Forbearance Levels Off; House Expands PPP; UBS Launches FinTech VC
By Tito Donis
May 31, 2020
Greetings,
This week, we cover the growing evidence of economic recovery; a big win on Madden-Midland; and, FinTech financing news. PeerIQ is also pleased to roll-out a loan delinquency and forbearance module - check out the screenshot below and reach out to learn more.
New unemployment claims clocked in at a 2.1MM filings this week. It’s a continuation of a downward trend in claims, albeit from historic levels.
And while more than 21MM Americans are receiving unemployment benefits of some kind, continuing claims dropped nearly 4MM from the prior week. That’s a notable change in trend that argues for the “recession has ended” thesis.
As unemployment benefits and stimulus checks arrive in people’s wallets, evidence is building that the economic fallout may not be as bad as once feared.
Forbearance requests by homeowners have begun to level off. Data from the Mortgage Bankers Association shows mortgage forbearance stabilizing at 8% over the last few weeks, after the run-up in early April. Servicers had initially feared forbearance requests could hit 30%.
That’s in line with what we’ve seen here at PeerIQ, where loans in hardship have hit a peak of ~14%.
Source: PeerIQ Analytics Platform
New on PeerIQ - Loan Delinquency Module
As the economic dislocation from COVID-19 has continued, we've spoken to many of you about trends we're seeing in loan performance and delinquencies among borrowers. We're happy to announce that we've added a new page to our Insights module to provide rapid access to portfolio delinquency and performance analytics on your loan pools.
Questions about modifications, delinquency trends, and general loan performance? Looking for forecasting tools?
Please reach out to the PeerIQ team for a demo or a platform refresher.
Stimulus funds are having a major impact on Americans’ wallets. Commerce Department figures show personal income increased by $2Tn in April, a 10% jump, with government benefits (+$3Tn) outweighing the loss in wages (-$0.9Tn).
While perhaps counterintuitive, this is consistent with our analysis in April that stimulus payments might in fact increase net incomes for certain borrowers.
And those stimulus funds are having an impact on everyday Americans. That’s according to Bank of America CEO, Brian Moynihan, who in an interview with CNBC noted that customers with balances under $5,000 have in fact seen an increase in available funds.
Taken together, there’s evidence that we might be on our way to a 3rd quarter recovery. You don’t have to take our word for it - that assessment comes from Jamie Dimon, CEO of JPMorgan, who pointed to government support as the catalyst.
Cross River’s Platform for PPP Loans Times are tough. If you are a qualifying small business struggling to get a PPP loan, take a look at applying via our partner, Cross River. Cross River, a leading FinTech bank, has rolled out a fully digital process to make applications as seamless as possible. And you don’t need an existing bank relationship to apply. Borrowers can securely link their own bank account and apply for loans (up to $2MM). Click here for more information on how to apply. |
Revised PPP Loan Guidance
Over in Washington, D.C., the SBA issued new guidance on PPP, committing to repay lenders within 90 days after eligible loans were forgiven.
Still, that leaves PPP with eligibility rules that are stricter than what many argue is needed.
In response, the House overwhelmingly passed legislation reducing the payroll requirements to 60% (from 75%) and extending the period borrowers can use funds to 24 weeks (from eight). The Senate is expected to take up the bill next week.
Finally, this week saw continued signs of steady growth in our industry.
CommonBond announced the launch of SmartCash, a program that allows its customers to open a core checking account while refinancing their student loans. CommonBond CEO and Co-Founder, David Klein, put the launch squarely in-line with the firm’s mission, calling it another way for clients to “use their student loan to unlock value in their financial lives.”
OCC Fixes Madden-Midland, Re-Affirms “Valid When Made” Doctrine
The OCC finalized the “valid when made” fix [ OCC press release here ]. Here’s the excerpt from Acting Comptroller of the Currency Brian Brooks:
“Today, as one of my first acts as Acting Comptroller of the Currency, I signed a final rule to protect Lincoln’s vision and to clarify that a bank may transfer a loan without affecting the legally permissible interest term. The rule supports the orderly function of markets and promotes the availability of credit by answering the legal uncertainty created by the “Madden” decision. Such certainty allows secondary markets to work efficiently and to serve their essential role in the business of banking and helping banks access liquidity and alternative funding, improve financial performance ratios, and meet customer needs.”
It’s a big win for lenders that rely on bank partnership models to originate loans across state lines. The fix will improve liquidity for loans in the whole loan market and ABS markets by removing the uncertainty on the validity of loan terms originated by a bank (and sold across state lines to a non-bank).
The regulatory initiative has been the primary focus for the Marketplace Lending Association, founded by Nat Hoopes, who has worked on the issue for more than 3 years.
The final rule will go into effect 60 days after being published in the Federal Register.
Payments - This Time Marqueta Continues to Dominate Financing Headlines
Congratulations to the team at Marqeta, who this week announced a $150MM funding round at a valuation north of $4Bn. In a blog post, CEO Jason Gardner, noted that the funds would “help us accelerate our product momentum and global growth as a company.” It’s certainly a testament to investors’ faith in the payments infrastructure: the fundraise comes just months after reaching a $2Bn valuation last year.
Capital One and QED Founder, Nigel Morris, is making the case that now is the time for banks to acquire FinTechs.
Finally, UBS announced it is launching a VC fund. The fund is designed to accelerate UBS digital strategy. Bloomberg notes that COVID-19 has accelerated a shift toward digital services - even for high-touch wealth management. The fund is planning investments between $10 million and $20 million in dozens of companies, and plans to hold those stakes for at least five years.
In the News:
- Americans on Unemployment Benefits Post First Drop of Pandemic (Bloomberg, 5/28/2020) The job market is starting to rebound as businesses start to reopen.
- Under Barrage Of Awful Data, Fed Debates Major Shift To Rules-Based Policy (Forbes, 5/24/2020) The Fed is considering explicit rules to govern interest rates.
- The Bond Market Is Betting on More Fed Action to Dodge a Depression (Bloomberg, 5/26/2020) The Fed unleashed many new policies to keep the economy out of depression, but investors believe it’s lining up another one.
- Consumer Spending Fell a Record 13.6% in April (WSJ, 5/29/2020) U.S. consumer spending fell by a record 13.6% in the month of April, but there are signs that purchasing is starting to pick up.
- The JPMorganChase Daily Consumer Spending Tracker (JPMorgan Chase, 5/27/2020) Daily release of JPM’s credit card spending data.
- Delinquencies and Foreclosures Won't be as Bad as Feared, Data Suggests (American Banker, 5/26/2020) Forbearance requests by homeowners nearly leveled off in the first half of May.
- An Optimistic Jamie Dimon Sees a 3rd Quarter Recovery (ai-CIO, 5/27/20) JPMorgan CEO points to DC-funded relief efforts as key driver.
- House Passes Bill Loosening Rules on PPP Small-Business Loans (WSJ, 5/28/2020) House approved bipartisan bill that would loosen requirements on hundreds of billions of dollars in small-business loans.
- The Future Of Fintech: The New Normal After The Covid-19 Crisis (Forbes, 5/26/2020) Once the COVID-19 pandemic is over, banks will need to accelerate their investments in FinTech.
- There's Never Been a Better Time for Banks to Buy FinTechs, According to a Capital One Cofounder. Here's Why Both Sides Need Each Other More Than Ever. (Business Insider, 5/28/2020) Capital One co-founder, Nigel Morris, said that there is a mutual benefit for both banks and FinTechs to work together once the pandemic is over.
- CommonBond Announces SmartCash™ - Connecting Student Loan Refinance to a More Seamless Cash Experience (PR Newswire, 5/29/2020) CommonBond’s new product, SmartCash, which allows customers to seamlessly open a core checking account while refinancing their student loan debt.
- UBS to Start Own Venture Capital Fund in Effort to Digitize Bank (Bloomberg, 5/25/2020) Swiss wealth manager, UBS Group AG, wants to further engage with and support FinTech firms by investing in them.
- Marqeta raises $150 Million in New Capital, to Accelerate Product Innovation and Global Growth (Marqeta, 5/27/2020) Oakland-based FinTech Startup, Marqeta, raised $150MM in equity funding, which values the company at $4.3Bn.
- OnDeck Shares Early Progress in Borrower Behavior (LendIt Fintech News, 5/28/20) Online lender shares mid-quarter update on cost saving program and improved borrower repayments.
Lighter Fare:
- New Species of Scaly, Deep-Sea Worms Named After Elvis have Been Found (Science News, 5/25/2020) New species of deep-sea worms are named after Elvis because they have luminous colored scales that are reminiscent of his iconic jumpsuits.