Housing Markets In The Time Of Coronavirus (w/ Logan Mohtashami)

TL;DR

The mortgage market is in chaos with early payoff risks, margin call risks, credit tightening, and servicer pressure due to forbearance.

Transcript

ASH BENNINGTON: You've been writing about the mortgage market meltdown. Where are we right now? How did we get here? What's going on? LOGAN MOHTASHAMI: We're still in the chaotic stage right now. When March 9th came in and the 10-year yield got down to about 32 basis points and mortgage rates fell with it, the first thing that came to my mind is ea... Read More

Key Insights

• ✳️ Early payoff risks from refinances and margin call risks are adding to the chaos in the mortgage market.
• 💳 Credit tightening due to recession and servicer pressure from forbearance programs are further complicating the situation.
• 🛩️ Non-QM loans are experiencing challenges but only constitute a small percentage of the overall mortgage market.
• 👶 New home sales have stalled, impacting construction jobs and inventory levels in the housing market.
• 👪 Existing home sales are still strong, but the new home sales market faces challenges in competition and oversupply.
• 😘 Housing starts remain relatively low compared to population growth, indicating potential stability post-recession.
• 😨 The mortgage market's performance during the pandemic is less volatile compared to other sectors like the car market.

Questions & Answers

Q: What are the main risks facing the mortgage market currently?

The mortgage market is facing early payoff risks, margin call risks, credit tightening, and servicer pressure due to forbearance programs.

Q: Why are non-QM loans impacted, and how does it affect the overall market?

Non-QM loans face challenges in the current market, affecting a small percentage of overall mortgage loans and contributing to credit tightening and reduced demand.

Q: How has the pandemic affected new home sales and existing inventory levels?

The pandemic has stalled new home sales and led to increased delistings, impacting construction jobs and inventory levels in the housing market.

Q: What is the outlook for the mortgage market regarding construction and economic impact?

A decline in new home construction could lead to job losses and decreased production, with potential ripple effects on the broader economy, though housing starts remain relatively low.

Summary & Key Takeaways

• The mortgage market is experiencing chaos due to early payoff risks from refinances and margin call risks.

• Credit tightens as recession hits, creating additional stress on mortgage rates.

• Servicers face challenges with forbearance, leading to credit stress and increased rates.