New Web address endings could be start of billion-dollar turf wars

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MCLEAN, Va. – April 8, 2009 – A sea change may be coming to cyberspace with Web addresses ending in anything from .a to .z. That has businesses increasingly worried they will have to spend millions to guard their brand names.

The familiar .com, .net, .org and 18 other suffixes – officially “generic top-level domains” – could be joined by a seemingly endless stream of new ones next year under a landmark change approved last summer by the Internet Corp. for Assigned Names and Numbers, the entity that oversees the Web’s address system.

Tourists might find information about the Liberty Bell, for example, at a site ending in .philly. A rapper might apply for a Web address ending in .hiphop.

“Whatever is open to the imagination can be applied for,” says Paul Levins, ICANN’s vice president of corporate affairs. “It could translate into one of the largest marketing and branding opportunities in history.”

Many businesses see more problems than profits – opportunities for scammers to exploit brand names and mislead consumers, or even attack brands.

“It costs companies hundreds of thousands of dollars, if not millions, to enforce their trademark rights in the existing space, so imagine how expensive it will be when Verizon gets infringed in a thousand new domains,” says Sarah Deutsch, vice president and associate general counsel for Verizon. “Many businesses feel this is a form of extortion.”

To beat a competitor to the punch, a company might decide it needs to control a new generic domain, such as .cereal or .detergent, but it would be costly. The currently proposed application fee is $185,000, says Levins, plus an annual “continuance” fee of $25,000. If more than one company wants a suffix, there could be a bidding war.

A more likely scenario would be for a business just to register site Web addresses pairing their brand name with any new extensions, such as fios.telephone or gillette.razor. But even that defense could cost marketers up to $1.5 billion, estimates the not-for-profit Coalition Against Domain Name Abuse.

Many businesses already do that, usually then redirecting users from, say “product”.net to the product’s primary website ending in .com. More generic domains will add to that cost.

Companies will “do it more out of competitive necessity than any real desire or ability to meet consumer needs or improve their business, and that’s a bad reason,” says Peter Fader, professor of marketing at the University of Pennsylvania’s Wharton School. “I would bet a large number of registrations would be purely that – people carving out turf they don’t want other people to have, but not necessarily turf they can do anything good with.”

The turf war could be endless, says Dan Jaffe, executive vice president of the Association of National Advertisers trade group of big marketers. “Think about some of the companies out there. Some have hundreds, maybe thousands of brands. … It’s really open-ended.”

Levins says ICANN is still taking comments on rules to protect trademarks, secure the Web and solidify a process to challenge new extensions as offensive.

ICANN won’t take new generic domain applications “until we’ve addressed those concerns,” he says, adding that the earliest would be the end of this year.

While some fret about new, more specific generic domains, others see opportunity.

“There’s prestige to it,” says film producer Minor Childers, who co-founded Dot Eco to push for a .eco domain for use by environmentalists. Al Gore is among its supporters. “It’s of value to someone who wants to say something about their identity.”

Such value would take effort to establish, however. At the end of 2008, 90.4 million of the 177 million registered website names ended in .com or .net, according to VeriSign, the company that manages those extensions.

Liliana Gil, director of global marketing services with Johnson & Johnson, doesn’t see the common suffixes being overtaken but believes, “This could be a fun new way to communicate a message digitally. …You could have tylenol.children, tylenol.pm.”

A new extension likely would need a marketing push. Generic top-level domains, such as .travel, approved in 2005 and .biz, approved in 2001, have been slow to catch on, says Ron Jackson, editor of Domain Name Journal.

“.Com was the only choice in the early years of the Internet, so that has been branded in the public’s consciousness,” he says. “If you’re a small businessman and you buy a new extension you’ve got an uphill fight. … It’s going to be like being invisible on the Web.”

2009 © USA TODAY. All rights reserved.

How will foreclosure affect credit scores?

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The amount of damage to a credit score caused by foreclosure, deed in lieu or a short sale during 2008 and 2009 may be mitigated by the slower economic times, say some credit and legal experts.

FICO may have to adjust its credit scores to lessen the impact of a foreclosure in the past two years, says Todd J. Zywicki, a professor of law at George Mason University.

”It just seems obvious that a foreclosure in 2008 or 2009 doesn’t have as much information value as a foreclosure five years ago,” he says. ”To the extent that foreclosure doesn’t predict future behavior as much as it did in the past, you’d expect that the FICO algorithm would change to adjust for that.”

One of the country’s largest credit unions, Golden 1, has already figured out a way to lend to people with a foreclosure on their record by offering a mortgage repair loan specifically for those who have lost a home to foreclosure and who want to buy a new one.

BECU, another large credit union based in Washington State, is about to present a program to fellow lenders, ”How to Lend to the Newly Credit Impaired.”

Source: The New York Times, Ron Lieber (03/14/2009)

 

Pending home sales down – housing affordability at record high

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WASHINGTON – March 3, 2009 – Pending home sales declined on the heels of a weakening economy as some buyers wait for clarity on housing stimulus provisions, according to the National Association of Realtors® (NAR).

The Pending Home Sales Index (PHSI), a forward-looking indicator based on contracts signed in January, fell 7.7 percent to 80.4 from a downwardly revised reading of 87.1 in December; it’s 6.4 percent below January 2008 when it was 85.9. The index is at the lowest level since tracking began in 2001, when the index value was set at 100.

Lawrence Yun, NAR chief economist, says the economic downturn also weighed heavily on the data. “Even with many serious potential homebuyers on the sidelines waiting for passage of the stimulus bill, job losses and weak consumer confidence were a natural drag on home sales,” he says. “We expect similarly soft home sales in the near term, but buyers are expected to respond to much improved affordability conditions and from the $8,000 first-time homebuyer tax credit.”

The PHSI in the South fell 11.9 percent to 82.2 in January and is 9.1 percent below a year ago. In the Northeast, it dropped 12.7 percent to 57.8 in January and is 19.7 percent below a year ago. In the Midwest, the index declined 9.2 percent to 72.6 and is 13.8 percent below January 2008. In the West, the index rose 2.4 percent to 103.6 and is 13.5 percent higher than January 2008.

NAR President Charles McMillan says it’s ironic with the weak housing market that affordability conditions have improved dramatically. “Housing affordability is at a record high – the buying power of a typical family has risen significantly,” he says. “With the drop in interest rates, a median-income family can afford a home costing $20,000 more than a year ago for the same monthly mortgage payment. With the strong housing stimulus, we are hopeful inventory will get trimmed and help prices stabilize in many areas by the end of this year.”

NAR’s Housing Affordability Index (HAI) rose 13.6 percentage points in January to 166.8, a new record high. The HAI, a broad index of affordability using consistent values and assumptions over time, shows that the relationship between home prices, mortgage interest rates and family income is the most favorable since tracking began in 1970.

According to the HAI, a median-income family earning $59,800 could afford a home costing $283,400 in January 2009, assuming a 20 percent downpayment and an expense equal to 25 percent of gross income for mortgage principal and interest. Affordability conditions for first-time buyers with the same income and small downpayments are roughly 80 percent of that amount. A year ago, the typical family could afford a home costing only $263,300.

 “Conditions have been aligning very favorably for homebuyers with the exception of consumer confidence,” says Yun. “But I am hopeful that sales will turn around by late spring and early summer because history suggests that home sales can rise even in times of job losses when housing affordability rises.”

 

Source: http://www.floridarealtors.org/NewsAndEvents/n3-030309.cfm

Homeowners’ rallying cry: Produce the note

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ZEPHYRHILLS, Fla. – Feb.18, 2009 – Kathy Lovelace lost her job and was about to lose her house, too. But then she made a seemingly simple request of the bank: Show me the original mortgage paperwork.

And just like that, the foreclosure proceedings came to a standstill.

Lovelace and other homeowners around the country are managing to stave off foreclosure by employing a strategy that goes to the heart of the whole nationwide mess.

During the real estate frenzy of the past decade, mortgages were sold and resold, bundled into securities and peddled to investors. In many cases, the original note signed by the homeowner was lost, stored away in a distant warehouse or destroyed.

Persuading a judge to compel production of hard-to-find or nonexistent documents can, at the very least, delay foreclosure, buying the homeowner some time and turning up the pressure on the lender to renegotiate the mortgage.

“I’m going to hang on for dear life until they can prove to me it belongs to them,” said Lovelace, a 50-year-old divorced mother who owns a $200,000 home in Zephyrhills, near Tampa. “I’ll try everything I can because it’s all I have left.”

In interviews with The Associated Press, lawyers, homeowners and advocates outlined the produce-the-note strategy. Exactly how many homeowners have employed it is unknown. Nor is it clear how successful it has been; some judges are more sympathetic than others.

More than 2.3 million homeowners faced foreclosure proceedings last year and millions more are in danger of losing their homes. On Wednesday, President Obama will unveil a plan to spend at least $50 billion to help homeowners fend off foreclosure.

Chris Hoyer, a Tampa lawyer whose Consumer Warning Network Web site offers the free court documents Lovelace used to file her request, has played a major role in promoting the produce-the-note strategy.

“We knew early on that the only relief that would ever come to people would be to the people who were in their houses,” Hoyer said. “Nobody was going to fashion any relief for people who have already lost their houses. So your only hope was to hang on any way you could.”

Tom Deutsch, deputy executive director of the American Securitization Forum, a group that represents banks, law firms and investors, dismissed the strategy as merely a stalling tactic, saying homeowners are “making lawyers jump through procedural hoops to delay what’s likely to be inevitable.”

Deutsch said the original note is almost always electronically retained and can eventually be found.

Judges are often willing to accept electronic documentation. And lenders are sometimes allowed to produce other paperwork to establish they are the holder of a loan. Still, assembling such documents to a judge’s satisfaction takes time, which to homeowners is the point.

Lovelace filed her produce-the-note demand last fall after the bank acknowledged that her original mortgage document had been lost or destroyed. Since then, there has been no activity on the foreclosure – no letters from the lender, no court filings.

The law firm handling the foreclosure for the lender refused to comment.

A University of Iowa study last year suggested that companies servicing mortgages are often negligent when it comes to producing the documentation to support foreclosure. In the study of more than 1,700 bankruptcy cases stemming from home foreclosures, the original note was missing more than 40 percent of the time, and other pieces of required documentation also were routinely left out.

The first big success of the produce-the-note movement came in 2007 when a federal judge in Cleveland threw out 14 foreclosures by Deutsche Bank National Trust Co. because the bank failed to produce the original notes.

Michael Silver, a lawyer for two of the families in that case, said at least one eventually lost their home. Still, he considers that a success.

“From the perspective of the person who’s in the home, you may have kept them in the house another 10 or 12 months,” he said. “If I can get a result with economic benefits to a client, then I think I won.”

Democratic Rep. Marcy Kaptur of Ohio endorsed the strategy in a fiery speech on the House floor during debate on the federal bank bailout last month.

“Don’t leave your home,” she said. “Because you know what? When those companies say they have your mortgage, unless you have a lawyer that can put his or her finger on that mortgage, you don’t have that mortgage, and you are going to find they can’t find the paper up there on Wall Street.”

April Charney, head of foreclosure defense for Jacksonville Area Legal Aid in Florida, said the strategy has been so successful for her that she now travels around the country to train other lawyers in how to use it. She said she has gotten cases delayed for years by demanding that lenders produce paperwork they cannot find.

“This is an army of lawyers getting out there to stop foreclosures so we can get to the serious business of creating solutions,” Charney said. “Nothing good is going to happen as long as we continue to bleed homeowners.”

On the Net: Consumer Warning Network: http://www.consumerwarningnetwork.com
American Securitization Forum: http://www.americansecuritization.com

 

Source: http://www.floridarealtors.org/NewsAndEvents/n2-021809.cfm

Tainted drywall affects real estate: Firms begin to seek legal advice

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MANATEE COUNTY, Fla. – Feb. 17, 2009 – The presence of defective drywall in some Manatee County homes has heightened awareness about the issue in the real estate world.

Buyers, sellers and real estate agents are all asking the same question: Which homes are affected?

“In the real estate community, the concern is which of these homes potentially has the Chinese drywall,” said Greg Owens, a Realtor with Keller Williams of Greater Manatee, Inc. “We’re here to represent our buyer’s best interest. We need to know from the builders and the construction companies which of these homes potentially have defective drywall that affects the homes.”

As the problem unfolds, neighborhoods in Manatee County that have reported the problem include GreyHawk Landing, Heritage Harbour, Greenbrook in Lakewood Ranch, Fairways at Imperial Lakewoods and Crystal Lakes. But more are likely to follow.

Real estate firms are beginning to seek legal advice on the problem.

Realtor Leslie Wells said she is consulting with an attorney about how to best approach the issue. It will likely include an additional drywall disclosure to accompany a standard residential disclosure form from the Florida Association of Realtors.

“From our standpoint, we want to be careful that the proper disclosures are made, but we aren’t going to overreact to this because it’s only been found in certain subdivisions,” she said.

Florida law requires a residential seller to disclose all known facts that materially affect the value of the property when they are not known or readily observable to the buyer.

Anne L. Weintraub, an attorney for Icard Merrill, has not personally handled any cases involving Chinese drywall but believes it’s likely she eventually will. If a client were looking to purchase property in an area known to be affected by tainted drywall, she would recommend that they take precautions, which would include conducting an investigation beyond the standard home inspection.

“The truth of the matter is that all parties to any real estate transaction involving properties affected by Chinese drywall must use extra caution, make the appropriate disclosures, and buyers must go the extra mile to confirm they are protected before closing,” Weintraub said. “In the event a seller has knowledge of Chinese drywall in their property and fails to disclose it to the buyer, the seller will most definitely be answering for their lack of disclosure in front of a judge.”

The landmark case, Johnson vs. Davis, ended the notion of “buyer beware” in Florida for residential property in the mid-1980s when the Supreme Court ruled that a seller has a duty to disclose defects on a home.

The ruling made it a duty for owners to disclose what they knew about defects that would affect the value of the property, said John Neukamm, chair-elect of the Florida Bar’s real property, probate and trust law section. A subsequent case made the same true for a broker involved in the sale of the real estate.

So in the case of Chinese drywall, an owner who even suspects or ignores symptoms of defective drywall could be held liable.

“You can’t just kind of like play see no evil or hear no evil,” Neukamm said.

The buyer who discovers a defect in the home can either sue for damages to recoup the out-of-pocket cost or actually reverse the transaction.

“If the cost to repair is too much, they can literally unwind the transaction,” he said. “It’s a pretty serious situation.”

Beth Barnett, a Realtor for Coldwell Banker at Lakewood Ranch, said she is getting questions about the potential of Chinese drywall in homes.

In addition to adding a disclosure to the contract for the home, she’s also advising people to have the home inspected to see if there are any problems. “It’s definitely scaring people,” she said.

 

Source: http://www.floridarealtors.org/NewsAndEvents/n4-021709.cfm

Other insurers poised to pick up State Farm’s slack

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PALM BEACH COUNTY, Fla. – Feb. 17, 2009 – For 700,000 homeowners covered by State Farm Florida, the departure of the state’s largest private home insurer might not be as financially painful as feared.

Florida Insurance Commissioner Kevin McCarty said Friday he’s negotiating with 15 insurers that want to take over State Farm Florida’s homeowners policies, and those carriers are interested in covering 50,000 to 500,000 policies each.

“We’ve got private companies that are ready, willing and able to take these policies,” McCarty said.

That’s a relief for homeowners who feared their coverage would move from State Farm to state-run Citizens Property Insurance Corp., which traditionally has charged the highest rates in Florida, although a rate freeze has held down Citizens’ rates in recent years. McCarty approved State Farm’s Jan. 27 request to pull out of Florida – but only if State Farm doesn’t dump those policies into Citizens.

“Most of the policies will be able to be placed in the private sector at rates at or below Citizens’,” McCarty said.

McCarty wouldn’t name the carriers he’s talking to. Smaller carriers such as Ormond Beach-based Security First Insurance have said they aim to add customers dumped by State Farm.

Florida Peninsula Insurance of Boca Raton is talking to McCarty about taking on 100,000 policies, Chief Executive Roger L. Desjadon said.

“We are a Florida-focused company, and we think that if you do the business correctly, you can do it very successfully in this state,” Desjadon said.

But Bill Newton, executive director of the Florida Consumer Action Network, doubted that State Farm’s exit would be as seamless as McCarty suggested.

“It’s a bit of a stretch,” Newton said. “If you could smoothly transition the policies with no bump, great, but I don’t think you can do it.”

Citing hurricane risk and steep losses, State Farm said last month it would drop 1.2 million Florida policies, including 700,000 homeowners policies, 80,000 condo unit owners policies and 94,000 personal liability umbrella policies.

McCarty on Friday approved State Farm’s plan, with caveats. It’s unclear whether State Farm will agree to the conditions set by McCarty. One of those conditions: that State Farm’s so-called captive agents be allowed to sell homeowners policies written by other carriers. Now, State Farm agents can arrange policies only through State Farm and Citizens.

“We’ll need to study the (Office of Insurance Regulation’s) opinion more closely, but we do appreciate its quick consideration of the plan,” State Farm said in a statement. “We hope to have further conversations with the OIR to create an orderly process that is best for our customers, our agents and the marketplace.”

Insurance experts lauded McCarty for taking steps to keep Citizens’ already bulging policy rolls from growing. Citizens has 1.1 million policyholders.

“Citizens is already overtaxed with the policies they have,” McCarty said.

Not only are Citizens’ prices high, but any losses could be absorbed by taxpayers.

“The more policies that are in Citizens, the more taxpayers are on the hook for potential losses,” Citizens spokesman John Kuczwanski said.

State Farm Florida has 54,000 homeowners policies in Palm Beach County, 5,900 in Martin County and 12,700 in St. Lucie County.

State Farm also is Florida’s largest auto insurer. Its life insurance and 3 million auto policies won’t be affected by the move, despite a 2007 Florida law that prevents carriers from selling auto coverage but not homeowners policies if they sell both types of coverage in other states.

State Farm is getting around that law by moving its auto policies into State Farm Mutual Automobile Insurance Co., a national carrier that sells only auto coverage.

McCarty talked tough during Friday’s news briefing. He said state regulators and politicians weren’t to blame for State Farm’s departure. Instead, he called State Farm’s losses “a crisis created by the company.”

And McCarty said State Farm broke its promise to stay in Florida if regulators approved a 52 percent rate hike in 2006.

“They said they would stay and commit to Florida with a 52 percent rate increase,” McCarty said. “We certainly got a lot of heat from policyholders for approving that increase.”

Not everyone is convinced that State Farm will leave. Newton, of the Florida Consumer Action Network, compared the showdown to a poker game where both sides are bluffing.

“The other shoe is yet to drop,” Newton said. “It’s hard to believe they would just walk away from that much business.”

But Florida Insurance Consumer Advocate Sean Shaw said both sides have been playing their hands too convincingly for State Farm to stay.

“They’re pretty far down the line to be bluffing at this point,” Shaw said. “We’re past the showdown phase and onto a new hand.”

Poker game or not, State Farm Florida’s departure is a dramatic example of the turmoil that has gripped Florida’s homeowners insurance market since Hurricane Andrew struck south of Miami in 1992. The barrage of hurricanes that hit Florida in 2004 and 2005 deepened the insurance crisis.

Since Andrew, insurance prices have soared. State Farm, for instance, has increased rates 530 percent since 1992, McCarty said, and hundreds of thousands of policyholders have been dumped by private insurers into Citizens.

 

Source: http://www.floridarealtors.org/NewsAndEvents/n2-021709.cfm

Ten real estate predictions for 2009

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NEW YORK – Dec. 18, 2008 – 2009 is likely to be a year of continuing adjustment to a changing real estate marketplace. Prepare yourself and your business with these predictions from HGTV’s FrontDoor.com Web site.

 

• Sellers will continue to face falling home values in the new year because they’ll be competing with banks and builders who are slashing prices to sell off the still-huge inventory of foreclosures and new homes.

 

• The Obama administration will act on its plan to crack down on abusive lending practices.

 

• Mortgage holders in danger of losing their homes will receive more assistance from a variety of programs since the Senate’s Joint Economic Committee has predicted two million foreclosures in 2009.

 

• Banks’ restructuring should bring increasing calm, making loan modifications and short sales easier to obtain. Eventually this will lead to a decrease in the number of bank-owned properties on the market.

 

• Mortgage applications will continue to receive a comprehensive review, requiring borrowers to provide extensive income and debt documentation. Those with the best credit will get the best rates.

 

• The foreclosure crisis has created wiser consumers, with a deeper understanding of real estate, mortgages and credit, enabling better decision-making going forward.

 

• Green is good with increasing numbers of buyers opting for smaller homes that are within walking distance of school and work.

 

• Buyers and sellers will be more and more tech savvy, relying on tools like video, webcasts, and mobile search. Consumers and practitioners will benefit from being ahead of the curve.

 

• Prices will be low as will interest rates, creating great buying opportunities, and likely, inspiring reluctant buyers to make their move.

 

• The recession will end and buyers will regain confidence in the market.

 

Source: Frontdoor.com (12/03/2008)

L-1 business visas allow foreigners a chance to succeed in America

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ORLANDO, Fla. – Dec. 18, 2008 – For Brazilian Renato Rosa, crisis equals opportunity.

 

Rosa thinks the current economic recession presents a chance for him and other foreigners to start companies – and achieve a piece of the American dream.

 

“You can have a crisis anywhere,” Rosa said. “A lot of my friends think I’m crazy for starting a business here, but I’m strong,” he said.

 

In September, Rosa opened an Orlando subsidiary of ArtiPlacWood, a 50-year-old wood- import business his father started in Brazil with little money. Rosa said his father’s legacy gave him the courage to start an Orlando subsidiary, despite the worst economic crisis since the Great Depression.

 

Many foreign nationals have taken the same leap of faith this year. Like Rosa, they have come to the U.S. on a L-1 business visa.

 

They are non-immigrant visas typically used by large foreign companies to create subsidiaries or to send employees with specialized knowledge to work in existing U.S. offices. L-1 visas, which can take from a couple of weeks to four months to process, are being issued in larger numbers: from 54,000 in 2000 to more than 84,000 this year, according to the U.S. Bureau of Consular Affairs.

 

Many small foreign businesses have used L-1 visas to expand internationally, with most of the visa holders coming from England, India, Venezuela, Brazil and Colombia, according to local immigration lawyers.

 

Brazilian Mario Chiavegatti, 52, and his wife, Roseli Zambon, 48, are among the many foreign nationals who have opened businesses this year.

 

Their company, DynaSource, sells radiation oncology machines to Florida hospitals and clinics. Chiavegatti and Zambon said launching their business in the U.S was easier than it would have been in Brazil, where they said rampant corruption and lack of capital are big hurdles.

 

“From the difficulty we have in Brazil selling this equipment, selling it here is a piece of cake,” Chiavegatti said.

 

“Crisis?” said Zambon. “You have to go to Brazil to see what a crisis is.”

 

Immigration lawyer James Lavigne said people such as Chiavegatti and Zambon are vital to the U.S. economy because their visas stipulate that they must hire American workers.

 

“The best time to start a business is when business is bad for everybody,” Lavigne said. “It helps our economy now because people are bringing money here to invest and hire people.”

 

Carlos Thurdekoos, a business broker whose clients include foreign nationals, said plummeting real-estate prices have allowed many foreign start-ups to expand cheaply and fill a void in the marketplace.

 

“They’re strategically placing themselves to provide services in the midst of the crisis,” he said.

 

Rosa and Chiavegatti already have plans to expand their businesses. Chiavegatti said he has hired two people and plans to hire a few more in coming months. He is in negotiations to sell four machines – at $300,000 to $400,000 each – to local hospitals and clinics.

 

Rosa is taking advantage of real-estate bargains and will close on a warehouse for his business next week. He said the warehouse will benefit him and the U.S. economy.

 

“There’s a trickle-down effect,” Rosa said. “When I buy the warehouse, I have to pay taxes on the warehouse, and I have to hire people to run the warehouse.”

 

One concern for Rosa and Chiavegatti is that their companies must be successful for them to remain in the U.S. The recession makes their residency status even more tenuous.

 

Both men have bought homes and plan to reside permanently in Orlando. They said they aren’t worried about returning to Brazil if their businesses fail.

 

“We’re still excited. If we’re all negative about the crisis, then it’s going to get worse,” Chiavegatti said.

 

Rosa also has a positive outlook.

 

“This is a challenge for me, but this is also a dream for me,” he said. “Hopefully I’ll reach the American dream.”

 

Source: http://www.floridarealtors.org/NewsAndEvents/n3-121808.cfm

Mortgage rates fall; Unemployment data still weak

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Mortgage rates are falling as this week’s dramatic action by the Federal Reserve provides a boost to the dismal housing market, but the nation’s unemployment rolls are stuck at historically high levels amid a deepening recession.

 

Mortgage giant Freddie Mac on Thursday reported that rates had fallen to the lowest level on records dating back to 1971. Average rates on 30-year fixed-rate mortgages dropped to 5.19 percent, down from the year’s previous low of 5.47 percent, set last week.

 

Jobs data from the government, while better than expected, was still sobering. The Labor Department on Thursday said its tally of initial jobless benefit claims fell to a seasonally adjusted 554,000 from an upwardly revised figure of 575,000 the previous week. The new tally was slightly below economists’ expectations of 558,000 claims.

 

Another slight improvement was seen in the number of people who continue to receive jobless benefits, which declined to 4.38 million from 4.43 million the previous week. Economists expected a slight increase to 4.45 million.

 

Still, claims remain near the highest level since 1982, though the labor force has grown by about half since then.

 

And the cuts continue. Water treatment and storage systems maker Pentair Inc. said Thursday that it will cut more than 10 percent of its work force, or about 1,600 jobs, due to a faster-than-expected drop-off in demand and consumer spending. One day earlier, hard drive maker Western Digital Corp., managed-care company Aetna Inc., and Newell Rubbermaid Inc., maker of products including Rubbermaid storage containers and Sharpie pens, announced mass job cuts.

 

Meanwhile, President-elect Barack Obama is laying the groundwork for a giant economic stimulus package, worth possibly $850 billion over two years, which Democratic congressional leaders say could be passed within two weeks of Obama taking office.

 

The Federal Reserve, aiming to free up lending and jolt the economy back to life, on Tuesday cut the federal funds rate from 1 percent to a target range of zero to 0.25 percent and pledged to keep funneling money into the market for mortgage investments.

 

On Wednesday, some mortgage brokers were quoting mortgage rates of close to 4.5 percent for people with strong credit and hefty down payments.

 

“This is beautiful, oh my gosh!” said Patti Mazzara, a mortgage broker in the Minneapolis suburb of Edina, who was surprised when she looked up rates and found them well below 5 percent, down at least three-quarters of a percentage point from earlier in the week. “This is a whole new game now. Hopefully it’s going to give people some relief.”

 

The national average rate on 30-year, fixed mortgages was 5.06 percent on Wednesday, according to financial publisher HSH Associates — the lowest since the 1960s and down from 5.3 percent Tuesday.

 

It was the best news in months for anyone looking to lock in a 30-year, fixed-rate mortgage. But it was not expected to be a cure-all, and borrowers already in danger of foreclosure probably won’t be able to take advantage.

 

“It’s a call to action for homeowners looking to get out of adjustable-rate mortgages,” said Greg McBride, senior financial analyst at Bankrate.com. “Unfortunately, it’s not an equal-opportunity party.”

 

Falling interest rates mean Americans could suddenly find billions of extra dollars in their pockets at a time when consumers have sharply cut back on spending amid rising unemployment and declining household wealth. But many experts believe that the interest rate cuts alone won’t be enough to jump-start the economy.

 

“It’s a tall order to get (people) to go out and spend again,” said Joseph LaVorgna, chief U.S. economist at Deutsche Bank. “That’s why you also need a stimulus.”

 

The New York-based Conference Board’s index of leading economic indicators for November fell 0.4 percent, which was slightly better than the 0.5 percent decline economists expected. The index, which posted a 0.9 percent decline in October, is designed to forecast economic activity in the next three to six months based on 10 economic components, including stock prices, building permits and initial claims for unemployment benefits.

 

Also Thursday, President-elect Barack Obama named a veteran of the Securities and Exchange Commission to lead the agency as it faces growing criticism for its failure to protect investors and detect trouble on Wall Street.

 

Mary Schapiro, who currently heads a nongovernment regulatory group for securities firms, is also a former head of the Commodity Futures Trading Commission and former member of the SEC. She has been appointed to government posts by two Republican presidents and one Democratic chief executive.

 

Wall Street stocks were mixed Thursday morning, after finishing moderately lower Wednesday. The Dow Jones industrial average lost about 20 points in midday trading.

 

Source: ap.org

Fed cuts target for key rate to record low

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The Federal Reserve has cut its target for a key interest rate to the lowest level on record and pledged to use “all available tools” to combat a severe financial crisis and prolonged recession.

 

The central bank on Tuesday said it had reduced the federal funds rate, the interest that banks charge each other, to a range of zero to 0.25 percent. That is down from the 1 percent target rate in effect since the last meeting in October.

 

Many analysts had expected the Fed to make a smaller cut to 0.5 percent.

The Fed’s aggressive move was greeted enthusiastically by Wall Street. The Dow Jones industrial average rose about 350 points in late-afternoon trading.

The Fed’s action and statement made clear that economic conditions have worsened since its last meeting in October.

 

Federal Reserve Chairman Ben Bernanke and his colleagues said they will use unconventional methods to try to contain a financial crisis that is the worst since the 1930s and a recession that is already the longest in a quarter-century. For example, the Fed last month said it planned to purchase up to $600 billion in direct debt and mortgage-backed securities issued by big financial players including Fannie Mae and Freddie Mac in an effort to boost the availability of mortgage loans.

 

That move was one of a series the central bank has taken to increase its loans by hundreds of billions of dollars as a way to deal with the worst financial crisis to hit the country in more than 70 years.

 

The Fed on Tuesday also made clear that it intends to keep the funds rate at extremely low levels.

 

“The committee anticipates that weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time,” the central bank’s panel that sets interest rates said in a statement.

 

Even before the announcement of a lower target, the funds rate has been trading well below the old target of 1 percent. For November, the funds rate had averaged 0.39 percent. Analysts said it was likely to fall further with the Fed setting the new target as low as zero.

 

The Fed’s decision was matched by a reduction in the prime lending rate, the benchmark rate for millions of business and consumer loans. Banking giant Wells Fargo and Co. said it was cutting its prime rate to 3.25 percent, down from 4 percent before the Fed action. Other banks are expected to quickly match Wells Fargo’s move.

 

The Fed has never pushed its target for the federal funds rate as low as zero to 0.25 percent. The lowest target rate before had been 1 percent, a level seen only once before in the past half-century.

 

Given how low interest rates are, the central bank said it planned to use a variety of unconventional methods to flood the banking system with credit and drive interest rates lower.

 

“The Federal Reserve will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability,” the Fed said.

 

The announcement on the deployment of unconventional methods had been expected given that Bernanke and other Fed officials have sought in recent comments to let financial markets know that the central bank will not be out of ammunition to battle the economic downturn even with the funds rate at such low levels.

 

In its statement Tuesday, the Fed said that since its last meeting in late October, “labor market conditions have deteriorated, and the available data indicate that consumer spending, business investment and industrial production have declined. Financial markets remain quite strained and credit conditions tight.”

The central bank acknowledged that it had room to battle the economic weakness because inflation pressures have “diminished appreciably” as the price of energy and other commodities has fallen sharply.

 

The Fed action came only hours after the government announced that consumer prices dropped by a record amount of 1.7 percent in November, reflecting a

record decline in the price of gasoline and other energy products.

 

Source: AP.org