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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Four Ohio pension funds have joined the New York state retirement fund in filing a class-action suit against BP for allowing its stock to plunge in value, New York State Comptroller Thomas DiNapoli said on Wednesday.

The four Ohio funds — the Ohio Public Employees Retirement System, the State Teachers Retirement system of Ohio, the School Employees Retirement System of Ohio and the Ohio Police & Fire Pension Fund — have a combined value of $150 billion.

These funds joined the New York State Common Retirement Fund, worth $132 billion, in filing suit against BP (BP), which has lost about 45% of its market value since the company’s oil well blew up an offshore rig in the Gulf of Mexico in April, killing 11 workers and unleashing a massive spill.

"BP misled investors with false and misleading statements about the safety of its drilling operations and its ability to fix events like the oil spill," DiNapoli said in an announcement that he released with Ohio Attorney General Richard Cordray, who represents the legal interests of the Ohio funds.

"By forming a partnership between New York and Ohio, we aim to compensate investors for what we believe was securities fraud and effect real change in the way BP and other companies do business," DiNapoli added payday loans.

BP did not immediately respond to calls seeking comment.

The New York fund, the country’s third-largest, originally filed suit against BP in June. The fund held 19 million BP shares at the time of the explosion.

Robert Whalen, spokesman for the New York comptrollers, said the New York fund is filing as a co-lead plaintiff with the Ohio funds. He said there are also four pending actions filed through U.S. district courts in Louisiana and California, but they will eventually be consolidated into one.

BP has agreed to set aside $20 billion in an escrow account for spill-related costs. The company also decided to suspend its dividend for the rest of the year.

On Wednesday, the Times of London reported that Tony Hayward is getting ready to step down from his job as chief executive officer, but BP denied the report.  

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Group buying website Living Social is coming to Sacramento.

Living Social will launch in Sacramento on Tuesday, the company announced.

Living Social is adding Sacramento and 24 other cities, which will bring the daily deal company up to 52 markets, a news release said.

Users can save up to 90 percent on local restaurants, spas, pole dancing lessons, horseback riding and other attractions, the company said cash advance loan no fax.

Membership to Living Social is free.

Groupon, another group buying website, launched in Sacramento, its 53rd city, in May.

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Riverview Bancorp Inc. wants to raise as much as $23 million in a stock offering, according to a new filing with the U.S. Securities and Exchanged Commission.

The Vancouver-based bank (NASDAQ: RVSB) will issue 6,896,552 shares, bringing its outstanding number of shares to 17,820,325.

The money will be used to support growth and meet the bank’s capital needs. The bank is under an order from the federal O

The bank’s shares fell 4 percent Friday to $2 .39. They had a 52-week range between $2.13 and $4.39.

Riverview Bancorp Inc. is the savings and loan holding company of Riverview Community Bank.

The bank had $838 million in assets as of March 31. It lost $5.4 million in fiscal 2010.

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Shares of rig operator Transocean Ltd. rose more than 10 percent Friday after analysts downplayed the company’s liability in the Gulf oil spill.

As Congress continues its investigation of the disaster, analysts say that Transocean’s potential liability appears to be declining. The rise in shares helps recover at least some losses after Transocean’s stock began its slide from about $90 per share just before the explosion of the April 20 Deepwater Horizon rig, which Transocean operated for BP.

Shares of Transocean (NYSE: RIG) closed Friday at $54.61, up $5.18 from its previous close.

The company, which has its corporate headquarters in Switzerland but maintains a significant presence in Houston, is faring better than other firms involved in the Gulf oil spill.

Both BP and Anadarko Petroleum Corp. suffered downgrades from rating agencies this week.

BP (NYSE: BP) took a downgrade by Moody’s Friday when the agency lowered the company’s rating from A2 to Aa2 on fears of the escalating cleanup and liability costs. That’s the third downgrade by a rating agency this week for BP.

Anadarko (NYSE: APC), which holds a 25 percent stake in the Macondo well where the Deepwater Horizon exploded, was downgraded by Fitch to “negative” from “stable” earlier this week after the agency estimated the spill could cost Anadarko up to $6 billion.

The Houston Business Journal is providing continuous coverage of the Gulf oil spill.

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A split-session job fair is being held Tuesday, June at Fairgrounds Gaming & Raceway in Hamburg.

The first session runs from 10 a.m. to 2 p.m. and then from 4 p.m. to 7 p.m. Available positions will be filled between July and August.

The facility, located on the fairgrounds in Hamburg, is operated by Delaware North Companies Inc faxless payday advance.

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Sonnenschein Nath & Rosenthal LLP, a law firm based in Chicago, will combine with London-based Denton Wilde Sapte LLP if partners vote to approve.

The combined firm will be known as SNR Denton and will have more than 1,400 lawyers in 18 countries. The heads of each firm will serve as co-chief executive officers, according to the joint statement.

If approved, it will be the second major combination of a U.S. and U.K. firm in the past year. On May 1, Washington-based Hogan & Hartson and London-based Lovells LLP joined to create Hogan Lovells, a 2,500-lawyer firm with about 40 offices, according to its website.

"Looking back in history, it is relatively rare to see transcontinental mergers," said Kent Zimmermann, a consultant with Zeughauser Group. "It’s been telling that there have been two recently. Globalization is the number one thing affecting the economy, and the number one thing affecting law firms."

Sonnenschein Nath & Rosenthal has had a St. Louis area office since 1990. It opened with one lawyer but now has nearly 50 lawyers on staff, said Jennifer A. Marler, the local office’s managing partner.

The firm’s partnership with Denton would have no immediate effect on the St. Louis office, she said.

Marler said she was pleased that the agreement would give the firm an international base of lawyers from whom to seek advice and counsel, and could help create future growth options for the firm as a whole.

Denton handles work for clients in energy, transport and infrastructure, financial institutions, real estate and retail and technology, media and telecommunications sectors, according to the firm’s website. It has offices in the Middle East, Europe and southeast Asia.

Robert Kelly of the Post-Dispatch contributed to this report.

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Running with the herd is the most popular way to invest, because everyone will commend you for heading in the right direction.

Taking a contrarian view, on the other hand, opens you to ridicule from your peers. You may seem out of step, as if you missed getting the proper message or aren’t smart enough to grasp the obvious.

"Contrarian investing is basically going against the grain and doing the opposite of what the majority is doing," explained Paul Merriman, editor of www.fundadvice.com in Seattle. "Most people are emotional market timers, and this is indicated by their huge commitment right now to bonds."

Stock investing in general has probably been the most significant contrarian investment of the past year because investors have been so wary, Merriman believes. Many stock gains were missed as a result.

"The approach to contrarian investing is to look for companies in situations that are misunderstood and out of favor," said David Decker, manager of Janus Contrarian Fund, which used the market downturn of 2008 and early 2009 to snap up stocks such as Apple Inc.

"Just keep in mind that the market is right quite often, so being a ‘knee-jerk’ contrarian is dangerous because a good return shouldn’t be dependent on the future unfolding in the perfect fashion you envision."

Decker’s Janus Contrarian Fund is up 64 percent over the past 12 months with a three-year annualized decline of 4 percent. This "no-load" (no sales charge) fund requires a $2,500 initial investment and has an annual expense ratio of 1 percent.

His largest stock holding, the Florida-based St. Joe Corp. real estate development firm, is an out-of-favor investment he researched well. The stock had fallen 33 percent in 2007 and 32 percent in 2008, but gained 19 percent last year and is up 15 percent in 2010.

Although the company still isn’t making money, usually a bad sign, it owns land worth considerably more than its current stock price, he believes. With the Northwest Florida Beaches International Airport opening near Panama City, the economic development in the region is going to expand. The fact that St. Joe owns the land around the airport has yet to be reflected in its stock price, he noted.

Investors interested in a contrarian approach either invest in a fund that is truly contrarian; find an advisor with that mindset; or research, on their own, good companies with temporary woes.

"A lot of statistical work has shown that if you bought out-of-favor stocks you would have done significantly better than the market in almost every decade since they started measuring it," said David Dreman, chairman and chief investment officer for Dreman Value Management LLC in Jersey City, N.J. "Contrarian investing is a form of value investing with a powerful research background that has worked well for 40 years."

His Dreman Contrarian Small Cap Value Fund "R" is up 65 percent over the past 12 months and has a five-year annualized return of 5 percent. This no-load fund requires a $2,500 initial investment and annual expense ratio of 1.38 percent.

An indication that Dreman is a true believer in contrarian philosophy: He invests a considerable portion of his own net worth in the fund.

He prefers companies with strong cash flow, accelerating returns on invested capital and smart management — putting money in them when their stock price is temporarily cheap. He invests across all types of industries as well as overseas markets.

"There are two possible problems with contrarian investing," cautioned Merriman. "First, value can underperform growth for a decade and you give up on it; or, second, in a depression the contrarian choices are likely the first ones to go under because they already have their own problems."

Contrarian is nonetheless a philosophy espoused by some of the best investors.

Bill Gates and Warren Buffett bought into Republic Services Inc., the second-largest waste collection firm, last November. They didn’t expect high growth, but rather consistent growth and an eventual return to favor, Merriman said. The firm’s ownership of landfills is impressive, and new competitors in the field are limited.

"If the fundamentals of a company are pretty good but for some reason or another it is out of favor, it should do well over the long run," said Dreman.

At the beginning of 2009 Dreman was buying unwanted financial stocks such as JPMorgan Chase & Co., PNC Financial Services and Wells Fargo, as well as out-of-favor oil service companies such as Devon Energy Corp., Apache Corp. and Chesapeake Energy Corp. The future of both groups was too bright to overlook, he believed.

"We look for an asymmetrically positive risk/reward in which the downside is relatively limited and the upside disproportionately large, then build a portfolio around those companies," said Decker. "As long as the company isn’t about to go bankrupt, the question is how much the market has priced in bad news and whether the price is attractive enough."

Major holdings in Janus Contrarian besides St. Joe include Kinder Morgan Management LLC, British American Tobacco Plc., DIRECTV Group Inc., CB Richard Ellis Group Inc. and Japan Tobacco Inc.

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TotalBank wants to seize a Hialeah Gardens service station and restaurant.

The Miami-based bank filed a foreclosure action on Monday against Nu Nez Realty Co. and managing members Enrique Nunez, Carmen Nunez, Armando Abreu and Lourdes Abreu, according to Miami-Dade County Circuit Court records. It’s over a mortgage last modified at $3.2 million in March 2009.

Nu Nez Realty bought the 10,257-square-foot center for $4.8 million in 2005 with help from a TotalBank loan. The tenants include a Shell service station and Mima’s Cocina Restaurant, which is registered to Armando Abreu and Lourdes Abreu guaranteed fast personal loans. The restaurant was named in the foreclosure action, but the gas station was not.

Miami attorney Manuel Garcia-Linares, who represents TotalBank in the lawsuit, did not immediately return a call seeking comment.

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The net worth of American households increased slightly during the final three months of 2009, the Federal Reserve said Thursday.

Household net worth, the difference between assets and liabilities, rose to $54.2 trillion in the fourth quarter of 2009, up from $53.5 trillion in the third quarter.

It was the third consecutive quarterly increase, but the figure remains well below the highs of just two years ago. In the second quarter of 2007, net worth peaked at $65.3 trillion.

For 2009 as a whole, household net rose $2.8 trillion, compared with a decline of $11.2 trillion in all of 2008, according to the Federal Reserve’s flow of funds report.

The report showed that household debt fell at an annual rate of 1.2%, marking the nearly two years of declines. But the drop came after Americans pared debt at a more aggressive 2.6% rate in the third quarter.

The rebound in household net worth came as the value of Americans’ investment portfolios continued to increase. Stock holdings jumped nearly 4% to $7.7 trillion.

However, real estate values rose less than 1% in the fourth quarter to roughly $1.6 trillion. That comes after an increase of more than 2% in the third quarter.

Meanwhile, the report showed that the federal government’s debt load increased by 12.6%, after an increase of 20.6% in the prior quarter. Debt levels for state and local governments increased 4.7%. 

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