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Obama ups pressure on banks to help homeowners
Loan servicers must detail plans to assist borrowers long-term. Laggards could face penalties and sanctions.
NEW YORK (CNNMoney.com) -- Looking to jumpstart its foreclosure rescue plan, the Obama administration announced new steps Monday to pressure banks to help homeowners long term.
Responding to complaints that too many borrowers are stuck in trial adjustments, administration officials said they would more closely monitor loan servicers' handling of modification applications.
In cases in which they have all the needed documentation, top loan servicers will be required to report the status of each modification and their plan to reach a decision. Also, these servicers must say how they will communicate decisions to borrowers.
Those failing to meet their obligations could face penalties and sanctions.
To help borrowers through the process, the administration is providing more information on the documents they need to submit to be considered for a permanent modification. Federal, state and local officials will increase outreach to delinquent homeowners.
"We now must refocus our efforts on the conversion phase to ensure that borrowers and servicers know what their responsibilities are in converting trial modifications to permanent ones," said Phyllis Caldwell, the new head of Treasury's Homeownership Preservation Office.
The administration's move is its latest attempt to revitalize its $75 billion loan modification plan, which many fear will fall far short of its goal to help up to 4 million delinquent homeowners.
Stuck in trial modifications
A growing number of borrowers are complaining that they are not receiving long-term assistance. Some 650,000 homeowners are currently in this preliminary phase, but only a small fraction have received permanent assistance.
About 375,000 people should be eligible to receive long-term relief by year's end, said Treasury officials. The administration is set to release its first report on the conversions next week.
As of Sept. 1, only 1,711, or 1.26%, of all trial adjustments were made permanent after three months, reported the Congressional Oversight Panel, which monitors the government's use of bailout funds.
The administration's steps indicate its foreclosure rescue plan is in trouble, said Alan White, a law professor at Valparaiso University who studies loan modifications. He would hope to see 50,000 to 100,000 people receiving permanent modifications by now, but is concerned the figure will be much lower.
"If we don't see a big increase in the permanent modification numbers, then there's something seriously wrong with this program," said White, referring to next week's report. "I can only assume the number is appallingly low."
Gathering paperwork
Increasing oversight of the servicers' modification efforts should help, White said.
Under the president's plan, delinquent borrowers are put into trial modifications for several months to make sure they can handle the new payments and to give them time to submit their financial paperwork.
Borrowers that qualify for long-term modifications can keep making the lower payments for five years. At that point, the interest rate will be set at the rate at the time of the adjustment, currently about 5%.
Loan servicers, however, say they are having trouble getting the necessary documents from borrowers, while homeowners maintain that their financial institutions are repeatedly losing the paperwork.
And once homeowners send in their forms, servicers may find these borrowers don't have enough income or have too much equity or savings to qualify. It also may be more profitable for the bank to foreclose on the home than to modify the mortgage.
Once the modification becomes permanent, servicers, investors and homeowners are eligible to receive thousands of dollars in incentive payments.
Cyber Monday shoppers: 4 million per minute
Online traffic surges 43% as Americans hunt for bargains from the comfort of their desk or home.
NEW YORK (CNNMoney.com) -- Not satisfied with your holiday weekend shopping? Don't worry, it's Cyber Monday.
It is the day that e-tailers will furiously push big discounts, free gift cards, free shipping and any other gimmick they can think of to entice consumers to spend even more of their holiday shopping dollars online.
Shoppers seemed to be responding to these moves early Monday.
By 11:15 a.m. ET, more than 270 retailing Web sites tracked by Internet monitoring firm Akamai were drawing more than 4 million visitors per minute.
Akamai said that its Net Usage Index -- which monitors North American visitors to sites such as American Eagle Outfitters, Overstock.com, QVC .com and eBags.com -- said traffic was up nearly 43% compared to the same time last year.
Here's a sampling of what sellers were serving up to customers.
Walmart.com is offering nearly 150 specials on such items as flatpanel TVs, gaming systems and toys as well as 97 cents shipping on laptops, digital cameras and MP3 players.
Wal-Mart (WMT, Fortune 500) said in a statement the deals are being offered through Friday, but only while supplies last.
LLBean.com is offering a $10 gift card with every $25 purchase or more. Macys.com is hoping that its offer of free shipping with every $75 purchase will draw big traffic to its Web site on Cyber Monday.
For book lovers, Barnesandnoble.com is chopping prices by 50% on all New York Times bestsellers and offering a $10 gift certificate for every $100 purchase.
Still, don't expect any special deal on Barnes & Noble's "Nook" eBook reader, which industry experts peg as one of the hottest products this holiday season.
A quick check on the book seller's Web site showed that if you order the Nook Monday, it won't be shipped until Jan. 4. And the "extra" incentive to Nook buyers is free shipping and a free gift certificate.
About 96.5 million Americans plan to shop online Monday, up from 85 million in 2008, according to the National Retail Federation.
The group said 88.2 million consumers will shop from home Monday but plenty of consumers -- an estimated 13.5 million -- will also look to lock in deals during their workday.
Despite these expected traffic numbers and heavy discounts, Cyber Monday is still seen as more of a ceremonial start to online holiday shopping.
The busiest online shopping day tends to be later in December, and is the last day that gifts can be shipped to guarantee delivery by Christmas Day.
Dollar retreats as Dubai concerns wane
The greenback falls against rival currencies after a rally last week as nervousness about the emirate's debt problems ease.
NEW YORK (Reuters) -- The U.S. dollar fell against the euro Monday as easing concerns about Dubai's debt problems and stronger-than-expected U.S. regional business activity data eroded safe-haven demand for the greenback.
Investors remained cautious, however, and the yen rose as a top Dubai finance official said the government will not guarantee Dubai World's debt and said creditors are responsible for their actions.
The dollar's decline began earlier in the global session as Asian equities advanced on the UAE central bank's pledge to provide emergency support to the region's banks and as Dubai's oil-rich neighbor, Abu Dhabi, offered to provide selective support to Dubai companies.
Dubai shares plummet 7%
"It's a return to risk scenario, really more than anything," said Andrew Busch, global currency and public policy strategist at BMO Capital Markets in Chicago. "The markets are taking comfort from the words out of Abu Dhabi and UAE on providing liquidity and supporting banks."
A report showing business activity in the U.S. Midwest expanded more strongly than expected in November also briefly lifted shares on Wall Street and weighed on the greenback.
In midday trading, the ICE Futures U.S. dollar index, a gauge of the greenback's performance against six other major currencies, was down 0.2% on the day at 74.888. The index touched a 15-month low of 74.170 last week.
The euro rose 0.2% to $1.4987, pulling back from last week's 15-month peak just above $1.5140.
Major currencies stayed in tight ranges as U.S. stocks fell in choppy trading and investors worried that markets will remain volatile until the year end.
"We will have a lot of window-dressing as the year winds down and investors and fund managers tend to shy away from riskier assets and currencies," said Shaun Osborne, chief currency strategist at TD Securities in Toronto.
For the month, the euro gained about 1.9% versus the dollar. The greenback fell 4.4% against the yen, the worst monthly performance since the end of 2008.
Japan speaks up
The Japanese yen stayed firm after hitting a 14-year high of 84.81 yen last week, according to Reuters data. The dollar last traded down 0.3% at 86.12 yen , while the euro fell 0.3% to 129.12 yen
A Japanese official said the government would try to stem the currency's rise, although he did not specify any measures.
"In light of the Dubai shock, we want to respond more aggressively than originally planned with an extra budget," Strategy Minister Naoto Kan, who is also deputy prime minister, told reporters. "We also want to stop the yen's rise and cooperate with the BOJ."
Finance Minister Hirohisa Fujii denied a report that he would not intervene in currency markets, saying he had never said intervention was impossible. Separately, Bank of Japan Governor Masaaki Shirakawa said currency volatility was undesirable.
"We expect the yen to remain in demand although recent government comments reveal an increasing degree of nervousness," currency strategists at BNP Paribas wrote in a research note. The firm expects dollar/yen to trade in a range of 85 to 88 as risk aversion continues.
The Australian dollar was up 0.8% at $0.9136. The Reserve Bank of Australia meets Tuesday. A decision to raise rates for a third straight time is seen as a close call.
Later in the week, investors will focus on the European Central Bank's decision on its one-year funding operation. It is expected to keep rates steady on Thursday.
A U.S. jobs report on Friday will also be closely watched.
The Canadian dollar rose, with the U.S. currency down 0.5% at C$1.0571 after data showed Canada exited recession in the third quarter after three quarters of negative growth.
Dubai banks to get United Arab Emirates support
But action is seen as bare minimum by analysts as world markets brace for more reaction to debt crisis.
DUBAI (Reuters) -- The United Arab Emirates offered banks emergency support Sunday, the first steps to ease fears that a looming debt default by two of Dubai's flagship firms could derail the global economic recovery.
But the move to inject liquidity into Dubai's banks by the central bank of the Gulf Arab state, together with promises by neighboring city-state Abu Dhabi to provide selective support to Dubai companies, was seen by analysts as the bare minimum.
Dubai markets, which are set to open on Monday morning after a four-day holiday, are expected to fall by the maximum daily limit of 10% as banks, property and construction firms face investor ire over moves to restructure the Dubai economy.
The action of the UAE central bank to allay concerns by setting up an emergency liquidity facility was viewed as a necessary, but minimal policy response.
"This is the absolute minimum they could have done and suggests they won't be making another announcement before tomorrow morning, which is a little disappointing," said Raj Madha, banking analyst at EFG-Hermes.
Regional investors want any sort of guidance from the central bank or government ahead of the market open as rumors about the scope and origin of the crisis run rampant.
The supreme fiscal committee of Dubai met Sunday evening to hammer out potential policy responses. But in the absence of concrete policy statements, doubt is likely to prevail.
The crisis began Wednesday when Dubai, part of the United Arab Emirates federation, asked to delay payment on billions of dollars of debt issued by conglomerate Dubai World and its main property subsidiary Nakheel, developer of three palm shaped islands that has attracted celebrities and the super-rich.
Dubai World had $59 billion of liabilities as of August, most of Dubai's total debt of $80 billion. International banks' exposure related to Dubai World could reach $12 billion in syndicated and bilateral loans, banking sources told Thomson Reuters LPC.
Investors are especially keen to discover whether the six-month "standstill" on debt repayments to Dubai World and Nakheel will be voluntary or involuntary. If creditors are not given a choice, the restructuring will be viewed as a default.
Abu Dhabi, the wealthy capital of the United Arab Emirates, will "pick and choose" how to assist debt-laden neighbor Dubai, a senior official said Saturday.
"We will look at Dubai's commitments and approach them on a case-by-case basis. It does not mean that Abu Dhabi will underwrite all of their debts," the official in the government of the adjoining emirate of Abu Dhabi told Reuters by phone.
Selective assistance for companies in "Dubai Inc.," a network of quasi-sovereign industries, instead of blanket assistance, would serve a rude awakening to investors. For years, many assumed that the conservative Abu Dhabi provided a safety net for its racier neighbor, which is known for its flashy nightlife and is home to the world's tallest building.
While politicians, central bank officials and corporate executives around the world have lined up to express concern at the risks of the Dubai debt crisis hitting their own economies, leaders in the UAE have remained quiet or minimized any threats.
Local media, mostly owned or controlled by government-related entities or vested interests, initially ignored the gravity of the crisis and have now taken to criticizing foreign media for blowing events out of proportion.
A headline from Arabic-language daily Al-bayan on Sunday read: "Dubai is exemplary for investment destinations". English-language Gulf News said: "Global outcry over Dubai World restructuring is exaggerated".
Dubai's depressed property market may see further price declines of around 20% to 30% and increased concern over the availability of finance after the emirate it delayed debt payments at two of its flagship firms, analysts said. Renewed job cuts could further hurt housing demand.
The crisis in the business hub of the world's biggest oil exporting region has spotlighted the Gulf's lack of economic transparency, and proved an awkward reminder of the risks of investing in emerging markets from Russia to Greece to Mexico.
Analysts said the timing of the news on the eve of the Muslim Eid al-Adha holiday, the lack of prior communication with investors, and the scant details given on the plans has dented Dubai's credibility.
In response, investors around the globe have dumped stocks, bonds, currencies and commodities since Thursday of last week, and sought safe havens in assets such as gold or the U.S. dollar.
The sell-off began in Europe, spread to Asia and then the United States, whose markets were closed Thursday for the Thanksgiving holiday. European markets dropped 3% Thursday but rebounded Friday, while U.S. stocks closed down 1% Friday in response to the Dubai news.
On Friday, one of the world's leading fund managers said that rising fears of a possible debt default at Dubai's biggest company was acting as a catalyst for an "overdue correction" in equities and risk assets following an eight-month rally. Fund managers have been playing catch-up after the financial crisis this year by ploughing monies into many speculative investments.
"While many have acknowledged in the last few weeks the growing wedge between market valuations and economic and corporate realities, few have been willing to take their equity exposure down, Mohamed El-Erian, chief executive of Pimco, the top bond fund manager, told Reuters on Friday.
"The Dubai announcement is serving as this catalyst."
Dollar falls as Dubai debt fears ease
Greenback suffers on increased risk appetite. Yen also sinks as Bank of Japan continues easing monetary policy.
LONDON (Reuters) -- The yen fell broadly on Tuesday after the Bank of Japan announced more measures to ease monetary policy to help the ailing economy following an emergency meeting, while holding interest rates at 0.1%.
Despite its gains against the yen, the dollar fell against other major currencies as risk appetite improved after more clarity about the debt situation in Dubai eased some concerns about the region's stability.
The yen struggled, but pared losses as the BOJ's move to provide three-month funds at rock-bottom rates surprised some in the market who had been expecting bolder policy steps, such as expanding purchases of government bonds to push yields down.
Addressing strength in the yen, which shot to a 14-year high against the dollar last week, BOJ Governor Masaaki Shirakawa said the central bank's commitment to keeping rates low would have an effect on currencies in the long run.
"The message is that the BOJ isn't completely indifferent to currency rates, and this should at least be marginally yen-negative," said Adam Cole, global head of currency strategy at RBC in London, while acknowledging the yen's initial reaction to the comments had been limited.
Shirakawa spoke to reporters after the BOJ introduced a new operation to provide 10 trillion yen in three-month funds at a fixed rate of 0.1% in a bid to enhance monetary easing by trying to bring down longer-term rates.
The dollar traded 0.5% higher on the day at ?86.80, having hit ?87.54 earlier in the day.
The dollar has suffered against the yen, hitting ?84.82 late last week for the first time since mid-1995, as dollar interbank borrowing costs have fallen below yen ones this year.
The euro rose 1% to ?130.90, while higher-yielding currencies including the Australian and New Zealand dollar rallied as much as 2% versus the yen.
The euro rose 0.4% to $1.5065 as risk demand rose after restructuring plans by Dubai World, which has been the center of concerns about the region's debt position, eased some woes about the area's financial health.
The dollar index fell 0.5% to 74.550, while European share prices rallied roughly 2%.
"The market is keeping an eye on Dubai, but it realizes that it's likely this won't lead to a systematic decline in Dubai's financial sector, so traders are willing to take on risk," said Jane Foley, research director at Forex.com in London.
More dollar/yen weakness?
The Australian dollar rose nearly 1% on the day to $0.9230, boosted after the Reserve Bank of Australia raised interest rates by 25 basis points to 3.75 as expected on Tuesday in its third consecutive hike.
Many in the market expect the dollar to stay weak against the yen, which may seriously hamper Japan's ability to recovery from recession.
Analysts said there was little standing in the way of more yen strength against the dollar so long as U.S. interest rates also remain essentially at zero, and that the prospects of yen-weakening intervention by Japan will remain low given the dollar's overall weakness.
"(The new BOJ operation) is unlikely to either have a material impact on economic recovery or alter the downward momentum in USD/JPY," analysts at BTM said in a note.
"In fact it may even exacerbate USD weakness by further encouraging the establishment of liquidity fueled USD-funded risk trades."
Political pressure on the BOJ to avert recession has grown, but Tuesday's decision is seen as a way to avoid a return to a narrow form of quantitative easing, under which the BOJ slashed rates to zero and flooded markets with cash in 2001-2006.
Home sales contracts soar in October
National Association of Realtors index spikes 32% as buyers take advantage of first-time homebuyer tax credit.
NEW YORK (CNNMoney.com) -- Americans are inking a lot of deals to buy homes.
In October the National Association of Realtors recorded an unprecedented ninth consecutive month of increases in the number of signed contracts.
Although these are not closed sales, and some deals can fall through, signed contracts are a good indicator of where the housing market is headed.
Between September and October NAR's Pending Home Sales Index rose 3.7% to 114.1 from 110 in October. But the index is 31.8% higher than a year ago, when it was 86.6. That's the biggest year-over-year gain in the history of the index.
The PHSI is also at its highest level since March 2006, and the rise confounded expert expectations. A panel of industry analysts put together by Briefing.com had forecast a 1% drop in new contracts.
NAR's chief economist, Lawrence Yun, gives much of the credit for increased sales to the homebuyer's tax credit, which first-time homebuyers could claim to reduce their taxes by up to $8,000.
"The tax credit is helping unleash a pent-up demand from a large pool of financially qualified renters, much more than borrowing sales from the future," Yun said in a prepared statement.
The credit had been due to lapse on Dec. 1, so many October buyers may have acted to get in under the wire.
However, the credit has been extended through the middle of 2010 and expanded to include many move-up buyers. The housing industry hopes that will keep sales perking until the economy picks up and markets return to a more normal condition.
In a related story, the Census Bureau reported that private residential construction spending surged 3.9% during October.
Yun cautioned, however, that housing market indicators, such as pending sales, may weaken over the next few months.
"The expanded tax credit has only been available for the past three weeks, but the time between when buyers start looking at homes until they close on a sale can take anywhere from three to five months," he said.
"Given the lag time, we could see a temporary decline in closed existing home sales from December until early spring when we get another surge," he added. "But the weak job market remains a major concern and could slow the recovery process."
The good news is that number of homes on the market has declined, removing some of the bloat that has depressed prices. There is now a seven month supply of homes on the market at the current rate of sale. which is down from 10.2 months a year ago. Yun predicted that housing conditions could return to near normal and home prices firm up by mid-2010.
"That would mean broad wealth stabilization for the vast number of middle-class families," he said.
Cyber Monday: A lot of clicking and shopping
Report says sales rose 14% over last year and shoppers on average spent more online than they did on Black Friday.
NEW YORK (CNNMoney.com) -- Did Cyber Monday outshine Black Friday this year?
Early reports suggest that Americans shopped more enthusiastically online for holiday bargains than they did in stores on Black Friday.
Cyber Monday sales rose 14% this year compared to 2008 and consumers also bought nearly 30% more items per order versus last year, according to research firm Coremetrics.
Also, the firm said shoppers bought 10% more items per order online than they did in stores on Black Friday.
"We are seeing good online buying momentum because people are looking for the very best deals, and are going online for the most convenient way to shop," John Squire, chief strategy officer, Coremetrics, said in a report Tuesday.
Clothing and jewelry e-tailers were the most popular shopping destinations on Cyber Monday. Although department stores saw a 33% increase in traffic to their Web sites, the average order volume actually fell 10% versus last year, the report said.
Kindle top seller at Amazon.com
Cyber Monday, which is the e-tailers version of Black Friday, is the day that e-tailers furiously push big discounts, free gift cards, free shipping and any other gimmick they can think of to entice consumers to spend even more of their holiday shopping dollars online.
Amazon.com (AMZN, Fortune 500) spokesman Craig Berman said its wireless Kindle e-reader was the "best-selling item across all of Amazon's product categories on Monday."
"This November has become the biggest month for Kindle sales since we launched the product two years ago," Berman said. But he declined to disclose how many Kindle units have been sold over that period.
Also, Berman said the e-tailer sold out of its Cyber Monday deal of the day, which was an 8GB iPod Touch for $158.
Other hot sellers Monday included the hugely popular Zhu Zhu pet hamsters, which are sold on Amazon through third party vendors.
Although the retail price of each hamster is $9.99, Berman said some of the hamsters, such as Mr. Squiggles, were selling for as much as $63 each.
4.3 million shoppers a minute
An average of 4.3 million consumers per minute visited shopping Web sites throughout the day Monday in North America, according to Internet monitoring firm Akamai, which tracks traffic trends to more than 270 e-tailers.
The firm, which monitors North American visitors to sites such as American Eagle Outfitters, Overstock.com, QVC.com and eBags.com, said traffic peaked at about 9:30 p.m. ET, reaching 5.1 million visitors per minute.
Pedro Santos, chief strategist for e-commerce with Akamai, said he expects heavy online traffic to continue on subsequent Mondays leading up to the last shipping day before Christmas.
Here's a sampling of what other sellers were serving up to customers.
Walmart.com is offering nearly 150 specials on such items as flat panel TVs, gaming systems and toys as well as 97-cent shipping on laptops, digital cameras and MP3 players.
Wal-Mart (WMT, Fortune 500) said in a statement the deals are being offered through Friday, but only while supplies last.
For book lovers, Barnesandnoble.com is chopping prices by 50% on all New York Times bestsellers and offering a $10 gift certificate for every $100 purchase.
Still, don't expect any special deal on Barnes & Noble's "Nook" eBook reader, which industry experts peg as one of the hottest products this holiday season.
A quick check on the book seller's Web site showed that if you order the Nook Monday, it won't be shipped until Jan. 4. And the "extra" incentive to Nook buyers is free shipping and a free gift certificate.
About 96.5 million Americans planned to shop online Monday, up from 85 million in 2008, according to the National Retail Federation.
Despite these expected traffic numbers and heavy discounts, Cyber Monday is still seen as more of a ceremonial start to online holiday shopping.
The busiest online shopping day tends to be later in December, and is the last day that gifts can be shipped to guarantee delivery by Christmas Day.