Loans

Moment of truth looms for Britain’s payday lenders

25 Nov 2013

Britain will cap the rates Wonga and rivals can charge borrowers for short-term loans. At present, annualised rates can top 5,000 pct. Payday lenders argue that reflects default risk; regulators worry about limited competition. What happens next should show who’s right.

Fannie, Freddie buyout offer too good to be true

14 Nov 2013

A group of investors wants to buy their insurance businesses. The offer of a takeover windfall might appeal. But the easy transition they promise and the need for no taxpayer backstop sound unlikely. The plan wouldn’t end the cycle of privatizing profit while socializing losses.

Rehab needed for U.S. 30-year mortgage habit

11 Nov 2013

America’s standard home loan format only really works well with stable interest rates. Floating-rate mortgages make more sense, especially when rates shoot up. But neither borrowers nor regulators seem fond of them. These obstacles risk a shock to the recovering housing market.

Say goodbye to American housing finance reform

7 Nov 2013

Bailed-out mortgage backers Fannie and Freddie had an astounding $39 bln quarter. That sort of performance won’t last forever, and it doesn’t erase the companies’ past misdeeds. But as Congress mulls fixing the housing system, it might have trouble slaughtering two cash cows.

Take M&A out of the financial crisis toolkit now

21 Oct 2013

JPMorgan and BofA are paying billions in settlements related to failed deals that were actively encouraged by regulators. The “supervisory acquisition” was a trusty instrument for decades. Not anymore, though. Watchdogs better hope their other new mechanisms work as planned.

Fresh U.S. mortgage bailout raises timely red flag

26 Sep 2013

Fannie and Freddie are on the mend, but the Federal Housing Administration may need extra Treasury support. New U.S. capital for an agency that backstops home loans would coincide with the re-emergence of private guarantors. It’s a helpful reminder to remember past mistakes.

Countrywide legal escape aided by investor apathy

11 Sep 2013

A U.S. court says shareholders lost the right to sue on the mortgage lender’s behalf after it was sold to BofA. That squelches one way to hold the likes of ex-CEO Mozilo to account. And it’s a reminder to litigious stock owners to cover all their bases sooner rather than later.

Private loans to U.S. consumers put DC on notice

6 Sep 2013

Investors are edging into the safest home and student debt without the benefit of government guarantees. That’s a positive step, but the danger is Uncle Sam may get stuck with the worst credits. Policymakers need to keep up and ensure subsidies only go where they are needed.

New U.S. mortgage bond rules at least are simpler

28 Aug 2013

Regulators have reworked proposals for how much of their own structured finance cooking banks must eat. Though the feds have given ground on down payments, the streamlined requirements – despite their 500 pages – are a step toward greater mortgage market confidence.

Obama college cost-cutting plan gets gentleman’s C

23 Aug 2013

The president aims to hold down tuition and loans by rating schools according to the value they deliver. But a proposed cap on debt repayments could encourage even more student borrowing. That and similarly counterproductive details pull down an otherwise useful program’s grade.

Uncle Sam owns country’s most lucrative business

8 Aug 2013

Forget about Apple and Exxon. At $10 bln, Fannie Mae’s second-quarter showing bested the tech and oil giants’ profit by 46 percent. Congress must be tempted to hold on to the lucre rather than wind down Fannie and sister agency Freddie Mac. But such earnings supremacy won’t last.

Latest US mortgage kickstarter’s clever but costly

25 Jul 2013

Freddie Mac is selling the first agency home-loan bond that offloads some risk from taxpayers to investors. Such innovations are crucial for reducing Uncle Sam’s exposure to the housing market. But at current rates, investors are getting most of the benefits at Freddie’s expense.

Ailing U.S. mortgage agency needs stronger walls

23 Jul 2013

The Federal Housing Administration is $16 bln in the red. Now a bipartisan group of senators is trying to boost the agency’s capital and oversight. Their bill, though, doesn’t go far enough. Without more robust rules on lending standards, the FHA will remain a fixer-upper.

Student loan rate hike is a D.C. dysfunction bonus

1 Jul 2013

Congressional inaction means Uncle Sam-backed college borrowing costs double to 6.8 pct. That should curb the rapid rise of such debt, now at nearly $1 trln. It might even slow education inflation. It’s a rare case of useful policy that doesn’t require waiting for the Fed.

Home equity help is better route to U.S. ownership

21 Jun 2013

The Federal Housing Administration is in a $16 bln hole thanks to a failed model of encouraging home-buying by allowing tiny down payments. A new proposal to match buyers’ savings to create a bigger slug of equity looks like a less risky way to subsidize the American Dream.

U.S. mortgage plan may offer best of bad options

13 Jun 2013

A bipartisan Senate proposal finally phases out Fannie and Freddie, but only tweaks the flawed government-backed home finance system. It may even hand a few hedge funds a profit. Sadly, more radical options have faded with time. It’s now about what’s politically possible.

Fannie, Freddie shareholders in cloud cuckoo land

12 Jun 2013

Some are suing the U.S. for $41 bln, claiming the two firms’ 2008 bailout gave investors a bum deal. That’s nuts. Fannie and Freddie were failing, racking up $150 bln in losses that could have bankrupted them and left shareholders with zilch. It’s time investors accepted that.

Fannie’s $59 bln payment is terrible good news

9 May 2013

Uncle Sam could use the money. Fannie Mae’s enormous dividend to be paid next month will cut the federal deficit further and give Treasury more headroom under the debt ceiling. But the benefits erode the cover politicians need to tackle entitlement and other much-needed reforms.

America’s consumer protector needs finance lesson

9 May 2013

Elizabeth Warren wants next year’s student-loan rate to match what the Fed charges banks. That ignores the two assets’ differing credit risks. It also sets students up for an adjustable-rate shock if and when the cost goes up. That’s surely not the outcome Senator Warren wants.

Freddie Mac’s $72 bln bailout could look worth it

8 May 2013

The housing agency’s Q1 results indicate Uncle Sam may soon be able to call the rescue a success. Freddie has already returned 40 pct of what it took. A $30 bln tax credit could make taxpayers almost whole. That’ll make it hard to take Freddie out on the rowboat “Godfather”-style.