A weekend topic starting with Bloomberg. "Fannie Mae and Freddie Mac said a regulator’s plan to boost their capital would increase mortgage borrowing costs for the millions of Americans who rely on the companies to buy homes and asked that the proposal be dialed back. Fannie and Freddie said the new capital requirements proposed by the Federal Housing Finance Agency would likely require the companies to raise the fees they charge to backstop mortgages. Fannie said fees would likely rise 0.2 percentage points on average, after making certain assumptions. Freddie said fees might have to rise between 0.15 percentage points and 0.35 percentage points."

"Both companies said that the need for higher fees could end up shrinking their businesses by pushing lenders and borrowers to other outlets for mortgage financing."

From Florida Today. "U.S. Rep. Charlie Crist, D-Fla., is claiming victory after the Federal Housing Finance Agency (FHFA) decided to postpone a new fee for homeowners looking to refinance. 'I am overjoyed that Pinellas homeowners will be spared from the Trump Refi Tax until at least December,' said Crist. 'With Floridians facing the dual emergencies of the pandemic and the economic meltdown, it is no time to be adding new refi taxes to homeowners looking to save money on their mortgage. Today’s news was made possible because of all the homeowners, consumer advocates, and industry leaders who made their voices heard. Alongside my colleagues Representatives Denny Heck and Lee Zeldin, I was proud to lead the bipartisan group that came together and put their differences aside to deliver results ‘For the People.’"

"'Right now, Americans are facing unprecedented financial burdens stemming from COVID-19 – and many are finding themselves unable to make mortgage and other payments during this crisis,' said Heck. 'This is simply the wrong time to be raising costs on homeowners who have chosen to refinance. What’s more, increasing housing fees during economic recovery has a history of failure. We must learn from the lessons of the 2008 financial crisis and allow American families to recover from this pandemic.'"

The South Florida Business Journal. "More than 33,000 homeowners in South Florida have fallen behind on their FHA mortgages, according to government data obtained by the American Enterprise Institute. The delinquency rate soared past 20% during the Covid-19 pandemic. Borrowers with FHA loans are particularly vulnerable to swings in the economy. The program allows people to purchase homes with relatively little cash down, although it does requires mortgage insurance. The dollar amount of FHA loans is capped base on median housing prices in the area. That means the program is often used by middle-class, and first-time homeowners without large reserves of capital."

"FHA lending typically makes up one-fifth of home mortgage lending in South Florida, according to the AEI. The FHA has a foreclosure and eviction moratorium for FHA loans in place through Dec. 31 due to the pandemic.The growing surge of delinquent FHA mortgages shows there’s a big mess to clean up in order to make those borrowers current. The borrowers will eventually have to make up the missed payments."

"Here’s a look at the FHA mortgage delinquency rates in South Florida as of July. Loans in forbearance were included in the delinquency count. Miami-Dade County had 13,490 delinquent FHA loans, or 24.4%. That was the sixth-highest delinquency rate in the nation. Broward County had 12,703 delinquent loans, or 25.8%. That was fourth highest. Palm Beach County had 7,480 delinquent loans, or 22.2%. That was ninth highest. The highest FHA loan delinquency rates were in Nassau-Suffolk County, New York; New York City; and Newark, New Jersey."

"Nationally, 17% of FHA mortgages were delinquent in July. The rate was only 4% in February, the month before the pandemic began to hurt the economy. 'It would be expected that these delinquency percentages will increase over time,' said Edward J. Pinto, director of the AEI Housing Center. 'At some point, a significant percentage of the then delinquent loans would be expected to be placed on the market by owners under distressed conditions or become foreclosures, and then enter the market.'"

The Orange County Register in California. "'The stability of the entire rental housing sector is thrown into question.' Those are not my words, but I concur. Doug Bibby, president of the National Multifamily Housing Council, wonders how his industry will survive after a week that saw California and President Donald Trump temporarily ban evictions, pushing off a landlord’s ability to toss out non-paying tenants until next year."

"The coronavirus has made the landlord business difficult in numerous ways — and it’s getting worse with no simple solutions to fixing it. The big risk is that a collapsing rental industry could take down the recovering homebuying business, too. It all starts with the pandemic, which devastated employment prospects for the renter class. Paying the rent became especially difficult after a weekly $600 jobless stipend evaporated."

"How much are landlords hurting? Well, after a post-Great Recession rebound that ballooned rents and inflated property values one could say today’s troubles are a comeuppance. Still, these are tough times: Empty units will grow. REIS forecasts the national vacancy rate, at 4.8% in the spring, will jump to 'at or close to 7% by early to mid-2021.'"

"Rising skipped payments. The apartment council found 7.9% of tenants made no August payment vs. 6% a year earlier. That non-payment gap averaged 1.4 percentage points the previous four months. Rents are moving in the wrong direction. The asking rents of big Southern California landlords dipped for the time in a decade. The Consumer Price Index shows local rent spending growing at the slowest pace in five years."

"Incentives double. In six California markets tracked by Zillow, 32% of rental listings on average showed some discounting in July vs. 15% five months earlier. It adds up to ugly. One rent-paying metric from Rentec Direct found landlord collections nationwide were down 29% from March to August."

"The home-selling business appears to be on its way, for now, to a nice pandemic rebound thanks to what may prove to be overly generous government largesse. But housing can’t be considered 'recovered' with a rental market on the brink of collapse. It’s especially tough on smaller landlords who don’t have big banks or Wall Street to help them out."

"Yes, some of the same mortgage forbearances offered to homeowners might be useful for 'mom and pop' landlords with mortgages. But they’ve got other bills, too — property taxes, insurance, upkeep, etc. And what about property owners who have no loans? Using the logic of how the mortgage and home-selling world has been propped up by federal assistance, somebody smart has to figure out how the government can “'buy' and 'insure' rental agreements of folks truly impacted by the pandemic. That would keep a roof over tenants’ heads and their landlords paid."

"If not, we may see a home-selling market flooded with rental units for sale — a wave of motivated sellers that could swamp a burgeoning homebuying upswing. And even if there’s enough pent-up demand for ownership (wink-wink!) … where will the renters living in these units go?"

The Financial Brand. "The challenges of the COVID-19 recession for lenders have not yet begun to bite in earnest, but banks and credit unions are going to start feeling it soon, according to an expert from Accenture. The impact on credit of all kinds is going to be felt in different ways depending on the makeup of each financial institution’s portfolio and on the demographics of their consumer and small business borrowers."

"But as the summer of 2020 moved into fall, the Novocain was wearing off on the recession pain as certain credit relief efforts tailed off and as the impact of multiple stimulus programs ended. Chris Scislowicz, Managing Director of Accenture’s financial services practice, and Head of North American credit practice, told The Financial Brand that many lenders, with the exception of the very largest, are only now beginning to get a handle on where they stand on the credit side and what is likely to come."

"An Accenture report, 'How Banks Can Prepare for the Looming Credit Crisis,' states that 'We are in the calm before the storm, the moment in which payment holidays are not flowing through into consumer credit scores and where underlying business health is being masked by furlough and payroll protection schemes.'"

"That calm is ending, according to Scislowicz, and many financial institutions are figuring out where they stand. He explains that the drain of the Paycheck Protection Program and forbearance programs on lenders’ attentions and energies cannot be overestimated. In many organizations each stage of the PPP, the Main Street programs and more combined to divert staff and time away from more analytical tasks due to the nature of the health and economic emergency."

"'The implications for the industry were pretty profound,' says Scislowicz, 'in terms of pulling people off the line. But now the folks with key responsibility for portfolios are starting to take a hard look at things. They are asking, now that programs are winding down, what it means for their books of business.'"

"While issues have already surfaced in commercial lending, that will be expanded as consumer credit forbearance begins to go away. 'I was on the phone with a chief credit officer from a major superregional bank in mid-August,' says Accenture’s Scislowicz, 'and he said that they were just starting to see delinquencies tick up.'"

"Accenture believes that because this recession is not being placed at banks’ doorsteps this time around lenders have the opportunity to be heroes. Some of this has already been seen in early efforts to voluntarily offer credit relief, such as skip-a-pay programs. But this is a limited-time opportunity. 'It will last right up until the point where their shares start to suffer and their shareholders come after them,' says Scislowicz. 'By that point they will have their own challenges.'"

"He explains that the risk is that lenders will start putting consumers and small businesses into categories based on broad characteristics of their borrowings and making blanket decisions. 'This includes such actions as deciding that anybody who has been delinquent for X number of days gets put into either foreclosure or special assets or what have you,' the analyst states."

"'Liquidity nearly dried up in 2010,' recalls Scislowicz. 'If banks suddenly put a hold on funding, we could find ourselves quickly in a different crisis. Similarly, if banks started to suddenly start foreclosing on homes rapidly, they could create a real estate crisis.'"

"The firm isn’t saying that this kind of development will come, only that it could come if lenders aren’t careful. 'There are levers that lenders can pull and certainly some of those levers could make this recession worse,' says Scislowicz. Another potential risk, for example, is institutions liquidating assets too quickly, flooding the market involved and driving down prices."

"'There’s the concept of lending into a problem, giving someone with a strong business model the funds to get through six more months,' Scislowicz explains. 'But the catch is that nobody’s got a crystal ball on how long this is going to last. If we’re still sitting in our homes wearing masks in August 2021, the U.S. will be a very different place, and some very different actions will have to be taken.'"