TheMReport

50 | TH E M R EP O RT O R I G I NAT I O N S E R V I C I N G A NA LY T I C S S E C O N DA R Y M A R K E T DEPARTMENT ORIGINATION ORIGINATION LOCAL EDITION Is GE Capital Too Big to Fail? THE TREASURY RESCINDS PREVIOUS DETERMINATION AND OPTS TO SUPERVISE GE INSTEAD. CONNECTICUT // The U.S. Treasury's Financial Stability Oversight Council rescinded its determination that GE Capital, headquartered in Norwalk, Connecticut, is too big to fail. According to the announce- ment, the FSOC pulled its deter- mination that "material financial distress at [GE Capital] could pose a threat to U.S. financial stability" and decided that the firm should be subject to super- vision by the Federal Reserve System and enhanced prudential standards. The FSOC originally desig- nated GE Capital in July 2013, and since then the company has "executed significant divestitures, transformed its funding model, and implemented a corporate reorganization," according to state- ment. "As a result, the company is a much less significant participant in U.S. financial markets and the economy" and, therefore, does not pose a significant threat for bailout the way it once did. In 2008, the FDIC backed $139 billion in capital debt for GE; a year ago, the embattled company announced it would dismantle much of its financial services and sell off most of GE Capital, a $500 billion lending business at the time. According to the Treasury, GE Capital was a significant source of credit to the U.S. economy, "providing financing to more than 243,000 commercial customers, 201,000 small business- es through retail programs, and 57 million consumers." After selling off nearly $168 billion of an intended $200 billion in assets, GE's impact on U.S. financial markets has been greatly minimized. "Today's decision clearly demonstrates that the Council's designation of nonbank financial companies is a two-way process," said Treasury Secretary Jacob Lew. "The Council follows the facts: When it identifies a com- pany that could threaten financial stability, it acts; when those risks change, the Council also acts." The Treasury's decision some - what flies in the face of its plan to fight the removal of the "signifi- cantly important financial institu- tions," or SIFI, designation from MetLife. Judge Rosemary Collyer, in the U.S. District Court in the District of Columbia, recent - ly ruled in a sealed opinion that the SIFI tag should be removed from MetLife, stating that the government body that applied the designation used a "fatally flawed" process. Treasury disagreed and plans to appeal the decision. MetLife had sued the FSOC in January 2015 to have the SIFI designation removed, because as a nonbank SIFI, MetLife said it would be subject to heightened regulation which the company says will increase compliance costs, hence increasing costs to consumers without any added safety benefit for the financial system. Nonprofit Network Sets $3 Billion Origination Goal NEIGHBORWORK AIMS TO EXPAND NUMBER OF FIRST-TIME BUYERS. DISTRICT OF COLUMBIA // Washington, D.C.-based NeighborWorks America, a non- profit community development corporation, recently called upon its network of nonprofits across the United States to help originate $3 billion of mortgages for first- time buyers this year. The amount would be an increase from the approximately $2.9 billion originated last year and the $2.8 billion originated in 2014. The forecast is based on mortgage rates consistently hover - ing near historic lows, improved underwriting standards, and NeighborWorks' expanding mar- keting and lending products. "NeighborWorks organizations are able to put thousands of peo- ple each year into homes and cre- ate billions of dollars in economic activity because we're focused on finding mortgage solutions for every credit-worthy customer we see," said Marietta Rodriguez, vice president of homeowner- ship programs and lending at NeighborWorks America. "That includes everything from helping a homebuyer obtain a mortgage from a national lender, originat- ing the mortgage loan themselves, or helping secure a low down payment mortgage through a state housing finance agency." The average home price for a NeighborWorks homeowner- ship customer is approximately $150,000. The agency claims its services, such as down payment assistance, help create sustain- able homeownership for more than 20,000 families every year. First-time homebuyers make up the majority of customers helped out by NeighborWorks' non- profit network; these buyers are often helped by down payment assistance, which is an impor - tant product in helping low- to moderate-income buyers achieve homeownership. "Homeownership is within reach, even with student loan debt, little cash for a down pay - ment or less than perfect credit," Rodriguez said. "The home buying market is tough right now because of tight inventory, particularly for entry level homes, but is improving. One of the best ways to access homeownership for first-time home buyers is to work with a housing counselor who knows their market 'inside and out,' and can help a consumer navigate the complex process. "The Council follows the facts: When it identifies a company that could threaten financial stability, it acts; when those risks change, the Council also acts." —Jacob Lew, Treasury Secretary

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