Consumer Bankruptcy

A federal regulator signaled that it would take a tougher stance with seller-financed home sales, saying that they were subject to many of the same consumer protections as a home bought with a more traditional mortgage, the New York Times reported. The Consumer Financial Protection Bureau (CFPB) released an advisory opinion that put sellers on notice that it would not tolerate the predatory practices that have come to dominate the so-called contract for deed market. These seller-backed sales have become popular in poor neighborhoods with rundown single-family homes, where mortgages are hard to come by. The CFPB made clear that contract-for-deed sales were subject to federal truth in lending laws that required sellers to first assess a person’s ability to buy a home as well as provide full disclosure of the risks and hidden costs associated with these deals. “The government is taking action to ensure that these products do not turn the dream of homeownership into a nightmare,” CFPB Director Rohit Chopra.The regulator also released a research report documenting the market’s abusive practices. Among them, a buyer can be evicted for missing a single monthly payment and builds up no equity in the home. Contract-for-deed sellers have targeted ethnic and religious communities. (Subscription required to view article.)

The CEO of Bank of America, Brian Moynihan, said that the financial giant no longer believes a recession is on the horizon for the American economy, hinting that the Biden administration and Federal Reserve have achieved a “soft landing” after inflation troubles in recent years, The Hill reported. Moynihan told CBS’s Margaret Brennan on “Face the Nation” Sunday that while the economy is slowing, consumer spending remains in line with prepandemic levels. “Our team is a great team at Bank of America Research; [it] does not have any recession predicted anymore,” Moynihan said. “Last year, this time, it was a recession.” Moynihan said the consumer spending rate stands at about 3 percent, about half of what it was last year. Consumers are feeling the pressure of high interest rates, though signs are still positive. “The consumer has slowed down. They have money in their accounts, but they’re depleting a little bit,” he said. “They’re employed, they’re earning money, but if you look at — they’ve really slowed down. So the Fed is in a position [where] they have to be careful that they don’t slow down too much.” Bank of America predicts two Fed interest rate cuts this year, one at next month’s meeting and one in December. The bank also predicts four rate cuts in 2025, Moynihan said. The Fed opted not to cut rates at its July meeting, going against market predictions.