KeNo's Housing and Economic Portal: Friday August 27 Housing and Economic stories

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Vultures' Save Troubled Homeowners - (online.wsj.com) Anna and Charlie Reynolds of St. George, Utah, were worried about losing their home to foreclosure last year. Then they got a lucky break—from an unlikely savior. Some investment funds are emerging as the best hope for millions of U.S. households, like the Reynolds, above, who were behind on their mortgage payments. James Hagerty discusses. Also, Anupreeta Das and Liam Denning talk about BHP's $38.6 billion hostile bid to buy Canada's Potash, a bid that Potash's management called 'grossly inadequate.' Selene Residential Mortgage Opportunity Fund, an investment fund managed by veteran mortgage-bond trader Lewis Ranieri, acquired the loan at a deep discount and renegotiated the terms with the Reynolds. The balance due was cut to $243,182 from $421,731, and the interest rate was lowered. That reduced the monthly payment to $1,573 from $3,464, allowing the family to stay in their home despite a drop in Mr. Reynolds' income as a real-estate agent. "It was a miracle," says Ms. Reynolds. But Mr. Ranieri isn't your typical miracle worker. As a fund manager who was once vice chairman of the bond-trading firm Salomon Brothers, he's a member of the Wall Street crowd that is often pilloried for helping inflate the housing bubble, though he sat out the excesses of recent years. The 1989 book "Liar's Poker" made him famous for billion-dollar trades in mortgage bonds and junk-food "feeding frenzies" with his trading-desk buddies. As the nation struggles with the worst foreclosure crisis since the 1930s, Mr. Ranieri's investment fund and others like it are emerging as the best hope for the roughly seven million U.S. households behind on their mortgage payments. Nimble, flush and willing to strike deals with borrowers, these funds have an edge over banks and other lenders that can be mired in bureaucracy and hampered by government rules about which loans can be renegotiated and how.

Germany Ignores Soros as Exports Boom at Consumers’ Expense - (www.bloomberg.com) Germany may have become too competitive for its own good. With exports driving the fastest economic growth since reunification, consumers are failing to respond in kind as companies from Siemens AG to Daimler AG hold fast to the wage restraint that’s given them an international edge. The result: Europe’s largest economy, four times more reliant on exports than the U.S., is firing on only one cylinder. That’s unlikely to change as Germany spearheads a push for European fiscal prudence and ignores calls from investors and the Obama administration to do more to help rebalance the global economy by reviving domestic demand. While Chancellor Angela Merkel’s plan to cut 80 billion euros ($103 billion) of spending helps make government bonds attractive to Pacific Investment Management Co., retail stocks may suffer, and the country’s dependence on exports leaves it vulnerable to a global slowdown.

Scientists raise queries about Gulf oil left behind - (www.reuters.com) Two new scientific reports raised fresh fears on Tuesday about the environmental fallout from the world's worst offshore oil spill and questioned government assurances that most of the oil from the ruptured well in the Gulf of Mexico was already gone. In one of the reports, researchers at the University of Georgia said about three-quarters of the oil from BP's blown-out Macondo well was still lurking below the surface of the Gulf and may pose a threat to the ecosystem. Charles Hopkinson, who helped lead the investigation, said up to 79 percent of the 4.1 million barrels of oil that gushed from the broken well and were not captured directly at the wellhead remained in the Gulf. The report was based on an analysis of government estimates released on August 2 that Hopkinson said had been widely misinterpreted as meaning that 75 percent of the oil spewed by the well had either evaporated, dissolved or been otherwise contained, leaving only about 25 percent. "The idea that 75 percent of the oil is gone and is of no further concern to the environment is just absolutely incorrect," Hopkinson told reporters on a conference call.

U.S. role at heart of housing debate - (www.washingtonpost.com) The Obama administration is seeking advice on how to rebuild a system at the center of the 2008 credit crisis. Some Republicans have sought to abolish Fannie Mae and Freddie Mac, the main sources of U.S. mortgage financing. Yesterday, Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., said the U.S. should consider “full nationalization” of the system. “To suggest that there’s a large place for private financing in the future of housing finance is unrealistic,” Gross said at the meeting. “Government is part of our future. We need a government balance sheet. To suggest that the private market come back in is simply impractical. It won’t work.” Fannie Mae, based in Washington, and Freddie Mac of McLean, Virginia, have drawn almost $150 billion in Treasury aid since September 2008, when they were seized by the government amid soaring losses on mortgage investments. The U.S. has promised unlimited support for the two companies. Including Ginnie Mae, the government insured almost 97 percent of U.S. mortgages in 2009, according to Inside Mortgage Finance.

Federal stimulus money misspent, Chick says - (www.sacbee.com) An Imperial County social service organization received $2.7 million in federal economic stimulus funds to weatherize homes of low-income residents but its workers are untrained and the organization's financial records are in disarray, Inspector General Laura Chick said today. Chick, the former Los Angeles city controller whom Gov. Arnold Schwarzenegger hired to monitor expenditure of federal stimulus finds, made her allegations in a audit report and a letter to the governor. The money was allocated to Brawley-based Campesinos Unidos, which helps farmworkers with services and jobs, by the state Department of Community Services and Development. Chick urged the department to stop weatherization work in Imperial and San Diego counties until workers are trained. "My report also found Campensinos' books are in such disarray that we cannot determine how much recovery money has actually been spent or how well it has been spent," Chick told Schwarzenegger. "This is not an acceptable way to account for the people e's money."