(WSJ) - Millions of homeowners in distress are getting some unexpected breathing room — lots of it in some places. In New York State, it would take lenders 62 years at their current pace, the longest time frame in the nation, to repossess the 213,000 houses now in severe default or foreclosure, according to calculations by LPS Applied Analytics, a prominent real estate data firm. Clearing the pipeline in New Jersey, which like New York handles foreclosures through the courts, would take 49 years. In Florida, Massachusetts and Illinois, it would take a decade. In the 27 states where the courts play no role in foreclosures, the pace is much more brisk — three years in California, two years in Nevada and Colorado — but the dynamic is the same: the foreclosure system is bogged down by the volume of cases, borrowers are fighting to keep their houses and many lenders seem to be in no hurry to add repossessed houses to their books. When major banks acknowledged last fall that they had been illegally processing foreclosures by filing false court documents, they said that any pause in repossessions and evictions would be brief. All of the major servicers agreed to institute reforms in their foreclosure procedures. In April, the Office of the Comptroller of the Currency and other regulators gave the banks 60 days to draw up a plan to do so. But nothing is happening quickly. When the comptroller’s deadline was reached last week, it was extended another month. A spokesman for Bank of America said, “Any suggestion that we have a strategy to delay foreclosures is baseless.” A Wells Fargo spokeswoman blamed changes in state laws governing foreclosure for any slowdown. A GMAC spokeswoman said it was following “regulatory and investor expectations.” JPMorgan Chase declined to comment. Servicers said some of the decline in foreclosures could be traced to an improved economy: http://www.nytimes.com/2011/06/19/business/19foreclosure.html

Profit taking and signs of short selling are being seen as equities attempt a modest recovery rally. The 10-year note is 4bps above its best overnight levels at 2.93% and the Fannie Mae 4.0 MBS coupon is only +1/32 at 100-23 after trading as high as 101-01 early in the session. This is poor timing as many lenders are taking down loan pricing indications to build rate sheets. As a result, rebate should be relatively flat compared to Friday's quotes. The Explanation: Since 3AM S&P futures have recovered 10 points of losses and are now flat on the day. Bond traders have been quick to take profits and push back against the "flight to safety", especially after the 10-year note broke back into the 2.80s. While the speculative and technical biases are still bullish, investors clearly aren't leaving profits on the table for long without a confirmed downturn in stocks. This illustrates a high level of headline news driven anxiety in the marketplace. And with many investors already sitting on the sidelines, "waiting for guidance", volumes will likely be low....increasing the potential for intraday price volatility.

(The Economist) - EU finance officials bargained through the night, but in the end they failed to reach an agreement to release the next desperately-needed tranche of money for Greece. After seven grueling hours in Luxembourg, which included a video conference with colleagues from G7 countries, the finance ministers of the 17 countries of the euro zone decided to delay until July the disbursement of €12 billion ($17 billion) in loans from the European Union and the IMF. By then, they said, two issues would have become clearer. Firstly, the finance ministers say they want to know how far Greece’s private creditors are willing to help “voluntarily” by rolling over Greek debt when current bonds mature. This has become vital for German domestic opinion to sweeten the bitterness of having to support a second bail-out for Greece. Secondly, the euro zone wants to know whether the reshuffled government of George Papandreou, the embattled Greek prime minister, will secure a vote of confidence in the Greek parliament, which is expected to come on Tuesday. Greek MPs are also due to approve, by the end of June, the next round of austerity measures and structural reforms—including a wholesale privatization of state companies and lands. In the end the ministers decided they could not issue a blank cheque. Jean-Claude Juncker, the prime minister of Luxembourg, who also presides over the euro-area finance ministers, declared: “I cannot imagine for one second that we would commit to finance Greece without knowing that the Greek parliament has given its vote of confidence to the government, and that it has taken on Greece’s commitments [to the EU/IMF].” So why spend seven hours behind closed doors, only to decide to wait and see? Because, Mr Juncker said, figuring out how to squeeze out some funding from private creditors, without it being deemed a default, “is very complicated”. As a result of the discussion, he said, the euro group had “cleared the way for a solution”.

Interest rates are lower to begin the week as equity markets continue to deflate. Stock futures fell on news last night that European officials are reluctant to deliver further aid to Greece until it decides on further austerity measures. The "flight to safety" that followed led benchmark 10-year yields back below 2.90% in early U.S. trading. As a result, production MBS coupon prices are higher. The Fannie Mae 4.0 MBS coupon is currently +6/32 at 100-28, near Friday's price high. This is our guidance for the Week Ahead: There's a weird feeling in the air. Stocks are teetering on a major technical breakdown and bonds smell fear but are waiting for new guidance to be offered. If stocks fail to mount a recovery rally in the near future, we could be looking at another leg lower in Best Execution mortgage rates. While this "feeling" ties together well with our long-term outlook, it's still speculative in nature. We say that because the timing of such a move is "at any moment". And until it happens, stocks are gonna put up a fight. This "scratching and clawing" in equities implies the potential for loan pricing volatility remains high. Remember, it was only last week when Best Execution Mortgage Rates were teetering on a shift higher because stocks had put together a decent intraday rally effort. We may have dodged a bullet, but we're not out of the woods yet. The past few days provide a perfect example of how quickly unfriendly fluctuations can occur in the mortgage market. Be prepared for it. FULL CALENDAR: http://www.mortgagenewsdaily.com/mortgage_rates/blog/216487.aspx