More scandals from Wells Fargo: extending mortgages without customer knowledge

A series of new legal allegations have been bought against the bank, once again regarding its improper handling of customer accounts. This time, light has been shed on the company’s mortgage business, in which unauthorized changes were made to the loan terms on the mortgages of customers in bankruptcy.

 

Wells Fargo, a major American Bank headquartered in San Francisco, has been plagued by scandals and bad publicity in the past year. On September 8 of 2016, it was forced to pay $185 million in fines for its activities in opening more than 1.5 million bank accounts without its customers’ consent. The company’s culture demands its managers and employees to reach incredibly high quotas and targets, and directives stems from the very highest levels of management. CEO John Stumpf encouraged employees to create as many accounts from each customer as they possibly can, his infamously motto being “eight is great”.

 

Clearly, the bank still hasn’t learned from its past mistakes. New class action lawsuits filed by multiple …

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Highlights from the 2017 Macro-Financial Review

The Central Bank of Ireland published today it’s 2017 Macro-Financial Review. The report gives an overview of the Irish economy and the state of its financial environment. The aim of the report is to help protect the interests of the Bank’s stakeholders, these include: the Irish people, national and international authorities, and other participants in the financial market.

Sharon Donnery, the Central Bank’s deputy governor, introduced the report in a speech this morning. She states that the state of the general economy is improving, but also mentions a few outstanding issues that have the potential to negatively impact the economy’s improvement.

The report notes that much of the uncertainty in the Irish economy is a consequence of Brexit. The depreciation of the sterling against the euro and decreasing consumer spending in the UK has already put a burden on export industries. Uncertainties relating to Brexit may also arise from new trade barriers, trade policies and changes in international taxation.

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A response to: Housing for homes – a classic case of market failure

A recent blog post published by Tom Healy, director of the Nevin Economic Research Institute, suggested that the current housing market in Ireland is an example of a failed market. Healy believes that the issue of under supply of housing can only be solved if the government expands provisions of social housing and extends its jurisdictions over prices and supply in the housing market.

Healy based his argument upon the assumption that the current housing market has failed and is unable to recover without intervention. He cites a chronic under supply of housing and the inability of government programs to sufficiently meet demand. While there is indeed a under supply of housing and rising prices due to pent up demand, a series of government construction plans such as the 2013 Forfas Strategy, Capital Investment Plan, and Action Plan for Housing and the Homeless, in addition to private investments are expected to dramatically increase housing supply within the next few years. These projects directly address the supply issue by promising 47,000 additional units of social housing before 2021.

The blog post …

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Bank of Ireland cuts mortgage rates

Bank of Ireland recently announced new and reduced mortgage rates, which will be available starting Friday the 16th. The highlight is cuts of fixed mortgages rates up to 0.35% for both existing customers and for first-time buyers. The bank decision ups its competition in Ireland’s reviving property market and marks Bank of Ireland as the fourth lender that has cut its rates within the last two months. KBC Bank cut its fixed rate in April, and currently has one of the lowest rates on the market. Permanent TSB and Ulster Bank are the other two lenders who have also taken similar measures.

 

Bank of Ireland’s fixed rate mortgages are based on a property’s loan to value ratio. It has cut its rates for first time buyers with an Loan to Value ratio of 81-90% by 0.25%. Customers with greater down payments and lower Loan to Values ratios also see their mortgage rates cut between 0.1%-0.25%. The greatest reductions however have been for Bank of Ireland’s existing customers, who see their mortgage rates fall by 0.35% if they have a …

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What Brexit Means for the Irish Economy: a pro and a con

With UK Prime Minister Theresa May failing to win a majority in elections last week, the fate of Brexit negotiations have become even more up in the air. It is likely that she will be forced to give concessions the opposition, and thus take a softer stance on the terms of Brexit. Despite the specifics of the negotiation still being uncertain, it has become obvious that the Irish Economy will be hurt by declining trade with the UK and will at the same time benefit from the relocation of multinational corporations from the UK to Ireland.

The UK is one of the top destinations for Irish exports. In 2015, 12% of Irish exports went to the UK, valuing at $12.9 billion. However, Brexit will force terms of trade between the UK and Ireland to be re-examined. While Ireland will definitely try it’s best to keep trade with the UK as open as possible, with declining consumer spending in the UK and the falling price of the pound to the euro, Irish goods …

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Yet Another Warning of a Property Bubble: More Perspectives

The Organization for Economic Co-operation and Development has voiced fears that the economy is overheating. This comes soon after the Fiscal Advisory Council heeded similar warnings earlier this week.

The OECD believes that the banking system is still fragile, with bad loans still accounting for 17% of the total. And while the government has already put into place plenty of macro-prudential policies, there is still the possibility that rapidly rising prices lead to another bubble and burst that would disrupt the delicate economy.

Indicative of OEDC’s stance, overall property market prices are up 8.2% this year at the end of April. The boom in construction is already visible on Dublin’s skyline. Irish Times counted 70 construction cranes towering over Dublin from the 7th floor of their office building on June 1st. This number represents a sizable increase compared to the number Irish Times counted in the first few months of this year. The number of cranes is predicted to continue to rise based on the number of large …

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Moody’s bumps up ratings on Irish banks

Credit rating agency Moody’s has upgraded the long term debt and deposit ratings of Irish Banks: Bank of Ireland (BOI) and Allied Irish Banks (AIB). It also upgraded each bank’s baseline credit assessment by one level. Irakli Pipia, Vice President-Senior Credit Officer at AIB said “the rating upgrades reflect a range of positive factors, including further reduction in non-preforming loans, improved capital ratios and achievement of stable core profitability”.

 

From the end of 2015 to the end of 2016, BOI’s problem loan ratio fell from 11% to 7.9% and the  loan to deposit ratio fell from 112% to 108%, signalling improvements in asset quality and a better funding ratio. The bank’s BAC was upgraded from ba1 to baa3, the 10th tier of Moody’s rating scale.

 

Moody’s also bumped its baselines credit assessment of AIB by one tier from ba1 to ba2. It cites a reduction in the percentage of the bank’s problem loans from 18.6% last year to 14% at the end of 2016 and the bank’s more liquid position.

 

Various other ratings were also affected in …

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Pepper Money Expands Lending in Ireland

Pepper Money, an Australian lender, will soon begin offering commercial property loans ranging in value from €250,000 to €7.5 million to borrowers in Ireland. It hopes to extend €300 million worth of commercial loans within the next two years, roughly half of what the Strategic Banking Corporation of Ireland has extended at the end of March 2017. These loans will meet the demand of professional buy-to-let borrowers hoping to refinance and the demands by first time buyers for properties with various commercial uses.

 

Pepper Money has been keen on taking risks in lending and exploring new markets, being the first new lender to enter the Irish Market for residential mortgages after the market crash and financial crisis, offering small home loans through brokers and direct channels. While entering the market for commercial mortgages, Pepper also plans to lend to borrowers with historical credit issues who have had trouble meeting criteria to obtain loans from banks and other lending institutions in Ireland. It will offer loans to borrowers as long as they are up to date for the past 18 …

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Danger of a new housing bubble?

While the economy is still in recovery, housing supply has been quickly picking up in the past few years. With government construction plans such as the 2013 Forfas Strategy, Capital Investment Plan, and Action Plan for Housing and the Homeless, the housing boom will likely continue if not further accelerate in the years to come.

There are voices of warning: the Fiscal Advisory Council warns that the trends in output and employment in the construction industry may overheat the overall economy, leading to rapidly raising prices and wages. There are also those who believe that output in the construction industry is recovering slowly and still well below what it should be. DKM Economic Consultants recently published a report lamenting a lack of skilled personnel in construction and advocating for greater government funding and availability of apprenticeships.

Acknowledging that the housing supply response is driven by pent up demand, The Fiscal Advisory Council warns that the speed and scale of the response is the real issue. A dramatic increase …

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Property Company Drops Landlords: What this means for Dublin’s rental market

Property agent Hooke & MacDonald announced Monday that it will no longer manage individual lettings because of the paperwork costs involved. The Residential Tenancies Act of 2004 has been recently amended by the Residential Tenancies Act of 2015 and the Planning and Development and Residential Tenancies Act of 2016, which extended rent pressure zones, made it harder to raise rents and increased the frequency of rent reviews and other bureaucratic procedures for private rented housing.

For a large property company like Hooke & MacDonald, the new regulations mean that managing single property lettings is no longer profitable. The company suffers from economies of scale, and only by managing entire apartment blocks and multiple lettings will it be cost efficient. For landlords renting a single property, this means not only being restricted by the regulations but also having to find a different company to represent them.

Hooke & MacDonald’s response reflects the consequences of the new regulations. In particular, regulation on rent pressure zones restrict the rise in rents …

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