and obtaining resources from the private market.
April 12, 2016 | Permalink | No Comments
April 11, 2016
S&L Flexible Porfolio Lending
DepositAccounts.com quoted me in Types of Institutions in the U.S. Banking System – Savings and Loan Associations. It opens,
When you think of a savings and loan, maybe you think of the Bailey Savings & Loan from the movie It’s a Wonderful Life or remember the savings and loan crisis of the 1980s, when more than 1,000 savings and loans with over $500 billion in assets failed.
But there’s much more to the story. Savings and loan associations originally specialized in home-financing, be it a mortgage, home improvements or construction. According to Encyclopedia Britannica, Savings and loan associations originated with the building societies of Great Britain in the late 1700s. They consisted of groups of workmen who financed the building of their homes by paying fixed sums of money at regular intervals to the societies. When all members had homes, the societies disbanded. The societies began to borrow money from people who did not want to buy homes themselves and became permanent institutions. Building societies spread from Great Britain to other European countries and the United States. They are also found in parts of Central and South America. The Oxford Provident Building Association of Philadelphia, which began operating in 1831 with 40 members, was the first savings and loan association in the United States. By 1890 they had spread to all states and territories.
Today, explains, David Bakke, a financial columnist for MoneyCrashers.com, explains how S&Ls have evolved. “More recently, they have also expanded into areas such as car loans, commercial loans and even mutual fund investing. Currently, there isn’t much difference between them and other types of financial institutions.”
S&Ls are a type of thrift institution. Like all financial institutions they are bound to rules and regulations. They can have a state or federal charter. Those with a federal charter are regulated by the Office of the Comptroller of the Currency (OCC). The Office of Thrift Supervision (OTS) used to be the regulator before it was merged with the OCC in 2011.
Another big change that impacted S&Ls was the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA). It abolished the Federal Savings and Loan Insurance Corporation, which had provided deposit insurance to savings and loans since 1934. It created two insurance funds, the Savings Association Insurance Fund (SAIF) and the Bank Insurance Fund (BIF), which were both administered by the FDIC. Those two funds were merged into the Deposit Insurance Fund (DIF) in 2006. In summary, your deposits at S&Ls today are insured by the FDIC.
If you’re wondering how S&Ls work, to put it simply, the money you deposit into your savings account, is used to fund the money the S&L doles out in loans.
Savings and loans have some advantages over other types of institutions. “Many S&Ls keep many of the loans that they originate in their own portfolio instead of selling them off for securitization. This means that they often have more flexibility in their underwriting criteria than do those lenders that sell off their mortgages to Fannie, Freddie and Wall Street securitizers. This means that borrowers with atypical profiles or borrowers interested in atypical properties might be more likely to find a lender open to a nontraditional deal in the S&L sector,” says David Reiss, a professor at Brooklyn Law School, that specializes in real estate.
April 11, 2016 | Permalink | No Comments
Monday’s Adjudication Roundup
- Two foreign investors brought suit against the U.S. Citizenship and Immigration Services claiming that its rule requiring EB-5 applicants to secure their loans by certain assets is arbitrary and capricious.
- A New York judge held that U.S. Bank’s (as trustee) suit against Credit Suisse was brought within the statute of limitations. The suit sought to make Credit Suisse buy back more than $1 billion in toxic mortgage loans used to back securities by the trust.
- A New York federal judge signed off on $1.2 billion settlement from Wells Fargo for defrauding the Federal Housing Administration by submitting insurance claims for defaulted loans that didn’t meet the FHA’s standards.
April 11, 2016 | Permalink | No Comments
April 8, 2016
Tax Refunds Into Mortgage Payments
TheStreet.com quoted me in Investing Your Tax Refund Instead of Spending It Boosts Retirement Savings. It opens,
Ramping up your emergency cash fund or IRA with your tax refund is a better option than spending it on a new smartphone or vacation.
Three out of four taxpayers received a refund of $3,000 in 2015. Although many consumers look forward to this windfall each year, it is not a “cause for celebration,” said Joe Jennings, a wealth director for PNC, a Pittsburgh-based financial institution.
“If you are receiving a large refund check, it actually means that you have loaned money to the government throughout the year and the next year the government is paying you back without interest,” he said.
Adjusting your withholdings is a good strategy if your refund exceeds $1,000. Changing the number of exemptions on your W-4 means you will net more income from each paycheck.
Bankrate.com, a North Palm Beach, Fla.-based financial content company, found that 31% of Americans who receive a tax refund this year plan to save or invest it. The survey revealed that 28% will use the funds to pay down debt, 27% will spend it on necessities like food/utility bills and 6% will splurge with a shopping spree or vacation.
Some consumers view the refund as a method of forcing them to save money each year or a way to pay down existing debt such as credit card balances with high interest.
Pay Off Existing Debt
Use your refund check to pay off as much as your credit card or student loan debt as possible since the amount of interest you are paying each month adds up quickly, said Jonathan Bochese, director of resolution services for Tax Defense Network, LLC, a Jacksonville, Fla.-based tax resolution company.
“The best use for any tax refund is to use it to pay off high interest revolving debts,” he said.
With the current low interest rate environment in money market funds and CDs, paying down debt is a no-brainer.
“If you can only make 3% on your investment and your debt is at a higher rate, pay off the debt,” said Carl Sera, a portfolio manager with Covestor, the online investing marketplace and managing principal of Sera Capital Management, a registered investment advisor in Annapolis, Md. “Don’t make it a habit to receive a tax refund, because it is money you have lent the taxing authority at a zero interest rate.”
Homeowners who do not have any other debt should pay down their mortgage by making an extra payment or two instead of stashing the refund in a savings account that is only receiving minimal interest, said David Reiss, a law professor at Brooklyn Law School.
“By doing so, you are making the equivalent of a pre-tax return of the interest rate on your mortgage,” he said. “If your mortgage has a 5% interest rate and your savings account has a 0.1% interest rate that is like getting a 4.9% higher rate of interest without taking any risk at all.”
April 8, 2016 | Permalink | No Comments
Friday’s Government Reports Roundup
- The Center on Budget and Policy Priorities released an updated report looking at 13 housing, health and social services block grant programs finding that the median funding from each program’s inception has decreased by a quarter.
- The Labor Department’s most recent labor report found that 215,000 jobs were created in March.
April 8, 2016 | Permalink | No Comments
April 7, 2016
Protecting Seniors’ Home Equity
The Consumer Financial Protection Bureau has issued and Advisory and Report for Financial Institutions on Preventing Elder Financial Abuse. The Report defines elder financial exploitation as
the illegal or improper use of an older person’s funds, property or assets. Studies suggest that financial exploitation is the most common form of elder abuse and yet only a small fraction of incidents are reported. Estimates of annual losses range from $2.9 billion to $36.48 billion. Perpetrators who target older consumers include, among others, family members, caregivers, scam artists, financial advisers, home repair contractors, and fiduciaries (such as agents under power of attorney and guardians of property).
Older people are attractive targets because they may have accumulated assets or equity in their homes and usually have a regular source of income such as Social Security or a pension. In 2011, the net worth of households headed by a consumer age 65 and older was approximately $17.2 trillion, and the median net worth was $170,500. These consumers may be especially vulnerable due to isolation, cognitive decline, physical disability, health problems, and/or the recent loss of a partner, family member, or friend.
Cognitive impairment is a key factor in why older adults are targeted and why perpetrators succeed in victimizing them. Even mild cognitive impairment (MCI) can significantly impact the capacity of older people to manage their finances and to judge whether something is a scam or a fraud. Mild cognitive impairment is an intermediate stage between the expected cognitive decline of normal aging and the more serious decline of dementia. Studies indicate that 22 percent of Americans over age 70 have MCI and about one third of Americans age 85 and over have Alzheimer’s disease. (8-9, footnotes omitted)
The CFPB recommends that financial institutions consider
- training staff to recognize abuse;
- using fraud detection technologies;
- offering age-friendly services; and
- reporting suspicious activities to authorities.
These recommendations are a step in the right direction, although they offer no panacea. As the Report acknowledges, even if financial institutions report suspicious activities to government authorities, there is no guarantee that they will be acted on. But if these recommendations are publicized, they may deter some predators who think that they can act freely within the fog of their victims’ cognitive decline. And a few well-publicized prosecutions of relatives, caregivers and advisors who violate the trust that was placed in them would help to spread the message that ripping off senior citizens is no easy path to riches.
April 7, 2016 | Permalink | No Comments
Thursday’s Advocacy & Think Tank Roundup
- The Brookings Institution released a report finding that concentrated poverty has increased since the Great Recession across the United States, from 5.2 million to 14 million living in extremely poor neighborhoods.
- The National Housing Conference and Children’s HealthWatch released a report finding that homelessness and unstable housing can harm infants and young children.
April 7, 2016 | Permalink | No Comments
