Daily Archives: November 27, 2013

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RBS faces possible criminal investigation

RBS faces possible criminal investigation

The Serious Fraud Office is considering a criminal investigation into allegations of wrongdoing at the Royal Bank of Scotland’s global restructuring group, after claims the lender was forcing small companies out of business.

The SFO is in the early stages of assessing whether there was any criminal activity and has not yet progressed to a full investigation, reports the Financial Times.

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Exclusive – JPMorgan tried but failed to satisfy Fed on metals warehousing: letters

Exclusive – JPMorgan tried but failed to satisfy Fed on metals warehousing: letters

The U.S. Federal Reserve was pressing JPMorgan Chase & Co (>> JPMorgan Chase & Co.) to distance itself from its metals warehousing business more than a year ago, documents seen by Reuters show, long before the issue became a focal point in the debate over Wall Street’s role in physical commodities trading.

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Banks may charge you interest on your savings

Banks may charge you interest on your savings

Bank customers could look forward to being charged to keep their money in U.S. banks.

That’s the latest threat coming out of Wall Street, according to a report in the Financial Times, as financial institutions look to combat a possible interest rate cut from the Federal Reserve on its bank reserves.

This latest potential step would be a hit to depositors, already earning close to zero interest on checking and savings accounts.

But the banks say it’s a side effect of the Fed’s quantitative-easing strategy and itseventual tapering of its asset purchases of $85 billion a month, which has created high liquidity within banks. The report cited executives at two of the top five U.S. banks, who said a cut in the 0.25 percent rate of interest on the $2.4 trillion in reserves they hold at the Fed would lead them to pass on the cost to depositors.

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N.Y. appeals court to decide time limits on MBS put-back claims

N.Y. appeals court to decide time limits on MBS put-back claims

On Wednesday, when most people are calculating how early they can slip out of work and begin their Thanksgiving festivities, an awful lot of high-priced New York lawyers will be fighting for seats at 27 Madison Avenue, where the New York Appellate Division, First Department, hears appeals. Billions of dollars of claims for breaches of representations and warranties on mortgage-backed securities hang on what the state appeals court decides about the time limits for these suits. Does the clock start ticking when the securities are issued and representations about underlying mortgage loans take effect? Or does New York’s six-year statute of limitations begin running only when the MBS seller refuses to repurchase loans that breach its contractual assurances? A five-judge appellate panel will confront the issue Wednesday in a case called Ace Securities v. Deutsche Bank Structured Products. The courtroom should be packed with lawyers and clients on both sides of New York’s sprawling MBS put-back litigation docket, who are hoping for clues about what the appeals court will decide

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Insight: A new wave of U.S. mortgage trouble threatens

Insight: A new wave of U.S. mortgage trouble threatens

(Reuters) – U.S. borrowers are increasingly missing payments on home equity lines of credit they took out during the housing bubble, a trend that could deal another blow to the country’s biggest banks.

The loans are a problem now because an increasing number are hitting their 10-year anniversary, at which point borrowers usually must start paying down the principal on the loans as well as the interest they had been paying all along.

More than $221 billion of these loans at the largest banks will hit this mark over the next four years, about 40 percent of the home equity lines of credit now outstanding.

For a typical consumer, that shift can translate to their monthly payment more than tripling, a particular burden for the subprime borrowers that often took out these loans. And payments will rise further when the Federal Reserve starts to hike rates, because the loans usually carry floating interest rates.

The number of borrowers missing payments around the 10-year point can double in their eleventh year, data from consumer credit agency Equifax shows. When the loans go bad, banks can lose an eye-popping 90 cents on the dollar, because a home equity line of credit is usually the second mortgage a borrower has. If the bank forecloses, most of the proceeds of the sale pay off the main mortgage, leaving little for the home equity lender.

House Republicans propose closing down FHA

As Congress slowly debates the future of housing finance, a group of House Republicans led by Justin Amash (R-MI) has proposed taking the government out of lending altogether using a 5-year phased plan.

A one page document summarizing H.R. 3550, The New Fair Deal Banking and Housing Stability Act of 2013, has been making the rounds on the Hill and was recently highlighted on the Confounded Interest blog:

There are a plethora of housing finance bills being written or circulating. These include the deeply flawed Corker-Warner bill, the Crapo-Johnson bill (that I have not seen), the PATH Act from the House. Now we have another House GSE reform bill, The New Fair Deal Banking And Housing Stability Act of 2013, from Representatives Justin Amash (sponsor), Jeff Duncan, Jim Jordan, Doug Lamborn, Tom McClintock, Mark Meadows, Tom Price and Matt Salmon.

Most interesting about this bill: it eliminates not only Fannie Mae and Freddie Mac, but also the FHA. Talk about getting the government out of the lending business. This is pretty much the “all-in” version of that approach.

Chinese buying up housing in California

The American consumer may still be hobbled, but investors are helping to prop up the U.S. housing market — and many of the retail investors buying homes are from Asia. CNBC reports:

While American secondary schools and universities are a big draw for the majority of Chinese buyers in California, Yang, and many of his colleagues, are also concerned about China’s political instability, inflation, even pollution. They are paying all-cash for real estate in California, using it as a safe-haven for their wealth. 

The coverage also notes that many aren’t moving to the U.S. immediately, as they have young children and are waiting for them to become school-aged. in the meantime, many of these new investors are renting out their homes.

Source: CNBC