KeNo's Housing and Economic Portal: Friday July 29 Housing and Economic stories

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Flash Mobs Thwart Foreclosures in Spain - (www.bloomberg.com) Luis Dominguez got up at dawn to take a 5 a.m. bus to join a human chain around a Madrid home threatened with foreclosure. Three weeks earlier, the crowd had come to him after he telephoned for help. “I was facing eviction and they saved me from losing my home,” said Dominguez, 74, a pensioner with a walking stick in one hand and a five-foot placard saying “Stop Evictions” in the other. “I came today to show my gratitude and support.” The 300 protesters, organized by a group called La Plataforma de los Afectados por la Hipoteca, or PAH, managed to win a reprieve for the property’s owner, a single mother with a disabled son. Rising unemployment in Spain may lead to 300,000 foreclosures this year and next, according to Adicae

, a rights group representing bank customers. Spain has become a battleground between banks hurt by a five-fold increase in residential mortgage arrears since 2007 and debt-laden homeowners who are appealing to the government to reduce the burden on those facing foreclosure.

Jefferson County Has A Plan To Avert Largest-Ever Muni Bankruptcy - (www.businessinsider.com) After hovering near the brink of insolvency for nearly three years, Alabama's Jefferson County finally has a plan to settle its $3.2 billion sewer debt and hopefully avoid the largest municipal bankruptcy in U.S. history. In an interview with Birmingham's WBRC TV station, Jefferson County Commission President David Carrington said county officials had finalized a plan to present to creditors that includes a fixed-rate repayment plan with a fixed term, and would be backed by the state of Alabama's good credit. Talks between the county and its sewer creditors have made substantial progress since the state stepped in last month with a "credit enhancement" offer, breaking an extended stalemate. The county has been battling bankruptcy since the sewer bond financing soured in 2008.

Italy Too Big to Bail Out as Crisis Enters ‘New Phase’: Chart of the Day - (www.bloomberg.com) The euro’s fate may lie in the hands of Italian bondholders as the region’s debt crisis threatens to envelop the Mediterranean nation, according to Credit Agricole Corporate & Investment Bank. The CHART OF THE DAY shows Italy’s government debt burden, the euro area’s largest at 1.8 trillion euros ($2.6 trillion), dwarfs those of Greece, Ireland and Portugal, which already received bailouts, and Spain, which has the next-highest borrowing costs. German Chancellor Angela Merkel is under pressure from coalition partners to limit its contribution to sovereign bailouts. The European Financial Stability Facility currently has a lending capacity of 250 billion euros. “If Italy gets to the point where its debt auctions start to fail and it loses access to the market, it becomes difficult to imagine who would have the kind of money that would be required to rescue it,” said Luca Jellinek, head of European interest-rate strategy at Credit Agricole CIB in London. “It’s undoubtedly bigger than the current scope of the EFSF.”

Dimon: ’Everybody Is Going to Sue’ Over Mortgages - (www.bloomberg.com) JPMorgan Chase & Co. (JPM) Chief Executive Officer Jamie Dimonsaid clashes over faulty mortgages may drag on as investors and regulators demand compensation for soured loans issued at the peak of the housing market. “There have been so many flaws in mortgages that it’s been an unmitigated disaster,” Dimon said during a conference call today. “We just really need to clean it up for the sake of everybody. And everybody is going to sue everybody else, and it’s going to go on for a long time.” JPMorgan disclosed about $2.5 billion in second-quarter costs tied to faulty mortgages and foreclosures. The bank added $1.27 billion to litigation reserves, mostly for mortgage matters, and incurred $1 billion of expenses tied to foreclosures, according to a slide showaccompanying today’s earnings report. Repurchase losses were $223 million, according to the company, which ranks second by assets among U.S. banks.

Italian Banks Face Funding Squeeze - (www.bloomberg.com) Italian banks, saddled with the nation’s record borrowing costs, may struggle to reverse a drop in profitability that’s already turned UniCredit SpA (UCG) and Intesa Sanpaolo SpA (ISP) into European laggards. Italy’s two biggest lenders have about 55.4 billion euros ($78.4 billion) of debt maturing in 2012, according to the banks. Investor concern that the sovereign debt crisis is spilling over to Italy, which has the region’s largest debt, pushed the country’s 10-year bond yields to their highest relative to German bunds since the introduction of the euro, adding about 1 percentage point to funding costs this month. The crisis has entered a new phase and higher financing costs for some European nations are here to stay, Bank of Italy Governor Mario Draghi said yesterday. For the banks, that translates into pressure on earnings and may force cost cutting, greater competition for deposits and a contraction in lending, mirroring the challenges Spanish lenders are also facing.