About 900,000 borrowers have enrolled in the $75 billion program since it launched in March, the Treasury Department said Friday. But as of last month, only about 66,500 homeowners had received permanent relief. Another 46,000 have been approved and should be finalized soon.

The plan aims to make borrowers’ mortgages more affordable by reducing the mortgage interest rate to as low as 2 percent. They receive temporary modifications, which are supposed to become permanent after borrowers make three payments on time and complete necessary paperwork, including proof of income and a letter explaining the reason for their financial hardship.

The Treasury Department is pressing the 102 mortgage companies that are participating in the program to do a better job.

The mortgage companies say they have struggled to get homeowners to return the necessary paperwork. Wells Fargo executives project that only about half of the borrowers who enrolled last summer will wind up being approved.

The rest will either won’t send back all the required documents or will be deemed ineligible according to the government’s formula. Collecting the documents up front would make the process much easier, said Mike Heid, co-president of Wells Fargo & Co.’s mortgage division.

“You could make a better decision for the consumer right up front,” he said.

Nevertheless, homeowners and housing counselors say navigating the bureaucratic maze often seems impossible.

The nation’s economic woes have made more borrowers fall behind on their payments. More than half of the borrowers approved for a loan modification have seen their income cut, according to the Treasury Department.

Unemployment, now at 10 percent, is expected to remain elevated for the whole year. Industry executives and housing advocates alike have been in talks with the Treasury Department to develop a program to aid the unemployed, but nothing has been rolled out yet.
Hard money training.

The government agency has seen its losses rise with the foreclosure rate. Its reserves have sunk below the minimum level required by Congress. A healthy FHA is vital for the housing market because it insures roughly 30 percent of new loans, and is the largest backer of mortgages to first-time buyers.

The changes, which will go into effect in the first half of the year, “are among the most significant steps to address risk in the agency’s history,” FHA Commissioner David Stevens said in a prepared statement.

The FHA does not make loans, but rather offers insurance against default. Borrowers are willing to pay for the insurance because FHA loans only require down payments of 3.5 percent of the purchase price — and that didn’t change.

The new policies, to be announced Wednesday, are designed to bring more revenue into the agency, while at the same time keeping loans available.

Under the changes, homebuyers will:

• Pay an upfront mortgage insurance premium of 2.25 percent of the total loan amount, up from the current level of 1.75 percent. A borrower taking out a $200,000 mortgage would pay a $4,500 fee, for example, rather than the current fee of $3,500. Borrowers will still be able to wrap these fees into the total amount borrowed. FHA officials also plan to ask Congress to increase the maximum annual premium that FHA can charge.
• Need a credit score of at least 580 to qualify. Many FHA lenders already require a higher score, but there had been no standard requirement across the program. Borrowers with a score lower than 580 will need a down payment of at least 10 percent.

The changes come as borrowers with loans backed by the agency have increasingly been falling into default. More than 18 percent of FHA borrowers are at least one payment behind or in foreclosure, compared with 14 percent for all loans, according to the Mortgage Bankers Association.

Hard money training

The average rate on a 30-year fixed mortgage was 5.06 percent this week, down from 5.09 percent a week earlier, mortgage company Freddie Mac said.

Rates dropped to a record low of 4.71 percent in early December, pushed down by an aggressive government campaign to reduce consumers’ borrowing costs, but then rose steadily for the rest of the month.

Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day, often in line with long-term Treasury bonds.

The Federal Reserve is pumping $1.25 trillion into mortgage-backed securities to try to bring down mortgage rates, but that money is set to run out next spring. The goal of the program is to make home buying more affordable and prop up the housing market.

While it’s possible that the program could be extended, analysts believe the Fed is reluctant to do so. “We believe that the bar for the Fed’s program extension is high,” Credit Suisse mortgage strategist Mahesh Swaminathan wrote Thursday.

The average rate on a 15-year fixed-rate mortgages fell to 4.45 percent, down from 4.50 percent last week, according to Freddie Mac.

Rates on five-year, adjustable-rate mortgages averaged 4.32 percent, down from 4.44 percent a week earlier. Rates on one-year, adjustable-rate mortgages rose to 4.39 percent from 4.31 percent.

The rates do not include add-on fees known as points. One point is equal to 1 percent of the total loan amount.

The nationwide fee for loans in Freddie Mac’s survey averaged 0.7 point for 30-year loans, 0.6 point for 15-year and five-year loans and 0.5 point for one-year loans.
Home Security Systems

The Commerce Department said Friday that businesses trimmed stockpiles by 0.2 percent in December, a weaker performance than the 0.2 percent gain that economists had expected. Total business sales rose 0.9 percent in December following a 2.4 percent increase in November.

The hope is that further gains in sales will convince businesses to make sustained increases in their inventories, a development that would boost factory production and help support a recovery from the deepest recession since the 1930s.

Businesses increased inventories by 0.5 percent in November and 0.3 percent in October, two monthly gains that followed 13 consecutive declines in inventories as companies struggled to control costs during the recession by trimming their stockpiles.

It was this slowdown in the pace of inventory reductions that contributed nearly two-thirds of the growth in the overall economy in the fourth quarter as measured by the gross domestic product.

The GDP shot up at an annual rate of 5.7 percent in the October-December period, the strongest showing in six years. The concern is that the boost from inventories will be temporary and GDP will slow significantly in coming quarters if consumer demand falters in the face of still-high unemployment.

For December, the 0.2 percent decline in total inventories reflected a 0.1 percent drop in inventories held by manufacturers and a 0.8 percent decline in inventories held by wholesalers. Retail inventories were unchanged during the month.

Wholesalers hold 25 percent of all inventories with factories holding about one-third and retailers holding the rest.

The 0.9 percent sales gain in December reflected a 1.9 percent jump in sales by manufacturers and a 0.8 percent rise in sales by wholesalers with sales at the retail level falling by 0.1 percent. A separate report Friday showed that retail sales rose by 0.5 percent in January, a better-than-expected showing.

The reduction in inventories and the rise in sales in December left the ratio of inventories to sales at 1.26 in December, meaning that it would take 1.26 months to deplete existing inventories at the December sales pace. That compared to a 1.27 inventory-to-sales ratio in November. Home Security Systems

The 0.5 percent gain the Commerce Department reported Friday exceeded the 0.3 percent rise economists had expected. Strength came from a surge at general merchandise stores. These include big chains such as those owned by Wal-Mart Stores Inc. Excluding autos, sales rose 0.6 percent.

Higher consumer spending is vital because it accounts for about 70 percent of economic activity. Economists caution, though, that the spending increases seen since summer could falter as the jobs crisis weighs on a fledgling recovery.

They noted a second report that showed consumer confidence slipped in early February. The Reuters/University of Michigan consumer sentiment index dipped to 73.7 for early February. That was down from 74.4 in January.

Some analysts said the unsettled global economy is eroding confidence that the United States can sustain a recovery from the worst recession in decades.

A debt crisis in Greece has plunged the euro, the currency used by 16 European nations, into the worst turmoil since it was launched 11 years ago. Financial markets fear a domino effect that could derail a global rebound.

Greek Prime Minister George Papandreou criticized the European Union on Friday for being too “timid” and slow in its support for Greece.

Concerns about the global economy were raised, too, by China’s move to restrict lending for a second time in a month to cool a credit boom. The order for banks to increase reserves against bad loans renewed fears that a flood of lending in China might be fueling a bubble in stock and real estate prices.

But economists said the biggest threat to the U.S. economy remains the reluctance of U.S. consumers to keep spending.

“We expect that lingering high unemployment, weak income growth, low confidence, tight credit conditions and the continuing need to deleverage will constrain consumption growth for at least this year and possibly well beyond,” said Paul Ashworth, senior U.S. economist at Capital Economics.

Adding to the caution was a separate Commerce report on businesses’ inventories. It said companies reduced their stockpiles 0.2 percent in December. Economists had expected firms to boost their inventories 0.2 percent.

The dip in inventories shows businesses are reluctant to add to their stockpiles because they think consumer demand and the recovery will remain weak. Still, total business sales rose 0.9 percent in December. That followed an even stronger 2.4 percent gain in November.

The economy grew at an annual rate of 5.7 percent from October through December. That was the best showing in six years. But analysts warn that growth could slow in coming months as the benefits of government stimulus programs fade and unemployment remains near double digits.

Many economists cautioned that retail sales were likely to fall in February because of the impact of winter storms that have hit most of the country in the past week.

The storms are a particular problem for apparel stores with mostly lightweight items on their floors. Merchants ended December with relatively little excess supply. As a result, some stores moved up their deliveries of spring items, from jumpsuits to sandals. But those items aren’t exactly what shoppers trudging through snow are thinking about now.

“Everything winter has sold out,” said New York-based independent consultant Walter Loeb. He added that the “snow stopped sales.”

On the other hand, supermarkets, drug stores and home improvement chains haven’t likely been hurt as much. Consumers’ rush to buy items like shovels and food in the hours before the storms likely offset slower business later this week when shoppers were snowed in, according to Joel Bines, director in the retail practice of AlixPartners.

For the retail industry overall, February is the second-least important month, after January. Retailers use these months to clear out winter items and bring in spring merchandise.

So even if the nation is hit hard by more snowstorms in the next few weeks, “it’s not going to kill the spring selling season,” said Brean Murray analyst Eric Beder.

But economists said the winter storms could skew the results of some economic reports in February, from retail sales to unemployment. That would make it even harder to divine a direction for a recovery that’s proceeding in fits and starts.

“The storms likely will cast a thicker cloud over what remains a foggy economic outlook,” said Bill Cheney, chief economist at John Hancock Financial Services in Boston. “February data is likely to look bad, and March is likely to snap back up sharply.”

In its annual economic report to Congress, the Obama administration on Thursday forecast that the economy would average 95,900 new jobs per month this year. That wouldn’t be enough to make much dent in an unemployment rate that’s now 9.7 percent.

The administration’s economists also forecast that Americans’ personal savings would remain high as credit remains tight. That, too, will likely hold back spending.

The 0.5 percent increase in retail sales in January followed a 0.1 percent decline in December. The December figure was revised up from an initial report that sales fell 0.3 percent that month. In November, sales had surged 2 percent.

Sales at auto dealerships were flat in January after a 0.1 percent rise in December. Activity last month was hurt by safety recalls at Toyota. The 0.6 percent increase in retail sales excluding autos followed a 0.2 percent drop in this category in December.

The 1.5 percent jump in sales at general merchandise stores in January was the biggest one-month jump in this category since February 2009. Sales at specialty clothing stores rose 0.3 percent. And sales at gasoline stations gained 0.4 percent.

Other stores with sales increases in January were sporting goods stores, restaurants and bars and nonstore retailers — the category that covers Internet shopping.

Retailers that suffered declines included furniture stores, where sales fell by 1.4 percent. Sales at hardware stores dropped 1.2 percent. Home Security Systems

The Wisconsin Housing and Economic Development Authority stopped issuing mortgages to low- and middle- income home buyers in October 2008, when the economic collapse left no market for the revenue bonds that finance them.

At a news conference Friday, WHEDA Executive Director Antonio Riley said a new 30-year mortgage product with significantly reduced closing costs will be available starting March 1.

“WHEDA is back in business,” Riley said, prompting applause from employees assembled in a conference room in agency headquarters in downtown Madison.

Real estate and banking leaders said they expected the loan to be popular immediately with would-be home buyers who have good credit but little money saved for down payments and closing costs. As little as $1,000 cash-out-of pocket will be needed for borrowers.

The news comes as the housing market picks up speed as first-time buyers rush to take advantage of an $8,000 federal tax credit for homes purchased before April 30.

“The timing is just incredible,” said John Horning, incoming chair of the Wisconsin Realtors Association. “Most loan programs have required 5 percent down or thousands of dollars in closing costs. What WHEDA is doing is going to enable many buyers to come in to the market that have not been able to.”

WHEDA’s return to the market is being made possible by a U.S. Treasury program announced last year to help state and local housing finance agencies crippled by the downturn. Treasury has agreed to purchase $325 million of WHEDA’s long-term bonds this year, which gives the agency the cash it needs to invest again invest in single-family mortgages.

Wisconsin’s housing agency is the first to take advantage of that program and to offer a new loan developed for the agencies by the U.S. government-controlled mortgage finance company Fannie Mae, Riley said. Others are expected to follow suit in coming weeks, he added.

The program will feature higher income limits and home purchase prices but stricter guidelines for a borrower’s credit than WHEDA’s previous loans.

To qualify, borrowers will generally need a credit score of 660 or higher unless they can put more money down, said WHEDA official Geoffrey Cooper. In the past, 85 percent of WHEDA borrowers have met that requirement, he said.

The loan will also not be allowed for the purchase of condominiums, which are seen as a riskier investment, under a restriction imposed by Fannie Mae, Cooper said.

Income limits vary by county from $66,000 to $83,900 for one- or two- member households, which make up the majority of WHEDA’s borrowers. For targeted neighborhoods in some cities, the limits are higher. The price purchase limits are $235,000 or $280,000 depending on the county.

The initial interest rate for the loans have not been set, but are expected to be above market rates, Cooper said. The lower closing costs and fees and a protection that covers up to six months of mortgage payments for borrowers who lose jobs will still make it a better deal, he said.

In all, WHEDA plans to issue $180 million in loans or more this year to roughly 1,800 borrowers. Before the suspension, the agency was issuing up to $500 million of loans per year to 5,000 borrowers. Riley promised to unveil other loan products in coming months. Home Security Systems

Nervous investors briefly were appeased by the EU leaders’ declaration, which called for countries that use the euro to take “determined and coordinated action, if needed, to safeguard stability in the euro area.”

But the lack of ready funding help and a murky strategy later caused the euro to slump. By Friday, the currency had reached its lowest level since last May, trading just above $1.35.

Greece is struggling to tame its budget deficit, which is estimated to have been worth almost 13% of gross domestic product last year, sharply above the 3% limit established by the EU. The country’s debt burden, around 113% of GDP, has sparked fears of default and made investors wary of other highly leveraged euro-zone countries, including Portugal and Spain.

EU leaders suggested euro-zone finance ministers would discuss more detailed plans to help Greece at their regular monthly meeting on Monday in Brussels. All 27 EU finance ministers are due to meet in Brussels on Tuesday.

In fact, euro-zone finance ministers have held a flurry of talks on this issue, including a conference call last Wednesday. Some of the options they are weighing to help Greece include loans from euro-zone governments, which would come with strict conditions and require Greece to pay interest, according to several people familiar with these discussions. Debt guarantees and direct purchases of Greek government bonds are also being considered.

A role for the International Monetary Fund also could be discussed. Greek Prime Minister George Papandreou on Thursday noted the EU doesn’t have the kind of experience or financial resources the IMF does. Several euro-zone policy makers have rejected the idea of an IMF-led bailout, however, saying the euro zone should solve its own problems.

Luxembourg’s Prime Minister Jean-Claude Juncker, who chairs the Eurogroup – the EU body that brings together the euro-zone finance ministers – on Thursday suggested the ministers have discussed a plan but haven’t received political backing.

“We are debating a determined and coordinated plan from the euro area to help Greece…but leaders are yet to decide the precise measures to help the Greek economy,” Mr. Juncker said.

Support for Greece is a touchy subject in some euro-zone countries, particularly in Germany, which feared having to pay for the excesses of other countries when the euro was being designed in the early 1990s. Greece also hasn’t endeared itself to the bloc, repeatedly revising its budget-deficit figures and raising doubts about whether it should have been allowed to join the euro zone.

At their meetings next week, the ministers will also discuss Greece’s plan to bring its deficit below 3% of GDP by 2012. The European Commission, the EU’s executive arm, has said this plan is feasible, but risky. Under EU rules, the bloc’s finance ministers formally have to endorse the commission’s assessment, which they are expected to do.

In addition to Greece’s debt crisis, the euro-zone finance ministers next week will also nominate a replacement for European Central Bank Vice President Lucas Papademos, whose term expires in May. Bank of Portugal Governor Vitor Constancio will be nominated, according to three people familiar with the matter. Home Security Systems.

At the same time, U.S. capital flows data underscored analysts’ worry that the economic recovery could be stymied by a steep rise in bond yields, making borrowing more expensive for homeowners and companies.

The data showed China sold U.S. Treasuries in December for the fifth straight month, analysts said, underscoring the risk that waning appetite for U.S. debt among major foreign holders could spark a selloff and send yields rising in future.

A gauge of manufacturing in New York state rose in February as inventories jumped, the New York Federal Reserve said in a report on Tuesday.

The New York Fed’s “Empire State” general business conditions index rose to 24.91 in February, the highest level since October and up from 15.92 in January.

On the surface, the main index appeared to reinforce the impression that industrial companies are continuing to bounce back after the long recession which ended last year. Economists polled by Reuters had expected a February figure of 18.

Despite a stronger-than-expected headline reading, however, some analysts said the details of the report were somewhat more bearish.

“A lot of the improvement was driven by a correction of inventories,” said Anna Piretti, senior U.S. economist at BNP Paribas in New York. “It’s a temporary factor. What worried me more was a sharp decline in new orders.”

The inventories index rose sharply, to zero from negative 17.33, its highest reading in more than a year.

But the new orders index tumbled to 8.78 in February from 20.48 in the previous month — a warning sign that activity could decelerate in future.

“This clearly indicates that some of the demand that we hoped would sustain the recovery in manufacturing is not there,” Piretti said.

However, the report offered some signs of improvement in the job market at factories.

Employment indexes were positive for a second consecutive month, although at relatively low levels, the Fed said.

The expectations index for six months ahead slipped to 52.78 in February from 56.

Over the longer term, borrowing costs may determine how anemic the U.S. economic recovery will prove to be.

Overall, net capital inflows into the United States rose to $60.9 billion in December, from an inflow of $30.9 billion the prior month, but foreigners cut purchases of long-term securities, the Treasury said on Tuesday.

The data also showed that China has now been a net seller of some $45 billion of U.S. Treasuries over the last five months, wrote Alan Ruskin, chief international strategist with RBS Securities Inc., which he added was “a long enough period to hint strongly at a trend.”

Much of China’s selling has been in short-dated Treasury bills, but China has not indicated that instead it will buy longer maturity U.S. government notes and bonds. “That is the bad news for the U.S. dollar and the Treasury market,” Ruskin wrote. Home Security Systems

Speaking on ABC’s Good Morning America program, Romer also said she believes there is bipartisan support in Congress to preserve jobs by providing new assistance to state governments struggling with yawning budget deficits.

President Barack Obama has made job creation his top priority in 2010 in a bid to address public anxiety about high unemployment and prospects for a slow economic recovery.

“Right now the employment numbers look basically stable,” Romer said days after the U.S. jobless rate for January fell to a five-month low of 9.7 percent, just below the psychologically important 10 percent mark.

“We think we’re going to see positive job growth by spring,” she told ABC.

Democrats in Congress, led by Senate Majority Leader Harry Reid, have unveiled a jobs bill that relies on tax cuts to drive employment growth.

The approach has been criticized in some quarters as being too small to aid job growth and lacking in assistance for state governments that are trimming payrolls to cope with fiscal problems.

But Romer appeared optimistic about the prospects for federal aid to states.

“Senator Reid has made it very clear that the package he’s talking about is one step,” she said.

“And we anticipate as we go through, I think there is a bipartisan realization of just how much states are still suffering and how state fiscal relief could help to keep teachers and all of those people that are working in our state governments employed.” Home Security Systems.

Initial claims for state unemployment benefits increased 31,000 to 473,000, the Labor Department said on Thursday. That compared to market expectations for 430,000.

Another report from the department showed prices paid at the farm and factory gate rose a faster than expected 1.4 percent from December after a 0.4 percent gain in December, as higher gasoline prices and unusually cold temperatures helped boost energy costs.

“When you have PPI moving up and still no progress in the jobs situation, that doesn’t bode well for continued improvement in equity prices,” said Alan Lancz, president at Alan B. Lancz & Associates Inc in Toledo, Ohio.

U.S. stock index futures added to losses after jobless claims and producer price data, while government debt prices rose.

Last week was the survey week for the employment report for February, which is scheduled for release in early March.

The labor market, hardest hit by the worst recession in seven decades, has lagged the economic recovery that started in the second half of 2009. The economy has lost 8.4 million jobs since the start of the downturn in December 2007.

The PPI report may give investors, who keeping a wary eye on inflation following massive efforts by the Federal Reserve to pull the economy out of its worst slump since the Great Depression of the 1930s, something to worry about.

“The bottom line is that the Fed is going to have some decisions to make at its next meeting, since it seems inflation is now back on the table,” said Lancz.

Fed officials, keeping an eye on how quickly the recovering economy absorbs the excess slack that built up during the recession, have said they are likely to keep interest rates extraordinarily low for “an extended period.”

About three-fourths of the increase in PPI last month was due to a 5.1 percent jump in prices for energy goods, the department said. Energy costs were pushed up by a spike in prices for gasoline, liquefied petroleum and home heating oil.

Strong energy prices overshadowed a slowdown in the food prices, which rose 0.4 percent after increasing 1.3 percent in December.

Stripping out the volatile food and energy costs, core producer prices rose a faster than expected 0.3 percent last month after being flat in December. The core index had been forecast to rise 0.1 percent in January.

The department on Friday will release its consumer price report for January. Headline CPI is seen rising 0.3 percent from December and core CPI gaining 0.1 percent, according to a Reuters survey.

“It does present some upside risks to our call for only modest gains in CPI and also points to some possible upward price pressures in the pipeline,” Millan Mulraine, an economics strategist at TD Securities in Toronto.

In the claims report, the four-week moving average of new claims, which irons out week-to-week volatility, fell 1,500 to 467,500, the Labor Department said. The number of people still receiving for benefits after an initial week of aid was unchanged at 4.56 million in the week ended February 6.

This measure has held below the 5 million mark for eight straight weeks and analysts believe it is starting to reflect an improvement in the labor market rather than people merely dropping off rolls because they have exhausted their benefits. Home Security Systems