Morning Report: 7% of all mortgages are in forbearance

Vital Statistics:


Last Change
S&P futures 2912 42.1
Oil (WTI) 12.71 -0.29
10 year government bond yield 0.64%
30 year fixed rate mortgage 3.43%


Stocks are higher this morning as earnings continue to come in. Bonds and MBS are flattish.


7% of all mortgages are in forbearance, according to the MBA. Ginnie Mae loans (FHA and VA) are now at 10%. Fannie loans are 4.6% and Freddie are 5.5%. Private label increased to 7.5%. The FHFA has also released a press release saying that lump sum payments at the end of the forbearance period are not required.


The Economic Policy Institute (a lefty think tank) estimates from a poll that initial jobless claims are understated by 9 – 14 million due to system problems, in other words people who can’t register because the state unemployment sites are overwhelmed with traffic. If they are right, then the actual number of people who lost their jobs due to COVID is about 37.5 million. In other words, about 662 livelihoods per person who has died from the virus.


The COVID lockdown is beginning to affect the food supply as well. At some point the cure is worse than the disease.


The Fed begins the two-day FOMC meeting this week. They can’t do much more monetary policy wise, but it sure would be nice if they announced a facility to allow mortgage bankers to repo servicing advances.


Home prices rose 0.4% MOM and 3.5% YOY in February, according to the Case-Shiller Home Price Index. It will be interesting to see if the COVID crisis affects home prices nationally. FWIW, Pulte said on its conference call that it hasn’t cut prices at all. In some markets where there is excess spec inventory, builders are adding financing incentives, but not breaking price.


We are starting to see warehouse banks curtail high balance loans. Cash-out refis are also getting harder to do. I heard a rumor that Ginnie Mae may also introduce some sort of vehicle to pass some of the forbearance costs onto lenders (perhaps a special pool for forbearance loans). While the government’s forbearance policies may provide relief to homeowners, the unintended consequence is a severe restriction in credit.


One of the big trends in the aftermath of the financial crisis was the Millennial Generation preferring to live in urban walkable areas. COVID-19 might have stuck a fork in that trend. Good news for suburban SFR property owners.


Author: Brent Nyitray

In the physical sciences, knowledge is cumulative. In the financial markets, it is cyclical

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