Tuesday, November 25, 2014

Republicans question BofA settlement funding 'activist groups'

Republican lawmakers are questioning a requirement in recent U.S. Justice Department settlements with lenders, including Bank of America's $16.7 billion accord, that the banks donate money to housing counseling agencies, The Wall Street Journal reported Tuesday.

The Journal reports that the lawmakers want to know how the Justice Department determined that the banks, including Citigroup, be required to donate money to the housing counseling agencies approved by the Department of Housing and Urban Development.

Here's an excerpt from the story:

The groups are meant to help homeowners avoid foreclosure. But in a letter dated Tuesday and reviewed by The Wall Street Journal, Rep. Bob Goodlatte of Virginia and Rep. Jeb Hensarling of Texas describe some of the nonprofits, such as National Council of La Raza and NeighborWorks America, as left-wing “activist groups.”

In their letter, the lawmakers also point out that Bank of America and Citigroup get extra credit toward meeting their consumer-relief obligations when they donate to the housing groups: a $2 credit for every $1 donated. The banks get less credit for actions like forgiving mortgage principal for homeowners who owe more than their homes are worth.

“The settlements appear to serve as a vehicle for funding activist groups rather than as a means of securing relief for consumers actually harmed,” wrote Mr. Goodlatte, who is chairman of the House Judiciary Committee, and Mr. Hensarling, who is chairman of the House Financial Services Committee.

The Justice Department didn’t immediately have a comment, the Journal said.

The Journal also points out that the required donations are a relatively small part of the settlements.

Bank of America must donate at least $20 million to the housing-counseling agencies, out of $7 billion set aside for consumer relief in its settlement. Citigroup, which reached a $7 billion settlement this year, is required to donate at least $10 million, out of $2.5 billion set aside for consumer relief.

Friday, November 21, 2014

Wells Fargo plans to modify student loans for struggling borrowers

At a time when high student loan debt has made national headlines, Wells Fargo has announced a program to lower interest rates on eligible private student loans.

The program is designed to help people with a Wells Fargo private loan who are experiencing "financial hardship or distress," the San Francisco-based lender said in announcing the program this week. The lender said it will review borrowers' financial situations on a case-by-case basis to determine eligibility for a short- or long-term loan modification.

If a borrower is found to be eligible for a modification, Wells Fargo will lower their interest rate to make the loan payment affordable based on their income, the lender said.

The move comes as Wells Fargo has continued to offer student loans even as other lenders have backed away from them. Bank of America, for example, has gotten out of the business.

The modification program also comes as regulators have been scrutinizing the private-loan industry.

For example, earlier this year the Consumer Financial Protection Bureau released a report on complaints about the industry’s practice of placing borrowers in default even when their loans are current and in good standing.

Last month, the bureau's ombudsman said that while federal student loans have various loan modification options to help borrowers avoid default, "private student loan servicers and lenders may not make it easy for borrowers to get help in times of distress, which may have consequences for not only your financial future, but also for the broader economy."

Wells Fargo is not the only lender offering to modify student loans.

Discover, based in Riverwoods, Ill., this week announced it is also looking to introduce a repayment assistance plan for student loans next year. The details of that plan are still being determined, the company said.

Wells Fargo said people who have one of its private student loans and are experiencing financial hardship can go to https://www.wellsfargo.com/student/repay/ or call  (800) 378-5526 to learn about the options to repay.

BB&T CEO: Apple Pay should be subjected to regulations

BB&T CEO Kelly King is among bankers who have expressed concerns about new regulations banks have been subjected to since the financial crisis.

A few years ago, for example, he warned that the Dodd-Frank financial overhaul act will cause thousands of small banks to disappear.

But this week, King called for regulations — for Apple's new payments system, that is.

King said Apple Pay, which Apple unveiled in September, and others like it should be subject to the same regulations as the biggest U.S. banks to head off attacks by terrorists and computer hackers, according to a Bloomberg story on Friday.

Here's an excerpt from that story:

The possibility that a terrorist hacks into the financial system through a third-party payments company is a “greater threat” than if a similar attack were leveled against a community lender, King said yesterday in an interview. “We have to start raising awareness of this issue.”

Regulators should consider whether such firms qualify as systemically important financial institutions, King, 66, said at a panel discussion in New York at the Clearing House annual conference. Such a designation could lead to tighter capital, leverage and liquidity rules like those faced by banks. While King said he favors healthy free-market competition between banks and nonbanks, industry regulations make that impossible, he said.

“We are headed toward a socialist system,” he said, smiling and drawing laughs from the audience. “My hope is that going forward we will have a healthy shadow and regular banking system” all subject to a similar regulatory regime, he said. 

Speaking of the "shadow" banking system, King has talked about that before. For example, he's previously traced the financial crisis to the development of the shadow banking system over the past few decades.

Here's what he said about that in a 2011 interview with the Observer:

Q. A lot of people, though, suffered in the financial crisis and some would say banks didn't look out enough for customers. What would you say to that?

A. I would say there's some truth to that. There are some customers that have been abused, and I'm ashamed of that for the broad financial services industry.

I will say that the vast majority of that occurred in the shadow system, which was not part of what I would call the banking system. These independent brokers that were being paid big fees just to get that little old lady to sign the loan and then ship it off — that's a horrible system. And those people have a right to be mad and those people who perpetrated those injustices should be dealt with.

BB&T is among large banks that have signed on to ApplePay so that their customers can tie the payments system to their bank accounts.

In an October interview with Bloomberg TV, King said BB&T wanted to make ApplePay available to its customers. "We're very happy to be a part of it," he said in the interview.

BB&T is based in Winston-Salem. The regional lender is the third-largest bank by market share in the Charlotte metro area.

On an unrelated note, King, speaking at that same conference where he made the Apple Pay remarks, expressed concerns about the "incredible" risk U.S. banks are taking in corporate and commercial lending. Here's a link to a Reuters story on that.

BofA to get Supreme Court hearing on second mortgages

The U.S. Supreme Court has agreed to hear two cases in which Bank of America has questioned the practice of voiding second mortgages when homeowners file for bankruptcy protection.

At issue is allowing people in Chapter 7 bankruptcy to "strip off" second mortgages on an underwater home -- one for which the mortgage balance exceeds the home's current value. Courts have been divided over the practice.

This week, the Supreme Court agreed to hear two cases involving Florida homeowners with second mortgages held by the Charlotte bank. The bank has argued that the bankruptcy code does not permit the mortgages to be eliminated.

The hearing comes at a time when many homeowners remain underwater since the housing bubble burst.

In the third quarter of this year, 8.1 million U.S. residential properties were "seriously underwater," according to data firm RealtyTrac. That means the amount still owed on each of those properties is at least 25 percent more than their estimated market value.

Wednesday, November 19, 2014

Wells Fargo names former Wachovia exec to its board

Wells Fargo said Wednesday it has named to its board of directors a former member of the Federal Reserve’s Board of Governors and former Wachovia executive.

Elizabeth Duke will join the board of the San Francisco lender effective at the start of next year and also serve on the board's risk committee. The committee oversees, among other things, how Wells Fargo manages major risks it faces.

Duke was on the Fed's board from August 2008 to August 2013. She was an executive vice president for Wachovia from 2004 to 2005. Wells Fargo acquired the Charlotte-based lender three years later.

In a statement, Wells Fargo said Duke meets New York Stock Exchange standards for an independent director. Under those rules, a director can't be considered independent if they are currently an employee of the company on whose board they sit or have been an employee of that company in the past three years.

Wells Fargo said Duke never worked for Wells Fargo after she left Wachovia.

As a board member, Duke will be automatically be granted a stock award worth about $53,000 on Jan. 2, according to a securities filing.

Last year, total compensation for board members ranged from $114,262 for the lowest-paid member to $344,005 for the highest paid. Those figures include stock awards, among other things.

Duke's appointment increases the number of Wells Fargo board members to 15.

Wells Fargo is not the only big U.S. bank to have a former member of the Federal Reserve’s Board of Governors on its board. Bank of America board member Susan Bies served on the Fed's board from 2001 to 2007.

Tuesday, November 18, 2014

Staffing firm says banking biz growth created need for bigger offices

Staffing company Ascendo Resources has relocated its Charlotte operation to a larger office, a move the company says was largely driven by growth in its banking business.

The company has moved out of the SouthPark Towers office complex, where it has been since entering the Charlotte market last year, to the Rotunda Building, which is also in SouthPark. The Rotunda Building is at 4201 Congress St.

Although it's a move of only about 400 yards, it gives Ascendo more space. The company said it has gone from 500 square feet at SouthPark Towers to now 2,500 square feet in the Rotunda Building.

A ribbon-cutting for the new office was held last week.

The move follows Ascendo's addition earlier this year of a banking division to its Charlotte operation. The company said it added the banking division to meet rising demand for risk and compliance positions in Charlotte's financial sector.

Nationwide, demand for risk and compliance positions in banking has been growing, in large part because of new regulations created in the wake of the financial crisis.

Since entering the Charlotte market, Ascendo's overall Charlotte operation has grown to seven recruiters, Ascendo said. It says it plans to hire 13 additional people for its Charlotte operation over the next year to meet growing demand to place employees in a variety of industries. 

Here's an excerpt from the company's press release about the new office:

From its new location, Ascendo will focus on placing temporary and permanent candidates throughout several specialized industries. The company’s new office was specifically designed to fit its unique culture and is strategically located within the SouthPark business district of Charlotte, which is home to some of the city’s biggest companies including Coca-Cola and Wells Fargo. Ascendo is actively looking to grow and expand its staff and is looking to hire more sales associates with experience within its targeted industries.

“Charlotte’s strong business climate makes it one of most attractive places for both job seekers and major corporations, so we’re excited to have a more permanent location that reflects our corporate identity,” said Rick Ferretti, managing director and head of Ascendo’s Charlotte office. “Since we began our operations here, we have leveraged our strong industry knowledge to make many great connections for our clients while ensuring a seamless hiring process.”

Friday, November 14, 2014

Report: BofA tops in net branch closures

Bank of America posted the biggest net decline of U.S. branches of any lender during the third quarter, as banks nationwide continue to shed locations, according to a report released Friday.

The Charlotte-based bank posted a net decrease of 41 branches in the quarter, the report by data firm SNL Financial shows. The bank opened one branch in the quarter and closed 42.

To be sure, many of the banks that had large net declines in branches in the quarter are among the biggest lenders in the U.S. 

JPMorgan Chase & Co., the largest U.S. bank by assets, was in second place, with a net decrease of 31 branches (it opened 12). Regional lender SunTrust Banks was in third place, with a net decrease of 22 (it did not open any during the quarter).

Bank of America, like other lenders, has said it does not need as many branches, as more customers use mobile banking and other self-service banking options.

Branches are also expensive for banks to operate at a time when financial institutions nationwide are trying to cut costs. According to SNL, many lenders say branch closures also let them focus on core markets.

Over the past four quarters, Bank of America has posted 148 net branch closures, the report says. So far this year, the bank has completed the sale of 84 branches.

Bank of America, the second-largest U.S. bank by assets, has just under 5,000 branches now, about 700 fewer than at the end of the third quarter in 2011. The bank had 4,975 branches as of Nov. 5.

Bank of America's chief financial officer told investors last month that even as the bank trims branches, customer satisfaction scores continue to improve.

In the past year or so, Bank of America has also eliminated drive-up teller service at some of its branches across the U.S., including in the Charlotte region. The bank said too few people were using the lanes to justify continuing the service.