Two reports from Housing Wire. "One thing that is clear, however, is that the mortgage lending landscape is vastly different in early April than it was in early March. Certain segments of the business – namely government, non-QM, and jumbo loans – have dried up substantially as lenders pull back from loans that are seen as riskier than GSE loans. And according to Federal Housing Finance Agency Director Mark Calabria, some of those changes may be sticking around for a while."

"The first domino that seemed to fall was non-QM lending. Late last month, many of the biggest lenders specializing in lending to borrowers outside the Qualified Mortgage lending box began pausing their activities due to uncertainty in the market. Then, the Federal Housing Administration lending environment began to shift with many lenders raising their FHA requirements, thereby limiting the number of borrowers that were able to get an FHA mortgage."

"More recently, many lenders have dialed back their jumbo lending as investor interest has dried up. Beyond that, a growing number of lenders are tightening lending standards as a record-breaking number of people are losing their jobs. The reason for all these changes is the same; there’s far too much uncertainty in the market and lenders are uneasy about lending to borrowers whose credit profile isn’t 'perfect.'"

"Calabria said that the recent tightening in credit availability is a normal reaction to economic situations like this one. 'Just like you saw a pullback after the last time,' Calabria said. 'Certainly, we saw credit standards tightening in 2009 and 2010. In fact, we saw credit standards tighten as early as 2006. So, there was a slow tightening over that time. I think you’ll see this as a reminder that credit risk is an actual thing in the mortgage market.'"

"The availability of mortgage credit in March crashed to the lowest level since June 2015, led by a pull-back in jumbo and non-QM lending, according to the Mortgage Bankers Association. The trade group’s monthly Mortgage Credit Availability Index plummeted by 16.1% to 152.1 last month, MBA said on Thursday. The Conventional index, meaning loans not backed by the government, decreased 24.2%, while the Conforming index that includes loans bought by Fannie Mae and Freddie Mac dipped by 2.7%, MBA said. The Jumbo index experienced a 36.9% freefall and the Government index that includes loans backed by the Federal Housing Administration and the Department of Veterans Affairs took a 6.6% downturn."

"'There was a reduction in the availability of loans with lower credit scores and higher LTV ratios, and the largest pullback came from the jumbo and non-QM space,' said Joel Kan, MBA associate vice president of economic and industry forecasting."

"Lenders are pulling back as the economic shutdown aimed at stemming the spread of COVID-19 spiked concern that borrowers wouldn’t be able to pay their bills, Kan said. 'This month’s release highlights the large retreat from jumbo and non-QM investors due to a sharp drop in liquidity,' Kan said. 'Lenders are making credit criteria changes to account for the increased likelihood of forbearance and defaults, as well as higher costs.'"

From Market Watch. "The federal government’s rush to support homeowners in the wake of the coronavirus pandemic should help many Americans avoid foreclosure, but it could have negative consequences for the mortgage industry."

'What most consumers don’t understand is even when they stop making their mortgage payments, servicers are required by contract to continue to make those payments on their behalf to whoever owns the mortgage note,' said Rick Sharga, a mortgage industry veteran. 'The government has basically put in place a program that allows borrowers not to pay but it’s done nothing to backstop the servicers who are going to need that cash to make the payments themselves.'"

"The forbearance situation is even more concerning for nonbank mortgage firms. In the wake of the Great Recession, non-bank mortgage lenders such as Quicken Loans, Freedom Mortgage and Mr. Cooper COOP, have grown significantly. Non-bank lenders accounted for nearly two-thirds of all new mortgages as of May 2019, according to data from the Urban Institute, a left-of-center policy research group. Back in 2013, comparatively, they made fewer than 40% of all loans."

"These companies play a particularly big role when it comes to loans backed by the FHA, Department of Veterans Affairs and Department of Agriculture. Non-bank lenders make up 86% of this market. These loans are more likely to go to first-time home buyers and black and Latino households, as compared with loans backed by Fannie Mae and Freddie Mac."

"While non-bank firms are subject to many of the same regulations as banks, they don’t need to undergo the same amount of stress testing or keep the same amount of capital on hand. And the fact that these companies don’t have deposits to draw on to continue making payments to investors means they’re in a particular bind as a result of the uptick in forbearance. 'There’s just no way anybody could have enough capital set aside to handle the kind of payments that servicers could have to make,' Sharga said."

"Within a matter of weeks, the U.S. could see servicers 'run out of cash and basically become insolvent,' said Karan Kaul, a research associate at the Urban Institute. If a servicer were to go out of business, borrowers’ loans would be transferred to another company. But the process of transferring loans is time consuming and can be messy."

"While some mortgage servicers are standalone firms, in most cases the companies that service mortgages also originate home loans. As a result, if these companies are put out of business because of the coronavirus crisis, Americans could have fewer options of where to get a mortgage in the future. 'And that impacts the eventual recovery as well, even after the virus has been contained,' Kaul said."

"Moreover, the effects of the situation in the servicing sector won’t be experienced equally by all home buyers. Because the non-bank servicers at risk of going out of business are more likely to serve people in the market for FHA and other government-insured loans, first-time home buyers and people of color are more likely to face trouble getting loans as a result."

From CNBC. "Loan servicers are being slammed by requests from homeowners to delay their monthly mortgage payments as the coronavirus forces millions of people out of work. Yet one of the industry’s top regulators vehemently denies that those servicers need any help. Top industry leaders are fighting back in an escalating war of words that could have a wide-ranging impact on the nation’s housing market."

"Last week, Mark Calabria, director of the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, said in an interview on CNBC that a liquidity facility for servicers might be necessary after a few months – but not now. Calabria estimated there could possibly be 2 million borrowers missing payments by the end of May. But forbearance requests have already topped 2 million, according to a report released Tuesday by the Mortgage Bankers Association. Servicers say they desperately need help to make those payments."

"Calabria is now saying servicers won’t need help for at least a year. He told The Wall Street Journal on Tuesday that he has seen no evidence to suggest that there’s a systemic crisis for nonbank servicers. He called the industry’s concern 'spin.' The Mortgage Bankers Association immediately took issue with Calabria’s comments."

"'The FHFA director’s recent statements send a troubling message to borrowers, lenders, and the mortgage market,' Bob Broeksmit, president and CEO of the group, said in a statement late Tuesday night. 'Since Fannie Mae and Freddie Mac will eventually reimburse mortgage servicers for the payments they must advance during forbearance, Director Calabria should advocate for the creation of a liquidity facility at the Fed to ensure the stability of the housing finance market.'"

"Calabria also told HousingWire that Fannie and Freddie may have to move mortgage servicing to bigger companies if smaller servicers don’t have the cash to handle all the forbearances. Industry observers were concerned by his comments."

"'We see this interview as counterproductive to efforts to stabilize the economy and housing finance,' wrote Jaret Seiberg, financial services and housing policy analyst at Cowen Washington Research Group. 'It is only going to increase concerns about the stability of servicers and reduce the willingness of lenders to originate mortgages, including refinancings. We do not see how that is in the public’s best interest.'"

The Globe and Mail in Canada. "Fewer Canadians are taking out mortgages and refinancing their debt, as home sales decline, interest rates on loans rise and lenders start tightening standards amid the economic fallout from the pandemic. 'Demand for mortgages, particularly for purchases, have declined quite precipitously in the last several weeks,' said Stephen Smith, chief executive of mortgage lender First National Financial Corp."

"Home sales in Toronto, Vancouver, Montreal and Calgary dropped in the past two weeks of March and are expected to slow further as unemployment soars amid government restrictions aimed at curbing COVID-19. 'The market swung so fast the other way,' said Calum Ross, principal broker with the Mortgage Management Group. 'There was a surge in demand when rates dipped. Now, the combination of people realizing that the refinancings are not as profitable and the falloff in purchase market, there is a meaningful fall in mortgage applications.'"

"At the same time, lenders are tightening their underwriting standards, according to mortgage brokers. Earlier in March, some lenders said they would proceed with mortgages even for those temporarily laid off, but now they are less forgiving. 'Now it is more, if you are temporarily laid off, we won’t be proceeding with credit,' said Trevor Yerema, president of Advanced Mortgage, which operates in Western Canada. 'We have seen one instance where a client was approved on the Friday. Everything was good to go, but then [the lender] did a secondary follow-up call on Monday to find out that they were laid off Monday morning and they pulled the approval.'"

"Lenders are also becoming more rigorous in their reviews of self-employed borrowers. The most common type of mortgage – a five-year fixed agreement – is now more expensive than it was at the beginning of the year, according to brokers. That rate is hovering around 2.89 per cent compared with 2.29 per cent just a few weeks ago. Only homeowners who held a variable mortgage rate before the first interest rate cut have been able to reap the full benefit of the Bank of Canada’s March rate cut."

"'Demand for refinancings have dropped 50 per cent of what it was two weeks ago,' Mr. Yerema said."

The Orange County Register in California. "Like many folks in the Southern California housing industry, the prime selling season looked promising to Emile Haddad. As February turned to March, the CEO of Five Point Holdings saw sales contracts at the Great Park Neighborhoods in Irvine running double the usual pace. One week, 24 homes sold. The next, 25. Then, in mid-March, the coronavirus’ economic wallop hit."

"Sales fell to nine in a week. And since then, basically, none. The project had 553 home sales last year."

"It’s not just Irvine. It’s just not new homes. Across Southern California, new sales contracts for existing homes plunged 35% in four weeks to a six-year low, according to ReportsOnHousing. 'It’s a testing time for all of us,' Haddad says."

"'Nobody is going to get out of this with 100 cents on the dollar,' Haddad says. 'Anybody who thinks so, at the expense of somebody else, is not acting in the spirit I think we need.'"

"Investors in Five Point, which also has development projects in Valencia and San Francisco, have taken a hit. Shares have been swept along Wall Street’s steeply descending rollercoaster, going from $9 in February to under $4 two weeks ago and almost back to $6. That’s roughly a $200 million decline in market capitalization over six weeks as investors try to gain visibility into future profits."