Millennial Women Have More Debt, But Better Credit, Than Men
As the grade school saying goes, “Girls rule, boys drool,” and at least as far as meeting debt obligations, it seems to ring true.
A new Lending Tree survey of about 1,000 millennial men and women found a gender divide within that generation on debt and credit.
“While millennial women had higher levels of student and other types of debt, with an average of more than $68,000 compared to $53,000 for millennial men, the women were better at paying it down, suggesting that they may be more responsible borrowers,” says Situs RERC Assistant Vice President Jennifer Rasmussen.
Rasmussen, who has a Ph.D. in psychology, says, “The Lending Tree survey found that millennial women, on average, earned lower wages than men, despite being more educated. With larger debt loads, millennial women may be more anxious than millennial men about their financial futures. Perhaps this uncertainty is leading millennial women to take a more active role in allocating resources to debt repayment.”
New statistics on college attendance support the disparity between millennial women’s and men’s student debt. More women are actually enrolling and going to four-year schools and getting their college education than men.
Consumers Taking Less Credit
Consumer borrowing slowed in June from the quick growth in the prior month, but continued at a solid pace, according to fresh government data released on Monday.
Total consumer credit increased $12.4 billion in June to a record seasonally adjusted $3.86 trillion, posting an annual growth rate of 3.9 percent, the Federal Reserve reported. This is down from a revised $18.3 billion gain in May, which was the strongest rate in six months.
Consumer borrowing slowed a bit in the second quarter as a whole, continuing a trend in place since last fall. Credit rose at a 4.5 percent annual rate during the second quarter, down slightly from a 5 percent pace in the first quarter.
The historical main source of credit growth is non-revolving credit, which covers loans for education and cars, rose at an annual rate of 4.9 percent in June, down from 8.2 percent in May.
Revolving credit, which is mostly made up of credit-card loans, increased at an annual rate of 3.9 percent in June, down from 5.7 percent in May.
Fix FICO Fast
A Senate bill would require Fannie Mae and Freddie Mac to use credit scoring models that would make it easier for millennials and first-time buyers to get in on the American dream of homeownership.
Co-sponsored by Sens. Tim Scott (R-S.C.) and Mark Warner (D-Va.), the bill would direct the mortgage giants to create procedures that would allow them to consider credit scores other than the traditional FICO model when deciding to purchase a residential loan.
Such a change would allow lenders to use alternative credit scores, like those from VantageScore Solutions, when determining whether consumers are fit to receive a loan.
“Unfortunately, the credit models that the government uses to gauge creditworthiness are very outdated and don’t do a satisfactory job of identifying qualified borrowers who don’t bank or use credit the way previous generations had,” says the Collingwood Group Managing Director Tom Cronin. “There’s a big disconnect now and, as a result, there are 40 million people who are ‘un-scorable’ and completely invisible to the current mortgage system.”
Legislation to change credit scoring has been circulating in Congress for some time. In February, a bipartisan group of Congressmen reintroduced the Credit Score Competition Act, which contains the same language as the Senate bill.
Also in February, the Consumer Financial Protection Bureau put out a call for feedback on the benefits and risks of alternative credit data. The CFPB has estimated that 26 million people in the U.S. are “credit invisible,” meaning they don’t have a credit history with a consumer reporting agency, while another 19 million consumers don’t have an extensive enough credit history to get a credit score.
Traditional “old school” credit scores, such as the FICO, consider only whether borrowers have repaid debts such as mortgages, credit cards or other loans.
“New school” models like VantageScore, meanwhile, look at a broader range of data to determine creditworthiness. It includes things like cellphone bills, utility payments and rental payments.
Using such credit scores that go beyond FICO would open up access to credit for roughly 72,000 more households each year, according to a 2015 VantageScore study.
That same research found that 16 percent more Hispanic and African-American households would have expanded mortgage access as a result.
Concludes Collingwood Group’s Cronin, “This will certainly give the mortgage and housing businesses, along with the economy, a needed shot in the arm. Adoption of alternative scoring models are arguably one of the best ways to bring more people into the system and expand access to credit. Any delay in adoption of alternative scoring models is keeping millions out of the system and negatively affecting the nation’s economic well-being.”
Invitation Homes Merges with Starwood Waypoint, Creates $11B Home Rental Company
Invitation Homes (INVH), which went public in February, is merging with StarWood Waypoint Homes to create a company with a combined market value of $11 billion.
The two companies, which both own and operate single-family rental homes in the U.S., have signed a definitive agreement to merge in a 100 percent stock-for-stock transaction, with each Starwood Waypoint Homes share converted into 1.614 Invitation Homes shares.
The new company will still have the name Invitation Homes, with Fred Tuomi, the current chief executive of StarWood Waypoint Homes, as CEO.
Bryce Blair, the CEO of the current Invitation Homes, will be chairman.
The combined shares are expected to continue trading under Invitation Homes’ ticker, “INVH.” Invitation Homes also reported second-quarter earnings Thursday, with net income of $5.5 million, or 2 cents per share, after reporting a loss of $19.7 million in the year-earlier period, or a loss per share of 6 cents.
Here’s What Happens to ARMs When Libor Goes Away
The Libor index is going away. For U.S. consumers, its demise is most likely to be felt in adjustable-rate mortgages.
So-called ARMs — where the interest rate rises and falls with broader indexes — are often closely tied to Libor, or the London interbank offered rate. While ARMs are out of favor these days, they are still a sizable portion of the mortgage market, and once Libor disappears it is unclear to what those mortgages would be pegged.
U.K. authorities recently said Libor would be phased out over the next five years due to allegations bankers manipulated it, which could prove troublesome for borrowers, lenders and investors in mortgage securities.
“In a fairly short amount of time, no one is going to know how to compute what the next payment is going to be” for this kind of mortgage, said Lou Barnes, a capital markets analyst with Premier Mortgage Group in Boulder, Colo. ”And that’s why it’s important.”
Such mortgages were popular before the financial crisis, when lenders used their low teaser rates to get borrowers into bigger homes. They have been a tougher sell in an era of super low interest rates, but still account for roughly $1.33 trillion of mortgages outstanding, according to Black Knight Financial Services Inc., a mortgage data and technology firm.
That is nearly 14% of the overall market, and lenders had been expecting that share to grow as the Federal Reserve continues to raise interest rates. Banks also favor ARMs for jumbo mortgages, high-dollar amount loans they view as a source of revenue growth.
read more: Wall St Journal
Good News for a Change at the Mall
Things may finally be looking up at the mall.
Macy’s reported second-quarter earnings and sales on Thursday that beat the street.
“We saw a notable contribution from the full execution of our new women’s shoe and jewelry models and the continued successful testing of Backstage in store,” CEO Jeff Gennette said in a statement.
“We are excited about plans for fall, including the launch of a new loyalty program and the new marketing strategy, which we anticipate will further improve our sales trend in the back half of the year. There is still work ahead of us; however, I’m encouraged by the progress we’re making on overall performance.”
Earlier this year, Macy’s shares plunged when the retailer reported a 39 percent drop in its fiscal first-quarter profit, hurt by a decline in sales and higher inventory that weighed on margins. Same-store sales — another metric watched closely by Wall Street for retail stocks — also came in weaker than anticipated
The news was good for Koh’s as well after the retailer also reported earnings that beat Wall Street estimates.
The Amazon Economy
Call it the Amazon economy: In July, as many jobs were created in the transportation and warehouse sectors as in retail, according to numbers in the latest Jobs Report.
The Labor Department reported that 900 new retail jobs were created, matching the new positions in transportation and warehousing.
While any one month, particularly at a sector level, can be considered to be a statistical blip, the broader story fits the narrative that Americans are ordering more online — from Amazon in particular — and have stopped going to the mall.
Over the last 12 months — a time of U.S. expansion and steady job creation — the retail sector has shed 7,000 jobs. Department stores have slashed 23,400 jobs in the past year.
Amazon’s jobs would be in the category called non-store retailing, which has added close to 28,000 jobs in the last 12 months.
read more: MarketWatch
Mall Madness: Victoria’s Secret has a Problem
Yet again, L Brands Inc., parent of the Victoria’s Secret lingerie chain, said the latest reported sales decline reflects the company’s exit from swim and apparel.
Experts beg to differ.
They say L Brands’ numbers reflect a dip in Victoria’s Secret’s key lingerie category, an area that company executives said they would be free to focus on without these other distractions.
L Brands reported a same-store sales decline of 7% for the four weeks ending July 29, with the aforementioned exits having a four-percentage-point impact on the company. The Victoria’s Secret brand was hurt by about five percentage points, according to the earnings statement. The company announced the decision to scrap swimwear and clothing in May of 2016.
For the 12 weeks ending July 29, sales totaled $2.76 billion, down from $2.89 billion for the year-before period. L Brands shares tumbled 6% in Thursday trading after the announcement.
“There is no doubt that dropping apparel and swim is impacting their performance, but there is more to the story,” said Jared Wiesel, partner at consulting firm Revenue Analytics. “The core business is also softening as they’ve missed some key shifts in consumer preferences and their shift in promotion strategy has not appeared to pay off.”
read more: MarketWatch
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