S&P/Experian Credit Default Indices Show Mainly Decreases in Default Rates

Over the past twelve months, the indices that follow consumer default rates have shown improvements, according to Experian and S&P.

Data released today by Standard & Poor’s and Experian for the indices of consumer credit defaults shows that, in May, the year-over-year defaults of consumer credits have decreased to 2.09 percent for first mortgages and to 1.42 percent for second mortgages, from the levels in April, of 2.16 percent and 1.51 percent.

The default rate for auto loans has also dropped to 1.34 percent in May, from 1.45 percent in April. In the credit cards sector, the default rates have increased slightly from 5.91 percent in April to 5.93 percent in May.

Chairman and Managing Director of the S&P Indices’ Index Committee, David Blitzer, said that month-to-month statistics presented some volatility. However, he added, the evolutions of default rates for several categories of consumer loans indicate that consumers are straightening out their balance sheets over the past years. Compared to the same period of last year, said David Blitzer, the indices show lowered default rates, and the image is even more optimistic if the data from this year is compared to that of 2008 and 2009.

The largest decreases of default rates were noted in New York – from 2.11 percent to 1.94 percent, Los Angeles – from 2.57 percent to 2.39 percent. Miami and Chicago posted default rates for May of 5.31 percent and 2.37 percent, respectively. In Dallas, there was a slight increase from 1.56 percent to 1.59 percent.

The data was provided by Experian, which has access to a database covering 11 trillion dollars worth of outstanding loans, collected from 11,500 financial lending institutions in the US.

Less than a Quarter of Americans Have a Six-Month Savings Safety Net

A recent Bankrate survey reveals that only 24 percent of Americans had savings that could cover their expenses in case of loss of income while another 24 percent had no safety net in savings whatsoever.

This statistic represents a wake-up call for Americans, as the number of people who have been unemployed for at least six months has reached 6.2 million.

The most likely to have savings that could cover expenses for six months are people with higher incomes, most in the 50s or 60s. However, in this age group, about half do not have an emergency savings fund. The worst performers in the savings department are low-income households and people below 30.

An additional portion of 22 percent has very small savings that would not allow them to cover expenses for three months. About 46 percent of the respondents said they had sufficient savings to cover expenses for at least three months.

The survey also shows that the Americans do not feel as secure about their financial security in June as they did in May. The index measuring financial security dropped from 98.5 to 97.8. However, 26 percent of the respondents said they were more relaxed about their debt compared to last year. Those that are uncomfortable with their debt accounted for only 19 percent of the participants to the survey, the lowest portion since December last year.

The index for financial security, issued monthly by Bankrate, is based on phone interviews with more than 1,000 US adults over the age of 18.

US RBC Bank to Be Acquired by PNC

Royal Bank of Canada (RBC) and the financial services company PNC announced today that they entered an agreement for RBC’s subsidiary in the US, RBC Bank USA, to be acquired by PNC for the price of 3.45 billion dollars.

The acquisition of RBC Bank USA will grant PNC access to very attractive markets in the southeast of the country, while adding value for PNC shareholders, explained the chief executive and chairman of PNC, James Rohr.

He added that the company’s recent acquisitions have demonstrated through their success that the company’s products are able to gather new clients and reduce costs, and the current transaction represented an incredible opportunity for the company’s growth.

RCB Bank, based in Raleigh, North Carolina, has 424 branches in South Carolina, Virginia, Georgia, Alabama, Florida, and North Carolina. After the acquisition, the two companies will have a total of 2,870 branches, pushing them to the fifth position in the top of US banks.

The transaction is expected to be accretive to PNC’s earnings in 2013, based on how much of the transaction price of 3.45 billion dollars will be paid in common stock. PNC has the option to pay RBC about one billion dollars in common stock, representing three percent of PNC’s shares at the price of 57.79 dollars, the closing price on Friday, June 17.

The acquisition offer represents some 97 percent of the current value of RBC Bank USA, based on the bank’s April balance sheet.

After the transaction is finalized, PNC could incur planned integration and merger costs of some 322 million dollars. PNC estimates that, after the merger, RBC Bank’s non-interest expenses would be reduced by approximately 230 million dollars through the improvement of administrative and operational efficiency.

The estimated closure date is estimated to be March 2012. The merger agreement has been approved by the management boards of both companies. The current price is subject to adjustments, based on the value of delivered tangible assets at the time of closing the transaction.

Lockton: The Law of Health Reform Causes Deep Distress to Employers

A recent survey from insurance broker Lockton revealed that almost 20 percent of employers considered the alternative of abandoning group coverage in 2014.

The “play or pay” mandate of the health reform law, taking effect in 2014, causes employers serious concerns. Roughly 70 percent of the employers interviewed by Lockton said they were either “very concerned” or “concerned” about the impact this law would have on their businesses.

By law, in 2014, most workers will have the possibility to choose from a number of insurance programs subsidized by the federal government, and this will allow employers to become more flexible and to terminate group insurance contracts. According to Lockton’s most recent, survey 18.8 percent on employers planned to do so.

The director of Compliance Services at Lockton, Edward Fensholt, said that the move would not be surprising. He added that the company’s clients have been hinting in this direction for the past few months and that they seemed apprehensive with regards to the provisions of the new law. Furthermore, employers are aware of the fact that the future would bring them increased expenses and work.

The survey is based on the answers of some 40 percent of Lockton’s client-companies. The survey consisted of 10 questions on the health reform. The responses were consistent, revealing a high level of frustration about the fact that the new law will make the administration of health plans even more burdensome from an administrative point of view and more costly than it currently is.

 

Mortgage Rates Continue to Fall Nine Weeks in A Row

Mortgage Rates Continue to Fall Nine Weeks in A Row

In a climate of less than optimistic economic news, mortgage rates continue to decline. The weekly nationwide survey conducted by Bankrate shows that the mortgage rate for fixed rate 30-year mortgage loans is now at 4.65 percent.

The average rate for fixed 15-year mortgage loans posted a new record low, dropping to 3.79 percent. A slight increase, to 5.19 percent, was noted in the jumbo loans extending for 30 years at a fixed rate.

According to Bankrate, the key factor for the decrease of mortgage rates was the recent employment report, which had disappointing findings. Furthermore, the recent economic results are lower than expected, bringing down the ten-year yields of Treasury notes at less than three percent. All these factors combined are responsible for the decrease of mortgage rate nine weeks in a row, reaching new  record lows.

Mortgage rates have not been above 6 percent since November 2008. At the time, fixed 30-year mortgage contracts had a rate of 6.33 percent, meaning that the monthly payments for a 200,000 dollars loan extended over 30 years generated 1,241.86 dollars monthly payments per contract. At the current level of 4.65 percent, the monthly payment has dropped by 210 dollars, to 1,031.27 dollars. This is to the advantage of people who are currently seeking to refinance their loans.

The survey is based on data from the top 10 US banks. About 62 percent of mortgage experts predicted that mortgage rates will remain mostly unchanged over the coming week. The remaining experts are equally split between a rebound or continued decline.

Credit Suisse: May ends with Core Hedge Fund Index 1.71 Percent Lower

The Core index for hedge fund performance form Dow Jones and Credit Suisse ended May with a 1.71 percent lower value than in April, as the trading environment remained difficult.

Some of the factors that contributed to an environment where trading proved difficult were the continuing market sell-offs, low volatility and higher correlations within stocks, explained Credit Suisse president Oliver Schupp.

The overall decline of the hedge fund index was lower by 1.71 percent, but the largest decline was noted in the Managed Futures segment, which fell by 4.4 percent, as equities, currencies and energy futures posted lower performances than in previous months. Next in line was the Global Macro segment, which dropped 2.52 percent.

For the year, the Hedge Fund Index still remains at a 0.87 percent increase, while the Managed Futures segment is still posting negative evolutions, with a 1.56 percent decrease year-to-date.

Currently, the best year-to-date evolution appears to be that of emerging markets, with an increase of 2.49 percent. For May, however, this segment of the index also dropped 0.65 percent.

After the events on the stock exchange market in 2008, investors have been focusing their attention on hedge funds with increased liquidity. Managed accounts are a segment of particular interest, since they have high potential for transparency and frequent liquidity.

The hedge fund index issued by Credit Suisse and Dow Jones is the only index that was designed specifically to track the performance of this segment, as well as other regulated market segments.

Expert Warns: Majority of Financial Advisors Offer Bad Advice to Customers

Bad AdvisorsAmericans are challenged by personal finance expert Roccy DeFrancesco to take charge of their finances, and to stop relying on advice from bad financial advisors.

In his latest book, “Bad Advisors”, DeFrancesco reveals some of the secrets of the financial services industry. The author, who is also a leading trainer of advanced strategies for managing personal finances, asks a very simple question. Namely, if Americans received good advice from their financial advisors, how did they happen to lose trillions of dollars in their IRAs, pension plans, 401ks, and the stock market in three years alone?

Roccy DeFrancesco answers this question by saying that, in his opinion, about 95 percent of financial advisors didn’t care as much about the financial well being of their customers, as about selling them company products. That translates into offering inadequate or plainly bad advice, which did not help customers achieve their financial goals.

DeFrancesco added that financial advisors might also impact the financial situation of many Americans in a negative way by not disclosing vital financial information, of which their clients should be aware in order to make informed decisions.

This attitude and behavior of financial advisors is highly detrimental to their clients. The finances of their clients are put at risk, and many Americans might be forced to seek jobs in their retirement years.

“Bad Advisors”, published by KS Publications, will offer readers a set of highly relevant questions that should be asked when meeting with financial advisors. The book’s goal is to teach Americans to take control of their financial situation. The author commented that people should not be afraid that they would offend their advisor through those questions and that they should keep in mind that what is at stake is their family’s future.

UK Adoption of Mobile Banking Technology Is Slow, Postal Communications Preferred

Global provider of customer satisfaction measurement, ForeSee Results, published today the company’s first analysis on customer satisfaction for the UK online banking sector.

The report is based on reports from about 1,000 customers from the top five UK retail banks – Santander, HSBC, Barclays, Lloyds and RBS. The survey was conducted in April, and it aimed to identify how bank customers felt about and interacted with the online services offered by their banks.

The survey revealed that UK bank customers using online banking services had a fairly high degree of satisfaction towards the services offered by the top five banks. On a scale of 100, the average degree of satisfaction was 80, the excellence threshold in this study.

The high degree of satisfaction in relation to online banking services indicates that this segment has very high potential for building and maintaining relationships with customers.

The lowest satisfaction score was 77, while the highest was 82, indicating that competition between the five banks was fairly tight.

Another key finding of the survey is that the adoption rate of mobile banking was low and, also, that customers were slow to adopt mobile banking services. According to the results of the survey, only 15 percent of the customers were aware of mobile applications for banking or of the mobile website versions of their banks.

Furthermore, some 10 percent of the surveyed bank customers used their mobile phones to conduct banking operations, and only a mere one percent has ever used a banking app.

Also, in terms of communicating with their banks, 42 percent of customers prefer all communications to go through postal services, and email is the first choice of 38 percent. Only 11 percent preferred website communications, while mobile alerts and text messaging are the top choice of only three percent.

FindLaw Survey: Bankruptcy Contemplated by 13 Pc of Americans

A new survey made by one of the most popular websites of legal information, FindLaw, reveals that almost one in eight US citizens, or 13 percent, have filed or are considering filing for bankruptcy.

People with ages of 18-34, or older than 55, are 50 percent less likely to file for bankruptcy than people in the 34-50age group, while people who are in their retirement period, with ages of 65 or older, are the least inclined to begin bankruptcy procedures. They represent a share of 7 percent.

According to the US Bankruptcy Research Center, approximately 1.5 million Americans filed for bankruptcy in 2010, putting the bankruptcy level at its highest since 2005. Back in 2005, the wave of bankruptcies preceded major reforms in the laws of bankruptcy.

Personal bankruptcy is, in most cases, stemming from a major event in the life of the individual, such as medical emergencies, job loss, home foreclosures or other similar events. The US laws of bankruptcy regulate what persons are eligible to file for bankruptcy, what debts will remain and what debts will be wiped clean, as well as what will happen to homes and other personal property of the person that filed for bankruptcy.

According to one of the FindLaw editors and attorneys, Stephanie Rahlfs, bankruptcy can be an emotionally taxing process even years after the procedure itself is closed. She added that there are cases when filing for bankruptcy is not the best solution.

Rahlfs added that those who are considering filing for bankruptcy should seek expert advice on the pros and cons of this solution from financial and legal advisers. Furthermore, she added, they should try to seek alternative solutions, such as debt management and credit counseling.

The survey was conducted by phone with a group of 1,000 US adults from all over the country. The findings should be taken with a margin for error of +/-3 percent.