The Fed’s latest survey on household wealth showed that total net-worth of American households rose by $2.19 Tn QoQ to nearly $107 Tn, driven by rising equity and home values. Household debt grew by 2.9% YoY to $15.4 Tn with consumer credit growing at 4% YoY. Consumer credit growth continues to propel GDP growth, undeterred by rising interest rates.
In regulatory news, the Comptroller of the Currency, Joseph Otting, penned his views on the ongoing legal challenges from the states to the OCC’s authority to issue a FinTech charter. This article seems to be a response to the lawsuit filed by the NY State Department of Financial Services challenging the OCC’s authority to issue the FinTech charter. Some of the main points he made are:
- The OCC’s power to issue FinTech charters stems from America’s dual banking system, which allows banks to register at either the state or the federal level. This dual system promotes innovation and consumer choice, by allowing banks to choose the regulatory environment that they are most comfortable with to operate in.
- The OCC’s FinTech charter will bring national licensing requirements on parity with those available in certain states.
- Fintech companies that become national banks will be expected to meet the same standards and will be subject to the same supervision and regulation that national banks receive, and this may not be right for all fintechs. Consequently, many will continue to operate at a state level to avoid complying with national capital, liquidity and oversight requirements.
- The FinTech charter does not undermine consumer protection, as any FinTech bank that grows above $10 Bn in assets will be subject to supervision by the CFPB.
- The OCC’s national perspective informs its oversight, allowing companies to benefit from broad industry-wide perspective as well as in-depth on-site knowledge and expertise, which state regulators may not possess.
- The OCC is issuing the FinTech charter under the National Bank Act, and it has broad authority to grant charters for national banks to carry on the “business of banking”. Opposition by states comes down to them protecting their licensing revenue at the cost of expanding economic opportunities.
The OCC is vigorously defending its turf and its ability to issue national bank charters, and expects multiple applications by the end of 2018. Initial applicants might need a significant reserve for legal fees to quash any challenges from states like New York. Meanwhile, the Fed is also planning to weigh in on whether FinTech charter applicants will have access to the US payments system and to central bank lending. If FinTechs need to partner with a bank to get access to the Fed, that would reduce the allure of the FinTech charter. You can read more about our take on the OCC’s Fintech charter here and access our webinar presentation here. Reach out to learn how PeerIQ’s risk analytics can help FinTechs satisfy risk management supervisory standards.
The Senate Banking Committee held a hearing on digitization, data and technology. The hearing focused on data management at banks and other large technology companies, and how electronic communication had helped the real estate industry to streamline home sales.
PeerIQ and TransUnion’s Webinar on “Managing and Forecasting Prepayments”
Thank you for joining our webinar on Friday! In case you missed it, you can access the slide deck here and watch the webcast here. We discuss: why prepayments may be increasing, what features borrowers are responding to (balance vs. term vs. APR), and the role of credit unions/banks in increasing re-financing.
Q3 Securitization Update
As Q3 draws to a close and in the lead-up to ABS East, we look at how the MPL ABS markets performed this quarter:
- Eight marketplace lending securitizations are expected to price this quarter totaling $3.5 Bn, the fifth-highest level of quarterly issuance, representing 35% growth YoY. To date, cumulative issuance equals $41.9 Bn across 134 deals.
- All-in spreads tightened, and all-in yields fell on new issuance this quarter. 2018Q2 was the first quarter where we observed higher all-in costs for issuers driven by rising front-end interest rates and ever-increasing ABS supply, breaking the trend of non-stop spread tightening. This quarter, weighted average all-in yields on consumer deals decreased from 4.2% to 3.4% QoQ, and on student deals from 4.5% to 3.5% QoQ.
- Average spreads at issuance are tighter in the consumer and student spaces across credit tranches, except on D tranches of consumer deals. New issue spreads in the consumer MPL space were tighter across the stack, with the spreads on As tighter by 15 bps, Bs tighter by 7 bps, Cs tighter by 1 bps, but those on Ds wider by 15 bps on average QoQ. New issue spreads in the student MPL space were tighter across the stack, with the spreads on As tighter by 72 bps and those on Cs tighter by 200 bps on average QoQ.
PeerIQ at ABS East
We look forward to seeing you at the ABS East Conference! Do stop by our booth to learn more about our exciting new product offerings. Additionally, PeerIQ’s CEO, Ram Ahluwalia, will speak on the Tomorrowland is Here Today: What Will the Structured Finance Market Look Like in 2025 panel at 11 am on Monday, September 24th. PeerIQ’s CCO, Kevin Walsh, will speak on The Innovation Institute: Technological Solutions for Improving Market Transparency panel at 4 pm on Monday, September 24th.
Reach out to schedule a meeting!
PeerIQ’s New Product Launches
We are launching 3 exciting new products at ABS East:
- ABS Investor Portal: Analyze and Benchmark the loan-level collateral of major ABS issuers. Perform Stress Test scenarios, such as the 2008 global financial crisis, on each originator and project cash flows. Access with originator permission.
- Modeling Archive: Build your own pre-pay and default models to drive investment decisions, derived from TransUnion data across all asset classes.
- Consumer Credit Digest: Track trends in each major asset class including Credit Availability, Credit Health, and Performance Analysis via an affordable monthly publication derived from TransUnion data.
ABS Investor Portal
Consumer Credit Digest
- PeerIQ Offering Stress Test (ABS Alert, 9/21/18)
- PeerIQ’s CEO, Ram Ahluwalia, will speak on the Tomorrowland is Here Today: What Will the Structured Finance Market Look Like in 2025 panel at 11 am on Monday, September 24th 2018 at ABS East in Miami.
- PeerIQ’s CCO, Kevin Walsh, will speak on The Innovation Institute: Technological Solutions for Improving Market Transparency panel at 4 pm on Monday, September 24th 2018 at ABS East in Miami.
- PeerIQ’s CEO, Ram Ahluwalia, will speak on The CEO’s Roundtable: Expanding Your Business Model panel at 10 am on Friday, November 2nd 2018 at the Investor’s Conference on Online Lending in New York
- Recent Developments in Household Net Worth and Domestic Nonfinancial Debt (Federal Reserve, 9/20/18) The Fed’s latest survey on household wealth showed that total net-worth of American households rose by $2.19 Tn QoQ to nearly $107 Tn, driven by rising equity and home values. Household debt grew by 2.9% YoY to $15.4 Tn.
- OCC’s Otting: Why do state regulators want to limit consumer choice? (American Banker, 9/18/18) Otting penned his views on the ongoing legal challenges from the states to the OCC’s authority to issue a FinTech charter and emphasized that the OCC had full authority to issue the charter and was fostering consumer choice.
- Fed will have the say on key parts of OCC’s fintech charter (American Banker, 9/18/18) The Fed is also planning to weigh in on whether FinTech charter applicants will have access to the US payments system and to central bank lending.
- Fintech: Examining Digitization, Data, and Technology (Senate Banking Committee, 9/18/18) The hearing focused on data management at banks and other large technology companies, and how electronic communication had helped the real estate industry to streamline home sales.
- CLUB 2018-P2 (KBRA, 9/12/18) Lending Club’s latest $270 Mn Prime Consumer loan deal has been rated A-, BBB, and BB respectively on the tranches by Kroll.
- Funding Circle to price 71.4 mln IPO shares between 420-530 pence (Nasdaq.com, 9/19/18) British P2P lender Funding Circle would raise $392 Mn at a $1.5 Bn valuation.
- JPMorgan forms commercial banking group to focus on startups (American Banker, 9/19/18) JPM’s emerging growth group will provide financial solutions to venture-backed and early-stage companies.
- Goldman Sachs Nears Deal to Spin Off ‘Simon’ App (WSJ, 9/19/18) Simon, Goldman’s retail brokerage platform for structured notes, is being spun-off at a valuation of ~$100 Mn.
- 2Wheel Partners With Affirm to Offer 0% Financing (motorcyclepowersportsnews.com, 9/19/18) Affirm is partnering with 2wheel.com, an online powersports retailer, to offer financing for powersports vehicles.
- Why Can’t More than Four People Have a Conversation at Once (Quartz, 9/13/18) Four seems to be the optimal number that allows every participant to get their point across.