Morning Report: Massive mortgage holiday?

Vital Statistics:


Last Change
S&P futures 2530 -78.4
Oil (WTI) 21.84 -0.69
10 year government bond yield 0.75%
30 year fixed rate mortgage 3.44%


Sloppy stock tape as we head into the weekend. Bonds and MBS are up.


The Fed is set to purchase another $50 billion of MBS and TBAs today. Mortgage bankers are getting killed on their hedges and fighting off the margin calls. The Fed and FICC really need to have a conversation about what they are doing.


The FHA market is tightening up dramatically. Sub 620 FICO? Forget about it. Seeing some aggregators add 15 point LLPAs to lower FICO FHAs. Right now, the floor is 660, and rising fast. If the government goes through with its mortgage relief plan, DQs are going way up. The government is planning to set up a facility for servicers to make advances, which should keep the biggest non-bank servicers alive during this period. Suffice it to say government servicing is worthless right now, because in all reality it is nothing more than an unbounded liability stream at this point.


The stimulus bill is headed to the House today. Unfortunately, the House isn’t in session at the moment, so lawmakers are scrambling to figure out a way to get a vote. In the Senate bill, there is a provision for borrowers who are affected by Coronavirus (directly or indirectly) to petition for relief from mortgage payments for up to 6 months (and extendable for another 6). No proof of hardship is required. The servicer has to report the loan as current to the reporting agencies. This language starts on page 565. Needless to say, this is incredibly generous and nobody has any idea of what the unintended consequences of that will be. I cannot imagine that stands as-is, but you never know.


Do renters get a break? The left will scream bloody murder if they don’t. Since relief only extends to primary residences, what does that mean for investment properties? The government really needs to think this through before they completely upend the real estate market.


Some good news: A new study from the University of Washington has Coronavirus deaths at about 81,000 and ending in June. In other words, just a bit worse than a typical flu season. Many of those dramatic “millions and millions are gonna die!!!” studies assume no changes in behavior, which isn’t the case.



47 Responses

  1. Some good news: A new study from the University of Washington has Coronavirus deaths at about 81,000 and ending in June. In other words, just a bit worse than a typical flu season. Many of those dramatic “millions and millions are gonna die!!!” studies assume no changes in behavior, which isn’t the case.

    They also assume the foundational numbers are meaningful–and until testing is more widespread and metrics are standardized, that’s just not the case. You can’t hope to accurately project from unreliable data.


  2. Decent Vox piece on the trade offs of ending social distancing.

    This point I think is key:

    “If the leading voices in the “carry-on” crowd have offered a false choice, part of the reason it’s taken hold is that the social distancing crowd has, too often, offered no choice at all.

    I live in the Bay Area, in northern California. We were the first locality to impose shelter-in-place rules. Those rules — their severity and their urgency — were clearly communicated. But despite closely following the news, I have no idea what is supposed to happen on April 7, when the order ends.”

    Liked by 1 person

    • Public health experts reacted with horror. But the question Trump is posing needs to be taken seriously. The costs of social distancing are tremendous. The economic forecasts now predict a GDP drop and an unemployment rate of Great Depression-level proportions. The human suffering that will be unleashed is real, and it is vicious.

      I feel like Trump must have gotten to Ezra somehow.

      Ah, there’s Ezra:

      This is why so many economists are skeptical of arguments that pit the economy against the virus. They worry that if you let the virus rage unchecked, you’ll get both a worse epidemic and a worse economy.

      I don’t think anyone is arguing that should let the virus rage unchecked. I think the argument is that shuttering everything is not the only safe option.



      He’s just swooping in to do what the government should be failing to do, slowly and ineffectively!!

      But now I really want to see a commercial with Dyson saying: “A ventilator should look and work like a piece of art . . . “


  3. So the entire House came back to DC and they still didn’t have a recorded vote because Massie couldn’t get a second for his quorum call?


    • Excellent read. I am forwarding to many.

      Cytokine storm is one possible explanation why healthy old folks like me are at greater risk. I never had any allergies – tested clean and could walk through a cloud of pollen – until I was fifty. That gradually chipped away as my immune system got stronger with age. This is a universal thing, and why we get more allergy symptoms after 50.

      Liked by 1 person

    • Just now read that Kevin. It scares me to be honest. The heroic work being done in hospitals across the country is astonishing and both inspirational and heartbreaking at the same time.

      Liked by 1 person

    • There are even further downstream effects on their suppliers, hell, even the throw rub cleaners have to be laid off. The economy is so fundamentally interconnected that to shut it down, as we have down, has devastating consequences.

      Liked by 1 person

    • I had a “this policy is having unintended consequences” conversation with the Fed today.


      • What’d Jerome say?


        • I talked to a staffer at the Atlanta Fed about how QE is having the exact opposite effect on mortgage lending that the Fed wanted.


      • Some friends of mine are getting a divorce and selling their house. They are trying to get pre-COVID 19 prices for it, but I suspect a real estate crash is coming as there will simply be fewer people with jobs and income sufficient to qualify to get a mortgage and buy.

        What’s your take Brent?


        • I don’t see a crash coming, the supply demand picture doesn’t support it. Traffic is going to be down however.

          FWIW, the real estate industry is finding workarounds (video notarizing etc) so sales are still going to happen.


        • Brent, from what I am seeing here, pipelined sales are continuing but listings have slowed and some realtors are suddenly at zero. On a related note, the MAI has issued health regulations for appraisers that are pretty stifling. It will slow appraisals but not stop them.

          It is not quite like ordering full HAZMAT for appraisers before entering a building, but that image is a useful way to imagine the situation.


        • Fannie and Fred are now accepting drive-by appraisals

          Liked by 1 person

        • now accepting drive-by appraisals

          Wow. That’s one way to respond. If I were a banker I would be pretty damned skeptical if my own bank’s money were on the line.


        • the only loans getting done right now are government guaranteed. So if Fannie and Freddie are willing to buy them, then it gets done.

          Basically right now, mortgage bankers make the loans, sell them to Fannie who guarantees them, and then sells them to the Fed who buys them.


        • “if my own bank’s money were on the line.”

          I don’t think that’s been the case for years. How long has it been since banks held a majority of the mortgages they issued?

          Liked by 1 person

        • This is true, of course, in home lending.

          But my long time practice was heavy with builders and contractors and commercial projects and sales of commercial buildings. I assume that commercial banks remain the front line here. Right, Brent?

          Liked by 1 person

        • Brent, so no jumbos?


        • jumbos are tricky right now. The big banks are about the only ones doing them and they pretty much are doing it only for their customers.

          I have one jumbo in the pipeline locked with US bank and i will only fund the loan if I get the green light from them that they will buy it.

          Liked by 1 person

        • Base line for conforming is $510,400 now?


        • if you are in a high cost area, it is 756k


  4. Once again I’m both grateful and proud to be born and raised in CA. While so many places in the country are behind the curve in preparations for the surge in COVID-19 cases our State and Counties here have been preparing since that first plane full of passengers was quarantined at March Air Reserve Base.

    I just finished watching a news conference with our Governor and the Mayor of LA, standing in front of the USNS Mercy at the Port of Los Angeles and wow, is it impressive.

    Governor Newsome was very appreciative of the assistance of the Federal Government and FEMA as well as President Trump. We have 8 field stations and now the Mercy to help with the surge of patients expected here in the next 6 to 12 days. We’ve also increased the bed capacity at all the hospitals by cancelling all elective surgeries and turning two vacant hospitals into active ones again. They’re still procuring staff and equipment for one and working on another one or two locations I think he said.

    We had in LA a 26% increase in positive tests in one day and while our numbers seem low compared to a few other states, we have 4,000 people in hospitals waiting for results who are highly suspected of being positive. In my county we’ve gone from 16 cases last Wed to 151 today. 107 yesterday with most of the new cases in the Western part of Riverside County where I live. The county is going to update their website sometime this afternoon with ages and actual city locations which will be helpful for us. Right now we’re still going out once a week for groceries but we can stop that if we have to.

    Our biggest problem here seems to be testing. We’ve so far tested about 88,000 people but some of the results are taking as long as 6 or 7 days to get back to us. We also have a severe shortage of testing materials such as swabs.

    Procurement of PPE is on going and right now we’re in good shape but will probably be short in the weeks to come so Newsome is being very aggressive about that. It’s amazing the numbers that are going to be needed.

    Anyway, I’m glad he was so aggressive in shutting us down early and continuing his and everyone elses efforts in procurement and preparedness. Maybe we won’t need it all, that’s my hope. It’s hard to watch what’s going on elsewhere in the country.

    Hope you all stay healthy and well this weekend. We’re taking a drive down to the beach and having a picnic in the car while we watch the waves from an undisclosed location. 😉

    Liked by 2 people

    • Good to hear. I thought the Mercy and the other ship weren’t going to be ready for a couple of weeks. Glad that got done.


  5. Just another reason why I’m happy to be a Californian,,,,,,

    A Northern California company is working around-the-lock to fix 170 busted ventilators received by the state from a federal stockpile, officials said Saturday.

    The equipment — crucial in treating COVID-19 patients — arrived Saturday at Bloom Energy in San Jose and should be working and dispatched to Los Angeles County by Monday, said Gov. Gavin Newsom.

    “Rather than lamenting about it, rather than complaining about it, rather than pointing fingers .. we got a car and a truck and we had those 170 brought here,” Newsom said at the company. “That’s the spirit of California, that’s the spirit of this moment.”


    • Lots of Silicon Valley types are chipping in as well. I don’t recall if I posted the Elon Musk story here the other day. After earlier tweeting that the panic was overblown he acquired 1200 ventilators to donate in stricken areas, donated thousands of n95 masks in Seattle, has SpaceX making free sanitizer and face shields, and has Tesla working on ventilators. Tim Cook and Apple are donating 10 million n95 masks and one report says they already have donated 9 million, and more. Apparently there are many helping hands in CA.

      Liked by 1 person


    The Swedes have opted for a limited response compared to most of Europe. That surprised me. Too early to tell if it works, apparently.


  7. I subscribe to the New England Journal of Medicine and my brother in law the now retired engineer in PA subscribes to Lancet.

    But I only want to report here on one issue that has not been addressed by the general news media. If you are on BP meds and yours is an ACE inhibitor you need to talk to your MD about it. If you are, email me at and I will fwd you some articles from these med journals for you to discuss with your MD.


  8. Worth a read:


    • the perils of outsourcing projects with critical public-health implications to private companies; their focus on maximizing profits is not always consistent with the government’s goal of preparing for a future crisis

      My sense is that this is complete bullshit. I don’t know about this particular instance but in my experience the problem is probably based on how the vendor(s) were chosen, language of the contract (especially what got left out) , likely turn-over in the government folks working with the vendors, etc. I don’t think some nationalized vendor would have made the difference because I expect the root problem here is with the government. Instead of coming up with some kind of incentive for private companies to produce the product and creating a competition for a potentially lucrative contract IF they produced the devices to spec, I’m guessing the paid for work rather than results and attempted to micromanage everything. I see no way in which the core problem didn’t come down to how the government side of the project is handled.

      Many companies exist to waste the governments money because that’s the incentive structure a lot of government contracting provides.


    • The process took forever, the companies couldn’t find a way to make them profitable, the contract obviously didn’t seriously obligate the companies on deliverables (just PM-style milestones) and I feel like the idea that the private sector is the problem is kind of contradicted by Dyson and Tesla during the current crisis.


  9. Anyone here investigated the SBA loans that are now available as a response to COVID-19?

    Edit: Answering my own post for anyone else who needs the info


  10. Warning: lots of f-bombs:


  11. Family-friendly:


Be kind, show respect, and all will be right with the world.

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