Finance news. My opinion.

One in 10 American homeowners fell behind on mortgage payments or were in foreclosure during the third quarter as the world’s largest economy shed jobs and real estate prices tumbled.

The share of mortgages 30 days or more overdue rose to a seasonally adjusted 6.99 percent while loans already in foreclosure rose to 2.97 percent, both all-time highs in a survey that goes back 29 years, the Mortgage Bankers Association said in a report today. The gain in delinquencies was driven by an increase of loans with payments 90 days or more overdue.

“Until we see a turnaround in the job situation, we’re not going to see these numbers improve,” said Jay Brinkmann, chief economist of the Washington-based bankers group, in an interview. “We’re seeing more loans build up in the 90-days bucket as lenders work to modify loans and states put in place programs that delay foreclosures.”

The U.S. economy has shed 1.91 million jobs this year, while falling home prices have made it difficult for people who can’t pay their mortgages to sell their property. Payrolls declined in each month of 2008 through November, the Labor Department said today in Washington.

New foreclosures fell to 1.07 percent from 1.08 percent in the second quarter as some states enacted laws to temporarily stop home repossessions and lenders increased efforts to modify the terms of loans, Brinkmann said.

Home Sales Sink

“Some servicers keep a loan in a delinquent state until they see customers carrying through on their agreements, and then they’ll switch it to performing,” Brinkmann said.

U.S. home sales and prices began to tumble in 2006 after a five-year boom, dragging the economy into a recession that began in December 2007, according to the National Bureau of Economic Research.

The median home price in the fourth quarter probably will be $190,300, down 19 percent from the record $226,800 in 2006’s second quarter, according to a Nov. 24 forecast by Fannie Mae, the world’s largest mortgage buyer payday loan online.

Purchases of existing homes in October slid to an annual rate of 4.98 million, lower than forecast, the National Association of Realtors said in a Nov. 24 report. The median price fell 11.3 percent from a year earlier, the most since the group began collecting data in 1968.

Federal Reserve Chairman Ben S. Bernanke yesterday urged using more taxpayer funds for new efforts to prevent home foreclosures, saying the private sector is incapable of coping with the crisis on its own.

Bernanke’s Plans

The Fed chief outlined four possible options, including buying delinquent mortgages and providing bigger incentives for refinancing loans. He called for addressing the “apparent market failure” where lenders aren’t modifying mortgages even in cases where it’s in their own economic interest to do so.

Bernanke’s proposed changes would go beyond those announced last month by Housing and Urban Development Secretary Steve Preston, who oversees the FHA. The agency will change the amount of the loan a lender must forgive and allow banks to extend the payback time of a mortgage.

There were 111.7 million occupied housing units in the U.S. in the third quarter, 68 percent used by owners and the remainder leased by renters, according to the Census Bureau. One in three U.S. homes has no mortgage, the bureau said.

The bankers’ report cites percentages without providing the number of mortgages. The U.S. had $11.3 trillion of outstanding home loans at the end of June, according to Federal Reserve data. Mortgage lending fell to $80.8 billion in the second quarter, down from $764 billion a year earlier, the Fed said.

The Mortgage Bankers report is based on a survey of 45.5 million loans by mortgage companies, commercial banks, thrifts, credit unions and other financial institutions.

Source

India's worst terrorist attack in 15 years has caused Mumbai's property market, already faltering in a slowing economy, to grind to a halt.

“The market's gone completely quiet,'' said Shiv Kumar Dembla, a property broker who owns Shiv Real Estate Consultants in Mumbai. “The future doesn't look bright either. The last six months were quiet, but now it could get worse.''

The city's home sales dropped 21 percent in the seven months to Oct. 31, according to estimates from UBS AG. That was before terrorists held south Mumbai under siege for almost 60 hours, with attacks on luxury hotels, a railway station and a Jewish center leaving more than 195 people dead last week.

Terrorists targeted the foreigners who helped make Mumbai the world's second-most expensive city for offices last year, as companies including Macquarie Group Ltd. and Barclays Plc sought space in India's financial capital. Now, apartment buyers are walking away and developers may be forced to shelve projects as companies rethink the risks of doing business in India, brokers and analysts said.

Mumbai, which accounts for a third of India's taxes, is home to the nation's central bank and primary stock and commodity exchanges, as well as its largest companies and the local headquarters of overseas firms such as Citigroup Inc. and Barclays.

The city is the world's sixth most-expensive in terms of apartment rentals, and ranks second in Asia behind Hong Kong, according to a survey released by ECA International in April.

Dearth of Inquiries

“Rentals in Mumbai have climbed up steeply over the past few years,'' Mridul Upreti, joint managing director for capital markets at commercial property broker Jones Lang LaSalle Inc.'s local unit, said in an interview in New Delhi on Dec. 2. “In the short term, residential prices are going to correct.''

Registrations of new homes in Mumbai dropped 35 percent in October from a year earlier as a slump in demand gathered pace, according to UBS analyst Suhas Harinarayanan. November sales data could be worse, he wrote in a note to clients on Dec. 2, without commenting on the terrorist attacks.

“Several non-resident Indians who were planning to come later this month to purchase properties have postponed their trips'' following the attacks, said Ashwin Mehta, who runs real estate brokerage Astute Acres Pvt. in Mumbai. “We've gotten hardly any inquiries since last week.''

Demand for housing in south Mumbai was already under pressure because of high borrowing costs and developers' reluctance to cut prices, Macquarie Research analyst Unmesh Sharma wrote in a note to clients Dec cash advance in 1 hour. 1.

Dud Auction

An October auction for land near Mumbai's emerging financial district of Bandra-Kurla Complex, home to Citigroup, ICICI Bank Ltd. and the National Stock Exchange, lured just one bidder. Mumbai officials also had to twice defer plans to lease two plots of land for offices in a north-central suburb because of slack demand.

Mumbai, along with New Delhi, will continue to be harder hit by the economic slowdown partly because of their dependence on the banking and financial services industry, Sandeep Mathew, an analyst at BNP Paribas, wrote in a note to clients today.

An index tracking 14 Indian real estate stocks has slumped 87 percent as a five-year rally in property prices ended and the global financial crisis choked off funding for developers. The nation's economy grew last quarter at the slowest pace since 2004, fueling expectations that property costs will decline further.

Home Prices

DLF Ltd., the nation's biggest real estate company, and Emaar MGF Land Pvt., the Indian unit of the Middle East's largest developer, have been cutting prices or offering cheaper homes to revive demand. Yet sales will rebound only if home prices in the nation decline by 25 percent to 30 percent, or borrowing costs drop, UBS's Harinarayanan estimated.

If the government's response to the terror attack fails to restore confidence among overseas investors, demand for office and retail space may drop further, Macquarie's Sharma said.

An added danger comes from private equity firms and overseas developers demanding higher risk premiums for investing in India, said Upreti of Jones Lang LaSalle.

“Investors will start seeking a high risk premium for investing in real estate in India,'' Upreti said. “So instead of 20 percent to 23 percent returns, you will start seeking 25 percent to 26 percent returns because country risk-premium will go up.''

Nowhere is the fallout more keenly felt than in Colaba, the upscale neighborhood in south Mumbai where gunmen stormed into the Taj Mahal Palace & Tower hotel and a Jewish center, took hostages and fought running battles with Indian special forces.

“People who were earlier planning to buy in Colaba now want to cancel the plans,'' said Narender Bhagwanani, who runs Om Sai Estate Property Consultants. “They are too scared to live around Colaba.''

Source

India may boost public spending, increase export incentives and cut interest rates to support the economy after the country’s worst terrorist attack in 15 years last week undermined investor confidence, economists said.

The government may establish a fund for investments in roads, power and ports, provide interest subsidies for housing and exports, and reduce the key repurchase rate by as much as 1.5 percentage points to 6 percent, The Economic Times reported today citing a government official it didn’t name.

“India definitely needs to announce policy measures as confidence is shaken after the terror attacks,” said Dariusz Kowalczyk, a strategist with CFC Seymour Ltd. in Hong Kong. “It makes sense to open government coffers and cut rates.”

India’s stimulus package is unlikely to match the $586 billion plan unveiled last month by China, as its debt as a proportion of gross domestic product is three times more. Still, Kowalczyk said India’s economy is more resilient to a global recession as it’s far less dependent on exports than China.

India’s 10-year bonds gained, pushing yields to 6.88 percent, the lowest level since June 2005, at 11:20 a.m. in Mumbai. The benchmark stock index fell 0.3 percent to 8716.01 while the rupee gained 0.4 percent to 49.9550 against the dollar.

Terrorist attacks in Mumbai, which began Nov. 26 at two luxury hotels, a railway terminal and a building housing a Jewish center, lasted for 60 hours, leaving 195 people dead. About 300 people have died this year in India from bomb explosions in markets, mosques, bus stations and theaters.

Consumer Demand

The government, which hasn’t revised its growth forecast after the Mumbai assault, says the economy will slow to as much as 7 percent in the year to March 31, the weakest pace since 2003. Prime Minister Manmohan Singh said last month growth will average 8 percent in the next five years, buoyed by consumer demand, which makes up 60 percent of the $1.2 trillion economy.

China, whose external trade links with the U Free Credit Report and Score.S. and Europe are stronger than India’s, is boosting spending to help the economy expand more than 8 percent for each of the next two years. Domestic consumption only accounts for 37 percent of Chinese GDP.

India, whose public debt is 77 percent of the economy compared with 22 percent in China, “has a more distinct lack of funds,” said Sanjay Mathur, a Singapore-based senior economist at Royal Bank of Scotland Group Plc. “Therefore the burden of stimulating growth willy-nilly falls on monetary policy.”

Rate Cuts

Since October, the Reserve Bank of India has cut its repurchase rate by 1.5 percentage points, and reduced the amount of deposits that lenders need to set aside as cash reserves and in government bonds by 3.5 percentage points and 1 percentage point respectively, to stimulate demand.

The Economic Times reported today the central bank may further cut the cash reserve ratio to 4 percent from 5.5 percent. The move will provide more money to lend to commercial banks.

The government also plans to cap interest rates on home loans up to 1 million rupees ($20,048) at 8.5 percent, with the government picking up the tab for the subsidy burden this would place on banks, the paper reported.

“India should not look for quick fixes and worsen the high debt it already has,” said Ramya Suryanarayanan, an economist at DBS Group in Singapore. “It will make the economy more vulnerable. If you use this crisis to push through reforms, such as cutting oil subsidies, that’s ideal.”

Minister Palaniappan Chidambaram, who was moved to the home ministry from finance ministry this week to tackle the threat of terrorism, told Bloomberg News on Nov. 18 that “this is not the year to worry about the budget deficit”.

“This is the year to worry about growth,” Chidambaram said.

Source

Federal Reserve Bank of New York President Timothy Geithner, the nominee for Treasury secretary, is leaving the central bank’s committee that sets the benchmark U.S. interest rate.

Christine Cumming, the New York Fed’s first vice president, will attend the Federal Open Market Committee’s Dec. 15-16 meeting in Geithner’s place, bank spokesman Calvin Mitchell said in an e-mail. The New York Fed president serves as vice chairman of the FOMC.

Leaving the FOMC would help Geithner avoid a conflict of interest or the appearance of one as he prepares to join President-elect Barack Obama’s administration. Presidents Bill Clinton and George W. Bush took a hands-off approach to the Fed’s monetary policy, and Obama has indicated he will do the same.

Departing Fed governors and district-bank presidents often skip their final FOMC meeting. Geithner, 47, hasn’t said when he will leave his post as chief of the bank since Obama picked him for Treasury secretary last week.

Cumming, 56, who has worked at the Fed for three decades, is the No. 2-ranking official and designated alternate for Geithner at FOMC meetings in Washington payday loan.

She substituted for Geithner at the Sept. 16 FOMC meeting, when policy makers voted to leave the benchmark rate at 2 percent. Geithner stayed in New York as officials negotiated the $85 billion bailout of insurer American International Group Inc.

Before her promotion to first vice president in 2004, Cumming served as the bank’s research director for four years. She also has experience in bank supervision, serving as a senior vice president in that division of the Fed from 1994 to 1999. She began her career at the central bank as an international economist in 1979.

Economists have said Cumming is unlikely to be a permanent replacement for Geithner as president. Instead, Chairman Ben S. Bernanke may turn to Fed Governor Kevin Warsh or New York Fed markets chief William Dudley, who have been closely involved in efforts to combat the financial crisis, Fed watchers say.

Source