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Freddie Mac had its strongest quarter of the year for both net income and in new business acquired as mortgage rates dipped.Its earnings call, hosted by James Whitlinger, interim chief financial officer, was terse, as it has been in recent years as Freddie Mac remains in conservatorship.The opening statement on the call covered Freddie Mac's efforts to keep people in their residences on both the multifamily side, with its August framework regarding minimum lease standards, and in single-family by reminding borrowers affected by Hurricanes Helene and Milton regarding the options available to them, such as forbearance."We also provide dedicated resources to renters and apartment buildings to help them plan and prepare for natural disasters as well as respond and recover after they strike," Whitlinger said. "Freddie Mac, communities and mortgage security investors all benefit alongside renters and homeowners when families are able to continue living in their homes."Net income at the government-sponsored enterprise was higher than the comparative periods. Freddie Mac earned $3.1 billion in the third quarter, up from $2.77 billion in the second quarter and $2.69 billion for the same period one year ago.The increase was primarily driven by a rise in net revenues and a decline in noninterest expenses. The latter improved because one year ago, Freddie Mac made an accrual of $313 million for an adverse judgment at trial when it was sued by preferred stockholders.That expense did not recur this quarter.Most of Freddie Mac's third quarter growth in net income came from the single-family business, which earned $2.57 billion, up from $2.28 billion in the prior quarter and $2.32 billion for the third quarter of 2023.The recent third quarter was the best by far this year for single-family new business activity, with $98 billion, versus $85 billion for both the second quarter and one year ago. This was the beneficiary of mortgage rates dipping as low as 6.08% by the end of the period, although they have been on the rise in the weeks since then.Purchase business made up $84 billion of the third quarter total of loans acquired, while refinances accounted for the remaining $15 billion.However, the serious delinquency rate in the segment rose four basis points, albeit off of an all-time low in the second quarter, to 54 basis points from 50 basis points. Whitlinger noted that was still 9 basis points lower than the 63 basis points recorded at the end of 2019.Notwithstanding that, "In the third quarter of 2023 we had a benefit for credit losses of $263 million which was primarily driven by credit reserve release in single-family due to improvements in house prices," he noted.Multifamily new business also rose to its highest level of the year so far, to $15 billion, compared with $11 billion in the second quarter and $9 billion in the first quarter. For the third quarter of 2023, Freddie Mac did $13 billion of new business activity in this segment.This line remained profitable at $532 million of net income, up by $51 million from $481 million one quarter ago, and by $170 million from $362 million for the third quarter last year.Its multifamily serious delinquency rate, which has been on the rise, had a much more moderate increase than in recent periods. It ended the quarter at 39 basis points, up 1 basis point from the second quarter. A year ago, it was at 24 basis points."This increase was driven primarily by an increase in delinquent floating rate loans, including small balance loans that are in their floating rate period; 96% of these delinquent loans have credit enhancement coverage," Whitlinger said.Freddie Mac's net worth increased to $56.4 billion as of Sept. 30, versus $53.2 billion on June 30 and $44.7 billion one year ago.That increase is a result of not having to pay any dividends to the U.S. Treasury because of the Preferred Stock Purchase Agreement modifications.But that means the liquidation preference for those holdings will increase in the fourth quarter to $129 billion from $125.9 billion on Sept. 30.

The U.S. economy expanded at a robust pace in the third quarter as household purchases accelerated ahead of the election and the federal government ramped up defense spending.Inflation-adjusted gross domestic product increased at a 2.8% annualized after rising 3% in the previous quarter, according to the government's initial estimate published Wednesday.Consumer spending, which comprises the largest share of economic activity, advanced 3.7%, the most since early 2023. The acceleration was led by broad increases across goods, including autos, household furnishings and recreational items.At the same time, a closely watched measure of underlying inflation rose 2.2%, roughly in line with the Federal Reserve's target, figures from the Bureau of Economic Analysis showed.The report card for the world's largest economy illustrates solid momentum in domestic demand as the Fed began unwinding its tightest monetary policy program in decades. It's also the last before Election Day, as American voters size up the general snapshot of US economic activity against their own financial situation, which has been beset in recent years by a high cost of living."There is almost nothing wrong with this picture," Carl Weinberg and Rubeela Farooqi, economists at High Frequency Economics, said in a note. "Steady normalization of rates at a moderate pace is what the economy needs, nothing more."The S&P 500 opened lower, the two-year Treasury yield rose and the dollar fluctuated after the GDP data. A separate ADP Research Institute report showing strong hiring in the private sector in October.GDP in the third quarter was restrained by volatile trade figures, which showed net exports subtracted 0.56 percentage point from the top line. Retailers stepped up imports of consumer goods as the quarter drew to a close on fears of a lingering dockworkers strike. Inventories also subtracted 0.17 percentage point.Final salesHowever, a measure of underlying growth trends favored by economists that combines consumer spending and business investment, known as final sales to private domestic purchasers, advanced 3.2%, the most this year.Government spending rose an annualized 5%, led by the largest increase in federal output since early 2021. National defense expenditures surged at a 14.9% rate, the most since 2003. Federal government spending excluding defense rose at the quickest pace in a year.Nonresidential fixed investment rose an annualized 3.3%, the slowest in a year and dragged down by spending on structures. However, business spending on equipment was the strongest since the second quarter of 2023, boosted by transportation.Outlays on computers and peripheral equipment surged 32.7%, the most since 2020, illustrating the ongoing boom in artificial intelligence.Residential investment declined an annualized 5.1%, the most since the end of 2022, as the housing market struggled under the weight of high mortgage rates and prices.The numbers should keep the Fed on track to continue cutting interest rates in the coming quarters, including at their meeting next week. The figures are good news for Vice President Kamala Harris in the final days of the election campaign against former President Donald Trump.Compared with a year earlier, GDP rose 2.7% — holding above 2.5% for a sixth consecutive quarter. That's "the longest stretch of such solid growth since 2006," Bill Adams, chief economist at Comerica Bank, said in a note.Growth, however, has not been evenly distributed in recent years, as the share of income going to profits has remained well above historical norms. Inflation-adjusted personal income after taxes increased an annualized 1.6%, the smallest advance in a year, the GDP data showed.A breakdown of corporate profits and employee compensation for the third quarter will be published next month with the BEA's second estimate of GDP for the period.

Pending home sales saw their biggest gain in more than four years in September, as a late-summer dip in borrowing costs and more selection on the market lured buyers.An index of contract signings for existing homes climbed 7.4% to 75.8 last month, marking the strongest increase since June 2020, according to data released Wednesday by the National Association of Realtors. The increase exceeded the median estimate of economists surveyed by Bloomberg, who saw it rising 1.9%.Despite the increase, the index level remains historically low in data going back more than two decades as many prospective buyers still await a decline in mortgage rates."Contract signings rose across all regions of the country as buyers took advantage of the combination of lower mortgage rates in late summer and more inventory choices," NAR Chief Economist Lawrence Yun said in a prepared statement. "Further gains are expected if the economy continues to add jobs, inventory levels grow and mortgage rates hold steady."September's improvement came despite soaring home prices and high financing costs that have yielded one of the least affordable housing markets on record and frozen what had been a hot existing-home market during the pandemic. Closings on previously owned homes had fallen to an almost 14-year low last month.The shortage of homes available to purchase has been a major problem, exacerbated by the so-called lock-in effect, seen when homeowners are reluctant to sell and lose their current, low mortgage rates. Inventory has, however, been creeping up in recent months and reached close to a four-year high last month.Pending sales last month got a boost from falling mortgage rates, which dropped to a two-year low of 6.13% in September after the Federal Reserve lowered its benchmark rate by a half percentage point. That encouraged more people to test the market, according to Yun. However, rates have since risen to 6.73%, after strong employment and inflation readings prompted bets the Fed will cut rates more slowly in coming months.Pending sales rose in all regions of the U.S., increasing 9.8% in the West, 7.1% in the Midwest, 6.7% in the South and 6.5% in the Northeast, NAR data show. Yun expected slower appreciation in home prices to boost sales over the next couple years."After two years of sluggish home sales in 2023 and 2024, existing-home sales are forecasted to rise to 4.47 million in 2025 and more than 5 million in 2026," Yun said in the release. "During the next two years, expect a slower rate of growth in home prices that's roughly in line with the consumer price index because of additional supply reaching the market."Pending-homes sales tend to be a leading indicator for previously owned homes, as houses typically go under contract a month or two before they're sold.

The worsening rate environment may not hurt all lenders equally. The 30-year fixed rate mortgage was 6.73% for the week ending Oct. 25, a double-digit rise from the prior stretch, according to the Mortgage Bankers Association. The effective rate went up for all loan types tracked by the trade group, and the 30-year FRM is up 60 basis points from a month ago. The trend, a reversal from a cool-off leading into the Federal Reserve's interest rate cut in September, has softened mortgage activity sizably. The MBA's Market Composite Index measure fell just 0.1% from the week prior, but the Refinance Index was down 6%.Refi activity is still up 84% compared to the same time a year ago, but a month ago was comparatively thriving. Those transactions also now make up just 43.1% of total applications, fading from the prior week and straying further from once accounting for the majority of activity.The conditions could elevate some of the industry's largest players compared to others, according to a research note Wednesday morning by Keefe, Bruyette and Woods. "We continue to believe this backdrop is particularly negative for refi volume-sensitive names within our coverage (primarily Rocket)," wrote analysts, using the lender's stock symbol. "We prefer names which typically benefit more on a relative basis from higher purchase volumes."The MBA's seasonally adjusted Purchase Index was up 4% compared to the prior week, and 10% higher than the year ago period.KBW pointed to Pennymac Financial Services and United Wholesale Mortgage as purchase market beneficiaries, and three major title insurers: First American Financial, Fidelity National Financial, and Stewart. Some of those firms have yet to announce earnings, while early third quarter earnings reports by Stewart, First American Financial and Pennymac showed mixed results this summer. The average contract interest rate for 30-year Federal Housing Administration loans is well in the mid-6% range, jumping 26 basis points to 6.55% last week. FHA and Department of Veterans Affairs-backed loan applications have dropped 41% in the past month. They're up 180% in the past 12 months, a stark rise because of a low 2023 base, KBW noted. The 15-year FRM and 5-1 adjustable mortgage rates are also leaving 5% behind, rising to 6.27% and 6.2% last week, respectively. The MBA meanwhile eyes reliable growth in at least one segment of the market. "We continue to expect housing demand from younger homebuyers to support purchase growth over the next few years as for-sale inventory loosens gradually," said Joel Kan, the MBA's vice president and deputy chief economist, in a press release.

Servicers have submitted thousands of loans to the Veterans Affairs Servicing Purchase program launched in May ahead of their October deadline but there's still work to be done.Around 2,500 of the more than 40,000 eligible veterans for the program have VASP submissions pending, John Bell III, executive director of the Department of Veterans Affairs' loan guaranty service, told attendees at the Mortgage Bankers Association's annual conference.The department wants to ensure the program, which it introduced in May to fill a gap created by the end of a temporary pandemic relief for distressed borrowers, has been working closely with servicers on the new last-resort assistance. So it's been patient with implementation.However, he said communication with servicers about the pace of the program is important when it comes to managing the funds allocated for it."Right now, here's what I'm most interested in from a budgetary standpoint, what the projection is on how many VASP loans you are going to send," Bell said.A subservicing executive speaking with Bell at the conference said processes related to VASP have taken several months to establish in collaboration with the department.Setting up the program, establishing quality assurance, figuring out messaging to veterans and legal reviews took around four or five months, said Michael Blair, executive vice president and chief operating officer at LoanCare, which rolled the program out in September."It's a complicated program, but it's going to do a lot of good," he said.Bell is anticipating that a voluntary and selective foreclosure ban for some loans the department guarantees will be the next key date for VASP. That moratorium ends Dec. 31."I think that's when you'll really start seeing volume tick up, minus any policy changes that might or might not occur," Bell said.The department originally had planned to end an earlier version of its foreclosure suspension in May, when it introduced VASP. It later revised and extended the moratorium.VASP is likely to continue to evolve over time, according to Bell."Will it look and feel the same way it does a year from now or two years from now? No, it never was created for that. It was created for this certain amount of borrowers that we needed to help," he said. "As we go along, we can understand what our portfolio mix is like, and then make adjustments to the program as we go forward."When pressed for details on what might change in a later question-and-answer session, he added only, "You have not seen everything on VASP, and I cannot talk about it."While the pandemic that led to VASP's existence is over, the department is still contending with borrower distress caused by a more recent concern."The thing that keeps me up at night, and I'm surprised and ashamed sometimes we don't talk about it more, is taxes and insurance going up as rapidly as we're seeing it go up in areas that are not the fault of the borrower," Bell said.T&I has risen as more as 35% to 45% in some areas, outpacing the regular monthly payment of principal and interest on some veterans' loans, according to Bell.

Home price growth went negative on a month-to-month basis in August, due to weakening conditions in the West and South, the latest Corelogic S&P Case-Shiller Home Price Index report stated.However, the Federal Housing Finance Agency House Price Index, whose next release will be used to determine the 2025 conforming loan limits, increased by 0.3% in August over July."Despite much-needed optimism, brought about by a sharp decline in mortgage rates in August, the boost was short-lived and not enough to markedly renew homebuyer interest," a commentary from Corelogic Chief Economist Selma Hepp said. "As a result, home prices continued to weaken relative to their seasonal trend. and year-over- year gains took a step back."Prices were down in August versus July by 0.13%, not adjusted for seasonality. This compared with an increase of 0.4% one year ago.In the pre-pandemic years of 2015 to 2019, the average monthly increase in August was 0.28%.On an annual basis, while prices rose 4.25% over August 2023, values were down from 5% in July, and pale the 6.5% gains in February and March."The tale of two regions reflects significant affordability challenges in the West and South, where home price increases in recent years and high mortgage rates priced out many potential buyers," Hepp said. "The Northeast and Midwest continue to benefit from relative affordability and less cumulative increase in prices over the last few years, but also more limited for-sale inventory."Non-mortgage costs of homeownership particularly impacted the South, and especially Florida, as rising insurance, condo reserves and taxes affected fixed-income households, Hepp said.On the FHFA HPI, the 0.3% gain compared with a revised 0.2% between June and July.The annual price index rose 4.2% for August."House price appreciation in the United States remained modest for the sixth consecutive month," said Anju Vajja, deputy director of FHFA's Division of Research and Statistics in a press release. "The slow but continued house price growth and the effect of locked-in interest rates led to persistent housing affordability challenges."Prices in both the Pacific and South Atlantic regions gained 0.1% between July and August, but they were not the weakest regions. Prices went down by 0.1% in both the New England and East North Central regions.On the other hand, they increased 0.9% in the West North Central states and by 0.8% in the West South Central and East South Central regions.First American Data and Analytics' September Real House Price Index reported a decrease of 3.1% from August and a 9.2% drop from one year ago.This index includes adjustments for such items as inflation. September's year-over-year increase in affordability was attributed to a 3.1% rise in nominal household income and lower mortgage rates, said First American Chief Economist Mark Fleming, in a press release."Nominal house price appreciation slowed nationally for the ninth consecutive month in September, but still reached another record high," Fleming said. "Yet, the increase in nominal house prices was not enough to offset the improved affordability from lower mortgage rates and higher household income."

First Foundation in Dallas reported a large quarterly loss after reclassifying a bundle of commercial real estate loans that it plans to sell under a strategy pivot announced earlier this year.The bank swung to a net loss of $82.2 million in the third quarter, compared with net income of $2.2 million in the same period a year earlier. The results were hurt by an $117.5 million adjustment First Foundation took from reclassifying multifamily loans that it plans to offload, reflecting a decrease in the fair value of those loans.After excluding that adjustment and others, the $13.4 billion-asset bank reported adjusted net income of $2.7 million, which was roughly flat from the third quarter of 2023.First Foundation executives said Tuesday that they have now laid the groundwork to reposition the company's balance sheet and stabilize its earnings."The pieces are in place, and now it's all about execution, and we are focused on getting it done," Chief Operating Officer Christopher Naghibi said during the company's earnings call.Still, the unadjusted quarterly net loss was larger than analysts polled by S&P had expected. First Foundation's stock price, which has been hammered over the last two years, fell by 7% Tuesday to close at $7.23.Since the summer, First Foundation has been making major moves in an effort to address problems caused by its large multifamily loan portfolio. That portfolio of fixed-rate loans became a major burden over the last couple of years, as interest rates rose and the cost of deposits needed to fund the loans also climbed.In early July, a group of investors led by Fortress Investment Group agreed to inject $228 million into the bank. The revamped strategy is to use those proceeds to enable the bank to reduce its multifamily loan exposure, increase its footprint in commercial & industrial loans, attract lower-cost deposits and add to its allowance for credit losses.During the third quarter, First Foundation's allowance stayed roughly flat from the year-ago period at $29.3 million. But company executives said they are in the process of reviewing the bank's methodology for establishing its allowance, indicating that the new formula will lead to higher allowances in the future.Although First Foundation's multifamily loans have traditionally had low losses, the bank's allowance is lower than similarly situated peer lenders, executives said.In explaining the planned overhaul of the bank's methodology, Naghibi pointed to what he called "an element of interest rate risk in the market" that is "truly unprecedented."First Foundation also reported progress as it prepares to rid itself of the $1.9 billion of multifamily loans that it moved to held-for-sale status. By the end of the year, the bank is looking to finish a securitization of about $500 million, according to Chief Financial Officer Jamie Britton.The bank plans to use the proceeds from loan sales to reduce its reliance on two higher-cost sources of funding: brokered deposits and advances from Federal Home Loan Banks."The real game-changer will be building up granular core deposits," Naghibi said, "because that's the foundation of sustainable, long-term success."First Foundation, which moved its headquarters from Southern California to Dallas in 2021, has operations in California, Texas, Florida and Hawaii. It's planning to hire new bankers who, over time, are expected to land both more deposits and more C&I loans."We see significant untapped potential in the markets within these geographies," Naghibi said. "We focus on relationships, not just transactions, but deposit growth is where it starts because deposits drive everything.""We've made it clear," he added. "New bankers in these markets will have both loan and deposit goals, and they will be incentivized to build self-funding relationships."

Representative Ritchie Torres, a Democrat from New York.Al Drago/Bloomberg NEW YORK — One of the banking sector's top allies in Congress said he is "cautiously optimistic" about a bill that would rein in so-called trigger leads related to mortgage borrowers. During an appearance at the American Bankers Association's annual convention, Rep. Ritchie Torres, D-N.Y., a member of the House Financial Services Committee, told attendees that the Homebuyers Privacy Protection Act stands a good chance of passing into law this year, "if we push hard enough." "The ranking member [Rep. Maxine Waters] is receptive to the legislation," Torres said. "We still have to have conversations with the chair [Rep. Patrick McHenry], but I'm cautiously optimistic we can land the plane in an otherwise dysfunctional Congress."The bill, also known as House Resolution 7297, was introduced at the committee level by Rep. John Rose, R-Tenn., in February. Torres is the lead Democratic co-sponsor of the bill. Sens. Jack Reed, D-R.I., and Bill Hagerty, R-Tenn., introduced similar legislation in the Senate Banking Committee last December.The legislation would limit the ability of credit-rating agencies to sell mortgage borrower information to financial services providers. Currently, when consumers apply for mortgages, they consent to credit checks through the three major ratings bureaus — Equifax, Experian and TransUnion. Those firms can then use that information to generate leads that are sold to companies that provide other lending, credit or insurance products. "The theory of trigger leads is that it will lead to more choice and competition, but the practical reality of trigger leads is that it's led to more aggressive telemarketing and predatory lending and fraud and abuse," Torres said during an on-stage event. "Within 24 hours of applying for a mortgage, a prospective home buyer might find himself bombarded with an endless stream of phone calls from telemarketers masquerading as underwriters, and so I feel strongly, as a matter of consumer protection, the credit bureau should be prohibited from selling your data a trigger lead without your knowledge and consent."The bill would allow the credit bureaus to continue generating lead triggers for financial institutions with which consumers already have a relationship. The ABA supports the legislation.In a separate conference panel on Tuesday, the ABA's top lobbyist, Kirsten Sutton, said the trigger leads bill could be included in the National Defense Authorization Act later this year. "There is a chance that we can see the trigger leads legislation appended to the NDAA, but the jury is still out on that — that legislation would need to go to conference," Sutton said. "But, it has been included in the Senate version of the NDAA, so we're keeping our eyes focused on that."The omnibus military spending bill has become a popular destination for legislative ideas that have bipartisan support but lack the momentum to pass as standalone laws. In 2022, then Sen. Pat Toomey, R-Pa., inserted a provision into the NDAA requiring the Federal Reserve to create a public list of institutions that have applied for, received or been denied so-called master accounts.Sutton noted that the spending package could also be used to advance elements of the SAFER Banking Act, which would make it easier for legal marijuana businesses to engage with the banking system. But, she cautioned, that the bill could include more controversial policies, such as those related to stablecoin regulation, executive compensation or the Credit Card Competition Act, which would require large credit card issuers to enable their cards to be used on at least two networks, including one that is not run by Visa or MasterCard. "If there is any kind of banking package moving, if we ask for help, it's because we need it," Sutton told the group's members. "We may be in a little bit of a live threat, if there's something that's moving so … that's something we'll be watching closely in the lame duck [session of Congress]."Sutton also flagged the Farm Bill and relief funding to support communities affected by Hurricanes Helene and Milton as potentially significant year-end legislative developments that could be impactful for banks.

Rithm Capital's mortgage operations are chugging along despite a large servicing valuation hit in the third quarter, but it has the tools in place for its desired borrower recapture opportunity.The company Tuesday reported a $227.5 million net loss in its Newrez origination and servicing segment, including a $682.6 million change in fair value of mortgage servicing rights. That compares to a $208.7 million profit for the segment in the second quarter. Its correspondent-heavy mortgage origination volume, however, grew to $15.9 billion in the third quarter, increases of 9% quarterly and 43% annually. Its overall gain-on-sale margin was flat from the year-ago period, but rebounded from 105 basis points in the spring to 123 bps in the third quarter.  Newrez's unpaid principal balance, including third-party servicing, grew 34% from the last third quarter to $754.7 billion in the recent period. The self-proclaimed second-largest non-bank servicer in an earnings presentation suggested a $144 billion recapture opportunity within its portfolio, regarding borrowers with higher interest rates. "We completed the first phase of our CRM rebuild in the second quarter of 2024, and we believe there is significant room to improve our ability to retain and continue to gain traction with our customers overall," said Baron Silverstein, president at Newrez, in an earnings call. The company touts a 3.4% mortgage market share, a servicing cost per loan of $113, and a consumer direct refinance recapture rate of 55% so far this year, including closed-end second liens.Overall, the real estate investment trust had net income of $97 million, or $0.20 per diluted share, including its asset management and investment portfolio segments. The third quarter bottom line was around half of the figures it reported in the last quarter, and the $193.9 million in net income and $0.40 per diluted share in the year ago period. Its Genesis Capital investor lending arm, which it acquired in 2021, also had a record third quarter, with $761 million in originations. The New York-based firm's long-mulled split of Newrez into a separate public entity could also happen next year, Rithm CEO, chairman and president Michael Nierenberg told analysts. "There's obviously other things we're thinking about from an M&A landscape perspective, but I think it's more likely going to be a (2025) event as we think about the mortgage company," he said.Nierenberg also opined on the upcoming election and its impact. Either incoming administration would have a difficult time passing legislation, and would face a growing federal deficit, he said. In the meantime, the company feels confident in its risk profile, and has $2 billion in liquidity."The way that we're positioned now is to have an abundance of cash and liquidity," said Nierenberg. " … And that's the way we're going to run until we get some other kind of tea leaves that may rear their heads."Rithm's stock trended up this morning on the earnings, trading at $10.67 per share as of late Tuesday afternoon. BTIG analyst Eric Hagen said in a research note the Rithm isn't receiving enough credit in its stock valuation for a "very strong track record" of hedging mortgage servicing rights marks against interest rate moves. The analyst is projecting $60 billion in originations for the firm over the next 12 months. "The visibility for stable earnings at Newrez ultimately plays directly into the opportunity we think it can unlock as it looks to capitalize the asset manager," he wrote Tuesday.

Andrew Harrer/Bloomberg NEW YORK — Treasury Secretary Janet Yellen on Tuesday said banks have a pivotal role to play in a new agency initiative focused on improving financial inclusion and narrowing the wealth gap. Speaking at the American Bankers Association Annual Convention in New York, Yellen unveiled the Treasury's National Strategy for Financial Inclusion. The plan — which was shaped by a yearlong collaborative process involving ABA staff, government agencies and consumer advocates — aims to expand access to the financial system for low-income households, people of color and rural populations as well as improve consumer outcomes."Access to financial products and services is essential to creating opportunity for all Americans," she noted in an accompanying release. "For the first time, Treasury's strategy provides a national roadmap to expand access to foundational financial tools like credit and investments that are key to building wealth. Implementing these recommendations will help more families build financial security and get ahead."Yellen said the agency would seek the industry's "active partnership in moving this strategy forward." The national strategy focuses on five core objectives aimed at providing access to products that foster well-being and financial security. The objectives are:Promote access to transaction accounts that meet consumer needs.Increase access to safe and affordable credit.Expand equitable access to savings and investments.Improve the inclusivity of financial products and services provided or backed by the government.Foster trust in the financial system by protecting consumers from illegal and predatory practices.Yellen said cooperation by financial institutions is needed to provide transaction accounts tailored to underserved communities, which would reduce the number of unbanked households in the United States. According to a 2021 survey conducted by the Federal Deposit Insurance Corp., nearly 5.9 million —  about 4.5% — of U.S. households didn't have checking or savings accounts.  While this represents the lowest rate recorded since 2009, the study found unbanked rates were disproportionately higher among lower-income, less-educated, Black, Hispanic, disabled, and single-mother households."It's clear that banks of all sizes have been crucial partners in moving forward many of our top economic priorities," she said. "So let me thank all of you for this strong and important collaboration and emphasize that it must continue."Regulatory lessonsReflecting on what regulators learned in 2023, Yellen said Treasury and federal officials would work closely with banks to address lingering vulnerabilities in the system. She underscored Treasury's ongoing focus on issues that played into the banking crisis — including some firms' reliance uninsured deposits and the effects of interest rate risk on banks' securities portfolios."This means ensuring that banks are prepared for liquidity stress," she said. "Including making sure banks have diverse sources of contingency funding and the capacity to borrow at the discount window and periodically test this capacity."Yellen also acknowledged the expanding role of nonbanks in finance and the unique challenges they pose to traditional banks. She said the agency will continue to monitor and address risks posed by the nonbank sector, including private credit and fintech, and its interconnections with the banking sector.