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Bucks Blog: Free Checking Still Widespread at Credit Unions

March 25, 2013 by Leave a Comment

Nearly three-quarters of the country’s largest credit unions still offer no-strings-attached free checking accounts, a new report from Bankrate.com finds.

By comparison, fewer than half of banks — 39 percent — offer “stand-alone” free checking accounts, which are those that have no requirements, like direct deposit or minimum balances, to avoid fees, according to Bankrate’s report on bank checking accounts released last fall.

The latest findings come from a survey of the 50 largest credit unions, based on total deposits, from Jan. 15 to 28. Thirty-six of the 50 offered free checking. Half had no minimum opening deposit requirement, and none had a minimum opening deposit of more than $100.

The availability of free checking at credit unions has declined modestly since 2010, but has “plummeted” at banks, according to Bankrate. Free checking, in fact, “remains the rule, rather than the exception” at credit unions, Greg McBride, Bankrate’s senior financial analyst, said in a statement.

The average credit union A.T.M. surcharge — the fee a machine operator charges a noncustomer — climbed to $2.29, from $2.08 last year. (The average bank A.T.M. surcharge is $2.50.)

Surcharges are nearly universal among both banks and credit unions, with $2 and $3 the most common charges at credit unions and $3 the most common at banks, the report found.

A.T.M. surcharges are different from the fees an institution may charge its own customers for making a withdrawal at an out-of-network A.T.M. The most common out-of-network fees are $1 and $1.50 at credit unions, and $2 at banks.

Further, the average “nonsufficient funds” charge at credit unions is about $27 at credit unions, compared with $31 at banks.

Do you use a free checking account at a credit union?

Article source: http://bucks.blogs.nytimes.com/2013/03/25/free-checking-still-widespread-at-credit-unions/?partner=rss&emc=rss

Filed Under: Your Money Tagged With: , ,

You’re the Boss Blog: A Modest Proposal to Open Up Small-Business Credit

January 14, 2013 by Leave a Comment
Searching for Capital

A broker assesses the small-business lending market.

In my last post about the state of small-business lending, I discussed the need to find a way to break through the gridlock in order to open up access to reasonably priced capital for small-business owners and entrepreneurs.

In this post, I would like to suggest that we create mechanisms and loan products that would allow lenders to be paid a percentage of an entrepreneur’s future earnings — irrespective of what company the entrepreneur ends up building or working for. The payments would continue until the obligation was paid off. (I’ve written previously about this idea on my company’s blog.)

While I am sure that many will consider this idea controversial, it’s also fairly simple. If you are an entrepreneur looking for a loan, and you have enough confidence in your business or idea, you should be willing to pledge to pay a percentage of your future earnings — regardless of whether your current idea succeeds — until you have fulfilled your obligation. This way, the lender is betting not just on a particular company or idea but on a person, one who is willing to put his or her neck on the line.

Perhaps this financing could be offered by Federal Deposit Insurance Corporation-regulated banks that could leverage their low cost of capital to help small businesses. Of course, this would require federal bank regulators to think outside of the box, but a form of this type of financing exists. It’s called revenue-based financing, and it involves a lender’s making a loan to a company in exchange for a future piece of the company’s revenue. In this case, the financing is tied to the success of a specific company, and not to the future of the entrepreneur. And it comes with expensive rates.

The market clearly needs new forms of collateral in order to keep rates reasonable and in check. In today’s environment, many small-business owners are forced to use their homes as collateral — but with so many homes underwater, many entrepreneurs do not even have that option. The upshot is that this “collateral crisis” either stymies innovation or forces the entrepreneur to obtain capital from an alternative source at very high interest rates.

In the new model I am proposing, because the lender is assured of a piece of the entrepreneur’s future earnings regardless of whether the current business succeeds, the lender should be willing to be more flexible with terms and rates. And finally, the mechanisms to enforce these loans do exist. If we can track down deadbeat fathers for a piece of their future earnings, we should be able to do so with entrepreneurs.

So what do you think? If you are an entrepreneur, would you consider taking a loan that collateralizes your future earnings? Presumably, instead of paying 40 to 60 percent interest for a six-month loan — as many of us are forced to do today — you might pay 6 percent interest on 10 percent of your earnings until your obligation is paid off.

And if you’re a lender, would you consider making these types of loans? Do you think this new collateral mechanism could open up credit markets and spur innovation and growth?

Ami Kassar founded MultiFunding, which is based near Philadelphia and helps small businesses find the right sources of financing for their companies.

Article source: http://boss.blogs.nytimes.com/2013/01/14/a-modest-proposal-to-open-up-small-business-credit/?partner=rss&emc=rss

Filed Under: Small Business Tagged With: , ,

Consumers Win Some Mortgage Safety in New Rules

January 10, 2013 by Leave a Comment

The rules, being laid out by the Consumer Financial Protection Bureau and taking effect next January, will also set some limits on interest-only packages or negative-amortization loans, where the balance due grows over time. Banks can make such loans, but the new rules would not protect them from potential borrower lawsuits if they do so.

And mortgage originators will in most cases be restricted from charging excessive upfront points and fees, from making loans with balloon payments and from making loans that load a borrower with total debt exceeding 43 percent of income.

With the sweeping rules, financial regulators are trying to substantially overhaul the market for home mortgages by creating a legal distinction between “qualified” loans that follow the new rules and are immune from legal action, and “unqualified” mortgages that continue practices that regulators have frowned on. The new rules are also aimed at getting banks to lend again, something they have been slow to do since the financial crisis and since the Dodd-Frank Act required new limits on bank activities.

Gone, the regulators hope, will be the unbridled frenzy that encouraged lenders to ignore whether borrowers could repay as long as the lenders could sell the mortgages to third parties, usually investment firms that sliced them up and resold them as part of complex financial derivatives.

By following the new rules, banks will be given a “safe harbor,” which ensures that they cannot be successfully sued for reckless or abusive lending practices, federal officials said Wednesday. Lenders must document a borrower’s ability to repay a loan; one way of doing that is to follow several guidelines issued Thursday that make a loan a “qualified” mortgage.

“When consumers sit down at the closing table, they shouldn’t be set up to fail with mortgages they can’t afford,” said Richard Cordray, the director of the consumer bureau. “Our ability-to-repay rule protects borrowers from the kinds of risky lending practices that resulted in so many families losing their homes.”

Mortgage bankers generally applauded the new regulations, saying that they clear up uncertainty that has hung over the home lending business since the financial crisis. In fact, most of the types of loans now being restricted, which were rampant during the inflation of the housing bubble, have been relatively rare in the last couple of years because many banks have tightened lending since the financial crisis.

“These rules offer protection for consumers and a clear, safe environment for banks to do business,” David Stevens, chief executive of the Mortgage Bankers Association, said in an interview. “Now everybody knows if you stay inside these lines, you are safe.”

He added that he believed the consumer bureau “did a great job listening to stakeholders” in shaping the rule.

The new rules will not necessarily lead to an immediate expansion of credit, Mr. Stevens said, because nearly all mortgage loans being made currently are being sold to government-sponsored enterprises like Fannie Mae and Freddie Mac. Their underwriting standards are not affected by the new rules.

In certain circumstances, the new lending rules can be bypassed for up to seven years, regulators said. New loans can be considered to be a “qualified loan” even if the borrower has a debt-to-income ratio of more than 43 percent as long as the loan is eligible for purchase or guaranteed by Fannie Mae or Freddie Mac, for example, or by one of several executive branch agencies, like the Department of Veterans Affairs.

The consumer bureau said that the exception was created “in light of the fragile state of the mortgage market as a result of the recent mortgage crisis.” Without the exception, the bureau said, “creditors might be reluctant to make loans that are not qualified mortgages, even if they are responsibly underwritten.”

Similarly, the new rules allow balloon payments in mortgages that are originated by and retained in the portfolio of small lenders that operate primarily in rural or underserved areas.

The legal protections offered to lenders by the qualified mortgage rule are not absolute. Lenders do not receive complete immunity from lawsuits in all circumstances. Some higher-priced loans, given to consumers with weak credit, can be challenged if the borrower can prove that he did not have sufficient income to pay the mortgage and other living expenses. And the rules do not affect the rights of consumers to challenge a lender for violating other federal consumer protection laws.

“We believe this rule does exactly what it is supposed to do,” Mr. Cordray said in a statement prepared for delivery Thursday morning in Baltimore, where the rules are being announced. “It protects consumers and helps strengthen the housing market by rooting out reckless and unsustainable lending, while enabling safer lending,” he said.

Article source: http://www.nytimes.com/2013/01/10/business/consumers-win-some-mortgage-safety-in-new-rules.html?partner=rss&emc=rss

Filed Under: Economy News Tagged With: , ,

Markets Take a Step Backward

December 5, 2012 by Leave a Comment
Opinion »

Editorial: Rigging the Financial System

Will authorities really hold banks and bankers accountable for manipulating interest rates?

Article source: http://www.nytimes.com/2012/12/06/business/daily-stock-market-activity.html?partner=rss&emc=rss

Filed Under: Business News Tagged With: , ,

Bucks Blog: Weighing Prepaid Cards vs. Checking Accounts

September 6, 2012 by Leave a Comment

Prepaid cards can be a better deal than checking accounts for some people, but the cards need more consumer safeguards, a new report from the Pew Charitable Trusts finds.

Along with the report, “Loaded with Uncertainty,” Pew introduced an online tool to help consumers determine which option is best for them.

The report divides consumers into three types in terms of their banking expertise: “savvy,” who use direct deposit and avoid fees whenever possible; “basic,” who aren’t as proficient at avoiding fees and have at least one overdraft fee a month; and “inexperienced,” who make heavy use of services but typically pay two overdraft fees a month.

Then, the researchers applied those characteristics to more than 200 checking accounts offered by the 12 largest banks, and 52 prepaid cards available online, to see which accounts best-suited each category.

For savvy consumers, checking accounts are the most economical, with a median monthly cost of about $4, compared with $4.50 for prepaid cards. Inexperienced consumers, however, did better with prepaid cards, which cost them a median of about $29 a month, compared with $94 for checking accounts.

Still, the cards carry myriad fees, and disclosure isn’t uniform. So just because a card doesn’t disclose that it charges a fee, for instance, doesn’t mean that it doesn’t charge it. There’s simply no way for consumers to know until they end up incurring the charge.

Also, balances on prepaid cards don’t always have clear protection from F.D.I.C. insurance, the report found. If a bank fails, the agency reimburses deposits up to $250,000. But many companies that offer prepaid cards aren’t banks and don’t hold the funds themselves. Rather, they pool funds in large accounts at a third-party bank, where the money may be covered by so-called “pass-through” insurance, which may be more tenuous, the report says.

Of the 52 cards Pew studied, only three indicated that they lacked F.D.I.C. insurance. But there is no federal oversight or supervision of prepaid companies that aren’t banks, to make sure the proper requirements for the insurance are met, Pew found.

“Claims of F.D.I.C. insurance in cases where portions of consumers’ funds may in fact be uninsured create a false sense of security for unsuspecting consumers,” the report said.

The report urges the federal Consumer Financial Protection Bureau to create better oversight of the cards.

Do you use prepaid cards? Do you prefer them to checking accounts?

Article source: http://bucks.blogs.nytimes.com/2012/09/06/weighing-prepaid-cards-vs-checking-accounts/?partner=rss&emc=rss

Filed Under: Your Money Tagged With: , ,

DealBook: Goldman Sachs Cuts a Little Deeper

June 5, 2012 by Leave a Comment

It isn’t getting better out there.

Wall Street, which has been paring its ranks over the last year as it struggles with lackluster markets and new regulations, is cutting deeper as it heads into what is expected to be a rough summer.

Goldman Sachs laid off roughly 50 people last week, according to people briefed on the matter but not authorized to speak on the record. The cutbacks have rattled some people in the firm, in part because a number of the employees were managing directors and on the higher end of Goldman’s pay scale. Managing directors make a base of $500,000 and receive an annual bonus that can climb into the millions of dollars.

Last week’s layoffs are seen as a sign that Goldman is looking further up the food chain for additional cuts after already slashing 8.5 percent of its work force, or 3,000 people, in the last year. In addition it has cut more than $1.4 billion in noncompensation expenses from its operations over the last year or so.

A Goldman spokesman declined to comment.

The layoffs are largely economic; the firm like the rest of Wall Street is confronting a number of challenges to growth, in part because of Europe’s debt woes. Already, analysts have begun ratcheting down their second-quarter earnings estimates for the banks.

Yet, Goldman has also named new managers in some crucial divisions recently, which has led to some staffing cuts, whether for strategic or budgetary reasons. If markets don’t pick up, it is almost certain that the firm will make additional cuts later this year.

And Goldman isn’t the only firm cutting staff. Morgan Stanley reduced its work force by 2,935 during the 12 months that ended March 31. While it is a similar number to Goldman’s, this represents just 4.7 percent of its work force. If markets continue to deteriorate this summer, Morgan Stanley is likely to make additional small cuts.

Other firms have been cutting aggressively. Credit Suisse, for instance, had laid off people and earlier this year filed filed a notice with the New York Department of Labor, saying that it planned to lay off 109 people in the state before May 1.

Article source: http://dealbook.nytimes.com/2012/06/04/goldman-sachs-cuts-a-little-deeper/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Internet Poker Owner Admits Deceiving Banks

December 20, 2011 by Leave a Comment
Opinion »

Disunion: Birthday of a Nation

On the first anniversary of secession, the Confederacy found itself surprisingly upbeat about its future.

Article source: http://feeds.nytimes.com/click.phdo?i=f661daeb79bd2edc92eb01071b136805

Filed Under: Business News Tagged With: , ,

Bucks Blog: Monday Reading: Time to Book Trips Involving Sun and Sand

November 14, 2011 by Leave a Comment

November 14

Monday Reading: Time to Book Trips Involving Sun and Sand

It’s time to book trips featuring sun and sand, banks impose new consumer fees, retiring without a home loan and other consumer-focused news from The New York Times.

Article source: http://feeds.nytimes.com/click.phdo?i=4d1c15fd2aebaa605f4b1171e252116b

Filed Under: Your Money Tagged With: , ,

Fair Game: A Foreclosure Settlement That Wouldn’t Sting

October 29, 2011 by Leave a Comment

While the exact terms remain under wraps, some aspects of this agreement — between banks on one side, and the federal government and a raft of state attorneys general on the other — are coming into focus.

Things could change, of course, and the deal could go by the boards. But here’s the state of play, according to people who have been briefed on the negotiations but were not authorized to discuss them publicly.

Cutting to the chase: if you thought this was the deal that would hold banks accountable for filing phony documents in courts, foreclosing without showing they had the legal right to do so and generally running roughshod over anyone who opposed them, you are likely to be disappointed.

This may not qualify as a shock. Accountability has been mostly A.W.O.L. in the aftermath of the 2008 financial crisis. A handful of state attorneys general became so troubled by the direction this deal was taking that they dropped out of the talks. Officials from Delaware, New York, Massachusetts and Nevada feared that the settlement would preclude further investigations, and would wind up being a gift to the banks.

It looks as if they were right to worry. As things stand, the settlement, said to total about $25 billion, would cost banks very little in actual cash — $3.5 billion to $5 billion. A dozen or so financial companies would contribute that money.

The rest — an estimated $20 billion — would consist of credits to banks that agree to reduce a predetermined dollar amount of principal owed on mortgages that they own or service for private investors. How many credits would accrue to a bank is unclear, but the amount would be based on a formula agreed to by the negotiators. A bank that writes down a second lien, for example, would receive a different amount from one that writes down a first lien.

Sure, $5 billion in cash isn’t nada. But government officials have held out this deal as the penalty for years of what they saw as unlawful foreclosure practices. A few billion spread among a dozen or so institutions wouldn’t seem a heavy burden, especially when considering the harm that was done.

The banks contend that they have seen no evidence that they evicted homeowners who were paying their mortgages. Then again, state and federal officials conducted few, if any, in-depth investigations before sitting down to cut a deal.

Shaun Donovan, secretary of Housing and Urban Development, said the settlement, which is still being worked out, would hold banks accountable. “We continue to make progress toward the key goals of the settlement, which are to establish strong protections for homeowners in the way their loans are serviced across every type of loan and to ensure real relief for homeowners, including the most substantial principal writedown that has occurred throughout this crisis.”

Still, a mountain of troubled mortgages would not be covered by this deal. Borrowers with loans held by Fannie Mae and Freddie Mac would be excluded, for example. Only loans that the banks hold on their books or that they service for investors would be involved.

One of the oddest terms is that the banks would give $1,500 to any borrower who lost his or her home to foreclosure since September 2008. For people whose foreclosures were done properly, this would be a windfall. For those wrongfully evicted, it would be pathetic. Roughly $1.5 billion in cash is expected to go into this pot.

The rest of the cash that would be paid by the banks is expected to be split this way: the federal government would get about $750 million, state bank regulators about $90 million. Participating states would share about $2.7 billion. That money is expected to finance legal aid programs, housing counselors and other borrower support. If 45 states participated, that would work out to about $60 million apiece.

Article source: http://feeds.nytimes.com/click.phdo?i=a4d2c8d4c0369136b1651afdd98360f5

Filed Under: Economy News Tagged With: , ,
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