by Calculated Risk on 11/09/2011 07:57:00 AM

• The Italian 10 year yield is at 7.32% after hitting 7.48% this morning.

• From Reuters: LCH.Clearnet Raises Initial Margin Call on Italian Debt

LCH.Clearnet increased the margin on debt from the [Italy] at a time when its bonds yields are close to levels deemed unsustainable.
...
When LCH.Clearnet Ltd took similar action on Portuguese and Irish debt as bond yields soared, it added to selling pressure on the paper. Both countries were later forced to seek bailouts.

• European stocks are off today with the FTSE down 2%, and the DAX down 3%.

by Calculated Risk on 11/09/2011 07:40:00 AM

From the MBA: Mortgage Applications Increase in Latest MBA Weekly Survey

The Refinance Index increased 12.1 percent from the previous week. The seasonally adjusted Purchase Index increased 4.8 percent from one week earlier to the highest level since August 2011.
...
"Treasury rates dropped last week, as renewed turmoil in Europe once again led to a flight to quality, and 30-year mortgage rates dropped to their second lowest level of the year," said Mike Fratantoni, MBA's Vice President of Research and Economics. "Refinance applications jumped more than 12 percent to their highest level in a month and some lenders experienced even larger increases. As has been the case all year, many refinance applicants are opting to deleverage by choosing 15-year mortgages."
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 4.22 percent from 4.31 percent.

The following graph shows the MBA Purchase Index and four week moving average since 1990.

Click on graph for larger image.

Although the purchase index increased, the index is still sharply below the levels of June and July - and at about the same level as in 1996. This does not include cash buyers, but this suggests weak home sales over the next couple of months.

All current Existing Home Graphs

by Calculated Risk on 11/08/2011 09:41:00 PM

An apt headline from the Athens News: Sinking with no captain

The European Union’s shattered trust in Greece and interparty wrangling have delayed the announcement of Greece’s new coalition government ...

The humiliating demand by EU Economic and Monetary Affairs Commissioner Olli Rehn that the next tranche of loans will not be disbursed unless New Democracy leader Antonis Samaras signs a declaration that he will support full implementation of the October 27 bailout threw his party into a tailspin.

The demand came a day after ND issued a nonpaper saying that the party will support the new government’s policies, only to reverse them when the conservatives come to power.

Designed to beat Samaras into complete submission, Rehn’s demand triggered an uproar in the ND party base ...

I don't know if this story is accurate, but if the plan is to default - just say so.

by Calculated Risk on 11/08/2011 05:45:00 PM

Important: REO inventories have declined over the last few quarters. This is a combination of more sales and fewer acquisitions due to the slowdown in the foreclosure process. However there are many more foreclosures coming (I'll have more on this later).

From Fannie Mae today: Fannie Mae Reports Third-Quarter 2011 Results

Fannie Mae today reported a net loss of $5.1 billion in the third quarter of 2011, compared to a net loss of $2.9 billion in the second quarter of the year. The company’s third-quarter loss was driven primarily by two factors: $4.9 billion in credit-related expenses, the substantial majority of which were related to its legacy (pre-2009) book of business; and $4.5 billion in fair value losses driven primarily by losses on risk management derivatives due to a significant decline in swap interest rates during the quarter. These losses were partially offset by $5.5 billion in net revenues.
...
The Acting Director of the Federal Housing Finance Agency (“FHFA”) will submit a request to Treasury on Fannie Mae’s behalf for $7.8 billion to eliminate the company’s net worth deficit.

The combined REO (Real Estate Owned) inventory for Fannie, Freddie and the FHA¹ decreased to 226,961 at the end of Q3 from 249,501 units at the end of Q2. The "F's" REO inventory decreased 23% compared to Q3 2010 (year-over-year comparison).

¹ FHA is for August, not Q3. The FHA is having system problems and hasn't reported for September yet.

Click on graph for larger image.

This graph shows the REO inventory for Fannie, Freddie and FHA¹ through Q3 2011.

The REO inventory for the "Fs" increased sharply in 2010, but may have peaked in Q4 2010. However there may be a new peak when the foreclosure dam eventually breaks - however I expect quite a few modifications as part of the settlement, and probably a bulk REO selling program from Fannie and Freddie.

I'll update the FHA data when it is released, and add the PLS and FDIC REO inventory.

by Calculated Risk on 11/08/2011 04:10:00 PM

From Steve Green at the Las Vegas Sun: Las Vegas house prices continue to slide, down 9 percent from year ago

“In less than four years, more than 100,000 homes in Las Vegas have been lost through foreclosure. That’s 18 percent of our privately owned housing stock: that’s nearly one home in five. And we’re nowhere near finished with foreclosures. In all likelihood, we have another 100,000 yet to go, and at the current rate, that’s another four years,” [housing analyst and SalesTraq President] Larry Murphy said.

According to Case-Shiller, house prices have declined almost 60% from the peak in Las Vegas ... no wonder foreclosure are so high.

And according to Core Logic, there were 426 thousand first mortgages in Las Vegas at the end of Q2 - and 270 thousand of these were in negative equity (about 63%). Another 100,000 foreclosures might be low.