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Your Money: Signs of Easier Money for Mortgages

April 12, 2013 by NewsMaker Leave a Comment

In the years after the housing bubble burst, borrowers had to practically promise their firstborn child to secure a mortgage. And while the requirements are still pretty rigorous, particularly for those with less than perfect credit, there are signs that at least some regional lenders and mortgage insurers are beginning to ease up. Some regional banks and credit unions are even offering products that vaguely resemble the more aggressive financing that became all too common during the boom days and eventually got many borrowers into trouble.

The piggyback loan, for instance, is back, mortgage lenders and brokers said. That is when borrowers take out two mortgages simultaneously (or a mortgage and a line of credit) so they can avoid the private mortgage insurance required on traditional mortgages for more than 80 percent of the home’s value.

And some credit unions, including Navy Federal and NASA Federal Credit Union, are offering 100 percent financing, at least in markets where home values have stabilized and appear to be on the upswing. U.S. Bank and Wells Fargo said they still allowed borrowers to use piggyback loans.

The big difference this time, lenders and mortgage brokers say, is that the loans are not being made to just anyone but to borrowers who can afford to pay them back (at least for now).

“This is all good news for consumers,” said Guy Cecala, publisher of Inside Mortgage Finance. “We are starting to see some loosening, but it’s very specific. It’s just in its infancy now, and it’s not the type of piggyback loans or low down payment loans that we saw before.”

And while there were clearly too many confusingly complex loans offered to too many unqualified borrowers at the height of the housing boom, what is being offered now seems reasonable, Mr. Cecala said. How far the lenders will eventually go to stand out from the competition remains to be seen. “The real question,” he said, “is, Will they be any more dangerous than what we’ve seen before?”

Lenders are beginning to be more accepting of merely average loan candidates, in certain circumstances. According to Mr. Cecala, traditional mortgages in the last several years were largely made to people with down payments of at least 20 percent and a strong average credit score of 760.

“That is phenomenally tough underwriting,” he said. “Now, what you are seeing is that lenders are willing to tinker with one element at a time. So if someone is putting at least 20 percent down, they will go down to 720. And if someone has a 760 or a 780 credit score, they might be willing to go up to a 95 percent” financing, he added, referring to a mortgage for 95 percent of the home’s value.

After 2008, many borrowers with little money to put down, and decent but not perfect credit, had little choice but to look to the Federal Housing Administration. The F.H.A., which does not make loans but insures mortgages that meet its guidelines, filled the hole left by the more traditional lenders: it extended credit to people who had as little as 3.5 percent to put down and spotty credit scores. As a result, the number of new mortgages originated by the F.H.A. ballooned.

But now, mortgage lenders and brokers say, more homeowners with smaller down payments are able to use private mortgage insurance. That is because the private insurers, which imposed even stricter qualifying standards than some banks during the housing downturn, are also becoming a bit more flexible. At the same time, the F.H.A. has been significantly increasing its fees over the last couple of years to shore up its finances and encourage more traditional lending again .

“We were frequently in the position where we could underwrite the loan but we couldn’t find the mortgage insurance,” said Brian Thielicke, a partner and senior loan officer at Cobalt Mortgage in Tukwila, Wash. “Now, it’s completely gone the other way.”

Mr. Ratcliff, a 27-year-old software tester, said he had no real trouble getting a mortgage for the four-bedroom house in Seattle that he bought for $325,000. He got a 30-year mortgage with a fixed rate of 3.5 percent.

“There was money out there if you had the credit,” Mr. Ratcliff said, adding that he had a good credit score. Finding an affordable first home proved the hard part, since there were so many other buyers to compete with and few homes in his price range.

He was able to make a down payment of 5 percent, or about $16,000, because he obtained private mortgage insurance. He borrowed another $15,000 or so from his 401(k) to cover closing and other costs, including the insurance. (He paid $5,800 upfront so he could avoid monthly insurance payments.) His overall monthly payments, about $1,700 and another $200 for the 401(k) loan, will be only slightly more than what he paid in rent.

Article source: http://www.nytimes.com/2013/04/13/your-money/signs-of-easier-money-for-mortgages.html?partner=rss&emc=rss

Filed Under: Your Money Tagged With: credit unions, offering products, piggyback loan

DealBook: Case Details Tension at S.&P. as Crisis Loomed

February 5, 2013 by NewsMaker Leave a Comment

Chip Somodevilla/Getty ImagesAttorney General Eric H. Holder Jr. announced the civil fraud charges against S.P. in Washington on Tuesday.

The subprime loans packaged as complex securities for Standard Poor’s to rate were already failing at such a fast clip in the fall of 2006 that some analysts at the firm thought they must be seeing typographical errors.

At the time, the nation’s biggest rating agency was making record profits, attaching sterling ratings to mortgage-related securities that were increasingly going bad. Inside the firm’s headquarters in Lower Manhattan, tensions were escalating. Some executives pushed to revise the firm’s rating models in hopes of preserving market share and profits, while others expressed deep concerns about the poor performance of the securities, according to court records.

“This market is a wildly spinning top which is going to end badly,” one executive wrote in a confidential memo.

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The account, culled from reams of internal e-mails, is part of civil fraud charges that the Justice Department filed late Monday against S.P. in federal court in Los Angeles, accusing the firm of inflating ratings of mortgage investments and setting them up for a crash when the financial crisis struck.

The government is seeking $5 billion in penalties against the company to cover losses to investors like state pension funds and federally insured banks and credit unions. The amount would be more than five times what S.P. made in 2011. S.P. said it would vigorously defend itself against “these unwarranted claims.”

Sixteen states, including Iowa, Mississippi and Illinois, joined the federal suit, and the New York attorney general said he was taking separate actions. California’s attorney general, Kamala D. Harris, said the state pension funds lost nearly $1 billion on the soured investments. The Securities and Exchange Commission has also been investigating possible wrongdoing at S.P.

“The action we announce today marks an important step forward in the administration’s ongoing effort to investigate — and punish — the conduct that is believed to have continued to the worst economic crisis in recent history,” said Mr. Holder. The Justice Department called its investigation “Alchemy,” after medieval alchemists’ attempts to turn lead into gold.

Standard Poor’s defended its corporate practices on Tuesday, saying the civil lawsuit filed by the Justice Department was “meritless.”

“Claims that we deliberately kept ratings high when we knew they should be lower are simply not true. S.P. has always been committed to serving the interests of investors and all market participants by providing independent opinions on creditworthiness based on available information,” the rating agency said in a statement on Tuesday.

The company said that at all times its actions reflected its best judgments about the investments at the heart of the suit — about 40 collateralized debt obligations, or C.D.O.’s, an exotic type of security made up of bundles of residential mortgage-backed securities, which in turn were composed of individual home loans.

“Unfortunately,” the company’s statement said, “S.P., like everyone else, did not predict the speed and severity of the coming crisis and how credit quality would ultimately be affected.”

McGraw-Hill shares were down 5 percent to $47.51 in early afternoon trading on the New York Stock Exchange, and have lost 19 percent of their value over the last two days.

The case is the first significant federal action against the ratings industry, which during the boom years bestowed high ratings that made many mortgage-related investments appear safer than they actually were.

It was unclear whether the Justice Department was looking at the other two major ratings agencies, Moody’s Investors Service and Fitch. Mr. West said he would not discuss actions against other rating agencies. In addition to joining the suit against S.P., James Hood, the attorney general in Mississippi, said his state had also filed lawsuit against Moody’s.

The joint federal-state suit against S.P. claims that from September 2004 through October 2007, S.P. “knowingly and with the intent to defraud, devised, participated in and executed a scheme to defraud investors” in certain mortgage-related securities. S.P. also falsely represented that its ratings “were objective, independent, uninfluenced by any conflicts of interest,” the suit said.

Settlement talks between S.P. and the Justice Department broke down in the last two weeks after prosecutors sought a penalty in excess of $1 billion and insisted that the company admit wrongdoing, several people with knowledge of the talks said. That amount would wipe out the profits of McGraw-Hill for an entire year. S.P. had proposed a settlement of around $100 million, the people said. The government pressed for an admission of guilt to at least one count of fraud, said the people. S.P. told prosecutors it could not admit guilt without exposing itself to liability in a multitude of civil cases.

On Monday, a spokesman for Moody’s declined to comment. A spokesman for Fitch, Daniel J. Noonan, said the agency could not comment on an action against Standard Poor’s, but added, “We have no reason to believe Fitch is a target of any such action.”

The securities were created at the height of the housing boom, mainly for investment banks. S.P. was paid fees of about $13 million for rating them. The firm gave the government more than 20 million pages of e-mails as part of its investigation, the people with knowledge of the process said.

Since the financial crisis in 2008, the ratings agencies’ business practices have been widely criticized, and questions have been raised as to whether independent analysis was corrupted by Wall Street’s push for profits.

A Senate investigation made public in 2010 found that S. P. and Moody’s used inaccurate rating models from 2004 to 2007 that failed to predict how high-risk mortgages would perform, allowed competitive pressures to affect their ratings and failed to reassess past ratings after improving their models in 2006.

The companies failed to assign adequate staff to examine exotic investments, and failed to take mortgage fraud, lax underwriting and “unsustainable home price appreciation” into account in their models, the inquiry found.

“Rating agencies continue to create an even bigger monster — the C.D.O. market,” one S.P. employee wrote in an internal e-mail in December 2006. “Let’s hope we are all wealthy and retired by the time this house of cards falters.”

Another S.P. employee wrote in an instant message the next April, reproduced in the complaint: “We rate every deal. It could be structured by cows and we would rate it.”

In its statement Tuesday, S.P. said that “the e-mail that says deals ‘could be structured by cows’ and be rated by S.P. had nothing to do with R.M.B.S. or C.D.O. ratings or any S.P. model. The company added that “the analyst had her concerns addressed with the issuer before S.P. issued any rating.” S.P. said that there was robust internal debate about how a rapidly deteriorating housing market might affect the C.D.O.’s, “and we applied the collective judgment of our committee-based system in good faith.”

“The e-mail excerpts cherry-picked by D.O.J. have been taken out of context, are contradicted by other evidence, and do not reflect our culture, integrity or how we do business,” the credit rating agency said.

The three major ratings agencies are typically paid by the issuers of the securities they rate — in this case, the banks that had packaged the mortgage-backed securities and wanted to market them. The investors were not involved in the process but depended on the rating agencies’ assessments.

In a separate statement on Monday, S.P. said it had begun stress-testing the mortgage-backed securities as early as 2005, trying to see how they would perform in a severe market downturn. S.P. said it had also sent out early warning signals, downgrading hundreds of mortgage-backed securities, starting in 2006. Nor was it the only one to have underestimated the coming crisis, it said — even the Federal Reserve’s Open Market Committee believed that any problems within the housing sector could be contained.

The Justice Department, the company said, “would be wrong in contending that S.P. ratings were motivated by commercial considerations and not issued in good faith.”

For many years, the ratings agencies have defended themselves successfully in civil litigation by saying their ratings were independent opinions, protected by the First Amendment, which guarantees the right to free speech. But developments in the wake of the financial crisis have raised questions about the agencies’ independence.

One federal judge, Shira A. Scheindlin, ruled in 2009 that the First Amendment did not apply in a lawsuit over ratings issued by S.P. and Moody’s, because the mortgage-backed securities had not been offered to the public at large. Judge Scheindlin also agreed with the plaintiffs, who argued the ratings were not opinions, but misrepresentations, possibly the result of fraud or negligence.

The federal-state action is the first time a credit ratings agency has been charged under a 1989 law intended to protect taxpayers from frauds involving federally insured financial institutions, which since the financial crisis has been used against a number of federally insured banks, including Wells Fargo, Bank of America and Citigroup.

The government is taking a novel approach by accusing S.P. of defrauding a federally insured institution and therefore injuring the taxpayer.

The lawsuit was filed in Central District of California, home to the defunct Western Federal Corporate Credit Union, among the largest corporate credit unions in the country. The credit union collapsed during the 2008 financial crisis after suffering huge losses on mortgage-backed securities rated by S.P.

The Justice Department said it interviewed about 150 people in the investigation, including former S.P. executives and analysts.

Article source: http://dealbook.nytimes.com/2013/02/05/case-details-internal-tension-at-s-p-amid-subprime-problems/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: civil fraud, credit unions, mortgage investments

Op-Ed Contributor: Worker-Owners of America, Unite!

December 15, 2011 by NewsMaker Leave a Comment

College Park, Md.

THE Occupy Wall Street protests have come and mostly gone, and whether they continue to have an impact or not, they have brought an astounding fact to the public’s attention: a mere 1 percent of Americans own just under half of the country’s financial assets and other investments. America, it would seem, is less equitable than ever, thanks to our no-holds-barred capitalist system.

But at another level, something different has been quietly brewing in recent decades: more and more Americans are involved in co-ops, worker-owned companies and other alternatives to the traditional capitalist model. We may, in fact, be moving toward a hybrid system, something different from both traditional capitalism and socialism, without anyone even noticing.

Some 130 million Americans, for example, now participate in the ownership of co-op businesses and credit unions. More than 13 million Americans have become worker-owners of more than 11,000 employee-owned companies, six million more than belong to private-sector unions.

And worker-owned companies make a difference. In Cleveland, for instance, an integrated group of worker-owned companies, supported in part by the purchasing power of large hospitals and universities, has taken the lead in local solar-panel installation, “green” institutional laundry services and a commercial hydroponic greenhouse capable of producing more than three million heads of lettuce a year.

Local and state governments are likewise changing the nature of American capitalism. Almost half the states manage venture capital efforts, taking partial ownership in new businesses. Calpers, California’s public pension authority, helps finance local development projects; in Alaska, state oil revenues provide each resident with dividends from public investment strategies as a matter of right; in Alabama, public pension investing has long focused on state economic development.

Moreover, this year some 14 states began to consider legislation to create public banks similar to the longstanding Bank of North Dakota; 15 more began to consider some form of single-payer or public-option health care plan.

Some of these developments, like rural co-ops and credit unions, have their origins in the New Deal era; some go back even further, to the Grange movement of the 1880s. The most widespread form of worker ownership stems from 1970s legislation that provided tax benefits to owners of small businesses who sold to their employees when they retired. Reagan-era domestic-spending cuts spurred nonprofits to form social enterprises that used profits to help finance their missions.

Recently, growing economic pain has provided a further catalyst. The Cleveland cooperatives are an answer to urban decay that traditional job training, small-business and other development strategies simply do not touch. They also build on a 30-year history of Ohio employee-ownership experiments traceable to the collapse of the steel industry in the 1970s and ’80s.

Further policy changes are likely. In Indiana, the Republican state treasurer, Richard Mourdock, is using state deposits to lower interest costs to employee-owned companies, a precedent others states could easily follow. Senator Sherrod Brown, Democrat of Ohio, is developing legislation to support worker-owned strategies like that of Cleveland in other cities. And several policy analysts have proposed expanding existing government “set aside” procurement programs for small businesses to include co-ops and other democratized enterprises.

If such cooperative efforts continue to increase in number, scale and sophistication, they may suggest the outlines, however tentative, of something very different from both traditional, corporate-dominated capitalism and traditional socialism.

It’s easy to overestimate the possibilities of a new system. These efforts are minor compared with the power of Wall Street banks and the other giants of the American economy. On the other hand, it is precisely these institutions that have created enormous economic problems and fueled public anger.

During the populist and progressive eras, a decades-long buildup of public anger led to major policy shifts, many of which simply took existing ideas from local and state efforts to the national stage. Furthermore, we have already seen how, in moments of crisis, the nationalization of auto giants like General Motors and Chrysler can suddenly become a reality. When the next financial breakdown occurs, huge injections of public money may well lead to de facto takeovers of major banks.

And while the American public has long supported the capitalist model, that, too, may be changing. In 2009 a Rasmussen poll reported that Americans under 30 years old were “essentially evenly divided” as to whether they preferred “capitalism” or “socialism.”

A long era of economic stagnation could well lead to a profound national debate about an America that is dominated neither by giant corporations nor by socialist bureaucrats. It would be a fitting next direction for a troubled nation that has long styled itself as of, by and for the people.

Gar Alperovitz, a professor of political economy at the University of Maryland and a founder of the Democracy Collaborative, is the author of “America Beyond Capitalism.”

Article source: http://feeds.nytimes.com/click.phdo?i=97fde54835b7c8f4619592a8e5c3aaaa

Filed Under: Business News Tagged With: credit unions, institutional laundry, state governments

Bucks Blog: The Exaggerated Impact of Bank Transfer Day

December 14, 2011 by NewsMaker Leave a Comment

Agence France-Presse — Getty ImagesAn anti-bank protester in Los Angeles.

The numbers sounded a bit too good to be true — and it turned out that they were. The Credit Union National Association now says that about 214,000 people joined credit unions in the month or so of anti-bank fervor this fall, not the 650,000 it originally estimated. As Gov. Rick Perry of Texas might say: “Oops.”

The credit union association attributed the difference to ambiguous wording in a survey that may have been misinterpreted by some credit unions. The association had asked its members to gauge the impact of Bank Transfer Day, Nov. 5, which had been designated by a grass-roots movement as the day for customers to switch from big banks to credit unions. The event was spurred in part by the backlash against the decision by big banks, including Bank of America, to charge customers a monthly fee for using their debit cards.

The survey wording apparently led some credit unions to report estimates not only of new members, but also of new checking accounts opened by existing members, in the weeks leading up to Bank Transfer Day, an association spokesman, Mark Wolff, said in an e-mail. (The revision was first reported by American Banker).

When the credit union association received its regular monthly data in October (information the association considers reliable, because it has been gathered for 30 years), the discrepancy became apparent. Actual growth now appears to have been 227,000 new members in September, and 214,000 in October, Mr. Wolff said.

“The combination of new members In October and new checking accounts from existing members would put the total close to the 650,000 estimate in our earlier pre-Bank Transfer Day survey,” he said.

The association says it believes credit union members who did not have a credit union checking account were opening the accounts at credit unions, probably because of fee increases at big banks.

The initial survey was “neither scientific nor a representative sample,” Bill Cheney, the association’s president and chief executive, said in a statement. Still, he said, it is clear that consumers made a “significant movement” to credit unions in the weeks leading up to Bank Transfer Day, either by joining credit unions or opening new accounts. The addition of 441,000 new members over two months represents about 75 percent of total credit union membership growth in 2010.

Did you open a new account at a credit union on Bank Transfer Day?

Article source: http://feeds.nytimes.com/click.phdo?i=f9e63b08436b73e6ba0558882320653b

Filed Under: Your Money Tagged With: credit unions, discrepancy, getty

Wal-Mart Benefits From Anger Over Banking Fees

November 8, 2011 by NewsMaker Leave a Comment

Geoffrey Cardone, a 26-year-old factory worker, said he dumped his bank account because he felt that he was being nickeled and dimed by fees. His new payday ritual includes a trip to the Wal-Mart here in northeastern Pennsylvania.

“It’s cheaper,” said Mr. Cardone, who was charged a flat fee of $3 to cash his paycheck. Many check-cashing stores keep a percentage of the check, which tends to be higher.

The Wal-Mart here has a clerk in a brightly painted Money Center near the entrance, like more than 1,000 other Wal-Marts across the country. Customers can cash work and government checks, pay bills, wire money overseas or load money on to a prepaid debit card. At most Wal-Marts without dedicated Money Centers, the financial services are available at the customer service desks or kiosks.

Four years ago, Wal-Mart abandoned its plans to obtain a long-sought federal bank charter amid opposition from the banking industry and lawmakers, who feared the huge retailer would drive small bankers out of business and potentially conflate its banking and retail operations. Ever since, Wal-Mart has been quietly building up à la carte financial services, becoming a force among the unbanked and “unhappily banked,” as one Wal-Mart executive put it.

Even before the recent outcry against banks, the services had become popular with cash-poor customers, many of whom never had a bank account and found the services more affordable than traditional check-cashing operations. Now newcomers to the ranks of the banking disaffected are helping to swell the numbers, Wal-Mart officials said.

The run from banks is happening elsewhere, too. In the last four weeks, as anger over debit card fees festered, more than 650,000 customers signed up for credit unions, according to the Credit Union National Association. The association was still tallying how many additional consumers had signed up on Bank Transfer Day, an initiative on Saturday to abandon traditional banks organized by people associated with Occupy Wall Street.

“We have a tremendous opportunity ahead of us, and it’s largely due to what you’re seeing around us happen in the industry,” said Daniel Eckert, the head of Wal-Mart Financial Services. “We’re not a bank, but we can serve a lot of types of functions you would see someone go into a bank for.”

Wal-Mart says it has no intention of reviving its plans to become a full-blown bank that could make loans and accept federally insured deposits. But the retailer has obtained bank charters in both Mexico and Canada, leading some bankers to suggest the company is laying similar groundwork in this country.

”It’s the proverbial camel’s nose under the tent,” said Terry J. Jorde, senior executive vice president at the Independent Community Bankers Association. “Once they get in and offer some financial services, they will continue to push for other products.”

Wal-Mart said it was simply offering financial products for less than its competitors, much the same way it does for underwear, detergent and milk. Wal-Mart does not produce the financial products, but sells them on behalf of financial firms. In doing so, the retailer is able to avoid financial regulations and, because of its size, offer steep discounts.

For instance, it offers prepaid debit cards via the Green Dot Corporation. The cards cost up to $4.95 to buy and $5.95 a month to maintain at other retailers, while at Wal-Mart they cost $3 to buy and $3 a month to maintain.

Wal-Mart officials declined to provide details on how much money it makes from financial services, or how many customers it serves. However, company officials and outsiders both said Wal-Mart’s financial products are gaining share.

“It is a big focus,” said Tien-tsin Huang, an analyst at J.P. Morgan. “They’ve invested in these Money Centers, and they’ve been very, very successful; they’ve all adopted the low-cost, low-prices model, and I think it’s brought in a lot of traffic that they normally wouldn’t see, meaning the lower-end demographics that typically use check-cashing services at rival stores.”

He added, “It’s clearly growing a lot faster than what we normally see for check cashers.”

Article source: http://feeds.nytimes.com/click.phdo?i=74034dd86d75af24682a767bd3132ee0

Filed Under: Your Money Tagged With: banking industry, credit unions, government checks

DealBook: Amid Wall Street Protests, Smaller Banks Gain Favor

November 4, 2011 by NewsMaker Leave a Comment

Peter DaSilva for The New York TimesVince Siciliano, the head of New Resource Bank in San Francisco, says his business is growing.

Vince Siciliano — a Birkenstock-wearing, organic food-eating, public transportation-riding sympathizer of Occupy Wall Street who earns $240,000 a year — is far from a banking baron.

But as the chief executive of New Resource Bank in San Francisco, Mr. Siciliano has managed to pull off what his bigger rivals have not: turn a profit and stay out of the line of fire.

“Our business has tripled this month,” said Mr. Siciliano, 61, referring to October. “We have had nonstop, all day long, people moving their money.”

New Resource, a small community bank that focuses on sustainable and “planet-smart” small businesses and nonprofits, is one of the many community-based lenders benefiting from the criticism of Wall Street.

In recent weeks, big banks, already barraged by flagging profits and widespread layoffs, have been a focus of global protests and disparagement over new fees. A $5 monthly debit card fee introduced by Bank of America provoked enough outrage that the company retracted its decision. An online campaign, called Bank Transfer Day, that encourages clients of the nation’s largest banks to park their money elsewhere, has attracted more than 75,000 Facebook commitments from angry customers of big banks.

On the margins, customers are seeking out alternatives like community banks and credit unions. Without the obligations to generate huge returns for public shareholders, these smaller banks often can charge lower fees and pay higher interest rates than their bigger competitors. More than 650,000 people have joined credit unions since Sept. 29 — the day Bank of America announced its debit card fee — and have brought in an estimated $4.5 billion in new deposits, according to a survey conducted by the Credit Union National Association.

“I think it’s a last-straw thing,” said Bill Cheney, the association’s chief executive. “Even though banks are backing up on some of their fees, there’s a sense that if it’s not this fee, its going to be something else.”

In October, New Resource added 150 new accounts and $1.5 million in deposits. GreenChoice Bank, a company based in Chicago that describes itself as a “green community bank,” has opened at least 100 new accounts since Occupy Wall Street began, including one for a couple who drove from Darien, Ill., 25 miles away, to move their money.

“People vote with their deposits,” said Steve Sherman, GreenChoice’s chief operating officer. “It all points to a broader cultural shift in what people expect from their bank, and from the companies they’re doing business with.”

Many bankers at these smaller companies come from traditional finance backgrounds. Mr. Siciliano spent 10 years at Bank of America, where he worked in Asia on corporate finance projects, before decamping to community banking. His switch to New Resource in 2009 required a major attitude shift.

“I tell people, there’s slow banking and fast banking,” Mr. Siciliano said. “In fast banking, you say, how fast can I grow? How high are my prices? How high an internal rate of return can I generate? Whereas slow banking says, it’s not about an exit strategy. It’s about building a long-term franchise around the mission.”

When Mr. Siciliano arrived at New Resource, during the financial crisis, it was in a state of disrepair. Deposits had shrunk, and federal regulators had ordered the bank to clean up its balance sheet. But after the bank began marketing itself as a green alternative to mainstream bank, and it became certified as a B-corporation — a type of corporation that encourages businesses to focus on creating environmental and social benefits as well as profits — business began to thrive. Last quarter, New Resource made a profit of $196,000, compared with a loss of $433,000 a year ago.

“It’s a good time for us,” Mr. Siciliano said. “Midsized foundations and nonprofits and companies are being asked by their boards, ‘Why do we bank at Wells Fargo or Bank of America?’ And we’re able to step in and offer an alternative.”

Part of the appeal of smaller banks has always been their focus on local investments. New Resource’s clientele is West Coast-centric, and includes Bay Area small businesses like San Francisco’s Haight Street Market in addition to people in the area.

“It’s a way to put your money in an institution that is investing in your community, and holds that as one of its core values,” said Jeannine Jacokes, chief executive of the Community Development Bankers Association, a trade group.

There are drawbacks, too. Many smaller banks lack the expansive ATM networks and online banking services of larger companies. And it can take weeks to move an account and set up auto-pay bill systems and direct deposits and have checks clear.

Michael Radparvar, the co-founder of Holstee, a lifestyle goods company in New York, does the company’s banking at Bank of America. He and his colleagues were contemplating switching to a smaller bank but had not decided whether the hassle would be worth it.

“The whole purpose is beautiful, and it jibes really well with our personal values,” he said. “It’s a matter of us finding a way to switch systems that’s seamless and doesn’t mess with the flow of what we’re working on.”

For some customers, though, feeling connected to a local bank is all that matters. David Becker, president of PhilippeBecker, a design firm in San Francisco, and a Bank of America refugee, said he had found shelter in a small local credit union, which charged him fewer fees, even though it lacked some of the conveniences of a larger bank.

“What’s a pretty Web interface worth?” he said. “What are you really getting?”

Mr. Becker, who has been keeping his business accounts at the Bank of San Francisco, a small local bank, for years, said it would be difficult to go back to his impersonal, fee-laden life as a big-bank customer.

“I called my credit union up the other day, and someone answered the phone,” he said. “I was like, holy smokes! I’m on a different planet!”

Article source: http://feeds.nytimes.com/click.phdo?i=d2b6a6cc7e17fc5fbdf6fbb7af238c4a

Filed Under: Business News Tagged With: community banks, credit unions, layoffs

Bucks Blog: Web Sites for Choosing a New Bank

November 4, 2011 by NewsMaker Leave a Comment

Even though the country’s largest banks have dropped plans to charge fees for debit card use, a movement encouraging customers to consider switching to community banks or credit unions remains energized. Promoters of Bank Transfer Day are urging dissatisfied big bank customers to open accounts at smaller institutions on Saturday.

So if you want to consider alternatives to a big national bank, where should you look? Here are some Web-based tools aimed at helping you narrow your search.

The Credit Union National Association, working with state-based credit union leagues, maintains a site that lets you search by ZIP code for a credit union — a financial institution structured as a nonprofit cooperative.

You may still have to do more research, however. There are thousands of credit unions, but many are organized to serve specific groups of people — say, employees of a certain company. The search engine gives detailed membership criteria for many institutions, but not all. So in some cases you may have to call to see if you qualify. You can also access the search tool via another credit-union sponsored Web site.

You can also try the Web site Nerdwallet for its Credit Union Finder, which lists more than 400 credit unions, many of which are “community” credit unions, where anyone living, working or learning in a certain area or group of counties can join, said Nerdwallet’s founder, Tim Chen. He said in an e-mail that such credit unions tended to be larger in terms of assets and easier for many people to join. (Nerdwallet’s listings are free to the credit unions, Mr. Chen said.)

BancVue offers a tool that lets you find community banks and credit unions offering high-interest-rate checking accounts.

The Move Your Money project, which encourages switching to credit unions as well as community banks, lets you search by ZIP code and also provides a check list for making the switch (including steps like rerouting direct deposits and contacting companies that directly take money out of your old account). Online banking is convenient, but adds steps when you want to disentangle yourself from your old checking account. So proceed carefully.

A site going online on Thursday aims to use crowdsourcing to provide more detailed information about both credit unions and community banks. Banxodus, an effort by the Progressive Change Campaign Committee, says it has more than 7,500 institutions in its database, which was created with the help of a few thousand volunteer researchers, and expects the list to grow after the site goes public.

“A lot of people are inspired to move, but don’t know where to move their money to,” said Neil Sroka, a spokesman for the committee, a liberal group. The site aims to help customers find “good guy banks” in their communities, he said. The initiative’s organizers encourage prospective customers to ask their new banks tough questions — not just, “How many A.T.M.’s do you have?” but also, “Do you keep the loans you make, or do you sell them to investors?”

If you know of other helpful sites for researching smaller financial institutions, please share the information in the comments section.

Article source: http://feeds.nytimes.com/click.phdo?i=935e6ab0d4ca9224b9c2b57cdeb7a512

Filed Under: Your Money Tagged With: credit unions, high interest rate, search tool

Bucks Blog: Chase Bank Won’t Impose Debit Card Fee

October 28, 2011 by NewsMaker Leave a Comment

Associated PressA protester burned a Bank of America debit card outside a Chase bank branch in Seattle earlier this month.

JPMorgan Chase has decided against adopting a monthly fee for account holders who use debit cards for purchases.

Chase, one of the country’s largest retail banks, had been testing an account that included a $3 monthly fee for debit card use. But the test, which began in February and was limited to two states, is ending next month and won’t be extended or expanded, said a person with knowledge of the bank’s plans who did not want to be named because the bank has not announced its decision. (The development was first reported by The Wall Street Journal.)

The news last month that Bank of America was planning to add a $5 monthly fee for some accountholders who use debit cards set off widespread outrage from the bank’s customers. Bank of America has said it expected to impose the fees early next year.

The person with knowledge of Chase’s plans denied that the outcry over Bank of America’s announcement was the reason it decided not to impose the fee. Instead, the person said, the checking accounts without the debit card fees proved more popular.

Some big banks, like Citigroup, have previously said they won’t adopt fees for debit card purchases.

But two other large banks, SunTrust and Regions Bank, already have added monthly fees of $5 and $4, respectively, for some accountholders who make purchases with debit cards. (The fees don’t apply for use of the cards at A.T.M.’s.) Wells Fargo is testing a $3 fee in five states.

Banks are generally charging higher fees to help make up for revenue they lost after the federal government set limits on the fees they could charge merchants for processing debit card purchases.

Smaller banks and credit unions have been trying to capitalize on the backlash against big banks by recruiting new customers.

Does the move by Chase make you feel any better about large banks?

Article source: http://feeds.nytimes.com/click.phdo?i=238a534c16ec6c6acbe5a85df651f68a

Filed Under: Your Money Tagged With: chase bank, credit unions, regions bank

Bucks: High-Yield Checking Accounts, if You Qualify

June 24, 2011 by NewsMaker Leave a Comment

It’s a bit harder to find nationally available, high-yield checking accounts, but they are out there. And they can offer significantly better interest rates than a traditional account — if you meet their requirements.

An annual survey from Bankrate.com found at least 57 banks offering such accounts, with 27 available nationally. (The findings aren’t necessarily all-inclusive — there could be other accounts out there — but the list represents results culled from a survey of 155 banks and credit unions.)

The average annual percentage yield on the accounts was 2.56 percent, compared with a paltry 0.11 percent for a traditional interest-bearing account. That’s a good deal, for a federally insured account that allows quick access to your money, Greg McBride, Bankrate’s senior financial analyst, said.

There are caveats, of course. Most of the accounts require at least one automatic deposit or payment a month, and a minimum of 10 debit transactions a month, to get the best rate. Failing to meet the minimum requirements results in a steep drop in interest — typically, down to the measly interest of a regular account. So if you’re someone who uses your debit card for everything, the accounts make sense. If you’re just an occasional debit card user, you won’t get the benefit of the higher rate. “It doesn’t do any good to average 10 transactions a month,” Mr. McBride says. “You need to hit the mark every month.”

Most of the accounts cap the balance that is eligible for the high rate — typically, $10,000 to $25,000. So to get the best deal, you have to compare both the rate as well as the balance limit. BankTexas, for instance, offers a rate of 3.25 percent, but caps the eligible balance at $10,000, the survey found. North Country Savings Bank, by contrast, has a higher cap of $50,000 — but a rate of 1.75 percent.

Despite pending caps in the rates that banks are paid for processing debit card transactions— so-called swipe fees — most banks haven’t increased the number of debit transactions required to qualify for high-yield accounts, Mr. McBride said. That may change, however, once the caps take effect later this summer.

Has your high-yield account started requiring more debit transactions?

Article source: http://feeds.nytimes.com/click.phdo?i=7095737c860606804e243e78f220c9b2

Filed Under: Your Money Tagged With: bearing, credit unions, debit card