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Trump Signs Dodd-Frank Rollback Legislation

ABI Bankruptcy Brief
ABI Bankruptcy Brief
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May 24, 2018

ABI Bankruptcy Brief

Trump Signs Dodd-Frank Rollback Legislation

President Trump today signed a bipartisan bill to loosen key portions of the Dodd-Frank Act of 2010, cementing the first major changes to President Obama’s landmark banking laws, The Hill reported. The bill leaves most of Dodd-Frank in place, but provides a major boost for some of the largest U.S. banks. The measure releases regional banks from tighter regulation by raising the threshold for closer Fed oversight from $50 billion to $250 billion in assets. Banks below the new threshold will no longer be automatically subject to annual Fed stress tests and capital buffers meant to protect large firms are from severe financial crises. Those banks are also no longer required to submit for Fed approval a “living will” that outlines how a bank’s assets could be liquidated upon the firm’s failure without causing a widespread meltdown.
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Some Businesses Helping to Pay Off Employees' Student Loans

About 4 percent of companies said they offered student loan repayment as a benefit last year, and the figure rises to 8 percent for companies with 40,000 employees or more, the Atlantic reported. The U.S. Consumer Financial Protection Bureau (CFPB) has said that the benefit could quickly become more popular, given how many people have student loans — more than 44 million in the United States — and how worried they are about them. In 2015, graduates who took out student loans finished with an average of $34,000 in debt, compared with $20,000 a decade earlier. In March, Federal Reserve Chairman Jerome Powell said that swelling levels of student debt could hold back economic growth. Economists at the Federal Reserve Bank of New York have found that graduates with student debt are less likely to own a home in their early 30s than those who completed their education without taking on as much or any debt.
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Commentary: Nonbanks’ Subprime Loan Growth Vaults Past Pre-Crisis Numbers*

Independent mortgage companies, or nonbanks, dominated the business of making loans to people with blemished credit and low incomes leading up to the crash of 2008, and they have steadily regained that status, according to a Bloomberg News commentary. In the pre-crash years, companies such as New Century Financial Corp. helped spur the crisis with their shoddy underwriting standards. No one is warning that the system is close to another collapse, but nonbanks, more loosely regulated than standard large banks, are bigger players today than during the last mortgage bubble, according to a Brookings Institution report. They’re making almost half of new loans, compared with 19 percent in 2007. For first-time purchasers, many nonbank lenders rely on the government’s affordable financing, backed by the Department of Veterans Affairs, the Department of Agriculture and, most of all, the Federal Housing Administration. Unlike the usurious loans of the past, federally backed mortgages can charge low rates — often less than 5 percent — and require documentation of jobs and income. Jonathan Gwin, American Financial Network’s chief operating officer, says delinquencies are low for these kinds of loans.
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*The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.

Store-Branded Credit Card Delinquencies Hit 7-Year High

Delinquency rates on store-branded credit cards have reached a seven-year high, according to credit bureau Equifax, USA Today reported. The share of private-label credit cards with accounts at least 60 days delinquent is 4.65 percent, up from 4.08 percent in March 2017, Equifax said Wednesday. That’s the highest since early 2011, the credit reporting agency said. Equifax blames the trend in part on consumers who mistakenly believe they can avoid paying their credit card bills when retailers go out of business, declare bankruptcy or close local stores. “This is a huge mistake, as the lenders behind the private-label cards are still reporting to credit bureaus, and the creditors to the retailer are keen to collect any outstanding accounts receivable toward their outstanding debts,” says Amy Crew Cutts, chief economist of Equifax. Additionally, some banks have expanded their lending to subprime borrowers as the economy has improved, says Matt Schulz, senior industry analyst for “Store credit cards are generally easier to get than your average credit card,” Schulz says, and are often available to riskier borrowers who may be rebuilding their credit. Also, he says, private-label credit card interest rates are higher than credit cards generally.
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Commentary: Too Big to Fix: What to Do with Fannie and Freddie*

When Fannie Mae and Freddie Mac were taken under federal control a decade ago, regulators saw the move as a short timeout. Last month, President Trump’s administration effectively acknowledged that it’s no closer to figuring out what to do with Fannie and Freddie, according to a Bloomberg News commentary. Treasury Secretary Steven Mnuchin said that there will likely be no end to federal control during this Congress. In the meantime, the duo has only become more crucial to America’s booming-again housing market, standing behind about $5 trillion of loans. Trump’s team hasn’t decided how to restructure the companies, or even who should do it: the White House or Congress. It’s still in the earliest stages of figuring out what a new housing-finance system should look like, according to interviews with officials inside and outside the administration. Fannie and Freddie still get taxpayer bailouts — about $4 billion between them in March, though that was the result of a one-time quirk in Trump’s tax law. Since 2008 they’ve been under control of the Federal Housing Finance Agency, while almost all their profits go to the Treasury. Most experts say the arrangement is untenable. But a new one involves weighing the availability of mortgages, the cost to the public purse, and the profits that shareholders, including big ones like Paulson & Co. and Fairholme Funds Inc., are entitled to make, according to the commentary. On those priorities, there’s little agreement among Republicans, Democrats, lenders and investors.
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*The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.

Nominations Now Being Accepted for the 2018 Class of ABI's “40 Under 40” Program!

Nominations are now open for ABI's “40 Under 40” program. This program recognizes outstanding young insolvency professionals who are driven by success, motivated by challenges and are role models for their peers. If you are, or know of, a dynamic insolvency professional who is committed to growth and excellence both professionally and in your community, this is one opportunity not to be missed! Visit the website for additional details on nominations and applications.

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New on ABI's Bankruptcy Blog Exchange: Where Are Our Celebrity Bankruptcy Debtors Now?

A recent blog post checks on the progress of celebrities who recently have sought bankruptcy protection.

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