Posts Tagged ‘Wells Fargo’

Attorney Generals in 49 out of 50 states voted for this mortgage settlement. All sounds good on the surface, politicians and banks are coming forth and declaring victory.

Mortgage Forclosure

Mortgage Foreclosure

Let’s take a closer look. The top 5 banks The signatories to the deal are Bank of America, Citibank, Wells Fargo & Co., JPMorgan Chase and Ally Financial (formerly GMAC), which handle payments on more than half the nation’s outstanding 27 million home loans and therefore have been at the center of the servicing and foreclosure abuses the settlement is supposed to end.

  • How much of this will translate into an outlay of cash by the five banks? Not much, if any.

On the surface it would seem that it is a $25 Billion dollar settlement when in fact it is not. The only cold cash the banks are paying is a combined $5 billion, including $1.5 billion to compensate borrowers whose homes were foreclosed on from 2008 through the end of last year, with the rest going to the federal and state governments to pay for regulatory programs.

Even the government acknowledges that a lender typically benefits when ways are found to keep a home out of foreclosure — a lender loses an average $60,000 on every foreclosure, according to figures the federal government disclosed in connection with the settlement announcement. It’s been institutional resistance and legal entanglements, not economics, that have kept more modifications from going forward.

Many of the loans destined to be modified under the settlement aren’t even owned by the banks, but rather by investors — the banks just collect the checks.

  • Investors such as pension funds
  • 401(k) plans
  • Insurance companies and the like

Parties that did not themselves engage in any of the wrongdoing covered by the settlement.” If I’m an investor, how am I with taking this kind of hair cut? This will not sit too well with the investor community.

What about homeowners? They don’t get much, especially in relation to the scale of the housing crisis.

  • More than 2 million owners have lost their homes to foreclosure during the last four years.
  • This deal will provide 750,000 with a payment of $2,000 each.

Some 11 million homeowners are underwater by about $700 billion combined, or an average of nearly $65,000 each. In a transport of optimism, federal officials are projecting that this deal will help 2 million of them, to the tune of perhaps $20,000 each. By the way, loans owned by the government-sponsored firms Fannie Mae and Freddie Mac aren’t eligible for this relief. Since they own or control the majority of all outstanding mortgages, that’s a rather large black hole.

Remember though, Fannie Mae and Freddie Mac are bleeding money every month, and our owned by the government. They  have paid out huge bonuses even in these tough economic times. Fannie Mae was the fair-haired child of Barney Frank . You may recall in July of 2008 Barney was on record defending Fannie Mae, how strong they were, and how dare anyone question their motives and financial strength. They collapsed less than 4 months from his statements to the public and Congress.

They were the entities that forced the banks into doing Stated Income Loans, No Assets Loans, NINA or No Income, No Asset Loans. While some may point fingers at the banks, Fannie and Freddie were at the forefront pushing these types of mortgages on the banks, and lenders, trying to increase homeownership to individuals who never should have been put into a house to begin with.

The settlement, meanwhile, provides cover for other stealth bailouts. On Thursday, the day of the big parade, the U.S. Office of the Controller of the Currency quietly settled claims against BofA, Wells Fargo, Citibank and JPMorgan Chase related to cease-and-desist orders the agency issued last year over the banks’ crooked mortgage servicing and foreclosure activities.

The agency says it settled those claims for $394 million. The actual figure is zero. That’s because the agency won’t ask for any of the money as long as the banks meet their obligations under the mortgage settlement. This is the kind of fun with math that helped get us into the housing crisis in the first place.


The number of Credit Union Membership is fairly well-distributed across the various Asset Group Sizes in terms of percentage. Credit Unions have reached $926 million in total assets as of 2010. Compared to their banking brethren, it pales in comparison.

Bank of America, J.P. Morgan Chase, Wells Fargo, Citigroup, and Goldman Sachs each are larger in asset size than ALL the Credit Unions combined. The top 5 banks now control 50% of the assets in these institutions, and just two years ago it took the top 15 banks to control 50%. Banks have slightly more institutions than credit unions, however the bigger credit unions are garnering a larger % of the asset pie just like the bigger banks.

What is abundantly clear…

  • 82% of the credit unions have an asset size <$100 million.
  • 53% have asset size <$20 million.
  • The big have become too Big to Fail.
  • Both FDIC and NCUSIF funds are basically insolvent, and will have to collect for years the premiums to pay for past failures.
  • These institutions will hasten mergers and failures if we have another financial meltdown.

Credit Union Asset Group Members

While the Credit Union mergers are getting bigger, what is happening to:

  • Asset size of the various Credit Union Groups?
  • Loan size of the various Credit Union Groups?
  • Membership of the various Credit Union Groups?

These are statistics as of the 3rd. Qtr. 2010. Large is considered >$100 Million in Assets. While most would consider this large, banks such as J.P. Morgan Chase, Wells Fargo have asset sizes larger than ALL Credit Unions Combined!

The larger credit unions control 86% of all the assets. Asset growth has been 21.6% since the beginning of 2006, and has slowed quite dramatically with these economic conditions. However you would think that with the bashing of the banks these past few years, that it would have been dramatically higher. Why Not?

Lack of leadership, marketing and branding. Social Media has now entered the arena, only to be embraced by most of the larger credit unions. The smaller credit unions have a great opportunity that they are wasting, and getting further and further behind.

The larger credit unions control 87.75% of all loans granted. Loan growth has been 12.31% since the beginning of 2006 and falling dramatically recently.

The larger credit unions control 78.89% of all membership. Membership has only grown 5.03% since 2006 in total.

What will the next 3-5 years look like for Credit Unions?

< $5 Mil $5-$20 $20-$100 > $100 Mil. Total
Total Assets $3,913 $23,423 $99,758 $792,900 $919,994
% of Total Assets 0.43% 2.55% 10.84% 86.19% 100.00%
Total Loans $1,951 $11,895 $56,361 $507,619 $577,826
% of Total Loans 0.34% 2.06% 9.75% 87.85% 100.00%
Total Members 1,117 4,321 13,988 72,593 92,019
% of Total Members 1.21% 4.70% 15.20% 78.89% 100.00%

A new federal law curbing fees on debit-card transactions could wipe out $9 billion in revenue annually for issuers.

The Durbin Amendment, which is part of the financial-overhaul bill enacted in July is one part of the reform. It calls for the Federal Reserve to determine that rates on debit-card transaction or interchange fees are “reasonable and proportional,” and that they cover the ” actual incremental cost” of the transaction. The Fed still has several months to set new terms. “The Durbin Amendment could significantly impact consumers by increasing the cost of their everyday debit card transactions, limiting their payment choices and impacting industry innovation,”Banks are scrambling to gain back some of the lost revenue from this and prior regulatory changes. Among the new tactics being considered:

  • Emphasizing prepaid cards, which are exempt from the new rules.
  • Adding new fees to existing products.
  • Having minimum balances for checking accounts.
  • Watering down debit card reward programs., estimates that if the Fed cuts interchange fees by half — considered a possible scenario by the industry — debit-card issuers will annually lose $9.1 billion, or $18.35 per debit card, in revenue.U.S. general purpose debit card purchases totaled $1.45 trillion in 2009, up 7.5% from 2008, according to the Nilson Report, which tracks the payment industry. Spending on U.S. Visa- and MasterCard-branded prepaid cards totaled $ 49 billion in 2009, accounting for 3.39% of all debit card purchase volume that year. Bank of America, Wells Fargo &Co. (WFC) and J.P. Morgan Chase & Co. (JPM) are the top U.S. issuers of debit cards. The three accounted for 38% of all debit card purchases in 2009, according to Nilson.

In August, Bank of America introduced its most basic checking account with a monthly fee of $8.95.

  • Customers may avoid this fee if they sign up for paperless statements and use automated teller machines or ATMs, and not bank tellers, for routine transactions such as deposits and withdrawals.
  • Last month, the firm took a $10.4 billion charge in its third quarter because of “limits to be placed on debit interchange fees … which will reduce future revenues.”
  • It is also testing different checking accounts, allowing customers to choose between a monthly maintenance fee or avoid this fee by using a Bank of America-issued debit or credit card or keeping higher account balances or a mortgage with the company.
Starting this month, Citigroup Inc. (C) will charge a monthly fee of $8 for its most basic checking account.
  • Customers can avoid this fee if they use their account at least five times in a month, including to pay bills and withdraw cash from an ATM. Monthly fees for Citigold — its fully loaded checking account with perks, including free paper checks and no annual fee on certain Citi credit and debit rewards cards — will be $30.
  • Customers may avoid this fee if they satisfy certain conditions, such as maintaining a minimum balance of $50,000 across their checking, savings and money market accounts.

Unintended consequences of financial reform always seem to raise the cost of doing business to the consumer, and the banks and credit unions still need to make their profits.

I wonder if the Free Toaster will be offered again for new accounts?

Let me know if you think these financial reforms are a good thing?