Morning Report: Trouble with some of the non-agency mortgage REITs

Vital Statistics:


Last Change
S&P futures 2438 -89.4
Oil (WTI) 20.46 0.09
10 year government bond yield 0.60%
30 year fixed rate mortgage 3.5%


Stock indices are lower as we kick off the second quarter. Bonds and MBS are up small.


The Fed took up just 53% of the bonds offered to them yesterday. It sounds like they are backing off on their aggressive buying which was triggering margin calls throughout the industry.


Speaking of margin calls, it looks like New Rez has a deal to buy $6.1 billion of non-agency bonds. No price was indicated, but a couple days ago New Rez cut its dividend by 90% and said that book value was down about 25% – 30% from the 12/31 mark.


Impac recently said it would suspend lending operations for two weeks after a whole loan investor went radio-silent about its commitment to purchase whole loans. They have let go most of their employees.


I can’t see how the non-QM market comes out of this as anything more than a portfolio product for banks who have the werewithall to hold the paper. While I would bet the vast majority of these non-QM loans are money good and will perform as expected, they simply aren’t suitable for repo financing. Securitize them or hold them.


The economy lost 27,000 jobs in March, according to the ADP jobs report. In the previous report the economy gained 183k. Small business bore the brunt of the job losses, losing 90k. The Street is expecting a -150k print for Friday’s job report. with the unemployment rate increasing from 3.5% to 3.9%. The government just passed a stimulus bill with aid to help small businesses get through this period. Many are hoping to hold on until the cavalry arrives.


Mortgage applications rose 15% last week as purchases fell 11% and refis rose 26%.

18 Responses

  1. Paycheck protection loan application dropped from Treasury late yesterday.


  2. Devastating.


  3. We’ve stopped the economy essentially for people like her and this is what she does?


  4. I kind of think I’m the only one here watching the stats and modeling re my state and the country (or at least I’m the only one bringing it up). I’m so grateful for our governor and our public health department for taking early mitigation steps and being honest with us about what we’re doing and what we expect. I’m sure most of you have heard that CA is one of the states handling the CoronaVirus pretty well, all things considered, because we took steps early and are a state that could have been fairly devastated by lack of preparation.

    I watch the stats in my county every day and also watch the governor’s briefings. In Riverside County, a population of about 2,425,000, we have to date 429 cases, 79 in Western Riverside where we live, and 13 deaths. The number of positives have doubled in 4.5 days which is a pretty good number compared to other parts of the country. Unfortunately, we’re still struggling here in CA with testing and results from testing. We have tests, but are short on swabs, and the results are lagging by as much as a week.

    In CA overall, we’re approaching 10,000 confirmed cases and a little over 200 deaths.

    What I’ve noticed from all the modeling is that when the hospitals are overrun and overwhelmed with serious/potentially deadly cases and lack of supplies, the number of deaths increase exponentially.

    Our modeling here in the county shows us that by 4/12 we will reach our capacity of ICU beds, by 4/22 we will max out the number of hospital beds, and by 4/26 we will run out of ventilators. Hopefully, we’ve bought enough time here to change this curve by procuring more supplies, beds, and staff. If not, 1000+ folks here in my county will probably die by May 6.


    • That’s interesting Lms. How accurate has the modeling been so far? For example, two weeks ago did it pick the close to the number of beds occupied, deaths, ventilators?


      • McWing I’ve only been following this for about 2 weeks when we had 16 cases total in Riverside County. They keep adding information and current data to the model. It’s really quite interesting. If I could remember how to post an image here I would share their mode. CA is very mitigation oriented.


      • Modeling tends to be inaccurate in one direction or the other. I expect they are taking the pessimistic view so they can use those numbers to prepare. Presumably, over-prepared will be better than under-prepared. And if there is in money slotted to come to them based on expected needs, then of course numbers will be high.

        The truth is, we don’t know. There are two strains of the virus that give you immunity to either, apparently–maybe–and we could actually have a lot more herd immunity than we think. Because of incomplete testing data, the need for hospitalization may be much lower than we think. But we really can’t know right now.


  5. Fatality.


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

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