Don’t Worry About the Housing Slump, B of A Says

According to an economist at the bank, lower mortgage rates should improve the situation, which provokes eerie memories.

The news hasn’t been good for the housing market of late, as sales tumbled last month to their lowest level since 2015. But Bank of America says real estate investors should take heart, thanks to cheaper home loans.

Mortgages are sliding, which means more buyers can swing a home purchase. “Don’t believe the narratives of a housing collapse,” B of A economist Michelle Meyer wrote in a research note. The housing sector’s problems, she added, “should only be a slight drag on growth.”

The biggest reason for her optimism is the recent slide in mortgage rates—to 4.62% for a 30-year fixed loan, from 5% last fall, which was a seven-year high, according to Bankrate, the loan research firm. That’s not as low as the 3.95% level of a year ago, but it marks progress.

You can’t blame people for feeling leery about the housing sector’s woes. Memories are still tender about the last real estate plunge, which set off the Great Recession.

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There’s no doubt that housing has been struggling recently. Existing home sales dropped 6.4% in December. High home prices and a lack of inventory, especially for starter homes, have kept ownership out of many potential buyers’ reach. A survey by Fannie Mae found that more Americans thought now was a bad time to buy a home.

What’s more, homebuilder stocks have been skidding, following a nice post-crisis recovery. The S&P housing sector, as reflected in the SPDR S&P Homebuilders ETF, had risen last January to exceed its 2006 peak—and then lost altitude, dipping 24.4%.

Lately, there has been a slowing in the increase in home prices, which is another good sign.

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Duke Pays More than $10 Million to Settle Retirement Plan Lawsuits

The university allegedly violated ERISA with poor investments and unreasonable expenses.

Duke University has agreed to pay $10.65 million to settle two lawsuits that alleged it breached its duties under the Employee Retirement Income Security Act (ERISA) by causing its 403(b) plan to incur unreasonable recordkeeping expenses, while providing underperforming investment options.

The settlement came after two years of litigation, more than 762,000 pages of documents, extensive discovery, and almost six months of “arm’s length negotiations” with the assistance of a national mediator, according to documents filed with The US District Court for the Middle District of North Carolina.

“This settlement includes both financial compensation and non-monetary improvements to the plan going forward,” said the plaintiffs’ attorney Jerry Schlichter in a statement. “It will enable Duke employees and retirees to improve their ability to build their retirement assets for years to come.”

The settlement requires the plan’s fiduciaries to retain an independent consultant regarding bids for recordkeeping services, to ease the ability of participants to transfer their investments out of frozen annuity accounts, analyze the cost of different share classes of mutual funds considered for inclusion in the plan, and avoid the use of plan assets to pay salaries of employees who work on the plan.

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Duke also agreed to provide a list of the retirement plan’s investment options and fees, and a copy of the plan’s investment policy statement. It is also required to communicate in writing with current plan participants, inform them of the investment options available in the new lineup, including the annuity option, and provide a link to a webpage containing the fees and performance information for the new investment options.

Duke denied it committed any fiduciary breach in its operation of the plan.

“This settlement was made solely to avoid the expense and inconvenience of prolonged litigation, and to ensure that Duke University’s resources are spent on retirement contributions for faculty and staff rather than the costs of litigation,” Michael Schoenfeld, Duke University’s vice president for public affairs and government relations, said in an email to the university’s student-run newspaper The Chronicle.

Under the terms of the proposed settlement, the majority of class members will automatically receive their distributions directly into their tax-deferred retirement account. Those who already left the retirement plan and no longer have an active account will be given the option to receive their distributions in the form of a check made out to them individually or as a roll-over into another tax-deferred account.

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