Financial thoughts

Stocks fell for a third day Thursday as concerns continued over how violent clashes in Libya would affect the global oil market. Major indexes pared steeper losses in the afternoon after oil prices fell for the first time in nine days.

Oil fell to $97.28 a barrel after the International Energy Agency said fighting between forces loyal to Moammar Gadhafi and anti-government protesters in Libya were not affecting oil inventories as much as analysts had feared. Libya is the world’s 15th largest exporter of crude, accounting for 2 percent of global daily output. Oil had traded as high as $103.41 earlier in the day.

Traders are worried that fighting could threaten Libya’s oil production and spread to other countries in the region, such as oil-rich Saudi Arabia. Higher oil prices can also slow the U.S. economy by increasing transportation costs.

Reports of ample oil inventories “calmed some of the short-term fears in the market,” said Bruce McCain, chief investment strategist at Key Private Bank. “But the fact that there is very little real information coming out the country is worrying.”

The Dow Jones industrial average fell 37.28 points, or 0.3 percent, to 12,068.50. It had been down as many as 122 points earlier in the day.

The Standard & Poor’s 500 index fell 1.30, or 0.1 percent, to 1,306.10. The Nasdaq composite gained 14.91 points, or 0 saving account pay day loan.5 percent, to 2,737.90.

The mixed stock performance came the same day the Labor Department reported that fewer people applied for unemployment benefits last week, a sign that the job market is recovering. The four-week average for applications, a figure closely watched by financial analysts, fell to its lowest level in more than two and a half years.

The housing market, however, continued to lag. The Commerce Department said sales of new homes fell significantly in January.

Several companies rose after announcing better than expected earnings.

Priceline.com11 Inc. jumped 8.5 percent after the online travel service reported a 73 percent surge in fourth-quarter earnings and raised its income forecast for the current quarter. Target Corp. rose 3.5 percent after the retailer reported an 11 percent gain in profit. H&R Block Inc. rose 5 percent after the tax preparation company said it expected to report near break-even earnings in its fiscal third quarter.

Bond prices rose, pushing their yields lower. The yield on the 10-year Treasury note fell to 3.46 percent from 3.49 percent late Wednesday.

Rising and falling shares were about even on the New York Stock Exchange. Volume came to 1.2 billion shares.

Source

Swiss bank UBS AG on Tuesday posted its first annual profit since the global financial crisis erupted, despite softer-than-expected fourth quarter earnings, and said it had managed to stanch the rich customers’ withdrawals that had plagued it since a high profile tax evasion scandal.

The largest Swiss bank reported that it made a net profit last year of 7.2 billion Swiss francs ($7.5 billion), compared with a 2009 loss of 2.7 billion francs.

The last year that UBS had posted an annual profit was in 2006. In the years since then the Zurich-based bank had incurred major losses from the U.S. real estate market and required a Swiss government bailout.

But its fourth-quarter profit was 1.29 billion francs ($1.35 billion), only a modest improvement from a year earlier, when the bank reported a profit of 1.205 billion francs, and below market expectations for 1.45 billion francs.

“While we made substantial progress in 2010, we are fully aware that we have to continue to improve our results,” said UBS Chief Executive Oswald Gruebel in a statement.

Fourth quarter results benefited from a one-off tax credit of 149 million Swiss francs _ significantly smaller than the one-off tax credit of 825 million Swiss francs that helped UBS beat expectations in the third quarter.

UBS said its securities unit and its private bank benefited from income gains. Its wealth management division, one of the biggest in the world, reversed earlier net outflows, suggesting it had regained the trust of rich clients who fled during a bitter tax evasion dispute with U.S. authorities.

Cross-town rival Credit Suisse, which is also based in Zurich and reports its fourth-quarter results on Thursday, had been gaining market share at the expense of UBS.

“Net inflows of new money were very small during the fourth quarter compared with 1 billion Swiss francs in the prior quarter. We saw inflows in the Asia Pacific region, in emerging markets and globally from ultra high net worth clients,” the bank said.

UBS had struggled to stem the flow of client withdrawals and had launched a large marketing campaign to win back the confidence of Swiss customers. In 2009, net clients withdrawals totaled 2.74 billion francs.

UBS said will not pay a dividend to its shareholders this year and will instead store up the profit to meet stricter Swiss banking rules and new international banking standards requiring higher stores of capital. It also said it was confident that activity among its wealthy clients would pick up this quarter.

Shares in the bank were trading mid-morning at 17.71 francs, up from its 17.50 closing share price Monday.

UBS said it had cut its bonus pool by 10 percent, down to $4.3 billion Swiss francs _ which is $500 million Swiss francs less than in 2009.

Those figures reflect the bank’s attempt to appease Swiss government, which kept the bank going two years ago, but retain talented staff. The head of the bank’s compensation committee, UBS board member Sally Bott, stepped down Monday.

UBS said its fourth quarter profits before taxes rose to 1.161 billion Swiss francs, up from 818 million Swiss francs in the third quarter, which it said reflected more client activity across all businesses and included some credit losses and higher general and administrative expenses.

Analyst Tobias Brutsch at private bank Vontobel had said investors would be looking for details on the restructuring of UBS’s investment bank, which is still lagging behind the company’s overall recovery. He had said he expected net profits of 1.44 billion francs in the fourth quarter.

In November, UBS firmed up a deal with American authorities to end a damaging three-year dispute and avoid further prosecution by the U.S. Justice Department. Under that deal, which cost UBS $780 million in fines, the Swiss government is to turn over the names of 4,500 suspected American tax cheats.

Source

CVS Caremark Corp. said Thursday that it expects profits at its Caremark pharmacy benefits management unit to shrink further this year in part because of costs related to a new multiyear contract with Aetna.

The weak forecast was a drag on shares of CVS Caremark, which also reported lower revenue and net income in the fourth quarter.

The outlook was a surprise as analysts had expected the company would begin to see improved results at Caremark, a nearly $27 billion acquisition that has continued to weigh on the Woonsocket, R.I., company.

CVS Caremark warned that other issues affecting Caremark’s results include lower payments from pharmacy benefits program for federal employees, less profitable contract renewals, and expenses related to cost cuts. It said its adjusted profit per prescription will also continue to decline, moving closer to the levels reported by Caremark’s competitors.

Shares of the company fell $1.97, or 5.7 percent, to $32.68 in afternoon trading. Earlier the stock lost as much as 6.3 percent.

Incoming CEO Larry Merlo said during a conference call that profits at the Caremark unit will decrease for the second consecutive year as it begins its 12-year relationship with Aetna Inc. On Jan. 1, Caremark began administering Aetna’s retail pharmacies and managing purchasing, inventory and prescription filling for Aetna’s mail order and specialty businesses. The deal is expected to boost the company’s revenue by $8.2 billion in 2011 alone, and Caremark will handle about 150 million adjusted prescriptions from Aetna this year. However, those prescriptions are less profitable than Caremark’s typical business.

Merlo said he is committed to making the CVS-Caremark combination is “financially successful for our shareholders.” CVS and Caremark united in 2007, saying that together, they would be able to use their size to reduce drug costs for health plan members and clients while improving retail sales. But the company _ now the second-largest drugstore chain and the third-largest PBM company _ has struggled at times, and some investors remain skeptical of the business model payday loans. The company also faces continued regulatory scrutiny.

CVS Caremark’s fourth-quarter profit fell 2 percent to $1.03 billion from $1.05 billion, but because the company has fewer shares on the market than it did a year ago, its per-share income grew to 75 cents from 74 cents. Revenue fell to $24.77 billion from $25.82 billion, reflecting a 10 percent decline in Caremark’s revenue due to client losses and fewer Medicare prescription drug program members.

Excluding one-time items, the company earned 80 cents per share. Analysts expected earnings of 79 cents a share on $24.98 billion in revenue.

Looking ahead to the first quarter, the company expects to earn 54 to 56 cents per share, below analysts’ estimate of 62 cents per share. Revenue is forecast to grow 7 to 9.5 percent, suggesting a total of $25.42 billion to $26.02 billion. Analysts expect $25.82 billion.

For 2011, the company expects adjusted earnings from continuing operations between $2.72 and $2.82 per share, while analysts expect $2.89 per share, according to FactSet.

The company said it expects Caremark’s profit to grow in 2012. The Aetna deal is expected to add at least 5 cents per share to its profit that year, and at least 10 cents per share in 2013. CVS said it can still reach its five-year profit and growth targets despite the setbacks for Caremark.

Merlo also said he wants to enhance returns for investors with greater dividends and stock repurchases. Last month the company boosted its quarterly dividend by 43 percent, to 12.5 cents.

For the full year, the company’s net income fell to $3.44 billion, or $2.49 per share, from $3.71 billion, or $2.55 per share, in 2009. Revenue declined to $96.41 billion from $98.73 billion.

____

Associated Press Writer Damian Troise contributed to this story from New York.

Source

BARBERMurphy Group represented parties in these transactions:

The U.S. trade deficit was probably little changed in October as gains in exports, reflecting a weaker dollar and growing economies overseas, kept pace with rising imports, analysts said before a report today.

The projected $43.8 billion gap would follow a $44 billion shortfall in September, according to the median estimate of 78 economists surveyed by Bloomberg News. Other reports may show consumer confidence climbed this month and the cost of imported goods rose in November.

3M Co. and General Dynamics Corp. are among companies that will probably benefit from growing demand in markets like China, Brazil and Singapore, which this year are among the top-10 buyers of American-made goods. Accelerating growth in the world’s largest economy may also lift imports, indicating the trade gap will stabilize near current levels.

“We’re looking for exports to be a big plus as our major trading partners are doing well,” said Mike Englund, chief economist at Action Economics LLC in Boulder, Colorado. “We don’t see much improvement in the trade deficit next year” as imports also climb.

The Commerce Department trade figures are due at 8:30 a.m. in Washington. Estimates in the Bloomberg survey ranged from deficits of $39.5 billion to $46.5 billion.

Also at 8:30 a.m., a Labor Department report may show the import-price index rose 0.8 percent last month, reflecting higher costs for crude oil and metals, according to the Bloomberg survey median. Estimates ranged from gains of 0.3 percent to 1.6 percent.

Sentiment Improving

The Thomson Reuters/University of Michigan’s preliminary household sentiment index rose to 72.5 this month, the highest level since June, according to the Bloomberg survey median. The gauge averaged 89 in the five years leading up to the recession that began in December 2007. The report is due at 9:55 a.m.

Since reaching a one-year high on June 7, the dollar has fallen 6.6 percent against a trade-weighted basket of currencies. The drop makes American goods cheaper to buyers abroad and will keep spurring manufacturing, which expanded for a 16th consecutive month in November.

Growing overseas economies are also contributing to demand for U.S. goods. China, set to become the world’s second-largest economy this year, had a 9.6 percent gain in third-quarter gross domestic product from a year ago. Singapore, in the running to be the world’s fastest-growing economy this year, expanded 10.6 percent while Brazil, South America’s biggest economy, grew 6.7 percent.

International Orders

General Dynamics, based in Falls Church, Virginia, is seeing “strong international order activity and interest, particularly in the emerging markets,” Chief Executive Officer Jay Johnson said in a Dec. 2 industry conference presentation.

St. Paul, Minnesota-based 3M, the maker of Scotch tape and films to brighten television screens, is expanding in emerging markets, which make up one-third of its sales and may climb to as much as 45 percent by 2015, according to company estimates.

“These opportunities continue to grow,” George W. Buckley, chief executive officer, said in a Dec. 7 conference call. Overseas sales will benefit from “India and Latin America, gathering momentum in sort of China-like style.”

President Barack Obama is seeking to double American exports over the next five years. The Commerce Department has asked industry groups to review its proposal to relax export controls for technology items with military uses, covering sales to 37 allies including Germany, Japan and Canada.

China’s Surplus

China’s trade surplus with the U.S. remains a thorny issue as some members of Congress accuse the Asian nation of keeping its currency too low in order to boost sales overseas. The renminbi’s advance against the dollar of 0.1 percent last month and 0.3 percent in October fell short of the 1.7 percent climb in September that Treasury Secretary Timothy F. Geithner signaled was appropriate.

Improving U.S. demand and the need to restock inventories led to gains in imports that swamped the rise in exports over the past two quarters. A widening deficit subtracted 1.76 percentage points from GDP in the third quarter as the economy expanded at a 2.5 percent annual rate.

Imports will probably grow at a slower pace as inventories are now better aligned with sales, indicating the deficit will stabilize and trade will no longer be an obstacle to GDP.

Bloomberg Survey ================================================================ Trade Import U of Mich Federal Balance Prices Conf. Budget $ Blns MOM% Index $ Blns ================================================================ Date of Release 12/10 12/10 12/10 12/10 Observation Period Oct. Nov. Dec. P Nov. —————————————————————- Median -43.8 0.8% 72.5 -138.0 Average -43.7 0.8% 72.6 -135.0 High Forecast -39.5 1.6% 76.5 -110.0 Low Forecast -46.5 0.3% 69.0 -145.0 Number of Participants 78 53 67 25 Previous -44.0 0.9% 71.6 -120.3 —————————————————————- 4CAST Ltd. -45.0 0.5% 73.5 — ABN Amro Inc. -43.0 — 73.0 — Action Economics -45.0 0.7% 71.0 -142.0 Aletti Gestielle SGR -45.4 — 71.5 — Ameriprise Financial -42.5 0.7% 73.0 — Banesto -43.9 0.8% 70.7 — Bank of Tokyo- Mitsubishi -43.4 0.7% 69.0 -142.0 Barclays Capital -44.0 0.7% 72.0 -142.0 BBVA -42.8 0.7% 72.0 -115.0 BMO Capital Markets -43.0 — — — BNP Paribas — 0.8% 75.0 -130.0 BofA Merrill Lynch Research -45.0 — 71.0 -145.0 Briefing.com -43.0 — 72.5 -142.0 Capital Economics -40.0 — 75.0 — CIBC World Markets -45.5 — — — Citi -45.0 1.0% 72.0 -125.0 ClearView Economics -45.5 0.8% 70.5 — Commerzbank AG -44.0 — 75.0 — Credit Agricole CIB -45.0 — 72.1 — Credit Suisse -42.0 1.0% 74.0 — Daiwa Securities America -45.0 — 72.0 -140.0 DekaBank -44.0 0.8% 73.0 — Deutsche Bank Securities -44.5 1.0% 72.0 — Deutsche Postbank AG -45.0 0.9% 72.5 — DZ Bank -42.0 0.7% 73.5 — Exane -43.0 — 73.0 — First Trust Advisors -43.6 1.0% 72.0 — FTN Financial -43.0 — 73.0 — Goldman, Sachs & Co. -40.5 — — — Helaba -43.5 — 74.0 — High Frequency Economics -40.0 1.5% 74.0 -110.0 Horizon Investments -45.5 1.0% 73.0 — HSBC Markets -44.0 1.2% 73.0 — Hugh Johnson Advisors -43.0 0.6% 70.0 — Ibersecurities -43.8 — — — IDEAglobal -43.5 0.7% 72.5 -135.0 IHS Global Insight -40.5 — 72.7 — Informa Global Markets -44.4 1.0% 70.4 — ING Financial Markets -43.5 0.9% 72.3 -137.0 Insight Economics -44.5 1.0% 72.5 — Intesa-SanPaulo -45.0 0.6% 72.5 — J.P. Morgan Chase -42.2 0.6% 73.0 -138.0 Janney Montgomery Scott -45.5 0.7% — — Jefferies & Co. -46.5 0.8% 73.0 -140.0 Landesbank Berlin -39.5 1.0% 73.5 — Landesbank BW -43.0 0.7% 73.5 — Maria Fiorini Ramirez — — — -142.0 MF Global -43.0 0.6% 74.0 -130.0 MFC Global Investment -44.5 1.0% 72.0 — Mizuho Securities -45.0 0.6% 72.0 — Moody’s Analytics -41.3 0.8% 74.0 — Morgan Keegan & Co. -44.8 0.6% — — Morgan Stanley & Co. -43.5 — — -137.0 National Bank Financial -43.5 — 72.5 — Natixis -43.8 0.5% 72.0 — Nomura Securities Intl. -43.1 0.8% 71.6 -130.0 Nord/LB -42.5 0.8% 71.5 — Pierian Capital -42.0 — — — Pierpont Securities LLC -44.5 — 73.0 -139.0 PineBridge Investments -42.0 1.2% 74.0 — PNC Bank -45.0 — — — Raiffeisen Zentralbank -44.0 0.8% — — Raymond James -45.3 — 72.2 — RBC Capital Markets -44.4 — 72.0 — RBS Securities Inc. -43.7 — 73.5 — Scotia Capital -43.6 — — — Societe Generale -45.7 1.6% 76.5 — Standard Chartered -43.7 0.8% 72.0 — State Street Global Markets -43.5 0.9% 72.0 -137.0 Stone & McCarthy Research -44.0 0.9% 71.0 -145.0 TD Securities -43.0 0.5% 73.0 — Thomson Reuters/IFR -45.2 0.8% 72.2 -142.0 Tullett Prebon -43.5 0.8% 72.5 -132.0 UBS -45.0 0.7% 75.0 — Union Investment -44.0 — 72.6 — University of Maryland -42.4 0.3% 71.6 -138.0 Wells Fargo & Co. -41.2 0.8% — — WestLB AG -45.0 0.8% 72.0 -120.0 Westpac Banking Co. -44.4 0.6% 72.5 — Wrightson ICAP -44.0 1.2% 71.0 — ================================================================

To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net

Source

The Federal Reserve’s decision to launch a new round of bond buying was the right medicine for an economy facing “uncomfortably low” inflation, Cleveland Fed President Sandra Pianalto said on Thursday .

“Responding to inflationary and disinflationary pressures gets to the heart of what a central bank can and must do,” Pianalto told an audience at Case Western Reserve University.

“Ensuring price stability is our job. My belief is that by promoting price stability, the Federal Reserve is following the best course for supporting the economic recovery,” she said.

The core consumer price index rose just 0.6 percent year-on-year in October, the lowest rate on records that date to 1957, the government reported on Wednesday.

Pianalto, a voter this year on the Fed’s policy-setting panel, said she viewed the inflation figure as troubling.

“Given the momentum toward lower inflation rates and sizable amounts of labor market slack already evident in today’s pricing decisions, I expect core inflation to remain quite subdued through 2013,” she said.

“Although I do not expect an outright decline in the general level of prices, with demand in the economy still weak and unemployment so high, further disinflation remains a risk to my outlook, Pianalto added. “I take this risk seriously, because in periods of significant economic slack, very low inflation risks tipping into deflation.”

Pianalto said she believed there was enough of a risk to growth and price stability to merit the Fed’s November 3 decision to buy a further $600 billion in U.S. government bonds.

She said she weighed the benefits against the risk the move would spark an unwanted inflation, but said the Fed was well prepared to counteract any build-up of price pressures.

The risk of an asset bubble was also a concern, she said, but one that was mitigated by the Fed’s willingness to regularly review the asset purchase program.

“Our economy is digging itself out of a deep hole and continues to perform far below its potential, Pianalto said, adding that she did not expect the U.S. jobless rate to fall below 8 percent before 2013.

Read more

Cott Corp. got the go-ahead from federal regulators for its planned acquisition of Cliffstar Corp.

The U.S. Department of Justice and Federal Trade Commission granted early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act for the deal, Cott said in a statement.

Cott plans to buy Cliffstar in a deal valued at up to $569 million. The closing remains subject to receipt of financing and other conditions. The transaction is expected to close in the third quarter.

Cott (NYSE: COT) is a private label soft drink company with executive offices and a plant in Tampa.

Source

In its third round of venture funding, Achaogen Inc. raised $56 million.

The San Francisco company seeks drugs to fight bacteria that are resistant to existing drugs. It’s also working on drugs aimed at bubonic plague and other bugs attractive to possible terrorists.

Frazier Healthcare Ventures, a new investor, led this round and put Robert More on Achaogen’s board of directors.

Alta Partners, 5 AM Ventures, Arch Venture Partners, Domain Associates, Venrock Associates, Versant Ventures and the Wellcome Trust also gave money.

Kevin Judice is CEO of Achaogen.

Source

The Philippine central bank cut the amount of money available for loans to lenders through its so- called rediscounting facility to reduce cash in the economy, even as it kept interest rates at a record low.

Bangko Sentral ng Pilipinas reduced the budget for the facility to 40 billion pesos ($875 million) from 60 billion pesos, effective March 15, it said in a statement in Manila today. Policy makers kept the benchmark interest rate at 4 percent for a sixth straight meeting, as expected by all 15 economists surveyed by Bloomberg News.

Asian nations from China to Malaysia have started withdrawing monetary stimulus as growth accelerates and inflation returns amid the global economic recovery. Philippine exports, which account for about a third of the nation’s $167 billion economy, rose at the fastest pace in more than 14 years in January, a report showed yesterday.

“Upbeat export readings would nudge policy makers’ priority away from downside risks to growth, and more into emerging inflation risks,” Jun Trinidad, an economist at Citigroup Inc. in Manila, said in a report yesterday. It “would support the phase out of accommodative liquidity measures.”

Philippine economic growth accelerated to a one-year high of 1.8 percent last quarter from a decade-low 0.4 percent in the previous three months, lifting prospects for the country’s property and food companies. Jollibee Foods Corp., the fast-food chain that outsells McDonald’s Corp. in the Philippines, is looking forward “to a more robust growth in 2010,” the company said last month.

Capital Flows

The government forecasts the economy will expand 2.6 percent to 3.6 percent in 2010, as President Gloria Arroyo, whose term ends this June, increases outlays on airports, bridges and state programs to a record 1.54 trillion pesos ($34 billion) this year to bolster growth.

Low interest rates in the U.S. and Europe and faster growth in Asia are spurring capital flows into the region, prompting China to start draining excess cash from the economy to prevent asset bubbles free online credit report. Australia and Vietnam have raised borrowing costs as inflation accelerates, and Malaysia last week increased its overnight policy rate, saying it wants to avoid “financial imbalances”.

Bangko Sentral in January announced the year’s first increase in the interest rate that it charges lenders for borrowing money from the central bank through the rediscounting facility. The rediscounting window allows lenders to borrow using loans as collateral.

Inflation Forecast

Deputy Governor Diwa Guinigundo said yesterday the unwinding of liquidity measures is “always on the table” and will happen in “a matter of time.” Still, “the policy rates can be maintained at this point as our inflation outlook remains positive and benign,” he said March 8.

Benchmark four-year bond yields dropped to a three-month low yesterday on optimism borrowing costs will remain low. The Philippine peso traded near an eight-week high today as Asia’s rebound attracts funds to the region’s assets.

Bangko Sentral forecasts inflation may slow to a range of 3.4 percent to 3.5 percent in 2011 from an estimated 4 percent this year, Guinigundo said this week. Consumer-price gains in the Philippines eased for a second month in February to 4.2 percent.

The Philippines’ benchmark interest rate is at the lowest level since central bank data started in 1990. Easing inflation last year allowed Bangko Sentral to slash the overnight borrowing rate by 2 percentage points from December 2008 to July 2009 to support economic growth as exports collapsed.

Policy makers also reduced the proportion of cash banks need to set aside as reserves and raised the amount of money available for the rediscounting facility in late 2008.

Source

Michelle Price was attending college and despite working two jobs was unable to put together enough money to buy a house for herself and her daughter.

That was before she participated in a program run by St. Louis County that gave her a $3,000 down payment, covered her closing costs and provided a zero-interest second mortgage. She was able to buy a three-bedroom, two-bath house in Spanish Lake for $165,000.

Individuals and families that meet income guidelines and complete a home-buying counseling course may become first-time buyers for as little as $500 down. Price, 49, said she couldn’t be more pleased with the Plantation Court house she bought last year.

"I really like it," she said. "I’d been in an apartment for 15 years. My house has a big kitchen with an open breakfast and dining area. It has a living room and a full basement, even though it’s unfinished."

Bank of America financed $100,000 of the purchase price with the county-run program financing the rest, Price said.

"I got a good interest rate," she said. "It’s fixed for 30 years."

About 200 individuals and families take part each year in the affordable housing program known as the St. Louis Home Consortium.

The consortium, formed in 2003, includes unincorporated St. Louis and St. Charles counties, Jefferson County, and the cities of Florissant; O’Fallon, Mo.; St. Charles and Wentzville. The city of St. Louis has a similar but separate program.

The Department of Housing and Urban Development gives the consortium about $4 million a year for down payments and second mortgages for first-time home buyers. Income limits apply. To get help in St. Louis County, for example, an individual’s annual income may not exceed $38,000. A family of four cannot earn more than $54,300.

Darlene Rich, a community development manager for the county, runs the consortium. She said the second mortgages — forgivable after five years in Wentzville, Florissant and St. Louis and Jefferson counties — act as "gap financing" for the buyer guaranteed payday loans.

After a bank or other lender approves a program participant’s primary loan, a consortium member purchases a second mortgage equal to the difference between the home’s appraised value and what the buyer can afford, Rich said. If the buyer, for example, can afford a $100,000 mortgage on a house valued at $125,000, the consortium member provides a second loan of $25,000.

Buyers also can use the $8,000 federal tax credit for first-time home buyers.

Participants must complete a home buying-counseling class conducted by one of three not-for-profit housing agencies that also are approved as the program’s lenders.

Second-mortgage foreclosure rates are low, less than 0.5 percent, said Tyrone Turner, acting director of housing and asset management for Better Family Life, one of the three approved lenders.

"Plus, the classroom part, I think, is really crucial, especially for those persons who have never purchased a home before," he said.

Participants learn the basics of mortgages, credit, insurance and even get tips on home maintenance.

In St. Louis County, three small developments are geared toward the affordable housing program. They are Villas at Woodson Ridge in Woodson Terrace, Savannah Heights in Jennings and Glenechort Homes in Wellston. Second mortgages on the homes there range from $25,000 to $42,000.

Turner said the housing slump dropped the number of participants in his agency’s share of the consortium’s mortgage program to about 75 last year from a peak of "well over" 100 in 2006. The $8,000 federal tax-credit for first-time home buyers and the slowly recovering economy will bring the number back to about 100 this year, he said. "There are still people buying homes. There are still people going to work every day."

Source