Morning Report

Vital Statistics:

	Last	Change	Percent
S&P Futures	1351.7	-9.7	-0.71%
Eurostoxx Index	2254.1	-30.9	-1.35%
Oil (WTI)	84.68	-2.5	-2.91%
LIBOR	0.458	-0.002	-0.44%
US Dollar Index (DXY)	83.06	0.246	0.30%
10 Year Govt Bond Yield	1.56%	-0.03%
RPX Composite Real Estate Index	183.3	0.5

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 up about 1/4 of a point.  Markets should be dull going into the weekend as a lot of players took the week off and the rest of the Street should be escaping the heat by heading out the the East end. Alcoa kicks off the earnings season on Monday.  Analysts have taken estimates way down across the Street.

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,t he 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 $125,000 30-year mortgage backed by the Federal Housing Administration, which has a program allowing borrowers to have as little as 2.25% equity."

The program would only be available for loans that are current (or fully paid up). So the investor (a bank, pension fund, whatever) would probably be carrying the loan at par and would take the hit when the city takes the mortgage away.  So the investor would lose the difference between the mortgage amount and the discounted bid to the property value ($300,000 - $120,000 = a $180,000 loss), while the VC firm (Mortgage Resolution Partners) would make the difference between the new 97.5% mortgage amount and the amount they bought the mortgage for (in this case $145,000 - $120,000 = a $25,000 gain).  Supposedly the VC firm and the city would split the profit.

There is no way the investor can be treated fairly here.  The only way this works is if the partner can buy the mortgage at a discount to the appraised value of the property. Otherwise they can't make a profit.

Needless to say, the Left is cheering this on. It is theft, if you ask me.  And people are scratching their heads wondering why it is so hard to get credit these days. If San Bernardino goes through with this and gets away with it, good luck getting a mortgage with a LTV over 60% anymore.