Feb. 1 (Bloomberg) -- U.S. stocks rose, Treasuries fell and the euro snapped a four-day decline versus the dollar on speculation manufacturing is recovering around the world.
The Standard & Poor’s 500 Index added 0.7 percent at 9:33 a.m. in New York as Exxon Mobil Corp. advanced. The euro strengthened 0.5 percent against the dollar and the yen. The zloty climbed as much as 1.5 percent to its highest in a year against the euro and the rand gained 0.7 percent against the dollar as factory production rose in Poland and South Africa.
U.S. manufacturing probably expanded in January for a sixth month, the Institute for Supply Management may say today, adding to evidence the recovery in the world’s biggest economy is gaining momentum. Indexes of manufacturing in the euro region and the U.K. rose more than economists forecast.
“We look for a further leg up in equities, which could be driven by positive economic and earnings news,” JPMorgan Asset Management strategists David Shairp and Rekha Sharma wrote in a report today. The prospect of central banks withdrawing stimulus may mean that “markets will be periodically challenged and volatility will be on the rise,” they wrote.
The MSCI World Index of 23 developed nations’ stocks added 0.5 percent, erasing an earlier slide of as much as 0.4 percent. Asian stocks dropped on concern China will take more steps to prevent its economy from overheating. Toshiba Corp. declined 6 percent in Tokyo after cutting its revenue forecast. Honda Motor Co. slid 2.5 after saying it’s recalling some cars in North America and the U.K.
European Movers
Europe’s Dow Jones Stoxx 600 Index added 0.1 percent, reversing earlier losses of as much as 0.8 percent. Vivendi SA, the owner of the world’s largest music company, slid 2.4 percent in Paris after a U.S. jury ruled it misled investors. Ryanair Holdings Plc advanced 5.7 percent in Dublin after Europe’s biggest discount airline raised its profit forecast.
Northumbrian Water Group Plc led shares of utility companies higher, jumping as much as 13 percent in London, after the Sunday Times reported that Ontario Teachers’ Pension Plan may bid 1.7 billion pounds ($2.7 billion) for the company.
The U.S. Institute for Supply Management’s factory index, due at 10 a.m. in New York, rose to 55.5 last month from 54.9 in December, according to the median forecast of 62 economists surveyed by Bloomberg News. Readings greater than 50 signal expansion. Commerce Department data showed Americans’ income rose more than estimated in December.
Earnings Rebound
A record nine-quarter earnings slump for S&P 500 companies is projected to have ended in the final three months of 2009 with a 76 percent increase in profits. Almost 80 percent of the results released since Jan. 11 topped the average forecasts of Wall Street estimates, data compiled by Bloomberg show.
Exxon added 1.6 percent to $65.45 after posting a smaller decline in fourth-quarter profit than analysts estimated as gains in oil prices and output cushioned the impact of slumping demand for diesel and gasoline.
The Dubai Financial Market General Index climbed 2.2 percent after Aabar Investments PJSC, the Abu Dhabi fund that’s the biggest shareholder in Daimler AG, said full-year profit more than doubled. The MSCI Emerging Markets Index fell 0.4 percent, extending its drop since Jan. 11 to as much as 10 percent.
The Dollar Index, which tracks the U.S. currency against those of six major trading partners, ended a four-day advance, dropping 0.3 percent. Treasuries fell for the first time in three days, with the yield on the 10-year note rising 4 basis points to 3.63 percent.
Copper for delivery in three months fell as much as 2.2 percent to $6,600 a metric ton in London, the lowest compared with intraday prices since Nov. 16. Tin retreated 5.8 percent to $16,200 a ton. Gold for immediate delivery added 0.5 percent to $1,086.32 an ounce in London and crude oil added 0.4 percent to $73.18 a barrel in New York.
Monday, February 1, 2010
Citigroup Said to Plan Sale of $10 Billion Private-Equity Unit
Feb. 1 (Bloomberg) -- Citigroup Inc. plans to sell or split off its $10 billion Citi Private Equity unit, expanding the list of money-management businesses the U.S. bank is disposing of to reduce debt, people familiar with the matter said.
Citi Private Equity, which takes minority stakes in companies and invests in other buyout funds, oversees about $2 billion of Citigroup’s money, said the people, who declined to be identified because the sale talks are private. The rest is from outside investors. Managers of the decade-old unit, led by Todd Benson and Darren Friedman, have discussed buying it for themselves alongside new partners or with other financing, one person said.
Citigroup, 27 percent owned by the government following a bailout in 2008, is selling almost a third of its $1.86 trillion of assets under regulatory pressure to shrink. Chief Executive Officer Vikram Pandit plans to keep a smaller buyout unit the bank bought in late 2007, a few months after he joined, the people said.
“Citi has been going in and out of these different investing vehicles, both private equity and hedge funds,” said Steven Kaplan, a professor at the University of Chicago Booth School of Business who studies the private-equity industry. “It’s been a game of musical chairs.”
Benson and Friedman stepped in as co-heads of Citi Private Equity after the January 2009 departure of John Barber, who had led the unit for nine years. Neither of the co-heads returned calls for comment, and Citigroup spokeswoman Shannon Bell declined to comment.
Metalmark to Stay
Other money-management units marked for sale or closure include the Citi Property Investors real-estate unit, which oversees $12.5 billion; and the Hedge Fund Management Group, which allocates money to hedge funds on behalf of its own investors, the people said.
Citigroup plans to keep Metalmark Capital LLC, a buyout firm the bank agreed to buy for an undisclosed sum in December 2007. Headed by former Morgan Stanley executive Howard Hoffen, Metalmark oversees almost $3.8 billion in several funds, one person said. It invests in energy, health care, financial and industrial companies, according to Metalmark’s Web site.
Pandit, 53, decided to keep Metalmark because he preferred its management and strategy to those of Citi Private Equity, three people said. Both Pandit and John Havens, who heads Citigroup’s trading- and investment-banking division, worked with Hoffen at Morgan Stanley from the late 1980s through the early 2000s.
Dorfman, O’Brien
The bank also is keeping another fund, Citi Venture Capital International, which focuses on China, India, Central and Eastern Europe and Latin America.
Citigroup’s hedge-fund and buyout division, Citi Capital Advisors, is run by Jonathan Dorfman and James O’Brien, another pair of former Morgan Stanley executives who joined Citigroup when it bought their hedge fund in October 2007. Four of Citigroup’s most senior executives previously took turns leading the division, including Pandit, Havens and Vice Chairmen Lewis Kaden and Edward “Ned” Kelly.
Citi Capital Advisors has about $14 billion under management, a figure that excludes the funds earmarked for disposal, people familiar with the matter said. At the end of 2007, the division oversaw $73 billion. More than a dozen funds were shuttered or frozen, including Pandit’s Old Lane Partners fund, which Citigroup bought in 2007 for $800 million. The bank stopped reporting the alternative-investing division’s results after the first quarter of 2008, when it had a net loss of $509 million.
Decision in 2009
The decision to sell Citi Private Equity was made last year, before President Barack Obama on Jan. 21 proposed banks be forced to divest their private-equity firms and hedge funds, the people familiar with the matter said. Ownership of such businesses can expose taxpayers to the risk of further bank bailouts, according to the White House.
A person close to Citigroup said its private-equity business doesn’t conflict with the proposal, since most investing is done on behalf of customers and little of the bank’s own capital is put at risk. Citigroup counts its remaining buyout and hedge funds among “core” operations that also include banking, trading, securities underwriting and credit cards.
Depending on how the new laws or regulations are written, Citigroup may have to overhaul its private-equity business again, said Calyon Securities USA analyst Michael Mayo, who rates Citigroup shares “underperform.”
Dollar General, GMAC
“None of this is set in stone,” Mayo said in an interview.
Citi Private Equity was formed in 2000. Early in the decade, the unit was used partly to consolidate investments inherited from the 1998 merger of Citicorp and Travelers Group Inc., people familiar with the matter said. In February 2007, Citi Private Equity raised about $3.3 billion of new funding.
Citigroup doesn’t publicly disclose the performance of Citi Private Equity. Managers of such funds typically charge fees for overseeing investors’ money and take a fixed cut of any capital gains.
The unit was a secondary investor on New York-based buyout firm KKR & Co.’s $7.3 billion takeover of discount retailer Dollar General Corp. in July 2007. Goodlettsville, Tennessee- based Dollar General went public through an initial stock offering last November, and now has a market value of about $8 billion.
Not as profitable was a supporting equity investment in New York-based Cerberus Capital Management LP’s takeover of auto- finance company GMAC LLC, people familiar with the matter say. Like Citigroup, GMAC had to get a series of infusions from the U.S. government as surging unemployment drove up consumer-loan defaults. In November, Michael Carpenter, who ran Citigroup’s hedge fund and buyout unit before he quit in 2006, was tapped as GMAC’s new CEO.
Citi Private Equity, which takes minority stakes in companies and invests in other buyout funds, oversees about $2 billion of Citigroup’s money, said the people, who declined to be identified because the sale talks are private. The rest is from outside investors. Managers of the decade-old unit, led by Todd Benson and Darren Friedman, have discussed buying it for themselves alongside new partners or with other financing, one person said.
Citigroup, 27 percent owned by the government following a bailout in 2008, is selling almost a third of its $1.86 trillion of assets under regulatory pressure to shrink. Chief Executive Officer Vikram Pandit plans to keep a smaller buyout unit the bank bought in late 2007, a few months after he joined, the people said.
“Citi has been going in and out of these different investing vehicles, both private equity and hedge funds,” said Steven Kaplan, a professor at the University of Chicago Booth School of Business who studies the private-equity industry. “It’s been a game of musical chairs.”
Benson and Friedman stepped in as co-heads of Citi Private Equity after the January 2009 departure of John Barber, who had led the unit for nine years. Neither of the co-heads returned calls for comment, and Citigroup spokeswoman Shannon Bell declined to comment.
Metalmark to Stay
Other money-management units marked for sale or closure include the Citi Property Investors real-estate unit, which oversees $12.5 billion; and the Hedge Fund Management Group, which allocates money to hedge funds on behalf of its own investors, the people said.
Citigroup plans to keep Metalmark Capital LLC, a buyout firm the bank agreed to buy for an undisclosed sum in December 2007. Headed by former Morgan Stanley executive Howard Hoffen, Metalmark oversees almost $3.8 billion in several funds, one person said. It invests in energy, health care, financial and industrial companies, according to Metalmark’s Web site.
Pandit, 53, decided to keep Metalmark because he preferred its management and strategy to those of Citi Private Equity, three people said. Both Pandit and John Havens, who heads Citigroup’s trading- and investment-banking division, worked with Hoffen at Morgan Stanley from the late 1980s through the early 2000s.
Dorfman, O’Brien
The bank also is keeping another fund, Citi Venture Capital International, which focuses on China, India, Central and Eastern Europe and Latin America.
Citigroup’s hedge-fund and buyout division, Citi Capital Advisors, is run by Jonathan Dorfman and James O’Brien, another pair of former Morgan Stanley executives who joined Citigroup when it bought their hedge fund in October 2007. Four of Citigroup’s most senior executives previously took turns leading the division, including Pandit, Havens and Vice Chairmen Lewis Kaden and Edward “Ned” Kelly.
Citi Capital Advisors has about $14 billion under management, a figure that excludes the funds earmarked for disposal, people familiar with the matter said. At the end of 2007, the division oversaw $73 billion. More than a dozen funds were shuttered or frozen, including Pandit’s Old Lane Partners fund, which Citigroup bought in 2007 for $800 million. The bank stopped reporting the alternative-investing division’s results after the first quarter of 2008, when it had a net loss of $509 million.
Decision in 2009
The decision to sell Citi Private Equity was made last year, before President Barack Obama on Jan. 21 proposed banks be forced to divest their private-equity firms and hedge funds, the people familiar with the matter said. Ownership of such businesses can expose taxpayers to the risk of further bank bailouts, according to the White House.
A person close to Citigroup said its private-equity business doesn’t conflict with the proposal, since most investing is done on behalf of customers and little of the bank’s own capital is put at risk. Citigroup counts its remaining buyout and hedge funds among “core” operations that also include banking, trading, securities underwriting and credit cards.
Depending on how the new laws or regulations are written, Citigroup may have to overhaul its private-equity business again, said Calyon Securities USA analyst Michael Mayo, who rates Citigroup shares “underperform.”
Dollar General, GMAC
“None of this is set in stone,” Mayo said in an interview.
Citi Private Equity was formed in 2000. Early in the decade, the unit was used partly to consolidate investments inherited from the 1998 merger of Citicorp and Travelers Group Inc., people familiar with the matter said. In February 2007, Citi Private Equity raised about $3.3 billion of new funding.
Citigroup doesn’t publicly disclose the performance of Citi Private Equity. Managers of such funds typically charge fees for overseeing investors’ money and take a fixed cut of any capital gains.
The unit was a secondary investor on New York-based buyout firm KKR & Co.’s $7.3 billion takeover of discount retailer Dollar General Corp. in July 2007. Goodlettsville, Tennessee- based Dollar General went public through an initial stock offering last November, and now has a market value of about $8 billion.
Not as profitable was a supporting equity investment in New York-based Cerberus Capital Management LP’s takeover of auto- finance company GMAC LLC, people familiar with the matter say. Like Citigroup, GMAC had to get a series of infusions from the U.S. government as surging unemployment drove up consumer-loan defaults. In November, Michael Carpenter, who ran Citigroup’s hedge fund and buyout unit before he quit in 2006, was tapped as GMAC’s new CEO.
Sunday, January 24, 2010
White House confident Bernanke to be confirmed
01/24/2010
WASHINGTON (Reuters) - White House senior advisers voiced confidence on Sunday that Federal Reserve Chairman Ben Bernanke would be confirmed by the Senate for a second term.
"The president is very confident that the chairman will be confirmed," David Axelrod said on CNN's "State of the Union" program. "The readings he's getting from his conversations are that Chairman Bernanke will be confirmed."
In a sign of concern about a surge of opposition to Bernanke's renomination, President Barack Obama contacted the Democratic Senate leadership on Saturday to make sure there were enough votes.
Uncertainty about the Senate's confirmation of Bernanke rattled investors last week, contributing to the worst three-day slide for U.S. stocks in 10 months.
Bernanke's second term appeared at risk on Friday after two Senate Democrats announced their opposition.
Bernanke's critics say the Fed failed to prevent the recent financial crisis, the worst since the Great Depression, and fought the meltdown in a way that favored the financial industry at the expense of ordinary citizens.
With congressional elections in November, many lawmakers are unwilling to take any stand that appears to benefit Wall Street, particularly after Tuesday's Republican upset for the Massachusetts Senate seat that had been a Democratic stronghold for decades.
But Obama heard from Senate Democratic leader Harry Reid that there was a lot of support for Bernanke, another senior Obama adviser, Valerie Jarrett, told NBC's "Meet the Press."
The Senate's top Republican, Mitch McConnell, also told "Meet the Press" he believed Bernanke would win bipartisan support, but would not say whether he would vote for the central banker.
MORE REPUBLICANS WEIGH IN
Some Republicans have moved to block Bernanke's confirmation, forcing Senate leaders to secure a super-majority of 60 votes in the 100-member chamber to advance the nomination.
"I think we need a fresh start," Republican Senator John Cornyn told "Fox News Sunday," saying he would oppose Bernanke.
Senator John McCain, the Republican presidential candidate who lost to Obama, said on CBS' "Face the Nation" program he was "both skeptical and leaning against" Bernanke's confirmation.
But Republican Senator Orrin Hatch told CNN he would vote for Bernanke partly out of worry of the nominee the administration would choose in his place.
"There are some things I don't agree with that have been done, but I think he basically has -- has all of the ability to do it," Hatch said. "I'd be terrified of having him replaced by this administration. You never know what you're going to get."
Bernanke, who was first named as chairman by former Republican President George W. Bush, was nominated to a second term by Obama in August.
Axelrod on CNN defended Bernanke's handling of the financial crisis.
"We're still in a fragile state here, even though the economy is growing, and we need his leadership," Axelrod said.
"He has been a very steady hand in this crisis. He's taken initiatives that have been important in terms of stabilizing the economy."
The unemployment rate currently stands at 10 percent, with more than 15 million Americans out of work.
Bernanke losing some support in Senate
01/24/2010
NEW YORK (CNNMoney.com) -- With only a week left before Federal Reserve Chairman Ben Bernanke's first term ends, whether the Senate has the 60 votes needed to overcome opposition remains in question.
And the White House and Senate leaders are starting to scramble, as more Democratic senators say they plan to vote against giving Bernanke a second term as Fed chief.
Sen. Barbara Boxer, D-Calif. and Sen. Russell Feingold, D-Wis., both said Friday that they plan to vote against Bernanke. Several other Democratic senators told CNN they're undecided.
"It is time for a change -- it is time for Main Street to have a champion at the Fed," Boxer said in a statement. "Dr. Bernanke played a lead role in crafting the Bush administration's economic policies, which led to the current economic crisis. Our next Federal Reserve Chairman must represent a clean break from the failed policies of the past."
It's not clear whether Bernanke's confirmation is in jeopardy, because he is likely to garner some Republican support. In the Senate Banking Committee, four Republicans voted to confirm Bernanke, crediting him for saving the economy from a second Great Depression.
Some Democratic senators issued statements of support over the weekend, including Senate Banking Committee chairman Chris Dodd, D-Conn., and John Kerry, D-Mass. (More in CNN's Political Ticker.)
But the Senate can't even start the process of considering Bernanke until 60 senators sign off, because a few senators who oppose his confirmation filed official "holds" delaying the process.
"The math to 60 -- at this point -- looks bad for Bernanke," wrote Chris Krueger, an analyst for Concept Capital Washington Research Group in a report. "Chaos is reigning on the Hill right now and Democratic members are in severe anxiety over their own re-elections."
Some are really starting to wonder whether Bernanke will be confirmed before Feb. 1. If the vote is delayed, there's a question as to whether Bernanke can be temporarily re-appointed as acting chair. If not, Fed Vice Chair Donald Kohn would serve as acting chairman.
Senate leaders were unsure Friday how the votes were going to play out or when they'd start the procedure to force a vote.
Even Senate Majority Leader Harry Reid issued a statement late Friday saying he'd support Bernanke, but "my support is not unconditional."
The White House is also getting involved, although spokesman Bill Burton declined to "engage in hypotheticals" about whether the president believed Bernanke's confirmation was in trouble.
"He continues to think that he's the best person for the job, and will be confirmed by the United States Senate," Burton said to reporters earlier Friday on Air Force One.
Bernanke has always had his critics in the Senate. Bernie Sanders, a left-leaning independent from Vermont who often votes with the Democrats, and Jim Bunning of Kentucky, Sanders' political opposite, are two of the most vocal.
Up until Tuesday, insiders believed that Bernanke had locked up more than 60 votes necessary to break a Senate filibuster. In December, he won solid support from the Senate Banking committee.
NEW YORK (CNNMoney.com) -- With only a week left before Federal Reserve Chairman Ben Bernanke's first term ends, whether the Senate has the 60 votes needed to overcome opposition remains in question.
And the White House and Senate leaders are starting to scramble, as more Democratic senators say they plan to vote against giving Bernanke a second term as Fed chief.
Sen. Barbara Boxer, D-Calif. and Sen. Russell Feingold, D-Wis., both said Friday that they plan to vote against Bernanke. Several other Democratic senators told CNN they're undecided.
"It is time for a change -- it is time for Main Street to have a champion at the Fed," Boxer said in a statement. "Dr. Bernanke played a lead role in crafting the Bush administration's economic policies, which led to the current economic crisis. Our next Federal Reserve Chairman must represent a clean break from the failed policies of the past."
It's not clear whether Bernanke's confirmation is in jeopardy, because he is likely to garner some Republican support. In the Senate Banking Committee, four Republicans voted to confirm Bernanke, crediting him for saving the economy from a second Great Depression.
Some Democratic senators issued statements of support over the weekend, including Senate Banking Committee chairman Chris Dodd, D-Conn., and John Kerry, D-Mass. (More in CNN's Political Ticker.)
But the Senate can't even start the process of considering Bernanke until 60 senators sign off, because a few senators who oppose his confirmation filed official "holds" delaying the process.
"The math to 60 -- at this point -- looks bad for Bernanke," wrote Chris Krueger, an analyst for Concept Capital Washington Research Group in a report. "Chaos is reigning on the Hill right now and Democratic members are in severe anxiety over their own re-elections."
Some are really starting to wonder whether Bernanke will be confirmed before Feb. 1. If the vote is delayed, there's a question as to whether Bernanke can be temporarily re-appointed as acting chair. If not, Fed Vice Chair Donald Kohn would serve as acting chairman.
Senate leaders were unsure Friday how the votes were going to play out or when they'd start the procedure to force a vote.
Even Senate Majority Leader Harry Reid issued a statement late Friday saying he'd support Bernanke, but "my support is not unconditional."
The White House is also getting involved, although spokesman Bill Burton declined to "engage in hypotheticals" about whether the president believed Bernanke's confirmation was in trouble.
"He continues to think that he's the best person for the job, and will be confirmed by the United States Senate," Burton said to reporters earlier Friday on Air Force One.
Bernanke has always had his critics in the Senate. Bernie Sanders, a left-leaning independent from Vermont who often votes with the Democrats, and Jim Bunning of Kentucky, Sanders' political opposite, are two of the most vocal.
Up until Tuesday, insiders believed that Bernanke had locked up more than 60 votes necessary to break a Senate filibuster. In December, he won solid support from the Senate Banking committee.
450,000 at risk in foreclosure-prevention program
01/23/2010
NEW YORK (CNNMoney.com) -- Hundreds of thousands of troubled homeowners who are making lower mortgage payments on a trial basis are at risk of being kicked out of President Obama's foreclosure-prevention program.
Companies that service the mortgages have until Jan. 31 to review all trial modifications that have been underway for several months under the Home Affordable Modification Program (HAMP), according to a Treasury Department guideline issued late last month. The Treasury Dept. said it would issue new guidelines next week, but wouldn't give details.
During the review period, servicers must determine whether borrowers have made all their payments and have handed in all the necessary paperwork. Those who haven't will get letters giving them 30 days to comply.
The goal is to clear up the backlog of borrowers stuck in trial modifications, in which a homeowner's monthly payments are lowered to no more than 31% of pre-tax income.
Some homeowners have spent seven or eight months waiting to hear if they qualify for a permanent adjustment to their mortgages.
This directive, however, has some bank regulators concerned.
"About 450,000 homeowners currently have HAMP trial modifications and have demonstrated a willingness and ability to make timely payments for at least three months," said Richard Neiman, superintendent of the New York State Banking Department.
"Now, unfortunately and very alarmingly, these same homeowners face the prospect of foreclosure strictly on account of documentation issues," he said.
Paperwork has proved a major stumbling block for the president's foreclosure-prevention program. Homeowners complain that their servicers continuously lose the documents they send in, while financial institutions argue that borrowers have not been sending in their paperwork.
Aware of the problem, Treasury officials said they plan to issue new guidance to servicers next week that will help expedite the conversion of borrowers in the trial period to permanent modification. It may also lighten the documentation requirements.
Converting to permanent modifications
Under fire for the low number of people receiving long-term help, the Treasury Department in late November ramped up pressure on servicers to convert borrowers to permanent modifications.
Some 66,500 people have received permanent adjustments, with another 787,200 homeowners in trial modifications.
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.
Once the modification becomes permanent, servicers, investors and homeowners are eligible to receive thousands of dollars in incentive payments.
Overall, about three-quarters of people are making their payments on time, according to the Treasury Department.
Treasury officials already lightened the documentation requirements in the fall in hopes of speeding up the conversion process. But more needs to be done, Neiman said.
For instance, Treasury should accelerate its implementation of a standardized documentation form and the creation of a Web portal that will allow homeowners to track the receipt of the paperwork, he said. Also, it should allow servicers more flexibility in accepting alternative documents.
If this isn't done, a lot of homeowners could soon face foreclosure, he said.
"This is a real concern to borrowers, particularly borrowers who've continued to make payments for three, four, five, even seven months," Neiman said.
NEW YORK (CNNMoney.com) -- Hundreds of thousands of troubled homeowners who are making lower mortgage payments on a trial basis are at risk of being kicked out of President Obama's foreclosure-prevention program.
Companies that service the mortgages have until Jan. 31 to review all trial modifications that have been underway for several months under the Home Affordable Modification Program (HAMP), according to a Treasury Department guideline issued late last month. The Treasury Dept. said it would issue new guidelines next week, but wouldn't give details.
During the review period, servicers must determine whether borrowers have made all their payments and have handed in all the necessary paperwork. Those who haven't will get letters giving them 30 days to comply.
The goal is to clear up the backlog of borrowers stuck in trial modifications, in which a homeowner's monthly payments are lowered to no more than 31% of pre-tax income.
Some homeowners have spent seven or eight months waiting to hear if they qualify for a permanent adjustment to their mortgages.
This directive, however, has some bank regulators concerned.
"About 450,000 homeowners currently have HAMP trial modifications and have demonstrated a willingness and ability to make timely payments for at least three months," said Richard Neiman, superintendent of the New York State Banking Department.
"Now, unfortunately and very alarmingly, these same homeowners face the prospect of foreclosure strictly on account of documentation issues," he said.
Paperwork has proved a major stumbling block for the president's foreclosure-prevention program. Homeowners complain that their servicers continuously lose the documents they send in, while financial institutions argue that borrowers have not been sending in their paperwork.
Aware of the problem, Treasury officials said they plan to issue new guidance to servicers next week that will help expedite the conversion of borrowers in the trial period to permanent modification. It may also lighten the documentation requirements.
Converting to permanent modifications
Under fire for the low number of people receiving long-term help, the Treasury Department in late November ramped up pressure on servicers to convert borrowers to permanent modifications.
Some 66,500 people have received permanent adjustments, with another 787,200 homeowners in trial modifications.
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.
Once the modification becomes permanent, servicers, investors and homeowners are eligible to receive thousands of dollars in incentive payments.
Overall, about three-quarters of people are making their payments on time, according to the Treasury Department.
Treasury officials already lightened the documentation requirements in the fall in hopes of speeding up the conversion process. But more needs to be done, Neiman said.
For instance, Treasury should accelerate its implementation of a standardized documentation form and the creation of a Web portal that will allow homeowners to track the receipt of the paperwork, he said. Also, it should allow servicers more flexibility in accepting alternative documents.
If this isn't done, a lot of homeowners could soon face foreclosure, he said.
"This is a real concern to borrowers, particularly borrowers who've continued to make payments for three, four, five, even seven months," Neiman said.
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