Uncommon Knowledge
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
You stop by your local supermarket on Sunday. It’s more crowded than usual, which makes finding a parking spot a little tough. You usually pick up a favorite brand’s organic, free-range chicken breasts, but you haven’t seen them stocked in a while. Instead, all that’s available are factory-farm brands — and they seem more expensive than they should be.
And those dog biscuits from the mom-and-pop bakery across town? They’re usually here, but you can’t find them, either. You’d ask an associate for help finding them, but you don’t see any employees who aren’t busy at the registers or behind the counter.
A version of this lackluster shopping experience is what antitrust experts fear everyday shoppers may encounter if The Kroger Company’s $24.6 billion acquisition of Albertsons Companies Inc. — which would be the largest grocery merger in the nation’s history — is permitted to close. On Feb. 26, the Federal Trade Commission filed a motion to block the acquisition, which was announced in 2022. Attorneys general from eight states and Washington, D.C., joined the FTC in its suit, and the attorneys general in two other states — Colorado and Washington — filed suits of their own against the move to combine the companies.
Several antitrust experts, including academics, public policy researchers and financial analysts, told NerdWallet that a merged Kroger and Albertsons could lead to less product variety, lower product quality, higher grocery prices and an overall worse shopping experience, with stores having fewer employees available for customer service. For workers, many of whom are part of the United Food and Commercial Workers International Union (UFCW), the proposed acquisition may threaten the competitive benefits and retirement packages that the union secured, UFCW representatives told NerdWallet.
One crux of the FTC’s case against the deal is the idea that a combined Kroger-Albertsons would create a monopoly in the supermarket sector, which it considers distinct from other kinds of food retail sectors, such as club stores (Sam’s Club, Costco), premium and organic stores (Whole Foods, Sprouts), superstores (Target, Walmart), dollar stores and e-commerce sellers.
“The FTC is saying that, among and within the entire constellation of companies that sell groceries at retail, there are niches within that larger constellation that matter, and one of them consists entirely of traditional grocery stores,” says James B. Speta, a professor of law at Northwestern University’s Pritzker School of Law. “The company is going to argue, ‘Oh, no, you’ve got to include all these others.’ When you do, composition in that larger market is less significant.”
And that is exactly what proponents of the acquisition say: that the real competition in retail grocery comes from Walmart and other non-traditional outlets.
Scott Moses, partner and head of the grocery, pharmacy and restaurants investment banking practice at Solomon Partners, a financial advisory firm, is representing Albertsons in the deal. Moses says it doesn’t make sense to consider the supermarket sector as distinct from the broader food retail market, which now includes companies like Walmart, Amazon, Costco, Target and several others. All of these companies have invested heavily in their grocery retail businesses over the past decade, competing with supermarkets and fundamentally altering the American grocery landscape.
Walmart owns a 30% market share of broader food retail, based on February 2024 earnings reports, Moses said, and traditional supermarket grocers make up 36% of the food retailers market when supercenters, dollar chains, specialty grocers and online sellers are included. The deal is essential for Kroger and Albertsons to survive the existential threat posed by those retailers, he says.
“The amount of capital that these folks are spending to drive their subscribed members and retain customers is radically more than any supermarket can remotely fathom competing with,” Moses says. “They simply cannot do it.”
Proponents and opponents of the acquisition slice the retail food market differently and tend to cite numbers that bolster their case. According to data from Food & Water Watch, a nongovernmental organization focused on corporate accountability, a combined Kroger and Albertsons would, alongside Walmart, control 55% of the food retail market, excluding convenience stores.
Based on a broader definition of food retailers that Kroger and Albertsons prefer, the new combined company would be the second-largest food retailer in the U.S., with an 11.8% market share, second to Walmart’s 17.1% share, based on widely reported rankings from the research firm GlobalData.
Kroger and Albertsons collectively own and operate nearly 5,000 stores in 48 states. Combined, they employ nearly 700,000 workers. The companies own more than 40 standalone grocery brands, including Safeway, Fred Meyer, Jewel-Osco, Ralphs, Dillons, Tom Thumb and Vons. Their brands are in all regions of the continental U.S. but are concentrated in the West, Midwest and New England. You’ve almost certainly visited one of their stores, and there’s a solid chance that a supermarket owned by either Kroger or Albertsons is your regular grocery store of choice.
Because Kroger and Albertsons are currently competitors, they’re naturally motivated to experiment with product offerings, promotions and prices, says William E. Kovacic, director of the Competition Law Center at George Washington University. These experiments can include stocking well-liked, locally made products that cost more to buy from suppliers than mass-produced alternatives, running sales during peak shopping seasons, or offering ready-to-eat meals and hot bar options.
“The FTC argues that the transaction will reduce the urgency that companies feel to do those kinds of things,” Kovacic says.
From the companies’ perspective, there’s no shortage of urgency to continue innovating and investing in product variety and promotions, Moses says, due to increased competition from Walmart, Costco and other non-supermarket food retailers. He says he first noticed similarities around 15 years ago between competition in the grocery space and the kinds of disruptions that eventually leveled the department store space, which led to hundreds of store closures, bankruptcies and job losses. Those department store disruptions came from some of the same retailing giants currently competing in the grocery space, like Amazon, Walmart and Target.
The continued existence of supermarkets is not guaranteed, Moses says. “If supermarket grocers aren’t allowed to level the playing field, it will not be long before grocery looks like department stores, with thousands of supermarkets closed and millions of union jobs lost.”
Conversely, antitrust experts worry that under a combined Kroger-Albertsons company, consumers would wind up paying the same or higher prices for food products of equal or lower quality. Eleanor Fox, an antitrust expert and professor at New York University School of Law, pointed to the $26 billion merger of Sprint and T-Mobile in 2020 as an illustration of how two companies that already command significant market share — just as Kroger and Albertsons do in the supermarket sector — can often behave after a merger.
In 2023, a federal judge in Chicago ruled that the merger led consumers to “pay higher prices” via “taxes and fees that were previously included in the plan prices, paying new fees and surcharges, or paying more for device protection plans or accessories.”
Of course, telecommunications and grocery are two starkly different industries. Still, Fox says the case is an example of how companies will often raise prices when facing less competition, simply because they can.
“When the competitor goes away, they can manipulate, they can do various things, they can decrease quality, they can decrease service,” Fox says. “They can simply not lower prices when their costs go down.”
Kroger, for its part, has publicly committed to lowering prices following the acquisition.
Workers advocates are concerned about the potential acquisition’s impacts and fear workers may lose significant retirement packages, benefits and work shifts if Kroger and Albertsons combine.
Kroger and Albertsons are the two largest employers of unionized grocery workers in the U.S., and the majority of their employees are represented by the UFCW. That’s a powerful negotiating tool for the union, specifically when one company is more open to an agreement or proposal than the other company, says John Marshall, capital strategies director for UFCW Local 300, which represents members across Washington state, northeast Oregon, and northern Idaho.
“Currently, we can go to Albertsons, get a tentative agreement on that particular proposal, and then go to Kroger and say, ‘Look, this is what Albertsons has agreed to. If you don’t also agree to this, we may end up going on strike at the Kroger stores,’” Marshall says. “Yeah, Kroger understands that’s a very effective tool.”
If Kroger’s acquisition goes through, Marshall says the union’s negotiating power would be weakened, and benefits once guaranteed by the union — like its competitive pension plan — may be in flux, Marshall says.
Moses disagrees.
“Stronger company unions get better wages and benefits for their members than weaker company unions, because the weaker company unions can’t afford better benefits,” Moses says. “Teammates will actually be better off.”
Most union members receive a defined benefit pension plan, says Bertha Rodríguez, a representative of UFCW 770, which represents workers in California. Under that plan, a union employee can expect retirement payouts comparable to their Social Security benefits, Marshall says, and the pension pays employees for life.
Defined benefit plans are almost always better for employees than defined contribution plans, as individuals can outlive the funds available in a 401(k) retirement account. Plus, having a defined benefit plan makes it easier to plan for retirement, because workers know exactly what their retirement savings will be worth when they retire. Also, defined benefit plans are guaranteed to pay the worker for as long as they live, unlike defined contribution plans, which can run out.
“The retirement and health care that our union has negotiated are generally far superior to nonunion benefits,” Marshall says.
Because individuals can withdraw from their 401(k) accounts before retirement, many employees wind up doing just that to cover unexpected emergency costs, such as car repairs or hospital bills, Marshall says. But most pension plans won’t allow employees to withdraw until they reach retirement age. This makes pensions a safer bet for grocery workers’ retirement savings, Marshall says. Many of those workers earn hourly wages and may therefore be more vulnerable when facing an emergency expense and have few options aside from pulling money from their retirement savings.
It’s worth noting that the FTC’s prioritization of workers’ rights is a unique hallmark of the Biden administration’s focus on worker protections, Kovacic says. In past antitrust complaints, worker protections typically aren’t cited as prominently as they are in the FTC’s allegations against Kroger and Albertsons.
“An unmistakable theme of the Biden administration’s antitrust program has been to give greater emphasis to the effect that business behavior has on worker welfare,” Kovacic says.
It also reflects the recent growth of unions in the private sector. In 2023, the unionization level in the private sector rose from 6.8% to 6.9% — an increase of more than 261,000 unionized workers, according to the Economic Policy Institute.
Although Kroger has explicitly stated that there will be no store closures as a result of the acquisition, both workers and antitrust experts are concerned about the possibility of closures in smaller cities and towns with fewer grocery retailers.
“Kroger and Albertsons are two of the largest supermarket chains in thousands of local communities throughout the country,” the FTC states in its suit against the deal. “In hundreds of those communities, the proposed acquisition would create a single supermarket with market shares so high as to be presumptively unlawful under the antitrust laws.”
In Gunnison, Colorado, a city south of Boulder with a population of less than 7,000, there are three traditional supermarkets: a Safeway, which is owned by Albertsons; a Kroger supermarket and a City Market, which Kroger owns. (There’s also a Walmart.) If the deal were to close, residents would have to drive 65 miles to a supermarket that’s not owned by Kroger.
“Combined, Kroger, Albertsons — were this merger to go through — and Walmart would control 55% of the food retail market,” says Karen Gardner, a senior policy associate at the Center for Science in the Public Interest, a food-focused consumer advocacy group based in Washington, D.C. “That means that there’s two CEOs who would be in control of the majority of food sold in America, and that doesn’t seem like a good idea to me.”
When asked about potential store closures, Moses rejected the notion that it would ever make financial sense for a combined Kroger-Albertsons to close any supermarkets.
“I don’t know how much more explicit they can be,” Moses says, referring to Kroger’s assurances that no stores would close due to the acquisition. “What you need, frankly, is to be larger, so you have more of an ability to invest more in lower prices, more in better stores, more in better wages, more in marketing, so that you can retain more customers.”
A hearing to evaluate the FTC’s block is scheduled for Aug. 26 in the U.S. District Court in Oregon. In January, before the FTC filed its suit, The Kroger Company issued a statement saying its acquisition of Albertsons would likely close before the end of the company’s second fiscal quarter on Aug. 17.
Source: nerdwallet.com
Mike Fratantoni, the chief economist and senior vice president of research and industry technology at the Mortgage Bankers Association (MBA), addressed three major challenges in the housing market during testimony before the U.S. House of Representatives‘ Financial Services Subcommittee on Housing and Insurance.
The biggest challenge in today’s housing market is the lack of inventory, Fratantoni said in his written statement on Wednesday.
“While the demographic fundamentals of the market continue to support strong housing demand for the next several years, the market is millions of units short of that needed to support this demand,” he said.
The silver lining, however, is that builders have picked up their pace of construction. New homes now account for roughly one-third of homes on the market, which compares to a more typical historical share of 10%.
As a result, a large delivery of multifamily units is expected over the next few years, but the recent trend in elevated mortgage rates has exacerbated this supply shortfall, Fratantoni explained.
Compounding the lack of supply is the proverbial “lock-in“ effect that has disincentivized homeowners to sell their current properties, thereby giving up a low mortgage rate and taking on a new loan at a much higher rate.
“A homeowner that was able to refinance into a low-3% or high-2% mortgage rate is just much less likely to list their property,” Fratantoni told lawmakers. “It doesn’t mean they’re never going to list … but it’s a friction in the system, so it’s going to keep existing inventory much lower than it otherwise would be.
“That’s been a support to home prices, but for someone trying to get into the market, it’s really an obstacle.”
Fratantoni also expressed concern that the recent Basel III Endgame proposal would accelerate the trend of the mortgage market shifting away from depository institutions, particularly large banks, toward non-depositories and independent mortgage banks.
The Basel Endgame proposal — issued by the Federal Reserve, Federal Deposit Insurance Corp. (FDIC) and the Office of the Comptroller of the Currency (OCC) in July 2023 – boosted capital requirements for residential mortgage portfolios at large U.S. banks in comparison to international standards.
Under the draft proposal, 40% to 90% risk weights would be assigned for large banks that issue residential mortgages, depending on the loan-to-value ratio, which is 20 basis points above the international standard.
MBA’s comment letter highlighted the overly conservative risk weights on mortgages — particularly for low down payment loans favored by first-time homebuyers — and the lack of benefit for loans with mortgage insurance. It also mentioned the punitive treatment of mortgage servicing rights (MSRs) and the burdensome treatment of warehouse lending as being particularly negative for the mortgage market.
The Basel Endgame proposal would increase capital requirements on all three types of mortgage activities by banks — low down payment loans held on balance sheets, mortgage servicing and warehouse lending.
As a result, the Basel Endgame proposal “poses a significant risk to the stability of the housing finance market if it is not modified across all of these dimensions,” Frantantoni stated.
Addressing the increased cost of property insurance for both prospective homebuyers and current homeowners is a priority for the MBA.
“The lack of availability and cost of homeowners insurance … it’s not only impacting the ability of borrowers to qualify for a loan, but increasing payments for existing homeowners to such an extent really puts them on an unstable path, so it really is front and center for us right now,” Fratantoni told lawmakers.
The average cost to insure a $300,000 home surged by 12% in 2023, reaching $1,770 per year, according to an Insurify report.
Certain insurance carriers have also limited their participation in natural disaster-prone states like California and Florida, given the increases in risks and costs.
Over the past 18 months, seven of the 12 largest insurance companies by market share in California have either paused or restricted new policies in the state, highlighted by the departures of State Farm and Allstate in June 2023.
Due to these departures and price hikes, the California FAIR Plan, the state’s insurer of last resort, has seen enrollment double over the past few years.
“Although these increases in premiums and reductions in availability of insurance have been concentrated in certain markets at this point, the concerns regarding property insurance continue to build for our lender members in the residential, multifamily and commercial sectors — and for all their customers,” Fratantoni said.
Source: housingwire.com
President Joe Biden, in his ongoing crusade against hidden junk fees, has so far cracked down on event ticketing, airlines, financial companies and rental housing. The next target: junk fees at colleges and in student lending.
On Friday, the Biden administration announced several new actions to alleviate the burden of these superfluous fees. The most significant would be the elimination of origination fees for federal student loans — if it passes muster with Congress.
“We feel strongly that there are times where the American consumer is kind of played for a sucker,” says Neera Tanden, domestic policy advisor to Biden. “There’s a hidden fee or there’s some way in which a company or an entity is basically using its market power to make you pay a fee that you shouldn’t have to.”
Junk fees are the label given to the irksome and often surprise surcharges to what you’re already paying for. This includes things like credit card late fees, overdraft fees at banks, amenity and resort fees at hotels, service fees for event ticketing or food delivery, as well as seat selection fees on airlines. For over a year, the Biden administration has taken several actions to curb junk fees and surface hidden fees.
On the student lending side, Biden would eliminate the student loan origination fee as part of his 2025 budget proposal.
Origination fees are the percentage of the loan amount that’s considered a processing fee. The fee ends up being tacked on to loan balances, which means borrowers would pay interest on the fee over the life of the loan. Origination fee rates range from 1% for undergraduate loans to 4% for graduate and parent PLUS loans.
Tanden, who spoke with NerdWallet in an exclusive interview, calls origination fees a “relic of the past” when private lenders originated student loans backed by the government, which hasn’t been the case since 2010 when the federal government began exclusively lending directly rather than guaranteeing loans made by private financial institutions. She adds that there’s no current rationale for it in federal student lending.
Borrowers collectively spend more than $1 billion annually on origination fees, according to a release by the administration. However, Biden can’t get rid of origination fees unless Congress approves it as part of the nation’s 2025 budget.
Tanden says she hopes the proposal will be treated as a nonpartisan issue. “We know that Republicans have welcomed ways to cut back on taxes for people,” she says. “This is really just a tax on student borrowing.”
If origination fees are eliminated, it would impact future student loans only, not existing debt.
The college-related fees Biden is targeting include “high and unusual fees” associated with student financial products. Colleges and universities often offer bank accounts and credit cards as part of affiliations with financial institutions. These fees include insufficient funds fees, maintenance fees and closure fees.
Biden wants to block financial companies that partner with colleges to disburse Title IV funds (such as student loans) from charging fees to students. The administration says these junk fees are out of step since banks have largely phased them out.
The measure to end junk fees for college banking and student credit cards is currently in the formal process known as negotiated rulemaking. Though it doesn’t require approval by Congress, don’t expect a change anytime soon.
Many colleges and universities have long included textbooks as part of students’ tuition bills. That means that the charge is automatically included and students have to pay for course materials regardless of the actual costs available on the market. Students might be able to find textbooks cheaper somewhere else, but colleges still bundle those anticipated costs as part of tuition.
Biden is proposing that students be required to authorize a charge on their tuition bill for textbooks and other required materials for their courses. The administration says these changes would provide students with the opportunity to do a cost comparison to find the cheapest options or eliminate the cost altogether by accessing free open-source textbooks.
“The college has a lot of power and sway and these are ways that, you know, essentially consumers — your students — are forced to pay for things that they should be able to look at cheaper costs,” says Tanden.
These changes are also in the negotiated rulemaking process and don’t require congressional approval.
Students are often required to purchase meal plans with their college or university, which are used for dining hall meals or as “flex dollars” to pay for food elsewhere on campus. But at the end of each semester, schools can rescind any remaining funds. That means students must spend the money before the semester ends or forfeit what they’ve already paid for — often with student loans.
“Students are often taking on debt in their college years to pay for the cost of living, as well as their tuition, and because of interest that could grow in cost,” says Tanden.
The Biden administration would halt colleges from taking leftover funds and instead require them to return the remaining dollars to students.
The administration announced it is now formally considering this regulation. It would need to move through the negotiated rulemaking process and wouldn’t need approval by Congress.
Photo by Drew Angerer/Getty Images News via Getty Images
Source: nerdwallet.com
President Joe Biden, in his ongoing crusade against hidden junk fees, has so far cracked down on event ticketing, airlines, financial companies and rental housing. The next target: junk fees at colleges and in student lending.
On Friday, the Biden administration announced several new actions to alleviate the burden of these superfluous fees. The most significant would be the elimination of origination fees for federal student loans — if it passes muster with Congress.
“We feel strongly that there are times where the American consumer is kind of played for a sucker,” says Neera Tanden, domestic policy advisor to Biden. “There’s a hidden fee or there’s some way in which a company or an entity is basically using its market power to make you pay a fee that you shouldn’t have to.”
Junk fees are the label given to the irksome and often surprise surcharges to what you’re already paying for. This includes things like credit card late fees, overdraft fees at banks, amenity and resort fees at hotels, service fees for event ticketing or food delivery, as well as seat selection fees on airlines. For over a year, the Biden administration has taken several actions to curb junk fees and surface hidden fees.
On the student lending side, Biden would eliminate the student loan origination fee as part of his 2025 budget proposal.
Origination fees are the percentage of the loan amount that’s considered a processing fee. The fee ends up being tacked on to loan balances, which means borrowers would pay interest on the fee over the life of the loan. Origination fee rates range from 1% for undergraduate loans to 4% for graduate and parent PLUS loans.
Tanden, who spoke with NerdWallet in an exclusive interview, calls origination fees a “relic of the past” when private lenders originated student loans backed by the government, which hasn’t been the case since 2010 when the federal government began exclusively lending directly rather than guaranteeing loans made by private financial institutions. She adds that there’s no current rationale for it in federal student lending.
Borrowers collectively spend more than $1 billion annually on origination fees, according to a release by the administration. However, Biden can’t get rid of origination fees unless Congress approves it as part of the nation’s 2025 budget.
Tanden says she hopes the proposal will be treated as a nonpartisan issue. “We know that Republicans have welcomed ways to cut back on taxes for people,” she says. “This is really just a tax on student borrowing.”
If origination fees are eliminated, it would impact future student loans only, not existing debt.
The college-related fees Biden is targeting include “high and unusual fees” associated with student financial products. Colleges and universities often offer bank accounts and credit cards as part of affiliations with financial institutions. These fees include insufficient funds fees, maintenance fees and closure fees.
Biden wants to block financial companies that partner with colleges to disburse Title IV funds (such as student loans) from charging fees to students. The administration says these junk fees are out of step since banks have largely phased them out.
The measure to end junk fees for college banking and student credit cards is currently in the formal process known as negotiated rulemaking. Though it doesn’t require approval by Congress, don’t expect a change anytime soon.
Many colleges and universities have long included textbooks as part of students’ tuition bills. That means that the charge is automatically included and students have to pay for course materials regardless of the actual costs available on the market. Students might be able to find textbooks cheaper somewhere else, but colleges still bundle those anticipated costs as part of tuition.
Biden is proposing that students be required to authorize a charge on their tuition bill for textbooks and other required materials for their courses. The administration says these changes would provide students with the opportunity to do a cost comparison to find the cheapest options or eliminate the cost altogether by accessing free open-source textbooks.
“The college has a lot of power and sway and these are ways that, you know, essentially consumers — your students — are forced to pay for things that they should be able to look at cheaper costs,” says Tanden.
These changes are also in the negotiated rulemaking process and don’t require congressional approval.
Students are often required to purchase meal plans with their college or university, which are used for dining hall meals or as “flex dollars” to pay for food elsewhere on campus. But at the end of each semester, schools can rescind any remaining funds. That means students must spend the money before the semester ends or forfeit what they’ve already paid for — often with student loans.
“Students are often taking on debt in their college years to pay for the cost of living, as well as their tuition, and because of interest that could grow in cost,” says Tanden.
The Biden administration would halt colleges from taking leftover funds and instead require them to return the remaining dollars to students.
The administration announced it is now formally considering this regulation. It would need to move through the negotiated rulemaking process and wouldn’t need approval by Congress.
Photo by Drew Angerer/Getty Images News via Getty Images
Source: nerdwallet.com
A day after targeting the title insurance industry, the Biden Administration has put the rest of the real estate finance process in its crosshairs.
On March 8, the Consumer Financial Protection Bureau posted a blog inviting consumers to tell it how “junk fees” in the closing process affect them.
While not able to speak to the specifics of the posting, nor about any possible actions the regulator might take, the Community Home Lenders of America “is thrilled that they’re jumping into this,” Scott Olson, its executive director, said in an interview.
“We’ve actually used this phrase [junk fees] ourselves a couple of years or so ago” he said in regards to click fees lenders are charged by third party vendors, which are passed on to consumers.
Others in the industry had a hard time understanding where the CFPB was coming from.
“The CFPB’s blog post is baffling and reveals little understanding of how the mortgage market works or awareness of its own regulations that provide for full fee transparency and limits on what can be charged,” Bob Broeksmit, president and CEO of the Mortgage Bankers Association, said in a lengthy statement.
“The fees mentioned are clearly disclosed to borrowers well before a home purchase on forms developed and prescribed by the Dodd-Frank Act and the CFPB itself,” he added, referring to the TILA-RESPA Integrated Disclosures, also known as TRID. One of those disclosures, the loan estimate, is given when the borrower contacts the originator and is supposed to be used to shop.
The other form – the closing disclosure presented at the end of the process – must be within certain tolerances of the data provided on the loan estimate.
“In 2020, the CFPB issued a report praising its own rule for improving consumers’ ability to locate key information, compare terms and costs between initial disclosures and final disclosures, and compare terms and costs across mortgage offers,” Broeksmit said.
But in Olson’s view, “transparency is not the same as competition.”
The CHLA has been supportive of the use of title insurance alternatives like attorney opinion letters, that could reduce costs to borrowers.
“We think that opening up the line of sight on some of these things is reasonable where there really is not competition,” Olson said.
CHLA plans to “comment vigorously” to the CFPB, he continued, adding that it has done so regarding competition and fees charges in the not-so-distant past, particularly in regards to the Intercontinental Exchange purchase of Black Knight.
As far back as 2003, if not even earlier, the government has had so-called mortgage junk fees in its crosshairs. Mel Martinez, Department of Housing and Urban Development secretary under President George W. Bush, said in a speech before the National Community Reinvestment Coalition almost exactly 11 years ago that members of Congress did not understand that reform proposal would help consumers understand the mortgage process and the costs involved so they don’t become “victims” of junk fees and broker abuse.
The CFPB, in its recent post, took its own shot at the lender policy portion of title insurance, saying the borrower has no control or options.
“Instead of paying this fee themselves, lenders make borrowers pay the cost,” said the blog posting authored by Julie Margetta Morgan, associate director. “The amount that borrowers pay for lender’s title insurance is often much greater than the risk.”
The CHLA has been supportive of the use of title insurance alternatives like attorney opinion letters, that could reduce costs to borrowers.
“We think that opening up the line of sight on some of these things is reasonable where there really is not competition,” Olson said.
The American Land Title Association issued commentary on the CFPB blog.
“Reform of mortgage closing costs is unnecessary,” the ALTA response said. “The contradictory use of the term ‘junk fee’ conflicts with the White House’s own definition, which cites the lack of disclosure of the fee being charged.”
Credit reports also were specifically mentioned as a problem area in the CFPB posting, claiming the business lacks competition and choice.
“The CFPB has heard reports of recent costs spiking 25% to as much as 400%,” the agency said. “At the same time, we estimate that nationwide credit reporting companies made over $1.3 billion annually.”
CFPB is also looking for consumer comment on the payment of discount points, although the posting does not distinguish between temporary and permanent rate buydowns.
“We are paying particular attention to the recent rise in discount points,” the posting said. “A higher percentage of borrowers reported paying discount points in 2022 than any other years since this data point was first reported in 2018.”
The agency said 50.2% of home purchase borrowers paid some discount points in 2022, with the median dollar amount being $2,370, up from 32.1% and $1,225 one year earlier.
Source: nationalmortgagenews.com
The Securities and Exchange Commission (SEC) this week announced new rules that will require publicly traded companies to disclose climate risks and how much greenhouse gas emissions they produce.
But compared with a prior proposed version of the rules from 2022, media outlets have characterized the rules as less onerous for companies.
“Under the original proposal, large companies would have been required to disclose not just planet-warming emissions from their own operations, but also emissions produced along what’s known as a company’s ‘value chain,’” according to reporting at The New York Times.
A “value chain” is something of a catch-all term that refers to “everything from the parts or services bought from other suppliers, to the way that people who use the products ultimately dispose of them,” the Times explained.
Pollution created up and down the value chain could certainly add up, the Times stated, but that reporting requirement is not included in the version of the rule unveiled on Wednesday.
While larger companies will have to report the emissions they directly produce, the determination of what kinds of emissions to report will be left to the companies themselves. If companies determine the produced emissions are “material,” they will have to proactively report them under the final version of the rules.
The Mortgage Bankers Association (MBA) largely lauded the move, according to a statement from president and CEO Bob Broeksmit.
“Public companies already disclose material information relevant to their financial condition and operations, including climate-related information,” Broeksmit said. “We are pleased that the SEC’s final rule addresses redundancies and that it does not contain some of the more complex and overly burdensome mandatory reporting requirements – particularly for Scope 3 emissions – that were issued in the proposal.”
Upon the initial announcement of the proposal, the MBA had recommended “a longer implementation schedule for required registrants,” which is included in the rule as announced by the SEC.
“[This is something] we appreciate given the substantial effort and resources necessary to comply with the rule,” Broeksmit said.
Given the larger focus on climate change by the Biden administration, discussion of climate issues has taken on more prominence since early 2021 when Biden took office. Still, state governments can often implement their own priorities on this front, but the MBA hopes they follow the SEC’s lead.
“MBA and its members are active participants in policy conversations and market developments on climate risk, extreme weather impacts, and ESG (environmental, social and governance) investing at the federal and state levels,” Broeksmit said.
“We urge state legislatures to refrain from proceeding with, or introducing, proposals that exceed this rulemaking or that impose costly and time-consuming reporting requirements that adversely impact businesses and consumers in their state.”
Source: housingwire.com
President Joe Biden has proposed an annual tax credit that would give Americans $400 a month for the next two years to put towards their mortgages.
Addressing the affordability crisis in the housing market in his State of the Union address on Thursday, Biden said: “I know the cost of housing is so important to you. Inflation keeps coming down, and mortgage rates will come down as well.
“But I’m not waiting. I want to provide an annual tax credit that will give Americans $400 a month for the next two years as mortgage rates come down, to put towards their mortgage when they buy their first home, or trade up for a little more space.”
Home prices skyrocketed during the pandemic, driven by relatively low mortgage rates, high demand and low inventory. At their peak, the median listed price for a home in the U.S. reached $465,000 in June 2022, according to data from the Federal Reserve Bank of St. Louis (FRED).
While the housing market experienced a price correction between late summer 2022 and spring 2023, prices remain historically high, propped up by lingering low supply. In June 2023, the median listed price for a home in the U.S. was $448,000. As of January 2024, this was $409,500, according to data from FRED.
While home prices have stayed high for the past three years, a rise in mortgage rates driven by the Federal Reserve’s aggressive hike rate campaign last year has led to many aspiring homebuyers being completely squeezed out of the market. In December last year, the reserve said that it would have stopped rising rates, but mortgages are yet to significantly come down.
High mortgage rates, together with the historic shortage of homes in the U.S.—due to the fact that the country hasn’t built enough homes to meet demand since the housing crash of 2008—have contributed to the current affordability crisis.
In late 2023, J.P. Morgan said that, based on then-current trends, housing affordability could be restored in 3.5 years. Newsweek contacted J.P. Morgan for comment by email on Friday morning.
Biden is now calling on Congress to provide a one-year tax credit of up to $10,000 to middle-class families who sell their starter home—a home below the median home price of the area where it is located—to another owner or occupant. The White House said that this proposal could help nearly 3 million American families.
On Friday, Biden’s announcement on the tax credit was met with a standing ovation and roaring applause by Democratic lawmakers, while about half of the House stayed seated.
The president also mentioned other measures to address the housing affordability crisis in the U.S. These included down-payment assistance for first-generation homeowners, tax credit to build more housing, and lowering costs by building and preserving millions of homes.
“My administration is also eliminating title insurance on federally backed mortgages,” Biden told lawmakers on Friday.
“When you refinance your home, you can save $1,000 or more as a consequence. We’re cracking down on big landlords who break antitrust laws by price-fixing and driving up rents. We’ve cut red tape, so builders can get federal financing,” the president said among the cheering of some lawmakers.
Update, 3/8/24, 8 a.m. ET: The headline on this article was updated.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Source: newsweek.com
The Consumer Financial Protection Bureau issued a rule Tuesday to slash credit card late fees in a move the agency says should save millions of credit card users an average of $220 per year. The decision drew immediate objection from banking trade groups.
The government agency reduced the typical credit card late fee from $32 to $8, which should translate to more than $10 billion in annual savings among the roughly 45 million consumers who are charged late fees.
“For over a decade, credit card giants have been exploiting a loophole to harvest billions of dollars in junk fees from American consumers,” said CFPB Director Rohit Chopra in a statement, asserting that the new rule will end these practices.
The lower fees are expected to take effect within three months, which would give card issuers time to update their disclosures and systems. It’s unclear how possible challenges to the rule could affect the timing.
The rule, which was proposed in 2023, closes a loophole in the Credit Card Accountability Responsibility and Disclosure Act of 2009.
The CARD Act banned credit card companies from charging higher late fees than needed to cover the companies’ costs associated with the late payment. But in 2010, the Federal Reserve Board of Governors voted to include a provision in the CARD Act that allowed banks to charge no more than $25 for the first late payment and $35 for subsequent late payments, with both of those figures being adjusted for inflation each year.
Today, those figures have swelled to $30 and $41, respectively, despite credit card companies having adopted cheaper business practices in recent years, the CFPB said in a statement. The average credit card late fee was $32 in 2022, up from $23 in 2010.
“Almost all of the credit card giants have been hiking these fees every year using automatic inflation adjustments as an excuse,” Chopra said in a call Monday announcing the CFPB’s new rule. “Today, the credit card industry hauls in more than $14 billion in late fee revenue, which our research shows is more than five times the companies’ associated costs.”
The rule applies to large credit card companies with more than 1 million open accounts. These companies hold more than 95% of open credit card balances, the CFPB said in the statement.
Find the right credit card for your wallet
Check out NerdWallet’s picks for the best credit cards across categories such as travel, cash back, and 0 APR.
Banking industry executives slammed the new rule. Rob Nichols, president and CEO of the American Bankers Association (ABA) said in a statement that the new CFPB rule “relied on flawed assumptions and a mischaracterization of the important role late fees play in promoting responsible consumer behavior.”
Adding that the ABA will try to challenge the new policy, Nichols said, “This rule should not be allowed to go into effect.”
Lindsey Johnson, president and CEO of the Consumer Bankers Association, said in a statement that the new rule is “normalizing being late on credit card payments” and ultimately puts consumers’ financial health at risk.
The CFPB’s latest announcement follows a similar move earlier in the year on overdraft fees, signaling a concerted crackdown on junk fees from federal officials and regulators.
In January, the agency proposed restrictions that could lower the average overdraft fee from $35 to $3 per transaction. Banking industry advocates spoke out fiercely against this proposal too. The restriction is currently expected to go into effect in October 2025.
The Biden administration will soon announce a “strike force” intended to “hold companies accountable when they engage in unfair and illegal practices that keep prices high,” Lael Brainard, director of the National Economic Council, said on the Monday call with Chopra.
The force is part of the administration’s efforts to lower the cost of groceries, prescription drugs and health care, banking, housing, airfare and basic utilities. It’ll be jointly led by the Federal Trade Commission and the Department of Justice.
In conjunction with those efforts, the Federal Communications Commission will also tackle “bulk billing,” in which people living or working in a building are charged by landlords or building owners for internet, cable or satellite service, whether they want the service or not.
(Photo by Michael A. McCoy/Getty Images)
Source: nerdwallet.com
Joaquin Arambula, a Democratic assemblyman from California, introduced Assembly Bill 1840 earlier this year, which could create an alternative way for illegal immigrants to achieve homeownership.
The bill is set to expand eligibility criteria for a state loan program to expand these loans to include undocumented migrants that are first-time buyers.
Arambula’s update to the bill states, “an applicant under the program shall not be disqualified solely based on the applicant’s immigration status.”
BILL MELUGIN: ‘WHAT HAPPENS AT THE BORDER NO LONGER STAYS HERE’
“It’s that ambiguity for undocumented individuals, despite the fact that they’ve qualified under existing criteria, such as having a qualified mortgage [that] underscores the pressing need for us to introduce legislation,” Arambula told the LA Times.
The bill focuses on the California Dream for All Shared Appreciation Loans program, which launched spring of 2023 to give qualifying first-time home buyers a loan that covers up to 20% of a property’s purchase price that will not accumulate interest or have required monthly payments. Loanees are instead expected to pay back the original loan amount in addition to 20% of the increase in the home’s value when the property’s mortgage is refinanced or resold.
First introduced on January 16th, Bill 1840 was originally intended to “provide shared appreciation loans” to low and middle income citizens. Under Arambula’s new proposal, the legislation would expand to allow the program to include illegal immigrants into the eligibility pool.
Arambula sent Fox News Digital a statement saying how the bill will address the uncertainty of the eligibility for undocumented indviduals.
“The California Dream for All program already exists – it was established to assist low- and middle-income individuals to purchase homes. But the program hasn’t been clear about eligibility for undocumented individuals, and AB 1840 addresses that issue. Let me be clear: anyone who meets the program’s criteria can apply for this loan program. And, to qualify, you must secure a bank loan or mortgage,” the statement said. “AB 1840 is about providing an opportunity for homeownership, which we know allows families to secure financial security and stability. The ability to do this strengthens local economies, and that benefits all people who call California home.”
TRUMP: ‘THIS IS A JOE BIDEN INVASION’
The LA Times reported the California loan program garnered 2,300 applicants in less than two weeks last year before the program’s applications were halted, and that “the program will replace its first-come, first-serve basis with a lottery.”
Concerns continue to rise across the country as the migrant crisis continues to grow and overpower different states’ available resources.
The new Senate border bill that was introduced earlier this month before subsequently failing to gather enough support, was at the forefront of Biden’s priorities during his recent visit to the border.
“Folks, the bipartisan border security bill is a win for the American people and a win for the people of Texas, and it’s fair for those who legitimately have a right to come here,” Biden stated.
CLICK HERE TO GET THE FOX NEWS APP
National Border Patrol Council (NBCP) President Brandon Judd, who was present at former President Trump’s visit to the border in Eagle Pass, TX, relayed his sentiments towards the ongoing migrant crisis.
“Border patrol agents are upset that we cannot get the proper policy that is necessary to protect human life, to protect American citizens, to protect the people that are crossing the border illegally. We can’t do that because President Biden’s policies continue to invite people to cross here,” Judd said.
The artic was updated to include a statement from State Rep. Arambula.
Source: foxnews.com
Capital One’s $35.3 billion all-stock deal to purchase Discover could make it the largest credit card issuer in the country, in addition to expanding both its digital banking presence and Discover’s global payment network.
The deal arrives as consumers are struggling to keep up with inflated prices — and they’re carrying more credit card debt than before the pandemic. A report by the Federal Reserve Bank of New York, released on Feb. 6, found that Americans held a collective $1.129 trillion in credit card debt at the end of 2023. By comparison, by the end of 2019, Americans held $930 billion in credit card debt.
The report also showed that borrowers are having trouble repaying their debt. Serious delinquencies among credit card borrowers rose 6.36% in the fourth quarter of 2023 compared with a 4.01% increase at the same time in 2022. Both Capital One and Discover show an increase in delinquency rates, but Discover’s fourth-quarter results reported a larger spike in consumer card delinquencies than Capital One’s.
After a Capital One call for investors on Tuesday morning, the markets responded: Discover’s stock rose while Capital One shares dipped slightly.
In the call, Capital One indicated it expects the deal to be complete by the end of 2024 or early 2025 — that is, if federal regulators allow it. The acquisition is expected to face close scrutiny in the coming year.
Here’s what you need to know about Capital One’s Discover acquisition.
See the best Capital One cards
Capital One has cards for earning rewards and cards for building credit. Some even do both.
The deal opens the door for Capital One to become the nation’s largest credit card issuer by outstanding debt, outpacing JPMorgan Chase and Citigroup, according to the payment industry trade journal the Nilson Report. The company will remain based in McLean, Virginia, while maintaining a significant presence in Chicago, where Discover is based.
In the call with investors on Tuesday, Richard Fairbank, CEO and chairman of Capital One, touted the benefits of acquiring Discover’s global payment network, which will allow Capital One to more directly deal with merchants as opposed to a network intermediary. The more merchants Capital One can reach, the more money it stands to make over time.
While Capital One still holds contracts with Visa and Mastercard for many of its credit products, it will move at least some of its cards onto the Discover network over time, thus keeping a larger slice of the lucrative merchant fees its customers generate.
By owning a payment network, Capital One is poised to compete with its most direct competitor, American Express, and reduce its dependency on the two biggest players in global payments: Visa and Mastercard.
Fairbank says the company is also hoping to expand Discover’s network deeper into the global market.
Capital One is the ninth-largest bank in the U.S. with both physical branches and an online presence. Meanwhile, Discover’s banking presence is overwhelmingly online. But both are credit card-first, banking-second companies. The acquisition won’t change that, but it will enable Capital One to expand further into banking.
The deal would accelerate Capital One’s banking business by allowing the company to tap in to Discover’s network for banks. In the call with investors, Fairbank said Capital One plans to move its debit card business over to the Discover Signature debit network to help Discover compete with the other three networks.
Fairbank said that branding for Discover’s banking network would remain Discover. “Capital One as the network might not be as ideal a thing for other banks to choose as the Discover brand,” he said.
Discover will remain its own brand in the combined company. In the investor call, Fairbank said Capital One will keep Discover’s branding and continue to market it. “Over time, customers would understand this is part of Capital One,” he said.
Fairbank indicated that it was unrealistic to convert the Discover brand into Capital One. “Think about all those stickers that are out there at every point of sale and all the real estate that’s now on every online checkout page and so on,” he said. “It would be a really big lift to convert that to the Capital One brand.”
Fairbank noted that while Discover is accepted nearly universally in the U.S., it has an image problem that Capital One hopes to change. He said, “Our research confirms that customers are very satisfied with acceptance, but the perception of acceptance among noncustomers lags the reality.”
Fairbank says Capital One plans to move some of its credit card volume to Discover’s network in order “to enhance its scale.” He also said the company “will lean hard into further building the brand and the perceived acceptance of the credit card network here in the United States.”
Find the best Discover card for you
Discover cards don’t charge annual fees, and they have a unique bonus offer. Check out our favorites.
Consumers won’t see any changes from the acquisition anytime soon. That’s because the deal won’t be complete until shareholders and regulators approve it.
The Justice Department, banking regulators and the Federal Deposit Insurance Corp. are likely to scrutinize the proposed deal. The Biden Administration has toughened its approach to mergers and acquisitions, including those still underway like the Kroger and Albertsons grocery chain merger and Alaska Airlines’ takeover of Hawaiian Airlines. And last month, a federal judge blocked JetBlue’s buyout of Spirit Airlines under antitrust laws.
The U.S. Office of the Comptroller of the Currency has also said it plans to institute a more complex, and ultimately slower, process for bank acquisitions. Capital One’s Discover proposal faces standard regulatory procedures, so it’s unclear whether these stricter requirements would apply to this acquisition.
Fairbank noted in the call with investors that both Capital One and Discover will be filing approval applications with the federal government in the next few months and said “we believe that we are well-positioned for approval.”
Credit card interest rates are now much higher than in recent years, mirroring the broader rate environment. The average APR among credit cards that incurred interest was 22.75% in the fourth quarter of 2023, according to data from the Federal Reserve.
When it comes to interest rate offers, bigger companies aren’t always better, at least not for consumers. An analysis of 2023 credit card interest rate data by the Consumer Financial Protection Bureau, released on Feb. 16, found that the largest credit card issuers offer high interest rates — a maximum APR over 30% among nearly half of those issuers.
The report found a broad disparity between the median APRs on credit cards offered by large and small financial institutions based on credit scores. The biggest difference is among customers with good credit scores (620 to 719 in this report): Large card issuers offer a median APR of 28.2% — a difference of 10.02 percentage points compared with the median APR offered by smaller card issuers.
Big companies are also more likely to include an annual fee, and those fees are 70% higher than at small banks and credit unions, according to the CFPB report.
Still, big companies do tend to offer more generous rewards and discounts, like cash back and travel points, with their credit cards compared with small institutions. But the best perks are offered to the wealthiest customers, who make the most money through frequent and larger spending at merchants.
Who doesn’t want to be rewarded?
Create a NerdWallet account for personalized recommendations, and find the card that rewards you the most for your spending.
Photo by Joe Raedle/Getty Images News via Getty Images
Source: nerdwallet.com