Charge-Offs and Bankruptcies

Our take on the latest trending events:

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Small Banks' Charge-Off Rates on the Increase
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Mortgage Balances Up, HELOC Balances Down
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An Overview of the China Effect on Banks
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Improvements in Job Market May Prompt Interest Rate Hikes
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A court ruling could have an impact on marketplace lending.
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From Loan Sales to Higher Profits: Santander Takes an Aggressive Approach
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Goldman Sachs: Moving Into Online Consumer Lending Market
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Government Regulation Leads to Unexpected Consequences
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The mortgage industry has faced substantial criticism following the financial crisis, and many critics and government officials have pounced on the opportunity to disparage this particular sector. While these views have been growing less harsh, those looking to spearhead meaningful reform have encountered numerous challenges, according to American Banker.  
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The banking sector has been benefiting from strong mergers and acquisitions activity, as economic conditions continue to improve and financial institutions look toward consolidation as a means of cutting costs, meeting capital requirements and even diversifying their businesses. 
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While they are frequently identified as being competitors of banks, marketplace lenders have asserted repeatedly that they want to work with these more traditional financial institutions. 
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As many banks consider partnering with marketplace lenders, they must carefully evaluate each particular alliance to get a strong sense of its potential costs and benefits. Marketplace lenders have been rising in importance, growing a strong customer base and in some cases raising significant sums of money by working with receptive investors. 
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Many banks are making major changes as they take steps to comply with the liquidity coverage ratio, including selling off assets and running off deposits that do little to help them meet the requirement.
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The valuations of technology startups have been surging as hedge funds and mutual funds pour money into this space in an effort to profit from the next big thing. Many institutional investors have taken an interest in technology startups, hoping to select the right ones and then profit when they hold an initial public offering.
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Regional banks have been putting significant effort into either raising the threshold for being deemed systemically important - which currently stands at $50 billion - or scrapping the level completely. 
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Recently, the U.S. Supreme Court heard a consolidated lawsuit that involved whether a secondary lien placed on the asset of a debtor can be reduced to the value of the collateral securing the obligation obligation and reduced to zero if there is no asset coverage. The decision could have broad implications, potentially impacting many bankruptcy proceedings that followed the nationwide housing crisis, according to Inman Magazine. 
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Loan demand has been rising all over the nation, according to figures provided in the Federal Reserve's March Beige Book. The Fed report revealed that most regions have been enjoying promising economic conditions, and banking activity stood out as a strong point in many cases.
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Puerto Rico's banking industry has undergone some seismic shifts in the aftermath of Doral Bank's failure earlier this year. While this troubled bank entered receivership, several competitors benefited from the situation, bolstering their market share by snapping up its branch locations, loans, deposits and mortgage servicing rights.
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Sterling Bancorp, one of the largest lenders doing business in the payroll lending market, recently acquired Damian Services Corporation, which provides payroll-related services to staffing firms. By making this purchase, Sterling will grow its client base, expand its lending capacity and open up new possibilities to earn fees in specialty finance, according to American Banker.
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Non-banks have been gaining an increasingly large share of the market for FHA-backed mortgage lending, according to a recent study conducted by the American Enterprise Institute's International Center on Housing Risk. These financial institutions, which are outside the reach of bank regulations and capital requirements, have been increasing issuance of these home loans as major banks retreat from this market.
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The peer-to-peer lending market recently benefited from a move by the U.S. Securities and Exchange Commission to revise existing regulations, as this decision gave smaller companies greater ability to raise money and investors more flexibility to participate in this particular industry. 
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PacWest Bancorp recently announced an agreement to purchase Square 1 Financial, Inc., a lender that focuses primarily on the technology industry. Pursuant to this deal, Square 1 bank, owned by Square 1 Financial, will merge into Pacific Western Bank, a Los Angeles subsidiary of PacWest Bancorp.
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Pinnacle Bank recently purchased a minority stake in an online health care lender, and this strategic move should provide the Nashville-based bank with numerous benefits. Pinnacle Bank, a subsidiary of Pinnacle Financial Partners, Inc., made this move at a time when traditional banks are facing numerous headwinds and online lending has been experiencing impressive growth. Garnet Capital believes this is a positive trend and is helping other banks and lenders create partnerships.
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While small business lending fell sharply after the financial crisis, there are signs this crucial activity is gaining steam. This development presents banks with new opportunity, but they should know the market has changed significantly, and many non-bank lenders have sprung up to fill the higher demand for small business loans, according to American Banker. 
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While lending activity has grown more conservative since the financial crisis, there is reason to believe this sector is once again running into trouble. More specifically, both auto and student loan debt saw their delinquencies track higher in the fourth quarter, and during the same time, household debt increased.
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America's millennials could potentially represent a huge market for alternative banking, according to the results of the most recent FICO survey. Financial institutions looking to stay abreast of the latest shifts in the rapidly changing banking industry might benefit substantially from gathering further detail on these customer preferences. 
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Consumer Financial Protection Bureau Director Richard Cordray took a minute to delve into some of the agency's current concerns, as well as the disagreements its staff are having. 
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Community banks need to either innovate or face extinction in the current environment, according to several industry participants who spoke at the American Bankers Association's National Conference for Community Bankers. 
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Regulators shut down Doral Bank on Friday, Feb. 27, after the financial institution faced a string of challenges including a dispute surrounding a tax refund, government investigations and sharp declines in stock prices. The Office of the Commissioner of Financial Institutions of Puerto Rico announced in a statement Friday that it had appointed the Federal Deposit Insurance Corporation receiver. 
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Federal Reserve Chair Janet Yellen testified before lawmakers on Tuesday, Feb. 24, providing greater clarity on the central bank's timeline for boosting benchmark interest rates. 
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Many banks have been focusing on deposits in the current environment, building up these resources instead of taking on additional credit risk. This approach reflects a more conservative stance, as financial institutions are unsure when the Federal Reserve will opt to push its benchmark interest rates higher. 
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Major banks, already facing a tough environment, have been encountering an additional headwind stemming from the dollar's sharp rally. The currency's recent appreciation, along with proposed capital guidelines, could make US banks seem bigger relative to their European counterparts. 
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Doral Financial's problems only seem to be getting worse. While the Puerto Rico-based holding company was able to improve its financial position late last year by attaining a legal victory, it has been encountering rising pressure from regulators, according to American Banker. 
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Mergers and acquisitions activity involving banks has been increasing, and this momentum has grown to include not only smaller banks in the U.S., but also midsize and international financial institutions. 
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Banks could run into challenges generating revenue growth as their ability to tap into loan-loss reserves deteriorates. 
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Lending Club recently announced a partnership with Alibaba Group whereby the peer-to-peer lender will provide small businesses with lines of credit for purchasing Chinese goods through the e-commerce giant's online marketplace. 
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Bank of America recently moved a $2.7 billion student loan portfolio to hold-for-sale status, chief financial officer Bruce Thompson told analysts during a conference call in January. 
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While many bemoan the challenges less-experienced borrowers face, San Francisco-based startup Earnest has been using an innovative new approach to assess their creditworthiness.
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BlackRock is planning to securitize loans purchased via internet origination channels. 
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New York Community Bancorp, Inc. has been generating many benefits by selling assets, keeping its balance sheet below the $50 billion mark and improving its financial results in the process. 
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The U.S. economy encountered some challenges during the fourth quarter, as weakness abroad and tepid business spending combined to limit fourth-quarter growth.
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While many banks have bemoaned the industry regulations created by the Consumer Financial Protection Bureau, smaller financial institutions in particular could benefit from the government agency's latest mortgage proposal.
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The recent announcement that Los Angeles-based City National has agreed to be acquired by Royal Bank of Canada could be a game changer for other banks in the region, providing them with stronger opportunities to find clients or buyers.
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Two groups of peer-to-peer consumer loans collectively worth more than $300 million recently obtained ratings from Moody's Investors Service, which represents a first because major credit ratings agencies have never before evaluated P2P securitizations.
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A handful of innovative banking startups have been working on creating lending algorithms that consider more than the traditional variables such as one's credit score. Amid this push, companies are developing risk evaluation methods that account for how much time an applicant spends reading terms and conditions or whether they only use capital letters when filling out forms, The New York Times reported.
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Banks are striving to generate loan growth amid stiff competition and low interest rates. At the same time, analysts and shareholders are pressuring these financial institutions to reign in their expenses where possible, according to American Banker.
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Many banks have been reporting falling interest income in the current environment of low rates and tight competition.
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Banks have had a hard time generating satisfactory earnings growth lately, and this difficulty could easily continue in 2015. Banks both large and small have suffered these challenges, as the major financial institutions and the regional ones have been reporting lackluster earnings so far this year. Legal costs and compressed loan margins are the major drags for the larger banks.  Community banks are also feeling the pinch in generating good quality assets.
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U.S. economic conditions continue to improve at a time when the nation is benefiting from increased growth, falling energy costs and sustained job creation.
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U.S. economic conditions have been steadily improving, and this development has helped bolster the performance of major banks such as Wells Fargo, whose executives have been rather vocal about how much faith they have in the nation's recovery. 
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The Swiss National Bank eliminated its cap on the euro-franc exchange rate Jan. 15, at a time when the global currency markets are experiencing sharp volatility and central banks across the world are using increasingly divergent monetary policy.
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While many U.S. consumers have been benefiting significantly from sharply dropping oil prices, they may find they have even more money in their pockets after the Federal Housing Administration's recent decision to reduce its annual premiums. 
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Fintech startup Larky has been taking an innovative approach with its mobile applications, marketing them directly to banks so they can be used to provide consumers with discounts and offers from local stores.
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The Consumer Financial Protection Bureau has been quite active in recent years, and there is no sign that this trend will stop in 2015.
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The banking industry is encountering various disruptive forces - including stiff regulations, the proliferation of online lending and innovative new lending activities - that bankers should monitor if they want to capitalize on existing opportunities.
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American Banker recently named marketplace lending its Innovation of the Year.
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Billionaire investor George Soros has been laying the foundation so he can back peer-to-peer lending, a burgeoning industry that is making greater use of more traditional funding methods in an effort to reduce lending costs. 
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Many banks have been encountering challenges in their efforts to originate high-quality loans, but have been taking steps to compensate for this situation.
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Ally Financial Inc. reported strong auto lending in the third quarter, and has predicted this success will continue, reducing the money it has set aside for loan losses even amid stiff competition and concerns that used car values will decline in the final quarter of the year.
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Distressed loan sale programs can help out homeowners, taxpayers and government organizations, but to generate these benefits, they must be set up in the right way, Sarah Edelman and Julia Gordon, who work for the Center for American Progress, wrote in a recent American Banker opinion piece.
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While some banks may feel challenged by their constantly-changing environment, the situation grants them an opportunity to better their reputation and stand out from the competition, two experts wrote recently in an American Banker opinion piece.
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The legal fees plaguing major banks continue to climb higher, and nobody knows when these financial institutions will get past these challenges.
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Sterling Bancorp and Hudson Valley Holding Corp. announced a definitive merger agreement on Nov. 5, which would create a larger combined entity catering to consumers and small - to medium-sized businesses in the New York metropolitan area.
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As auto lending activity strengthens across the country, banks have been viewing it with fresh eyes, looking to this particular activity as an opportunity where they can potentially benefit from low default rates, attractive rates, short duration and significant demand.
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In an effort to generate desired results amid sharp competition, many big banks are focusing on prime auto lending.
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U.S. Bancorp CEO Richard Davis has been offering some fairly rosy views of the economy, predicting that growth will accelerate sharply next year.
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The revenue banks are generating from customer-account fees has dropped sharply, stemming from changes in consumer behavior and new regulations created to protect account holder interests.
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The Office of the Comptroller of the Currency recently published final risk management and governance guidelines for major financial institutions, giving them different expected timelines for compliance based on their size.
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As the real estate market continues to strengthen, investors are clamoring to get their hands on securities backed by pools of nonperforming residential mortgages.
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The value of many assets around the world - including real estate, stocks and bonds - has been rising, and several market participants have warned they have grown inflated and approach bubble status.
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Banks are on a mission to increase their loan income, and their desire to meet this objective has helped fuel mergers and acquisitions.
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Banks could generate more revenue by adding P2P originations to their branch originations, according to a study recently released by research firm Cognizant.
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Subprime auto lending has recently experienced a sharp uptick, and the robust activity has provoked warnings that a bubble is forming.
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Credit union lending ramped up in May and June, according to recent reports from the Credit Union National Association.
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Fledgling startup companies could one day dominate the banking industry, financial expert Richard Magrann-Wells wrote in a recent American Banker piece.
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As a result of hitting a critical point in its development, the market for Federal Family Education Loan Program loan sales may soon enjoy a sharp rise in activity.
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Bank mergers and acquisitions have surged lately, as the industry struggles to overcome numerous headwinds including a challenging compliance environment, higher capital requirements and the proliferation of alternative lending.
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New financial product structures are growing in availability, and a great deal of the finance industry's innovation centers around this trend, former Citigroup chief executive Vikram Pandit recently told American Banker. Amid this situation, Pandit highlighted a key opportunity.
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The Office of the Comptroller of the Currency recently took action to clarify best practices surrounding debt sales when it issued guidelines on Aug. 4.
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Lending Club, a major peer-to-peer lender, recently announced impressive second quarter figures, reporting that it facilitated $1 billion in new credit during the period.
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U.S. auto lending warmed up in the first quarter, as the total loans of banks and thrifts climbed higher and delinquencies declined.
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Concerned that traditional underwriting methods are leaving some would-be borrowers behind, peer-to-peer lender Upstart has responded by developing a unique process to vet credit applicants.
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Loan sales have been picking up steam in the U.S., as the rising interest in home equity loans and non-performing loan securitizations helps increase the value of such transactions.
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Sam Hodges, the CEO of innovative P2P lender Funding Circle USA, recently sat down for an interview with writer David Gustin of Spend Matters Network.
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Property tax bills are on the rise, and their steady climb has been causing stress for the already-troubled mortgage market.
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In a recent report, the Office of the Comptroller of the Currency warned banks about the credit risk that is steadily accumulating because of their willingness to provide loans easily.
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Certain mortgage lenders have been following more stringent requirements than those created by the Consumer Financial Protection Bureau in an effort to ensure compliance.
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LendingClub Corp., the largest peer-to-peer lender in the U.S., has started preparing for an initial public offering, selecting major investment banks Morgan Stanley and Goldman Sachs Group Inc. to lead the sale, individuals familiar with the situation told The Financial Times.
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Nigel Morris, who co-founded financial services firm Capital One, recently joined the board of Prosper Marketplace, the parent company of peer-to-peer online loan marketplace Prosper.
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San Francisco-based startup Affirm Inc. is harnessing an innovative new approach to lending, which some believe could potentially disrupt loan markets as we know them.
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Younger people are more likely to consider alternative banking, according to the results of a recent Accenture survey.
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The federal government recently announced plans to make mortgage lending standards less stringent, hoping that doing so will help jump-start the housing market.
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The U.S. Treasury Department recently announced the outcome of its latest auction of 10-year notes.
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Financial services industry participants looking to get a fresh view of this particular sector might consider attending the upcoming conference EMERGE: The Forum on Consumer Financial Services Innovation.
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The Federal Deposit Insurance Corp. recently released its Quarterly Banking Profile, and this report contained data indicating that loan origination could increase sharply in the near future.
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The Consumer Financial Protection Bureau recently released a report on its supervision of non-bank activities.
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The auto loan portfolios held by credit unions grew at the fastest pace in 13 years durin?g March, according to data provided in a CUNA Mutual Group report.
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Lenders identified Consumer Financial Protection Bureau mandates as their single greatest compliance challenge in a recent QuestSoft survey.
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Younger Americans have been paying down their debts, gradually lifting the burden off their shoulders in the aftermath of the recession.
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Jobless claims recently fell to their lowest level in seven years, and this development could show the latest progress made by the labor market.
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Commercial and multifamily mortgage loan originations fell during the first quarter, according to figures contained in a recent Mortgage Bankers Association report.
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Household debt rose during the first quarter, according to figures provided in a report from the Federal Reserve Bank of New York.
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Mortgage applications surged during the week ending May 2, according to Mortgage Bankers Association figures.
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Larger lenders have been approving a higher fraction of applications for small business loans, taking market share away from banks with a more modest scope.
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Home prices experienced a sharp year-over-year surge in March, according to data contained in a CoreLogic report.
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Many U.S. banks recently reduced their standards for mortgage lending, and this development could boost loan sales by increasing the availability of this type of debt.
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The Consumer Financial Protection Bureau has been pushing U.S. lenders offering auto loans through car dealerships to price this debt using a flat-rate structure, and BMO Harris Bank was the first sizable financial institution to adopt this approach.
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Jonathan Lippman, chief judge of the state of New York, recently proposed reforms to debt collection lawsuits, 100,000 of which are filed against residents of the state each year.
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Commercial and industrial loan origination moved higher during the first quarter, according to Federal Reserve data.
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The volume of weekly mortgage applications dropped to its lowest in almost 14 years during the week ending April 25, according to data from a recent Mortgage Bankers Association survey.
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The Labor Department's April jobs report provided some strong figures, and this development could easily help bolster the sentiment of everyday Americans.
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A growing percentage of Americans are paying their credit card balances in full every month, according to a recent Gallup poll.
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U.S. economic growth seems to be picking up, and this development could affect both loan origination and loan sales by bolstering the sentiment of consumers and the demand for credit.
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Various measures of consumer confidence have shown strength lately, and the continued improvement in this sentiment could fuel more robust loan origination by increasing the demand for credit.
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U.S. consumer defaults plunged in March, and this development could affect loan sales and pricing by lowering the supply of low-quality credit.
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