Top-20 U.S. mortgage lender Bank of America (BofA) reported declining mortgage and home equity production in the third quarter of 2023, compared to the previous quarter. And more declines are yet to come if regulators’ proposed capital rules are applied to banks, according to BofA’s executives.
On July 27, the Federal Reserve, Federal Depository Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) released the proposed changes for the Basel III rule (called the Basel endgame). It significantly increases capital requirements for banks.
“If we add to our capital, it will reduce our lending capacity to American businesses and consumers, and those trade-offs are being debated,” Brian Moynihan, chair and CEO of BofA, said in a call with analysts on Tuesday morning.
“But as far as the rules are concerned, there are many parts of the rules that our industry doesn’t agree with because of double counts or increased trading and market risk. And we’re talking to those proposals and working, and we’re hopeful they’ll change,” Moynihan added.
According to Moynihan, BofA holds the required capital today. “And, of course, we’d have to build a buffer to that throughout the implementation period.”
“Once we understand the final rules, we’ll, of course, have a chance to optimize our balance sheet and appropriately price assets to improve the return on tangible common equity.”
Regarding the mortgage space, Alastair Borthwick, BofA’s chief financial officer, said, “It is a little puzzling that you see some of the RWA [risk-weighted assets] increases for mortgage loans.”
“Now what would happen is we’d have to adjust the pricing, and it would become more expensive,” Borthwick said.
Mortgage, home equity volumes
BofA’s mortgage originations totaled $5.6 billion during the third quarter of 2023, a 5.8% decline from $5.9 billion posted in the second quarter and a 35.8% drop from the $8.7 billion originated in the third quarter of 2022.
BofA’s sequential production decline follows that of Wells Fargo, which also posted lower mortgage volumes during the third quarter. Meanwhile, JPMorgan Chase slowly improved its production in the period, showing a different path.
BofA also originated $2.42 billion in home equity loans in the third quarter, which was flat compared to last year but lower than the $2.54 billion volume in the previous quarter.
Bank of America had $229 billion in outstanding residential mortgages on its books through Sept. 30, up from $228.7 billion in Q2 2023 and $228.4 billion in the third quarter of 2022.
The home equity portfolio was $25.6 billion at the end of the third quarter, down from $25.9 billion from the previous quarter — and a decline from $27.3 billion a year prior.
Bank of America’s total mortgage-backed securities reached a $32.1 billion fair value as of Sept. 30, compared to $33 billion as of June 30, 2023.
Overall, the bank posted a net income of $7.8 billion from July to September, increasing 5.3% quarter over quarter and 10% year over year.
Deposits at Bank of America were $1.88 trillion in the third quarter of 2023, flat compared to the previous quarter. The consumer banking division posted a net income of $2.86 billion, up $11 billion compared to the prior quarter, according to its filing with the Securities and Exchange Commission (SEC).
DUBLIN–(BUSINESS WIRE)–The “United States Home Loan Market Competition Forecast & Opportunities, 2028” report has been added to ResearchAndMarkets.com’s offering.
The United States home loan market is expected to experience significant growth to 2028
The United States home loan market is undergoing a transformation, driven by several key factors that are reshaping the lending landscape. These factors include a growing pool of potential homebuyers, the automation of loan processes, and the pervasive trend of digitalization.
Home loans, typically extended by financial institutions, serve as the financial backbone for individuals aspiring to acquire residential properties. These properties can range from completed, move-in-ready homes to those still in construction phases. Banks and non-banking financial companies (NBFCs) both offer home loans, often determining interest rates based on the borrower’s creditworthiness. These loans commonly come with lengthy repayment periods of up to 30 years, structured through equated monthly installments (EMIs).
In recent years, the demand for mortgages in the United States has experienced a notable upswing, primarily catalyzed by heightened home purchasing activities during the COVID-19 pandemic. Consequently, this surge has generated substantial demand within the purchase market, attracting banks, nonbank lenders, and investors operating in the mortgage sector.
Furthermore, despite the economic repercussions of the pandemic, the desire for homeownership in the United States remains unwavering. The broader economic expansion and the growth in the number of households have contributed to the increasing rate of homeownership.
Notably, 2020 witnessed a 2.6% annual uptick in homeownership, welcoming over 2.1 million new homeowners into the fold. Geographically, the Midwest and South regions of the United States exhibit higher homeownership rates compared to the Northeast and West. With this surge in homeownership, a concurrent rise in the demand for home loans is anticipated.
Automation has emerged as a pivotal force in streamlining the home loan process, substantially elevating the overall customer experience. The mortgage industry has eagerly embraced technology to expedite and simplify mortgage applications, thereby widening access to home financing and home-buying services.
A cornerstone of this technological revolution is digitalization, with the U.S. digital payments sector expanding at a commendable rate of 23%. These technological strides are designed to expedite mortgage applications, curtail expenses, and enhance the overall client journey. Consequently, the escalating wave of digitalization is poised to further propel the United States home loan market.
The ascendancy of nonbank lenders has introduced a seismic shift in the market landscape. Nonbank lenders have emerged as a credible alternative, especially for borrowers seeking refinancing options. Over the past decade, nonbank mortgage lenders have not only gained market share but have also eclipsed traditional banks in prominence.
In 2020, seven out of the top ten mortgage lenders in the United States hailed from the nonbank sector. These lenders have strategically invested in diverse technologies to fortify their operations, spanning from platform modernization to automated compliance solutions. Consequently, the continued ascent of nonbank lenders is set to stoke the growth engine of the home loan market.
In summation, the United States home loan market stands at the cusp of substantial growth, underpinned by a confluence of factors, including surging demand, automation enhancements, and the burgeoning influence of nonbank lenders.
Market Dynamics
Market Trends & Developments
Increasing number of fintech companies
Rising focus towards loan sector by Bank and NBFCs
Increasing construction activities
Rapid urbanization
Attractive marketing strategies
Drivers
Increasing home ownership
Automation in loan process
Growth of nonbank lenders
Challenges
Security concerns
Surging competition
Competitive Landscape
Bank of America Corporation
JPMorgan Chase & Co.
Citigroup, Inc.
Wells Fargo & Co.
U.S. Bancorp
PNC Financial Services Group, Inc.
American Express Company
Ally Financial Inc.
Truist Financial Corporation
Goldman Sachs & Co. LLC.
Voice of Customer Analysis
Sample Size Determination
Respondent Demographics
By Gender
By Age
By Occupation
Brand Awareness
Factors Influencing Loan Availing Decision
Sources of Information
Challenges Faced
Impact of COVID-19 on United States Home Loan Market
Impact Assessment Model
Key Segments Impacted
Key Regions Impacted
Report Scope
United States Home Loan Market, by Type:
Home Purchase
Refinance
Home Improvement
Construction
Others
United States Home Loan Market, by End User:
Employed Individuals
Professionals
Students
Entrepreneurs
Others
United States Home Loan Market, by Tenure Period:
Less than 5 years
6-10 years
11-24 years
25-30 years
United States Home Loan Market, by Region:
South
Midwest
Northeast
West
For more information about this report visit https://www.researchandmarkets.com/r/culceq
About ResearchAndMarkets.com
ResearchAndMarkets.com is the world’s leading source for international market research reports and market data. We provide you with the latest data on international and regional markets, key industries, the top companies, new products and the latest trends.
Mortgage credit quality remained “relatively steady” over the past six months, with 94 percent of loans held by nine key national banks current and performing, according to the OCC Mortgage Metrics Report released today.
The comprehensive data set includes more than 23 million first mortgage loans valued at $3.8 trillion, or approximately 40 percent of all home loans outstanding.
Per the report, the 30-59 day delinquency rate fell to 2.37 percent as of the end of March from 2.61 percent in October, while 90+ day mortgage lates increased to 0.98 percent from 0.82 percent.
Along with late mortgage payments, there were a total of 283,988 foreclosures in process as of the end of March, representing 1.23 percent of the total portfolio, up from 0.90 percent, or 205,248 total in October.
Nearly 10 percent (9.64%) of subprime mortgages were deemed seriously delinquent (60+ day lates or bankrupt borrowers 30+ days late), compared to 4.38 percent of Alt-A mortgages and just 0.74 percent of prime loans.
The delinquency rate for subprime loans actually fell three basis points from last October, while it increased 30 bps for Alt-A loans and 14 bps for prime loans.
Unsurprisingly, while subprime mortgages only accounted for less than nine percent of the total loan portfolio, they were involved in 43 of all loss mitigation efforts as of the end of March.
They also accounted for nearly 33 percent of total foreclosures in process, while prime loans representing 62 percent of the portfolio accounted for just 30 percent of foreclosures in process.
With regard to loss mitigation, prepayment plans outnumbered loan modifications by four to one, but increased at a faster rate in the past six months.
Alt-A mortgages made up about nine percent of the total loan portfolio and accounted for 19 percent of all loss mit action.
The report includes data from mortgage lenders like Bank of America, Citibank, First Horizon, HSBC, JPMorgan Chase, National City, USBank, Wachovia, and Wells Fargo.
Check out the whole report here, it’s full of more data.
DUBLIN, Oct. 4, 2023 /PRNewswire/ — The “United States Home Loan Market Competition Forecast & Opportunities, 2028” report has been added to ResearchAndMarkets.com’s offering.
The United States home loan market is expected to experience significant growth to 2028
The United States home loan market is undergoing a transformation, driven by several key factors that are reshaping the lending landscape. These factors include a growing pool of potential homebuyers, the automation of loan processes, and the pervasive trend of digitalization.
Home loans, typically extended by financial institutions, serve as the financial backbone for individuals aspiring to acquire residential properties. These properties can range from completed, move-in-ready homes to those still in construction phases. Banks and non-banking financial companies (NBFCs) both offer home loans, often determining interest rates based on the borrower’s creditworthiness. These loans commonly come with lengthy repayment periods of up to 30 years, structured through equated monthly installments (EMIs).
In recent years, the demand for mortgages in the United States has experienced a notable upswing, primarily catalyzed by heightened home purchasing activities during the COVID-19 pandemic. Consequently, this surge has generated substantial demand within the purchase market, attracting banks, nonbank lenders, and investors operating in the mortgage sector.
Furthermore, despite the economic repercussions of the pandemic, the desire for homeownership in the United States remains unwavering. The broader economic expansion and the growth in the number of households have contributed to the increasing rate of homeownership.
Notably, 2020 witnessed a 2.6% annual uptick in homeownership, welcoming over 2.1 million new homeowners into the fold. Geographically, the Midwest and South regions of the United States exhibit higher homeownership rates compared to the Northeast and West. With this surge in homeownership, a concurrent rise in the demand for home loans is anticipated.
Automation has emerged as a pivotal force in streamlining the home loan process, substantially elevating the overall customer experience. The mortgage industry has eagerly embraced technology to expedite and simplify mortgage applications, thereby widening access to home financing and home-buying services.
A cornerstone of this technological revolution is digitalization, with the U.S. digital payments sector expanding at a commendable rate of 23%. These technological strides are designed to expedite mortgage applications, curtail expenses, and enhance the overall client journey. Consequently, the escalating wave of digitalization is poised to further propel the United States home loan market.
The ascendancy of nonbank lenders has introduced a seismic shift in the market landscape. Nonbank lenders have emerged as a credible alternative, especially for borrowers seeking refinancing options. Over the past decade, nonbank mortgage lenders have not only gained market share but have also eclipsed traditional banks in prominence.
In 2020, seven out of the top ten mortgage lenders in the United States hailed from the nonbank sector. These lenders have strategically invested in diverse technologies to fortify their operations, spanning from platform modernization to automated compliance solutions. Consequently, the continued ascent of nonbank lenders is set to stoke the growth engine of the home loan market.
In summation, the United States home loan market stands at the cusp of substantial growth, underpinned by a confluence of factors, including surging demand, automation enhancements, and the burgeoning influence of nonbank lenders.
Market Dynamics
Market Trends & Developments
Increasing number of fintech companies
Rising focus towards loan sector by Bank and NBFCs
Increasing construction activities
Rapid urbanization
Attractive marketing strategies
Drivers
Increasing home ownership
Automation in loan process
Growth of nonbank lenders
Challenges
Security concerns
Surging competition
Competitive Landscape
Bank of America Corporation
JPMorgan Chase & Co.
Citigroup, Inc.
Wells Fargo & Co.
U.S. Bancorp
PNC Financial Services Group, Inc.
American Express Company
Ally Financial Inc.
Truist Financial Corporation
Goldman Sachs & Co. LLC.
Voice of Customer Analysis
Sample Size Determination
Respondent Demographics
By Gender
By Age
By Occupation
Brand Awareness
Factors Influencing Loan Availing Decision
Sources of Information
Challenges Faced
Impact of COVID-19 on United States Home Loan Market
Impact Assessment Model
Key Segments Impacted
Key Regions Impacted
Report Scope
United States Home Loan Market, by Type:
Home Purchase
Refinance
Home Improvement
Construction
Others
United States Home Loan Market, by End User:
Employed Individuals
Professionals
Students
Entrepreneurs
Others
United States Home Loan Market, by Tenure Period:
Less than 5 years
6-10 years
11-24 years
25-30 years
United States Home Loan Market, by Region:
South
Midwest
Northeast
West
For more information about this report visit https://www.researchandmarkets.com/r/efxqax
About ResearchAndMarkets.com ResearchAndMarkets.com is the world’s leading source for international market research reports and market data. We provide you with the latest data on international and regional markets, key industries, the top companies, new products and the latest trends.
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The so-called “Independent Foreclosure Review” was tweaked Monday to allow borrowers to receive compensation for loan servicing wrongdoings in a more expeditious manner.
As a result of the latest agreement between the Treasury, OCC, and 10 mortgage servicing companies, the Independent Foreclosure Review will be replaced with a “broader framework.”
The new system will ensure that affected borrowers receive compensation regardless of whether they filed a “request for review form,” which was a key component of the original process.
In fact, borrowers don’t need to take any additional action to be eligible for compensation, and should expect to be contacted by a payment agent by the end of March to discuss payment details.
Additionally, receiving compensation doesn’t waive any legal claims borrowers may have against their loan servicers. And each servicer’s internal complaint process will still remain available to affected borrowers.
The following servicers are part of the Independent Foreclosure Review 2.0:
– Aurora – Bank of America – Citibank – JPMorgan Chase – MetLife Bank – PNC – Sovereign – SunTrust – U.S. Bank – Wells Fargo
They have agreed to provide $3.3 billion in direct payments to eligible borrowers, and another $5.2 billion via loan modifications and forgiveness of deficiency judgments.
Of course, the amount of compensation is expected to vary widely, from as little as a few hundred dollars to as much as $125,000, depending on the magnitude of the “error.”
Eligible borrowers include those with loans serviced by the aforementioned companies whose primary homes were in foreclosure in 2009 and 2010.
The original agreement included several more companies, including Countrywide, EMC, HSBC, IndyMac, National City, Wachovia, and Washington Mutual.
As you can see, many of these names are now obsolete, pushed to the brink thanks to high-risk lending that led up to the now infamous mortgage crisis.
Other Loan Servicers May Soon Join
The OCC and Treasury said it is continuing to work with other major servicers involved in shoddy foreclosure practices, such as robosigning, to reach similar agreements.
Under the previous Independent Foreclosure Review, which was announced all the way back in 2011, borrowers had to submit a complaint to their lender or loan servicer on a case-by-case basis.
A review would then be conducted by an independent consultant to determine any financial injury related to foreclosure proceedings.
Examples of financial injury include dual tracking, where servicers continued to pursue foreclosure even while borrowers attempted to modify their loans, or where fees and/or mortgage balances were higher than what was actually owed.
In hindsight, it wasn’t the most effective way of serving the millions who experienced foreclosure during those years, and clearly wasn’t the most cost efficient method.
Bank of America Cleans Up Countrywide Mess
Could 2013 be the year of the great mortgage cleanup? So far it looks that way.
Bank of America also announced yesterday an agreement with Fannie Mae to resolve any issues with bad loans it sold to the government-sponsored entity.
The Charlotte-based bank said it would make a cash payment of $3.6 billion to Fannie while also repurchasing $6.75 billion in residential mortgage loans sold to the company.
The agreement covers pretty much all loans originated and sold to Fannie from 2000 to 2008, including those from now-defunct Countrywide.
Bank of America will also make a cash payment to Fannie to settle future claims for compensation arising out of past foreclosure delays.
And the bank announced the sale of servicing rights of roughly two million mortgages with an aggregate unpaid balance of $306 billion to Nationstar and Walter Investment Management Corp.
The sale includes 232,000 first mortgages classified as 60+ days delinquent.
Bank of America said it held 775,000 such loans as of December 31, 2012, down from 936,000 loans at September 30, 2012.
Once these sales are complete, those numbers will fall dramatically and the Bank may finally be able to look forward.
Since ICE announced plans to acquire Black Knight in May 2022, the firm went through a bumpy 16-month-period facing antitrust concerns from the Federal Trade Commission(FTC), lawmakers and trade groups.
FTC sued ICE earlier this year alleging the two top mortgage technology providers would drive up costs, reduce innovation and limit lenders’ choices for mortgage origination tools.
In an effort to save the merger deal, the two companies agreed to sell Black Knight’s Empower loan origination system and product and pricing engine (PPE) unit Optimal Blue to a subsidiary of Canada’s Constellation Software.
Under the agreement between the FTC and the two mortgage tech providers, ICE completed the sale of Black Knight’s Optimal Blue and Empower in September.
ICE affirmed that Optimal Blue is still available to its customers, who are the largest consumers of Optimal Blue Solutions.
In parallel, ICE plans to develop its own PPE to provide additional options to lenders and partners, ultimately lowering the cost for the consumer.
“We plan to maintain and invest in our own product and pricing engine, further strengthening the mortgage ecosystem by providing additional options and greater efficiencies to lenders, servicers and partners. Ultimately, lowering acquisition costs for lenders and enabling those savings to be passed to the consumer,” Jackson said.
With Black Knight part of ICE now, executives expect the integration of data and technology across the mortgage workflow to enable greater automation, in turn reducing friction and lower cost to originate a home mortgage for every party involved.
“By combining data on the consumer’s payment history, and loan balance with our rich analytical solutions, such as our valuations and AllRegs – which is an industry leading product availability and eligibility database – our servicing customers will be able to identify opportunities to proactively offer more efficient loan solutions to help lower costs and meet consumers needs,” Jackson noted.
Other opportunities ICE acknowledged include developing innovative analytics that help lenders connect with potential buyers in historically underserved markets and identify minority bias in the home valuation process.
Financials
In terms of financials, ICE expects net revenue synergies of up to $125 million by 2028 largely through cross-sell opportunities across the platform and ICE’s expanded customer base.
ICE executives said they’ve identified north of $300 million worth of opportunities for the company to go after which includes cross-selling data and document automation platform to the entire Black Knight’s MSP mortgage servicing system.
“There’s a little north of 100 [MSP clients] and we believe that 40 of those are not on Encompass today. That represents roughly 15 to 20% market share of annual loan volume that we think we’re going to have a great opportunity,” Jackson said.
For example, JPMorgan Chase, one of the largest servicing customers of Black Knight, is implementing ICE’s data and document automation platform to both its retail and correspondent channels, replacing its in-house legacy infrastructure, executives noted.
ICE expects Backnight to contribute approximately $85 million to $90 million of net revenues, and roughly 50 million to $55 million of adjusted operating expenses to Q3 results.
Full year 2023 ICE Mortgage Technology (IMT) revenues including the legacy IMT business and pro forma for Black Knight are expected to be between $2.05 billion and $2.07 billion.
“With Black Knight, ICE is well positioned to improve the execution and subsequent settlement and servicing of US home mortgages, the major credit exposure for most US consumers,” said Jeff Sprecher, chair and CEO of ICE.
Ready to buy a home? Whether you’ve already found your dream home or you’re just starting the process, one thing’s for sure—you’ll probably need a home loan. But before you start looking into mortgages, you might need to give your credit score a little evaluation. You need a decent score to get a decent mortgage, but what’s the minimum credit score for a home loan?
The short answer? It depends on a lot of things. If you’re ready to start looking for home loans, but aren’t sure if your score is up to par, we’re to help. Keep reading to learn if your credit score is mortgage-ready.
A Quick Look at Minimum Credit Scores for Mortgages
Mortgages are complex forms of financing, so a lot of factors come into play when you’re applying. Find out more about the minimum credit requirements for these types of loans—and why your credit score even matters—below.
Why Does Your Credit Score Matter for a Mortgage Loan?
Your credit history tells a financial story about you. It lets mortgage lenders better understand whether you’re reliable, how likely you are to pay off your debt and whether your debt-to-income ratio is low enough to allow you to cover your current debt obligations in addition to a new mortgage payment.
If you have bad credit, you may look like a risky investment to potential lenders and you’ll be less likely to get the approval. Or, if you do get approved, you may be required to pay higher interest rates than individuals with a better credit score might pay.
Luckily, you can still get approved for a home loan even with a lower-than-average score. That’s because your credit score is critical, but it’s not the only factor lenders consider. Plus, different types of loans come with different requirements, so you don’t always need a good credit score to qualify.
Get matched with a personal
loan that’s right for you today.
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more
What Credit Score Do You Need to Get a Mortgage?
As stated above, the required credit score really depends on what type of loan you’re looking at. Let’s break it down a bit, defining these types of loans, so you can understand more about mortgages and some of your options.
Credit Requirements for Conventional Mortgage Loans
Conventional mortgage loans are not backed by a government entity. They’re offered via private lenders, including banks and mortgage companies. Typically, you need good credit to qualify for a conventional mortgage. For this purpose, that’s considered to be 640 or higher.
However, if you fall slightly short of that mark, you might still be able to find a lender if your payment history, debt-to-income ratio and other factors are positive. Ultimately, lenders need to know that you’re likely to pay your mortgage as agreed and that you also have the resources to do so.
Credit Requirements for Government-Backed Mortgage Loans
Credit requirements for government-backed loans get a bit more complex. Since these loans are all or partially backed by federal government agencies, lenders may approve you even if you don’t have good credit. However, that doesn’t mean everyone gets approved. Here are some basics about eligibility and minimum credit score requirements for various government-backed mortgage types.
Credit Score Requirements for USDA Loans
These loans are partially backed by the federal government and are available to individuals buying qualifying suburban or rural homes. USDA loan lenders must conduct a thorough review of an applicant’s credit profile. Here are just some of the rules they must apply:
If three credit scores are present, they take the middle one. If two credit scores are present, they take the lowest one. If only one or no credit score is present, the lender must do a credit analysis and obtain alternate credit verification.
The credit score must be based on at least two trade lines (open accounts) that were active at least 12 of the past 24 months. In short, if you don’t have much credit or you haven’t dealt in credit for years, you may have a challenge getting approved.
There must be no significant delinquencies or collection accounts.
Credit Score Requirements for VA Loans
VA loans are available to eligible veterans and their families and are backed by the Department of Veterans Affairs. They don’t require a down payment or private mortgage insurance. The VA does not establish minimum credit score requirements and requires lenders to conduct a comprehensive credit analysis.
VA loans don’t have maximum debt ratios, but the lender has to provide compensating factors that prove they can pay the mortgage if their debt-to-income ratio is more than 41%. Veterans who borrow without a down payment may be limited to mortgages of $453,100 or less.
Credit Score Requirements for FHA Loans
FHA loans are backed by the Federal Housing Administration and are seen as a lower risk by lenders because they’re government-backed loans. This option is a common choice for anyone who qualifies as a first-time home buyer because of its relatively low minimum credit score requirements.
Credit score requirements for FHA loans are:
580 or higher for maximum financing—this means you wouldn’t need a down payment or could have a very small down payment, depending on other factors.
500 or higher for partial financing—this means you’d need at least some down payment orwould need to buy a house for less than it was worth.
You can’t get approved for an FHA loan with a credit score less than 500. Other factors do impact approval, such as your payment history, income and debt level.
Do You Need Good Credit to Refinance Your Mortgage?
A refinance is still a mortgage, so yes, you typically need good credit to get approved for one. Many of the minimum credit scores for home loans above apply to refi loans too. One benefit you get when refinancing is that you may owe less than your house is worth. That could reduce the need for down payments and even help you access better interest rates because the lender has less risk in making the loan.
Has COVID-19 Impacted Mortgage Credit Requirements?
Yes, COVID-19 has impacted minimum credit scores for mortgages. These changes are typically made by each bank. In the early months of the pandemic, uncertainty led many banks to drastically reduce home loans or even put them on hold. For example, in April 2020, JPMorgan Chase changed credit requirements to at least a 700 credit score with a 20% down payment.
However, falling interest rates and improved economic factors caused many banks to loosen requirements in the later months of the pandemic and into 2021. Ultimately, you’ll need to do your research when you’re ready to apply for a mortgage loan to find out what options you might qualify for.
What You Can Do Now
First, check your credit score. You might consider signing up for ExtraCredit. You’ll get access to 28 of your FICO scores—and you’ll see the credit scores that mortgage lenders see. ExtraCredit also has features such as Build It to help you positively impact your credit score if you need to boost it before applying for a mortgage.
Once you have a credit score that’s above 640—or, even more optimally, above 700—you can start shopping for mortgage loans and good rates. And remember that if you do get approved, your credit score also impacts your interest rates. Always ensure you know what your mortgage is going to cost you each month and over the life of the loan.
The banking industry and its allies are ramping up their efforts to combat federal regulators’ plan to increase capital requirements on banks with at least $100 billion of assets.
Initially opting for a passive approach focused on research papers and a website dedicated to sussing out the “price tag” of higher capital requirements, bankers and bank lobbyists are taking the fight to regulators more directly through advertising campaigns and procedural challenges.
“The industry appears more willing to battle the regulators on this issue than any in recent memory, which suggests that we could see litigation on the other side of the rule being finalized,” said Isaac Boltansky, director of policy research at BTIG.
On Tuesday, several top banking and financial industry groups sent a joint letter to the Federal Reserve, Federal Deposit Insurance Corp. and Office of the Comptroller of the Currency asking them to issue a new proposal for their so-called Basel III endgame package to close data-disclosure gaps. The groups accuse the agencies of drawing from “nonpublic” data for their proposals, thus violating standards of the Administrative Procedure Act, or APA.
“To remedy this violation, the agencies must make available the various types of missing material — along with any and all other evidence and analyses the agencies relied on in proposing the rule — and re-propose the rule,” the groups wrote. “To remain consistent with what the agencies themselves have determined to be an ‘appropriate’ comment period, the agencies should provide for a new 120-day comment period in the re-proposal.”
Representatives from the Fed and OCC declined to comment on the letter. The FDIC did not respond to an interview request on Tuesday.
The letter was co-signed by the Bank Policy Institute, American Bankers Association, Financial Services Forum, Institute of International Bankers, Securities Industry and Financial Markets Association and the U.S. Chamber of Commerce. It cites several violations of “basic legal obligations” under the APA, potentially setting the stage for a legal challenge should the proposal be enacted.
Boltansky said it is unlikely that the letter will actually compel regulators to issue a new proposal, but he said it could make them think twice about finalizing the rule as is.
“It is difficult to envision the banking regulators pulling and reproposing, but the letter from industry groups will add even more pressure for the standard to be softened prior to finalization,” he said.
The letter comes less than a week after BPI, which represents banks with more than $100 billion of assets, launched its “Stop Basel Endgame” advertising campaign, a nationwide push to draw attention to the risks the rules present to the banking sector, the U.S. economy and individual households. The effort includes print and radio ads in Washington, D.C., and other select markets as well as targeted online ad buys.
“The current Basel proposal is unacceptable, and BPI is committed to ensuring that lawmakers, regulators and the public fully understand how this proposal will affect every person and every business in this country,” BPI President and CEO Greg Baer said. “The largest media campaign in the organization’s history is underway, and our goal is to force regulators to justify to the public why they are imposing these costs and pushing still more economic activity into the shadow banking system.”
Banks themselves have gotten in on the effort to undermine recent regulatory proposals, which call for additional risk-weighted capital requirements and new resolution standards for banks between $100 billion and $250 billion of assets. On Tuesday, Goldman Sachs released a survey of small-business owners in which 84% of respondents said they were “concerned that the proposal will negatively impact their ability to access capital in an already difficult market.”
On Monday, JPMorgan Chase CEO Jamie Dimon ripped the proposal during an on-stage appearance at Barclays Global Financial Services Conference, calling it “hugely disappointing.”
In fiery remarks, Dimon said the proposed risk capital rules would result in U.S. banks facing more stringent regulatory obligations than their international peers, undermining the initial goal of the international standards on bank regulation. “What was the goddamn point of Basel in the first place?” he said.
Dimon said the rules would likely drive certain activities — including mortgage lending and financing leveraged lending by nonbanks — out of the banking sector entirely. He argued that if that is the intended outcome the Fed, FDIC and OCC had in mind, they should have said so explicitly, adding that the proposal marks a low point in relations between banks and their regulators.
“I’m not sure it’s a great thing that we have this constant battle with regulators as opposed to open, thoughtful things. We used to have real conversation with regulators — there is none anymore in the United States. Like, virtually none,” he said. “This stuff is just all from up top and imposed down below. And then … we simply have to take it. They’re judge, jury and hangman, and that is what it is.”
Proponents of the potential changes say the all-out push by bankers and industry groups to combat the proposal was to be expected.
“Wall Street’s latest attack on these modest and sensible rules is as baseless as it is unsurprising,” said Dennis Kelleher, head of the consumer advocacy group Better Markets. “Wall Street is going to do and say anything to try to stop any increase in capital, no matter how baseless or false.”
Regulators released their risk-capital proposal at the end of July along with a potential change to their global systemically important bank, or GSIB, surcharge that could have a meaningful impact on some foreign banks.
Much of the 1,000-page Basel III endgame proposal is focused on justifications for the rule changes, including recent bank failures and disparate treatments of operational risks by large banks. Currently, banks are able to rely on internal models for managing these risks which, the documents notes, “include a degree of subjectivity, which can result in varying risk-based capital requirements for similar exposures.”
The Fed estimates the changes will lead to a 16% aggregate increase in capital requirements for the affected banks, with the largest burden falling on GSIBs, which are set to see their capital obligations increase by 19%.
Dimon, however, said the actual increase will be closer to 25% by JPMorgan’s calculations, though the exact impacts of the potential changes have been a subject of debate since they were proposed. Fed Vice Chair for Supervision Michael Barr, in remarks made during a public meeting about the proposals, said the central bank intends to “collect additional data to refine our estimates of the rule’s effects.”
The recent push by bank trade groups adds to the mounting opposition that has been building against the Fed’s capital proposal for the past year. Republicans and some moderate Democrats in Washington questioned whether new rules were necessary in the months before the proposal was rolled out, and thus far the proposal has few vocal champions on Capitol Hill.
But regulators do not need the backing of Congress to enact the rule changes, which fall within the regulatory framework codified by the Dodd-Frank Act of 2010 and modified by the Economic Growth, Regulatory Relief and Consumer Protection Act of 2018.
Kelleher said bank failures earlier this year underscore the importance of having a well capitalized banking system. He added that the rule changes would apply additional protection from the highest-risk activities at the 35 biggest banks in the country.
“It’s no different than when banks require their customers to put up a down payment when they buy a house,” he said. “The homeowner then has to absorb the first 20% of losses on the house, which protects the bank from losses. The American people should be protected as well.”
Resilient household spending and a strong labor market will likely help the U.S. economy avoid a severe recession, according to a new forecast from economists at some of the country’s biggest banks.
The economy is poised to grow at a rate of less than 1% through the second quarter of 2024, the American Bankers Association’s Economic Advisory Committee said Monday. That is low compared with the second quarter rate of 4.1% but well above the dire predictions some economists once harbored for 2024.
“The odds of a soft landing have improved quite dramatically in the near term,” said Simona Mocuta, chief economist at State Street Global Advisors and the chair of the ABA’s committee of economic advisors.
The specter of recession has weighed on banks for close to 18 months, since the Federal Reserve began its campaign of rate hikes in March 2022. The health of the U.S. economy plays a key role in the profitability of banks, so the prospect of a contraction in economic growth raised red flags for banks large and small. The likely avoidance of one of the harsher economic scenarios — a severe recession — is good news for banks, which are also contending with generally tighter profit margins and increasing competition for customers.
Robust consumer spending has helped boost the U.S. economy so far in 2023, the ABA economists noted. Low unemployment and strong wage gains mean households have been able to keep up with many of their spending habits, even as inflation has persisted.
Inflation is also expected to improve in the coming quarters. Big-bank economists anticipate inflation levels to continue to cool to an annualized rate of 2.2% by the second quarter of 2024, close to the central bank’s target rate of 2%.
Although the overall economic picture is brighter, economists warn that there are several lingering threats that could make it more difficult for the U.S. economy and banks alike to grow.
The economists expect businesses to invest less capital in the short term, which could weigh on loan growth at banks. Loan growth at U.S. commercial banks increased 4.5% in the second quarter from a year earlier, according to Federal Deposit Insurance Corp. data.
About 4.4% of the labor forcewill be unemployed by the end of 2024, according to the economists’ forecast. A higher unemployment rate could make it more difficult for laid-off workers to make loan payments, potentially boosting the level of charge-offs at banks.
Credit quality reached historic lows during the pandemic, when many creditors offered grace periods and other breaks to struggling borrowers until the economy got back on track. Analysts expect asset quality to continue to deteriorate, with loan-loss increases spreading beyond the credit card and commercial real estate arenas.
“Investors are eager to learn how much higher net charge-offs are expected to go, especially with the student loan moratorium coming to an end,” Jason Goldberg, managing director and senior equity analyst at Barclays, wrote in a recent research note.
Certain elements of the ABA’s advisory committee’s forecast provide a strong contrast to the details issued when the last forecast was issued earlier this year, when economists believed the U.S. was on the edge of a mild recession.
“The tone of the conversation certainly feels much more positive today,” Mocuta said.
The ABA committee includes economists from some of the country’s largest banks. The group meets twice a year to discuss the economic environment and issue forecasts on economic growth, inflation and the trajectory of interest rate moves.
This year’s committee features representatives from U.S. Bank, Wells Fargo, JPMorgan Chase, State Street, Comerica Bank, BMO, TD Bank, PNC Financial Services, Deutsche Bank, First Horizon, Regions Financial, Northern Trust, Wilmington Trust and Morgan Stanley.
Mat Ishbia, chairman and chief executive officer at United Wholesale Mortgage (UWM), provided more than half of the mortgage company’s outstanding shares as a guarantee to secure loans ahead of the acquisition of the Phoenix Suns, according to a Bloomberg report.
According to the report, Ishbia pledged stock he controls to back two loans that were finalized days before his purchase of the Suns was approved. The deal, which values the Suns at $4 billion, first became public in December. The executive received the NBA blessing in February.
In total, 805 million shares, currently worth $4.6 billion, secured two loans with JP Morgan Chase & Co. Ishbia holds his UWM stake via SFS Holding Corp., which owns 94% of UWM’s outstanding stock and pledged the shares, per the firm’s 2023 proxy statements.
“The number of shares of Class A common stock beneficially owned by SFS Corp. also includes a total 805,281,450 shares of Class A common stock which are pledged as security for two separate loan facilities,” the proxy statement states.
The risk of tying up the shares to the loans is that if the value of the stock falls, the bank can usually request additional collateral or for the loan to be repaid. And if the borrower fails to comply, the bank can seize and sell the shares.
The Bloomberg Billionaires Index shows Ishbia’s fortune dropped by $3.4 billion after the pledged shares were removed from his net worth calculation.
UWM and JP Morgan Chase declined to comment on the topic.
The seller of the Suns Legacy Holdings, which owns the Phoenix Suns and Mercury, was Robert Sarver. The executive acquired both teams in 2004. Earlier in 2022, Sarver was fined $10 million and suspended for one year following an NBA investigation regarding workplace conduct.
Ishbia and his brother Justin bought 50% ownership of the franchises, including Sarver’s interest. They also acquired a portion of the interest of minority partners, who were granted additional sale rights. Mat serves as governor and Justin as alternate governor.