FHA-guaranteed loans make up a larger share of the market. That gain is not limited to LMI communities. In 2006, for instance, FHA made up about one-fourth of loans in poor neighborhoods and about 11 percent of loans in upper-income neighborhoods. In 2009, it has grown to the point where FHA loans make up one in three new mortgages in upper income neighborhoods (and two-thirds in poor areas.)

The FHA trend began sometime ago. The role of FHA in 2009 is hardly changed from 2008, at least in terms of home purchases in low-income areas.

This is happening as a complementary piece to the conventional market. Poor areas and poor borrowers (more…)

The rules that govern how money changes hands during most debit card transactions is about to change, but it is anybody’s guess where things will stand once the marketplace finds its new equilibrium.

The Durbin Amendment to the Dodd-Frank legislation puts a price ceiling on how much retailers will pay on transactions where the card issuer has more than $10 billion in assets. Most financial institutions do not have $10 billion in assets, but the ones that do are the dominant in the debit card marketplace. Some accounts estimate their market share to be as high as 75 percent.

The pricing is driven by a principle that the ultimate cost of a debit card transaction should be at or below the cost of a paper check. There (more…)

MetaBank is wasting no time in attempting to collect on the outstanding balances on their now closed i-advance lines of credit.

How MetaBank would collect on the i-advances that were extended to existing customers has been a question ever since the OTS’ action against the thrift from Storm Lake. The Office of Thrift Supervision‘s October 12th Supervisory Directive forced MetaBank to close existing i-advance accounts. On its website, MetaBank acknowledged that it was not sure how well they would be able to pull back their loans.

MetaBank published an 8-K later that day which warned investors about the situation.

We cannot predict with assurance whether and to what extent the OTS will address the compliance and supervisory matters in addition to those described above. However, the OTS has informed us that it will address in the future its expectations with respect to reimbursement of borrowers under the iAdvance program. It is anticipated that the (more…)

The success of NetSpend‘s IPO, with shares finding a price of $11, has now been echoed and perhaps even amplified by the subsequent demand for those shares during the first two days of their trading on the open NASDAQ.

NetSpend’s success illustrates an important lesson. Companies can still be very profitable without offering high-cost credit. There are tens of millions of unbanked households. They need some access to the payments system. Warren Buffet would love this business, because it comes with a good moat and because there are plenty of untapped consumers. Offering them a debit card is enough.

NetSpend wanted to get between $10 and $12 for their shares. On Monday, they got $11 per share, without the i-advance. Two days later, (more…)

There may not be much legal basis for HSBC’s hesitancy to provide financial products for H&R Block, but the exchange of letters and the court documents generated by the dispute are still very telling.

HSBC has failed to perform a number of steps necessary for the fulfillment of their retail distribution agreement (the “RDA”). Block expected HSBC to provide a template for a RAL and RAC application form by September 1st, along with a list of fees for those products. On September 15th, Block expected to have HSBC’s underwriting criteria for refund anticipation loans, as well as a template for disclosure statements that are programmed into the tax preparation software used by Block staff.

John Butler of HSBC sent a letter to the assistant Vice-President for Settlement Products at H&R Block on August 30th. Butler wrote that the agreement terms state that “the Settlement Products Program must be consistent with safe and sound banking practices.” There was no specific factor given for what constituted a lack of such sound practices, but it is fairly easy to see the reference: the IRS had suspended the debt indicator on August 5th.

Unfortunately for HSBC, their contract doesn’t give HSBC room to make that statement. There is a portion of the RDA that covers termination which gives either party grounds to quit the contract if there is some change in how the IRS sanctions RALs and RACs. Here is (more…)