From homeowner to tenant

CHICAGO (MarketWatch) -- Qualifying homeowners facing foreclosure will be able to stay in their homes -- as renters -- under a new program announced by Fannie Mae on Thursday.

The Deed for Lease Program is designed to help borrowers who aren't eligible or haven't been able to sustain other work-out solutions, including a modification, according to a news release.

Participating borrowers voluntarily transfer their property deed back to the lender; the lender then leases the house back to the borrower at a market rate for up to a year. After the period is up, there's a possibility of a term renewal or a month-to-month lease arrangement, the release said.

More aid for home buyersThe News Hub panel discusses Washington's new legislation that will extend more help to the jobless and to home buyers.
"The Deed for Lease Program provides an additional option for qualifying homeowners who are facing foreclosure and are not eligible for modifications," said Jay Ryan, vice president of Fannie Mae, in the release. "This new program helps eliminate some of the uncertainty of foreclosure, keeps families and tenants in their homes during a transitional period, and helps to stabilize neighborhoods and communities."

To qualify, the home must be the borrower's primary residence, and he or she needs to be released from any subordinate liens on the property. The borrower also has to document that the new market rental rate doesn't exceed 31% of his or her gross income.

"This policy takes advantage of the fact that in many former bubble markets, ownership costs are likely to be far higher than the cost of renting an equivalent unit, if the homeowner purchased their home near the peak of the market. In many cases this gap can be dramatic," said Dean Baker, co-director of the Center for Economic and Policy Research, in a separate release.

"For example, the savings on a moderate-priced home purchased near the peak of the market in the Washington, D.C. area could be more than $1,300 a month. The gap between ownership costs and renting in the Los Angeles area could be almost $2,000 a month," he said. "Many homeowners who could not sustain mortgages based on the original purchase price, even with sharp reductions in interest rates, can afford the market rent."

A big step
Baker called the Deed for Lease Program a "very big step" toward giving families facing foreclosure more housing security.

"Families that like their home, their neighborhood, or the schools for their children will have the opportunity to stay in their house even after foreclosure," he said. "This is also good policy for neighborhoods that have been hard-hit by foreclosures. The Deed for Lease Program will keep the homes occupied rather than being an eyesore and a potential safety hazard."

But Baker does have one criticism of the program: He said the guaranteed lease period should be longer than a year -- possibly contingent on timely rent payments and proper upkeep. "Nonetheless, the new policy by Fannie Mae is an important step forward in dealing with the housing crisis," he said.

How to Use Futures Trading Strategies

Before making any investments, no matter what the investment vehicle, a person should know the market and understand how to use certain trading strategies to possibly turn a profit. Futures' trading is no exception, and a person should use caution when trading. There are certain trading strategies that have proven themselves over the long-term, but an investor still must understand the underlying investment and not just the strategy.

Step 1 : Go long on a futures contract. Going long is just trading verbiage for buying a futures contract and then holding it on the expectation that the price will rise. Then, you can sell the future at a profit.

Step 2 : Trade futures contracts on margin. This is where you borrow the money from a trading company and then use that money or credit to buy futures contracts. Generally, the trading will require that you deposit a percentage of the margin to secure the loan. The percentage by law has to be 50% or more. This is risky because the company can call the margin at anytime they choose, and you will be responsible for any deficit in trading price no matter the amount.

Step 3 : Use a spread strategy to trade futures contracts. This is where a trader can buy and sell futures contracts for the same commodity. For example, say there is a -05 price difference in the futures of pork belly contracts from one month to the next month. You expect the price to rise. You would then sell the current month's contract and buy the next months contract given that this expected rise in price makes the latter contract more profitable.

Step 4 : Utilize a butterfly-spread futures-trading strategy. In this example, you would buy a first-of-the-month contract, sell two middle-of-the-month contract and then buy an end-of-the-month futures contract.

Overseas students hit by Australia college closures

MELBOURNE, Nov 6 — Australia’s image as a top destination for foreign students suffered another setback today after four bankrupt colleges closed, leaving more than 2,000 students stranded.

Australia’s A$13 billion (RM40.49 billion) international student sector, the country’s third-largest export earner behind oil and coal, has come under fire after reports some colleges had taken payments for certificates and residency visas.

The issue has caused diplomatic discomfort for Australia, with Indian officials expressing concern over the treatment of Indian students, who make up the largest number of overseas students in Australia.

A spate of attacks on Indian students in Australia earlier this year also sparked angry protests in India and prompted Prime Minister Kevin Rudd to call his Indian counterpart to assure him of student safety.

Global Campus Management Group, which owns four private colleges in Sydney and Melbourne, was placed into voluntary administration yesterday.

India’s deputy high commissioner to Australia, V. K. Sharma, said an estimated 300 or so of the affected students were Indians and that the recent collapse of some colleges had led to a sharp fall in student arrivals from India.

“There was also a lot of fraud going on in the system,” he added.

He said the current shake-out of Australia’s education system was necessary to restore the confidence of overseas students, a process that could take a couple of years.

The Australian Education Union said greater regulation of the private colleges was needed.

“There are a growing number of private colleges collapsing and it’s the students who pay the price,” said union president Angelo Gavrielatos.

“The scrutiny of new and existing operators has not been adequate to ensure that they are financially viable and delivering a quality education to international and domestic students.” — Reuters

Can gold hit $1,500?

NEW YORK (CNNMoney.com) -- Gold investors are partying like it's 1849.

The price of the yellow precious metal hit yet another all-time high Wednesday. At nearly $1,100 an ounce, you have to wonder just how much higher gold can go in the next few months. Is it $1200? $1300? Heck, is $1500 out of the question?

The Gold Rush of 2009 has been stunning to watch. Unlike some prior gold price spikes, the "good" news about gold's recent rise is that it does not appear to be due to worries about an imminent meltdown of the financial system. Gold rallied in early 2008, for example, just as Bear Stearns was about to collapse.

Instead, gold has rallied recently as the dollar has weakened. Gold, along with other metals, such as silver and copper, and commodities, like oil, are benefiting from inflation fears.

Investors around the world have fled the dollar due to worries that the massive amounts of money pumped into the U.S. economy by Congress, the Treasury Department and the Federal Reserve will eventually lead to inflation.

Prior to this week though, many experts thought that the bump in gold had more to do with momentum traders taking advantage of these fears and simply riding a hot hand. But there is now growing evidence that real demand for gold is playing a role in the run as well.

Gold, unlike silver, copper and many other metals, does not have that much of an industrial use. But gold has often been considered the safest of safe havens when the dollar declines. As a hard, tangible asset of value, some investors buy gold as an alternative to the dollar.

The International Monetary Fund announced on Monday that it sold a huge chunk (200 metric tons) of gold to the central bank of India. Now there is chatter that other nations may also want to bulk up on gold.

"More central banks may look to move into gold and out of the dollar. There are some rumblings that it could be like a series of dominos now that India has taken the first step," said Darin Newsom, senior analyst with Televent DTN, a financial markets research firm based in Omaha.

Partly for this reason, Newsom said that it's not out of the question for gold to go as high as about $1,400 an ounce in the next year or so.

0:00 /2:32Cashing in on gold
Central banks don't appear to be the only big gold buyers. Mining companies are doing so as well.

With gold prices continuing to rise, some producers have announced plans to stop hedging as much (if it all) against the possibility of falling prices. To do that, producers are buying back gold from what is known as their hedge books.

Barrick Gold (ABX) said Monday that it bought back 1 million ounces in October, while AngloGold Ashanti (AU) also announced that day that it intends to reduce the size of its hedge book by 800,000 ounces a year over the next five years. More gold producers may follow suit.

"Gold producers are going to need to close their hedge books because for every dollar that the price of gold goes up, they lose a lot of money," said David Beahm, vice president of economic research with Blanchard & Company Inc., a New Orleans-based investing firm that specializes in gold and other precious metals.

This demand, coupled with more worries about inflation, is likely to lead gold significantly higher, Beahm said. He thinks gold could hit $1,150 by the end of this year and $1,500 by the end of 2010.

"There is no doubt that there will be inflation. It's not a matter of if but a matter of when. And when that happens gold will spike again," he said.

Now of course, it's probably a good idea to still have a healthy dose of skepticism about how much higher gold can go. After all, it was only a year ago that oil spiked above $140 a barrel and many commodity bulls were predicting that crude would hit $200 before long. That didn't happen.

If the economy is really in recovery mode, the Fed will eventually start raising interest rates from their current level of near zero. Once it does that, some of the inflation pressures should subside. That could take some of the air out of the gold run.

But there is also a good chance that gold could gain even more ground over the long haul even if the global economy gets back on track and the dollar strengthens again. It's simple Economics 101.

Marshall Berol, co-manager of the Encompass fund, a mutual fund that is currently investing heavily in commodity-producing companies, said many investors don't realize how much time and effort it takes to produce gold.

And instead of just watching gold trends from afar, Berol said he and his fellow co-manager like to visit projects of companies the fund owns to get a better sense of how supply is shaping up. They have a trip planned to Chile and Argentina next week, for example, to look at mining projects run by Exeter Resources (XRA), one of the fund's holdings.

So even if demand doesn't remain as robust as it is now, Berol thinks a low supply of gold should mean that prices will continue to move up.

"On a day-to-day basis, people talk about gold going up because of the dollar or oil," he said. "But the difficulties in finding significant new deposits is overlooked. Not only do you have to find it but determine how much there is and how you are going to get it out. Bringing new mines to production takes years."

RM3,000 is poverty line for the urban poor

PETALING JAYA: The Government has decided to set RM3,000 as the poverty line for the urban poor based on feedback from people living in major urban areas such as Kuala Lumpur.

This is according to Federal Territories Minister Datuk Raja Nong Chik Raja Zainal Abidin whose ministry is to be renamed Federal Territories and Urban Wellbeing Ministry, in efforts to improve the lives of the urban poor.

“If you have three children and your household income is RM3,000 or below, you’re almost at the poverty line,” he said, adding that many lower income families had more than four children and still needed to pay for their cars, houses and other mortgage payments.

Therefore, a new set of criteria to eradicate urban poverty is in the pipeline, he said.

“I will have to work out the details with my ministry’s secretary-general,” he said on the sidelines of a family fair at the Malay-sian Tourism Information Centre here yesterday. Raja Nong said his ministry would also have to conduct a new census to identify those who came under the urban poverty mark.

“The number of urban poor and slum dwellers in the cities is rising,” said Raja Nong.

“There is no social safety net for such people, including single parents with three to five children living in low-cost flats.”

In his Budget 2010 speech on Friday, Prime Minister Datuk Seri Najib Tun Razak an-nounced that urban poverty eradication programmes would be drawn out nationwide.

The Budget had allocated RM48mil to implement the programmes.

According to Housing and Local Govern-ment Minister Datuk Seri Kong Cho Ha, the Government had decided two to three months ago that urban poverty eradication would be handled primarily by the Implementation Coordination Unit (ICU) under the Prime Minister’s Department.

“The information of those identified as being in the urban poverty bracket will be passed on to the ICU, which gets a list from the Rural Department, and other ministries and departments.”

Stop the fat-cat bonuses! George Soros turns on the bankers

LONDON, Oct 25 — As bailed-out institutions plan to share billions among staff, top figures in the City — including bank directors — call on the Government to take decisive action at last

British banks have just five working days to show they have “got it”. On Saturday, they must submit to the regulator — the FSA — their planned bonus awards, widely estimated to total £6 billion (RM32.4 billion). Prince Andrew may have said in an interview that he regards this sum as “minute in the scheme of things”, but, as the economy still falters and unemployment rises, it was clear last night that the banks will grant themselves their billions in an increasingly hostile atmosphere.

George Soros (below) became the latest high-profile figure from the world of finance to condemn the bankers, and call for watertight restrictions on their activities yesterday. He said: “Banks are actually getting hidden subsidies of enormous amounts because of their ability to borrow at effectively zero, and buy 10-year government bonds at 3.5 per cent. So those earnings are not the achievement of risk-takers. These are gifts, hidden gifts, from the Government, so I don’t think those monies should be used to pay bonuses. So there’s a resentment which I think is justified.”

And, as increasing numbers wonder why the United States’ decisive action to cap bonuses in firms taking public money has not been matched in Britain, there are now signs of a hardening of attitudes towards bankers inside the City. The Square Mile grandee Sir David Walker, The Independent today understands, is now expected to call for them to be banned from paying guaranteed bonuses in his forthcoming report on corporate governance. He is believed to have been impressed by the growing acceptance among big institutional investors, and even the banks themselves, that paying out huge salaries and bonuses may have exacerbated and contributed to the banking crisis. One source said: “Everyone knows the levels of bonuses are quite insane. None of the banks dare break ranks and stop paying such big bonuses because they are frightened traders will jump ship to another bank, or overseas. That’s why many actually want to be told what to do.”

Sir David, whose report is due on 26 November, has received a flurry of submissions from the industry, most of which have argued for bank boards to take a much tougher line on how pay is structured because, they argue, the big pay awards may have pushed traders — particularly in proprietary trading — to take bigger risks than they should. Remarkably, many of the complaints he received from the City, including those from non-executive directors on bank boards, were that they felt powerless to stop banks paying out such big bonuses. Last week, it was reported that Royal Bank of Scotland, which has received £20 billion of public money and fired 15,000 staff since the start of the recession, aims to pay £4 biliion-£5 billion in bonuses. Goldman Sachs, which has benefited from US government support, will pay its staff worldwide up to £14 billion in bonuses, averaging around £400,000 for each of its 5,500 London staff.

And ministers have also been contacted privately by bank chairmen and directors asking for guidance on pay because of worries about public hostility over bonus levels. One banker said: “Many are terrified because they don’t know what to do. Some want to cut bonuses, but they don’t want to be the first to do it in case it drives staff either to rivals or overseas. But they also know that changes have to be made and want leadership from government.”

These developments come at the end of a week in which Mervyn King, Governor of the Bank of England, attacked the way banks have exploited being seen as “too big to fail”. He was critical of how high-risk trading was conducted by banks which knew they could rely on a publicly funded safety net. “The past two years,” he said, “have shown how dangerous it is to let bankers play with fire.”

His frustration was contrasted with the situation in the US, where regulators last week announced tough, immediate and non-negotiable action on bonuses. The Federal Reserve plans to regulate bonus payouts from banks forced under its control after they took cash handouts from the bailout programme. And America’s “pay tsar” is looking to impose a cap of $500,000 on cash salaries received by executives at affected firms. Executives seeking more than $25,000 in special benefits, such as club memberships or company cars, will have to ask the government for permission.

In Britain, such decisive action has been talked about, but not taken, leaving the Government looking like customers impotently waving their arms while a counter clerk, smug behind the security glass, refuses to correct an error. Yesterday, Gordon Brown repeated what has so far seemed an empty recital of good intentions and so-far unheeded warnings. In his weekly podcast, he said: “We must bring financial markets into closer alignment with the values that everybody holds: hard work, responsibility, integrity and fairness.”

The singers from this familiar hymn sheet — Brown, the Chancellor, Alistair Darling, and Lord Myners, the Financial Services Secretary to the Treasury — are relying both on Sir David’s report and the eventual enactment of policies agreed at the G20. The UK’s big-five banks and 11 other foreign banks, such as Goldman, have already signed up to FSA and G20 pay-guideline principles, which could see bonuses clawed back in future years. According to Lord Turner, chairman of the FSA, the regulator has “a range of levers” to block “excessive bonus payments”. But what these levers are is a mystery to many.

Public impatience with the unhurried progress of such reforms has been rising, and will not have lessened in the past few days with the disappointing news on the British economy. Far from showing a little growth, as the Treasury expected, it actually shrank, with all that this implies for public finances. The present record £175 billion in net borrowing is likely to rise as tax receipts fall short of predictions, and estimated benefit payments increase. Overall, the country is now in the longest recession since records began in 1955.

What is significant about the signals being picked up by this newspaper is that this mood of anger at the bankers, and their disconnection from the world inhabited by the rest of the economy, is being echoed by the likes of Mervyn King and George Soros. In an interview with the Financial Times, Soros said there was a need to regulate payments to employees, even if that meant banks found it hard to retain talented risk-takers. He said: “That would push the risk-takers who are good at taking risks out of Goldman Sachs into hedge funds, where they actually belong, because hedge funds take risks with their own capital, not with deposits and not with government guarantees.” — Independent

Trip to Medan & Berastagi 10/09