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Barrick, in a move that shows its faith that gold will continue to rise, announced an equity sale of at least $3 billion late on Tuesday, to be used to eliminate all of its fixed-price gold hedges and a portion of its floating hedges.

On Wednesday morning the world’s top gold miner boosted the offering amount to at least $3.5 billion, or as much as $4 billion if an overallotment is exercised, citing strong investor demand.

Buying back the hedges — which will result in a $5.6 billion charge to third-quarter earnings — should remove a major overhang on the company’s shares, as investors have long called for Barrick to completely exit its hedge book.

During times of weak prices, gold miners often sell a portion of their future production to protect, or hedge, against the possibility that prices will fall.

When prices rise, as they have done since 2001, the company suffers because value of the future production they’ve sold does not increase with the gold price.

Barrick will spend $1.9 billion to eliminate its entire fixed-price position of 3 million ounces — on which the company essentially loses money every time gold rises — and will pay $1 billion to buy back a portion of its floating-price position.

Jennings Research analyst Ron Coll called the move positive, both in terms of the company’s ability to fully benefit from rising gold prices and in terms of what it suggests about Barrick’s own expectations for the metal.

“It is a signal that the industry’s largest producer does not want to be caught out in what it views as a fundamentally and inflationary driven increasing gold price environment,” he said in a note.

He maintained a C$50 target on the shares, despite the dilutive impact of the offering, which could raise Barrick’s share count by as much as 12.5 percent.

Investors, however, put pressure on the stock following a delayed open on the Toronto Stock Exchange, selling it down C$1.75 to C$40.70. The price of gold XAU=, meanwhile, was hovering just below $1,000 an ounce, having risen about 5 percent so far this month.

Blackmont Capital’s Richard Gray cut his target on Barrick stock to C$48.50 from C$49.00, but said the move was a major positive for both the company and the entire gold market.

“From an overall market standpoint, the buyback of the 3 million ounces in the market should have a positive impact, but just as important is the monumental signal by the world’s largest gold company that it believes gold prices are poised to increase further,” he said in a note.

“We believe this move by Barrick will help to sustain gold prices above $1,000 an ounce over the next 6-12 months.”

Open Exchange: Spotlight – Barrick Gold Corp. – Bloomberg
Shaping the Post-Crisis World – Live! From World Economic Forum in Davos, Switzerland: Interview with Barrick Gold Chairman Peter Munk

Announcement of the arrests came at a Thursday afternoon Justice Department press conference conducted by Deputy Attorney General Mark R. Filip and FBI Director Robert Mueller. Filip said the arrests took place in Chicago, Atlanta, Miami, and suburban Maryland among other locations and those arrested included industry borrowers, loan originators, and real estate agents. 60 people were arrested on Wednesday alone with the round-up continuing.

The sweep, code named Operation Malicious Mortgage, was the third major action that the Department of Justice has headed up since 2004 against mortgage fraud and related crimes. The most recent activity has resulted in 144 mortgage fraud cases in which 406 defendants have been charged since March 1. Cases were brought in every region of the country and in more than 50 judicial districts. The FBI estimates that approximately $1 billion in losses resulted from the mortgage fraud schemes employed in these cases.

Mortgage fraud video provided by Moishe Alexander, Canadian Funding Corp Innovations

In general, mortgage fraud involves three distinct types of fraud; lending fraud, foreclosure rescue scams and mortgage-related bankruptcy schemes. Lending fraud frequently involves multiple loan transactions in which industry professionals construct mortgage transactions based on gross fraudulent misrepresentations about the borrower’s financial status, such as overstating the borrower’s income or assets, using false or fictitious employment records or inflating property values. Foreclosure rescue scams involve criminals who target legitimate homeowners in dire financial circumstances and fraudulently collect fees for foreclosure prevention services or obtain ownership interests in residential properties. Both of these fraudulent mortgage schemes may be furthered by filing bankruptcy petitions that automatically stay foreclosure.

In the case of the recent DOJ action, the most common type of mortgage fraud was misstatement of income or assets, followed by forged documents, inflated appraisals and misrepresentation of a buyer’s intent to occupy a property as a primary residence. Filip said, “The integrity and credibility of these markets depend upon fair dealing. While the law cannot dictate economic outcomes or protect individuals from bad investment decisions or unlucky greats, it does protect them from fraud.” He said that the investigation and prosecution of these crimes will continue.

In a separate action, an indictment was unsealed in the Eastern District of New York charging two Bear Stearns portfolio managers with conspiracy, securities fraud, wire fraud, and insider trading charges growing out of alleged misrepresentations to two Bear Stearns hedge funds that invested in securities tied to mortgage debt. The indictment alleges that the two marketed the funds as a low risk strategy. By March, 2007 they believed the funds were in grave condition and at risk of collapse but made misrepresentations about the amount of money other investors were withdrawing and about the extent of their personal investment in the funds. This was done, the indictment alleges, to stave off investor withdrawal. The funds did collapse last summer, resulting in losses to investors estimated at $1.4 billion.

Filip and Mueller credited a number of other federal agencies with assisting with the investigation including the Internal Revenue Service, U.S. Postal Service, Immigration and Customs Enforcement, the Federal Deposit Insurance Corporation, and the Department of Housing and Urban Development. The FBI says it has arrested about 300 real estate industry players since March — including dozens over the last two days — in its crackdown on incidents of mortgage fraud that have contributed to the country’s housing crisis. (We assume that the discrepancy in numbers arrested is attributable to police actions taken by other agencies.)

Barack Obama laid out his foreclosure-prevention plan in February. Part of the program provides incentives for mortgage-servicing businesses to reduce loan payments to reasonable levels. This is for people who are already in trouble and also for those who are at risk of falling behind. Over 200,000 borrowers that are delinquent or at risk of default have received trial adjustments — that is the first step. Obama administration officials said the adjustment program could help three to four million people.

Lisa Sitkin, staff attorney at Housing and Economic Rights Advocates in Oakland, Calif., said she was very pleased when help for at-risk borrowers was declared. “It’s disturbing to see that it is several months later and it’s still not up and running at any scale that is meaningful,” said Lisa Sitkin. Mortgage-servicing companies said they were totally committed to the plan. Bank of America Corp. is starting to implement the Obama plan for all at-risk borrowers, a company spokeswoman said. Bank of America has been putting these borrowers on a plan that allows them to make a partial mortgage payment for several months and then be considered for a loan modification.

Borrowers are saying they are being told to stop making loan payments and seek a modification later. Alisha Gorder of Bridgeport, Conn., was referred to Auriton Solutions, an approved housing counselor, after she called a mortgage industry hotline because she wasn’t getting anywhere with her mortgage company. Ms. Gorder has been struggling to make ends meet because sales have slid at her children’s boutique and her husband, Christoph, who runs disaster-relief programs for the nonprofit AmeriCares, had to take a 21% cut in compensation.

Wells Fargo & Co. didn’t begin offering some at-risk borrowers loan modifications under the Obama plan until early June. One issue was that mortgage companies were waiting for final federal guidelines on key issues such as how to determine whether a loan modification is preferable to a foreclosure, said Mary Coffin, head of loan servicing for Wells Fargo Home Mortgage.

“Stop paying on the mortgage since you don’t have the resources to cover all your expenses,” an Auriton employee said in a letter to Ms. Gorder in mid-July. The letter advised Ms. Gorder to focus on basic living expenses and to follow up with the lender after she had increased her income. Ms. Gorder said she was stunned. “To be told I should do something to put my family in this risky position doesn’t make sense,” she said. “I had a lot of faith in the system. For me, it’s really shocking and jarring to see that the system doesn’t work.”

President Tiff Worley called the missive “poorly worded.” But he added that it “correctly recognizes that this person has an upside-down budget situation and is still shorting things to her family every month.” Employees at mortgage-servicing companies often tell borrowers they can’t be helped if they are current on their loans, said Michael van Zalingen, director of homeownership services for the nonprofit Neighborhood Housing Services of Chicago.

Other borrowers complained of long waits for help. Suzanne DeNick of New Jersey said J.P. Morgan Chase & Co. told her it would take four to six weeks for her modification request to be assigned to an analyst and another 90 to 120 days before she received a decision. The company also asked her to resend her application, further delaying the process.

A J.P. Morgan spokesman acknowledged “that the process took more than our typical time frame,” but added that “it took some time for us to receive a completed and signed paperwork package from the borrower.” Once paperwork is complete, it typically takes 30 to 60 days to determine whether a modification is possible, she said.

There is much confusion regarding who is eligible. A spokeswoman from Bank of America said, “Given widespread public mis-expectations, a significant percentage of borrowers seeking Home Affordable modifications under the imminent-default provisions will not qualify.”

Oh by the way the company’s name is, wait for it – Microsoft. Microsoft is the company we all love to hate. Maybe they thought that vomit would make us draw nearer.

“Vomit is not a widely used advertising hook,” said a Canadian Funding Corp representative on Thursday. “On the other hand, perhaps in this day and age, anything goes. I don’t want to let my mind go any further on the subject. It is rather unpleasant to say the least.”

The ad has now been removed from several source channels and sites. Canadian Funding Corp could have advised them ahead of time not to do it – but we weren’t asked. Perhaps the stuff that they were smoking in their pipe wouldn’t have made them amenable to reason in any case.

Guess what? As of this time you can see the ad on YouTube. We will spare you the pleasure of viewing it on our site.

A Microsoft source said, “While much of the feedback to this particular piece of creative was positive, some of our customers found it offensive, so we have removed it.” Big surprise!!!

Bradley and Montgomery, the agency responsible for the upchuck campaign still proudly displayed the ad on its own site as of today. No surprise! They are certainly proud of their work. Whatever.

They say that even this kind of advertising is positive for the company because it creates chatter. The truth is that, at Canadian Funding Corp, we purchase Microsoft products because we need them and now, more than ever, we wish we didn’t have to.

We also hope that the lady’s gastrointestinal sensitivities calm down. We did the research, we saw the video – on to something else.

Canadian Funding Corp says this video has no representation of regurgitation. Phew!

Again, what is the origin of the word “mortgage”? The word “mortgage” comes from the French legal term meaning “dead pledge”. Sounds scary? Well there is something called a “live pledge”. What is the difference? A “dead pledge” was absolute in form. A “live pledge” was not conditionally dependent on its repayment solely from raising and selling crops or livestock or simply giving the crops and livestock raised on the mortgaged land. The mortgage debt remained in effect whether or not the land could successfully produce enough income to repay the debt. In theory, a mortgage required no further steps to be taken by the creditor, such as acceptance of crops and livestock in repayment.

The difficulty with this arrangement was that the lender was absolute owner of the property and could sell it or refuse to reconvey it to the borrower, who was in a weak position. Increasingly the courts of equity began to protect the borrower’s interests, so that a borrower came to have an absolute right to insist on reconveyance on redemption. This right of the borrower is known as the “equity of redemption”.

This arrangement, whereby the lender was in theory the absolute owner, but in practice had few of the practical rights of ownership, was seen in many jurisdictions as being awkwardly artificial. By statute the common law’s position was altered so that the mortgagor would retain ownership, but the mortgagee’s rights, such as foreclosure, the power of sale, and the right to take possession, would be protected.

In the United States, those states that have reformed the nature of mortgages in this way are known as lien states. A similar effect was achieved in England and Wales by the Law of Property Act 1925, which abolished mortgages by the conveyance of a fee simple.

If you are not getting it yet, Canadian Funding Corp urges you to read on to successive posts.

Meanwhile, courtesy of Canadian Funding Corp Innovations, a video!