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Surge in risky loans leaves global economy vulnerable to rate hikes, IMF warns

“Low interest rates and surging economic growth have stoked a boom in risky lending which could turn sour as interest rates rise, potentially derailing global growth” writes Tim Wallace for telegraph.co.uk. Even low-quality borrowers are able to issue bonds at very low interest rates, the International Monetary Fund said, leading to a spike in poorly-rated bond issuance.Loans to heavily indebted or even junk-grade borrowers have also shot up – $788bn (£554bn) of so-called leveraged loans were issued last year, smashing through the pre-crisis record of $762bn in 2007. The amount…

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Markets News 

How fintech lenders give mortgage borrowers an edge

“Fintech lenders are far from the only ones who are investing in online platforms and working to digitize the mortgage process” writes Jacob Passy for marketwatch.com. This is especially true for minority mortgage applicants.And for buyers who will rely on a mortgage to finance a home purchase, an online lender could provide them with that advantage.The researchers attributed this in large part to the underwriting standards imposed by Freddie Mac FMCC, -2.07%   and Fannie Mae FNMA, -1.63%   that guide the algorithms used to automate the mortgage process.In short,…

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People have stopped paying their mobile-home loans, and it’s a warning sign for the economy

“The delinquency rate on mobile-home loans has increased by 200 basis points, or 2 percentage points, over the past year, according to research cited by UBS. The 30-day-plus delinquency level is now about 5%, the highest level since 2005” writes Matt Turner for businessinsider.com. The increase in the number of struggling mobile-home borrowers suggests that a large chunk of these people haven’t benefitted from the economic growth of the past few years, despite the low unemployment level. “We believe weakness in these two groups will drive higher credit losses at…

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Chicago can pursue part of Wells Fargo predatory lending case

“FILE PHOTO – Wells Fargo branch is seen in the Chicago suburb of Evanston, Illinois Thomson Reuters By Jonathan Stempel (Reuters) – A federal judge significantly narrowed but refused to dismiss a lawsuit accusing Wells Fargo & Co, the third-largest U.S. bank, of predatory mortgage lending targeting black and Hispanic borrowers in the Chicago area” reports businessinsider.com. Other U.S. cities have brought predatory lending cases against major banks, among which are Baltimore, Cleveland, Los Angeles and Philadelphia.Cook County accused Wells Fargo of steering minority borrowers into loans they could not…

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Markets News 

Corporate Borrowers Stressed By Weak Dollar, Expensive Hedging

“Corporate borrowers in the U.S. are facing new pressures thanks to expensive hedging costs and a weak dollar, according to Bloomberg reports on Friday (March 23)” reports pymnts.com. Data from Bank of America showed a net selloff of U.S. corporate debt last week by foreign investors, the publication noted.The latest reports suggest a reversal of a trend among investors racing to purchase U.S. corporate bonds. Reports in Financial Times last September found the sale of corporate bonds surpassed $1 trillion, its fastest pace ever, as corporates took advantage of lower…

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You may soon be able to declare bankruptcy on your student loans—here’s how

“Student loan borrowers in the United States collectively owe almost $1.5 trillion in student debt, and according to the Brookings Institute, almost 40 percent of borrowers will default on their student loans by 2023” writes Abigail Hess for cnbc.com. Currently, it is nearly impossible to have your student debt forgiven during bankruptcy — but that may soon change.In February, the Department of Education announced that it will review and potentially alter policies that make it difficult for student debt to be discharged in bankruptcy.Miranda Marquit, personal finance expert at Student…

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Bank of England warns on mortgage risk as interest rates rise

“Mortgage borrowers have to prove to lenders that they can afford their repayments even if interest rates jump by 3 percentage points” writes Tim Wallace for telegraph.co.uk. Officials have put a limit on the proportion of loans banks can give at above 4.5-times income.Now interest rates are going up, that threshold rises.Banks have been warned that British homeowners’ giant mortgages may be affordable now, but could get them into trouble as interest rates rise.The FPC warned of “some signs of rising domestic risk appetite” in the mortgage and corporate loan markets. Source: telegraph.co.uk Share…

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Wells Fargo faces sanctions over ‘forced’ auto insurance sales

“In July, Wells Fargo blamed a third-party vendor for wrongly layering insurance policies on its auto borrowers” reports nypost.com. QBE Insurance managed the bank’s force-placed insurance program at the time and was part of the settlement.Wells Fargo’s auto insurance woes stem from a policy drivers must carry when they borrow money to buy a new car.A settlement over auto insurance abuse would likely be another joint action among regulators, said people familiar with the probe. Source: nypost.com Share This:

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New Fed chair doesn’t understand why student debt can’t be discharged in bankruptcy

“More than 40 million Americans hold nearly $1.4 trillion in outstanding student loans” writes Jillian Berman for marketwatch.com. Congress has never defined ‘undue hardship’ for student debt Powell’s comments come as the Department of Education is looking for input on the way student loans are treated in bankruptcy. New York Fed chair William Dudley regularly discusses the impact of student debt on economic mobility and former Fed chair Janet Yellen said it had escalated to an “extraordinary degree.” When pressed by Schatz about whether student loans were a macro economic…

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Trump’s budget majorly impact student loans, but is it a bad thing?

“The proposed changes to the Federal Student Loan Repayment program attempt to combine the current federal repayment plans into a single, income-based student loan repayment plan” writes Kate Hardiman for washingtonexaminer.com. Under the new budget that President Trump proposed on Monday, several student loan programs are slated to take major hits.The Public Service Loan Forgiveness program, which forgives federal student loans for borrowers employed full-time in an eligible federal, state, or local public service job, is slated for elimination.The proposed plan only affects federally funded student loans, not private student…

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