Finance and Economic

The president’s signature foreclosure rescue plan is losing its punch, according to a federal report released Friday.

Only 36,695 troubled homeowners received long-term mortgage modifications in July under the Obama administration’s Home Affordable Modification Program, known as HAMP. This brings the total to 434,717 borrowers who have successfully made it out of the trial phase.

A month ago, 51,205 delinquent borrowers were given long-term assistance.

The number of people falling out of the program, however, is on the rise. Some 12,912 homeowners had their permanent modifications canceled in July, 272 of whom paid off their loans.

Obama officials acknowledge that the foreclosure rescue program will not help every troubled homeowner and that it may be a while before the housing market stabilizes. They are shifting their focus to initiatives that are targeted to those who have been hit by the recession and declining home prices.

"While there has been some stabilization in the housing market, it remains clear that we have more work ahead," said Raphael Bostic, assistant housing secretary. "We know that we must continue to provide support to underwater borrowers, unemployed homeowners, and to the nation’s hardest hit neighborhoods."

Foreclosure prevention programs have taken on renewed importance with the housing market on shaky ground again. A spike in foreclosures, combined with weak housing sales, could send home prices plummeting again.

In July, foreclosures were up 3.6% from the month before but down 9.7% from the year earlier period, according to RealtyTrac.

Defaults on the rise

The latest report comes two weeks after the government had to revise its June redefault figures sharply higher, after analysts called the initial numbers misleading.

The revision showed that nearly 20% of homeowners were at least two months delinquent nine months after receiving a permanent modification. The initial figure showed that 7.7% had fallen behind.

The government did not provide redefault statistics for July in the current report. Officials said the data would be released quarterly.

Analysts at Barclay’s Capital said last month said 60% of homeowners may ultimately redefault instant personal loans guaranteed.

Status of trial mods

Some 96,025 people in trial modifications were canceled in July, bringing the total to 616,839 since the program began in the spring of 2009.

Homeowners usually are kicked out of the trial program because they do not make the required payments, meet the qualifications or submit the needed paperwork. Going forward, loan servicers will gather the necessary documents and review homeowners’ eligibility before entering them in trial modifications.

Once their trials are canceled, about 45.4% of homeowners receive alternate modifications, often one from their loan servicer. Some 9.8% had foreclosure proceedings started against them and 1.8% lost their home in foreclosure.

Only 255,934 troubled borrowers remain in the trial phase, some 24,577 of whom entered the program in July. Nearly 118,000 have been in trials for at least six months, though loan servicers should address these homeowners in the next month, administration officials said.

Another new program

Launched with great fanfare, the president’s foreclosure prevention plan calls for servicers to reduce eligible troubled homeowners’ monthly payments to no more than 31% of their pre-tax income. However, it has come under persistent fire for being slow to launch and for not helping enough people.

Meanwhile, the government is set to roll out yet another fix for the housing market. Borrowers can start applying for the FHA Short Refinance option starting Sept. 7.

The program allows those who owe more than their homes are worth to refinance into a Federal Housing Administration-backed loan provided they are current on their mortgages and their lender agrees to write off at least 10% of their principal balance. The initiative is open to those who do not currently have an FHA loan and who have a credit score of 500 or more.

In recent months, the administration has stressed the wide range of housing programs it has underway, including initiatives to keep interest rates low and to provide tax credits to first-time homebuyers.  

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Ann Moore, the chief executive of Time Inc. — the world’s largest magazine publisher — is stepping down from the company to be replaced by Jack Griffin, a group president of Meredith Corp., according to published reports.

The New York Times, Wall Street Journal and New York Post all reported the CEO shakeup Wednesday evening, citing unnamed executives at the companies.

A Time Warner (TWX, Fortune 500) subsidiary, Time Inc. publishes about 115 magazines worldwide including Time and Sports Illustrated and accounts for almost a quarter of total advertising revenues of U.S. consumer magazines. Measured by circulation, it’s the world’s largest magazine company, followed by Meredith, which is based in Des Moines, Iowa.

A Time Warner spokesman could not be immediately reached for comment. CNNMoney is a joint venture of CNN and Time Inc.

A 32-year veteran of Time Inc., Moore was appointed CEO in 2002. She has presided during a time when magazines suffered an unprecedented decline in advertising revenue due to competition from online media and the recession.

In recent years, Time Inc. has made major staff cuts and shed some of its magazine titles.

Griffin ran Meredith’s magazine brands — including Better Homes and Gardens, Parents and Family Circle — as well as its Internet and digital properties.

Meredith announced his departure from the company on Monday, saying he had left "to pursue another opportunity."

Griffin would inherit Moore’s role just as Time Inc. reported a 50% surge in its quarterly operating profit Wednesday.

That surge was primarily due to substantial cost-cutting measures, including a restructuring of the company’s pension expenses.

Time Inc.’s quarterly revenue remained virtually unchanged. Advertising sales were up 4%, but other revenue failed to grow primarily due to flat subscription growth and an ongoing impact from the sale of Southern Living at Home last fall, the company said.

Nearly all of Moore’s career has played out at Time Inc., where she worked her way up the corporate ladder. She started as an analyst shortly after earning her Harvard M.B.A. in 1978 and later became publisher and then president of People. 

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Servigistics bought Conduit Internet Technologies Inc. for an undisclosed sum.

Atlanta-based Servigistics provides software to help companies manage their parts inventory.

Conduit, headquartered in State College, Pa., provides product content management technology for OEM and dealer-based service organizations.

"Conduit's content management solutions will give potential and existing Servigistics clients extended capabilities to drive revenue through the service chain by granting more visibility and access to critical content necessary to support their distribution channels," said Eric Hinkle, CEO of Servigistics, in a statement paydayloans.

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Bruton Smith, chief executive of Speedway Motorsports Inc., saw a drop in his compensation last year to $1.7 million.

Smith received $1.9 million in 2008.

According to a company filing with the Securities and Exchange Commission, Smith was paid a salary of $600,000 and received nonequity incentives of $1.1 million last year.

He received a salary of $600,000 and nonequity incentives of $1.3 million in 2008.

Speedway Motorsports (NYSE:TRK) is a Concord-based promoter of motorsports entertainment. The company owns and operates Charlotte Motor Speedway, Atlanta Motor Speedway, Bristol Motor Speedway in Tennessee, Infineon Raceway in California, Kentucky Speedway, Las Vegas Motor Speedway, New Hampshire Motor Speedway and Texas Motor Speedway near Fort Worth.

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Colleges are bracing for another year of high demand for financial aid — and that means students need to get their applications in as quickly as possible.

Federal student loans remain plentiful, but other types of aid from states and colleges are more limited. By missing one of the many deadlines, students could receive fewer sought-after grants and scholarships that don’t have to be repaid, and end up having to apply for loans that do.

Blame the continued weak economy for the stiff competition for aid. Unemployment remains high. Families that have burned through cash reserves now are applying for aid for the first time, aid officials say.

In addition, a bumper crop of high school seniors and more people returning to school for advanced degrees will add to the aid demand, says Patricia Nash Christel, a spokeswoman for student loan giant Sallie Mae.

The first step to getting aid is filling out the Free Application for Federal Student Aid at fafsa.ed.gov. It not only will determine your federal aid, but states and colleges also use the FAFSA to award their money.

The earliest you can submit a FAFSA is Jan. 1. States and schools set their own deadlines for when the FAFSA must be submitted.

Schools often set priority deadlines so applications submitted by that date will be the first batch looked at. Deadlines can differ widely, so check your school’s website.

Parents often want to file their tax returns before filling out the FAFSA. Although having an up-to-date tax return makes filling out the application easier, it’s better to get the application in by the deadline using last year’s tax return and then correcting the information later.

Besides the FAFSA, many schools are creating their own aid forms or requiring families to submit additional documents to make sure the aid is going to students in need.

What if you blow all the deadlines? You can still qualify for federal Stafford student loans by submitting the FAFSA any time during the academic year.

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In an aggressive effort to highlight their growth and health at a time of challenge for all publishers, The Business Journal Serving Greater Milwaukee and the 39 other papers in the American City Business Journals group this week took a novel approach to tell their story: All 40 business journals printed a four-page “wrap” around their papers filled with statistics and testimonials from readers in their local markets, detailing the niche their papers fill in each of their communities.

To see the wrapper, click here.

The testimonials highlighted ways that their papers have connected them to new sales, new jobs, and new ways to grow their businesses, and most recently, ways to tap government stimulus dollars. The national campaign cites statistics that include recent numbers for paid circulation, time spent reading business journals, and event attendance.

Collectively, the papers gained in paid circulation by 3.85 percent between 2005 and 2009, while daily newspapers in those same markets lost 18.81 percent in the same years, according to Audit Bureau of Circulations publisher statements. From 2007 to 2009 alone, the ACBJ circulation growth totaled 2.7 percent, according to ABC figures.

Nationally, ACBJ readers spend an average of 50 minutes reading their local business journal each week, according to media audits.

And through 2009, about 175,000 business leaders have attended business journal events across the country.

The campaign has linked the papers together under a single message that asks, “Who Do You Want To Meet Today?” That message centers on the way each paper connects business leaders with each other, via print, in person, at events, or online through the bizjournals pay day loans.com network of local business journal sites.

ACBJ newspapers reach 4 million readers each week with in-depth coverage of their business communities. ACBJ cites recent research as evidence of the sweet spot it occupies in the media: 83% of all business news is local. Further, the company attributes it commitment to exclusive, top-quality journalism as vital to its success.

“No one in the local business community is more connected, more aware, more in touch than business journals are,” says ACBJ CEO Whitney Shaw, in a Q&A offered in each paper’s four-page wrap. “We're giving vital, up to the minute information to corporate executives, small business owners, community leaders, to virtually anybody who has a stake in the economy. And we're giving that information with a depth they can't get anywhere else.”

ACBJ is a unit of Advance Publications Inc., which also operates Conde Nast Magazines, Parade magazine, Fairchild Publications, the Golf Digest companies, Newhouse Newspapers and cable television interests.

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BP Plc beat third-quarter earnings forecasts by a big margin as its cost-cutting program proved more successful than expected, prompting the British oil major to increase its target for savings for the year.

Dealers said they expected the London-based company’s shares to open 3 percent higher on the earnings.

BP said third-quarter replacement cost net profit, which strips out unrealized gains or losses related to changes in the value of fuel inventories, fell 50 percent to $4.98 billion, due to lower oil and gas prices.

Excluding one-offs, the result was $4.67 billion, compared to an average forecast of $3.16 billion from a Reuters poll of 11 analysts.

A lower-than-expected tax rate flattered the result but reductions of over 15 percent in costs in the oil and gas production and refining units was the key driver of the better-than-expected earnings, a spokesman said.

“These results demonstrate real operational momentum across the company. We continue to transform our cost base,” Chief Executive Tony Hayward said in a statement.

The strong progress on squeezing out costs could boost investor optimism about cost-cutting programs at rivals such as Royal Dutch Shell, which reports on Thursday.

The company said oil and gas production averaged 3.917 million barrels of oil equivalent per day, up 7 percent compared to the same period in 2008.

BP said its debt-to-equity or gearing ratio fell in the quarter, against expectations that it would rise.

BP and its rivals had been borrowing this year to meet high dividend payments, or in some cases, cutting their dividends.

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Missouri’s struggling dairy farmers are asking Gov. Jay Nixon to call a special session of the state Legislature so lawmakers can approve emergency funding to help keep them in business.

The farmers asked in August for a nearly $16.5 million emergency payment from federal stimulus funds but were told that only the Legislature could approve distribution of the funds, not the governor, according to the Missouri Dairy Association.

The association is pointing to lawmakers in other states who are trying to secure funds from the $787 billion stimulus package for dairy farmers in their states. About $1 billion of that package is eligible for states, according to association leaders.

Dairy farmers are facing their worst economic crisis in decades, with prices $5 below the cost of production, per hundred pounds of milk. The state has about 2,000 dairy farmers with an economic impact of roughly $1.5 billion, the association said.

Jon Hagler, head of the state’s Department of Agriculture, said in a statement Friday: "Producers in Missouri have been faced with challenges and continue to struggle during these hard economic times.

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The G20 will promise this weekend to keep economic support packages in place until recovery is certain and seek to reassure financial markets they have credible plans to withdraw the stimulus when appropriate.

With finance ministers and central bankers from the Group of 20 developed and emerging nations meeting in London, a document obtained by Reuters on Friday showed the International Monetary Fund has revised up its forecast for the world economy this year and next.

The IMF now forecasts global shrinkage of 1.3 percent in 2009, a shade less than its April forecast of a 1.4 percent contraction, and growth of 2.9 percent in 2010, revised up from 2.5 percent previously.

Policymakers are cautious about declaring victory yet, especially given most major economies are still shrinking this year and only expected to post sluggish growth next year.

“Unwinding the stimulus too soon runs a real risk of derailing the recovery, with potentially significant implications for growth and unemployment,” said IMF chief Dominique Strauss-Kahn at a conference in Berlin on Friday.

Ministers laying the groundwork for a G20 leaders’ summit in Pittsburgh are also expected to discuss putting curbs on bank bonuses, tighter financial regulation and reform of international institutions.

G7 sources have told Reuters that the G20’s communique, due on Saturday, will likely maintain the pledge to keep policy accommodative for as long as was needed.

“The biggest risk is to think that the job’s done — that recovery is guaranteed. No country can be complacent — we’ve got to see this through,” British finance minister and meeting host Alistair Darling said late on Thursday Business Card Holders.

Still, with interest rates at record lows and trillions of dollars thrown into their economies to fight the crisis, policymakers are keen to show they have exit strategies in place lest financial markets take fright that inflation will rocket and public finances fall apart.

“Now is not the time to exit. But I would like to make it clear that the ECB has a strategy, and we stand ready to put it into action when the appropriate time comes,” said European Central Bank President Jean-Claude Trichet said in Frankfurt.

BONUS CURBS

With unemployment likely to rise for some while and eat into government poll ratings, the politicians are also looking for someone to blame and will stress that banks cannot return to business as normal.

France, Germany and Britain on Thursday put forward joint proposals to change the bonus culture at banks that many say was the root of the current crisis. These include deferrals and subjecting payments to clawback but fall short of the tax being advocated by some charities and initially the French.

Ministers will look at enhanced regulation of systemically important banks and ways in which these institutions can be wound up if needed without shaking the financial system.

U.S. Treasury Secretary Timothy Geithner is pressing the G20 to back tough new international standards for bank capital and liquidity. The U.S. Treasury said on Thursday a comprehensive agreement should be reached by the end of 2010, with countries implementing the standards by the end of 2012. 

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Andre Campbell isn’t short on job experience. At age 27, he has poured coffee for Tim Hortons, mowed lawns, sorted recycling and cooked fast food, among numerous other jobs.

"I’ve learned a lot of random, general labour things – anything I could do with my hands," he said.

But even with experience, Campbell is struggling to find work. In seven months of looking, he’s had just two interviews.

For young job seekers, this summer has been a cruel one. For students, it’s been bad enough to break records. The unemployment rate for students rose sharply to 20.9 per cent in July, Statistics Canada said yesterday in its latest report. That’s up from 13.8 per cent from July 2008 – and the highest level since the government started tracking it in 1977.

"The stars were aligned about as badly as they could have been for the summer market this year, whether it was the currency, the weather, or the underlying economy," said Doug Porter, deputy chief economist for BMO Capital Markets. "It’s tough to imagine a worse set of circumstances for student employment."

Overall, the jobless rate held steady at 8.6 per cent for July. That may sound positive, but details in the report are discouraging:

Toronto’s unemployment rate roared into double-digit territory, hitting 10 per cent for the first time since 1994. The GTA now has the fourth-highest unemployment rate in the province – and the country.

The economy lost 44,500 jobs – a lot more than expected. That casts doubt on the Bank of Canada’s hope that economic recovery will take hold in the second half of this year.

Some 54,000 Canadians dropped out of the workforce entirely. They were so discouraged that they just gave up looking for a job.

Speaking to reporters in Regina, where he is attending the Council of the Federation meeting, Premier Dalton McGuinty said Canada’s national unemployment statistics were "a hopeful sign" for Ontario.

Peter Walker, 22, an aerospace engineering student, started the summer hoping for work in his field, but then broadened his search to "anything," he said.

With just a few weeks to go until classes resume, he’s still looking, "but after three months of not finding anything, it’s more of going through the motions. I really don’t believe anything is going to come up."

Nisha Mahadjeri, 17, hasn’t had any luck finding summer work. The high-school student left a job selling shoes three months ago to look for something better. Since then, she’s taken short stints at McDonald’s but hasn’t found what she wants.

Young workers are at a disadvantage compared to their older counterparts, and a recession only makes it worse, as more experienced workers start competing for the same jobs, said John-Frederick Cameron, a vice-president at Youth Employment Services.

"For the same amount of money, employers can get the 35-year-old who’s got the experience, who’s got the degree," Cameron said.

"It’s just a recipe for disaster online payday loans."

He said the agency has seen nearly double the number of youths looking for work in the last year.

StatsCan defines students as those between the ages of 15 and 24 "who attended school full-time in March and who are planning to return to school in the fall."

For other youth in the same age bracket, the jobless rate is much lower, 13.4 per cent, but still much higher than the national average.

This summer, the industries that typically employ students, restaurants, catering, hospitality, tourism and construction, cut back on hiring because of the recession.

In Toronto, the sharp climb in the jobless rate, to 10 per cent in July from 9.6 per cent in June, came as the tourism sector struggles with a strong Canadian dollar and new passport requirements that may be keeping visitors away, as well cool, wet weather that tends puts a damper on summer spending.

"Toronto is important for the tourism sector, and tourism has been hammered by this downturn. We rely on visitors from abroad and the strong currency isn’t helping," economist Porter said.

The weakness in construction also weighed heavily on the city.

Windsor has the highest unemployment in the country, 15.2 per cent, followed by London at 10.9 per cent and 10.5 per cent in St. Catharines-Niagara. These communities that have seen steep job losses as automotive and manufacturing plants cut production and, in some cases, shut their doors.

StatsCan measures unemployment for what it calls the Toronto CMA, or census metropolitan area, which extends from Milton in the west to Ajax on the east side, and north to Georgina.

The StatsCan report found that the private sector shed 74,900 jobs in July, and the public sector lost another 4,400. Those losses were offset as 34,800 people joined the ranks of the self-employed.

That gives a net loss of 44,500 jobs for the month – far more than the 7,400 the economy lost in June.

"The Bank of Canada is talking about the recession ending in the third quarter, but (this) certainly suggests there is still quite a bit of weakness embedded in the economy," said Beata Caranci, director of economic forecasting for TD Economics.

Economists expect unemployment to go up, even as the economy starts to recover, "but the magnitude of the job losses at least should be tapering, and that didn’t happen in this report," she added.

But the overall unemployment rate didn’t budge because of the number of people who dropped out of the workforce. That lead to a decline in what’s known as the participation rate, which was holding at just below 68 per cent. It dropped another 0.3 per cent in July, to 67.2 per cent.

Meanwhile, in the U.S., the pace of job losses slowed more than forecast in July and the unemployment rate dropped for the first time since April 2008, the clearest signs yet that the worst recession since the Great Depression is easing.

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