The Week in Preview - Is it getting hot in here?
The biggest market event is the Covid-19 Coronavirus, so let’s address that first.
What are the medical experts saying?
We need three things:
- Testing for everyone, so we can accurately identify the potential carriers of the virus
- Tracking those infected with the virus, so we can separate them from the rest of the population, and help them during their recovery and infectious period.
- Treatment, all the major pharmaceutical companies and governments are working hard on coming up with a treatment; and for the most part committed to sharing it with the world when they do.
The estimates vary by country, states, and cities; but these three items are the key to the exit door from this pandemic. We all hope this solution comes sooner than later.
Now for the economic and financial markets. Most every country and state have committed to doing all it can both fiscally (through government programs) and monetarily (through their Central Banks). The United States is pushing through their fiscal PPP, SBA, Unemployment, and other programs that exceed a $trillion. And the monetary policies are providing $trillions of liquidity to buy “bonds” in multiple sectors, including Mortgage Backed Securities.
The hope is that will buy us the time to bridge the medical solution gap.
Some markets like oil, airline, cruise ships are experiencing a glut of supply, with extremely low or no demand. Then of course there are the online industries that are providing us with entertainment and supplies as we shelter in place, who are experiencing extremely high demand and a strain on their capacity.
Our mortgage market is also experiencing an uneven supply and demand side, reflected in our FHA/VA/USDA loan pricing (or lack of), as well as, the lack of investor demand in the jumbo and non-QM loan markets. It also is further layered with the changes in risk to the servicing side (which is reflected in our loan pricing) as SRP buyers price in more risk for potential forbearance of payments and delays in foreclosures. The lower interest rates from the stimulus activities have increased the supply of refinances, while the shelter in place is slowing the sale of home purchases.
We have rolled out our MasonMac programs to fill the gap left by our correspondents, who have their own challenges in servicing and loan risks in forbearance of payments and foreclosures. We will get through this chapter like we have through previous disasters we have never experienced before.
And we will have a new “normal” to adapt to lessen the impact of this type of event and move forward together as we support each other. Stay safe and healthy.
Next week (the last week of April) the markets will be focused on the FOMC 2 day meeting and $352 in Treasury auctions.
Friday, April 24, 2020
Durable Goods -14.4% and Capital Goods 0.1% in March. New orders for key U.S.-made capital goods unexpectedly rose in March, but the gains are not likely to be sustainable amid the novel coronavirus outbreak, which has abruptly shut down the economy and contributed to a collapse in crude oil prices.
University of Michigan Sentiment 71.8 in April. April's final Sentiment Index reading remained largely unchanged from the mid-month figure, and households with below & above median incomes both expressed the same level of confidence.
Reading Up for the Fed Meeting; Fed to Disclose Details of Lending Programs. The 10yr UST price is down 2/32 to yield of 0.617% as of 9:35 AM ET, and UMBS 2.5% prices are up 1+/32, 3.0% are up 1+/32, 3.5%, 4%, and 4.5% are unchg.
Mnuchin Says U.S. Has No Plans for Mortgage Servicer Lifeline.
Does coronavirus spell the end of non-digital mortgage transactions? As the industry awaits that federal approval, luddite lenders are rushing to adopt systems that employ RON and other e-docs as quickly as they can.
We got out early and quickly': FHA chief details coronavirus response. The Federal Housing Administration has provided struggling homeowners with payment flexibility and explored other measures. At the same time, the agency is mindful of protecting itself against downside risks.