Friday July 26 Housing and Economic stories

TOP STORIES:

Watchdogs warn 1.7 million homeowners risk foreclosing, feds unprepared - (www.washingtonguardian.com) The government is already struggling to manage the more than 195,000 foreclosed homes it now possesses and is ill-prepared as a new wave of foreclosures looms on the horizon, according to federal watchdogs who paint a less rosy picture of the housing market than politicians. In fact, the inspectors general at the Federal Housing Finance Agency (FHFA) and the Department of Housing and Urban Development (HUD) warn that a stunning 1.7 million mortgages are 90 days or more delinquent, putting them in danger of foreclosure. Such homes are considered "shadow inventory" in danger of being assumed by the government if the loans default. "Even a fraction of the shadow inventory falling into foreclosure could considerably swell" taxpayers' liability by increasing the number of foreclosed homes that HUD and the federally-run Fannie Mae and Freddie Mac mortgage giants must maintain, market and sell, the new report warns.

Greek outlook bleaker than lenders think, local think tank calculates - (www.reuters.com) Greece's economy could shrink by as much as 5 percent this year, the Athens-based IOBE think tank said on Tuesday, revising down its previous projection and offering a more pessimistic forecast than the country's foreign lenders. Athens, which has been limping along on bailout funds since 2010, secured its latest lifeline from its European Union and International Monetary Fund lenders on Monday but was told it must keep its promises on cutting public sector jobs and on selling state assets to get all the cash.

Alcoa Facing ‘Hard Decisions’ on Aluminum Plants - (www.bloomberg.com) The scale of the challenge in the aluminum market facing producers such as Alcoa can be seen in the size of stockpiles of the lightweight metal. Inventories total about 12 million tons, excluding China, Oleg Mukhamedshin, a director at Russian smelter United Co., said in an interview July 1. That’s equal to about 27 percent of 2012 global consumption, according to data compiled by Bloomberg. While producers worldwide have announced capacity cuts of about 1.3 million tons in 2013, others are set to add 5.4 million tons of capacity this year, led by new plants in China, Morgan Stanley said in a June 25 report. In comparison, Alcoa produced 3.74 million tons of aluminum in 2012. Alcoa has confirmed the shutdown of 149,000 tons of capacity so far in 2013, adding to the 531,000 tons temporarily and permanently closed last year. The company is doing more than most to help balance supply and demand, Davenport’s O’Carroll said.

Fed Says a Few Dealers Report Deterioration in MBS Market  - (www.bloomberg.com) The Federal Reserve said a few Wall Street dealers have seen a deterioration in the functioning of the market for residential mortgage-backed securities where the Fed each month is buying $40 billion in bonds. “A few dealers indicated that the liquidity and functioning of the underlying market for agency RMBS had deteriorated,” the central bank said today in a quarterly survey of senior credit officers. “For other collateral types covered in the survey, the liquidity and functioning of the underlying markets were generally characterized as little changed.” Twenty percent of dealers who responded to the question said the market in MBS had deteriorated “somewhat” or “considerably.” Ten percent said the market improved somewhat, while the remaining 70 percent saw the market “basically unchanged.”

[Bloomberg] China Central Bank Tightens Rules on Interbank Bond Trading - (www.bloomberg.com) China’s central bank is tightening rules on interbank bond market trading by ordering all transactions to be conducted through the National Interbank Funding Center as it seeks to boost transparency. Transactions including forward deals and repurchases can’t be reversed or changed once agreed between the two parties, the People’s Bank of China said in a statement posted on its website today. Clearing agencies should not engage in settling trades outside the interbank market, according to the statement. Alterations to bond ownership, such as inheritance that are not related to trading, must be supported by legal documents explaining the nature of the transaction, it said. Chinese authorities are seeking to clean up the $3.8 trillion market and encourage companies to raise funds through bonds rather than relying on bank lending. 

OTHER STORIES:

U.S. Banks May Face Two Ratios as FDIC Sets Capital Vote - (www.bloomberg.com)

Alcoa Earnings Exceed Estimates as Aircraft Orders Gain - (www.bloomberg.com)

[ Henry Kaufman] The Fed must change itself as well as its policies - (www.ft.com)
Dozens Killed in Egypt as Islamists Fight Army - (www.bloomberg.com)

Spanish corruption row seen shaking but not felling PM - (www.reuters.com)

Japan Says China Using Force to Try to Change Status Quo - (www.bloomberg.com)

China inflation picks up, limits room for policy easing - (www.reuters.com)

India to Inject $2.3 Billion Into State-Run Banks Over 3 Months - (www.bloomberg.com)