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A survey of business economists today said that canceling Americans’ student debt, as prescribed by Elizabeth Warren and other Democratic presidential candidates, would have an adverse effect on the U.S. economy, Bloomberg News reported. Sixty-four percent of respondents believe forgiving most or all of student debt in the country would be a net negative for the economy, according to the National Association for Business Economics. Americans owe about $1.6 trillion in student loans, a number so staggering some borrowers will die before paying off their loans. Advocates have argued forgiving student loans could even the playing field for Americans, reduce the wealth gap, and provide opportunities for a debt-burdened middle class such as buying a home. When asked about raising the minimum wage, almost two-thirds of survey respondents are in favor of it. However, approximately 40 percent say that it should be raised without exception and 19 percent believe the federal minimum wage should be abolished altogether. Eleven percent say there’s no need to increase it. The survey included responses from 226 National Association for Business Economics members and took place July 14 to Aug. 1. Read more. 

The issue of student loan debt and bankruptcy is the first problem addressed in the Final Report of the ABI Commission on Consumer Bankruptcy. Click here to download your copy. 

The Consumer Financial Protection Bureau (CFPB) announced on Friday the appointment of Robert G. Cameron to serve as the CFPB’s private education loan ombudsman, according to a press release. Cameron is a Colonel and Staff Judge Advocate for the Pennsylvania Army National Guard. He has served in the United States Army for 29 years. Cameron also joins the CFPB from the Pennsylvania Higher Education Assistance Agency where he was a high-ranking official responsible for litigation, compliance, and risk mitigation efforts. The Dodd-Frank Act created a private education loan ombudsman position within the Bureau. The Dodd-Frank Act gave the Treasury Secretary, in consultation with the CFPB Director, the authority to designate the ombudsman. The ombudsman is responsible for receiving, reviewing, and attempting to resolve complaints from private student loan borrowers. The ombudsman is also responsible for compiling and analyzing complaint data on private education loans and making appropriate recommendations to the Secretary of the Treasury, the CFPB Director, the Secretary of Education, and Congress.

The Consumer Financial Protection Bureau (Bureau) and the Office of the Arkansas Attorney General yesterday filed a proposed settlement with Andrew Gamber; Voyager Financial Group, LLC; BAIC, Inc.; and SoBell Corp. The companies, owned and operated by Gamber, were brokers of contracts offering high-interest credit to veterans, many of whom are disabled, and to other consumers, according to a CFPB press release. Under the proposed settlement, Gamber and the companies will be banned from the industry and a judgment requiring redress, a civil money penalty, and a payment to the State of Arkansas will be entered against them. The Bureau and the Arkansas Attorney General alleged that Gamber and his companies misrepresented to consumers that the contracts the companies facilitate are valid and enforceable when, in fact, the contracts are void under federal and state law; misrepresented to consumers that the product is a sale of payments and not a high-interest credit offer; misrepresented to consumers when they will receive their funds; and failed to inform consumers of the applicable interest rate on the credit offer. Under the proposed settlement, Gamber and the companies are permanently banned from brokering, offering, or arranging agreements between pension recipients and third parties under which the consumer purports to sell a future right to an income stream from the consumer’s pension. The proposed settlement would also impose a judgment for redress of $2.7 million, a civil money penalty of $1 to the Bureau, and a payment of $75,000 to the Arkansas Attorney General’s Consumer Education and Enforcement Fund in lieu of a civil money penalty to the State of Arkansas.

U.S. mortgage debt reached a record in the second quarter, exceeding its 2008 peak as the financial crisis unfolded, the Wall Street Journal reported. Mortgage balances rose by $162 billion in the second quarter to $9.406 trillion, surpassing the high of $9.294 trillion in the third quarter of 2008, the Federal Reserve Bank of New York said yesterday. Mortgages are the largest component of household debt. Mortgage originations, which include refinancings, increased by $130 billion to $474 billion in the second quarter. The figures are nominal, meaning they aren’t adjusted for inflation. The milestone for mortgage debt has been long in the making. Americans’ mortgage debt dropped by about 15 percent from the 2008 peak to the trough in the second quarter of 2013 and has climbed slowly since then. Total household debt has been on the rise since mid-2013. It rose by 1.4 percent from the first quarter to $13.86 trillion, the 20th consecutive quarter of increase. Mortgages remain the largest form of household borrowing but have become a smaller share of total debt since the late 2000s as consumers take on more automotive and student loans. Despite the higher debt loads, Americans appear to be keeping up with their payments. The report found that 95.6 percent of balances were current, the highest level of the current expansion. Read more. (Subscription required.) 

Be sure to check out yesterday’s “Chart of the Day” in the ABI Newsroom. 

There’s some good news and bad news about the state of Americans’ finances embedded in the Federal Reserve Bank of New York’s latest Quarterly Report on Household Debt and Credit, according to a Bloomberg News commentary. First, the good news: 95.6 percent of households were current on their debt payments as of the second quarter, whether that’s mortgages, student or automobile loans or credit card bills. That’s the largest share since the third quarter of 2006, which of course was well before the financial crisis and the start of the last recession. It’s a sign that many individuals and families are continuing to benefit from this record-long recovery and have the resources to make timely payments on what they owe. The bad news is that the share of households deemed “severely derogatory” on payments isn’t going away like it was 13 years ago. The category, which the New York Fed defines as “any stage of delinquency paired with a repossession, foreclosure, or ‘charge off,’” is hovering at 2 percent, the same level it’s been at since the second quarter of 2015. As the bank’s researchers noted in a blog post, severely derogatory balances now make up almost half of all delinquencies, the largest share ever in data going back to 2003. Of the roughly $250 billion severely derogatory outstanding balance, defaulted student loans make up 35 percent, the report found. That’s a new phenomenon: For years, student loans barely registered compared with mortgages and credit cards. But, as the researchers noted, the U.S. housing crisis is in the rear-view mirror and the foreclosure pipeline has cleared out pretty much everywhere across the country. On the other hand, defaults on student debt “have grown stunningly since 2012,” they said. Read more. 

*The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.

The issue of student loan debt and bankruptcy is the first problem addressed in the Final Report of the ABI Commission on Consumer Bankruptcy. Click here to download your copy. 

Fannie Mae and Freddie Mac, two mortgage-finance firms that back nearly half of U.S. mortgages, will have to consider credit-score alternatives to Fair Isaac Corp.’s FICO score when determining a mortgage applicant’s creditworthiness, under a new rule issued yesterday by the mortgage-finance giants’ federal overseer, the Wall Street Journal reported. The move by the Federal Housing Finance Agency is seen as a win for VantageScore, a credit-score system by VantageScore Solutions LLC, which is owned by the three large credit-reporting firms: Equifax Inc., TransUnion and Experian PLC. “One of my priorities is to ensure that the American people have a safe and sound path to sustainable homeownership, which requires tools to accurately measure risk,” FHFA Director Mark Calabria said in a written statement. The new rule “is an important step toward achieving that goal,” he added. Regulatory rollback legislation signed into law last year required the FHFA to set new standards for Fannie Mae and Freddie Mac to approve credit-score models.

The U.S. Consumer Financial Protection Bureau (CFPB) said yesterday that it had reached a settlement with ITT Educational Services Inc. over predatory lending practices, but does not plan to collect any of a $60 million judgment from the bankrupt for-profit college, Reuters reported. The proposed settlement stipulates that the bureau will not seek any funds through bankruptcy proceedings from ITT, citing the limited amount available to be distributed to former students. The settlement, filed in the U.S. District Court for the Southern District of Indiana also bars ITT, which filed for bankruptcy in September 2016, from providing student loans in the future. The CFPB had sued ITT in 2014, alleging it engaged in predatory lending practices, pushing student borrowers into high-cost private loans that they did not understand and could not afford. ITT closed roughly 130 campuses as it filed for bankruptcy, amid growing government scrutiny of for-profit colleges. In June, the government announced ITT’s affiliated lender, Student CU Connect CUSO, would stop collecting on $168 million in outstanding student loans.