Fewer charge-offs for mortgages have resulted in the smallest losses for banks on loans since before the recession, according to the Federal Deposit Insurance Corporation's Quarterly Banking Report for the second quarter of 2014 released on Thursday. For the second quarter, FDIC-insured banks charged off a net total of $9.9 billion, the lowest amount for any quarter since the second quarter of 2007. The total is down from $14.1 billion since the same period last year. The amount banks charged off for mortgages on 1.4 family homes plummeted by 75 percent since 2013, a big reason for the overall decline.
Banks loan losses decreased year-over-year for the 16th consecutive quarter. Except for auto loans, which saw a 10.4 percent increase in net loan charge-offs, all other major loan categories saw year-over-year dropoffs in the amount charged off in the second quarter. Only 6.8 percent of FDIC-insured banks were unprofitable in the second quarter of 2014, which is the smallest percentage in eight years. Analysts see the dropoff in bank loan losses as a sign that both borrowers and lenders are economically healthier, which is a possible indicator that the overall economy is improving.
Michigan-based Flagstar Bancorp announced that it has filed a Form 8-K with the U.S. Securities and Exchange Commission in order to notify its investors that the bank is currently trying to work out a settlement with the Consumer Financial Protection Bureau regarding alleged violations of consumer financial laws. The alleged violations on the part of Flagstar Bank date back to 2011. The CFPB has made civil investigative demands regarding the bank's mitigation loss and default service practices, and in response the bank has provided the CFPB with information and documents relating to those practices.