Red Sonja! US 30Y Mortgage Spread To 10Y Treasury Yield Averaged 1.71 Since 1971

Ever curious about how low the 30-year mortgage rate can go? Just check out the 10-year Treasury yield.

The spread between the 30-year mortgage rate over the 10-year Treasury yield since 1971 has averaged 1.7159.

But since the Covid event in March, the spread has been decreasing and is now 1.9862.

Unfortunately, those looking at SONIA to explain The Fed Funds Target rate have to look elsewhere.

Let’s see what happens to mortgage rates as mortgage credit availability and M2 Money velocity crash.

Stay With Me? What Happens To Loan Defaults/Forbearance When The Stimulus Wears Out In January? Kaboom Or …?

Or stay with your family? Or live in your parents’ basement?

In January, much of the stimulus to households (CARES Act) wears out.

New forbearance plans have flattened after the Covid spike in March.

But ACTIVE forbearance plans remains high.

According to Attom, foreclosure starts are rising rapidly in New York and Chicago.

The MBA estimates 3.4 million homeowners are currently in forbearance plans. And if forbearance isn’t continued, a potentially high percentage of these loans could end up in default.

So we could have a mortgage default crisis on our hands. If forbearance doesn’t stop the impacts of Covid because of soaring, yet improving unemployment.

Rental markets? The CARES Act provided direct payments to households and if the government shutdowns persist, we could see an increased in defaults on multi-family properties. Freddie Mac’s forborne multifamily loans are concentrated in New York with 25.4% in forbearance followed by Texas with 13.4%.

The magnitude of the losses if the CARES Act isn’t extended? It depends on who wins in November.

But at we now know why Wells Fargo is trying to dump their $10 billion student-loan portfolio. The bank said earlier this month that it had notified customers of its planned exit from the student-lending business. PARTICULARLY IF THE CARES Act isn’t expanded OR governments stop their lockdown of economies.

The good news? The CARES Act money has not been completely spent … yet. But come January, watch out

Seasonality Strikes! Mortgage Purchase Applications Fall By -1.96% WoW, Refi Apps Rise By 0.23% (Purchase Apps Up By 26% Versus Same Week Last Year)

Covid through the mortgage market for a loop. Normally mortgage purchase applications peak in late April or early May, but in 2020 unadjusted purchases applications peaked in mid-June thanks to Covid-19.

Here is a chart showing the seasonality of mortgage purchase applications. And how mortgage purchase application are 26 percent higher than the same week one year ago.

Refi applications? Essentially flat with an increase of only

V-Shaped Recovery In Housing Starts/Permits To Build (1-unit Starts Up 8.52% In September)

The housing starts numbers for September were released this morning and point to a V-shaped recovery for housing markets. 1 unit starts were up 8.52% and permits to build were up 7.8%.

This is a V-shaped recovery for single family housing.

Unfortunately, there is no V-shaped recovery in 5+ unit multifamily housing.

But the overall economy is showing a distinct v-shaped recovery, according to The Atlanta Fed GDPNow forecast model.

MBA Mortgage Refi Applications UP 8.23% WoW While Purchase Apps DOWN -1.42% (Mortgage Credit Availability Sinks)

I was watching Stuart Varney on Fox Business and he excitedly announced that MBA applications were up 4.56% WoW in the latest MBA report.

True, but applications for a purchase mortgage were down -1.42% WoW.

But refinancing application were up 8.23% WoW as mortgage rates continue to fall since the Covid outbreak.

Mortgage credit availability plunged as mortgage rates hit all-time low.

Mortgage 30 Day Delinquencies Tick Up Again As Key States Remain On Covid Lockdown (GDP Forecast Is Now 34.602%)

Just when we thought the US mortgage market had recovered from the financial crisis, then along came Covid and The Federal Reserve helping to push mortgage rates to near all-time lows.

According to Black Knight, the share of borrowers with only one missed payment was already below pre-pandemic levels in July and in August that number fell again. The number of loans in the 30- to 60-days past due bucket dropped by other 9.0 percent. At the same time, serious delinquencies, loans 90 or more days past due, increased by 5 percent and have risen in each of the past five months.

The transition from 30 days delinquent to 60 days late was falling as expected but showed a disturbing uptick in August.

Compared to natural disasters such as hurricanes, this time it is different PRIMARILY BECAUSE OF GOVERNMENT ECONOMIC SHUTDOWNS.

Most mortgages in forbearance remain in active forebearence and had the term extended DUE TO GOVERNMENT LOCKDOWNS OF SEVERAL KEY ECONOMIES.

But with US GDP growth expected to recover at a rate of 34.602%, look for forbearances and 30 day delinquencies to fade.

Unless Speaker Nancy Pelosi’s nephew California Governor Gavin Newsome insists on keeping California on eternal lockdown in order to prevent the spread of Covid.

Why does Gavin Newsome remind me of Beloche performing the ceremony opening the ark of the covenants in Raiders of the Lost Ark?