The Biden administration is developing plans for how it will restart federal student loan payments early next year when the pandemic pause on monthly payments for tens of millions of Americans ends, POLITICO reported. The Education Department is eyeing proposals that would give borrowers new flexibility as they face student loan bills for the first time in nearly two years, such as an initial grace period for missed payments, the documents and sources show. Officials are also looking at policies to make it easier for millions of borrowers to remain enrolled in income-based repayment programs to avoid a sudden increase in their monthly payment amount. And the administration is actively considering a sweeping plan to expunge the defaults of borrowers who were struggling even before the pandemic. The plans, some of which are still in progress and not finalized, are aimed at averting a potential surge in delinquencies when payments resume in February, which the Biden administration announced in August.
Consumers have lost $586 million to fraud linked to the Covid-19 pandemic, according to data from the Federal Trade Commission, CNBC.com reported. Americans filed more than 269,000 fraud complaints from the beginning of 2020 to Oct. 14, 2021, according to most recent federal data. (Consumers cited Covid, stimulus or related terms in the complaints.) The typical victim (as measured by the median) lost $392, in a range of schemes targeting online shoppers, travelers and others. The losses skew higher for older Americans: Seniors over age 80 lost $1,000 each. However, pandemic-related scams appear to be declining, officials report. There were 273 consumer complaints filed Thursday (as measured by the rolling 14-day average), according to FTC data. That’s the lowest level since March 16, 2020. It’s also about eight times less than the 2,100-daily-complaint peak in early April this year, around the time Covid vaccinations were beginning to be deployed more broadly and the federal government was issuing $1,400 stimulus checks authorized by the American Rescue Plan. Online shopping accounted for the largest number of reported scams to the FTC, at about 57,600 complaints.
A stalemate between New York and New Jersey on how to divvy up federal coronavirus relief funds for public transit may force New York City’s subway system to borrow as much as $4 billion in short-term debt to cover operating costs, Bloomberg News reported. The Metropolitan Transportation Authority, the largest public transit system in the U.S., is considering issuing the short-term debt as officials work to resolve a dispute with New Jersey over federal funds allocated to the region’s mass transit providers. Congress approved the funding for the region in two coronavirus relief packages, with the states responsible for dividing up the money. “The regional allocation, what’s referred to as the whack up between the states of New York, New Jersey and Connecticut, is not resolved and due to that continuing issue we need that money sooner,” Pat McCoy, MTA’s deputy chief, financial services, said yesterday during the agency’s monthly finance committee meeting. The standoff is delaying the MTA’s receipt of $10.5 billion of federal aid that it needs to cover lost revenue during the pandemic, when subway ridership plunged by as much as 90%. The states must decide how to allocate the funds by Nov. 8 to participate in a $2.2 billion pot of federal discretionary funds for mass transit systems hit hardest by Covid. “We do anticipate resolution soon,” McCoy said. “I would anticipate by Nov. 8 because that’s when we need to file application papers for a $2.2 billion competitive or discretionary grant for coronavirus support.”
Industrial production fell a sharp 1.3% in September, the Federal Reserve reported yesterday, MarketWatch.com reported. Adding to the sense of weakness in the data, industrial output in August was revised to a fall of 0.1% versus the prior estimate of a 0.4% gain. Capacity utilization fell to 75.2% in September, the lowest rate since April. The capacity utilization rate reflects the limits to operating the nation’s factories, mines and utilities. Some of the weakness was due to Hurricane Ida. The hurricane cut about 0.6 percentage points from the drop in total industrial production, the Fed said. Output at manufacturers fell 0.7% in September, led by a 7.2% drop in production of motor vehicles and parts. Excluding the auto sector, manufacturing was down 0.3%.
Foreclosures are starting to surge as government and private sector programs designed to help homeowners deal with the economic fallout of the COVID-19 pandemic have begun to expire, CNBC.com reported. Mortgage lenders began the foreclosure process on 25,209 properties in the third quarter, a 32% increase from the second quarter. On a year-over-year basis, it’s a 67% increase from the third quarter of 2020, according to ATTOM, a mortgage data firm. While the increases in foreclosures are dramatic, they are coming off extreme lows that were created by the forbearance programs. New foreclosures, also known as starts, usually number around 40,000 per month. They fell to as low as 3,000 to 4,000 in the first year of the pandemic, when forbearance programs were in full force. Government and private-sector relief programs allowed borrowers with financial difficulties to delay their monthly payments for up to 18 months. The missed payments could then be tacked on to the end of the loan period or repaid when the home was sold or the mortgage refinanced.
Retail sales rose in September despite rising prices and supply shortages, according to data released on Friday by the Census Bureau, The Hill reported. Sales by retailers, including restaurants and bars, not adjusted for inflation totaled $625.4 billion in September, rising 0.7 percent from August’s revised total of $620.9 billion. The increase defied the expectations of economists, who projected sales to decline as supply chain snarls continue to raise prices. Stores that sell sports equipment, musical instruments, books and hobby products saw the biggest increase in September, with sales rising 3.7 percent last month after falling 3.3 percent in August. Superstores and other general merchandise sellers saw a 2 percent increase in sales last month, while online retail sales rose 0.6 percent after a sharp 5.7 percent-jump in August. Only electronics and appliance stores and health and personal care stores saw sales fall last month.
Nearly 40% of U.S. households said they faced serious financial difficulties in recent months of the COVID-19 pandemic, citing problems such as paying utility bills or credit card debt, according to a recent poll. About one-fifth have depleted all of their savings, the Wall Street Journal reported. U.S. households are struggling in many ways over a year into the coronavirus pandemic, according to the poll conducted by the Harvard T.H. Chan School of Public Health, the Robert Wood Johnson Foundation and National Public Radio. Nearly 60% of households earning less than $50,000 a year reported facing serious financial challenges in recent months. Of those, 30% lost all of their savings, according to the poll. The survey questioned about 3,600 adults in August and early September about a variety of potential problems during the pandemic and how the effects have continued in more recent months. In addition to financial concerns, respondents were asked about healthcare, education, child care and personal safety. The results show how the pandemic deepened an already divided economy in the U.S., with well-off people and businesses coming out the same or stronger while many lower-wage workers were thrust into financial crisis. The highly transmissible Delta variant slowed the U.S. economic recovery as businesses and consumers adjusted their plans. In late August, as the poll was being conducted, the Supreme Court lifted the federal government’s ban on evictions during the pandemic. Federal boosts to unemployment benefits expired in September, after the survey was completed. Close to 20% of those polled said their financial situation is better now than before the COVID-19 outbreak, compared with 32% who said their situation is worse. About half, 49%, said it stayed the same.
Close to half a million low-income homeowners in the United States, many of them minorities, are nearing the end of mortgage forbearance plans that allowed them to halt loan payments during the COVID-19 pandemic, presenting a test for the mortgage service firms tasked with helping struggling borrowers move onto payment plans they can afford, Reuters reported. The number of borrowers exiting the plans is expected to surge over coming weeks as people who signed up early on in the pandemic reach the 18-month limit for forbearance. While close to 80% of homeowners who entered programs at some point inthe pandemic have since exited them, the remaining 20% tend to live in areas with higher shares of minorities, or have lower credit scores and lower incomes, research shows. Their missed payments could add up to a "forbearance overhang" of more than $15 billion in postponed mortgage payments, or about $14,200 per person, according to Brookings Institution research. "When coupled with unemployment insurance expiring and other things happening at the same time, it’s not clear that these folks will have an easy time coming out of this," said Amit Seru, a professor at Stanford Graduate School of Business and a senior fellow at the Hoover Institution. Many borrowers will be able to push missed payments to the end of their loans, and others will be able to capitalize on a hot housing market to refinance or even sell their homes. Homeowners facing hardships who signed up for forbearance in later months may still be eligible for additional extensions. The pandemic worsened racial disparities among homeowners. Black and Hispanic homeowners, disproportionately affected by pandemic-related job losses, were 30% more likely to fall behind on mortgages than the average borrower in the early months of the crisis, between April and November of 2020, according to the Federal Reserve Bank of Philadelphia. Some 7.6 million borrowers have been in forbearance at some point during the pandemic, representing about 15% of all mortgage holders, and about 1.25 million borrowers were still in forbearance plans in mid-October, according to Black Knight, a mortgage technology and data provider. It estimates that about 850,000 homeowners who participated in forbearance were in plans set to expire by the end of this year, including those who already exhausted their options. Roughly half of those homeowners have loans backed by the Federal Housing Administration or the Department of Veterans Affairs.
Higher rents after a brief COVID-19 pandemic slump, burdening households and fueling overall inflation, are bad news for the Federal Reserve, possibly making today’s uncomfortably rapid price gains last longer, the New York Times reported. They are also problematic for the White House because they hit households right in their pocketbooks, diminishing well-being and fueling unhappiness among voters. The jump in rents stemmed from a frenzy in the market for owned homes. People tried to buy as the pandemic took hold in the United States, often searching for extra space, but found that houses were in short supply after years of under-building following the housing crisis. That dearth of properties has been exacerbated by work stoppages, supply shortages and labor constraints during the coronavirus era, all of which have kept developers from ramping up production to meet demand. As buyers bid up prices on single-family homes and condominiums, many people who would have otherwise moved toward homeownership found themselves unable to afford it, increasing demand for apartments and home leases. Rents have been further boosted by the large number of people searching for places with more space and home offices during the pandemic, and as millennials in their late 20s and early to mid-30s look for more autonomy. Government stimulus checks and expanded unemployment benefits also helped people amass savings over the course of the pandemic, so they can afford to move. Personal savings as a share of disposable income popped during the crisis, and while the share has come down toward normal levels, it remains slightly elevated at 9.4 percent, compared with about 8 percent just before the pandemic. The combination of factors seems to have created a perfect storm that pushed the Consumer Price Index measure of rent up 0.5 percent just between August and September, the fastest pace in about 20 years. That’s a concern for the Fed, because housing prices tend to move slowly and once they go up, they tend to stay up for a while. Rent data also feed into what is called “owners’ equivalent rent” — which tries to put a price on how much owners would pay for housing if they hadn’t bought a home. Together, housing measures make up about a third of the overall Consumer Price Index.
A man admitted in federal court in New Jersey that he participated in a scheme to fraudulently try to obtain nearly $7 million in Paycheck Protection Program loans, the Associated Press reported. Gregory Blotnick pleaded guilty Wednesday to wire fraud and money laundering. Blotnick, who lives in New York and Florida, submitted 21 fraudulent PPP loan applications to 13 lenders on behalf of nine purported businesses that Blotnick controlled from April 2020 through March 2021, according to court documents. The forgivable loans were created to help small businesses retain jobs and cover other expenses during the coronavirus pandemic. Blotnick falsified employment and income records and managed to obtain $4.6 million in funds, prosecutors said. They said he transferred the money into brokerage accounts from which he placed more than approximately $3 million in losing stock trades. The charge of wire fraud carries a maximum potential penalty of 20 years in prison and a fine of the greater of $250,000, twice the gross profits or loss, whichever is greatest, prosecutors said. The charge of money laundering carries a maximum penalty of 10 years in prison and a $250,000 fine, or twice the gross gain to the defendant or gross loss to the victim, whichever is greatest. His sentencing is scheduled for March 2022.
