FNMA and FMCC preferreds. In search of the elusive 10 bagger.

[Guest Covid-19_Survivor]

Ok, please write this guy than: 

[Wiggins]

GSE shareholders are omnipresent on Twitter and elsewhere. They're viewed as enthusiastic sources of capital at this point, for companies that are bulwarks of the housing finance system. The tides have turned.

 

LOL

 

Ask the next tweet why they're not buying.

 

"Ok, please write this guy than:  https://twitter.com/SenSchumer/status/1245380988697481216"

 

 

No thanks.

If you're looking for market rationality with the GSEs good luck to you.

[DRValue]

Is the confidence of Glen Bradford warranted or unwarranted? Cos this forbearance is starting to make me worry.

 

Someone give me the confidence of GB stat!

[DRValue]

Is the confidence of Glen Bradford warranted or unwarranted? Cos this forbearance is starting to make me worry.

 

Someone give me the confidence of GB stat!

 

And now we're at 5.6%

 

www.cnbc.com/amp/2020/04/24/mortgage-bailout-balloons-by-half-a-million-more-loans-in-one-week.html

[DRValue]

Is the confidence of Glen Bradford warranted or unwarranted? Cos this forbearance is starting to make me worry.

 

Someone give me the confidence of GB stat!

 

And now we're at 5.6%

 

www.cnbc.com/amp/2020/04/24/mortgage-bailout-balloons-by-half-a-million-more-loans-in-one-week.html

 

And, does anyone know the fnf forbearance terms for recouping the 10's of billions they're now likely to pay?

[orthopa]

what I dont know is what will happen when mortgages in forbearance hit the end of the initial forbearance period, say 4 months.  will many servicers demand immediate catch up payment?  will fhfa permit this? I assume fhfa has power to dictate practices to servicers since they are operating under sub servicing agreements with GSEs. will a high % of these mortgages become delinquent at this time...I wouldn't think so because CARES specifically calls for extension of addition forbearance periods.  so one would think that all (?) loans in forbearance can continue in forbearance and not pose an immediate repurchase obligation to GSE. so I am not sure how or when the GSE repurchase obligation becomes a real problem until at some point in the future when, hopefully, mortgagors get re-employed and get back into current pay on their loans.  and I haven't read anybody who has been asking and answering these questions.

 

Rosner while not absolute usually has a pretty good handle on things and spells it out well here. Rosner says for the second forbearance there will be some legal documentation needed. 

 

https://documentcloud.adobe.com/link/review/?uri=urn%3Aaaid%3Ascds%3AUS%3A2c1c44a8-7097-46ca-874f-a05130964e2f

 

GSEs will need provide liquidity and will per Mnuchin/Calabria but this will likely not be a credit or capital event for the GSEs.

 

As I posted before it appears that any defaults will likely be pushed out more then 12 months because those needing forbearance will need it for (2) 6 months periods. That should push us out time wise pass the capital levels needed to approach par value for the preferred based on capital build once the Srs are gone, and levels needed for a consent agreement. 

 

As of right now maybe Im dumber then I look/think but not too worried about this right now. Capital build is preserved and things should stay on track as expected till year end.

 

Will this being a liquidity and not capital event why would there be any loss reserve build up as a result?

 

 

[Guest cherzeca]

@orthopa

 

thanks for Rosner link.  he does a good job of setting forth the scenarios.

 

Tim Howard thinks that there should be no loss reserve build ups in Q1 and Q2 since all forborne loans are performing as per CARES and there should be no credit events (as discussed by Rosner) until beginning with Q3

[investorG]

all this is well put, but me?  I am waiting for Seila. 

 

now, even if Seila comes down as I expect, as a favorable and directly applicable precedent to invalidate the NWS (I can see no substantial reason why Seila doesnt have its CID voided), the more interesting thing to consider is the different reactions one can expect from Arnold & Porter, and Milbank.  A&P will immediately start to divine differences between the Seila holding and the Collins situation so as to neuter Seila, and all good litigators are very good at doing this, and so the litigation beat goes on so far as A&P is concerned.  I would expect Milbank to take a very different approach, advisory rather than litigious.  and if Seila comes down the way I expect, I also expect Milbank to advise FHFA that Seila is the bad news that we all want FHFA to think it is.

 

I'm wondering if in light of circumstances John Roberts sides with the liberals to either wiggle into the view that CFPB is constitutional or punt the case until a direct challenge comes from a President wanting to fire the agency head.  A don't rock the boat mentality when an independent CFPB might come in handy over the next couple years.  Congress likely wouldn't have created the agency if the head was a Prez appointee (per Warren) and doing retroactive relief without a forward remedy could muddy the waters on many other actions from the agency.

[investorG]

@orthopa

 

thanks for Rosner link.  he does a good job of setting forth the scenarios.

 

Tim Howard thinks that there should be no loss reserve build ups in Q1 and Q2 since all forborne loans are performing as per CARES and there should be no credit events (as discussed by Rosner) until beginning with Q3

 

I'm not a former CFO and am somewhat guessing but i'd be shocked if there was no reserve build.  At a minimum they should stop releasing reserves which would lower earnings from before.

[Guest cherzeca]

@orthopa

 

thanks for Rosner link.  he does a good job of setting forth the scenarios.

 

Tim Howard thinks that there should be no loss reserve build ups in Q1 and Q2 since all forborne loans are performing as per CARES and there should be no credit events (as discussed by Rosner) until beginning with Q3

 

I'm not a former CFO and am somewhat guessing but i'd be shocked if there was no reserve build.  At a minimum they should stop releasing reserves which would lower earnings from before.

 

@investorG

 

there can be both retrospective and prospective relief in seila.  not either/or.  the latter is a close call; I dont see the former a close call.  also note J. Roberts mentioning twice during orals how the combination of removal only with cause AND no congressional appropriation was particularly troubling...setting the stage for a concurrence on unconstitutionality where the maj/plurality opinion focuses only on removal

 

as for reserves, I trust Tim Howard more than either of us re accounting...though as a deal lawyer I was an unofficial accountant...

[investorG]

@orthopa

 

thanks for Rosner link.  he does a good job of setting forth the scenarios.

 

Tim Howard thinks that there should be no loss reserve build ups in Q1 and Q2 since all forborne loans are performing as per CARES and there should be no credit events (as discussed by Rosner) until beginning with Q3

 

I'm not a former CFO and am somewhat guessing but i'd be shocked if there was no reserve build.  At a minimum they should stop releasing reserves which would lower earnings from before.

 

@investorG

 

there can be both retrospective and prospective relief in seila.  not either/or.  the latter is a close call; I dont see the former a close call.  also note J. Roberts mentioning twice during orals how the combination of removal only with cause AND no congressional appropriation was particularly troubling...setting the stage for a concurrence on unconstitutionality where the man/plurality opinion focuses only on removal

 

as for reserves, I trust Tim Howard more than either of us re accounting...though as a deal lawyer I was an unofficial accountant...

 

reading Shanmugam's comments at the beginning of the oral arguments suggests that congress might need to get re-involved if it's retro without prospective.  I'd guess retro needs prospective to be included for a chance.

 

if Roberts unexpectedly squeezes into constitutional and/or punts, and Prez Dem XYZ fires calabria jan 2021 for some bogus claim of inefficiency, would calabria remain in power during the likely court challenges or would he have to leave right away?  if it's the former, i'd lean that way for the outcome.  if the latter, then Roberts might as well go ahead and decide unconstitutional and figure out the remedy now.

 

[Guest cherzeca]

@investorG

 

a lot of your speculations are <50% in my view.  you are right to express them, but my reaction is that if they are, say, 30% probability, then you can either eliminate them or reduce your exposure accordingly.  I eliminate them, understanding the risk but not letting the risk immobilize me or lead me to discount the opportunity...after all, this ain't coupon clipping.  having said that, I would put this in a cabined risk portfolio balanced by stuff that you can coupon clip.

[investorG]

@investorG

 

a lot of your speculations are <50% in my view.  you are right to express them, but my reaction is that if they are, say, 30% probability, then you can either eliminate them or reduce your exposure accordingly.  I eliminate them, understanding the risk but not letting the risk immobilize me or lead me to discount the opportunity...after all, this ain't coupon clipping.  having said that, I would put this in a cabined risk portfolio balanced by stuff that you can coupon clip.

 

I know you are expecting retro but punting or finding constitutional from these prices could be bullish compared with the widely-speculated probable outcome of prospective only if it's deemed to insulate calabria from a dem president. 

[Guest cherzeca]

@investorG

 

a lot of your speculations are <50% in my view.  you are right to express them, but my reaction is that if they are, say, 30% probability, then you can either eliminate them or reduce your exposure accordingly.  I eliminate them, understanding the risk but not letting the risk immobilize me or lead me to discount the opportunity...after all, this ain't coupon clipping.  having said that, I would put this in a cabined risk portfolio balanced by stuff that you can coupon clip.

 

I know you are expecting retro but punting or finding constitutional from these prices could be bullish compared with the widely-speculated probable outcome of prospective only if it's deemed to insulate calabria from a dem president.

 

I think that scotus would have to distinguish away Lucia in order to not give retrospective relief, and I just dont see it

[TwoCitiesCapital]

what I dont know is what will happen when mortgages in forbearance hit the end of the initial forbearance period, say 4 months.  will many servicers demand immediate catch up payment?  will fhfa permit this? I assume fhfa has power to dictate practices to servicers since they are operating under sub servicing agreements with GSEs. will a high % of these mortgages become delinquent at this time...I wouldn't think so because CARES specifically calls for extension of addition forbearance periods.  so one would think that all (?) loans in forbearance can continue in forbearance and not pose an immediate repurchase obligation to GSE. so I am not sure how or when the GSE repurchase obligation becomes a real problem until at some point in the future when, hopefully, mortgagors get re-employed and get back into current pay on their loans.  and I haven't read anybody who has been asking and answering these questions.

 

Seems like there is a lot of mixed info out there. I've basically only heard forbearance for the 3-month term afterwhich an extension of mortgage modification could be requested.

 

As for as when the forbearance is due, I've read a ton of articles that say either at the end of the 3-month period and a ton of articles that say they tack an additional 3-months onto your mortgage. I've also read a ton of articles where consumers are being told both of those things by their banks depending on who they're talking to.

 

It really doesn't seem like ANYONE knows when the money will be due to be repaid at this point, but I imagine there will be some clarity once they've had some time.

 

For an example, see this article from the WSJ

 

https://www.wsj.com/articles/getting-a-mortgage-payment-break-isnt-the-boon-many-expected-11587634200

 

https://nationalmortgageprofessional.com/news/74667/lump-repayment-required-loans-forbearance

 

Seems there are multiple options for repayment available to confirming mortgages and lump sum payment is not being required.

[allnatural]

The more options you give homeowners, the better chances to get back into good status from forbearance to avoid delinquencies.

 

what I dont know is what will happen when mortgages in forbearance hit the end of the initial forbearance period, say 4 months.  will many servicers demand immediate catch up payment?  will fhfa permit this? I assume fhfa has power to dictate practices to servicers since they are operating under sub servicing agreements with GSEs. will a high % of these mortgages become delinquent at this time...I wouldn't think so because CARES specifically calls for extension of addition forbearance periods.  so one would think that all (?) loans in forbearance can continue in forbearance and not pose an immediate repurchase obligation to GSE. so I am not sure how or when the GSE repurchase obligation becomes a real problem until at some point in the future when, hopefully, mortgagors get re-employed and get back into current pay on their loans.  and I haven't read anybody who has been asking and answering these questions.

 

Seems like there is a lot of mixed info out there. I've basically only heard forbearance for the 3-month term afterwhich an extension of mortgage modification could be requested.

 

As for as when the forbearance is due, I've read a ton of articles that say either at the end of the 3-month period and a ton of articles that say they tack an additional 3-months onto your mortgage. I've also read a ton of articles where consumers are being told both of those things by their banks depending on who they're talking to.

 

It really doesn't seem like ANYONE knows when the money will be due to be repaid at this point, but I imagine there will be some clarity once they've had some time.

 

For an example, see this article from the WSJ

 

https://www.wsj.com/articles/getting-a-mortgage-payment-break-isnt-the-boon-many-expected-11587634200

 

https://nationalmortgageprofessional.com/news/74667/lump-repayment-required-loans-forbearance

 

Seems there are multiple options for repayment available to confirming mortgages and lump sum payment is not being required.

[Guest Covid-19_Survivor]

Freddie:  COVID-19 Script for Servicer Use with Homeowners

 

http://www.freddiemac.com/about/pdf/covid_19_forbearance_servicer_script.pdf

 

This material is informational and meant to assist servicers and borrowers when discussing forbearance

options. Use of this is not mandatory. For complete information about Freddie Mac's COVID-19 policies please

visit the Single-Family COVID-19 Resources web page.

 

Step 1: Determine Nature of Hardship

▪ Let’s get started

▪ Tell me about your situation and how it’s affecting your housing circumstances.

 

NOTE TO SERVICER:

 

Servicer should ask appropriate questions to elicit details about the borrower’s situation.

▪ If a borrower has experienced a financial hardship directly or indirectly related to the COVID-19

National Emergency (e.g., unemployment, reduction in regular work hours, or illness of a borrower/coborrower or dependent family member), the Servicer should proceed with script below.

▪ If a borrower has a hardship which has impacted their ability to make their monthly mortgage payment,

but the hardship is not directly or indirectly related to the COVID-19 National Emergency, the Servicer

should proceed with normal loss mitigation scripting.

▪ If a borrower has no hardship, the Servicer should use customary exit language.

 

Step 2: Follow this script if the borrower has a financial hardship related directly or indirectly to the COVID-19

National Emergency.

▪ Thank you for sharing this information. I’m so sorry to hear about your financial hardship.

▪ We are prepared to work with you on a workout solution to ease some of your burden.

▪ We have programs that are available to help homeowners facing a financial hardship because of

COVID-19.

 

Introducing Forbearance

 

Freddie Mac — the investor in your loan — has a number of assistance programs that can help you keep your

home even when you have payment challenges.

▪ Special programs are available and designed for temporary income loss or even longer-term financial

hardships attributed to COVID-19.

▪ Based on what you have told me about your current situation, the most appropriate program is called a

forbearance plan. Forbearance is designed to help with financial hardships by reducing or suspending

your mortgage payment while you regain your financial footing.

▪ Forbearance involves suspending all or part of your mortgage payment, so you will not have to pay

your full monthly payment during forbearance.

▪ Forbearance does not mean your payments are forgiven. You are still required to eventually fully

repay your forbearance, but you won’t have to repay it all at once — unless you are able to do so.

▪ After this initial payment break of _____ months, we’ll reevaluate your situation and if you are still

financially impacted by COVID-19 we can (may) extend your forbearance period.

▪ If your financial situation changes, we can adjust the length of the forbearance at any time during the

forbearance period. You should contact us about any change in your circumstances so that your

forbearance period is not unnecessarily prolonged.

▪ It’s important to understand that the amount of your payment that is reduced or suspended still needs to

be repaid — but not until after the forbearance period ends.

▪ I also need to remind you that if you pay your taxes, insurance, or HOA/Condo fees separately from

your mortgage, then you must continue making those payments during forbearance.

▪ If you can make partial payments, it will reduce the amount outstanding at the end of the forbearance

period.

▪ As we work with you on the next steps after the forbearance, the best solution will depend on your

financial situation when your forbearance plan has concluded.

o If you are able to afford it, you can reinstate which means paying the total amount due, or we

can set up a repayment plan, allowing you to catch up gradually while you are paying your

regular monthly payment.

o If you can’t afford the additional amount, but you can resume making your normal monthly

payment, we can leverage alternative ways of paying back the suspended payments in a

manner that is affordable.

o If you have a sustained reduction in income resulting from the crisis, then we can look at a

modification (changes to the terms of your loan) that might suit your new circumstances; those

changes will aim to reduce your original monthly payment amount.

▪ We’ll reach out to you about 30 days before your forbearance plan is scheduled to end to determine

which assistance program is best for you at that time — a repayment plan, loan modification, or even

an extension of the forbearance period if needed.

▪ Do you have any questions at this time?

 

[Guest Covid-19_Survivor]

Is the confidence of Glen Bradford warranted or unwarranted? Cos this forbearance is starting to make me worry.

 

Someone give me the confidence of GB stat!

 

And now we're at 5.6%

 

www.cnbc.com/amp/2020/04/24/mortgage-bailout-balloons-by-half-a-million-more-loans-in-one-week.html

 

4.9% with Ginnie at 7.2%. But this guy ("in line with the expectations of other analysts") believes it will reach 20-30%:

https://nationalinterest.org/blog/buzz/can-fannie-mae-and-freddie-mac-handle-coronavirus-mortgage-crunch-147776

 

Good read. Learned a few new terms today, and one is particularly ugly: "actual/actual"

[investorG]

Is the confidence of Glen Bradford warranted or unwarranted? Cos this forbearance is starting to make me worry.

 

Someone give me the confidence of GB stat!

 

And now we're at 5.6%

 

www.cnbc.com/amp/2020/04/24/mortgage-bailout-balloons-by-half-a-million-more-loans-in-one-week.html

 

4.9% with Ginnie at 7.2%. But this guy ("in line with the expectations of other analysts") believes it will reach 20-30%:

https://nationalinterest.org/blog/buzz/can-fannie-mae-and-freddie-mac-handle-coronavirus-mortgage-crunch-147776

 

Good read. Learned a few new terms today, and one is particularly ugly: "actual/actual"

 

It's in Trump's political interests to get it up to 20-30pct ASAP.  his poll numbers are tanking this is an easy win to get private or public (non pspa) capital into the GSEs asap (while settling collins) and turn them loose to soothe the mortgage mkt (servicers included) and ease the citizens' pain. 

[Guest Covid-19_Survivor]

Is the confidence of Glen Bradford warranted or unwarranted? Cos this forbearance is starting to make me worry.

 

Someone give me the confidence of GB stat!

 

And now we're at 5.6%

 

www.cnbc.com/amp/2020/04/24/mortgage-bailout-balloons-by-half-a-million-more-loans-in-one-week.html

 

4.9% with Ginnie at 7.2%. But this guy ("in line with the expectations of other analysts") believes it will reach 20-30%:

https://nationalinterest.org/blog/buzz/can-fannie-mae-and-freddie-mac-handle-coronavirus-mortgage-crunch-147776

 

Good read. Learned a few new terms today, and one is particularly ugly: "actual/actual"

 

It's in Trump's political interests to get it up to 20-30pct ASAP.  his poll numbers are tanking this is an easy win to get private or public (non pspa) capital into the GSEs asap (while settling collins) and turn them loose to soothe the mortgage mkt (servicers included) and ease the citizens' pain.

 

Yeah, you need to convince yourself that all of this is on the backburner, because it is. Far more important goals to accomplish first, like getting the country right. As far as Trump, I'm sure he's already counting his election winnings. Biden is a joke.

[investorG]

Is the confidence of Glen Bradford warranted or unwarranted? Cos this forbearance is starting to make me worry.

 

Someone give me the confidence of GB stat!

 

And now we're at 5.6%

 

www.cnbc.com/amp/2020/04/24/mortgage-bailout-balloons-by-half-a-million-more-loans-in-one-week.html

 

4.9% with Ginnie at 7.2%. But this guy ("in line with the expectations of other analysts") believes it will reach 20-30%:

https://nationalinterest.org/blog/buzz/can-fannie-mae-and-freddie-mac-handle-coronavirus-mortgage-crunch-147776

 

Good read. Learned a few new terms today, and one is particularly ugly: "actual/actual"

 

It's in Trump's political interests to get it up to 20-30pct ASAP.  his poll numbers are tanking this is an easy win to get private or public (non pspa) capital into the GSEs asap (while settling collins) and turn them loose to soothe the mortgage mkt (servicers included) and ease the citizens' pain.

 

Yeah, you need to convince yourself that all of this is on the backburner, because it is. Far more important goals to accomplish first, like getting the country right. As far as Trump, I'm sure he's already counting his election winnings. Biden is a joke.

 

Disagree.  Trump's #'s are down and he's concerned, the election is a referendum on him with Biden viewed as an establishment figure head non factor.  Aggressive and generous forbearance is the cheapest form of Main street economic stimulus on the menu. Hard to do that without capital into the GSEs, if Calabria holds his ground.    I do agree that re-IPO, conversion, etc are likely dormant for a long while.

 

edit:  see ny post editorial today entitled 'Fannie Mae not doing enough to help with mortgages during coronavirus crisis'.  This is an unforced political error.  They are trying to protect FnF with the 12 month Forbearance with -- as you pointed out -- a complicated script.  They don't want 20pct+ forbearance but they should want it because that's extra cash in the economy during election season, and unlike other actions to date its mostly a middle class benefit.

[Guest cherzeca]

Is the confidence of Glen Bradford warranted or unwarranted? Cos this forbearance is starting to make me worry.

 

Someone give me the confidence of GB stat!

 

And now we're at 5.6%

 

www.cnbc.com/amp/2020/04/24/mortgage-bailout-balloons-by-half-a-million-more-loans-in-one-week.html

 

4.9% with Ginnie at 7.2%. But this guy ("in line with the expectations of other analysts") believes it will reach 20-30%:

https://nationalinterest.org/blog/buzz/can-fannie-mae-and-freddie-mac-handle-coronavirus-mortgage-crunch-147776

 

Good read. Learned a few new terms today, and one is particularly ugly: "actual/actual"

 

It's in Trump's political interests to get it up to 20-30pct ASAP.  his poll numbers are tanking this is an easy win to get private or public (non pspa) capital into the GSEs asap (while settling collins) and turn them loose to soothe the mortgage mkt (servicers included) and ease the citizens' pain.

 

Yeah, you need to convince yourself that all of this is on the backburner, because it is. Far more important goals to accomplish first, like getting the country right. As far as Trump, I'm sure he's already counting his election winnings. Biden is a joke.

 

Disagree.  Trump's #'s are down and he's concerned, the election is a referendum on him with Biden viewed as an establishment figure head non factor.  Aggressive and generous forbearance is the cheapest form of Main street economic stimulus on the menu. Hard to do that without capital into the GSEs, if Calabria holds his ground.    I do agree that re-IPO, conversion, etc are likely dormant for a long while.

 

edit:  see ny post editorial today entitled 'Fannie Mae not doing enough to help with mortgages during coronavirus crisis'.  This is an unforced political error.  They are trying to protect FnF with the 12 month Forbearance with -- as you pointed out -- a complicated script.  They don't want 20pct+ forbearance but they should want it because that's extra cash in the economy during election season, and unlike other actions to date its mostly a middle class benefit.

 

trump's poll #s never seem to reflect reality.  see HRC 2016. not sure why, maybe people just dont want to tell strangers that they like trump.  in any event, in election, you count electoral votes not popular vote, and I dont see Biden doing better than HRC.

 

as for GSEs and forbearance, I love it that Calabria and Mnuchin are on the same page.  augers well

[Midas79]

Is the confidence of Glen Bradford warranted or unwarranted? Cos this forbearance is starting to make me worry.

 

Someone give me the confidence of GB stat!

 

And now we're at 5.6%

 

www.cnbc.com/amp/2020/04/24/mortgage-bailout-balloons-by-half-a-million-more-loans-in-one-week.html

 

4.9% with Ginnie at 7.2%. But this guy ("in line with the expectations of other analysts") believes it will reach 20-30%:

https://nationalinterest.org/blog/buzz/can-fannie-mae-and-freddie-mac-handle-coronavirus-mortgage-crunch-147776

 

Good read. Learned a few new terms today, and one is particularly ugly: "actual/actual"

 

Do consider the source. Pinto is in that group that would see a red EXIT light in a movie theater and yell "Fire!" if he thought it would hurt FnF.

 

I do wonder if his estimates for the percentage of loans in forbearance per month is even accurate. He has it going from 4-8% at the end of April to 8-18% in May, 20-25% in June, and 30% in July. But how many people are there really who were able to make their April payments and will take the forbearance later? Shouldn't the percentage of loans in forbearance should peak much sooner than July?

 

Pinto also misses the fact that FnF only have to start advancing the money themselves after 4 months have passed in forbearance. The servicers are on the hook until then. That means FnF won't have any obligations in this regard at all until August, and even then only for the (so far less than 10% of) loans in forbearance in April.

 

A servicer liquidity facility, if it is big enough, should remove the need for FnF to ever have to deal with this. I would hope that by August some of the forbearance borrowers will return to paying status too.

[Guest Covid-19_Survivor]

Is the confidence of Glen Bradford warranted or unwarranted? Cos this forbearance is starting to make me worry.

 

Someone give me the confidence of GB stat!

 

And now we're at 5.6%

 

www.cnbc.com/amp/2020/04/24/mortgage-bailout-balloons-by-half-a-million-more-loans-in-one-week.html

 

4.9% with Ginnie at 7.2%. But this guy ("in line with the expectations of other analysts") believes it will reach 20-30%:

https://nationalinterest.org/blog/buzz/can-fannie-mae-and-freddie-mac-handle-coronavirus-mortgage-crunch-147776

 

Good read. Learned a few new terms today, and one is particularly ugly: "actual/actual"

 

Do consider the source. Pinto is in that group that would see a red EXIT light in a movie theater and yell "Fire!" if he thought it would hurt FnF.

 

I do wonder if his estimates for the percentage of loans in forbearance per month is even accurate. He has it going from 4-8% at the end of April to 8-18% in May, 20-25% in June, and 30% in July. But how many people are there really who were able to make their April payments and will take the forbearance later? Shouldn't the percentage of loans in forbearance should peak much sooner than July?

I was not aware of him so I appreciate the update. Still, his report is well written.

Pinto also misses the fact that FnF only have to start advancing the money themselves after 4 months have passed in forbearance. The servicers are on the hook until then. That means FnF won't have any obligations in this regard at all until August, and even then only for the (so far less than 10% of) loans in forbearance in April.

 

1st, actual/actual exists. A google search returns more actual/actuals than scheduled/scheduled, but FnF do not categorize them so we're in the dark on how many mortgages FnF are covering instead of the servicers. Beyond that, no one knows what type of lifeline Calabria will extend those servicers, if any more than he already has.

 

A servicer liquidity facility, if it is big enough, should remove the need for FnF to ever have to deal with this. I would hope that by August some of the forbearance borrowers will return to paying status too.

 

It's odd how this is working presently. My puts on XLE and oil @ 13 and change have been crushed, which suggests that market sees an end by August. But CIM, for example, can still be had @ a 22% divi. So that market it nowhere near convinced. Personally, I think we're a year out before stuff normalizes again.

[Guest cherzeca]

Tim Howard has confirmed that Freddie (and likely Fannie will announce tomorrow) have adopted CECL accounting even though banks had the option to defer it for two years.  Tim thinks fhfa required this.  so the next two quarters will be difficult...hopefully flat but probably showing losses.  this is a very conservative posture, and it certainly doesnt help the GSEs to get to the full capital buildup position set forth in the treasury/fhfa letter agreement.  which feeds into Layton's narrative that the re-Ipo will be delayed. 

 

this seems like an unforced error to me since one might think that if the GSEs would have adopted CECL two years from now, the GSEs would be in a far better position to separate the "good" forbearance loans from the "bad" forbearance loans.