KeNo's Housing and Economic Portal: Friday June 10 Housing and Economic stories

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Greek Restructuring Could be 'Catastrophic' - (online.wsj.com) Greece might be denied the next tranche of financial aid if an audit of its budget accounting shows that the country cannot guarantee financing for the next 12 months, Eurogroup President Jean-Claude Juncker said Thursday. "I'm not the spokesman of the International Monetary Fund, but the rules say they can only disburse if there is a financing guarantee for the 12-month period," Mr. Juncker told reporters at a conference in Luxembourg. "I don't think that the troika will come to the conclusion that this is given. If the Europeans have to realize that the disbursement of the IMF before June 29 can't operatively happen, the expectation of the IMF is then that the Europeans will take the place of the IMF," he added. The troika are representatives of the IMF, EU and Greek government who regularly meet in Athens to review progress on reforms and deficit-reduction. He said some countries, including Germany and Finland, would likely not accept this. "Everything depends on the troika report which is due next week," he added.

Fannie, Freddie back 75 pct Q1 mortgage securities - (www.reuters.com) The government's mortgage buyers Fannie Mae and Freddie Mac guaranteed three-quarters of the mortgage-backed securities in the first quarter of this year, a federal regulator said on Wednesday. The Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, said the two agencies remained by far the largest issuer of mortgage-related securities in the secondary market. Mortgage originations for home purchases and refinances dropped 35 percent in the first quarter of this year compared to the last quarter of 2010, the regulator said in testimony prepared to be delivered to a congressional panel. Lawmakers in the House of Representatives are mulling legislation to reduce the role of government in the $10.5 trillion residential mortgage market.

California and Illinois Expand Foreclosure Probes - (online.wsj.com) Attorneys general in California and Illinois said they issued subpoenas to two companies that help mortgage servicers manage home loans, in the latest sign state officials are stepping up pressure on the mortgage industry. On Tuesday, California Attorney General Kamala D. Harris and Illinois Attorney General Lisa Madigan said they had issued subpoenas to Lender Processing Services Inc. as part of their investigation of questionable foreclosure practices, including so-called robo-signing, when employees approve legal documents without proper review. Ms. Madigan's office said it also issued a subpoena to Nationwide Title Clearing Inc., a mortgage-industry services provider. The Illinois subpoenas seek information about the companies' clients, practices and relationships with foreclosure law firms, Ms. Madigan said. California didn't provide details on the specific information requested, but Ms. Harris's office said in a release it was seeking documents and written answers to questions in relation to the probe. Nationwide Title said the company hadn't received its subpoena and that it would cooperate with any investigation. The company's documents and procedures have been thoroughly audited and examined for accuracy, the company said in a statement. "We have every reason to believe that this issue will be short-lived and will be quickly resolved," said spokesman Jeremy Pomerantz. A spokesman for LPS declined to comment, saying the company hadn't yet received the subpoenas.

Greece's 100 billion-euro shadow over banks - (www.reuters.com) European banks remain saddled with almost 100 billion euros of Greek government debt they can't sell, hedge or ignore, after a number of recent deals to offload the exposure to reduce the impact of a possible default ended in failure, according to bankers involved. The deals have been thwarted by a lack of willing buyers for the debt -- even at record low prices -- and that exposed lenders have been unable to buy protection because of the high costs, with top bankers advising their clients all they can now do is cross their fingers and hope for the best. "The vast majority of these banks have just been unable to do anything," said one European banker who has advised dozens of such banks. "Protection is too expensive, and markets for these bonds are illiquid, so many are riding out the problem. Right now, all they can do is shut their eyes and hope." Greek domestic banks are by far the biggest holders of the country's bonds with some 50 billion euros of exposure, according to a handful of estimates. But another 50 billion is held at banks outside the country, with German banks alone exposed to around 19 billion of the paper, while French banks hold another 15 billion.

Eurogroup President Says This May Be The End For Greek Aid - (www.businessinsider.com) Eurogroup president Jean-Claude Juncker just said that the IMF may not give Greece the next tranche of its bailout funds next month, according to Bloomberg. Juncker says that, according to IMF rules, refinancing guarantees must be in place for 12 months. That means the IMF needs to be convinced that Greece can rollover its debt for the next 12 months without any problems If it isn't convinced, then it won't shell out the cash. We should know the IMF's decision by early next week, according to Juncker. And Juncker says the "troika," or ECB, IMF, and EU, won't be convinced that this is "a given." Juncker says the IMF expects the EU to step in and bail Greece out if they don't (via Neil Hume). In that scenario, the EFSF, or European Financial Stability Fund, will be tapped for more cash. That's unlikely to go over well in countries like Germany and Finland, where people are already upset over the costs of the bailouts. Political opposition from EU members states could mean the end of bailout cash for Greece.