Belgium beat the United States by scoring two goals in extra time. The U.S. made a late run, but the clock ran out and the U.S. is coming home.
It’s not every day that five government agencies, including the Federal Reserve and the FDIC, all come out with the same warning on the same day. That’s what happened this morning, and it amounted to a collective "watch out" to banks over homeowners ability to pay back lines of credit in the next few years.
Back in the early 2000s, right up to 2008, a lot of people took out lines of credit on their homes – this is where you can borrow money and use your house as collateral. They’re known as HELOCs (Home Equity Lines of Credit).
“Anybody who had a breath, any house still standing, seemed to be eligible for these kinds of loans,” recalls Nicolas Retsinas, senior lecturer in real estate at Harvard Business School.
HELOCs can typically last 10 years in what’s called a “draw period,” where people can continue to draw on the line of credit. After 10 years, they can’t draw any longer and they have to start paying back the principal. Starting about now, 10 years have gone by. Now it’s time to pay up.
“This is another bill coming due from the lending binge of the early 21st century,” says Retsinas. A bill that, according to the Office of the Comptroller of the Currency, now totals around $218 billion, of which $199 billion will be due by 2018.
If homeowners haven’t been paying down the principal, the change in bills may be substantial when they have to start doing so.
“We’re seeing that payments can go up 100 percent or even 200 percent or higher,” says Bob Piepergerdes, director of retail credit risk at the Office of the Comptroller of the Currency.
Given median incomes are lower than they were in 2007 and unemployment is higher, some borrowers may experience problems paying up.
“There is some risk of repayment so we’re asking institutions to evaluate where their borrowers are,” says Piepergerdes. And then he needs them to prepare accordingly
“The good news,” he says, “is that institutions have taken action.” The guidance put out by different agencies “is really to set forth the expectations of what we would like to see institutions do from a risk management stand point, but the institutions have been preparing for this for as long as we’ve been talking about it.”
JPMorgan Chase, for example, says it’s stocked up on reserves and is reaching out to customers.
“We are looking for ways to limit payment shock for our customers by being hyper-focused on communicating options to them,” the bank, which holds $49 billion in HELOCs, of which $29 billion will require higher payments through 2017, said in a statement. “We want to make sure customers are making enough of a payment so when they go into the repayment period of the principal it’s a step up not a leap up.” The bank estimates that more than half of the $29 billion will refinance or pay off before payments jump higher.
Overall, the largest lenders have reduced exposure by 20 percent through refinancing.
Homeowners would be advised to dig out their old loan agreements and look at the fine print, says Bob Davis, Executive Vice President at the American Bankers Association. “That’s one thing consumers ought to do right now, they ought to look at the payments they may have to make,” Davis says, “and if they want to change the loan arrangement and pay off their home equity line of credit by refinancing, they ought to be aware of their access to credit and whether their credit rating will allow them to.”
The Federal Trade Commission alleges the company profited from scams against its customers. Its long phone bills, the FTC says, made it nearly impossible for customers to understand the charge.
Abuse of narcotic painkillers is a national problem. But it turns out that where you live can make a big difference in how likely you are to get a prescription for the medicines.
Every year, hundreds of new charter schools open in the U.S. – largely in low-income, urban neighborhoods. This fall, Sejong Academy in St. Paul, Minnesota, will be one of them. The Korean-immersion school for kids in kindergarten through sixth grade will be located just a few miles from the nation's very first charter school, which opened in St. Paul in 1992.
A big idea behind charters, which now educate roughly 2.5 million kids in the U.S., is to try out concepts that traditional public schools typically wouldn't, like focusing on the outdoors, Korean language immersion – or even yoga.
Sejong Academy's founders hope their curriculum will appeal to a big population of Korean adoptees in the Twin Cities. Plus, they think non-Koreans might like learning another language. Board chair Grace Lee, herself Korean-American, thinks Sejong will offer richer cultural lessons than your typical public school might.
"I think of course a lot of schools will say, 'Oh, we promote global diversity.' But how are they demonstrating that? Are they just having some ethnic food at an open house, or something like that?" she says.
The real battle between charter schools and their traditional counterparts is far more pitched. One of the contentious aspects is that the roughly 6,500 charter schools in the country are public schools, and they get taxpayer dollars. But they're run independently, meaning that in many states they are not subject to the same rules and regulations as are traditional public schools. Each school is overseen by a so-called "authorizer," which approves the school's charter and makes sure the school meets its performance goals.
Charter advocates include lots of average parents as well as some very big guns like the Gates and Walton Foundations, which funnel millions of dollars to organizations that support charter schools. They believe there's greater flexibility in charters than in the traditional system. It's easier to hire and fire teachers – and open and close schools.
"That is the secret ingredient to chartering, the fact that if the school isn't performing well, it can be closed," says Nina Rees, president of the National Alliance for Public Charter Schools. She says each year, about 500 charters open and 150 or so close. The authorities who oversee them, called authorizers, might pull the plug due to low enrollment, poor performance or mismanagement.
Opponents, often local school boards and powerful teachers unions, say charters leech money from the traditional school system. They also complain that charter school teachers, who tend to work in poor districts, aren't in it for the long haul.
"I think schools that serve in high poverty areas, the revolving door of principals and teachers is really a disservice to students," says Dennis Van Roekel, president of the nation's largest union, the National Education Association.
Lots of charter schools are operating with mixed results. A recent study by researchers at Stanford University found that about a quarter of charter schools studied achieved better outcomes on reading measures than traditional schools. But nearly a fifth of the charter schools did much worse. For math, an even greater share of charter schools were underperformers.
"I think the evidence tells us that the best charter schools are exceptional schools, and that the worst charter schools are extraordinarily bad," says Jack Schneider, an education expert at the College of the Holy Cross. "And the vast majority of charter schools are more or less equivalent to traditional public schools."
Andrea Springer is about to test her luck. She's Korean-American and is considering sending her kids to the Korean immersion charter school in St. Paul that opens this fall.
"We've stayed away from what I view as traditional public education because I think as a child I was pretty bored or the teacher was dealing with behavior problems versus teaching us," Springer says.
Springer also likes that her kids could learn Korean at the charter school without her having to nag them with workbooks.
But Springer does have some reservations about sending her kids to a start-up charter.
"It's the first year, so you get nervous, 'Do I want to be the test batch parent?'" she asks.
Even as charter schools remain controversial, demand for them appears to be strong. The National Alliance for Public Charter Schools says hundreds of thousands of kids are on charter school wait lists.
The prairie hamlet of Swett — population 2 plus a dog — comes with 6 acres, a house, three trailers, an old tire shop and a Volvo semi. If you don't have the money, no Swett.