On Wednesday, the Federal Reserve will release its latest Beige Book , a publication about current economic conditions across the 12 Federal Reserve Districts. The Book is published eight times per year, and summarizes key economic conditions by each of the Fed districts. The last Book revealed increased economic activity across the U.S. Eight of the 12 Federal Reserve Districts reported modest to moderate growth. The majority of Districts indicated that manufacturing expanded, but that growth had slowed, particularly in the auto and energy sectors. New home construction and existing home sales were little changed, with several Districts reporting that sales were limited by rising prices and low inventory. Commercial real estate activity was also little changed on balance. Most Districts reported modest to moderate growth in activity in the nonfinancial services sector, though a few Districts noted that growth there had slowed. According to the Book, residential real estate markets saw ongoing price increases and mixed sales results; contacts in a couple of markets cited greater “balance” as local shortages of housing inventory eased somewhat. While retailers (including an auto dealer) and manufacturers said sizable tariff increases would pose significant problems if they occurred and many respondents cited uncertainty, outlooks remained mostly positive. Closed single-family sales were up year-over-year from November 2017 to November 2018 in Rhode Island, Boston, and Maine, and down in Massachusetts and New Hampshire. Residential markets in Rhode Island and Boston became more balanced in recent months, with growing supplies of homes for sale and moderation in the pace of home price appreciation. Despite a seller’s market environment, contacts said real estate was a preferred investment choice, given the volatile U.S. stock market. Here’s what else is happening in The Week Ahead:
– Eighth Annual AEI-CRN Housing Conference (October 16-17)
– Affinity Consulting 2019 Management Symposium (October 16-17)
– Census Bureau Housing Starts (October 17)
– Census Bureau Building Permits Survey (October 17)
– The Consumer Financial Protection Bureau’s Semi-Annual Report to Congress (October 17)
China warns to keep ‘champagne’ on ice after ‘phase one’ trade deal
The United States and China still have some work to do before finalizing their “phase one” trade deal. Beijing wants to send Vice Premier Liu He, China’s top trade negotiator, to Washington as soon as the end of October to finalize a deal that can be signed next month at the Asia-Pacific Economic Cooperation conference next month in Chile. “While the negotiations do appear to have produced a fundamental understanding on the key issues and the broader benefits of friendly relations, the Champagne should probably be kept on ice, at least until the two presidents put pen to paper,” wrote the state-owned China Daily. Stocks futures are pointing to a modestly lower open following the report. Last week, the major averages rallied sharply in anticipation of a deal. “The outline of the agreement is quite similar to what was reached in late 2018 after the first trade summit between Presidents Trump and Xi,” wrote a global markets research team at the Tokyo-based investment bank Nomura, adding that the deal does little to materially reduce “fundamental uncertainties regarding the US-China economic relationship.” The “phase one” agreement came days before customs data released Monday by Beijing showed Chinese exports to the U.S. fell 17.8 percent to $36.5 billion in September, evidence the trade war is taking a toll on the world’s second-largest economy. The U.S. is the biggest buyer of Chinese goods. Trade negotiators from the U.S. and China on Friday agreed to a deal in principle that is expected to take three to five weeks to complete. As part of the deal, China agreed to increase its purchases of U.S. agricultural products and Boeing aircraft, in addition to making reforms on intellectual property and financial services. The U.S. has agreed to not raise tariffs from 25 percent to 30 percent on Oct. 15. A decision has not yet been made on the tariff increase scheduled for Dec. 15. Trump touted the agreement as a big win for U.S. industrial companies and farmers. “There will be more tractors sold, they’re going to be bigger and better and more powerful and they’re going to be made by John Deere and Case [IH] and Caterpillar,” Trump said Friday during a rally in Lake Charles, Louisiana. On Sunday, he tweeted, “My deal with China is that they will IMMEDIATELY start buying very large quantities of our Agricultural Product, not wait until the deal is signed over the next 3 or 4 weeks.”
Citibank fined $30 million for holding onto foreclosures for too long
Citibank was fined $30 million by federal banking regulators after an investigation found that the bank was not selling foreclosed homes back into the market fast enough. The Office of the Comptroller of the Currency announced Friday that it fined Citibank $30 million for “violations related to the holding period of other real estate owned.” Under federal banking regulations, there is a two-year limit on banks maintaining possession of a foreclosed property. The rules stipulate that banks can apply for an annual exemption that can push their ownership of a property to as much as five years. But after that, the bank is supposed to sell the property back into the market to prevent available housing inventory from being kept away from would-be homebuyers. And according to the OCC, Citibank violated that rule by holding onto hundreds of foreclosures for longer than the five-year limit. “The OCC found the bank engaged in repeated violations of the statutory holding period for OREO,” the OCC said in a statement. “These violations resulted from the bank’s deficient processes and controls in the identification and monitoring of the OREO holding period. In assessing this civil money penalty, the OCC found the bank failed to meet its commitment to implement corrective actions, resulting in additional violations.” A quick note of explanation on the use of the term “OREO” by the OCC: Most in the housing industry refer to foreclosures as REOs, for real-estate owned, but federal regulators like the OCC and the Federal Reserve refer to them as OREO, for other real estate owned. According to the OCC order, an investigation found more than 200 violations of the foreclosure sale time limit rule between April 4, 2017 and Aug. 14, 2019. But, Citibank states that the problem was limited to those 200 properties. “The maximum holding period for foreclosed properties by a national bank may not exceed five years. In some instances, we did not meet the requirement,” the bank said in a statement. “The issue, involving approximately 200 properties, was identified in 2015 and there was no impact on our customers,” the bank continued. “Since identifying the issue, we have strengthened controls, processes and procedures to ensure the timely disposition of these assets,” the bank added. “Most importantly, we consistently worked to ensure the responsible disposition of the properties to avoid negatively affecting the real estate market in those communities.” As Citibank noted, the problem began in 2015.
According to the OCC, in 2015, the bank found its own processes to be “deficient.” More specifically, the bank “lacked adequate policies, procedures, and processes to effectively identify and monitor the holding period for OREO assets,” the OCC said. The OCC stated that at that time, Citibank “committed to developing and implementing corrective actions to address these deficiencies.” But, the bank later submitted multiple requests to extend the holding period for REO properties that were “not made timely and resulted in numerous additional violations,” the OCC said. Then, in April 2017, the OCC told Citibank that its internal controls on REOs remained “decentralized, ineffective, and inadequate.” After that, Citibank continued to submit “untimely requests” to extend the REO holding period, the OCC said. And things didn’t get much better from there. “Following additional efforts to correct the root cause of the continued OREO holding period violations, the Bank recommitted to implementing corrective actions by August 31, 2018,” the OCC said. “The Bank failed to meet its commitment, resulting in additional violations.” According to the OCC, the bank has made progress in dealing the REOs in question. In fact, the regulator states that Citibank has “significantly reduced” its REO holdings in the last year. “The OCC continues to monitor the Bank’s progress to implement the required corrective actions to attain effective policies, procedures, and processes to identify and monitor the holding period for OREO assets in compliance with the law and regulation,” the OCC stated. “As part of these efforts the Bank has, over the last twelve months, significantly reduced its inventory of OREO assets.” According to the OCC, Citibank has already paid the penalty to the Department of the Treasury.
Ross Stores expanding, announces dozens of new stores
Ross Stores is growing, the California-based retailer expanding its national footprint. And the discount clothing store’s brand shows no sign of slowing growth. The new stores – 30 Ross Dress for Less locations (“Ross”) and 12 dd’s DISCOUNTS stores – will be added to 19 states. This is part of a national burst in openings for the brand, the new additions giving a total of 98 openings for Ross this year. These additions add to the 1,811 Ross Dress for Less and dd’s DISCOUNTS locations as well. Noticeable among the announced locations are nine stores in the Midwest where Ross has been actively seeking to expand its presence. This summer, Ross went into Ohio for the first time with two new stores. “This fall, we continued to expand our Ross and dd’s footprints across our existing markets as well as expansion in our newer market — the Midwest. The 42 locations we added this fall included nine stores in our newer Midwest markets of Illinois, Indiana, Kentucky, Nebraska, and Ohio. In addition, dd’s DISCOUNTS entered the state of Virginia with the opening of one new store and now operates in 19 states,” said Jim Fassio, president and chief development officer. “Looking ahead, we remain confident in our ability to grow to 2,400 Ross Dress for Less and 600 dd’s DISCOUNTS locations over time.” According to their website, Ross offers “name brand and designer apparel, accessories, footwear, and home fashions for the entire family at savings of 20% to 60% off department and specialty store regular prices every day.”