2023-11-28 19:02

Nov 28 (Reuters) - Bank of America (BAC.N) agreed to pay a $12 million fine to settle U.S. regulatory charges it routinely submitted inaccurate information about mortgage applicants to the federal government, violating a law that thousands of mortgage lenders have followed for decades. The U.S. Consumer Financial Protection Bureau said on Tuesday that more than 400 loan officers at the second-largest U.S. bank failed to ask applicants required questions about their race, ethnicity and sex, and then falsely reported that the applicants chose not to respond. Failing to accurately report demographic data violates the Home Mortgage Disclosure Act, a 1975 law that helps regulators assess whether lenders are serving their communities' housing needs and not engaged in discriminatory lending, the CFPB said. Bank of America did not admit or deny wrongdoing in accepting the civil fine, which covered alleged conduct between 2016 and 2021. "We will be taking additional steps to ensure that Bank of America stops breaking the law," CFPB Director Rohit Chopra said in a statement, without elaborating. In a statement, the Charlotte, North Carolina-based bank said it properly collected demographic data more than 99% of the time, and notified the government after receiving a complaint in 2020. It also said it has improved training to ensure that employees ask mortgage applicants for the data. The CFPB had no immediate additional comment. According to its latest quarterly report, Bank of America's consumer lending business originated $15.5 billion of first mortgages between January and September, down 61% from a year earlier when interest rates were lower. https://www.reuters.com/business/bank-america-pays-12-mln-fine-reporting-false-mortgage-data-2023-11-28/

2023-11-28 18:34

Nov 28 (Reuters) - Shares of "buy now, pay later" provider Affirm Holdings (AFRM.O) extended a rally on Tuesday following a rating upgrade and data showing that more price-conscious shoppers turned to BNPL services to fund Cyber Monday purchases. Record sales of $12.4 billion on one of the country's busiest shopping days have highlighted the growing role of BNPL providers like Affirm, as well as rivals PayPal (PYPL.O), Afterpay, Klarna and Zip (ZIP.AX), in driving online retail shopping. U.S. BNPL use hit an all-time high on Cyber Monday, contributing $940 million in online spending, up 42.5% from a year earlier, Adobe Analytics data showed. The number of items per order rose by 11%, according to Adobe, as shoppers used BNPL for increasingly larger carts. BNPL providers partner with online merchants such as Amazon.com (AMZN.O), Target (TGT.N) and Walmart (WMT.N) to extend loans to customers to cover purchases, which they pay back in installments. Their loans typically charge zero interest, helping to increase dramatically the affordability of online goods, particularly for shoppers who have lower credit scores. Affirm's shares finished up 11.5% at $32.75 on Tuesday, a day after gaining 12% on Cyber Monday and following Black Friday, another day in which U.S. shoppers seized upon widespread discounts. Jefferies analysts on Tuesday raised their target price on the San Francisco-based company from $9.50 to $30, citing increased loan demand, improved funding conditions and better credit performance of its securities. Affirm's stock price has more than tripled this year, buoyed by increased demand for its services from customers faced with higher interest rates and red-hot inflation, as well as an extended partnership with Amazon's business-to-business store. "AFRM is benefiting from the current inflationary/macro pressures consumers are facing as BNPL is now becoming a convenient solution from holiday shopping to gas/groceries," the Jefferies analysts led by John Hecht wrote. Other analysts said the company was overvalued. "It's a very competitive market," said Kevin Barker at Piper Sandler, noting that Affirm trades at approximately 60 times its projected earnings for next year, yet is not profitable. Barker currently has an "underweight" rating on the company's stock. Affirm's net loss had narrowed 32% to $171.8 million in the third quarter. The company mostly lends to near-prime and prime borrowers, but has tightened its credit standards this year, the company has said. "Consumers are voting with their wallets as they increasingly embrace more transparent and flexible payment options like Affirm," an Affirm spokesperson said on Tuesday. "We provide consumers with increased purchasing power, and greater control over managing their finances." DOWNSIDE RISK? Affirm raises funding from banks, insurance firms and the capital markets to front up loans, and earns a commission from merchants - which can sometimes be as high as 12.5%. While BNPL providers' most popular four-installment products are typically interest-free, some charge interest on other purchases. Affirm does not charge late fees, but other providers do. Affirm offloads some of its loans to investors via sales of asset-backed securities. Some other BNPL providers - including Sweden's Klarna, which recently turned profitable- are able to partly fund loans through their deposit-taking banking arms or robust payments business. Despite booming business, BNPL margins are thin. According to regulatory data, average unit margins at the major five BNPL lenders were 1.01% of gross merchandise volume in 2021. Affirm's stock remains at a fraction of the all-time $176.65 high it reached in November 2021 during the pandemic online shopping boom. Brian Mulberry, client portfolio manager at Zacks Investment Management, warned that some borrowers may be unable to make good on their loans if the economy slows. "We definitely have questions about the viability of the BNPL firms if the economic picture turns the way some people are expecting it to," he said. https://www.reuters.com/markets/us/bnpl-provider-affirm-set-extend-rally-upgrade-cyber-monday-boost-2023-11-28/

2023-11-28 17:45

NEW YORK, Nov 28 (Reuters) - Hedge funds cut their exposure in equities, mainly in healthcare, while adding a bit of small-cap stocks to their portfolios last week, according to a BofA Securities note about its clients flow trends. The bank said that overall its hedge fund clientele sold more than bought stocks for a second consecutive week, dumping stakes in most sectors, despite a higher concentration on healthcare. Hedge funds' decision to trim their equity exposure came as all three U.S. indexes notched their fourth consecutive weekly gains. Institutional and retail clients, however, added more stocks to their portfolios. The healthcare sector has lagged the gain of over 18% of the S&P 500 index (.SPX). The S&P 500 Health Care index (.SPXHC) is down 4.39% this year. Investors, however, have poured $5.8 billion into the healthcare sector this year, according to BofA, more than double the amount seen last year and the third largest inflows of any sector. Healthcare is seen as a defensive sector because it has constant demand and is somewhat insulated from the economy, so investors have adjusted their positions throughout this year over how long the economy will remain strong. BofA saw a hedge fund outflow of almost $800 million from mid- and large-cap stocks, while a reduced volume of small caps was added. https://www.reuters.com/markets/us/hedge-flow-hedge-funds-dump-healthcare-stocks-buy-small-caps-bofa-2023-11-28/

2023-11-28 17:22

LONDON, Nov 28 (Reuters) - Three of the world's cornerstone institutions - the International Monetary Fund, the World Bank and the Bank for International Settlements - are to work together for the first time to "tokenise" some of the financial instruments that underpin their global work, a BIS official said on Tuesday. The trio will also work with Switzerland's central bank which has been pioneering tokenisation, the process of turning conventional assets into uniquely coded "tokens" that can be used in faster new systems. Their collaboration will initially focus on simple but still paper-based processes such as when richer countries donate into some of the World Bank's funds to support poorer parts of the world. That original pledge can be in the form of what is known as "promissory note." It is that note that could be tokenised, making it easier to transfer when required. "We will work together ... to simplify the process for making development money available for emerging and developing economies," BIS official Cecilia Skingsley said at conference hosted by the Atlantic Council think tank in Washington. She added that tokenisation also opens up the possibility of "encoding policy and regulatory requirements" into a "common protocol" for tackling problems such as international money laundering. She also touched on the new breed of central bank digital currencies (CBDCs), repeating calls for some global rules and technology standards so they can work across the world and with existing payment systems. "Questions remain," Skingsley said. "Do these standards need to be implemented early on or else they would be difficult to change later? To what extent do they need to be adapted to ensure they can operate with non-CBDC systems? https://www.reuters.com/markets/imf-world-bank-bis-first-tokenisation-collaboration-2023-11-28/

2023-11-28 15:57

Nov 28 (Reuters) - U.S. annual home price growth accelerated again in September, underscoring the rebound of the housing market as it entered the final quarter of the year, data showed on Tuesday. Home prices rose 6.1% on a year-over-year basis in September, up from an upwardly revised 5.8% increase in the prior month, the Federal Housing Finance Agency (FHFA) said. On a quarterly basis, annual house prices increased 5.5% between the third quarter of last year and the comparative period this year. Home prices rose 2.1% in the third quarter compared to the second quarter of this year, reflecting the reacceleration since June that has taken place following a period of softness in the market. The report also showed prices rose moderately on a month-over-month basis, in line with recent trends. Prices were up 0.6% in September, compared with an upwardly revised 0.7% month-over-month increase in August. The cost of mortgage loans fell last week to a two-month low after topping out at almost 8% in October, the highest level in more than 20 years. Despite the dip, housing inventory remains low, which has kept a floor under prices paid for properties. The Federal Reserve kept its benchmark overnight lending rate unchanged earlier this month after raising its policy rate from the near-zero level in March 2022 to the 5.25%-5.50% range in July 2023. Investors do not expect another rate increase and are currently forecasting a rate cut in May of next year, given the Fed has indicated it would raise interest rates again only if progress in controlling inflation faltered. Annual house prices rose the most in the New England and Middle Atlantic regions in August, with gains of 11.4% and 8.3%, respectively, the FHFA data showed. A separate report on Tuesday bolstered the view that the housing market is ramping up again, with the S&P CoreLogic Case-Shiller national home price index posting a 3.9% increase in September on an annual basis. That compared to a 2.5% rise in August. Prices in Detroit accelerated the most on a city basis, overtaking Chicago, which had held the top spot for fourth straight months, the Case-Shiller data showed. https://www.reuters.com/markets/us/us-annual-home-price-growth-61-september-fhfa-says-2023-11-28/

2023-11-28 15:48

Nov 28 (Reuters) - The U.S. central bank will likely need to raise borrowing costs further in order to bring inflation back down to its 2% target over a reasonable period, Federal Reserve Governor Michelle Bowman said on Tuesday. "My baseline economic outlook continues to expect that we will need to increase the federal funds rate further to keep policy sufficiently restrictive to bring inflation down to our 2% target in a timely way," Bowman said in prepared remarks to a banking association in Salt Lake City, Utah. Earlier this month, the Fed kept its benchmark overnight lending rate unchanged in the 5.25%-5.50% range for the second consecutive policy meeting. Since then, Fed Chair Jerome Powell has signaled that while the central bank stands prepared to raise interest rates again, it would only do so if progress on getting inflation back to the 2% target falters. However, Bowman has repeatedly been among a small minority of policymakers who have said they don't think the Fed's job is yet done. By the Fed's preferred measure, inflation fell to 3.4% in September, down from a peak of 7.1% last summer, and other Fed policymakers have pointed out that they still expect it will take more time for the full impact of the rise in borrowing costs over the past 20 months to filter through the economy. Bowman, for her part, is less certain that will be enough, noting that inflation remains high and progress "uneven" and outlining in her remarks the "unusually high level of uncertainty" on the economic outlook. It remains unclear whether a further easing of goods and labor supply will continue to lower inflation, given greater spending among consumers, higher energy prices, and possible new labor shortages in the next few years tied to the trend of bringing more manufacturing back from abroad, Bowman said. Likewise, some signs of interest rate insensitivity among businesses could dull the effects of tighter monetary policy and financial conditions on economic activity and inflation, Bowman said, and overall longer-term economic conditions might mean the Fed's policy rate may need to be higher than pre-pandemic norms. "In my view, given potential structural changes in the economy, such as higher demand for investment relative to saving, it is quite possible that the level of the federal funds rate consistent with low and stable inflation will be higher than before the pandemic," Bowman said. Earlier on Tuesday, Fed Governor Christopher Waller said he is "increasingly confident" the central bank's current policy setting will prove enough to return inflation to the Fed's target. https://www.reuters.com/markets/us/feds-bowman-says-she-still-expects-another-interest-rate-hike-2023-11-28/