NEW YORK (CNNMoney) -- Charles and Jill Segal have not made a mortgage payment in nearly five years -- but they continue to live in their five-bedroom West Palm Beach, Fla. home. Lynn, from St. Petersburg, Fla., has been living without paying for three years. In Thousand Oaks, Calif., an actor has missed 30 payments, and still, he has not lost his home. They're not alone. Some 4.2 million mortgage borrowers are either seriously delinquent or have had their cases referred to lawyers to pursue foreclosure auctions, according to LPS Applied Analytics. Of those, two-thirds have made no payments at all for at least a year, and nearly one-third have gone more than two years. These cases can go on and on. Nationwide, it takes an average of 565 days to foreclose on borrowers in default from their first missed payments to the final auction. In New York, the average is 800 days and in Florida, where the "robo-signing" issue is particularly combative, it's 807.

Production MBS coupons are up 4 to 8/32nds this morning, rate sheets will improve as a result. Weakness in stocks and a generally bullish bias can be cited as the main motivations for loan pricing appreciations today. Stocks opened the day weaker an added to losses after "dovish" comments from New York Federal Reserve Bank president Bill Dudley said U.S. economic growth will pick up in the second half of the year but the recovery will be "painfully slow" for many. This sent a "flight to safety" into government bonds which pushed Treasury yields lower and led MBS prices higher. Stocks continue to hover near 3-month lows (S&P futures -0.80% at 1277) while rates venture toward levels not seen in 7-months. The 10-year note is currently +12/32 at 101-15 yielding 2.955% after bouncing off 3.02% support yesterday.

(Reuters) - The U.S. economy will regain some momentum in the second half of 2011 but the pace of growth will remain "painfully slow" for many, a top Federal Reserve official said on Friday. New York Federal Reserve President William Dudley said financial conditions have improved gradually and the labor market was stronger than it was a year ago. But he said high food and energy prices and a weak housing market remained downside risks for the economy. "I anticipate economic growth will pick up enough in the second half of 2011 to sustain a moderate economic recovery," he told business leaders during a speech in Brooklyn, New York. "Still, the pace of recovery will probably be painfully slow for the many unemployed and underemployed workers." He said any "aggressive near-term spending cuts or tax increases" to shrink the large U.S. budget deficit may also slow growth in short run. "I would emphasize, however, that a credible plan for long-term fiscal consolidation is sorely required and would have economic benefits." (Reporting by Steven C. Johnson; Editing by Chizu Nomiyama)

There has been very limited reaction to this data in U.S. markets.....(Reuters) - U.S. import prices rose for an eight straight month in May despite a drop in fuel costs, with the year-on-year increase reaching its highest level in nearly three years, according to data on Friday. The Labor Department said import prices climbed 0.2 percent last month, confounding forecasts for a 0.7 percent decline and following April's revised 2.1 percent jump. In the year to May, import prices surged 12.5 percent, the largest gain since September 2008. Petroleum import prices fell 0.4 percent, the first decline since September 2010. Exports prices rose 0.2 percent after a downwardly revised 0.9 percent gain. Analysts had been looking for a 0.3 percent gain. ((Reporting by Pedro da Costa and Emily Stephenson, Editing by Chizu Nomiyama))

Is the flight to quality back on already? Ten-year Treasury yields are 3.5 basis points lower in early trading at 2.96% and the Fannie Mae 4.0 MBS coupon is +8/32 at 100-29 (after the roll). We feel auction concession drove yields higher this week and still see the underlying tone as bullish in the bond market. We are encouraged by "Lift-Off" support levels holding yesterday as well (lift-off levels: http://www.mortgagenewsdaily.com/mortgage_rates/blog/214242.aspx) One culprit of strength in bonds this morning: UK industrial production fell 1.7% on a monthly basis in April, versus predictions of a flat month. The March gain was +0.3%. Manufacturing orders fell 1.5%, far worse than expectations of a 0.1% decrease. "Investors remain cautious regarding global economic recovery in the face of increased uncertainty over the next Greek bailout package," said economists at BMO Capital Markets. S&P 500 futures are 0.15% lower at 1,285.75 and Dow futures are down 0.27% at 12,089. On Thursday the stock market broke a six-day losing streak as the Dow added 75 points - its first gain in June - but the session ended on a soft note as stock sold off in the final hour. The S&P ended 0.74% higher, or up 9.4 points. Other overnight news included a widening trade surplus in China. At $13.1 billion, the May surplus failed to meet forecasts of $19.8 billion, but it did expand from $11.4 billion the month prior. Exports slowed to a 19.4% growth rate (annualized), compared with a 29.9% pace the month prior. Light crude oil fell 1.01% overnight to $100.94 per barrel, while gold prices declined 0.05% to $1,542. Brent crude, meanwhile, jumped to a five-week high of $120 per barrel after Thursday's trade deficit was narrower than anticipated.