Morning Report: A description of the chaos in the mortgage market in late March

Vital Statistics:


Last Change
S&P futures 3126 4.1
Oil (WTI) 37.94 -0.39
10 year government bond yield 0.75%
30 year fixed rate mortgage 3.16%


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


Housing starts rose 4% MOM in May to 974,000. This is still 23% below last year. Building Permits rose 14% MOM but are down 9% YOY. Shelter-in-place orders were still in force for most of the country in May. Despite the drop in May, homebuilder confidence rebounded in June.


Jerome Powell heads to Capitol Hill for his second day of Humphrey-Hawkins testimony. Powell was cautious yesterday about how quickly jobs would come back. That said, investors ignored him, pushing stocks higher. Note that the Fed was consistently over-optimistic about the economy during the Obama Administration and has been consistently over-pessimistic about the economy during the Trump Administration. Note the COVID epidemic has swelled the Fed’s balance sheet even more. The Fed now holds $7.2 trillion in assets. Before the Great Recession, it held about $800B.


Fed assets


Mortgage REIT MFA Financial reported earnings yesterday. On the conference call, the company talked about how bad things got in the MBS market in late March:

January, February and the first two weeks of March were very normal and a good start to the new year. And in only a few days, the financial markets and the mortgage market in particular completely collapsed. With the onset of the COVID-19 pandemic, pricing dislocations for markets and residential mortgage assets was so extreme that liquidity evaporated. Prices of legacy non-agencies, which had not changed by more than 3 points in the last two to three years, were suddenly lower by 20 points. CRT securities dropped as much as 20 points to 50 points and MSR-related asset prices were lower by 20 points to 30 points, all in a few days. MFA received almost $800 million in margin calls during the weeks of March 16 and March 23 and over $600 million of these were on mortgage-backed securities. In contrast, we received $7 million of margin calls on these portfolios during the entire week of March 2 and $37 million during the week of March 9. And during the months of December, January, and February, we received a total of six margin calls, all related to factor changes with a total aggregate amount of $4 million.

MFA received almost $800 million in margin calls, and entered the year with about $70 million in unrestricted cash. This was the dislocation in the market that caused the Fed to react so aggressively to support the MBS market. Of course they almost killed the smaller originators and TBA brokers in the process….


Mortgage Applications increased 8% last week as purchases rose 4% and refis increased 10%. “The housing market continues to experience the release of unrealized pent-up demand from earlier this spring, as well as a gradual improvement in consumer confidence,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. “Mortgage rates dropped to another record low in MBA’s survey, leading to a 10 percent surge in refinance applications. Refinancing continues to support households’ finances, as homeowners who refinance are able to gain savings on their monthly mortgage payments in a still-uncertain period of the economic recovery.”

23 Responses

  1. I’m curious how Ezra plans to get the income redistribution he envisions here without coercion.

    “Imagining the nonviolent state

    What if nonviolence wasn’t an inhuman standard demanded of the powerless, but an ethic upon which we reimagined the state?

    By Ezra Klein
    Jun 17, 2020, 7:00am EDT”

    Absent the military and police, the government is just another aggressive panhandler shaking a cup at me.

    Also, he’s a bit behind. Gandhi has been canceled as a racist.


    • Reminds me of A101…. Communism is just state capitalism. In my utopia there is no state…


    • they just won’t ever admit that we were right.
      did you want a big state? well, here you go.


      • I kept trying to convince him I was just going to take his stuff.

        Liked by 1 person

      • I find it infuriating that they will write sentences like this:

        “Eric Garner was choked to death for the crime of selling loose cigarettes, extinguished while his killers were surrounded by cameras, and a grand jury chose not to charge the officer responsible.”

        Without ever asking how selling loose cigarettes came to be a crime in the first place.

        Every law that you ask to be enforced will have a body count attached to it. I’ve only seen one or two commentators consider “have fewer laws” as a response to issues with policing.

        Liked by 1 person

        • Because those that don’t mention don’t mind the number of laws. Heck, I’d bet most want more laws.

          For whitey anyway.

          I followed AP standards and didn’t capitalize the w.


        • You make an excellent point, and the same point can be made about the over-incarceration of blacks–it’s not just they are over-arrested for crimes (like drug possession) as often committed by white people, but the laws against and/or penalties for these crimes. Though decriminalizing drug possession or turning them into misdemeanors with reasonable fines could like solve much of that problem, I never hear anybody on the left seriously advocating for that. Or very rarely.

          Also, this speaks to another problem (editorially and also in what purports to be actual reportage): Eric Garner was not choked to death for the crime of selling loose cigarettes. There was an attempt to subdue him that ended up with an officer using excessive force. It was not a punishment for the specific crime, which likely would have seen him in and out of jail in a short time period (unless he was violating probation, which may have been the case, I don’t remember). There’s an effort to indict the justice system to say we exercise the death penalty for minor crimes if you’re black. Which is not the actual problem.


    • Interesting, but Gandhi has always been revered in the past but (like MLK, probably, and apparently Mother Theresa) was problematic in a lot of ways and has been whitewashed for public consumption and sainted. That always seemed to be a leftist history-rewriting project so seems really weird he’s now getting called out for his racism and other bad behaviors (although not for arguably fighting to maintain the Indian caste system and the extreme poverty it creates).


  2. Points for honesty, but it may not be the best slogan to take to a general election:

    ““To Halt Climate Change, We Need an Ecological Leninism”

    An interview with
    Andreas Malm”

    Liked by 1 person

    • They should run on it, it’s a sure winner. Appeasing Gaia polls very well.

      Liked by 1 person

    • Proving once again that the “climate crisis” is nothing more than a convenient justification for more leftism.

      Liked by 1 person

      • It’s like a lot of recent events–a likely real thing (and in the case of climate change, something there’s actual science involved with) that’s being twisted and abused in the attempt to grab power and move us along on that road to a socialist utopia.

        COVID-19 has been much the same way. It’s a real thing but the response to it, the reporting around it, and the “science” of it has been twisted and perverted until nothing useful or productive in objective reality can be said or done.

        Which becomes self-defeating. Appears recent sunspot activity would predict cooler overall temperatures this year. But it won’t be able global warming during that time frame, per se, there will be some hurricane or spate of tornadoes that will be blamed on climate change–because they’ve set it up so everything can be blamed on climate change. “SO GIVE US POWER! And all the money.”


  3. “Quaker Oats Replaces Historically Racist Aunt Jemima Mascot With Black Female Lawyer Who Enjoys Pancakes Sometimes”


    • So just before heading over to the party, Schafer, a graphic designer and friend of Toles, decided to dress as Kelly in blackface to mock her, she said.

      So, she dressed as Megan Kelly in blackface to mock Megan Kelly defending the use of blackface (or what used to be called using stage makeup, or something like it) on Halloween. Presumably being critical of Kelly while DOING exactly what she was defending and . . . this stuff is getting too meta.

      “I’m Megyn Kelly — it’s funny!” Schafer replied, the witnesses said.

      This is what we’re dealing with. A universal “it’s all okay when we do it because we’re good and progressive, so no standards need to apply to us until it’s necessary to pretend they do REALLY ENTHUSIASTICALLY for virtue signaling”.

      That being said, there’s a picture of Lyric Prince–one of the people who confronted Schafer’s black face–in silverface. And if all this continues in this direction, how long until using makeup to change your race at all becomes problematic? Why can’t we complain that using all silver makeup over your face with bright red lipstick is “evocative” of blackface and therefore offensive?

      This is where all our impulses that we had learned to channel into religion is going–along with an uncontrolled sea-change in our apparent compulsion to both demonstrate and demand “good manners”. Gotta have saints, sinners, sins, original sin, confession, and all sorts of symbolic behaviors and symbolic restrictions on behaviors as part of the religious pageantry.

      “and watched in silence as she harassed two young women of color.”

      I wasn’t there but it sounds like she is arguing that by not agreeing with the two young women of color, that constituted harassment.

      ‘I cannot excuse my friend’s bad behavior because it does reflect on me if I say nothing.’ ”

      Report on your friends, your neighbors, your parents, even your children or spouse if they exhibit any evidence of going against or disregarding the orthodoxy of the state, or might do anything that would offend the sensibilities of the party apparatchik.

      “I wish I’d have been the one to call her out,” said Philippa Hughes, a Washington arts entrepreneur who attended the party.

      What the hell is wrong with these people? “Ooooh, I wish I’d been the one to cast the first stone and make her cry and leave in tears! That would have made me feel so much better about myself!”

      Every single person at that party should have said something to her. There’s culpability all around.”

      This is not just eating their own. This is advocacy for systemic shaming, for punishing people for ignorance (but just certain kinds) and making public examples of them because everybody is taught they should be offended by certain things, no matter the context, no matter the intent. That a failed effort to do something clever and insult Megan Kelly–no matter how misguided–should involve a mob attack. IT can’t be someone taking her aside and saying, “No, uncool, don’t do that–go wash your face off, what’s wrong with you?” Everybody has to take their bound of flesh. Everybody has to throw a rock during the stoning or they are “guilty” too.

      And the goal of interviewing Toles is clearly to make him feel bad and confess his sins. I can’t believe that you have be some conservative or libertarian to read this article and be *far* more disgusted by this blackface inquisition than the original sin of ignorance they are persecuting.

      But about 15 minutes after Gruber got to the party, she saw Schafer in blackface in Toles’s backyard. “I thought there’s just no way,” Gruber recalled. “I had never seen someone in blackface before. . . . It was like, ‘Holy s—, this is for real.’ ”

      This speaks to how rare a problem this is in the present day, and how probably 95% of “blackface” incidents are liberals trying to lampoon blackface or make some other ill-considered progressive point. In their entire lives these people had NEVER seen anyone do it. But they just breeze right by it like there’s nothing to learn from that fact.

      Prince said in an interview that she was worried about being stereotyped as an “angry black woman,” worried that someone might call the police.

      These people are delusional. Psychotic even. Someone was going to call the police on the angry black woman at a Washington Post party full of progressives. That’s insane.

      Gruber asked Schafer whether she knew the history of blackface. “People have been murdered,” she recalled saying. She said she addressed Schafer “calmly and politely.” “They lynched people back in the day. There’s a painful history, and you should have some respect for that.”

      That’s not the history of blackface. The history of blackface, presented briefly, was about not hiring African Americans as performers and instead giving those jobs to white people, while getting to have a little exotic mocking of black people in their entertainments. It was not about lynching people.

      On her Facebook page, Schafer posts often about her opposition to President Trump and her support of immigrants, gun control, gay rights and anti-racism causes, including photos she took at marches and demonstrations she attended.

      But nothing–nothing–protects you from offending the progressive elites now. Which is good. It’s getting to the point where they have to live by the standards they have been setting for everybody else for so long.

      Prince, too, has sought to work through the events of the evening with a therapist. “It was a humiliating experience for me,” she said. “I felt threatened and physically and emotionally exposed. . . . I felt powerless in a way that I never want to feel again.”

      There is something very wrong with how we’re raising people in this society if that’s the case. Something that should get an eye-roll and an “idiot” or “bigot” instead causes PTSD.

      She said she would like a chance to tell Gruber in person how sorry she is: “With this story, they’ll get the public humiliation they want, but it won’t foster any real dialogue between us. I wish they would talk to me. I made a mistake, and I understand now that when black people make a mistake, they can get killed.”

      I wonder if the public confession of guilt in this modern-era show trial will prevent the execution.

      On Wednesday, after Schafer informed her employer, a government contractor, about the blackface incident and The Post’s forthcoming article, she was fired, she said.

      Apparently not!

      But Toles did not give Gruber the woman’s name, and Gruber reacted sharply: “Hiding her name is a deliberate act of white privilege and cowardice, not friendship.”

      This just does not sound . . . healthy at all. Got the gestapo showing up and demand you name the names of the person in your building who did not salute Dear Leader with appropriate vigor or was known to have made an inappropriate joke about the party.

      Gruber replied that she has “a hard time believing that you are genuine in remorse. . . . I do not feel comfortable reaching out to a woman who publicly harassed me and my friend — simply because we are not white. This happened in public — and so I want a public apology, not a private one.”

      All this sounds . . . not even sure how to describe it. Why does it need to be a public apology? What did she do to harass them–just wearing the blackface, I guess? And the whole thing sounds like what pathological narcissists do to punish disobedient victims. It’s just gross to me, but in the modern era I am not allowed an opinion on it, i know.

      She told Toles that he was not innocent in the conflict: “As you well know,” Gruber wrote, “we are an extension of the company we keep.”

      Again, letting everyone know that they too can be punished for things they should have known they should have done to not anger a member of the superior race.

      An earlier version of this story slightly mischaracterized Prince’s profession. She is a science writer, art critic and artist.

      Folks flexing their muscles. That people think this is going to be good for society, at all, just astounds me. We’ve apparently learned nothing about what having a privileged class and a serf class ends up doing–though history is replete with lessons.


      • How can I help encourage this type of behavior?


      • “Someone was going to call the police on the angry black woman at a Washington Post party full of progressives. That’s insane.”

        That’s actually not insane. See the woman in Central Park.

        And the best historical analogy to this is the Cultural Revolution in China.


        • jnc:

          And the best historical analogy to this is the Cultural Revolution in China.

          This. Very much, this. I said exactly this to my brother a few days ago.


    • I find the comments of the article interesting. Even many of their fellow travelers recognize there is something wrong with the show trial being conducted here.

      This is not news. The is useless gossip. You should take this ridiculous story down.

      Much as I’d like to be completely sympathetic toward and support of both Gruber & Prince, they’ve gone way beyond the pale (yeah, lousy joke – at MY expense) with this. The woman has been outed, publicly humiliated AND lost her job. My God, how much MORE do these two want? Lighten up, ladies. You’re beating it to death and doing so at a time when REAL outrageous and indisputable acts of overt racism deserve center stage, not something as long past and relatively innocuous as this.

      Congrats guys! (Com)Posties, millennials, and everybody else who conspired to further destroy the life of somebody whose attempt at humor in mocking a despised figure missed the mark, was told about it at the time, apologized for it, and needed freakin’ therapy over it.

      What a pathetic bunch of human beings, so fit for this pathetic excuse for a publication.

      Heaven help if any of you are ever in need of any kind of forgiveness at any point in your lives.

      “But Toles did not give Gruber the woman’s name, and Gruber reacted sharply: “Hiding her name is a deliberate act of white privilege and cowardice, not friendship.” OMG. I think we may have touched bottom. WAPO, please stop.

      Gruber and Prince, this article makes you look unreasonable. (Almost as unreasonable as the Post looks for writing about a story that has no reason for being in a national newspaper.)

      You are seriously so triggered that you have to dredge up something from two years ago? And make someone lose her job over it? It seems really vindictive. Especially when Schafer apologized, and her decision to wear blackface shows bad judgment rather than racism.

      Maybe, Gruber and Prince, when you are older and life has thrown more at you, you will realize we all make bad choices sometimes. And that sometimes we deserve mercy and grace from others. I hope when you make bad choices others will treat you with more grace.

      And on and on. There’s almost no comments saying, “Good article” in any way shape for form.


    • And finally, this recent article from Variety mentions 10 other movies that need warning labels in addition to Gone With the Wind.

      The comments are almost universally of the opinion that the article is ridiculous and Variety is in the process of getting woke and going broke.

      The polls (or even the legit public opinion of Trump and/or the Republicans) may not reflect it, but I think the progressives are really overstepping when it comes to the attitudes of the general public and even traditional liberals.


    • Another thing about this: almost all these progressives have done something or said something, much of it recorded somewhere, that can be targeted the same way at some point. Just because it wasn’t blackface doesn’t mean the mob can’t seek you out or won’t. None of them are safe.


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

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