Archive for May, 2016

Getting to Know You: What Banks Should Know About Millennials

Posted on May 31, 2016 by Laura Lam

Banks have a hard time figuring out millennials, those born between the early 1980s and 2000. Many millennials don’t remember a world without the Internet, plenty entered adulthood during the thick of the financial crisis and the generation is broadly considered one willing to vote with its feet. Banks are anxious to market to this demographic (and might be neglecting seniors in the process) and are eager to find out just what makes them tick.  Several firms have tried to demystify millennials for bankers. The following is a look at some of the data. 1. They Don’t See a Future…

What Should You Spend on a Home?

Posted on May 27, 2016 by Laura Lam

Since the 2008 financial crisis (fueled in large part by a real estate bubble), regulations have been put in place to cut down on predatory lending, most notably through the Title XIV of 2010’s Dodd-Frank Act, which is called the Mortgage Reform and Anti-Predatory Lending Act. The act established national underwriting standards for residential loans, but some consumers are still approved for mortgages that are unrealistic for them when it comes to monthly payments. Tasha Bishop, director of business development at Apprisen, estimates that about 35% of mortgages that are approved are unrealistic for consumers. What’s more: Many people “really trust…

Companies Still in Debt Despite Inflated Balance Sheets

Posted on May 26, 2016 by Laura Lam

Combining all of the corporate cash in the U.S. wouldn’t cover the $1.8 trillion of corporate debt that’s coming due in the next 5 years, according to a report by Moody’s Investors Service.  That’s because U.S. companies have been borrowing more quickly than they’ve built up the record $1.68 trillion of cash on their balance sheets. More of that debt comes due sooner. “You’re seeing more and more borrowing,” Richard Lane, said senior vice president at Moody’s.  “The increase in leverage has been notable.”  Cash coverage of near-term maturities hasn’t fallen below 100% since 2012, and hasn’t been as low…

Businesses Fall Behind on Their Loans

Posted on May 25, 2016 by Laura Lam

The Board of Governors of the Federal Reserve released its delinquency and charge-off data for all commercial banks in the first quarter – and it’s very sobering data.   While delinquencies on the consumer side appear quite positive, delinquencies on the business side are spiking. Consumer loans and credit card loans have been hanging in there so far. Credit card delinquencies rose in the second half of 2015, but in Q1 2016, they ticked down a little. Mortgage delinquencies are low and falling. When home prices are soaring, no one defaults for long; you can sell the home and pay off your mortgage….

Financial Services Industry Shows Signs of Growth

Posted on May 24, 2016 by Laura Lam

The Great Recession hit the financial services industry – and the ARM companies that serve it – the hardest. Even now, this segment is still recovering; new regulatory policies are forcing banks to shift some of their focus toward compliance, taking resources away from business-growing practices. However, there’s good news. Although the market seems depressed right now, Kaulkin Ginsberg’s   market research team has identified four economic trends indicating the financial services industry will reach 2008’s business levels in the next 5 to 7 years: S. Census data projects the number of households is expected to increase at an average rate…

Are House Prices Creeping Toward Bubble Territory?

Posted on May 23, 2016 by Laura Lam

A decade ago, a bubble in house prices led to the worst financial crisis since the Great Depression.  House prices then collapsed, falling below their long-term trend.  In recent years, however, as the economy has recovered, so have house prices. While they are still a long way from their 2005-2007 bubble peak, they’re also now once again far above their long-term average. There are two common valuation metrics with which to measure house prices: price-to-income and price-to-rent.  The chart above from Jeremy Grantham of GMO shows price-to-income for the past 40 years.  As you can see, for the last quarter of the 20th century,…

Banks Neglect Seniors in Digital Push

Posted on May 20, 2016 by Laura Lam

According to a 2016 mobile banking study from the Federal Reserve, only 18% of seniors use mobile banking services, versus a whopping 67% of millennials.  Seniors have been laggards in shifting to mobile banking. But banks’ inability as an industry to design websites and apps that respond to the seniors’ needs contributes to the lack of use.  Despite research from Nielsen Norman Group on seniors’ challenges in using the web, developers are still not adequately taking into account older customers’ challenges in when designing digital interfaces. Not only are these customers generally less versed in the mobile environment, but designers…

Most Americans Have Financial Regrets

Posted on May 19, 2016 by Laura Lam

It’s hard to get through life without at least one major financial regret. That’s the conclusion from a new Bankrate nationwide survey that finds only 17% of Americans say they have no money decisions they’d want to take back.  When Bankrate asked people to pick their biggest regret from a list of possibilities, “not saving for retirement early enough” was the most popular choice, with 18% of Americans saying that’s their top reason for face-palming over finances. Those in or near retirement are much more likely to bemoan a late start on retirement-saving than younger Americans. More than a quarter…

Reverse Mortgages Safer But Still Have Issues

Posted on May 17, 2016 by Laura Lam

Across the nation, a sticky subgroup of foreclosure cases involves reverse mortgages.  These loans, usually taken out by seniors, are heavily promoted in advertising and aimed at persuading older Americans to borrow using the equity in their homes. The attraction? Generally, there is nothing to be repaid until the borrower dies, moves out or sells the home. Consumer groups have long railed against reverse mortgages, saying they were often misrepresented by eager salespeople, setting heirs of the borrowers up for shocking balances due on houses that children assumed they’d inherit debt-free.  Now, such groups as AARP and Consumers Unions –…