KeNo's Housing and Economic Portal: Thursday November 24 Housing and Economic stories

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TOP STORIES:

Italian borrowing costs reach breaking point - (www.reuters.com) Italian borrowing costs reached breaking point Wednesday after Prime Minister Silvio Berlusconi's insistence on elections instead of an interim government opened the way to prolonged instability and delays to long-promised economic reforms. In a dramatic escalation of the euro zone debt crisis, Italian 10-year bond yields shot above the 7 percent level that is widely deemed unsustainable, reflecting an evaporation of investor confidence and prompting German Chancellor Angela Merkel to issue a call to arms. Merkel said Europe's plight was now so "unpleasant" that deep structural reforms were needed quickly, warning the rest of the world would not wait. "That will mean more Europe, not less Europe," she told a conference in Berlin.

Late mortgage payments rise in 3rd qtr for first time since 2009; may show start of new trend - (www.washingtonpost.com) While lawmakers in Washington debated the debt ceiling and consumer confidence dropped, more homeowners in the U.S. were having a harder time making their mortgage payments. The rate that mortgage holders were late with their payments by 60 days or more rose in the June-to-September period for the first time since the last three months of 2009, according to TransUnion. The credit reporting agency said 5.88 percent of homeowners missed two or more payments, an early sign of possible foreclosure. That was up from 5.82 percent in the second quarter of 2011. The increase surprised TransUnion researchers, who previously forecast late payments, or delinquency, to fall for the quarter. “It’s much different than we’ve been talking about the last few quarters,” said Tim Martin, group vice president of U.S. Housing in TransUnion’s financial services business unit.

Italy’s Political Crisis Ambushes Ireland After Greek Escape: Euro Credit - (www.bloomberg.com) After convincing investors and the European Central Bank that it’s not Greece, Ireland may find it harder to escape the fallout from Italian turmoil. Irish bonds have declined almost 3.6 percent since the end of September, eroding the highest returns in the world since June. Since falling to an eight-month low on Oct. 4, the yield on two-year Irish notes has jumped to about 75 basis points above its average of the past two months, according to data compiled by Bloomberg. Borrowing costs for Ireland, which announced additional austerity measures last week, have risen as Italian Prime Minister Silvio Berlusconi agreed to resign to win parliamentary approval of plans to cut the region’s second-biggest debt load and Greek premier George Papandreou tries to form a unity government under a new leader. “If the disaster scenario happens, I’m sure they’ll get hit with the same kind of contagion again,” said Haig Bathgate, chief investment officer at Turcan Connell, an Edinburgh-based manager of 1 billion pounds ($1.6 billion) for mainly wealthy clients.

Italy’s Political Woes Spell ‘Nightmare’ for BNP, Agricole - (www.bloomberg.com) BNP Paribas SA and Credit Agricole SA (ACA), France’s largest banks by assets, are finding that their pursuit of growth in neighboring Italy in the past decade has a downside: political risk. As the world’s biggest foreign holders of Italian public and private borrowings -- with $416.4 billion of such debt at the end of June -- French lenders face collateral damage from the political turmoil that sent Italy’s bond yields to euro-era records. Austerity measures to balance Italy’s budget are also threatening growth in an economy that has lagged behind the European average for more than a decade, and may hurt the French banks’ consumer businesses. “Italy was a dream investment for French banks,” said Christophe Nijdam, a bank analyst at AlphaValue in Paris. “Nobody could have imagined a sovereign crisis touching a G-7 economy at that time. But the political deadlock is turning the dream into a nightmare.” Prime Minister Silvio Berlusconi, who failed to muster an absolute majority in a routine ballot in Rome yesterday, agreed to resign after parliament approves the country’s austerity plans next week. Berlusconi’s move forces Italy to seek a new regime stable enough to convince investors the country can fund itself and implement painful budget-cutting measures.

Financial Alchemy Undercuts Capital Regime as European Banks Redefine Risk - (www.bloomberg.com) Banks in Europe are undercutting regulators’ demands that they boost capital by declaring assets they hold less risky today than they were yesterday. Banco Santander SA (SAN), Spain’s largest lender, and Banco Bilbao Vizcaya Argentaria SA (BBVA), the second-biggest, say they can go halfway to adding 13.6 billion euros ($18.8 billion) of capital by changing how they calculate risk-weightings, the probability of default lenders assign to loans, mortgages and derivatives. The practice, known as “risk-weighted asset optimization,” allows banks to boost capital ratios without cutting lending, selling assets or tapping shareholders. Regulators in Europe, seeking to stem the region’s sovereign-debt crisis, ordered banks last month to increase core capital to 9 percent of risk-weighted assets by the end of June. Lenders, facing a 106 billion-euro shortfall, are reluctant to plug the gap by cutting dividends or bonuses and are struggling to sell assets or raise cash in rights offerings. Politicians are trying to stop banks from the alternative, cutting back lending, because it could trigger a recession.