For the first time in 3,000 days, and with much anticipation, the 3-month and 10-year treasury curve inverted. The median time to a recession after this curve inverts is between 1 to 1.5 years. However, unprecedented interventions such as QE (and higher central bank holdings globally) make it difficult to draw hard and fast conclusions. Market participants are pricing in a 41% probability of an interest rate cut in the September meeting.

Source: PeerIQ; Bianco Research

In regulatory news, the SEC is investigating Direct Lending Investments over material misstatements of the valuations of one of its investments. Direct Lending lent to mid-cap companies and overvalued its investment in one of its borrowers who defaulted. The trifecta pattern of a liquidity mismatch, Level 3 holdings, and investor redemption/subscription activity made the Direct Lending fund prone to misstatements. The SEC has stepped up enforcement actions on direct lending funds and you can read about our prior analysis on this topic here. Do reach out to learn how PeerIQ can help you with regulatorily-compliant valuations. 

ICBA Takes on Square

The Independent Community Bankers of America are seeking to block FinTechs from receiving FDIC insurance if they obtain Industrial Loan Charters. The group contends that such a charter will allow FinTechs to operate nationally without any supervision from the Fed. Square has reapplied for an ILC and has received until now limited pushback on its application. Meanwhile,

LendingClub is considering filing an application with the OCC to operate as a national bank.

New Products from FinTechs

FinTech innovation continues with new products from PeerStreet and Figure. PeerStreet has launched a 30-year loan to enable private investors to buy rental properties. Residential for Rent loans are targeted towards rental home operators. The rental market in the US has grown exponentially post-crisis people struggle to buy homes. The number of rental homes has grown from 36 Mn in 2006 to 43 Mn in 2017.

Source: FactTank, PeerIQ

Figure is launching Figure Home Leaseback, a reverse mortgage product which allows homeowners to sell their homes to Figure and continue to live in place as renters. This new product complements Figure’s Home Equity Line of Credit.

Industry Update:

Lighter Fare: