How does your credit score stack up against other consumers in your state? According to Experian, the average national VantageScore credit score value for 2017 was 675 which would put you well above average in Mississippi, well below average in Minnesota, and in the “fair” credit range nationally. The VantageScore scoring system ranges from 300850, with the fair credit range as 650-699 covering 18% of all Americans with credit reports in 2017. The ten states with the best average credit scores fall at the upper end of this range or into the good credit range, while the ten states with the worst average fall near the lower end of the fair range. Mississippi has the lowest average credit score of all states at 647 making it the only state with an average in the poor credit range (550-649) used by the credit bureau. The rest of the “bottom ten” states are Louisiana at 650, Georgia and Alabama at 654, Nevada at 655, Texas and Oklahoma at 656, South Carolina and Arkansas at 657, and West Virginia at 658. On the other end of the scale, Minnesota’s average credit score of 709 tops the nation. Minnesota is joined by three other states in the good credit category Vermont (702), New Hampshire (701), and South Dakota (700). The remaining six of the top ten states fall just short of the good average credit range Massachusetts (699), North Dakota (697), Wisconsin (696), Iowa and Nebraska (695), and Hawaii (693).
Minutes of the Fed’s June policy meeting, released yesterday, revealed that the central bank considered an alternative approach to avoid some of the shortcomings of using bond yields, the New York Times reported. The bond market indicator in question is the yield curve, which tracks the yields on Treasury securities that are repaid after different periods. The yields on the Treasuries that are repaid in two years are usually lower than those that are repaid, or “mature,” in 10. But sometimes, as is now the case, the difference between the yields on two-year and 10-year Treasuries narrows. When that happens, the yield is said to be flattening. This week, the spread between the two bonds was only 0.3 percentage points. But the most alarming signal is sent when the yield curve “inverts.” That is when the yields on two-year Treasuries are higher than those on 10-year Treasuries. When that has happened in the past, recessions have soon followed. But changes in the bond market and economy may have made the yield curve a less useful predictor. The Fed and other central banks bought huge amounts of government securities after the financial crisis, which raised their prices and reduced their yields. Those purchases may still be holding down yields. In addition, investors appear to believe that there is less risk of inflation in the global economy these days, which makes Treasuries more appealing. At the same time, the Fed has been raising short-term interest rates, and is expected to keep doing so through at least next year.
The Securities and Exchange Commission on Thursday voted to ease financial reporting requirements for nearly 1,000 companies by expanding the definition of which firms qualify as smaller sized and therefore are eligible for less stringent disclosure requirements, the Wall Street Journal reported. Newly adopted amendments define a “smaller reporting company” as one with less than $250 million in publicly traded shares, up from the previous definition of $75 million. The agency also expanded the definition to include companies with less than $100 million in annual revenue if they also have less than $700 million in publicly held shares. The previous revenue test allowed “scaled disclosure” of a company with no publicly traded shares and less than $50 million in annual revenues. The SEC estimates that the move will allow an additional 966 to be eligible for smaller reporting company status over the first year under the new definition.
The Federal Reserve yesterday gave clean bills of health to most of the largest American banks, allowing them to return money to shareholders, but it forced Goldman Sachs and Morgan Stanley to freeze such payouts around last year’s levels, the New York Times reported. The Fed said that all of the nation’s very biggest banks — Bank of America, Wells Fargo, Citigroup, Goldman Sachs, Morgan Stanley and JPMorgan Chase — passed the second round of the central bank’s “stress tests,” which gauge whether financial institutions have enough capital and are sufficiently well-managed to continue lending during periods of financial upheaval. The tests were intended to gauge the health of 35 banks, and regulators said they would allow 34 of them to pay dividends and buy back their own shares, a boon for investors who have been eager to benefit from the banks’ record profits.
A federal district judge ruled yesterday that the structure of the Consumer Financial Protection Bureau (CFPB) violates the Constitution, countering a January ruling from a federal appeals court, The Hill reported. Judge Loretta Preska of the Southern District of New York ruled that the CFPB’s creation as an independent agency with a director that could only be dismissed for wrongdoing was unconstitutional. In January, the U.S. Court of Appeals for the District of Columbia Circuit ruled that the CFPB’s structure was constitutional, reversing a 2016 verdict issued by a panel of the court’s judges. The appeals court’s initial opinion, written by Judge Brett Kavanaugh, sought to fix the issue by ruling that the CFPB director could be fired at will. Preska, an appointee of former President George H.W. Bush, concurred with part of the D.C. appellate court’s initial ruling against the CFPB, which held that the agency “is unconstitutionally structured because it is an independent agency that exercises substantial executive power and is headed by a single Director.” She ruled that the entire section of the 2010 Dodd-Frank Act that established the CFPB should be stricken, and she dismissed the CFPB from the case, which was filed in May 2017 by then-New York Attorney General Eric Schneiderman (D). Preska did not issue an order to shut down the bureau.
The newly appointed head of the Federal Deposit Insurance Corp. (FDIC) said yesterday that said she plans to review the decades-old system for measuring lenders’ financial health, which banks say is outdated, Reuters reported. Jelena McWilliams, who became FDIC chair this month, said she wants the regulator to be more transparent about how it rates banks’ financial health using the so-called CAMELS rating system. CAMELS has not been modernized in more than 20 years, said McWilliams, a former banker who was appointed by President Donald Trump. The FDIC guarantees customer deposits in case a bank fails and has the power to seize banks that are judged to be on the verge of collapse. Like other bank regulators, the FDIC uses the CAMELS system to measure a bank’s overall financial condition. The system assesses capital adequacy, asset quality, management capability, earnings, liquidity and risk sensitivity. The Clearing House and other groups have complained that the system, as applied by the FDIC, is opaque because banks are not able to contest their rating. McWilliams said she soon intends to open the CAMELS system and other regulations to public comment so lenders and academics can advise whether the rules have shortcomings.
The Securities and Exchange Commission voted 3-to-2 yesterday to seek public comment on the Volcker revamp, the last of five agencies that needed to sign off on the proposal, Bloomberg News reported. After reviewing feedback from financial firms, lawmakers and Wall Street critics, regulators will likely hold a second round of votes on whether to make the changes final. The plan for revising Volcker, which was named for former Federal Reserve Chairman Paul Volcker, is a significant win for banks that have long argued the original rule was overly complex and costly to comply with. The Federal Reserve became the first agency to move the proposal forward last week, followed by the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency, the Commodity Futures Trading Commission and now the SEC. The proposal maintains Volcker’s ban on proprietary trading, in which banks invest for their own profits rather than on behalf of customers. But it would remove an important assumption that positions held by lenders for fewer than 60 days are proprietary and make it easier for banks to determine whether trades are prohibited. Regulators also want to give firms more leeway to take advantage of exemptions in Volcker that permit trades that hedge market risk and are done for market-making purposes.
The Supreme Court yesterday resolved a split of circuits by holding that a false statement about one asset must be in writing to provide grounds for rendering a debt non[-]dischargeable under Section 523(a)(2), according to a special analysis by ABI's Bill Rochelle. The 15-page opinion by Justice Sonia Sotomayor focused primarily on the plain language of the statute and the meaning of the word “respecting.” The opinion was unanimous, except that Justices Clarence Thomas, Samuel A. Alito Jr. and Neil M. Gorsuch did not join in a section of the decision where Justice Sotomayor buttressed her conclusion by relying on legislative history surrounding the adoption of the Bankruptcy Code in 1978.
The Mortgage Bankers Association said that total mortgage application volume decreased 0.5 percent on a seasonally adjusted basis compared with the previous week, CNBC.com reported. Volume was 13.5 percent lower than the same week one year ago. Applications to refinance a home mortgage fell 2 percent for the week and were 28 percent lower than the same week one year ago, when interest rates were lower. The refinance share of mortgage activity decreased to 37.2 percent of total applications from 37.6 percent the previous week. More than half of all homeowners with a mortgage today have rates below 4 percent, according to CoreLogic. Home equity lines of credit are increasing as refinances decrease. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) decreased to 4.79 percent last week from 4.84 percent the previous week, with points decreasing to 0.41 from 0.42 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
The interim head of the Consumer Financial Protection Bureau announced Thursday he would lift the freeze on the bureau’s collection of private consumer data, which helps its examiners oversee financial institutions, the Wall Street Journal reported. “Out of an abundance of caution and a desire to protect Americans’ privacy, I placed a hold on the collection of personally identifiable information and other sensitive data,” Mick Mulvaney said in a memo to agency staff. “We can lift that hold.” Mulvaney said that the concerns he had raised when he implemented the freeze in December had been assuaged after an independent review of the CFPB’s cybersecurity defenses. “The independent review concluded that ‘externally facing bureau systems appear to be well-secured,’” he said. Mulvaney added the review had uncovered other vulnerabilities when employees opened unsafe emails that could have contained viruses.