Morning Report 7/6/12

Vital Statistics:

  Last Change Percent
S&P Futures  1351.0 -10.4 -0.76%
Eurostoxx Index 2261.3 -23.6 -1.03%
Oil (WTI) 84.46 -2.8 -3.16%
LIBOR 0.458 -0.002 -0.44%
US Dollar Index (DXY) 82.97 0.154 0.19%
10 Year Govt Bond Yield 1.55% -0.04%  
RPX Composite Real Estate Index 182.8 0.3  


Jobs Friday. Basically a crummy report – Nonfarm payrolls increased by 80k, less than economists forecast. The unemployment rate remained at 8.2% and the labor force participation rate remained at a depressed 63.8%.  The only bright spot was that weekly hours ticked up, as did hourly earnings. But otherwise, it was a disappointing report.

S&P futures are selling off on the number, and bonds are rallying. MBS are flat. Markets should be dull going into the weekend as a lot of players took the week off. Alcoa kicks off the earnings season on Monday. 

In the “you can’t make this up” category, San Bernardino County is considering using eminent domain to seize underwater mortgages from banks. The WSJ explains:  

“For a home with an existing $300,000 mortgage that now has a market value of $150,000, Mortgage Resolution Partners might argue the loan is worth only $120,000. If a judge agreed, the program’s private financiers would fund the city’s seizure of the loan, paying the current loan investors that reduced amount. Then, they could offer to help the homeowner refinance into a new $145,000 30-year mortgage backed by the Federal Housing Administration, which has a program allowing borrowers to have as little as 2.25% in equity”

The program would only be available for current loans. So banks (and pension funds) would take the hit on the mortgage, since current mortgages are probably carried on their books at par. The only way the partner (Mortgage Resolution Partners) can make any money is if they purchase the mortgage at a discount to the value of the underlying real estate.  So the bank would lose the difference between the mortgage amount and the discounted bid to the underlying real estate ($300,000 – $120,000 = a $180,000 loss).  The VC fund and the city would make the difference between the discounted bid on the underlying real estate and the new mortgage amount ($145,000 – $120,000 = a $25,000 gain).  Supposedly the VC fund and the city would split the profits. 

Needless to say, the Left is cheering this on. It is theft, if you ask me.

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