HousingWire's Morning Radar provides a look at what's trending across media outlets nationwide.
Small banks get a wake-up call
The Federal Reserve shocked bankers Thursday by approving a proposal that would force even the smallest lenders to comply with standards aimed at shoring up the biggest global banks, The Wall Street Journal reports.
Among the new rules, banks would have to maintain a level of common equity equal to 4.5% of their risk-weighted assets, plus an additional 2.5% capital conservation buffer, also of common equity. The total 7% common-equity cushion compares to current common-equity standards as low as roughly 2%.
The tougher capital rules backed by the Fed Thursday won't take effect until 2019 but will come as an unwelcome surprise to small bankers struggling amid uneven economic growth, tough new rules limiting fees and technological and regulatory moves that have made larger banks more profitable, WSJ said.
Preapproving better than prequalifying
With the housing market warming up in some areas, and multiple offers becoming more commonplace, buyers who want an advantage in the bidding process will need more than a mortgage prequalification — they’ll need a preapproval.
Prequalifying for a mortgage is based solely on what you disclose to the loan officer or broker. “It’s verbal — it doesn’t really mean anything,” beyond providing some basic guidance on the range of prices you may be able to afford, a vice president at Wells Fargo Home Mortgage tells The New York Times.
By contrast, a preapproval requires borrowers to provide documentation of their income and their assets. “Preapproval carries more weight when you go to negotiate a deal,” says a certified financial planner in New York City. “It gives them bargaining power.”
Fed's balance sheet expands a bit
The Federal Reserve's balance sheet grew in the latest week, Reuters reports. The Fed's balance sheet — a broad gauge of its lending to the financial system — stood at $2.84 trillion on Wednesday, up from $2.83 trillion a week earlier.
The Fed's ownership of mortgage bonds guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae totaled $851.76 billion, up slightly from $851.75 billion the previous week. The Fed's holdings of debt issued by Fannie, Freddie and the Federal Home Loan Bank system totaled $93.25 billion, unchanged on the week.
— Justin T. Hilley