Bank of America closing money-market fund

CHARLOTTE, N.C. - Bank of America Corp. is liquidating a privately placed, enhanced institutional cash fund amid withering losses on complex asset-backed securities, the bank said Monday.

The Columbia Strategic Cash Portfolio fund for institutional investors that was worth $34 billion on Nov. 30, currently has about $12 billion in assets, the Charlotte-based bank said. The fund will be closed off to new investors, it added.

The loss is related to the subprime-mortgage crisis that has rippled across the globe, Goldstein said.

"The conditions have really weakened the performance across the industry, including this one," Goldstein said.

Columbia Management approached some of the biggest investors in the fund to redeem "in kind," which means they get their share of the fund's assets put into a separately managed account managed by Columbia, according to Jon Goldstein, a spokesman for Bank of America.

The enhanced money fund was a short-term investment pool that offered higher yields than a traditional money-market fund. It had some money invested in so-called structured investment vehicles, or SIVs, which have been buffeted by this year's credit crisis.

Unlike traditional money-market funds, the Strategic Cash fund was not required to maintain a $1-per-share net asset value, although the fund was managed toward that goal, Goldstein said.

The Strategic Cash portfolio was open only to investors with a minimum of $25 million or more. Columbia Management is the bank's Boston-based asset management arm.

Bank of America shares rose $1.27, or 2.8 percent, to $46.64 Monday.

Real Estate Designers offers totally innovative solutions for your software development, Internet programming, real estate web design and hosting needs. Our service includes domain name registration and real estate web design. Real Estate Designers provides the complete solution including design, application development and marketing.

source: msnbc.msn.com

Effort to help homeowners shows limits of persuasion approach

In late October 1907, the American financial system appeared to be on the verge of collapse. The trouble had begun with a seemingly minor event—a failed attempt at stock-market speculation by a bank owner named F. A. Heinze—but it spread quickly after news of Heinze’s losses prompted a run on his banks by worried depositors.

In a matter of days, financial institutions with connections to Heinze were facing similar withdrawal frenzies, and the stock market was falling precipitously. Amid the turmoil, the financier J.P. Morgan stepped in. Consulting with the Treasury Department, which committed millions in deposits to weak banks, Morgan browbeat bankers into bailing out struggling institutions, funnelled money to cash-starved brokers and even convinced clergymen in New York City to dedicate their Sunday sermons to the need for “calmness and confidence.”

Within a few weeks, the fear and chaos had subsided, and the “panic of 1907” left only a small dent in the U.S. economy. A hundred years later, in the midst of what you might call the panic of 2007, many investors are hoping that a Morgan-style rescue plan will have similarly beneficial effects. The plan, which was unveiled last Thursday, after weeks of orchestration by Treasury Secretary Henry Paulson, seeks to stabilize the chaotic subprime-loan market by freezing the interest rates of some borrowers.

Although Paulson works for the government, his scheme involves no action by the state. Instead, he has relied, much as Morgan did, on collective suasion, assembling representatives of the many parties involved—mortgage lenders and servicers, investors who bought mortgage bonds, and borrowers—and pushing them toward a solution that, in theory, will leave the economy better off.

The plan targets a looming crisis. Many subprime mortgages came with so-called teaser rates—interest rates that start out low but quickly reset to become significantly higher. Many of those loans—more than $350 billion worth, in fact—are going to reset next year. That means that hundreds of thousands of people who are currently able to pay their mortgages are about to see their payments rise by hundreds of dollars a month.

If the credit and housing markets were more buoyant, these people might be able to refinance their loans or sell their homes. But the sharp decline in housing prices and the tightening of credit standards has closed off those options for most subprime borrowers, which pretty much guarantees a big increase in the number of foreclosures. The Paulson plan is meant to buy borrowers—and, arguably, the economy—some time, by postponing the interest-rate resets for five years.

Not for everyone, though. The plan sets up a system of triage, separating borrowers into three categories: Those who will be able to keep paying after the rates reset, or else refinance their loans; those who can pay now but won’t be able to when the rates go higher; and those for whom even the current rates are too high. Only the second group will get help. Also, the plan doesn’t go into effect until next year—if your loan resets on Dec. 31, you’re out of luck.

Real Estate Designers offers totally innovative solutions for your software development, Internet programming, real estate web design and hosting needs. Our service includes domain name registration and real estate web design. Real Estate Designers provides the complete solution including design, application development and marketing.

source: msnbc.msn.com

Trade group lifts outlook for 2008 home sales

WASHINGTON - Bucking conventional wisdom, a trade group for real estate agents on Monday said the battered housing market is on the verge of stabilizing and inched-up its outlook for 2007 and 2008 home sales.

The revised monthly forecast from the National Association of Realtors, which followed nine straight months of downward revisions, calls for U.S. existing home sales to fall 12.5 percent this year to 5.67 million — the lowest level since 2002. Last month, the association predicted 5.66 million existing homes would be sold this year.

The Realtors' group also forecast sales will rise slightly in 2008 to 5.7 million, up from last month's prediction of 5.69 million.

Numerous other economists, however, are far less optimistic than the trade group. They predict weak sales and falling prices through next year and beyond and emphasize that those problems could worsen if the economy sinks into a recession.

Mark Zandi, chief economist at Moody's Economy.com, predicted at a housing forum last week that, if the economy slips into recession or if efforts to prevent foreclosures don't pick up substantially, the housing market downturn could last through the end of the decade.

The trade group's chief economist, Lawrence Yun, cited job growth and the replacement of subprime lenders to borrowers with weak credit with government-backed loans as reasons for the improved outlook.

"Despite over-exaggerated negative coverage on the housing conditions, many local markets are actually seeing price increases," Yun said at a press briefing. "Mortgage availability is improving"

The trade group also said its index that forecasts near-term home sales inched upward in October. The trade group's seasonally adjusted index of pending sales for existing homes rose 0.6 percent to 87.2 from an upwardly revised September index of 86.7, but was down 18.4 percent from a year ago — the third-largest year-over year decline on record.

The Realtors group also said the median price for U.S. existing homes — the point at which half sold for more and half for less — will sink by 1.9 percent to $217,600 this year and rise 0.3 percent next year to $218,300.

If median prices fall this year, it will be the first price decline in the nearly 40 years that the trade group has tracked that data.

Other ways to measure national housing prices, such as the S&P/Case-Shiller index, have already shown price declines.

A government index of national home prices in the fourth quarter marked a quarterly decline for the first time in 13 years in the third quarter.

Home prices dipped 0.4 percent nationwide in the July-September period, compared with the previous quarter, the Office of Federal Housing Enterprise Oversight said last month, citing weakening prices in much of the country.

Compared with the third quarter of 2006, U.S home prices posted an increase of 1.8 percent, but it was the smallest year-over-year increase since 1995, according to the agency, which oversees the big mortgage-finance companies Fannie Mae and Freddie Mac.

Real Estate Designers offers totally innovative solutions for your software development, Internet programming, real estate web design and hosting needs. Our service includes domain name registration and real estate web design. Real Estate Designers provides the complete solution including design, application development and marketing.

source: msnbc.msn.com

H&R Block loss soars on mortgage meltdown

KANSAS CITY, Mo. - H&R Block Inc., the nation’s largest tax preparer, said in a preliminary earnings report Tuesday that it expected a huge second-quarter loss as it continued to wrestle with its disintegrating mortgage arm.

The company said it was filing its quarterly report late, blaming the decision earlier this fall to change accounting firms.

But it said it expected a net loss of $502.3 million, or $1.55 per share, for the quarter ending Oct. 31, compared with a loss of $156.5 million, or 49 cents per share, during the same period a year ago.

Of that loss, $366.2 million, or $1.13 per share, came from discontinued operations, including much of its Option One Mortgage Corp., which has suffered as an increase in borrower defaults and a drying up of credit markets caused dozens of lenders to disappear.

The company posted a loss from continuing operations of $136.1 million, or 42 cents per share, compared with a loss of $121 million, or 38 cents, during the same period a year ago.

H&R Block typically has a loss in its second quarter as it makes most of its revenue and earnings during the January-April tax filing season.

The company said its discontinued operations had a pretax loss of $551.2 million, including $367 million in operating losses and losses on sales of mortgage assets, $123 million to adjust the value of remaining mortgage origination and servicing assets and $61 million in costs for restructuring Option One’s loan origination operations.

H&R Block said last week a proposed sale of Option One to Cerberus Capital Management LP had failed and that it was scrapping most of the business.

The company said it expected to file its quarterly report by Friday.

It said the delay came as it switched to auditing firm Deloitte & Touche LLP in October, shortly before the quarter ended and the firm needed more time to perform its work.

H&R Block changed auditors after the election in September of dissident shareholder Richard Breeden to the company’s board of directors. Breeden is serving as a court-appointed monitor for KPMG, the company’s previous auditor, and company officials worried that relationship would endanger the auditor’s independence.

Breeden has since become chairman of the company, ousting former Chairman and Chief Executive Officer Mark Ernst.

Real Estate Designers offers totally innovative solutions for your software development, Internet programming, real estate web design and hosting needs. Our service includes domain name registration and real estate web design. Real Estate Designers provides the complete solution including design, application development and marketing.

source: msnbc.msn.com

Washington Mutual to lay off more than 3,000

SEATTLE - Washington Mutual Inc., the nation’s largest savings and loan, said Monday that problems in the mortgage and credit markets are forcing it to close offices, lay off more than 3,000 workers and set aside up to $1.6 billion for loan losses in the fourth quarter.

WaMu is also slashing its quarterly dividend 73 percent and plans a $2.5 billion offering of preferred stock that is convertible to common shares. WaMu has not yet priced the offering, but increasing the total number of company shares will dilute their value for existing stockholders. In after-hours trading, WaMu shares fell $1.76, or nearly 9 percent, to $18.12 following the company’s announcement.

The offering follows recent announcements by other big banks and mortgage-related companies to sell special stock to shore up their finances.

These actions ... should ensure that it has the financial strength to address difficult conditions in the credit and housing markets in 2008,” the company said in a statement.

After dismantling much of its subprime mortgage operation in September, Seattle-based WaMu will now get out of the business entirely. The company said it will close about 190 of its 335 home loan centers and sales offices, shut down nine call centers and eliminate 2,600 home loan workers and 550 corporate and support jobs.

It had already cut 1,000 jobs related to the sale of home loans to people with questionable credit.

The company also said it will shutter WaMu Capital Corp. and rely on third party broker-dealers to sell mortgage-backed securities.

These changes, meant to address what WaMu called “unprecedented challenges in the mortgage and credit markets,” will save the thrift $140 million in the fourth quarter. But the company still expects to post a loss, due in part to a $1.6 billion charge for the writedown of goodwill associated with the shrinking home loans business.

On top of that, WaMu now expects to set aside between $1.5 billion and $1.6 billion for loan losses in the fourth quarter, from the $1.1 billion to $1.3 billion predicted by executives in early November.

For the first quarter of 2008, the company said it expects loan losses to total $1.8 billion to $2 billion. Loan losses will remain high throughout the year, WaMu added.

Word of WaMu’s convertible preferred stock offering came just hours after Switzerland-based UBS AG said it would sell $11.5 billion in shares to Government of Singapore Investment Corp., a sovereign-wealth fund, and to an unidentified investor in the Middle East. And last month, Citigroup Inc. took a $7.5 billion investment from the Abu Dhabi Investment Authority in exchange for up to 4.9 percent of Citigroup’s equity.

Government-sponsored mortgage finance companies Freddie Mac and Fannie Mae both recently announced plans to sell preferred stock totaling $6 billion and $7 billion, respectively.

WaMu has not yet priced its offering, and it may have to settle for less-than-favorable terms if the other recent deals are any indication. In exchange for its cash, the Abu Dhabi fund will get an 11 percent annual yield from Citigroup. The Freddie Mac offering have a fixed dividend rate of 8.375 percent, almost 2 percentage points higher than its last sale of preferred stock, in September.

WaMu also slashed its quarterly dividend to 15 cents per share from its most recent dividend of 56 cents per share, for savings of more than $1 billion.

Moody’s Investors Service downgraded several long-term and short-term ratings for WaMu and said in a statement that the move “was based on its view that credit losses from WaMu’s mortgage operations will be noticeably higher than previously estimated.” The credit rating agency said it doesn’t expect WaMu’s profitability to begin to recover until 2010.

Real Estate Designers offers totally innovative solutions for your software development, Internet programming, real estate web design and hosting needs. Our service includes domain name registration and real estate web design. Real Estate Designers provides the complete solution including design, application development and marketing.

source: msnbc.msn.com