Long term effects of virus shutdown

FireFoley

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Okay @BMF and @Detroitgator see if my analogy makes any sense regarding these margin calls against the hedges that these mortgage banker's purchased and have obviously blown up. Remember during the housing/credit crisis, the theory was that house prices would always rise so all you had to do was keep refinancing. So b/c that was the prevailing view, it was AIG (the Insurance company) who came up with the novel idea to sell insurance on all these loans that got packaged into CDO's and CMO's and got rated as AAA :lmao2: and places like Goldman Sachs knew they were shyt, but sold them to investors and then went and purchased all that insurance on this garbage from (drum roll please) AIG. AIG thinking they would charge premiums on something that would never fail ended up being completely wrong, as when the shyt hit the fan, Goldman called AIG to collect their insurance and AIG then set the financial world on fire. I think it is something like that, but not nearly the same magnitude. Thoughts?
 

Detroitgator

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Okay @BMF and @Detroitgator see if my analogy makes any sense regarding these margin calls against the hedges that these mortgage banker's purchased and have obviously blown up. Remember during the housing/credit crisis, the theory was that house prices would always rise so all you had to do was keep refinancing. So b/c that was the prevailing view, it was AIG (the Insurance company) who came up with the novel idea to sell insurance on all these loans that got packaged into CDO's and CMO's and got rated as AAA :lmao2: and places like Goldman Sachs knew they were shyt, but sold them to investors and then went and purchased all that insurance on this garbage from (drum roll please) AIG. AIG thinking they would charge premiums on something that would never fail ended up being completely wrong, as when the shyt hit the fan, Goldman called AIG to collect their insurance and AIG then set the financial world on fire. I think it is something like that, but not nearly the same magnitude. Thoughts?
Why would you think the magnitude now is a smaller magnitude?
 

BMF

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Okay @BMF and @Detroitgator see if my analogy makes any sense regarding these margin calls against the hedges that these mortgage banker's purchased and have obviously blown up. Remember during the housing/credit crisis, the theory was that house prices would always rise so all you had to do was keep refinancing. So b/c that was the prevailing view, it was AIG (the Insurance company) who came up with the novel idea to sell insurance on all these loans that got packaged into CDO's and CMO's and got rated as AAA :lmao2: and places like Goldman Sachs knew they were shyt, but sold them to investors and then went and purchased all that insurance on this garbage from (drum roll please) AIG. AIG thinking they would charge premiums on something that would never fail ended up being completely wrong, as when the shyt hit the fan, Goldman called AIG to collect their insurance and AIG then set the financial world on fire. I think it is something like that, but not nearly the same magnitude. Thoughts?

Who gets burned in this deal? The REIT's?
 

ChiefGator

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I would like to see the elimination of "margin". if you can't afford to buy some investment you probably should not buy it or just borrow from some other asset you might have.
 

FireFoley

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Who gets burned in this deal? The REIT's?

Not sure, but after reading and thinking, the margin calls are against the banker's who bought the hedges on margin. So it would be only on those mortgages that did not get immediately sold to Fannie, or Freddie or some other secondary purchaser. I am still not quite sure who actually is on the other side of the hedge making the margin call? Oh wait, didn't there use to be some mortgage insurance companies that were public companies like PMI and MTG? I thought that all went bust in the credit crisis? I am honestly not sure I think the mortgage reits borrow money then buy mortgages at higher rates and try and earn that spread? It sounds like the Insurer is making the call on the bank. Where is @Concrete Helmet when we need him? Either way as @Detroitgator said, probably just means that the government will be the sole player in this area in the future, just like when they overtook Fannie and Freddie and they still have not been able to unwind them like they have talked about for the past 5 or so years.
 

Concrete Helmet

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Not sure, but after reading and thinking, the margin calls are against the banker's who bought the hedges on margin. So it would be only on those mortgages that did not get immediately sold to Fannie, or Freddie or some other secondary purchaser. I am still not quite sure who actually is on the other side of the hedge making the margin call? Oh wait, didn't there use to be some mortgage insurance companies that were public companies like PMI and MTG? I thought that all went bust in the credit crisis? I am honestly not sure I think the mortgage reits borrow money then buy mortgages at higher rates and try and earn that spread? It sounds like the Insurer is making the call on the bank. Where is @Concrete Helmet when we need him? Either way as @Detroitgator said, probably just means that the government will be the sole player in this area in the future, just like when they overtook Fannie and Freddie and they still have not been able to unwind them like they have talked about for the past 5 or so years.
I think the Gov will end up owning a bigger portion for sure. Where rates are and frankly have been for the last 6 years is just plain undesirable for even conservative investors.

As far as margin calls go I'm not gonna say because I really would be talking out of my ass....but the reason over the last 10-12 years or so that most mortgages are only sold after 2-3 years is so that the lender makes back any upfront cost that they discounted to the borrower....ever heard the terms "no closing cost" or "low closing cost", well my guess is that they make some of that back in servicing the loan for a while....Remember servicers don't do it out of the goodness of their heart...

Our largest client, a local credit union sells almost all of their loans immediately BUT....they keep the servicing.....they also shelf some high quality investment loans(they kept my rental mortgages because I'm high quality paper on shorter terms)
 

GatorCatsi

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THE ODDS OF A V-SHAPED RECOVERY ARE ZERO

There are multiple economic recovery scenarios, and varying expectations for how long each one could take. These scenarios are often described as letters of the alphabet.

  • A “V-shaped” recovery is the best-case scenario. In a V-shaped recovery, the economy bounces back as quickly as it fell. V-shaped recoveries are fast and vigorous.
  • A “U-shaped” recovery is the middle-of-the-road scenario. There is a flat stretch of time at the bottom of the recovery, and then a near-vertical return to normalcy.
  • The “L-shaped” recovery is the toughest road. This is the one that takes the longest. Unlike the other two, with an “L-shaped” recovery there is no vigorous bounce-back at all. Instead the bottom of the L stretches out, over a timeframe of multiple quarters or even multiple years.
Some are hoping the United States will have a V-shaped recovery. It will not. This is simply impossible.

The odds of a V-shaped economic recovery — though many hope for it, and some pundits predict one — are zero in our view. There is just no chance.

By “zero” we, of course, mean statistically zero, because theoretically speaking anything could happen.

Someone could come up with a miracle Covid-19 vaccine overnight, while someone else simultaneously comes up with an energy breakthrough bigger than fracking.

But those aren’t remotely plausible possibilities; they are akin to betting on a miracle.

And a flat-out miracle, a kind of combination reverse black swan and deus ex machina, is what the U.S. would need to actually recover quickly from what it faces now. We don’t see it. Or if there were odds on this kind of thing, we would put them at 0.00001% or something of that order.

The news is not all bad. There will be good things ahead when the economy recovers, and attractive trading and investing opportunities long before it recovers.

But we need to be realistic about the odds and probabilities of what is likely to happen next.

In the months, quarters, and years ahead, profitable investments will be found in various corners of the market where local optimism is justified. Optimism with respect to the market on the whole, or the economy on the whole, will mostly be false hope.

To understand why this is true, think of the U.S. economy like an athlete who has just sustained an injury.

It’s never a pretty sight when a professional athlete is sidelined. If the athlete is still in their prime, the question is almost always, “How soon can they be back?”

The answer depends on the injury.

With a lightly sprained ankle, the recovery time could be weeks. With a bone fracture, recovery could take an entire season. With a more severe injury, recovery and rehabilitation could take years.

What the U.S. economy has to recover from now is very different from anything that came before. In sports terms, the injury is far more severe.

What’s more, over the past few decades, investors have been spoiled by a pattern of financial crises followed by liquidity injections fueling a fast rebound.

This pattern of crisis-and-quick-recovery began with the stock market crash of 1987, when Federal Reserve Chairman Alan Greenspan, relatively new on the job, responded to the crash by flooding the system with liquidity.

After 1987, the market bounced back immediately, and Greenspan learned in his gut that this is what a central banker should do: Whenever there is a crisis, throw liquidity at it.

Greenspan’s successors, Ben Bernanke, Janet Yellen, and now Jerome Powell, all inherited the same playbook: To bounce back from a financial crisis, smother it with interest rate cuts, liquidity, and bank credit.

But the recession created by the pandemic — and we are surely in a deep recession now — was not created by a financial engineering blow-up, and thus does not have a financial engineering fix.

As a result of coronavirus “shelter in place” measures and mandated business closures, the St. Louis Federal Reserve estimates U.S. job losses could hit 47 million.

They further note that 67 million Americans are in jobs with high lay-off risk, and that unemployment levels could hit an astonishing 32%.

“These are very large numbers by historical standards, but this is a rather unique shock that is unlike any other experienced by the U.S. economy in the last 100 years,” one of their researchers writes.

There will be happy talk about how the U.S. can get over this quickly. But the numbers don’t add up.

Consider the job count in just three industries — restaurants, retail, and travel:

  • Restaurants: 15.6 million jobs (National Restaurant Association)
  • Retail: 42 million jobs (National Retail Federation)
  • Travel and Tourism: 15.8 million jobs (U.S. Travel Association)
Those three industries alone — restaurants, retail, and travel — account for 73.4 million jobs by trade industry estimates, which amount to roughly 47% of all jobs in the United States.

Those are also the three industries hit hardest by the pandemic. There are other hard hits to be sure, but restaurants, retail, and travel are the big three.

And many of the job losses there will be structural, long-lasting, and permanent.

The restaurant and retail sectors were already in retreat heading into 2020, after years of overexpansion and growing competition from e-commerce.

Travel will also be significantly curtailed, on both an international and local level.

Casual travelers are more likely to stay home. Businesses are more likely to go remote. The industry will bounce back, eventually, but in a leaner state.

But what about the $2 trillion worth of stimulus? Won’t that be a huge shot in the arm for the economy?

Yes and no, because “stimulus” is actually the wrong word. The $2 trillion was more like an emergency blood infusion to keep the patient alive than a B12 booster shot for pep.

To put it another way, the real purpose of the $2 trillion was not to get the economy back on its feet.

It was to avoid an immediate repeat of the Great Depression.

If the $2 trillion can help the United States avoid another Great Depression, and the U.S. merely experiences a brutal recession it can fight its way through with a long, drawn-out recovery, the rescue package will have done its job.

Because the real aim was not bounce-back. It was keeping the patient from dying on the table. That should tell you something about where we are.

In 2008, the global financial system went into cardiac arrest. In 2020, it was not the financial system but the real economy that went into cardiac arrest.

As a result of the pandemic-related shutdowns, you had supply and demand come to a screeching halt simultaneously, even as consumer psychology patterns went from “carefree spending” to “panic-buying toilet paper” in record time.

Supply is gone. Demand is gone. Consumption patterns were halted like a needle scratching across a record. The return will be hesitant and cautious at best, and won’t even start for another month.

We have never, ever, seen anything remotely like this. V-shaped recovery? No.

One of the best things about the $2 trillion rescue package, besides the $1,200 that will go to Americans who desperately need it, was a $600 top-up in weekly unemployment benefits.

For many, the rescue funds will be a godsend. But ask yourself, what will they spend the money on?

We would wager that, for tens of millions of Americans, both those who are unemployed and those who fear job loss in future, the rescue cash will likely go toward four areas:

  • Saving the cash for an emergency
  • Paying down debt
  • Paying rent
  • Buying food
Does that sound like a bounce back recipe to you? It certainly shouldn’t. The ability to pay rent, buy food, pay off debt, and save for a rainy day is very helpful. But in terms of bringing the economy back, it’s like filling in a hole. The $2 trillion will help fill in a hole. It’s not a launching pad for anything.

Then, too, for years the “real economy” got weaker as the financial economy prospered. We are facing the consequences of that now.

The real economy, which centers around Main Street instead of Wall Street, is the one where 70% of the country lives paycheck to paycheck, and where 40% of Americans would struggle to come up with $400 cash for an emergency expense.

Monetary policy doesn’t help the real economy, either. The Fed can loan cheaply to banks, and make it easier for big corporations to borrow, but it can’t create consumer demand where none exists.

The $2 trillion stimulus will have transmission problems, too.

Any mass-spending effort by the government will only be partially effective at best. If it were otherwise, rich-world economies would never have recessions at all, because fiscal stimulus packages could reverse them every time. We normally avoid fiscal stimulus because it’s a lousy option, best used as a last resort.

On March 29, Treasury Secretary Steven Mnuchin said Americans can expect their cash payments “within three weeks.” In an interview with Face the Nation, Mnuchin further explained that people without a direct deposit connection will be able to sign up on a government website.

Three weeks is a long time to wait. Hopefully the website works correctly the first time, and doesn’t crash under strain the way multiple state websites did recently in a rush of unemployment filings.

(With a government project heavy on technology, built to service tens of millions of users, the odds of delay or failure seem about 50-50.)

Meanwhile the clock is ticking, the economy is shut down, and landlords are still asking for rent. With every day in limbo, more Americans get closer to the edge.

In some places, rent and mortgages have been suspended, but that leads to a whole different set of issues (think mortgage REITs with share prices falling toward zero as the mortgage bundlers face insolvency).

The point of recounting all this is not to be a Gloomy Gus or a Debbie Downer.

It’s to help inoculate you with facts and logic against the “rah rah rah, sis-boom-bah” type mentality that suggests the economy can bounce back quickly and so stocks can bounce back quickly, too.

That isn’t the case. The old economy, and the old stock market multiples, are not coming back.

One last point to consider here: The pandemic is landing at the tail end of a 10-year bull market, when valuations were already extreme, debt and leverage levels were high, broad economic indicators were already slowing down, and a bear market was already due.

This is all the more reason not to bank on a “bounce back quickly” scenario.

The quick bounce-backs were for financialized markets, in a financialization trend that was still ongoing, with stock buybacks aplenty (those are over now, too) and central banks in control of the narrative.

That world is gone now.

It’s not all bad news by any means. There will be huge opportunities in the post-pandemic landscape.

In fact, there are big opportunities even now, and trading and investing ideas to be excited about, both bullish and bearish. (We wrote about another big one just today, in a new trade note to Decoder subscribers.)

To prepare for this new landscape, throw away the false optimism. Stick with justified optimism instead, which will only be found in local pockets of the market with selective digging and hard work.

There is no V-recovery coming, no magical resurgence of market multiples to look forward to.

It’s a new reality now. But we can help you navigate it. And when there’s treasure to be found, we can help you find it.
 

Detroitgator

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Okay @BMF and @Detroitgator see if my analogy makes any sense regarding these margin calls against the hedges that these mortgage banker's purchased and have obviously blown up. Remember during the housing/credit crisis, the theory was that house prices would always rise so all you had to do was keep refinancing. So b/c that was the prevailing view, it was AIG (the Insurance company) who came up with the novel idea to sell insurance on all these loans that got packaged into CDO's and CMO's and got rated as AAA :lmao2: and places like Goldman Sachs knew they were shyt, but sold them to investors and then went and purchased all that insurance on this garbage from (drum roll please) AIG. AIG thinking they would charge premiums on something that would never fail ended up being completely wrong, as when the shyt hit the fan, Goldman called AIG to collect their insurance and AIG then set the financial world on fire. I think it is something like that, but not nearly the same magnitude. Thoughts?
Following up on the "magnitude" issue. We "knew" that the Fed was funneling trillions to friendly CBs... now they have officially opened a special, "TEMPORARY" lending arm to friendly CBs... mmm k.
Fed steps in once again to try to smooth out lending markets
 

Concrete Helmet

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Hey I got an idea.....lets make more dollars, help out the largest banks, insurance companies and auto makers, invest billions in green energy companies and get our shovels ready.....
 

GatorCatsi

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Don’t Let COVID-19 Kill American Industry: Bring Back the Aluminum Strategic Stockpile

For all its strategic importance, American aluminum has been left to weather harsh market forces on its own. After reaching two million metric tons per year as recently as a decade ago, U.S. aluminum production fell 60% in 2015. With the sector shrinking from 13 smelters in 2013 to just 5 smelters today, production in 2019 was 1.1 million tons, barely half the former amount. Now comes the COVID-19 gut-punch, and a roller-coaster plunge into recession.

It's harsh but true: America's crisis is China's opportunity. There's a cruel asymmetry here. China's state-owned enterprises can incur deficits without consequence, as the government plays the long game for market dominance. Without U.S. Government backing and at the mercy of Chinese market-flooding, U.S. aluminum producers could well be driven into bankruptcy and out of business.

The United States has allies in its effort to keep the aluminum industry alive. Canada, recognized by statute as part of the U.S. Defense Industrial Base, has been integrated into our supply chain since the eve of World War II. And now that U.S. law has expanded the National Technology Industrial Base to include Australia – which hosts four aluminum smelters, down from six in the last decade – any policy adopted by the U.S. should recognize this “aluminum alliance” as a national security asset. We have an opportunity to coordinate aluminum stockpile purchases, or even maintain an allied aluminum stockpile.

As the pandemic spreads, U.S. policymakers are discussing direct cash payments to every woman, man and child, and low- or no-interest loans to keep small businesses alive. In the same spirit, the President and Congress should consider restoring a strategic aluminum stockpile to keep our remaining handful of smelters from shutting down. When the COVID-induced recession gives way to national economic recovery, we'll need an American aluminum industry – not only for the metal it makes but for the jobs and GDP it generates as well.
 

FireFoley

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The Coronavirus Meltdown


The current Coronavirus crisis is having a critical impact on the Mortgage Industry, which could potentially make the 2008 financial crisis pale in comparison. The pressing issue centers around capital that’s required by Mortgage Lenders to be able to function and meet covenants that are required for them to continue to lend.



Here’s How The Mortgage Market Works


Let’s begin with the mortgage process. A borrower goes to a Mortgage Originator to obtain a mortgage. Once closed, the loan is handled by a Servicer, which many or may not be the same company that originated the loan. The borrower submits payments to the Servicer, however, the Servicer does not own the loan, they are simply maintaining the loan. This means collecting payments and forwarding them to the investor, paying taxes and insurance, answering questions, etc. While they maintain or “service” the loan, the asset itself is sold to an aggregator or directly to a government agency like Fannie Mae (FNMA), Freddie Mac (FHLMC), or Ginnie Mae (GNMA). The loan then gets placed inside a large bundle, which is put in the hands of an Investment Banker. That Investment Banker converts those loans into a Mortgage Backed Security (MBS) that can be sold to the public. This shows up in different investments like Mutual Funds, Insurance Plans, and Retirement Accounts.



The Servicer’s role is very critical. In order to obtain the right to service loans, the Servicer will typically pay 1% of the loan amount up front. The Servicer then receives a monthly payment or “strip” equal to about 30 basis points (bp) per year. Because they paid about 1% to obtain the servicing rights and receive roughly 30bp in annual income, the breakeven period is approximately 3 years. The longer that loan remains on the books, the more money that Servicer makes. In many cases, the Servicer might want to use leverage to increase their level of income. Therefore, they may often finance half of the cost of acquiring the loan and pay the rest in cash.
Servicer Dilemma



As you can imagine, when interest rates drop dramatically, there is an increased incentive for many people to refinance their loans more rapidly. This causes the loans that a Servicer had on their books to pay off sooner…often before that 3-year breakeven period. This servicing runoff creates losses for that Mortgage Lender who is servicing the loan. The more loans in a Mortgage Lender’s portfolio, the greater the loss. Servicing runoff, or even the anticipation of it, can adversely impact the market valuation of a servicing portfolio. But at the same time, Lenders typically experience an increase in new loan activity because of the decline in interest rates. This gives them additional income to help overcome the losses in their servicing portfolio.



But the Coronavirus has caused a virtual shutdown of the US economy, which has created an unprecedented amount of job losses. This adds a new risk to the servicer because borrowers may have difficulty paying their mortgage in a timely manner. And although the Servicer does not own the asset, they have the responsibility to make the payment to the investor, even if they have not yet received it from the borrower. Under normal circumstances, the Servicer has plenty of cushion to account for this. But an extreme level of delinquency puts the Servicer in an unmanageable position.

“I’m From The Government And I’m Here To Help”


In the Government’s effort to help those who have lost their jobs because of the Coronavirus shutdown, they have granted forbearance of mortgage payments for affected individuals. This presents an enormous obstacle for Servicers who are obligated to forward the mortgage payment to the investor, even though they have not yet received it. Fortunately, there is a new facility set up to help Mortgage Servicers bridge the gap to the investor. However, it is unclear as to how long it will take for Servicers to access this facility.



But what has not been yet contemplated is the fact that a borrower who does not make their very first mortgage payment causes that loan to be ineligible to be sold to an investor. This means that the Servicer must hold onto the asset itself, which ties up their available credit. And with so many new loans being originated of late, the amount of transactions that will not qualify for sale is significant. This restricts the Lender’s ability to clear their pipeline and get reimbursed with cash so they can now fund new transactions.



Mark To Market


This week - Due to accelerated prepayments and the uncertainty of repayment, the value of servicing was slashed in half from 1% to 0.5%. This drastic decrease in value prompted margin calls for the many Servicers who financed their acquisition of servicing. Additionally, the decreased value of a Lender’s servicing portfolio reduces the Lender’s overall net worth. Since the amount a Lender can lend is based on a multiple of their net worth, the decrease in value of their servicing portfolio asset, along with the cash paid for margin calls, reduces their capacity to lend.

Mark To Market


This week - Due to accelerated prepayments and the uncertainty of repayment, the value of servicing was slashed in half from 1% to 0.5%. This drastic decrease in value prompted margin calls for the many Servicers who financed their acquisition of servicing. Additionally, the decreased value of a Lender’s servicing portfolio reduces the Lender’s overall net worth. Since the amount a Lender can lend is based on a multiple of their net worth, the decrease in value of their servicing portfolio asset, along with the cash paid for margin calls, reduces their capacity to lend.



Unintended Consequences


The Fed’s desire to bring mortgage rates down isn’t just damaging servicing portfolios because of prepayments, it’s also wreaking chaos in Lenders’ ability to hedge their risk. Let’s look at what happens when a borrower locks in their mortgage rate with a Mortgage Lender. Mortgage rates are based on the trading of Mortgage Backed Securities (MBS). As Mortgage Backed Securities rise in price, interest rates improve and move lower. A locked rate on a mortgage is nothing more than a Lender promising to hold an interest rate, for a period of time, or until the transaction closes. The Lender is at risk for any MBS price changes in the marketplace between the time they agreed to grant the lock and the time that the loan closes.



If rates were to rise because MBS prices declined, the Lender would be obligated to buy down the borrower’s mortgage rate to the level they were promised. And since the Lender doesn’t want to be in a position of gambling, they hedge their locked loans by shorting Mortgage Backed Securities. Therefore, should MBS drop in price, causing rates to rise, the Lender’s cost to buy down the borrower’s rate is offset by the Lender’s gains of their short positions in MBS.



Now think about what happens when MBS prices rise or improve, causing mortgage rates to decline. On paper the Lender should be able to close the mortgage loan at a better price than promised to the borrower, giving the Lender additional profits. However, the Lender’s losses on their short position
negate any additional profits from the improvement in MBS pricing. This hedging system works well to deliver the borrower what was promised, while removing market risk from the Lender.





But in an effort to reduce mortgage rates, the Fed has been purchasing an incredible amount of Mortgage Backed Securities, causing their price to rise dramatically and swiftly. This, in turn, causes the Lenders’ hedged short positions of MBS to show huge losses. These losses appear to be offset on paper by the potential market gains on the loans that the lender hopes to close in the future. But the Broker Dealer will not wait on the possibility of future loans closing and demands an immediate margin call. The recent amount that these Lenders are paying in margin calls are staggering. They run in the tens of millions of Dollars. All this on top of the aforementioned stresses that Lenders are having to endure. So, while the Fed believes they are stimulating lending, their actions are resulting in the exact opposite. The market for Government Loans, Jumbo Loans, and loans that don’t fit ideal parameters, have all but dried up. And many Lenders have no choice but to slow their intake of transactions by throttling mortgage rates higher and by reducing the term that they are willing to guarantee a rate lock.



Furthering the Fed’s unintended consequences was the announcement to cut interest rates on the Fed Funds Rate by 1% to virtually zero. Because the Fed’s communication failed to educate the general public that the Fed Funds Rate is very different than mortgage rates, it prompted borrowers in process to break their locks and try to jump ship to a lower rate. This dramatically increased hedging losses from loans that didn’t end up closing.

Even Stephen King Could Not Have Scripted This


It’s been said that the Stock market will do the most damage, to the most people, at the worst time. And the current mortgage market is experiencing the most perfect storm. Just when volume levels were at the highest in history, servicing runoff at its peak, and pipelines hedged more than ever, the Coronavirus arrived.



Lenders need to clear their pipelines, but social distancing is making it more difficult for transactions to be processed. And those loans that are about to close require that employment be verified. As you can imagine, with millions of individuals losing their jobs, those mortgages are unable to fund, leaving lenders with more hedging losses and no income to offset it.



What Needs To Be Done Now


Fortunately, there are many smart people in the Mortgage Industry who are doing everything they can to navigate through these perilous times. But the Fed and our Government needs to stop making it more difficult. The Fed must temporarily slow MBS purchases to allow pipelines to clear. Lawmakers need to allow for first payment defaults, due to forbearance, to be saleable. And finally, the Fed must more clearly communicate that Mortgage Rates and the Fed Funds Rate are not the same.


We have faith that the effects of the Coronavirus will subside and that things will become more normalized in the upcoming months.
 

Concrete Helmet

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We finished this month with 266 loans closed and very few cancellations BUT our 2 biggest lenders guaranteed their rate lock from a while back due to closing their branches for us to close their customers.....Yup everyone has to come to our office now which is making us jump thru hoops scheduling....unless they refuse then we charged them $275 for a mobile notary to close....Our lenders has now requested we call them the day before closing so they can in turn check employment status...

Looks like on paper we'll end up at about 225 or so for April....hope the unemployment bug doesn't bite those numbers too hard before the end of the month....Won't know the ugly truth until then because we usually have 350-400 loans stockpiled in processing....I want to spread some of that icing around for May/June.....
 

Detroitgator

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We finished this month with 266 loans closed and very few cancellations BUT our 2 biggest lenders guaranteed their rate lock from a while back due to closing their branches for us to close their customers.....Yup everyone has to come to our office now which is making us jump thru hoops scheduling....unless they refuse then we charged them $275 for a mobile notary to close....Our lenders has now requested we call them the day before closing so they can in turn check employment status...

Looks like on paper we'll end up at about 225 or so for April....hope the unemployment bug doesn't bite those numbers too hard before the end of the month....Won't know the ugly truth until then because we usually have 350-400 loans stockpiled in processing....I want to spread some of that icing around for May/June.....
i've done online notary with webcam twice now (pre-Corona).
 

FireFoley

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Not sure which thread to put this, but the home mortgage forbearance rules seem haphazard at best and might create more chaos in the long run. From what I understand,if you have a gov. agency backed loan you get 90 days forbearance, no questions asked. I get it, but we can debate the no questions asked thing. But I am now reading that there is talk of extending that forbearance to 1 year? Please tell me that you would have to prove true hardship to get a 1 year reprieve? And there is a chance that many people will not need 3 months forbearance as they may still be working, but I get it? But if you give blanket 1 year forbearance, what happens when the economy gets back up and running (slowly) yet many companies decide not to bring back or rehire all their employees (which will happen), then you will have many people living for 1 year in a home that no money is being paid on, and then they will just pack up and move? I can see that happening. Somehow it needs to be means tested and spelled out in writing prior to being implemented. This shoot from the hip BS causes more problems than it solves.

Maybe if Crete is not drowning in paperwork, he can chime in.
 

Concrete Helmet

Hook, Line, and Sinker
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Jul 29, 2014
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Not sure which thread to put this, but the home mortgage forbearance rules seem haphazard at best and might create more chaos in the long run. From what I understand,if you have a gov. agency backed loan you get 90 days forbearance, no questions asked. I get it, but we can debate the no questions asked thing. But I am now reading that there is talk of extending that forbearance to 1 year? Please tell me that you would have to prove true hardship to get a 1 year reprieve? And there is a chance that many people will not need 3 months forbearance as they may still be working, but I get it? But if you give blanket 1 year forbearance, what happens when the economy gets back up and running (slowly) yet many companies decide not to bring back or rehire all their employees (which will happen), then you will have many people living for 1 year in a home that no money is being paid on, and then they will just pack up and move? I can see that happening. Somehow it needs to be means tested and spelled out in writing prior to being implemented. This shoot from the hip BS causes more problems than it solves.

Maybe if Crete is not drowning in paperwork, he can chime in.
I'll see if I can find out anything from our lenders but I'm thinking it sounds like a terrible idea....One month or maybe up to 3, Ok but more than that seems excessive to me.


The fact of the matter is if someone is going to be foreclosed on they will most likely stay in that house for much longer than 1 year....It takes a while before banks can even start the process and once it becomes a trend the process gets longer and longer....throw attorneys and liberal Judges into the picture and you can have cases that go on for several years......

Meanwhile were still getting 20-25 orders a day for refi's and HELOC's and so far we've only had to cancel 2 due to loss of employment verification BUT the lenders have told us to SLOW DOWN scheduling so they can reverify and see if more that might be teetering on the edge fall over.

Maybe I'm still stuck in the thought I will wake up and this will all have just been a nightmare.
 

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