Morning Report

Vital Statistics:

	Last	Change	Percent
S&P Futures	1400.5	2.3	0.16%
Eurostoxx Index	2427.8	-4.5	-0.19%
Oil (WTI)	93.89	0.5	0.58%
LIBOR	0.438	0.001	0.17%
US Dollar Index (DXY)	82.69	0.293	0.36%
10 Year Govt Bond Yield	1.72%	0.07%
RPX Composite Real Estate Index	189.1	0.1

Markets are grinding higher on no real news.  FWIW, the markets seem to be getting back into "risk-on" mode, with the latest rally in the stock market and the sell-off in the 10 year. After breaking 1.40, a few weeks ago, the 10-year is now over 1.72%.  MBS are down about 1/4 of a point.

Mortgage delinquencies fell to 7.58%, slightly higher than the street 7.4% estimate. Foreclosures edged down to 4.27%.

The eminent domain issue is becoming bigger as FHFA weighs in. To recap, San Bernardino has proposed to use eminent domain to seize performing underwater mortgages from investors. They would pay the investors a "fair price" - presumably lower than the value of the property - and write down the principal of the mortgage to the market value of the house. SIFMA (who oversees a critical part of the securitization market) warned San Bernardino that if they followed this path that newly-mortgages originated in that area would be ineligible for inclusion into TBA pools, which would make it extremely difficult to get a mortgage there. California Lieutenant Governor Gavin Newsom fired back, telling the organization to "cease making threats to the local officials of San Bernardino County."  Now FHFA has stepped in with a notice expressing "significant concerns" regarding the proposal, which is really more or less theft. Unless the county backs off, this could become to big to ignore, making it an explosive issue (for Democrats, at least) going into the election.

Hey, Fannie made some money. They note that improving home prices, better efficiency in managing REO, and a continued decline in delinquency rates were able to overcome the drain from their legacy book of subprime mortgages bought during the bubble years.

Initial Jobless claims came in at 361k, slightly lower than the 370k street estimate. Initial Jobless claims have fallen back to historical norms. Chart:  Initial Jobless Claims 1967-Present