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The More Astute Operators In The Mortgage Industry Knew There Again Would Be Problems With The GSEs When The Bull Market Ended

An opinion piece from Christopher Whalen, Chairman, Whalen Global Advisors LLC at National Mortgage News. “Last week was difficult for members of the mortgage industry, especially for those members of the residential lending community who’ve been working in the world of mortgage finance for more than a decade. As in the late 1990s and the 2008 financial crisis, lenders and servicers are learning once again that the government market of the Federal Housing Administration and Ginnie Mae is the only reliable one for agency mortgage loans.”

“The government-sponsored enterprises or GSEs, Fannie Mae, Freddie Mac and the Federal Home Loan banks, are again backing away from the market. In the 1990s and the 2008 crisis, lest we forget, the private mortgage insurers and ultimately the GSEs retreated from their legal obligation to repurchase defaulted loans, seeking instead to give them back to the lenders.”

“The more astute operators in the mortgage industry knew there again would be problems with the GSEs when the bull market in housing ended, but today the situation is even more serious for banks and nonbanks alike.”

“The Federal Housing Finance Agency seems determined to keep the GSEs out of the fray as COVID-19 pushes unemployment rates to levels not seen since the 1930s. With unemployment in the mid-teens in April and likely to move significantly higher, the rate of defaults in one-to-four family loans could easily exceed the 2009 peak level for charge-offs by the end of the year.”

“While the banking system and nonbank mortgage servicers can deal with the operational load of the coronavirus crisis, preserving the conventional loan market will depend upon the GSEs honoring their legal obligation to repurchase genuinely defaulted loans and the MIs paying out on mortgage insurance claims. Unfortunately, FHFA Director Mark Calabria seems to think he can stiff the mortgage servicers for the cost of dealing with the natural disaster called COVID-19, a position that is in striking contrast to the helpfulness and urgency shown by the FHA and Ginnie Mae in recent weeks.”

“It seems a bit churlish for the FHFA not to support the GSEs to help lower the cost of government loan forbearance on the very mortgage servicing strips that the GSEs ultimately own. Michael Bright, former Ginnie Mae president and CEO of the Structured Finance Association said last week, ‘The administration, including FHFA, has advocated for this forbearance and should be willing to pay for its own programs rather than expecting private American companies to pick up the tab, with potentially bad outcomes for homeowners and taxpayers.'”

“Everyone knows the GSEs don’t have the cash to repurchase loans in a crisis of the magnitude now facing the industry. The GSEs did not have the cash in 2008 and, to Director Calabria’s point, their first quarter results should show the same in 2020. The best thing FHFA can do is to allow the GSEs to operate exactly the way they did before this crisis began — buy loans out in normal course and focus on bringing liquidity to a broad cross section of smaller issuers in the conventional ecosystem. The big banks and nonbanks can handle the load, but only if Director Calabria stops attacking the industry in public. Comments last week by Director Calabria caused a firestorm in the mortgage industry, especially when he told the Financial Times that the GSEs would run out of cash in 12 weeks.”

“With such harsh negative views coming from a federal regulator, markets are viewing the servicing small-bank and nonbank assets as toxic, making loan origination uneconomic for anyone but the big banks and larger nonbank aggregators, and killing any liquidity in mortgage servicing rights. The decision last week by JPMorgan Chase to limit warehouse lines to government and conventional loans is directly attributable to the comments by Director Calabria that he would not support conventional servicers. How are these comments helpful?”

“But more than the cost of dealing with the CARES Act, what the FHFA, Fed and other agencies within the Financial Stability Oversight Council need to prepare for is the very real default risk tsunami headed our way. It is likely that the rate of actual default in one-to-four family mortgages could be twice the peak levels seen between 2008 and 2010, when U.S. banks charged off hundreds of billions in loans and bond investors sustained huge losses on subprime MBS.”

“During 2020 and 2021, the $11.5 trillion MBS sector could be forced to absorb 5% to 6% charge-off rates across GSE and prime jumbo exposures and well into double digits for FHA/VA/USDA and the scant few below-prime residential loans outstanding. Assume that the banks hold the best quality prime loans in credit terms, then comes the GSEs, then the FHA market. That still gives us $200-250 billion in prospective loan repurchase costs for the GSEs over the next two years. If loan loss rates go higher into double digits, then all bets are off and even the very liquid, well capitalized money center banks will suffer.”

“Rather than fighting with members of the mortgage industry, we think the FHFA director and his FSOC counterparts need to sit down with the Treasury and fashion an emergency capital plan for the GSEs. Treasury needs to help the GSEs plough through possible double-digit loan defaults.”

“Instead of going to Treasury for yet another ‘bailout,’ Director Calabria instead seems to think the private servicers can bailout the GSEs through potentially unprecedented levels of principal and interest advancing relative to any past crisis. It is probably time for the Trump administration to put aside the idea of ending the conservatorship for the GSEs next year. Instead, we need to focus on how Fannie Mae and Freddie Mac will be able to finance what could be several hundred billion dollars in loan buyouts from MBS investors over the next two years.”

From CNBC. “Mortgage credit availability in March fell to the lowest level in five years, according to a survey by the Mortgage Bankers Association. Lenders cite a large drop in liquidity, as investors in jumbo mortgage-backed bonds pull back. Jumbo loans are those valued above the conforming loan limit of $510,400.”

“‘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, an MBA economist. Non-QM are loans that fall outside the criteria for government purchase. ‘Lenders are making credit criteria changes to account for the increased likelihood of forbearance and defaults, as well as higher costs.'”

“Early last week, Wells Fargo, the nation’s largest mortgage lender by volume, temporarily suspended its purchasing of nonconforming, loans from correspondent sellers, ‘due to unprecedented market conditions,’ according to Tom Goyda, a company spokesman. It is also scaling back its own retail originations of nonconforming refinances and conforming high-balance loans.”

“The servicing industry has been begging the Federal Reserve for some kind of liquidity facility to help them make their payments to bondholders, but so far only Ginnie Mae has done that for FHA loans. The lack of liquidity is putting the whole servicing industry at risk and adding to a growing list of reasons to tighten lending.”

“‘No one really wants to hear this, but the tightening is very logical in this environment,’ said Matthew Graham, chief operating officer at Mortgage News Daily. ‘Sure, investors will certainly get their money back at some point. But how long will that take, how much of their business will be affected, and what will the interruptions/headaches look like?'”

“Several nonbank lenders are also raising minimum credit scores for FHA loans, which are generally used by borrowers with lower scores and lower down payments. The FHA itself has not changed its guidelines. For homebuyers, and there are still some out there, the timing of locking in a mortgage rate and then getting all the way through to closing on a home has lengthened dramatically, putting the availability of that mortgage at risk.”

“‘It depends on what type of mortgage you are looking for in terms of difficulty,’ said Guy Cecala, CEO of Inside Mortgage Finance. ‘A conforming mortgage for a home purchase is probably the ‘easiest,’ while a jumbo refi is probably the ‘hardest’ to get in the current environment.'”

From Housing Wire. “Standards for home loans are tightening by the hour as companies like United Wholesale Mortgage, the nation’s largest wholesale lender, beef up rules to ward off early defaults from people losing jobs because of the COVID-19 pandemic. ‘I get as many as 10 emails a day from companies announcing new overlays – mostly for re-verification of employment,’ said Mark Goldman, a loan officer with C2 Financial in San Diego. ‘All the lenders want to make sure borrowers are still working and still have cash flow.'”

“As lenders tightened standards, an index measuring 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, the Mortgage Bankers Association said in a Thursday report. MBA’s Mortgage Credit Availability Index fell 16% led by a 24% plunge in jumbo and non-QM mortgages. A drop in the index means rules are stricter and mortgages are harder to get.”

From ABC Action News in Florida. “It could be harder for some people to get an FHA loan during the pandemic, according to agents. They say lenders are now requiring a higher credit score for the same loans. An FHA loan through the Department of Housing and Urban Development is designed for low-to-moderate income borrowers and requires lower minimum down payments and credit scores than many conventional loans. Cities and counties also often offer down-payment assistance programs.”

“Brian D. Frey, an agent in Tampa said before the COVID-19 pandemic, lenders were requiring a 580, 590, or 600 credit score for an FHA loan. Now, they are requiring a 620 to 640 credit score. According to agents, lenders had to ensure people can really afford to buy the homes after the changes we’ve seen in the economy after the pandemic hit. ‘I mean people’s financial positions changed overnight,’ Frey said. ‘They had to put the brakes on it, but it is not game over.'”

From WSB TV in Georgia. “It’s a common story realtor Shalitia Smith has been hearing from her clients. ‘They would call and they would be told that they would be given a period of time, whether it’s three months, six months as a forbearance plan, but at the end of that term they would have to pay back all of the amounts of money that they missed,’ she said. Smith told Petchenik those payments include interest, too. ‘To me, for my clients who have been laid off, it puts them in a foreclosure situation if they’re not able to pay that money back,’ she said.”

This Post Has 155 Comments
  1. ‘Richard Christopher Whalen is an investment banker and writer who lives in New York City. He is Chairman of Whalen Global Advisors LLC and focuses on the banking, mortgage finance and fintech sectors. Christopher is the author of several books, is contributing editor at National Mortgage News, and appears in a variety of other publications and media. He is a member of FINRA and is a Senior Advisor at J.V.B. Financial Group in New York’

    https://www.rcwhalen.com/

    As I said the other day, the food fight over who is going to eat the sh$t sandwich has begun.

      1. Better buy overpriced assets while you can before cash becomes worthless. I’m hoping for a decrease to something like fair value before that happens. Generation Greed is using government intervention to prevent it.

        1. Generation Greed

          When my classmates and I are all gone, won’t you and yours take over the title?

          1. In fact, the Republicans have already proposed making Social Security and Medicare and “contractural guarantee” for those born in 1957 or sooner, with drastic cuts in benefits for later-born generations who have “time to adjust.”

            That was before the $trillions borrowed for the Trump tax cuts, and the additional $trillions borrowed for the coronavirus.

            The Democrats have a different plan. INCREASE benefits for the generations already collecting, and lie about what later born generations will not be getting until later, so there is no adjustment.

        2. Better buy overpriced assets while you can before cash becomes worthless.

          No thanks. I’m good. I’ll buy them when they’re dirt cheap.

  2. ‘The big banks and nonbanks can handle the load, but only if Director Calabria stops attacking the industry in public. Comments last week by Director Calabria caused a firestorm in the mortgage industry, especially when he told the Financial Times that the GSEs would run out of cash in 12 weeks’

    ‘With such harsh negative views coming from a federal regulator, markets are viewing the servicing small-bank and nonbank assets as toxic, making loan origination uneconomic for anyone but the big banks and larger nonbank aggregators, and killing any liquidity in mortgage servicing rights’

    They are toxic Chris. You said so yourself:

    ‘the rate of defaults in one-to-four family loans could easily exceed the 2009 peak level for charge-offs by the end of the year’

    1. Ben – This from Housing Wire today…….
      “As the country struggles through the economic impact of the coronavirus, numerous mortgage companies have raised their lending standards to protect both borrowers and themselves. Now, one of the largest mortgage lenders in the country is joining that list.
      JPMorgan Chase this week is increasing its minimum lending standards to require nearly all borrowers to have at least 20% down in order to buy a home. Beyond that, Chase is also raising its minimum FICO credit score to 700 on purchase mortgages.
      Put simply, if a borrower doesn’t have a 20% down payment and a FICO score of 700 or above, they will likely not be able get a loan from Chase to buy a home. According to Chase, those lending standards also apply to refinances on non-Chase mortgages.
      The bank will still move forward with refis under its previous lending standards if the loan is either serviced by Chase or in Chase’s portfolio, but for all other refis, it’s 700 FICO or look somewhere else.”

      BUUUUT……..This really caught my eye…….

      “It should be noted that the changes do not apply to Chase’s DreaMaker mortgage program, which makes loans available for low-to-moderate income borrowers with as little as 3% down and reduced mortgage insurance requirements. According to Chase, the changes will allow the bank to spend more time on the loans it is working on and do the appropriate verifications to ensure the loan is the right move for all involved.”

      So….if I get this straight the folks who are least likely to maintain payments on a home loan i.e. less than 700 FICO score are given special dispensation by these yahoos. Really??

      1. It should be noted that the changes do not apply to Chase’s DreaMaker mortgage program

        Do you have to be an illegal to qualify?

    2. The FIRE people seem to have launched an all out media war on Calabria. I guess some folks are missing Easy Peazy Mel’s tenure as FHFA chief.

  3. The best thing FHFA can do is to allow the GSEs to operate exactly the way they did before this crisis began — buy loans out in normal course and focus on bringing liquidity to a broad cross section of smaller issuers in the conventional ecosystem.

    No, the best thing FHFA can do is all the GSEs to go bankrupt, then dissolve itself and announce that FedGov is no longer in the housing business, having created this mess in the first place.

    1. Screw his ecosystem. BTW, technically I think FHA is a GSE too. But the alphabet soup is blurry. This administration was trying to throw off Fannie and Freddie, without guarantees. But the swamp was resisting and the CCP virus showed up.

  4. ‘The more astute operators in the mortgage industry knew there again would be problems with the GSEs when the bull market in housing ended, but today the situation is even more serious for banks and nonbanks alike’

    Wa? But lending Barney Rubble rock solid! Thornberg said prices wouldn’t fall! There’s no subprime, right?

    Take a big bite of the sh$t sandwich Chris, and all the non-banks can eat up too.

    1. I am sure cash flow is king but I am wondering about MSR impairments and subsequent write downs.
      When hedging a servicing portfolio most companies use Treasury Bonds.(Or used to)
      Those values have been very volatile, makes me wonder if that volatility has been effectively managed, especially at the less experienced non-banks.

      1. Not everyone is struggling to cope with volatility.

        WSJ News Exclusive Hedge Funds
        California Hedge Fund Bets on Volatility Spike, Reaps 400% Gain
        LongTail Alpha funds capitalized on the markets’ reaction to the new coronavirus pandemic
        Why the VIX Keeps Investors on Edge
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        Why the VIX Keeps Investors on Edge
        Why the VIX Keeps Investors on Edge

        Since the financial crisis, the Cboe Volatility Index — also known as the VIX — has been considered an early warning signal for market distress. But how does it work? WSJ explains. Photo Composite: Tom McCarten for The Wall Street Journal.
        By Justin Baer
        April 9, 2020 2:11 pm ET

        A California hedge-fund manager posted large gains last month by betting on the reemergence of market chaos.

      2. March 26, 2020

        “As America heads into a deep recession, the $11 trillion residential-mortgage market is in crisis. Investors who buy home loans packaged into bonds are dumping even those with federal backing because of panic that millions might not make their payments. Yet one risky sector had started to show cracks long before the coronavirus pandemic sparked the worst financial meltdown in 12 years: the federal government’s largest affordable-housing program, whose lenient terms are geared toward marginal borrowers.”

        “As real estate prices soared in recent years, working-class adults everywhere have increasingly relied on mortgages backed by the Federal Housing Administration — and U.S. taxpayers. Since 2007, the FHA’s portfolio has tripled in value to more than $1.2 trillion, almost 11% of the market. While private lenders make these loans, they are packaged into Ginnie Mae bonds, common in mutual funds and pensions.”

        “Before Covid-19 started roiling China, a November FHA report found that 27% of borrowers last year spent more than half their incomes on debt, a level it describes as ‘unprecedented.’ The share of FHA loans souring in their first six months has doubled over the last three years to almost 1%.”

        “Not long ago, Alex Castillo drove his shiny black Infiniti SUV through an office park north of the San Antonio airport, along a busy seven-mile stretch of highway that loan officers call ‘Mortgage Row’ because of its abundance of small independent mortgage companies that dominate FHA lending. Castillo, who has the words ‘The Dream Starts Here’ stitched into his jacket, works for Pennsylvania-based American Residential Lending. Oddly, amid the pandemic, his business is booming. His customers locked in FHA mortgages after interest rates plunged this month — adding to federally backed mortgage debt.”

        “‘If the government tells me you’re good enough to get a loan, I have to trust and believe in the government,’ Castillo said. ‘Then we just hope and pray that the client doesn’t get foreclosed on.’”

        “In downtown San Antonio, scores of investors stood on a parched lawn beside the city’s historic granite-and-red-sandstone courthouse. It was the first Tuesday of February, the day of the foreclosure auction. Matt Badders, a San Antonio lawyer who represents lenders, auctioned off two houses. The failed mortgages remind him of the run-up to the financial crisis 12 years ago, when lending to customers with spotty credit nearly brought down the world’s financial system. ‘We’re almost back to 2007, when mortgage originators are waking people up on park benches, saying sign here,’ Badders said.”

        “At the auction, the crowd bid on 338 homes, a third with FHA mortgages, according to Roddy’s Foreclosure Listing Service. One house had dual master bedrooms, a game room and granite kitchen counters. It sold for $202,000 — $52,000 less than the homeowner borrowed only two years ago. The taxpayer-backed FHA insurance fund will take a loss.”

        “Dave Stevens, FHA commissioner under President Barack Obama and former chief executive officer of the Mortgage Bankers Association, said a recession will expose hidden risks in home lending. ‘This should be an alarm bell to policymakers,’ Stevens said. ‘Sometimes you get blinded by a good economy and suddenly look at it and see a bubble of defaults coming.’”

        “The federal government has decided it doesn’t want to pursue — and has asked a judge to dismiss — a lawsuit against Utah-based Academy Mortgage Corp. The judge refused. The suit claims the company’s staff would repeatedly feed information into an automated federal underwriting system, manipulating it until the computer gave the green light. ‘Decline is a curse word,’ Plaintiff Gwen Thrower, a former underwriter, quoted a manager as saying. ‘We don’t use it.’”

        http://housingbubble.blog/?p=3070

        1. “Before Covid-19 started roiling China, a November FHA report found that 27% of borrowers last year spent more than half their incomes on debt, a level it describes as ‘unprecedented.’ ”

          All to benefit richer, older sellers.

          How about going back to three times income? How about going back to 25 percent of your stable income for the mortgage? Later-born generations don’t have stable incomes, because of economic changes that benefitted those older and richer? Then sell for less!

          1. How about going back to 25 percent of your stable income for the mortgage?

            “Stable income”? Never heard of it.

          2. Never heard of it.

            How could you honestly promise to pay back huge sums of borrowed money 30 years from now without that being guaranteed?

    2. “Take a big bite of the sh$t sandwich Chris”

      This isn’t Reddit. If You’re looking for a Reddit hugbox it’s back there, on Reddit. REALTOR, now read this:

      “Mortgage credit availability in March fell to the lowest level in five years”

      Realtor gonna have to get a real job.
      A real job, Realtor.
      Scary 🙁

      1. “Learn to code” is not going to help them as most are over 40 and NOT on h1-b visa.

  5. “But more than the cost of dealing with the CARES Act, what the FHFA, Fed and other agencies within the Financial Stability Oversight Council need to prepare for is the very real default risk tsunami headed our way.”

    Yep, and from my lawn chair I hope to watch it lay waste to the speculative excesses and malinvestment created by 11 years of Fed monetary malpractice, and 40 years of a corrupt and venal .1% in the financial sector rigging the game for their own exclusive benefit.

    1. corrupt and venal .1%

      Thank you for getting the % right and not including hard-working upper-middle-class folks in your outrage!

    2. You got it wrong Randy. If it comes down to they will take it from you and give it to .1%. They are diabolical….they will stop at nothing….even if it means killing you.

  6. ‘Several nonbank lenders are also raising minimum credit scores for FHA loans, which are generally used by borrowers with lower scores and lower down payments. The FHA itself has not changed its guidelines’

    I mentioned this the other day, and it’s crucial to understanding what’s going down. The lenders are raising the guidelines, not FHA. And it spread to now include jumbo (cough, cough, California, cough). We’re seeing it across the “risk layering” with down payments going up to 20% for conventional loans in some cases. Funny cuz if they had been at 20%/high credit scores all along, none of this would have happened.

    1. The lenders are raising the guidelines

      It’s kind of like the alcoholic suddenly having great concern for their liver after 40 years of drinking a fifth of vodka per day. It’s a little late for that sh!t.

    2. “Funny cuz if they had been at 20%/high credit scores all along, none of this would have happened.”

      Spot on.

      As a famous Midwest transplant to California once described what is now underway:

      A banker is a fellow who lends you his umbrella when the sun is shining, but wants it back the minute it begins to rain.

      ― Mark Twain

    3. “…if they had been at 20%/high credit scores all along, none of this would have happened.”

      Isn’t root.cause$.analysi$ an in$ightful tool. 🍷

  7. To me, for my clients who have been laid off, it puts them in a foreclosure situation if they’re not able to pay that money back,’ she said.”

    Yeah, that’s kinda the way it works, Shalitia.

  8. The title from the HW article:

    Lenders get stricter as some borrowers think they don’t have to pay

    Overlays are increasing to protect lenders from early defaults, buyback demands

    1. I know a guy who is a manager at a nationwide musical instrument retailer. He told me that the rent on their now closed store is $14,000 a month. While he didn’t say so, I suspect his employer will be going Cheesecake Factory and not pay the rent until they can reopen the stores. What is the landlord going to do? Evict them and search for a new, non-existing tenant, or wait until they can pay the rent again?

      1. “What is the landlord going to do? Evict them and search for a new, non-existing tenant, or wait until they can pay the rent again?”

        If the landlord is also leveraged there will be few options. Otherwise, if owned outright then maybe settling for half the rent, and muddle along for a few months to see where the economy is headed, is better than no rent.

        1. Well, yeah, if the landlord is getting foreclosed, who knows? I suppose it depends on who own the strip malls and other locations where the rent.

      1. What I typically miss in these deeper crater prediction narratives is how the Fed’s Unlimited Quantitative Easing will factor into the outcome. Do they believe:
        1) The Fed will eventually run out of ammunition? 2) The Fed will not run out, but will eventually declare a cease fire in its War on Savers? 3) The Fed will keep putting on bandages, but the gunshot wound will fail to stop bleeding? 4) Some other eventual consequence or resolution to recently spending $1 million a minute on asset purchases?

        Without factoring in the Fed’s Unlimited Quantitative Easing, I find these prognostications unconvincing.

      2. The MarketWatch editors must really love this article, as it’s posted twice on the same web page on their site.

        Global fund managers haven’t shifted so much into cash since 9/11 era

        Home Investing Stocks
        Opinion: The force that’s propelled the stock market rally will exhaust itself this week
        Published: April 13, 2020 at 3:56 p.m. ET
        By Nigam Arora
        As of last week, the S&P 500 had risen over 20% from its mid-March low. That explosive rally will soon be over.

    1. $1,400,000
      5bed 3.5bath 4,201sqft 0.66acres lot
      15925 Lime Grove Rd, Poway, CA 92064

      I guess everyone in Poway is a millionaire.

      Last Sold $ 378k in 1992

      I

      1. That’s around where my landlord lived when I rented in Poway back in 2009 -2010. I rented a dump off community rd.

    1. “We conducted a cross-sectional analysis of all patients with laboratory-confirmed Covid-19 treated at a single academic health system in New York City between March 1, 2020 and April 2, 2020, with follow up through April 7, 2020. Primary outcomes were hospitalization and critical illness (intensive care, mechanical ventilation, hospice and/or death). We conducted multivariable logistic regression to identify risk factors for adverse outcomes, and maximum information gain decision tree classifications to identify key splitters. Results: Among 4,103 Covid-19 patients, 1,999 (48.7%) were hospitalized, of whom 981/1,999 (49.1%) have been discharged home, and 292/1,999 (14.6%) have died or were discharged to hospice. Of 445 patients requiring mechanical ventilation, 162/445 (36.4%) have died.

      That’s pretty grim.

      No mention was made of whether those who tested positive were wearing masks while shopping…I guess that information was either unavailable or deemed not relevant to the outcomes.

        1. In this case, the denominator was a bunch of folks who tested positive. Maybe they had to be fairly sick to get tested, but were they sicker on average than the other 585,816 Americans who have tested positive?

  9. Interesting development here. Somebody better figure this out soon, before the economy dies while hooked up to the COVID-19 ventilator.

    Wolf joins governors developing reopening plan
    COVID-19

    Apr 13, 2020

    The leaders of six Mid-Atlantic states, including Pennsylvania, announced the formation of a committee to help tackle how they will reopen businesses, schools, and other things that have been shuttered by the coronavirus pandemic.

    Pennsylvania Gov. Tom Wolf joined Gov. Andrew Cuomo (New York), Gov. Phil Murphy (New Jersey), Gov. Ned Lamont (Connecticut), Gov. John Carney (Delaware), and Gov. Gina Raimondo (Rhode Island) on a media conference call briefing Monday to reveal the steps that will be taken.

      1. Cool! I wish these governors all success. Eighteen more months of society-wide house arrest is not viable.

        1. The first time derivative of California home prices appears to be miraculously positive through the right end of the figure.

          The second derivative is cratering, and that’s where prices are headed, as I am reasonably sure that figure is based on stale sales data.

          1. From the AEI Housing Center report:

            “California, which was among the first states affected by the virus, shows that a further deceleration of HPA is likely.”

            Deceleration is what the second time derivative of home prices measures.

          2. Looks like they will need to expand the lower portion to include some negative percentages. Gonna be a tall chart!

          3. Yes. That year-over-year chart averages over a lot of pre-virus months when real estate was steadily and steeply rising. So prices must recently have been falling pretty fast to average out to just 1% year-over-year gain in the latest period.

        2. $till leading the way for the re$t of the Nation to follow! 😜🤪🤠

          Bee.ute.tea.full!

        3. What’$ the ex-governor in yer State doing?

          Arnold Schwarzenegger Fed The Entire Medical Staff At A California Hospital

          Delish / April 13, 2020

          Charitable giving in a time of crisis! CA.$overeign.Nation United we stand!

          Arnold Schwarzenegger
          The man, the myth, the legend teamed up with Buca di Beppo over the weekend to donate 1,000 meals to the Keck USC Medical Center in Los Angeles to help feed their first responders.

          1. Everyone’s giving to first responders….Nobody’s giving to grocery workers. Amerikka!

    1. $tates.Right$! … $tates.Right$! … $tates.Right$! … $tates.Right$! … $tates.Right$!
      … eye’s forgotten which group of angry folks used to hoot&holler that all.the.time!

        1. Oh yeah, those fellas Thee.Patriot.Movement

          (talk ’bout’s owning.thee.pun):

          The most explosive growth came from the so-called Patriot movement, whose adherents view the federal government as their enemy.

          The Patriot movement reached a peak in 1996, a year after right-wing extremist Timothy McVeigh set off a truck bomb outside the Oklahoma City federal building, killing 168 people. McVeigh and a co-conspirator were convicted, and McVeigh was executed.

          1. Well, those fellas think theys can do things within their State, the way they wants it, States Rights Trumps Federal Law.

            (Had nothing to do with Federal monie$, except collecting from them what they owed on grazin’ fee$)

            Acquitted, convicted, fined or free: after the Oregon standoff
            Two years after the armed takeover of a wildlife refuge, consequences vary widely.

            By Brooke Warren / High Country News

            The final defendant in the court case stemming from the 2016 armed occupation of Oregon’s Malheur National Wildlife Refuge is set to be sentenced this June in Portland. Blaine Cooper of Arizona, who recruited militia members to join the takeover, pleaded guilty to conspiracy to impede federal officers in July 2016. Since then, 25 people have been acquitted, convicted or had their case dismissed for their parts in the refuge occupation.

            The 26-person indictment came after Ammon and Ryan Bundy, sons of Nevada rancher Cliven Bundy, led a group of people to take over U.S. Fish and Wildlife buildings at the refuge near Burns, Oregon, demanding the lands be handed over to local control.

            The Bundys described the action as a stand against federal tyranny and government mismanagement of natural resources. Dozens of people from across the country joined the occupation.

            Directly following the march, Bundy announced he was moving the protest to the nearby wildlife refuge, to “take a hard stand.” While most protesters took their leave at that point, a small group followed Bundy to the refuge.

            The occupation elicited harsh criticism from members of the Burns Paiute Tribe, whose ancestral lands include the refuge, other locals who disagreed with the Bundys’ armed tactics, and public lands advocates across the country.

            It ended on Feb. 11, 2016, when FBI agents forced the final four protesters to surrender.

    2. How is the formation of a government committee an “interesting development” toward an end to this nonsense? Governments use committees to procrastinate decisions.

      1. “…procrastinate decisions…”

        I’m guessing that they will set forth some agreed conditions that would have to be met to make it safe for reopening to happen. But this is just a hunch.

  10. Is Mark Calabria of FHFA for real? He has been and still is talking like a true blue free-market anti-bailout conservative, but is he going to fold his cards?

  11. This is “the man” of SFL RE. If he’s scared, so am I
    Jack McCabe is scared.
    McCabe was one of the earliest voices warning of the housing collapse 13 years ago. He runs a real estate economic consulting firm based in Deerfield Beach that bears his name. As early as 2005, McCabe was sounding alarms of a slowing housing market in South Florida.

    Of course, It didn’t just slow — it collapsed.
    WLRN depends on donors to remain South Florida’s leading nonprofit, most trusted source of news and information. Support our mission by giving monthly as a sustaining member of Friends of WLRN or make a one-time donation of your choice. Thank you. Click here to give.
    McCabe is not predicting a similar crash in the regional housing market because of the coronavirus. Yes, the high end of the market — new luxury homes and condos — has seen softer prices even before the stay-at-home orders to slow the spread of COVID-19. But the middle of the housing market is stronger because very few new homes in that price range have been built.
    Still, McCabe is worried.
    “I’m scared of this,” he said. “We had all the numbers that we could count on and I could see what was happening in the marketplace last time. It made it fairly easy to predict what was going to happen. This time around I don’t know if there’s any way of predicting.”

  12. “Standards for home loans are tightening by the hour as companies like United Wholesale Mortgage, the nation’s largest wholesale lender, beef up rules to ward off early defaults from people losing jobs because of the COVID-19 pandemic. ‘I get as many as 10 emails a day from companies announcing new overlays – mostly for re-verification of employment,’ said Mark Goldman, a loan officer with C2 Financial in San Diego. ‘All the lenders want to make sure borrowers are still working and still have cash flow.’”

    This is like closing the barn doors after all the animals have escaped.

    1. 📣🎙”…it’s just the common.cold folks!” By Ra$h limp.baughs

      Day 1 = 1 ….. Day 30 = 10,000

      NEW YORK (AP) — New York’s coronaviru$ death toll has now topped 10,000 only about a month after the state recorded its first fatality, Gov. Andrew Cuomo said Monday

      1. Tucker Carlson: Possible That Doctors Are Classifying Conventional Pneumonia Deaths As COVID Deaths, Increasing The Count

        Posted By Ian Schwartz
        On Date April 7, 2020

        For many years, the CDC has tracked the total number of Americans who die each week from pneumonia. For the last few weeks, that number has come in far lower than at the same moment in previous years. How could that be? It seems entirely possible that doctors are classifying conventional pneumonia deaths as COVID-19 deaths. This would mean the epidemic is being credited for thousands of deaths that would have occurred if the virus never arrived here.

        Not so long ago, some of our leaders seemed on the verge of panic. On March 24, Governor Cuomo of New York descended into a state of frenzy during his daily press conference. Cuomo dismissed the federal assistance New York had received as grossly insufficient. Tens of thousands of innocent New Yorkers were going to die, he said, choking to death while doctors could do nothing to help them:

        CUOMO: FEMA says we’re sending 400 ventilators. Really? What am I going to do with 400 ventilators when I need 30,000?! You pick the 26,000 people that are gonna die because you only sent 400 ventilators.

        It was a horrifying thought. As recently as last Friday, April 3, Cuomo was threatening to use the national guard to seize ventilators from facilities upstate. That’s how badly New York City needed them. Except it didn’t. As it turns out, New York has many more beds, and ventilators, than it needs:

        https://www.realclearpolitics.com/video/2020/04/07/tucker_carlson_possible_that_doctors_are_classifying_conventional_pneumonia_deaths_as_covid_deaths_increasing_the_count.html

        1. Posted By Ian Schwartz
          On Date April 7, 2020

          Dr. Fauci offers sobering assessment about return to normal, saying it will only happen “when you can completely protect the population” with a vaccine and treatment. Otherwise: “If you want to get to pre-coronavirus, that might not ever happen, since the threat is there.”

          Life may never return to normal. This is becoming a species of conventional wisdom. On MSNBC last night, where conventional wisdom is often formed, U-Penn professor Ezekiel Emanuel explained that America may be shuttered for 18 months. At least:

          EMANUEL: Realistically, COVID-19 will be here for the next 18 months or more. We will not be able to return to normalcy until we find a vaccine or effective medications. I know that’s dreadful news to hear. How are people supposed to find work if this goes on in some form for a year and a half? Is all that economic pain worth trying to stop COVID-19? The truth is we have no choice. If we prematurely end that physical distancing and the other measures keeping it at bay, deaths could skyrocket into the hundreds of thousands if not a million. We cannot return to normal until there’s a vaccine.

          “The truth is we have no choice.” That’s a familiar phrase in Washington. It ought to make you nervous. “Do what I say — follow my orders without complaint — or a million people will die. The oceans will rise. The polar bears will die. The human race will go extinct.” Ok. Maybe. These are smart people. We should hear them out. But these are also big decisions — history-changing decisions, with consequences we can’t even begin to anticipate this far out. Before we go ahead and alter our lives and our country forever, it’s fair to ask about the numbers. Their numbers. The ones that we acted on the first time, but that turned out to be completely wrong. How’d they screw that up so completely? That’s a fair question. If they can answer that question — slowly, rationally, in a way that makes sense, and suggests a deeper humility going forward — then that’s enough. They’re allowed to make more public policy decisions. But if they can’t answer it — if they dissemble or dodge or attack the questioner — then they’re disqualified forever from influencing our lives. Let’s see if they can do it.

          1. ,“The truth is we have no choice.” That’s a familiar phrase in Washington.’

            Who says that?

          2. “The truth is we have no choice.”

            Who says that?

            Over.time printing.pre$$ worker$ @ the Federal.Re$erve.!

            (It’$ only $6+ Trillion$ + “UNLIMITED” + (0%) a$ in Zero … Ea$y.Pea$y!)

            “We don’t need$ no $tinkin’ “Over.$ight$!” … mi$.u$e axoh!”

            Here’$ thee.$hort.ver$ion:

            💰💲💰💲💰💲💰💲💰💲💰💲💰💲💰💲💰💲💰💲💰💲💰💲=

            🙈🙉🙊

      1. Better than either of my husband’s La Jolla properties at higher price points. Landlords don’t “invest” in luxury kitchens for tenants.

        1. The place is a dump. It’s a Chinese speculator who bought it in 2018 for a million. That’s a $300,000 house.

          1. By the way, the “back of the envelope” calculation for rental houses used to be 100x monthly rent. That puts this eyesore at $400,000.

        1. Published observation from Thailand: https://www.sciencedirect.com/science/article/pii/S1752928X20300718

          “At present (20th March 2020), the accumulated number of COVID-19 in Thailand is 272. Of this, one of the cases is a forensic practitioner working in Bangkok, capital of Thailand. Indeed, there are only 2 COVID-19 patients who are medical personnel (the forensic medicine professional and a nurse assistant3). Although patients may get the infection from workplace exposure or through spreading in the community, at the period of the occurrence of this case, the patients in Thailand are mostly imported cases and recording of local spreading in the community is limited. There is low chance of forensic medicine professionals coming into contact with infected patients, but they can have contact with biological samples and corpses.”

          That is the extent of causation provided.

  13. Used car sales are also tanking:

    The auto industry, already fretting lengthy factory shutdowns and depressed new-vehicle demand, is starting to sound the alarm about a potential used-car price collapse that could have far-reaching consequences for manufacturers, lenders and rental companies.

    Used-vehicle auctions are for now virtually paralyzed, much like the rest of the economy. The grave concern market watchers have is that vehicles already are starting to pile up at places where buyers and sellers make and take bids on cars and trucks — and that this imbalance will last for months.

    If that fear is realized and prices plummet, it will be detrimental to automakers and their in-house lending units, which likely will have to write down the value of lease contracts that had assumed vehicles would retain greater value. Rental-car companies also will get less money from selling down their fleet of vehicles, which are sitting idle amid a global pandemic that’s been catastrophic for travel.

    “There aren’t a lot of people in gloves and masks running out to buy cars,” said Maryann Keller, a former Wall Street analyst who’s now an auto-industry consultant in Stamford, Connecticut. “Auctions are mostly shut down and they’re filled with cars that have no buyers.”

    Sounds like some bargains may be available soon.

    https://www.msn.com/en-us/money/companies/fear-of-impending-car-price-collapse-grips-auto-industry/ar-BB12ym4q

    The article doesn’t even mention the potential torrent of repos coming. If those people in the multimile long line of cars at the Vegas food bank can’t afford groceries at WalMart, will they have the $600+ nut due next month for the car payment?

    What is the repo car equivalent of pouring cement down the toilet? Sugar in the gas tank?

    1. All of this 3 – 6 month lease/loan accommodation from the manufacturer’s financing units is their swansong, but that’s just the tip of the “auto loans bundled into junk bonds” iceberg, which are held by Private Equity firms that sold a huge slice to Pension funds. Recall the Vanity Fair piece by Bethany McLean.

      1. Every problem leads right back to the same place – the financialization of every industry in this eCONomy.

    2. “What is the repo car equivalent of pouring cement down the toilet? Sugar in the gas tank?”

      Engine & drivetrain & exhaust.systems removal. Seats too!

      1. I went to college in Newark, NY in the ’70s. Knew of a couple of insurance resolutions resulting from an anger trigger on the back window while parked overnight on the street.

        I took the train, and was everybody’s friend.

  14. Vlad does not seem glad,
    but mad
    To realize that he’s been had.

    Russia paid a heavy price to end the oil price war
    By Evgenia Pismennaya, Ilya Arkhipov and Henry Meyer on 4/13/2020

    MOSCOW (Bloomberg) –Vladimir Putin’s deal with OPEC to cut oil output and boost prices three years ago was a triumph for the Russian leader, bolstering his clout on the global stage. But now he’s had to make stinging concessions after U.S. President Donald Trump stepped in to end a price war.

    Amid relief in Moscow at the unprecedented deal with Saudi Arabia and other major producers to slash oil output, the accord marks a painful setback for Russia, said two people close to the Kremlin.

    1. Looks very bullish. I’d imagine the stock market will rally considerably on this good news.

  15. Does JPMorgan’s earnings announcement suggest that Mr Market will soon resume his miraculous Easter Resurrection rally?

    1. The Financial Times
      fastFT JPMorgan Chase & Co
      JPMorgan braced for losses from ‘fairly severe’ recession
      Net income falls by 69% in first quarter as America’s biggest bank ramps up loan provisions
      © Bloomberg
      Laura Noonan in New York
      6 minutes ago

      JPMorgan Chase’s profits fell by 69 per cent in the first quarter as America’s biggest bank prepared for a “fairly severe recession” by dramatically ramping up loan loss provisions while the global economy reels from the economic fallout of coronavirus.

      The bank reported net income of almost $2.9bn for the three months ended in March, down from about $9.2bn a year earlier. Earnings per share of 78c were far worse than the $1.76 predicted by analysts contributing to a Bloomberg poll.

      The fall in profits was primarily driven by a surge of almost $6.8bn in provisions for loan losses, which chief executive Jamie Dimon attributed to “the likelihood of a fairly severe recession”. Total loan provisions came in at $8.3bn for the first quarter of 2020, the highest since 2009 during the global financial crisis.

      JPMorgan is known as one of the most conservative banks on Wall Street but the scale of the provisions sets a grim tone for the other big US banks reporting later this week.

      JPMorgan also warned that it expected a $3.5bn fall in non interest revenue at its investment bank for the 2020 year overall, while net interest income across the bank was expected to come in at $55.5bn for the full year — lower than the $57bn-plus JPMorgan had headlined at its investor day on February 25.

      Other headwinds from the challenging backdrop of low interest rates, rising unemployment and the suspension of swathes of the global economy included lower fees from asset and wealth management business and lower investment banking fees “on lower activity”.

  16. “The truth is we have no choice.” That’s a familiar phrase in Washington. It ought to make you nervous. “Do what I say — follow my orders without complaint — or a million people will die. The oceans will rise. The polar bears will die. The human race will go extinct.”

    Tucker Carlson:

    1. He has a point. “You are all doomed if you don’t do as I say” is a favorite coercive mechanism for political demagogues.

      Like the people who claim that it is dangerous to go grocery shopping or for a walk around the block without wearing facial covering.

      1. Like the people who claim that it is dangerous to go grocery shopping or for a walk around the block without wearing facial covering. I see no coercion in that, just opinions.

  17. Does it seem like the gap between the size and direction of upbeat stock market moves and the ever more somber tone of economic news releases is widening? I can’t help but expect a thunder clap ahead after seeing all of these lightening strikes.

      1. The worser the economic outlook, the more the stock market goes up like a rocket. What does Mr Market know that the MSM economic gloomsters are missing?

        1. The worser the economic outlook, the more the stock market goes up like a rocket.

          Yup. On CNN’s business page, right under the skyrocketing indices, it says “A stark warning; The IMF says coronavirus will lead to the worst recession since the Great Depression”

          Also says:

          “JPMorgan’s profit plummets nearly 70%.
          Wells Fargo’s profit nosedives 89% as it braces for coronavirus turmoil
          Auto dealers are closed. Sales have plunged. Online sales are now the industry’s best hope”

          Online auto sales? How does the finance manager give you the hard sell for an extended warranty and prepaid service? Does he start a Zoom session?

          1. Road traffic seems close to normal in my little burg. I have no idea where everyone is going.

          2. Multiple trips to dispensary?

            We don’t have any in our town, though neighboring Ft. Collins and Berthoud do.

            It is puzzling, as I see the traffic, yet supermarket parking lots aren’t packed. I have noticed that the drive thru lines are as long, if not longer, than ever.

        2. To put my point another way, the gap between the real economy and the financial economy is steadily widening. What this portends, I cannot say, but this is what is happening at the moment.

      2. When I was a young man, news like this would have sent the stock market into a tailspin.

        But these days the market always goes up, no matter what. Go figure!

        The Financial Times
        Global economic growth
        Global economy to suffer worst blow since the 1930s, warns IMF
        Most countries’ economies set to be at least 5% smaller, even after recovery
        A closed café in Vienna, Austria. Businesses around the world have shut their doors
        © Leonhard Foeger/Reuters
        Chris Giles in London 2 hours ago

        The coronavirus crisis will leave lasting scars on the global economy and most countries should expect their economies to be 5 per cent smaller than planned even after a sharp recovery in 2021, the IMF said on Tuesday.

        Forecasting that this year would be the worst global economic contraction since the Great Depression of the 1930s, Gita Gopinath, the fund’s chief economist, said the world outlook had “changed dramatically” since January with output losses that would “dwarf” the global financial crisis 12 years ago.

        “A partial recovery is projected for 2021, with above-trend growth rates, but the level of GDP will remain below the pre-virus trend, with considerable uncertainty about the strength of the rebound,” she said.

    1. Could it be that Wall Street traders are in a state of shock, and too numb to earnings news to respond to it very quickly?

    1. “cusp of retirement”

      The guy in the cover shot is too young to retire. First, he needs some Valium, and then work on his “left-handed pitch” delivering newspapers from his “past due” F350.

  18. Cato At Liberty
    April 14, 2020 10:59AM
    Are Low Oil Prices Bad?
    By Jeffrey Miron and Erin Partin

    A new oil deal led by the United States, Russia, and Saudi Arabia promises to withhold 9.7 million barrels of crude oil a day from global markets – over 13 percent of the world’s daily supply. The deal is in response to cratering demand for gasoline as millions stay home to prevent the spread of COVID-19 and as businesses reduce their energy utilization.

    Limiting crude oil supply to inflate oil prices is a sharp reversal of previous U.S. policy. As recently as last September experts worried of the damage that high oil prices would cause the U.S. economy, and the U.S. has a historically antagonistic relationship with OPEC. Current worry over low prices is, at a minimum, surprising.

    So why the change of heart? A glance at the S&P 500 Energy Sector tells part of the story. From January 1 to March 18 the index dropped by 60 percent. Markets have rebounded somewhat since then but still remain at barely half their six‐​month high.

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