Morning Report - 40% of modded mortgages are still underwater

Vital Statistics:

	Last	Change	Percent
S&P Futures	1917.9	-3.9	-0.20%
Eurostoxx Index	3240.1	-7.7	-0.24%
Oil (WTI)	102.5	0.1	0.06%
LIBOR	0.227	0.000	0.11%
US Dollar Index (DXY)	80.49	-0.150	-0.19%
10 Year Govt Bond Yield	2.55%	0.02%
Current Coupon Ginnie Mae TBA	106.5	-0.1
Current Coupon Fannie Mae TBA	105.5	-0.2
BankRate 30 Year Fixed Rate Mortgage	4.18

Markets are lower this morning on no real news. Bonds and MBS are down. The automakers will be releasing May auto sales throughout the day - so far GM and Ford have both reported strong numbers.

In other economic data, ISM New York increased from 50.6 to 55.3. April factory orders increased .7% (and March was revised upward from 1.1% to 1.5%). Finally, the IBD / TIPP Economic Optimism Index came in better than expected to 47.7 from 47.

Yesterday, bond traders were given a quite the headfake with two incorrect reports for the ISM Manufacturing Index (a rather important economic indicator). The initial report had the index missing expectations significantly - a reading of 53.2 versus expectations of 55.5. This was a bond bullish number. However, later that morning they corrected the number to 56. Stronger number, so bond bearish. Finally, they got it right and reported the true number 55.4 - more or less in line with expectations. The market was probably more sensitive to this number than it should have been, but April's economic data has been all over the place, and Friday's jobs report looms large. 

Home Prices increased 10.5% nationwide in April, according to CoreLogic. They are forecasting home price appreciation to moderate over the next year, with a prices expected to increase 6.3%. Excluding distressed sales, prices increased 8.3%. Overall, prices remain 14.3% below their April 2006 peak. Note that the FHFA Home Price Index has us within about 6% of the peak, but FHFA is a subset of the market in that it only looks at homes with conforming mortgages on them. 95% of the MSAs reported price increases. 

The latest Black Knight Mortgage Monitor is out, with data through April 2014. Roughly 40% of the homes who received mortgage modifications are still underwater. We are finally seeing the judicial foreclosure states work through their pipelines, which is why we are starting to see more home price appreciation there. New York and New Jersey are making progress, while Massachusetts is not (and in fact is suing Fannie and Freddie over resisting their foreclosure prevention program). Note that Massachusetts had a .8% drop in its home price appreciation last month, one of the worst showings, while New York is finally showing meaningful price appreciation. Some day politicians will figure out that foreclosure prevention means home price appreciation prevention.