Morning Report: Purchase Applications increase in New York

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S&P futures 2853 3.1
Oil (WTI) 25.59 0.29
10 year government bond yield 0.67%
30 year fixed rate mortgage 3.36%


Stocks are flat this morning on no real news. Bonds and MBS are up.


Mortgage Applications rose 0.3% last week as purchases rose 11% and refis fell 3%. “There continues to be a stark recovery in purchase applications, as most large states saw increases in activity last week. In the ten largest states in MBA’s survey, New York – after a 9 percent gain two weeks ago – led the increases with a 14 percent jump. Illinois, Florida, Georgia, California and North Carolina also had double-digit increases last week,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “We expect this positive purchase trend to continue – at varying rates across the country – as states gradually loosen social distancing measures, and some of the pent-up demand for housing returns in what is typically the final weeks of the spring home buying season.” Interesting comments about New York. It looks like people are fleeing NYC after the COVID-19 issue, and why not? NYC is expensive as heck, and the main thing to recommend it is the easy commute if you work there and all the great bars and restaurants. With work at home now becoming mainstream, is it worth the expense and the risk?


Delinquencies ticked up in the first quarter after hitting a record low in the fourth, according to the MBA. “The mortgage delinquency rate in the fourth quarter of 2019 was at its lowest rate since MBA’s survey began in 1979. Fast-forward to the end of March, and it is clear the COVID-19 pandemic is impacting homeowners. Mortgage delinquencies jumped by 59 basis points – which is reminiscent of the hurricane-related, 64-basis-point increase seen in the third quarter of 2017,” said Marina Walsh, MBA’s Vice President of Industry Analysis. “The major variances from the fourth quarter of 2019 to this year’s first quarter are tied to the increase in early-stage delinquencies for all loan types. For example, the 30-day FHA delinquency rate rose by 113 basis points, the second-highest quarterly ramp-up in the survey series. The 30-day VA delinquency rate rose by 78 basis points – the highest quarterly increase.”


Wholesale prices fell in April, according to the PPI. The headline number was down 1.3% MOM and 1.2% YOY. Even ex-food and energy, trade services, etc, it was down on a YOY basis.


Jerome Powell warned of a prolonged recession after the Coronavirus issue get sorted out. He points out that this recession was not caused by a burst bubble or an inflationary spate which caused a tightening. “This downturn is different from those that came before it. Earlier in the post–World War II period, recessions were sometimes linked to a cycle of high inflation followed by Fed tightening. The lower inflation levels of recent decades have brought a series of long expansions, often accompanied by the buildup of imbalances over time— asset prices that reached unsupportable levels, for instance, or important sectors of the economy, such as housing, that boomed unsustainably. The current downturn is unique in that it is attributable to the virus and the steps taken to limit its fallout. This time, high inflation was not a problem. There was no economy-threatening bubble to pop and no unsustainable boom to bust. The virus is the cause, not the usual suspects—something worth keeping in mind as we respond.”  For this reason, I think the economic damage won’t be as bad as the media is hoping. I also think a prolonged period of social distancing is not in the cards either, people aren’t going to put up with that, not even in deep blue states like NY and CA.

19 Responses

  1. This is great. Very much worth the payoff.


  2. How to make things worse:

    “What Washington must do to protect workers

    The government’s bailout rule should be simple: No support if you don’t hire back all of your pre-pandemic workers.

    By Andrew M. Cuomo”

    Liked by 1 person

  3. Welp, the government just told everyone to not pay their mortgage for a year and to take an interest-free loan.

    This ensures that Fannie and Freddie will need a bailout right around election time. Smart.

    Today, to help homeowners who are in COVID-19 related forbearance, the Federal Housing Finance Agency (FHFA) has announced that Fannie Mae and Freddie Mac (the Enterprises) are making available a new payment deferral option. The payment deferral option allows borrowers, who are able to return to making their normal monthly mortgage payment, the ability to repay their missed payments at the time the home is sold, refinanced, or at maturity.

    “For homeowners in forbearance due to COVID-19, payment deferral allows them to make up missed forbearance payments when they sell their home or refinance,” said FHFA Director Mark Calabria. “This new forbearance repayment solution responsibly simplifies options for homeowners while providing an additional tool for mortgage servicers. Borrowers who can pay their mortgage should, because missed payments remain an obligation that will ultimately have to be repaid.”


    • So there’s literally no other consequences to the borrower other than the payments get tacked onto the end of the loan?

      Liked by 1 person

      • apparently not. it used to be that you couldn’t refinance if the forbearance was outstanding, but it looks like they removed it.

        and you aren’t allowed to report it to the credit bureaus.

        why isn’t everyone going to do this?


        • Not trusting that the government would keep up it’s end of the bargain?

          If the government can retroactively screw Bank of America and JP Morgan on their deals in 2009, they can screw homeowners who take forbearance too.

          A lot of small business owners are having second thoughts about the Paycheck Protection Program as well because the government has issued changing guidance on what qualifies for forgiveness, what will trigger audits and what constitutes safe harbors.

          Liked by 1 person

        • Fannie Mae is going to burn through its capital and its remaining credit line with the government if enough people recognize what the offer is and take advantage of it.

          I guess there is the risk the government could rescind the order to permit borrowers to defer paying back the missed payments until maturity or refinance.


        • I certainly would if I were unemployed. Otherwise, it doesn’t feel like a real advantage because I make no progress in paying down the debt. If it included 10% off the principal of my loan then sure I’d do that. Or a suspension of interest so that my full payments for the next year went straight to the principal, again, I’d sign up for that. If it only defers (admittedly interest free) the payments . . . I guess I could use that gap to really pay down all other debt, which would be nice.

          Eh, I’ll think about it.


        • What would give me pause is how forbearance would be legally enforceable for the person with the mortgage if FHFA decides to change policy.

          Basically, my impression is that all of this is at their discretion.


  4. This is great:

    Liked by 1 person

  5. Worth a read:


    • For many then, it was hard to believe that a virus we couldn’t much see evidence of, less understand, would require us to shut down our economy.

      For many now it’s hard to believe that COVID-19 required us to shut down our economy. Indeed, I still don’t believe that.

      And the numbers do not support it. IMO.

      Their actions saved hundreds of thousands, if not millions, of lives and spared American hospitals the horrors of rationing care.

      I really hate stuff like this. It’s claiming for yourself or your position benefits where there is not and will likely never be any positive evidence. It’s possible things could have transpired identically or even better with much less draconian measures. There is no way to know. Certainly, it’s possible you could have done a quarter of the mitigation efforts and gotten the same results. We can only guess because there is no alternate world where we tried other paths and measured the results.

      This is like millions of jobs created or saved. You have no way of knowing if those jobs would have been created anyway (and chances are they would have) or that all these jobs would have been lost if only you hadn’t imposed your ivory tower wisdom on the masses.

      There is also the numbers. 1/3rd of COVID-19 deaths in the US are in New York. Where the government mandated nursing homes accept symptomatic individuals, which apparently led to a lot of unnecessary infections in the highest risk group. Then there’s also other things like the ventilation in a lot of the residential units in NYC that might have contributed to infectious spread, but when (with the exception of New Jersey) fatalities are 10% of what they were in New York (which makes it begin to look much more like a bad case of flu), some of which were fairly lax on enforcement of social distancing and isolating-at-home . . . It begs the question as to if this was the right call.

      I’d also point to the age of fatal cases. While nobody wants to have to struggle with this, most of the fatalities are in people over retirement age–most of whom do not work or do not need to work, particularly. Those who could have isolated more easily, or in communities where everybody is old and a lockdown would have made sense. Younger people who died typically had other complications, 99% of time their health issues were known, so again–the fact we didn’t focus on at risk groups seems really strange to me. Because that’s where all the fatalities are. The fatality rate of people under the age of 60 without risk factors (cancer, asthma, organ transplant, etc) seems to be about the same as traffic fatality rates for that cohort. Or close enough that, again, our justification for shutting everything down seems very questionable to me.

      The choice before us isn’t to fully lock down or to totally reopen. Many argue as though those are the only options.

      That wasn’t the choice before, either. Protect at-risk groups, lock down elderly communities, advise shelter in place for at risk groups and self-quarantine for anyone symptomatic. Push social distancing as much as possible. There were other options.

      That would worsen already troubling trends, given that Covid-19 disproportionately affects disadvantaged communities dependent on public transit and in congested living conditions

      Outside of New York is there any real evidence of this? Just curious. Numbers I’ve seen don’t tend to suggest that. Or is this just an assumption because “women and minorities” are always “hardest hit”?

      Spend more time outside. Since April, we’ve learned a lot about indoor versus outdoor transmission of the coronavirus.

      I feel like this is the intuitive conclusion and shouldn’t surprise anybody. Also, should add–don’t arrest people for being outside. Don’t waste police enforcement on single people or families alone outside on beaches or parks.

      I still think this resistance to herd immunity is wrong. I guess the expectation is eventually we will get an effective vaccine and that will provide herd immunity.

      And admittedly, no point to herd immunity unless we become certain reinfection isn’t possible.

      Eh, agree on protecting nursing homes and high risk groups.


      • “We can only guess because there is no alternate world where we tried other paths and measured the results.”

        You can look at countries like Italy.


        • I don’t think we know–and probably can’t for a while–if we are comparing apples to apples in terms of how cases were diagnosed, fatalities were contained, and I’m not sure what the holes are in mitigation.

          MY point was, is and will remain: mitigation does not require a complete shutdown of the economy to protect at risks groups, require or recommend social distancing, advise the wearing of masks, etc. All Italy would have to do is leave their nursing homes open to visitors beyond awareness that there was a pandemic to skew the numbers.

          Seems to me the first things to do in a pandemic would likely be to lockdown nursing homes and institute limited visiting protocols in hospitals.

          Then talk about social distancing, reducing maximum capacity of public spaces to avoid crowds, advise all business to do ALL meetings as teleconferences rather than face-to-face. Masks and hand sanitizers at the salon. Minimum of six feet between seated guests at restaurants and hand sanitizer at every table. Periodic Lysol sweeps of the restrooms.

          More bleach in cleaning. More seating on patios. But the primary thing is to acknowledge that all cases weren’t created equal and were never going to be–lock down the nursing homes and elevate sanitation protocols at same. Restrict visitation at hospitals. Constant warning to keep distance from elderly relatives and call them on the phone and sanitize anything you send or take to them. Etc. Etc.

          That being said, I still say we have to wait for the numbers. This stuff is going to have to be analyzed and weighted against what information we have about how cases were diagnosed, accuracy of testing, how death was determined (because I don’t think determination is uniform across the numbers) amongst other things. Before we really understand what the numbers are.

          But just a cultural shift in frequency of hand washing and being conscious of when you touch your face or touch a surface you can’t be sure is sanitized … could make all the difference.


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