NY Times Online Debates Charging Readers
March 12, 2010
The Raw Story
By AFP
With The New York Times and Rupert Murdoch poised to start charging for newspapers online, media heavyweights sparred on Thursday over whether readers will pay for news on the Web.
The Times plans to require payment for full access to NYTimes.com in early 2011 and Murdoch, who already charges for The Wall Street Journal online, has pledged to begin charging Web readers of his other News Corp. newspapers.
Keynote speakers and panelists at the Bloomberg BusinessWeek Media Summit here differed sharply on whether Internet users would be ready to shell out money for what they have become accustomed to getting for free.
New York Times publisher Arthur Sulzberger said the time is right for his newspaper to start charging for its website and the move will provide a “critical” new revenue stream to add to print and online advertising revenue.
“There is an opportunity, I think, for us to gain a great deal of revenue from this paid model going forward,” Times Co. president and chief executive Janet Robinson said.
Merrill Brown, chief strategist for Journalism Online, said more than 1,300 publications around the world have expressed interest in the services offered by the company founded last year to help news outlets make money on the Web.
“Everyone of them is contemplating a paid strategy of one kind or another,” Brown said.
Readers will not pay for “commoditized headlines,” he said, “but they will pay for very specialized news.
“They will pay for deep coverage of their favorite sports teams, they will pay for content which only local newspapers have in their communities,” Brown said. “If (publishers) market it smartly to their most engaged users they have a chance to add at least incremental revenue.”
Brown said that although the data is “inadequate,” studies suggest that in the United States, over 20 percent of regular visitors to a particular news website may be willing to pay.
“That would be a pretty good thing at any large publication in the country,” he said.
Andrew Keen, author of “The Cult of the Amateur,” a book which takes a critical look at the impact of the Internet on culture, said the newspaper industry “shot itself in the foot” by not charging on the Web in the first place but has every right to do so now.
“We do need to fight the culture of free, the culture which suggests that large media companies or for that matter small media companies don’t have the right to charge for their content,” he said.
“Media companies if they choose can give their stuff away for free but they shouldn’t be vilified if they choose to build pay walls around it and sell it,” Keen said.
Michael Wolff, founder of news aggregator website Newser and the author of a book on Murdoch, said any attempt to make readers pay online is doomed to fail.
“We’re in a moment of destruction, transformation beyond all imagination,” Wolff said.
“Newspapers are going out of business, every big city newspaper will be out of business or will be owned by a rich man hobbyist within the foreseeable future,” he said.
“It’s not going to happen that The New York Times is going to successfully charge or that anyone else is going to successfully charge,” Wolff said.
“You’re not going to pay for news because it’s something you already get, it’s everywhere,” he said. “If you’re connected in any way the news comes to you.”
Richard Gingras, chief executive of online arts and culture magazine Salon, said media companies “clearly have to look for alternate revenue streams and not just rely on advertising” but expressed skepticism readers would be willing to open their wallets to get news online.
“They won’t pay for local news content, not in sufficient numbers,” he said. “It’s very hard to convince anyone that the value is such that they should pay to get it.”
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Cries for Wall Street Regulation
March 12, 2010
Reuters
By David Morgan
The findings suggest that 82 percent of Americans want the government to clamp down more strongly on Wall Street excesses, with a particular emphasis on bonus schemes that have rewarded employees at loss-making companies such as American International Group.
A Harris release on the February 16-21 telephone survey of 1,010 adults did not specify how financial regulation should be applied but said three-quarters of Americans believe Wall Street companies should pay bonuses only while in the black.
Harris said the U.S. public does see value in Wall Street itself: nearly 60 percent say the financial sector is an essential benefit to the United States.
But a slightly larger majority disagrees that what is good for Wall Street is good for the country, while about two-thirds harbor strong negative views about the people who work there.
By a margin of 66 percent to 29 percent, Americans agree that “most people on Wall Street would be willing to break the law if they believed they could make a lot of money and get away with it,” pollsters found.
Sixty-five percent say most successful people on Wall Street do not deserve the kind of money they make.
A similar majority said those in the financial sector are generally less honest and less moral than the general public.
“Those who manage large banks and other financial institutions can draw some comfort from the majorities who believe that Wall Street is essential and benefits the country, even if these numbers are much worse than they were before the 2008 crash,” Harris said in a statement.
“On the other hand, there is no evidence that the American people have begun to forgive the people in Wall Street or to forget the huge problems that they caused.”
Harris did not provide a margin of error for the poll.
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US Taxpayers on the Hook for Five Trillion in Bad Debt
March 11, 2010
Yahoo Finance
By Aaron Task
House Financial Services Chairman Barney Frank caused a bit of an uproar Friday when he suggested the U.S. government does not guarantee the debts of Fannie Mae and Freddie Mac.
Rep. Frank later recanted and backed a Treasury Department statement reassuring investors that, yes, Fannie and Freddie Mae debt is guaranteed by the U.S. government. “Going forward,” he said in a statement, we “will make sure that there are no implicit guarantees, hints, suggestions, or winks and nods…we will be explicit about what is and is not an obligation of the federal government.”
But after years of winks and nods, there’s no doubt that Fannie and Freddie now enjoy an explicit guarantee, according to most observers. The U.S. government placed Fannie Mae and Freddie Mac in conservatorship in September 2008: “This means that the U.S. Taxpayer now stands behind $5 trillion of GSE debt,” according to the Congressional Research Service.
The problem is that $5 trillion of so-called agency paper is not treated as if it is a debt of Uncle Sam for accounting purposes, says Richard Suttmeier, chief market strategist at Niagara International Capital and ValuEngine.com.
“Get it on the balance sheet – that’s where it belongs,” Suttmeier says. “Add it to the $14.2 trillion in [federal] debt and let’s move on.”
Another Time Bomb Ticking But $5 trillion is a lot of money – even by government standards — and moving on may be the problem because of ongoing problems in the housing market, Suttmeier says. “There’s a general concern on Main Street U.S.A. that ‘my neighbors are throwing in their keys, there’s more for sale signs in my community…do I want to buy a new home, risking there’s still downside risk to housing?’ ”
Noting the Case-Shiller 20-City Home Price Index is still 50% above 1999 levels and mortgage delinquencies are still rising despite the rebound in GDP, Suttmeier says “victory is nowhere in sight, particularly when the drain we’re going to see from Fannie and Freddie is unlimited losses between now and the end of 2012 — on top of the $400 billion that’s already been allocated.”
Coincidentally (or not), the FDIC is allowing U.S. banks until 2012 before forcing them to fully write-down bad or toxic loans, which is “another time bomb ticking,” Suttmeier says. “They’re hoping the public market comes back into the mortgage arena, which is going to be hard to do.”
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Canadian Dollar Likely to Trump US
March 11, 2010
Yahoo News
The Canadian dollar, or loonie as it is affectionately called here, is likely to soar above parity with the US greenback this year, experts at a Canadian bank said Wednesday.
Canadian Imperial Bank of Canada (CIBC) chief economist Avery Shenfeld said the Canadian dollar had already gained several cents in recent weeks as the market firms up expectations of an interest rate hike in July.
If as expected, the central bank “is out in front of the US Federal Reserve by a couple of quarters” in raising interest rates, the Canadian dollar could reach 1.02 dollars versus the US dollar by September, before dipping back to 0.97 dollars by year end,” Shenfeld said.
The Bank of Canada has maintained its key lending rate at a historic low of 0.25 percent since April 2009 to help bolster a fragile economic recovery, but is widely expected to review its position mid-year.
CIBC said other factors were also aligning to push up the value of Canada’s currency such as increased demand for oil, minerals and fertilizers; resurgent capital markets; and global debt fears.
“If the capital markets finally get an appetite for M&A (mergers and acquisitions) then Canada could be one of the first places to see the benefit of foreign inflows,” said CIBC analyst Zafar Bhatti.
Or “if the investing world starts looking for a place to park capital in the wake of deteriorating sovereign credits then Canada would look very attractive,” Bhatti said in a report.
Since the beginning of the year, the Canadian dollar has appreciated 2.5 percent against the US dollar and more than seven percent against the euro.
The loonie last achieved parity with the US greenback in 2008, and previously hit a record 1.10 dollars in 2007.
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Permanent Unemployment Benefits???
March 10, 2010
Washington Post
By Michael A. Fletcher and Dana Hedgpeth
Millions of Americans have been forced to rely on unemployment payments for extended periods as the nation struggles through its longest period of high joblessness in a generation, and critics are taking aim, saying that the Depression-era program created as a temporary bridge for laid-off workers is turning into an expensive entitlement.
About 11.4 million out-of-work people now collect unemployment compensation, at a cost of $10 billion a month. Half of them have been receiving payments for more than six months, the usual insurance limit. But under multiple extensions enacted by the federal government in response to the downturn, workers can collect the payments for as long as 99 weeks in states with the highest unemployment rates — the longest period since the program’s inception.
The unemployed say extensions help to tide them over in unusually difficult times when jobs are hard to come by. Although unemployment held steady at 9.7 percent in February, millions of jobs have been lost in the downturn, particularly in the hardest-hit sectors including real estate, construction, manufacturing and financial services. Those jobs are unlikely to return even when the economy recovers, many experts say.
But complaints that extending unemployment payments discourages job-seeking have begun to bubble into the political debate. Sen. Jim Bunning (R-Ky.) recently single-handedly held up the latest extension, a bill to keep unemployment benefits in place for 30 more days, saying Congress should find other cuts to cover its $10 billion price tag.
Sen. Jon Kyl (R-Ariz.) did not join Bunning’s effort, but he defended his colleague’s point of view. Kyl told the Senate he questioned why anyone would see unemployment benefits as helpful to the economy, or to the job market.
“If anything, continuing to pay people unemployment compensation is a disincentive for them to seek new work,” Kyl said. “I am sure most of them would like work and probably have tried to seek it, but you can’t argue it is a job enhancer.”
Andrew Stettner, deputy director of the National Employment Law Center, says there’s a good reason people are out of work for so long. There are six unemployed Americans for every available job, he said.
“The primary reason people are out of work so long is a lack of jobs,” Stettner said.
The 14.9 million jobless Americans have been out of work an average of 29.7 weeks, just below January’s 30.2-week average. Those levels are the highest since the government began keeping those records in the 1950s, according to Stettner.
The ranks of the unemployed include Jerome Boyd, 48, a father of four who lives in Arlington. He was laid off in August from his job as a sous chef at Gaylord National Hotel at National Harbor.
He receives $1,200 a month in unemployment benefits, less than half the $3,000 a month he brought home from his job. Now he is often behind paying about $1,500 in rent, a car payment and other expenses. “I’m stealing from Peter to pay Paul,” he said, adding: “There’s the cable, the phone bill. I owe the bank overdraft fees and the insurance is lapsing a little bit. I can’t take my kids shopping for school clothes because I don’t have enough to do that.”
The checks may be meager, but Boyd does not know what he would do without them. “I depend on this money,” he said. “I’m wondering every other week if it is going to keep coming in or not. It’s stressful, and especially when you’re trying to look for a job, too.”
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Sales Tax Rates Hit Record High
March 10, 2010
Forbes.com
By William P. Barrett
While President Obama’s push to raise federal income taxes for the wealthy gets lots of attention, the continuing upward creep in the sales tax rates imposed by state and local governments has gotten less notice.
But Vertex Inc., which calculates sales tax for Internet sellers, reports that the average general sales tax rate nationwide reached 8.629% at the end of 2009, the highest since the Berwyn, Pa., company started tracking data in 1982. That was up a nickel on a taxable $100 purchase from a year earlier and up nearly 40 cents for the decade. The highest sales tax rate in the country now stands at 12%.
During 2009 seven states and the District of Columbia raised sales tax rates, with one jurisdiction — North Carolina — actually doing it twice. Only four states hiked rates in 2008 and only one in 2007. Given state budget problems, the 2009 state sales tax increases aren’t surprising. States have also been raising income tax rates on the wealthy and on corporations and boosting excise taxes on alcohol and tobacco. With states now facing record budget shortfalls, more tax increases seem likely.
State level sales tax generally accounts for only about two-thirds of the total sales tax bill. The rest comes from levies assessed by counties, municipalities, Indian tribes and special-purpose taxing districts funding mass transit, urban renewal and even stadiums. Among lower level jurisdictions such as counties and towns, Vertex counted 649 new or increased sales tax rates during 2009 and just 192 reductions.
The result is a wide range of combined sales tax rates across the country. At the bottom: 0%, found in all of Delaware and New Hampshire, and most of Montana, Oregon and Alaska. The country’s highest rate now is 12%, in the tiny portion of tiny Arab, Ala., (population 7,500) sticking into Cullman County. The rest of the northern Alabama town, in no-sales-tax Marshall County, pays just 8%.
Right now Chicago has the highest big-city rate, 10.25%. But in a move forced by Cook County lawmakers, the rate is scheduled to drop on July 1 to 9.75%, matching that of Los Angeles. In New York City the total bite is 8.875%. Other high big-city rates include San Francisco and Seattle(9.5%), New Orleans (9%), Houston, Dallas and Charlotte (8.25%), Las Vegas (8.1%) and Philadelphia and Atlanta (8%).
In Arizona, voters will go to the polls May 18 to pass judgment on a 1% rise in the state’s 5.6% rate for three years. If approved, the rate in Phoenix would jump from 8.3% to 9.3%.
Some of the highest sales taxes in the nation are designed to grab dollars from tourists. The New Orleans International Airport has a special 10.75% rate, while Snowmass Village, the ski resort in Colorado, levies a 10.4% sales tax. (Many locales also impose special higher taxes on services purchased by tourists, such as rental cars and hotel rooms.)
Nationally, sales taxes in 2008 generated more revenue for state and local governments — about $450 billion, a recent Government Accountability Office report suggests — than did either property taxes ($411 billion) or personal income taxes ($310 billion).
At the federal level and in some states, the income tax is progressive, with higher rates imposed on upper-income taxpayers. But rich and poor pay the same sales tax rate. In many states, however, there’s no sales tax on food or medical prescriptions.
The combined local sales rate is what local merchants charge for in-person customers. Through a parallel system called the use tax, it’s also what residents in a given jurisdiction are supposed to pay on purchases over the Internet from out-of-state sellers, but such payments are widely flouted. Congress has declined to pass legislation that would require large Internet only sellers like Amazon.com and Overstock.com to collect sales taxes for all states. (Currently, they only have to do so for states in which they have some physical presence.)
Many big online merchants, including Wal-Mart, Dell, Office Depot Inc. and Staples Inc., collect sales taxes from Internet buyers. Some states, with New York in the lead, have adopted new “Amazon” laws designed to force the Web giant and others to collect their taxes. More such laws are likely this year.
West Virginia adopted the country’s first sales tax in 1921. Periodically, the federal government has considered a national sales tax, but such proposals have never gotten traction.
In Canada, which has a national 5% sales tax, all but two of the provinces (Alberta and Saskatchewan) have combined sales taxes of 12% or higher. The highest is the 15.5% hit on Prince Edward Island.
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36,000 Jobs Lost In February
March 8, 2010
Bureau of Labor Statistics
Nonfarm payroll employment was little changed (-36,000) in February, and the
unemployment rate held at 9.7 percent, the U.S. Bureau of Labor Statistics
reported today. Employment fell in construction and information, while tem-
porary help services added jobs. Severe winter weather in parts of the
country may have affected payroll employment and hours; however, it is not
possible to quantify precisely the net impact of the winter storms on these
measures. For more information on the effects of the severe weather on employ-
ment estimates, see the box note at the end of the release.
Household Survey Data
In February, the number of unemployed persons, at 14.9 million, was essen-
tially unchanged, and the unemployment rate remained at 9.7 percent. (See
table A-1.)
Among the major worker groups, the unemployment rates for adult men (10.0 per-
cent), adult women (8.0 percent), whites (8.8 percent), blacks (15.8 percent),
Hispanics (12.4 percent), and teenagers (25.0 percent) showed little to no
change in February. The jobless rate for Asians was 8.4 percent, not season-
ally adjusted. (See tables A-1, A-2, and A-3.)
The number of long-term unemployed (those jobless for 27 weeks and over) was
6.1 million in February and has been about that level since December. About 4
in 10 unemployed persons have been unemployed for 27 weeks or more. (See
table A-12.)
In February, the civilian labor force participation rate (64.8 percent) and
the employment-population ratio (58.5 percent) were little changed. (See
table A-1.)
The number of persons working part time for economic reasons (sometimes refer-
red to as involuntary part-time workers) increased from 8.3 to 8.8 million in
February, partially offsetting a large decrease in the prior month. These in-
dividuals were working part time because their hours had been cut back or be-
cause they were unable to find a full-time job. (See table A-8.)
About 2.5 million persons were marginally attached to the labor force in
February, an increase of 476,000 from a year earlier. (The data are not sea-
sonally adjusted.) These individuals were not in the labor force, wanted and
were available for work, and had looked for a job sometime in the prior 12
months. They were not counted as unemployed because they had not searched for
work in the 4 weeks preceding the survey. (See table A-16.)
Among the marginally attached, there were 1.2 million discouraged workers in
February, up by 473,000 from a year earlier. (The data are not seasonally ad-
justed.) Discouraged workers are persons not currently looking for work be-
cause they believe no jobs are available for them. The remaining 1.3 million
persons marginally attached to the labor force had not searched for work in
the 4 weeks preceding the survey for reasons such as school attendance or
family responsibilities.
Establishment Survey Data
Total nonfarm payroll employment was little changed in February (-36,000).
Job losses continued in construction and information, while employment con-
tinued to increase in temporary help services. Since the start of the reces-
sion in December 2007, payroll employment has fallen by 8.4 million. (See
table B-1.)
Construction employment fell by 64,000 in February, about in line with the
average monthly job loss over the prior 6 months. Job losses were concen-
trated in nonresidential building (-10,000) and among nonresidential specialty
trade contractors (-35,000). Since December 2007, employment in construction
has fallen by 1.9 million.
Employment in the information industry dropped by 18,000 in February. Since
December 2007, job losses in information have totaled 297,000. In February,
employment in transportation and warehousing continued to trend down.
Employment in manufacturing was essentially unchanged in February. Small job
gains in a number of component industries were offset by job losses in motor
vehicles and parts and in chemicals.
Retail trade employment was unchanged in February, after a sizeable increase
in January. Over the month, job gains in building material and garden supply
stores (7,000) and in department stores (6,000) were offset by declines in
food and beverage stores (-9,000).
In February, temporary help services added 48,000 jobs. Since reaching a low
point in September 2009, temporary help services employment has risen by
284,000. Health care employment continued to trend upward in February.
In February, employment in the federal government edged up. The hiring of
15,000 temporary workers for Census 2010 was partially offset by a decline
in U.S. Postal Service employment.
The average workweek for all employees on private nonfarm payrolls declined
by 0.1 hour to 33.8 hours in February. The manufacturing workweek for all
employees dropped by 0.4 hour to 39.5 hours, and factory overtime decreased
by 0.2 hour over the month. In February, the average workweek for production
or nonsupervisory employees on private nonfarm payrolls fell by 0.2 hour to
33.1 hours; the workweek fell by 1.0 hour in construction, likely reflecting
the unusually severe winter storms. (See tables B-2 and B-7.)
In February, average hourly earnings of all employees on private nonfarm
payrolls increased by 3 cents, or 0.1 percent, to $22.46. Over the past 12
months, average hourly earnings have risen by 1.9 percent. In February, aver-
age hourly earnings of private production and nonsupervisory employees rose
by 3 cents, or 0.2 percent, to $18.93. (See tables B-3 and B-8.)
The change in total nonfarm payroll employment for December was revised from
-150,000 to -109,000, and the change for January was revised from -20,000 to
-26,000.
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Economists Warn Another Financial Crisis On the Way
march 2, 2010
ABC News
By Matthew Jaffe
Even as many Americans still struggle to recover from the country’s worst economic downturn since the Great Depression, another crisis – one that will be even worse than the current one – is looming, according to a new report from a group of leading economists, financiers, and former federal regulators.
In the report, the panel, which includes Rob Johnson of the United Nations Commission of Experts on Finance and bailout watchdog Elizabeth Warren, warns that financial regulatory reform measures proposed by the Obama administration and Congress must be beefed up to prevent banks from continuing to engage in high-risk investing that precipitated the near-collapse of the U.S. economy in 2008.
The report warns that the country is now immersed in a “doomsday cycle” wherein banks use borrowed money to take massive risks in an attempt to pay big dividends to shareholders and big bonuses to management – and when the risks go wrong, the banks receive taxpayer bailouts from the government.
“Risk-taking at banks,” the report cautions, “will soon be larger than ever.”
Without more stringent reforms, “another crisis – a bigger crisis that weakens both our financial sector and our larger economy – is more than predictable, it is inevitable,” Johnson says in the report, commissioned by the nonpartisan Roosevelt Institute.
The institute’s chief economist, Nobel Prize-winner Joseph Stiglitz, calls the report “an important point of departure for a debate on where we are on the road to regulatory reform.”
The report blasts some of Washington’s key players. Johnson writes, “Our government leaders have shown little capacity to fix the flaws in our market system.” Two other panelists, Simon Johnson, a professor at MIT, and Peter Boone of the Centre for Economic Performance, voiced similar criticisms.
Federal Reserve Chairman Ben Bernanke and Treasury Secretary Tim Geithner “oversaw policy as the bubble was inflating,” write Johnson and Boone, and “these same men are now designing our ‘rescue.’”
The study says that “In 2008-09, we came remarkably close to another Great Depression. Next time we may not be so ‘lucky.’ The threat of the doomsday cycle remains strong and growing,” they say. “What will happen when the next shock hits? We may be nearing the stage where the answer will be – just as it was in the Great Depression – a calamitous global collapse.”
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JP Morgan Chief Warns California Greater Risk Than Greece
March 1, 2010
Telegraph.co.uk
By James Quinn
Mr Dimon told investors at the Wall Street bank’s annual meeting that “there could be contagion” if a state the size of California, the biggest of the United States, had problems making debt repayments. “Greece itself would not be an issue for this company, nor would any other country,” said Mr Dimon. “We don’t really foresee the European Union coming apart.” The senior banker said that JP Morgan Chase and other US rivals are largely immune from the European debt crisis, as the risks have largely been hedged.
California however poses more of a risk, given the state’s $20bn (£13.1bn) budget deficit, which Governor Arnold Schwarzenegger is desperately trying to reduce.
Earlier this week, the state’s legislature passed bills that will cut the deficit by $2.8bn through budget cuts and other measures. However the former Hollywood film star turned politician is looking for $8.9bn of cuts over the next 16 months, and is also hoping for as much as $7bn of handouts from the federal government.
Earlier this week, John Chiang, the state’s controller, said that if a workable plan to reduce the deficit and increase cash levels is not reached soon, he will have to return to issuing IOU’s, forcing state workers to take additional unpaid leave and potentially freezing spending.
Last summer, California issued $3bn of IOU’s to creditors including residents owed tax refunds as a way of staving off a cash crisis.
“I can’t write checks without money; that’s against the law. My main goal is to keep the state afloat, but I won’t be able to do it without the help of new legislation,” said Mr Chiang.
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Obama May Ban All Foreclosures Without HAMP Review
February 26, 2010
Bloomberg
By Dawn Kopecki
The Obama administration may expand efforts to ease the housing crisis by banning all foreclosures on home loans unless they have been screened and rejected by the government’s Home Affordable Modification Program.
The proposal, reviewed by lenders last week on a White House conference call, “prohibits referral to foreclosure until borrower is evaluated and found ineligible for HAMP or reasonable contact efforts have failed,” according to a Treasury Department document outlining the plan.
“It is one of the many ideas under consideration in the administration’s ongoing housing stabilization efforts,” Treasury spokeswoman Meg Reilly said in an e-mail. “This proposal has not been approved and there are no immediate planned announcements on the issue.”
She confirmed the authenticity of the document, which hasn’t been made public.
At present, lenders can initiate foreclosure proceedings on any loan that hasn’t been submitted for HAMP eligibility. Under current HAMP rules, foreclosure litigation can proceed while borrowers are under review for the program or even in a trial modification.
The proposed changes would prohibit lenders from initiating new foreclosure actions before loan screening by HAMP and would require lenders to halt existing proceedings for borrowers once they are in a trial repayment plan.
‘Improved Protections’
The Treasury Department will soon release guidance “which will include a set of improved protections for borrowers” in HAMP, Phyllis Caldwell, chief of Treasury’s Homeownership Preservation Office, said today in testimony prepared for a House Oversight and Government Reform subcommittee. She didn’t provide details.
The proposal goes further than rules adopted amid the crisis by federally controlled mortgage-finance companies Freddie Mac and Fannie Mae, which require lenders to review borrowers for a federal loan modification before a foreclosed property can be sold.
Foreclosure proceedings can still be initiated without a review, said Freddie Mac spokesman Doug Duvall. Fannie Mae spokeswoman Amy Bonitatibus said it adopted the same policy last March.
About 89 percent of outstanding residential mortgage loans are covered by the voluntary HAMP program.
About 2.82 million U.S. homeowners lost properties to foreclosure last year and 4.5 million filings are expected in 2010, RealtyTrac Inc., an Irvine, California data company, said last month.
Seven Million
Obama’s foreclosure prevention initiative, announced in February 2009 to help as many as 4 million Americans avert foreclosure, has modified 116,297 loans through steps such as lowering interest rates or lengthening repayment terms. More than 830,000 borrowers received trial repayment plans through January, according to Treasury data.
“Foreclosure processes differ among states, and the process is often confusing to homeowners already facing distress,” Caldwell said in her prepared testimony. “Treasury has been reviewing guidelines around outreach and the foreclosure process as part of its continual assessment of program effectiveness and transparency.”
Foreclosures may reach as many as 7 million mortgages, and an additional 5 million are at risk of default because borrowers owe more than the property is worth, Laurie Goodman, senior managing director at Amherst Securities Group LP in New York, said in a Feb. 17 interview.
Republican Criticism
“This is a problem of mammoth proportions,” Goodman said. “You can’t throw 12 million people out of their homes, so you need a successful modification program. My fear is that this isn’t it, but I’m highly confident that the administration will continue to iterate until they succeed.”
The Treasury proposal would require all borrowers who are 60 or more days delinquent on their mortgage to be sought out for participation in HAMP. Mortgage companies would need to try to contact the borrower at least four times by phone and twice by certified mail over 30 or more days before going to foreclosure.
Under current Treasury policy, foreclosure proceedings are only halted when a borrower receives a permanent modification plan.
House Republicans criticized HAMP as a failure today, saying in a report that it is prolonging the economic crisis and harming homeowners.
“By every empirical measure, HAMP has failed,” according to the 18-page report released by Republicans on the House Oversight and Government Reform Committee. “In its current form, HAMP both hurts homeowners who might otherwise spend their trial-period mortgage payments on rent and also distorts the housing market, delaying any recovery.”
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