Council on Metro Economies and the New American City: Modest GDP Growth in 2013; Need Debt Extension to Avoid Recession
By Dave Gatton
January 28, 2013
The U.S. economy is expected to grow a modest 1.7 percent during 2013, according to projections provided by IHS Senior Director James Diffley at the Council on Metro Economies and the New American City meeting held January 17 in Washington (DC). Diffley said the unemployment rate would slightly fall to 7.5 percent by the year’s end from its current rate of 7.8 percent.
Responding to Council Chair Columbus Mayor Michael Coleman’s question on how the debt ceiling debate could affect economic growth, Diffley said that Congressional failure to extend the debt ceiling could pull the economy back into recession. Since the meeting, the House passed a bill to extend the debt ceiling for three months to allow time for Congress to pass a federal budget.
Coleman outlined the Council’s work in the coming year, which will include continued publication of the U.S. Metro Economies Series; expansion of the Council’s DollarWise Campaign: Mayors for Financial Literacy; continued work with the Consumer Financial Protection Bureau; analysis of sustainable development trends and projects; and expanded joint research with the Initiative for a Competitive Inner City (ICIC).
Elenaor Blume, of the Consumer Financial Protection Bureau (CFPB), reviewed recent regulatory actions that will require lenders to ensure that prospective buyers have the ability to repay their mortgages. The new rule stipulates that lenders must document information such as employment status; income and assets; current debt obligations; credit history; monthly payments on the mortgage; monthly payments on any other mortgages on the same property; and monthly payments for mortgage-related obligations. So-called no-doc or low-doc loans would be prohibited.
A borrower would have to have sufficient assets or income to pay back the loan, and teaser rates could no longer mask the true cost of a mortgage.
For a loan to be deemed “qualified,” affording the lender certain liability protections, the loan must not have excessive upfront points and fees; no toxic loan features, and a 43 percent cap on the amount of borrower income that can go toward debt.
Blume also indicated that the CFPB had recently entered into a MOU with Chicago to link the city’s 311 service to the Bureau’s consumer protection services. She said the CFPB was interested in discussing a similar arrangement with other cities.
Mortgage Bankers Association Senior Vice President Steve O’Connor indicated that the mortgage lending industry would be challenged to absorb implementation of 13 major regulations that are slated for issuance over the next year as a result of the Dodd Frank legislation. He projected that the tightened rules would result in a shift to rental, having a long-term impact on the multi-family market.
Food as Economic Development
ICIC President Mary Kay Leonard reviewed findings from a joint Conference of Mayors/ICIC research paper that outlined the various approaches used by Detroit, Oakland and New York City to use food as a “lynchpin of inner city economic development.” The report, “Growing Health Economies: Leveraging America’s Urban Food Cluster,” says that inner cities’ central locations, access to multi-modal transportation hubs and under-utilized manufacturing and warehouse space can be leveraged by companies in the food cluster.
According to the report, about 60 percent of workers in the food industry have a high school diploma or less, making food cluster jobs uniquely accessible to inner city residents. Some 91 percent of food companies have 50 employees or less.