Morning Report: Forbearances are flat

Vital Statistics:

Stocks are flattish this morning on no real news. Bonds and MBS are flat as well.

The percentage of loans in forbearance was flat at 7.2% last week, according to the MBA. Fannie and Freddie loans decreased by 5 basis points while FHA and private label increased. The share of loans in forbearance was unchanged, as the decline in the share of GSE loans was offset by increases for Ginnie Mae, and portfolio and PLS loans,” said Mike Fratantoni, MBA Senior Vice President and Chief Economist. “The pace of new forbearance requests has been relatively flat across investor types, but for those with GSE loans, the rate of exits from forbearance regularly exceeds the rate of new requests. The exception in these trends are borrowers with Ginnie Mae loans. The loss of enhanced unemployment insurance benefits, coupled with a consistently high rate of layoffs and uncertainty about the job market, are having a disproportionate impact on FHA and VA borrowers.”

Rep Maxine Waters (D-CA) laid into the FHFA over the 50 basis point adverse market fee. “Just two weeks ago, Director Calabria approved an outrageous penalty – in the middle of a pandemic and an economic recession – that would apply to homeowners looking to use today’s historically low mortgage rates to refinance their mortgages and reduce their mortgage payments,” Waters said. “Now, after bipartisan backlash, Director Calabria is attempting to save face by delaying the penalty until December 1st and then only providing very narrow exemptions moving forward. While this delay will buy homeowners looking to refinance some time, at the end of the day, the vast majority of homeowners will still pay the penalty – and homeowners in higher-cost areas like Los Angeles will disproportionately be excluded from the narrow exemptions provided. I am calling on Director Calabria to terminate this penalty altogether, not just delay it.”

CoreLogic reported that home prices rose 5.5% in July. CoreLogic CEO Frank Martell said: “On an aggregated level, the housing economy remains rock solid despite the shock and awe of the pandemic. A long period of record-low mortgage rates has opened the flood gates for a refinancing boom that is likely to last for several years. In addition, after a momentary COVID-19-induced blip, purchase demand has picked up, driven by low rates and enthusiastic millennial and investor buyers. Spurred on by strong demand and record-low mortgage rates, we expect to see more home building in 2021 and beyond, which should help support a healthy housing market for years to come.” That said, CoreLogic forecasts a deceleration for home price appreciation going forward of sub-1% for the July 21 – July 20 period.

Many companies who were planning on re-opening offices after Labor Day are rethinking that idea.

Author: Brent Nyitray

In the physical sciences, knowledge is cumulative. In the financial markets, it is cyclical View all posts by Brent Nyitray