Wednesday, May 29, 2013

Thursday May 30 Housing and Economic stories


TOP STORIES:

Banks on Verge of Collapse in Denmark Win Time in FSA Review - (www.bloomberg.com) Danish banks in breach of the nation’s solvency rules will get more time to raise capital and avert failure as the regulator eases its resolution practices. The Financial Supervisory Authority will give two banks currently in breach of individual solvency requirements the time they need to rebuild their capital buffers, said Anders Balling, head of banking at the regulator in Copenhagen. At the height of Denmark’s banking crisis two years ago, the FSA gave lenders as little as 48 hours to find investors before they were shut down. “We have moved away from an either-or model,” Balling said in a telephone interview. “We can see the benefits of a gradual approach. This is also part of the thinking in the new European capital requirement rules.”

JGBs skid for third session, pushing 10-yr yield to 9-month high - (www.reuters.com) Japanese government bond prices sold off for a third straight session on Tuesday and the benchmark yield hit a nine-month high, though a late downturn in shares pulled yields off their intraday highs. Decent demand at a 30-year auction did little to reassure some investors, particularly banks, which continued to cut their holdings of short- to medium-term notes. In recent sessions, the yen's weakness against the dollar has helped push up Japanese share prices, pressuring JGB prices which were already feeling the pinch from sagging U.S Treasuries. "The auction was better than some people had feared, but we have a series of auctions in the coming weeks," said Maki Shimizu, senior strategist at Citigroup in Tokyo. "Today's selloff was not driven by the auction," she said, but rather by the medium-term and the long-term tenors.

Why Did Mortgage Rates Spike Quickly To One-Month Highs? - (www.mortgagenewsdaily.com)  Mortgage rates rocketed higher precipitously today, taking them to their highest levels since April 2nd.  The move was all the more confounding as it happened on a day with no significant headlines or data releases--at least not the caliber of information that normally motivates such violent swings.  When the dust settled, borrowing costs at the 3.5% 'best-execution' were up anywhere from 0.4 to 1.2% depending on the scenario (this is equivalent to $400-$1200 in closing costs or lender credit for every $100k financed).  It was also enough of a move to bring 3.625% back into picture and as a viable best-execution contender.  The differences between those two rates are minimal in terms of efficiency, and in most cases, the choice amounts to a trade-off between up-front cost and monthly payment. While there was no overt causality for today's big movement, it wasn't without it's reasons.  That said, the reasons (or 'probable' reasons, as the case may be) have to do with some of the more esoteric factors driving mortgage rates.  We know that Mortgage-Backed-Securities (MBS)--the financial instruments that groups of similar loans ultimately become, have the most direct effect on mortgage rates.  We've also spoken about how the movements of MBS prices are often very similar to movement of bond prices, particularly in US Treasuries.  

Grind of Euro Crisis Wears Down Support for Union, Poll Finds - (www.nytimes.com) Europeans have never been wild about the European Union. With the region sapped by the euro crisis, confidence in the institution and the benefits it was supposed to provide is flagging faster and further than ever before, according to an influential opinion survey released Monday. The results of an annual survey by the Pew Research Center, a nonpartisan organization based in Washington, show a deepening disillusionment with the union in major member countries. The results of the survey suggest that more citizens than ever could end up opposing the transfer of more power to European Union institutions that may be vital for transforming the euro into a viable currency over the long term. “The effort over the past half-century to create a more united Europe is now the principal casualty of the euro crisis,” according to a report that Pew published with the survey results. The title of the report summed it up: “The New Sick Man of Europe: the European Union.”

62% of delinquent loans are more than 90 days past due - (www.ochousingnews.com) Lenders made no progress on their resolution of legacy loans over the last year. The delinquency rate of all loans inched down from 6.8% in March of 2012 to 6.59% in March of 2013. Given the improvement shown by recent vintages, that means the delinquency of legacy loans is unchanged, and itt may have gotten worse. As lenders kick the can with loan modifications, borrowers are redefaulting faster than lenders can remodify their loans. The only net reduction in legacy loan delinquencies is coming from the trickle of foreclosures. As a result, legacy loans now account for 62% of long-term delinquencies. Lenders are committed to a policy of can kicking until prices come back. They are foreclosing on a handful of committed squatters in an attempt to spook the herd and prompt them to agree to loan modifications. From their perspective, the plan is working. Remember, negative equity is another lender euphemism. It disguises the fact that lenders have a huge exposure to loans without collateral backing, and it makes borrowers feel like they have hope of actual equity again while they rent from the bank. (Notice the deception in the chart below that cuts off the bottom 10% to make the improvement look better than it is).




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