Biden Administration Announces Mortgage Relief as Foreclosure Moratorium Comes to an End (The Never-ending Mortgage Crisis)

The good news? Only 3.6% of all active mortgages remain in forbearance. The bad news? The mortgage foreclosure moratorium comes to an end on July 31st. The good news? The Biden Administration rode to the rescue with a new mortgage relief program. The bad news? The Biden Administration rode to the rescue with a new mortgage relief program. And today, FHFA announced an extension of the COVID-19 REO eviction moratorium through September 30, 2021.

Where do we stand in terms of the forbearance crisis? According to Black Knight As of July 13, 1.9M borrowers remain in COVID-19 forbearance plans, making up 3.6% of all active mortgages and 2.0% of GSE, 6.3% of FHA/VA and 4.4% of Portfolio/PLS loans.

Forbearances rose most significantly among loans held in bank portfolios or private label securities (+35K), with FHA/VA mortgages seeing an uptick as well (+1K) The 5K decline among GSE loans offset just a small share of the total weekly rise.

There are still some 179K plans are still scheduled to be reviewed for extension/removal in July, which provides some substantial opportunity for improvement next week.

While still low, new forbearance plan starts hit their highest weekly level since late March, with restart activity also remaining elevated. Roughly 2/3 of all starts over the past week were restarts.

Removal volumes were the lowest since late May given the low volume of review activity at this time of month.

But with Covid Delta Variant and the Biden Administration saying that they are considering the return of the economy-destroying lockdown that will result in MORE deficit spending, MORE Covid relief programs, all of which will require MORE Federal Reserve spiking of the monetary punch bowl.

This is the never-ending mortgage crisis that started in late 2007 (partly due to the Federal government pushing affordable housing and homeownership so hard the it broke). Then it was the foreclosure crisis, this is a Covid-related government-shutdown crisis.

Government housing policies (push for homeownership and the Covid economic shutdowns) require The Federal Reserve to spike the punch bowl perpetually.

The Federal Reserve is the punch bowl king.

GDP Huge Swing And A Miss! Economy Grew Just 6.5% In Q2, Far Below 8.5% Expected As M2 Money Velocity Declines (S&P 500 Hits Record High!)

The US economy is still growing at an above average rate quarter-over-quarter, but Q2’s GDP print was lower than expected (6.5% versus the expected 8.4%).

US GDP growth slowed as M2 Money growth slowed. Although M2 Money growth us almost 2x real GDP growth.

M2 Money velocity fell … again … to its second lowest print in history at 1.1197.

And then we have GDP price growth (inflation) at 6% QoQ.

The good news is that personal consumption expenditures rose 11.8% QoQ almost matching M2 Money growth of 12.2% YoY.

The S&P 500 rose to an all-time high on the GDP news!!

Real Negative Mortgage Rates Abound As Do House Price Bubbles (Pfandbriefe 10Y Rate Negative Too) The Case Of Germany Versus USA

Living in a negative rate world

It is not surprising that the REAL German Pfandbriefe 10-year rate is negative, since the NOMINAL rate is also negative. Especially since the NOMINAL German sovereign yield is negative.

When we subtract German inflation from the Pfandbriefe 10-year rate, we get a REAL Pfandbriefe rate of 2.365%.

A Pfandbriefe is a type of covered bond. A covered bond is a debt security that is common in Europe. It issued by a bank or mortgage institution and collateralized against a pool of assets that, in case of default of the issuer, can cover claims at any point of time.

On the short end of maturity, the REAL 1-2 year Pfandbriefe rate is -2.55.

Then we have negative REAL 30-year mortgage rates in the US.

Housing prices? Germany looks positively tame in terms of house price growth compared to the US, although the Eurostat data for German house price growth is lagged behind the already lagged Case-Shiller data.

Like the US, there is a considerable gap between house price growth and income growth.

Here is a chart for the US pointing to unsustainable house price growth.

How is the ECB impacting German house prices? Much like the USA.

Housing in a negative rate and housing bubble world.

Reverse China Syndrome: Nasdaq China Index Falls Another 4% On Rout Over China’s Clampdown On Technology (Food Clamdown Coming Next!)

This is a China Syndome in reverse.

The Hang Seng Index (HSI) is down another 4%+ today as China continues to clampdown on technology companies, with the regulators taking aim at the food sector today. The HSI is now down nearly 20% after printing an all-time high in February this year. The indices’ constituents are a sea of red with double-digit losses seen in Alibaba Health Info tech (-18.5%), China Feihe (-16.2%), Meituan Dianping (-17.6%) among others. The Hang Seng Tech index has been hit even harder and the recent sell-off has seen the indices lose over 40% this year,

The daily HSI chart shows the recent damage caused by the government crackdown with the index now trading below all three simple moving averages, while the 50-day sma has fallen through the 200-day sma, forming a bearish ‘death cross’. The CCI indicator is flashing an extreme oversold warning, while volatility, measured by the 14-day ATR, is climbing sharply. The multi-month higher low made at the end of last year has been broken with ease today, leaving the October 30 swing-low at 23,961 the next level of support.

China syndrome” is a term that describes a nuclear meltdown, where reactor components melt through their containment structures and into the underlying earth, “all the way to China”.

The exchange-traded fund at the epicenter of the Chinese tech implosion is seeing record options activity. Open interest in call contracts for the $4.3 billion KraneShares CSI China Internet Fund is surging as the ETF tumbles more than 20% on Beijing’s sweeping regulatory crackdowns. Investors may be betting that the fund’s price is about to bottom, or taking advantage of a spike in volatility to sell the contracts.

The reverse China Syndrome is that China’s clampdown is bleeding through to other equity markets around the globe.

In related news, CFA Pass Rate Plummets to Record Low of 25% for Level 1 Exam.

Great job college professors!! … NOT!

Home Price Growth At Record High (Fed Wants To Take It Higher!) Phoenix Leads At +25.9% YoY

The Federal Reserve wants to take home prices higher. But not taking any action … until next year(?)

The Case-Shiller home price index rose a record high 16.6% YoY in May. The problem with Case-Shiller is that it is the end of July.

Here is my concern that I mentioned in Benzinga. When home prices are growing at record highs (+16.61% YoY) and hourly wage growth is a paltry +2.28% YoY), were have serious affordability problems. That will eventually lead to a slowdown in home price growth.

The spread between home price growth an hourly earnings for workers is also at an all-time high.

How hot is the US housing market? All 20 metro areas in Case-Shiller’s 20 index are in double digits. Chicago is the slowest at +11.1% YoY. Phoenix AZ is the hottest at +25.9% YoY.

Here is Fed Chair Powell trying to tame home price growth at the Jackson Hole meetings.

US 30-year REAL Mortgage Rate Plunges To -2.35%, The Lowest Since 1975, House Price Growth Highest In History

Talk about NIRP (negative interest rate policy). The Real 30-year mortgage rate (nominal rate – headline CPI YoY) has now fallen to -2.35%.

While the REAL 30-year mortgage rate is at its lowest level since 1975 and President Gerald Ford, home price growth is at its highest in history and higher than the peak of the housing bubble.

And then we have this chart of US House Price-to-Rent ratio. Highest ever! Even exceeding 1975!

Lowest real mortgage rates since Gerald Ford.

Fed Helps Repress Stock And Bond Volatility While Commodity Volatility Soars (House Price Growth Jumped From 4.28% Pre-Covid To 14.59% Post Fed Intervention)

Since the Covid outbreak of March 2020, The Federal Reserve entered markets in force, spiking their assets purchases and continually expanding their balance sheet.

Consequently, stock and bond market volatility (as measured by VIX and MOVE) have been repressed.

But commodities are a different story.

Crude oil futures are tracking The Fed’s balance sheet pretty closely while coffee “Arabica” futures have soared since July 17th. On the other hand, lumber futures prices have declined considerably since spiking in early May. Steel rebar prices have risen dramatically since mid-December 2020, a month before Biden’s inauguration as President.

Now, that’s volatility.

Home price growth jumped from 4.28% YoY pre-Covid to 14.59% after Fed intervention.

Fed Reserve Chairman Jerome Powell using his stock and bond market volatility repression beam.

US Treasury 10Y-3M Slope Declines As Dow Drops > 900 Points As German Sovereign Curve Negative Out To 25 Years

As fears of the Covid Delta Variant sink in, we are seeing a flight to quality. The 10Y-3M Treasury curve slope is declining.

But the US Treasury actives curve remains upward sloping as does the on/off the run curve.


While the US Treasury curve (green) is upward sloping and all yields above zero, Japan’s sovereign curve is negative in tenors of less than 10 years. Germany has negative sovereign yields for tenors less that 25 years.

The big three Central Banks are expanding like crazy.

The Dow in down > 900 points

Graphically, the Dow is dropping alongside 10Y Treasury yields as investors flee to quality.

Paging Fauci for a lecture of Covid and more “go big” talk from Treasury Secretary Yellen.

US Producer Price Index Final Demand Soars To 7.3% YoY As Powell Says “We Ain’t Stopping!”

Today’s Producer Prices Index Final Demand printed at a whopping 7.3% YoY.

At the same time, Federal Reserve Chairman Jerome Powell Says Achieving ‘Substantial Further Progress’ a Ways Off

Here is a chart of PPI Final Demand YoY against average hourly earnings YoY. Average hourly earnings have returned to pre-Covid levels (yellow line).

Or it is Powell wants to be reappointed as Fed Chair and is bending over backwards to appease the free-spending Biden Administration?

Powell: “Strong demand in sectors where production bottlenecks or other supply constraints have limited production has led to especially rapid price increases for some goods and services, which should partially reverse as the effects of the bottlenecks unwind,” Powell said. “Prices for services that were hard hit by the pandemic have also jumped in recent months as demand for these services has surged with the reopening of the economy.”

But how will Fed monetary policy cure bottlenecks, other that drive prices higher?

Powell: “Smokin’! Somebody stop me!”

Grantham Says Sell U.S. Stocks to Avoid Unprecedented Bubble (Summers Say House Prices ARE Inflation … And Scary!)

Some are saying the bull market may last up to five years while others are saying that markets are in a huge bubble that could burst at any moment (or if The Federal Reserve decides to cut monetary stimulus).

(Bloomberg) — Jeremy Grantham said the U.S. stock market is in a bubble and investing in it is “simply playing with fire.”

“I have been completely amazed,” the veteran bearish investor said in an interview Wednesday on CNBC. “It is a rally without precedent — the fastest in this time ever and the only one in the history books that takes place against a background of undeniable economic problems.”

Individual investors jumping into the market now should sell U.S. stocks, buy emerging market equities and “throw the key away” for a few years, he said, adding “this is becoming the fourth real McCoy bubble of my career.

The S&P 500 index has jumped almost 40% from its March 23 low even as the coronavirus pandemic has damaged almost every sector of the economy and put millions of people out of work.

And the S&P 500 index has soared since The Fed’s epic intervention in 2008 and then again in March 2020.

And then we have Larry Summers (former Chief Economist of the World Bank, US Treasury Secretary, former director of the National Economic Council for President Obama and former president of Harvard University) saying “This is scary. Rising house prices in most people’s common sense of the world represents inflation.”

Yes Larry, I agree with you. The house price graph looks eerily similar to the S&P 500 index graph.

Here is a nice Q2 summary of asset price changes for Q2 from GoldSilver.com.

For all the talk of The Fed raising rates and cutting monetary stimulus, here is a disturbing chart showing U-3 unemployment rate against the CBO’s short-term natural rate of unemployment. If The Fed is chasing lower unemployment rates, they might be around longer than many anticipate (especially if there is a Covid Delta shutdown).

The inflation numbers will be released on Monday. Knock on wood.

But it appears that we are addicted to gov and Fed intervention.

Doctor, Doctor, here is the news. We’ve got a bad case of asset bubbles.