THE COLLINGWOOD GROUP NEWS BRIEFING
Everything YOU Need to Know to Stay Ahead of Your Competitors
Considering all that snow outside, many of you will be reading this from home. Enjoy the day.
Here are some stories you may want to catch up on:
From Snow Business: We Go to FED, and this time Yellen and Company mean Business
The Fed begins its two-day meeting today and a rate rise is all but a done deal.
Household wealth has hit record levels. U.S. stock prices recently hit all-time highs. Inflation is nearing the Federal Reserve’s 2.0 percent goal, and the world economy including the once-sick eurozone has skirted the risk of a deep new downturn.
When Fed Chair Janet Yellen holds her first news conference of 2017 tomorrow she can arguably declare a victory of sorts with an expected interest rate rise that will leave monetary policy looking increasingly normal.
“The market has already priced in a quarter-point increase in the Fed Funds rate. The rate increase should not impact the Spring home buying season. It’s all about income growth, Millennials coming of age, and confidence,” says The Collingwood Group Chairman Tim Rood, “and President Trump is making businesses and consumers feel better.” Rood went on to say, “President Trump is posed to cut unnecessary and productivity killing regulations that have prevented companies from investing in and growing their businesses in the past.”
(Collingwood Group Chmn Tim Rood joins FBN’s Cavuto this Friday 3/17 at 12 PM ET)
The rate increase expected tomorrow will be the second in four months, a pace unseen since the peak of the U.S. housing boom in 2006. A rate hike will also bring the Fed’s target rate to between 0.75 – 1.00 percentage points, near the bottom of the range within which the Fed operated before the 2007-2009 financial crisis.
The conversation is now focused on whether the Fed, when it releases new economic forecasts this week, could even raise its forecast for rate rises also.
From FED Business, We move to: Risky Business
Riskier borrowers are making up a growing share of new mortgages, pushing up delinquencies modestly and raising concerns about an eventual spike in defaults that could slow or derail the housing recovery.
The trend is centered around home loans guaranteed by the Federal Housing Administration that typically require down payments of just 3% to 5% and are often snapped up by first-time buyers. The FHA-backed loans are increasingly being offered by non-bank lenders with more lenient credit standards than banks.
The landscape is nothing like it was in the mid-2000s when subprime mortgages were approved without verification of buyers’ income or assets, setting off a housing bubble and then a crash. And Quicken Loans, one of the largest FHA lenders, dismisses the concerns as overwrought. Still, for some analysts, the latest development is at least faintly reminiscent of the run-up to that crisis.
“We have a situation where home prices are high relative to average hourly earnings and we’re pushing 5%-down mortgages, and that’s a bad idea,” says Hans Nordby, chief economist of real estate research firm CoStar.
The share of FHA mortgage payments that were 30 to 59 days past due averaged 2.19% in the fourth quarter, up from about 2.07% the previous quarter and 2.13% a year earlier, according to research firm CoreLogic and FHA. That’s still down from 3.77% in early 2009 but it represents a noticeable uptick.
While that could simply represent monthly volatility, “the risk is that the performance will continue to deteriorate and then you get foreclosures that put downward pressure on home prices,” says Sam Khater, CoreLogic’s deputy chief economist. Such a scenario likely would take a few years to play out.
The early signs of some minor turbulence in the mortgage market add to concerns generated by recent increases in delinquent subprime auto loans, personal loans and credit card debt as lenders target lower-income borrowers to grow revenue in the latter stages of the recovery.
Non-banks, including Quicken Loans and Freedom Mortgage, comprised 93% of FHA loan volume last year, up from 40% in 2009, according to Inside Mortgage Finance. Meanwhile, the average credit score of an FHA borrower fell to 678 in the fourth quarter from 693 in 2013, according to FHA, below the 747 average for non-FHA borrowers. Mish says non-banks generally have looser credit requirements, and lenders have further eased standards – such as the size of a monthly mortgage payment relative to income – as median U.S. wages stagnated even as home values marched higher.
read more: http://www.usatoday.com/story/money/2017/03/12/concerns-riskier-mortgages-sprouting/98954348/
From Risky Business, We Move to Show Business
Hollywood Talent Agency Takes Stake In A Bank
United Talent Agency is taking a stake in boutique investment bank AGM Partners, the latest example of a Hollywood talent agency looking beyond traditional entertainment representation for growth.
The deal forms a “strategic alliance” between UTA and AGM, the companies said, that will allow UTA and its clients to call on the investment bank for guidance in deals. Financial terms of the stake were not disclosed.
The partnership between the two companies, which have worked together for nearly a decade, follows several recent deals involving Hollywood talent agencies that look beyond the film and television industries.
Talent representation in Hollywood has undergone a radical transformation in recent years, as stars’ salaries fall and studios pull back on spending. A slew of acquisitions and partnerships have turned UTA and its larger competitors into media businesses that are relying less and less on the traditional 10% cut on clients’ work. Now, it isn’t uncommon for agencies to buy businesses outright or make seed investments in startups.
read more: https://www.wsj.com/articles/a-hollywood-talent-agency-takes-stake-in-a-bank-1489164871
Trump Said to Weigh Political Risks of Firing CFPB’s Cordray
Since Donald Trump’s surprise election victory, he’s faced demands from Republican lawmakers to quickly oust the head of a controversial financial regulator. The president indicated this week that he’s proceeding cautiously.
At a closed-door discussion with community bankers, Trump said that firing the head of the Consumer Financial Protection Bureau would probably spur a political backlash, according to people who attended the White House meeting. And while the president didn’t reveal any plans he has for the agency or its director, Richard Cordray, he acknowledged that there are risks in revamping a regulator set up to protect consumers from abusive lending, the people said.
Cordray has been under attack from Republicans ever since Barack Obama installed him as the CFPB’s first director in a 2012 recess appoint. GOP lawmakers argue he has too much power, pursues investigations outside his jurisdiction and has imposed unreasonable fines on financial firms.
But Democrats, including Wall Street critic Elizabeth Warren, a senator from Massachusetts, have aggressively defended Cordray and vowed to fight any efforts to dismantle the agency, arguing that doing so would be a gift to bankers at the expense of consumers.
Trump and White House advisers who were at Thursday’s meeting laid out a number of strategies they could pursue to revamp the CFPB. During the discussion, advisers informed Trump that Cordray’s term doesn’t end until July 2018, which seemed to surprise the president, according to the people who attended.
Trump then asked Gary Cohn, the former Goldman Sachs Group Inc. executive who’s now director of the National Economic Council, what the options were on Cordray before his term lapses, the people said. Cohn responded that Cordray, who previously served as Ohio’s attorney general, could voluntarily step down if he decides to run for governor in his home state, as has been rumored.
A spokesman for the CFPB declined to comment.
read more: https://www.bloomberg.com/news/articles/2017-03-10/trump-said-to-weigh-political-consequences-of-firing-cfpb-chief
FDIC Leads Agencies in Major Cyber Incidents
The Federal Deposit Insurance Corporation was responsible for 10 of 16 major information security incidents in FY2016, according to the annual report of the Office of Management and Budget.
The FDIC incidents, linked to a flaw in their system that permitted personally identifiable information to be downloaded to removable media, caused big headaches for tech officials at the agency when they were uncovered by Congress in May 2016.
The annual Federal Information Security Modernization Act report sums up the observations and audits of inspectors general across the federal government and other agency data. Overall, agencies reported 30,899 cybersecurity incidents in fiscal 2016. Loss or theft of equipment was the most frequently reported attack vector with more than 5,300 incidents. Web and phishing attacks were also common, as well as attacks linked to improper usage. However, more than 11,000 incidents defied categorization, according to the report, and are listed only as “other.”
Housing Key Topic at South By Southwest Festival
When Mayor Steve Adler came to Austin in the late 1970s for law school, he had every intention of returning to Washington, D.C., or New York City when he finished. It was the city’s thriving arts and culture scene that led him to stay.
“The thought of actually living in the South was unfathomable to me, much less Texas,” Adler said. “I fell in love with this place. It’s a magical city because of the music and the art and the creativity and the culture and the spirit.”
Gentrification and rising housing prices put that culture in jeopardy, he said. In a community talk hosted at Saint David’s Episcopal Church Sunday in conjunction with South by Southwest Conferences & Festivals, he addressed how the city is working to ease Austin’s growing pains.
“If we lose [the artist community] in this city, we will become something else,” Adler said.
The city is pursuing creative solutions to the problem. Adler said the city is looking to collaborate with entities in the private market and come up with an answer to preserve affordable housing.
He used San Francisco as an example of what Austin is on the road to becoming if affordability is not made a priority.
Adler said the art and music scene is a huge part of Austin’s identity; SXSW itself is a product of the city’s creativity. It began as a homegrown effort to provide a platform for local musicians in the Austin area and has since grown to become one of the biggest festivals in the world.
“South By Southwest is like having a Super Bowl every year in this city, but it’s integrative to who we are,” Adler said. “It’s an expression of Austin.”
read more: https://communityimpact.com/austin/arts-entertainment/2017/03/12/mayor-adler-talks-protecting-austins-art-music-scene/
Why It’s Now An Empty Nesters’ Housing Market
There’s a mismatch in the housing market. Demand is rising, yet homebuilders don’t have the capacity to create the supply the way they did in the boom years. They haven’t banked as much land, they haven’t filed the permits and they’ve become increasingly short of labor—one possible byproduct of the Trump administration’s crackdown on illegal immigrants. In fact, the nation is probably short about 700,000 homes on an annual basis. That explains why new home sales have been somewhat disappointing.
It also explains why sellers in many markets are now in prime position. According to Realtor.com, in December and January the supply of existing homes was 3.6 months, something that hadn’t happened since January 2005. In Seattle, for instance, the average time a house stays on the market is 36 days, compared with the national average of 90 days. In Dallas-Ft. Worth, it’s 42 days, according to Realtor.com. Combine that with the prospect of higher-priced mortgages thanks to the Federal Reserve’s decision to begin lifting interest rates and it makes buyers a little more motivated. “We’ve seen home sales surge because buyers are beginning to realize there is this expectation that mortgage rates will rebound: you might as well get in now,” says Bernard Baumohl, chief global economist at The Economic Outlook Group. He says prices are rising at twice the rate of inflation and more than two times the rate of average hourly pay. That’s bad news on the affordability front for first-time buyers who are trying to get onto the first rung of the housing ladder.But it’s great news for empty nesters and other homeowners looking to downsize. Even better, there’s less of a supply constraint because developers have targeted the boomer market by building high service, luxury condominiums in major markets. And why not, says Peter Wells, a partner at Real Capital Solutions, which is developing a luxury condo tower in suburban Dallas: “When [boomers] sell their big place, they’re cash rich and it becomes all lifestyle driven.” Spring is a traditional time for buying and selling homes, and this season stands to be a busy one.
read more: http://time.com/4698451/empty-nesters-housing-market/
Here’s the way the rest of this snowy week shapes up:
Fed Meeting Begins
NFIB Small Business Optimism Index
Fed Meeting Announcement 2:00 PM ET
Fed Forecasts 2:00 PM ET
Fed Chair Janet Yellen News Conference 2:30 PM ET
Housing Starts 8:30 AM ET
Happy St. Patrick’s Day
Have a prosperous day ahead!
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Senior Media Consultant