Are HELOCS a growth opportunity?

May 30, 2014 at 8:54 am Leave a comment

This might seem like a strange question given the downward revision of first-quarter GDP (more on that in a moment) and the general sluggishness of the housing market, but according to the WSJ:

“Home-equity lines of credit, or Helocs, and home-equity loans jumped 8% in the first quarter from a year earlier, industry newsletter Inside Mortgage Finance said Thursday. The $13 billion extended was the most for the start of a year since 2009. Inside Mortgage Finance noted the bulk of the home-equity originations were Helocs. While that is still far below the peak of $113 billion during the third quarter of 2006, this year’s gains are the latest evidence that the tight credit conditions that have defined mortgage lending in recent years are starting to loosen.”

You will have to excuse me for being just a little confused: If I got this straight the American consumer is once again using her home as an ATM, Fannie and Freddie are still in business and we still have banks that are too big to fail. It looks like the more things change the more they stay the same. The full article is available at: http://online.wsj.com/articles/borrowers-tap-their-homes-at-a-hot-clip-1401407763

Are things worse than they appear?

Damn lies and statistics. Yesterday, the government released revised GDP figures for the first quarter of this year and instead of things being really bad they were really, really bad. According to the government’s Bureau of Labor Statistics GDP actually contracted at an annual rate of 1.0 as opposed to eking out growth of 0.1 percent. This revision will hardly be surprising to the credit unions I talked to about a month ago who watched a bitter cold winter keep people indoors rather than go shopping for big-ticket items.
One interesting note about the report. Cutbacks in government spending continue to be a drag on economic expansion. When economists look back for lessons about what we are going through right now one of the questions that will be debated is how smart is it for the same governments that are trying to increase economic activity to be cutting back spending on that economy? Here is the report:
http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm

Is the government using banks to choke off legitimate businesses?
In an earlier blog this week, I talked about a disturbing trend in which prosecutors and regulators were increasing pressure on financial institutions to stop doing business with legal merchants. Yesterday, the House Oversight Committee released a report detailing just how aggressive and far-reaching the Department of Justice’s efforts to pressure financial institutions is becoming. According to the report the most immediate target of these for enforcement efforts is payday lending activities. Congressional investigators also question whether the Justice Department has the legal authority to carry out its program.
In general, I believe everything that comes out of the House committee on Government Reform and Oversight should be taken with two grains of salt. It is an election year and one of the primary purposes of the committee is to make the administration look bad. But even with that caveat the scope and aggressiveness of government efforts to use financial institutions to clamp down on business activities that prosecutors don’t agree with is certainly an issue worthy of further discussion. Where exactly is the government drawing the line? Should financial institutions be put in the middle of what are essentially consumer protection disputes? Inquiring minds want to know. You can get the full report at:
http://oversight.house.gov/wp-content/uploads/2014/05/Staff-Report-Operation-Choke-Point1.pdf

On that note enjoy your weekend. I will be back on Monday as my bid for the Los Angeles clippers was apparently not good enough. By the way, how would you like to be punished by selling a team for $2 billion?

Entry filed under: Economy, General, Mortgage Lending. Tags: , , .

In God, and Accountants, We Trust Matz-CUs Don’t Need No Stinking Buffer

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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