Wells Fargo Discriminated Blacks, Latinos, & Other Minority

Wells Fargo agreed to pay $175 million to settle charges that it discriminated against thousands of blacks, Latinos, and other minority borrowers between 2004 and 2009, the Department of Justice announced Thursday, July 12. The Justice Department had accused Wells Fargo, the country's largest mortgage lender, of charging minority borrowers higher interest rates and fees on home loans than it charged white borrowers with similar credit ratings.

Wells Fargo will use $125 million to compensate affected borrowers. The remaining $50 million will go toward helping people in eight metropolitan areas' minority communities, including Baltimore's, make down payments or improve their homes.

The Justice Department says Wells Fargo engaged in a pattern of systemic discrimination in which some 30,000 minority borrowers across 36 states were charged higher fees and interest rates than their white counterparts. A black borrower in Chicago, for example, paid an average of nearly $3,000 more in fees than a white applicant who had the same credit rating. A Latino borrower paid more than $2,000 extra. The average "surtax" for a black borrower in the Miami area in 2007 was $3,657. In addition, Wells Fargo steered some 4,000 minority borrowers with good credit toward subprime loans — which are usually reserved for those with shaky credit, and have interest rates that often spike after several years.

Though it's coughing up a massive settlement, the bank did not officially admit wrongdoing, and claims that it settled the case "solely for the purpose of avoiding contested litigation" with the government. The bank stopped issuing subprime loans in 2008.

The Justice Department's case against Wells Fargo stems from a lawsuit filed by the city of Baltimore, which found that its minority communities were decimated by the housing crisis. In late 2011, Bank of America settled a similar discrimination lawsuit in which it paid out $335 million.
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U.S. home prices at lowest level in decade

U.S. home prices continued to fall sharply in February to hit the
worst level in nearly a decade, according to a closely followed index
released Tuesday. The S&P/Case-Shiller 20-city composite is at its
lowest level since October 2002.

The index fell 0.8% compared to January levels to take the
year-on-year drop to 3.5%. Of the 20 cities measured, 16 had negative
readings and only three showed gains.

The decline may be due to the typical pattern of diminished interest
during the winter and heightened interest in housing during the spring
and summer, as prices rose 0.2% on a seasonally adjusted basis.

Data-security breach at card processors and U.S. banks

Card-payment processors and large U.S. banks that issue debit and
credit cards were hit by a data-security breach after third-party
services provider Global Payments Inc discovered its systems were
compromised by unauthorized access.

Global Payments said it determined that an unauthorized entity had
accessed its systems and possible customer card data in early March.
Global Payments helps card companies processes electronic transactions
for merchants.

U.S. law enforcement authorities including the Secret Service are
investigating and MasterCard said it has hired an independent
data-security organization to review the incident.

MasterCard announced earlier Friday that it was investigating whether
cardholder account data was improperly accessed. The payments company
said it has alerted law enforcement authorities and notified card
issuers about the potential breach of cardholders' account
information.

Visa said in a statement Friday that it was "aware of a potential data
compromise incident at a third-party entity affecting card account
information from all major card brands." The company emphasized that
there had been no breach of any Visa system, "including its core
processing network VisaNet."

Citigroup Inc said it has been notified by processors of the breach,
while Wells Fargo & Co said it was too early to comment on the
impact. No comment issued by Bank of America Corp.

JPMorgan Chase & Co, as well as American Express and Discover, which
issue their own cards, said they are monitoring customers' accounts
and would issue new cards to anyone whose information may have been
compromised.

Banks and processors emphasized customers would not be held liable for
any fraudulent charges that may occur. Any financial losses from the
data breach would be shouldered by merchants, card issuers and Global
Payments rather than Visa or Mastercard, which operate payment
networks.

30-year mortgage fixed-rate falls to 3.99%

Following various reports of weaker housing data, the 30-year
fixed-rate mortgage average fell to 3.99% in the week ending March 29
from 4.08% in the prior week, Freddie Mac said Thursday in its weekly
report. The rate was 4.86% a year earlier.

To obtain the latest rate, payment of an average 0.7 point was
required, according to Freddie, a buyer of residential mortgages. A
point is 1% of the mortgage amount, charged in prepaid interest.

The 15-year fixed-rate mortgage fell to 3.23% in the latest week from
3.30% in the prior week.

Meanwhile, the average rate on the 5-year Treasury-indexed hybrid
adjustable-rate mortgage decreased to 2.90% from 2.96%.

The 1-year Treasury-indexed ARM fell to 2.78% from 2.84%.

Understanding the Balance Sheets

A balance sheet, also known as statements of financial position, is a snapshot of a business's financial condition at a specific moment in time, usually at the close of an accounting period. A balance sheet comprises assets, liabilities, and owners' or stockholders' equity. Assets and liabilities are divided into short- and long-term obligations including cash accounts such as checking, money market, or government securities. At any given time, assets must equal liabilities plus owners' equity. An asset is anything the business owns that has monetary value. Liabilities are the claims of creditors against the assets of the business.

What is a balance sheet used for? According to dLoewi.com, a balance sheet helps a small-business owner quickly get a handle on the financial strength and capabilities of the business. Is the business in a position to expand? Can the business easily handle the normal financial ebbs and flows of revenues and expenses? Or should the business take immediate steps to bolster cash reserves?

Balance sheets can identify and analyze trends, particularly in the area of receivables and payables. Is the receivables cycle lengthening? Can receivables be collected more aggressively? Is some debt uncollectable? Has the business been slowing down payables to forestall an inevitable cash shortage?

Balance sheets, along with income statements, are the most basic elements in providing financial reporting to potential lenders such as banks, investors, and vendors who are considering how much credit to grant the firm.

Assets

Assets are subdivided into current and long-term assets to reflect the ease of liquidating each asset. Cash, for obvious reasons, is considered the most liquid of all assets. Long-term assets, such as real estate or machinery, are less likely to sell overnight or have the capability of being quickly converted into a current asset such as cash. Total assets represents the total dollar value of both the short-term and long-term assets of your business.

Current assets

Current are any assets that can be easily converted into cash within one calendar year. Examples of current assets would be checking or money market accounts, accounts receivable, and notes receivable that are due within one year's time.

Cash: Money available immediately, such as in checking accounts, is the most liquid of all short-term assets.

Accounts receivables: This is money owed to the business for purchases made by customers, suppliers, and other vendors.

Notes receivables: Notes receivables that are due within one year are current assets. Notes that cannot be collected on within one year should be considered long-term assets.

Fixed assets

Fixed assets include land, buildings, machinery, and vehicles that are used in connection with the business. Total fixed assets is the total dollar value of all fixed assets in your business, less any accumulated depreciation.

Land: Land is considered a fixed asset but, unlike other fixed assets, is not depreciated, because land is considered an asset that never wears out.

Buildings: Buildings are categorized as fixed assets and are depreciated over time.

Office equipment: This includes office equipment such as copiers, fax machines, printers, and computers used in your business.

Machinery: This figure represents machines and equipment used in your plant to produce your product. Examples of machinery might include lathes, conveyor belts, or a printing press.

Vehicles: This would include any vehicles used in your business

Liabilities and owners' equity

This includes all debts and obligations owed by the business to outside creditors, vendors, or banks that are payable within one year, plus the owners' equity. Often this side of the balance sheet is simply referred to as "liabilities." Total liabilities and owners' equity: comprises all debts and monies that are owed to outside creditors, vendors, or banks and the remaining monies that are owed to shareholders, including retained earnings reinvested in the business.

Current liabilities

Current liabilities include all liabilities due to creditors that must be paid within a one-year time frame.

Accounts payable: This includes all short-term obligations owed by your business to creditors, suppliers, and other vendors. Accounts payable can include supplies and materials acquired on credit.

Notes payable: This represents money owed on a short-term collection cycle of one year or less. It may include bank notes, mortgage obligations, or vehicle payments.

Accrued payroll and withholding: This includes any earned wages or withholdings that are owed to or for employees but have not yet been paid.

Long-term liabilities

These are any debts or obligations owed by the business that are due more than one year out from the current date.

Mortgage note payable: This is the balance of a mortgage that extends out beyond the current year. For example, you may have paid off three years of a 15-year mortgage note, of which the remaining 11 years, not counting the current year, are considered long-term.

Owners' equity

Sometimes this is referred to as stockholders' equity. Owners' equity is made up of the initial investment in the business as well as any retained earnings that are reinvested in the business.

Common stock: This is stock issued as part of the initial or later-stage investment in the business.

Retained earnings: These are earnings reinvested in the business after the deduction of any distributions to shareholders, such as dividend payments.

Value measurement

Although a balance sheet presents an enterprise’s financial position, it does not purport to report its real value. It can be explained by some following reasons.

The values of certain assets, such as human resources, secret processes, and competitive advantages are not included in a balance sheet despite the fact that they have value and will generate future cash flows.

The values of other assets are measured at historical cost, rather than market value, replacement cost, or specific value to the enterprise. For example, property and equipment are measured at original cost reduced by depreciation, but the underlying asset’s value can significantly exceed that adjusted cost and the assets may continue to be productive even though fully depreciated in the accounting records.

The values of most liabilities are measured at the present value of cash flows at the date the liability was incurred rather than at the current market rate. When market rates increase, the increase in value of a liability payable at a fixed interest rate that is below market is not recognized in the balance sheet. Conversely, when interest rates decrease, the loss in value of a liability payable at a fixed rate in excess of the market rate is not recognized.

Art investing

Art as an investment avenue has been considered an interesting and profitable alternative, but it is also extremely risky.

On May 4, Pablo Picasso's "Nude, Green Leaves, and Bust" sold for $106.5 million at Christie's in New York, setting the world record for any work of art sold at an auction.

The art world tends to trail the stock market by six to 18 months, says Michael Moses, a retired professor at New York University's Stern School of Business. But those hoping to swoop in on a nascent rally should be aware that even the most beautiful art can carry major blemishes as an investment. "Just like stocks, there are parts of the art market that will perform differently," he says.

All told, art lost 5% of its worth in the first quarter of 2010, according to the All Art index, which tracks prices by analyzing some 15,000 repeat sales at auctions. The index plunged 35% during the same time last year. The index tracks only a sample of works that have proven themselves in the marketplace by being sold and resold, so it may not give a complete picture of the entire art market. It does not track the prices of works that have been bought but not resold or haven't been put on the market at all.

Expert cautions anyone with less than $20 million in cash to avoid investing heavily in art. Art investment is a black hole. From the moment you buy or sell, there are ongoing costs. As an owner, you have to be realistic. Instead, you should buy because you enjoy what you're doing or are passionate. But don't cloud the issue by claiming to invest.

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Peer-to-Peer Lending: Prosper’s new version

Peer-to-peer lending (sometimes called person-to-person lending) Web sites, such as LendingClub, Prosper and PertuityDirect, facilitate match individual borrowers with lenders online.

Now, after shutting down most of its operations since last October, Prosper is re-launching the service by introducing a secondary market that allows financial institutions to tap into its markets. By offering loans to investors willing to bid on them, banks, credit unions, auto-finance companies and others could get access to funds they could use to make loans to more people.

Prosper investors benefit with potentially higher interest rates on loans that have already been vetted by a financial institution, are current and have at least three months of payments that have already been made. Investors can see all the details related to each individual loan.

Though the industry is small, having brokered just $90 million in loans last year, peer-to-peer lending has offered choices to small lenders whose options for car loans and help with credit card debt have increasingly dried up.

These online lending models are gaining popularity as they provide alternatives for both lenders and borrowers, while banks have been nervous about lending to consumers for fear of rising delinquencies and losses. Banks have also been hampered by their limited capital and the bearish stock market, making it difficult and more expensive for them to raise money to fund new loans.