Mortgage Credit News by Louis S Barnes - April 30, 2021

The flow of news is strange. Addled by Covid, sources and economic forces off-kilter, of course distorted by the web-media minute-by-minute declaration of national emergency...and strangest of all the sense of missing pieces and actors.
So: rates, data, virus, housing, and some new politics of money.
Rates steady. The all-powerful 10-year T-note has stayed in its trading range since early April, 1.55%-1.67%, helped by several things. Chair Powell after this week’s meeting was so firm that he suppressed news of the meeting. No, we are not even talking about tapering purchases of bonds and MBS, and will let you know when we begin to talk, long before any actual taper. Inflation? Don’t be silly.
Europe is back in recession, its helplessness a vacuum aching for someone else to fill. Germany has at last steepened it vaccination curve, but only half the shots achieved in the UK. And Brexit was a rejection of the modern... uh-huh. The global economy ex-US is virus-impaired, not an engine of inflation, and China’s actual economic situation more and more in doubt.
Economic data in traditional forms is a useless mess. Personal income in March surged 21%, but spending only 4.2%. What? www.calculatedriskblog.com has a splendid analysis of income minus transfer payments from the government -- still 1.2% below pre-Covid.
Wall Street firms and other investment salespeople churn out their pitches as “analysis.” Nothing motivates investors to hire a new manager better than fear, in part because regulators take a dim view of pitches promising good things. Fear is okay. So this spring we sit under a cascade of inflation threats, consumer spending certain to soar because consumers have saved so much money. As above, income up 21% versus spending up 4.2%, the remainder saved. We have seen this pattern for the whole last year, and every indication that savings are durable, the threat of inflation from excessive spending only in sales pitches.
GDP up 6.4% in the 1st Quarter? Nice, but from what and going where? Significant chunks of the economy are still shut, and accumulating damage which will make re-opening slower and harder.
Covid. Into our second year, the behavioral response to the virus is as wide as ever, and will impede economic recovery. Today the University of Colorado football team had its spring game. Boulder County grudgingly allowed 1,000 fans to attend. The stadium seats 53,613. The team is the safest place from infection in Colorado. Two weeks ago, 47,218 attended the Alabama spring game. Confession: we could not get that many to attend if we gave money with each ticket. CU will require student vaccination. Bama prolly not.
Housing. Case/Shiller reported for February a 12% year-over-year jump in its index of home prices. NAR’s index of the number of pending sales has roughly flat this year. Okay, short supply leads to price gains, and possibly a fragile structure of prices if/when/maybe supply returns.
Herewith semi-permanent exceptions to these reports: first, alleged uniformity. C/S treats housing as though shares of Apple, all the same everywhere, when the mix of housing sold changes constantly. Undermeasured: homes which have not sold -- the only data for that enormous segment is the FHFA’s base of refi appraisals, but it misses the homes not refied. Only about 40% of US homes have mortgages at all. Every piece of real estate in the US has a separate legal description and separate amenities and price paths.
Relief for Low-Income Refis? Under technical cover the Director of the FHFA, Mark Calabria continues his Fannie-Freddie demolition derby. The focus for the moment is funding for rentals and second homes, but he clearly intends as much damage as possible by regulatory fiat. The White House and Treasury have been inert, the paralysis partly due to housing markets feeling no pain, but we will.
Calabria this week floated a political smokescreen, by summer a new refi program to help low-income borrowers. Oh-what-a-good-boy-am-I. Limited to borrowers with incomes 80% or less of area median, beneficiaries will be nearly undetectable. Some hurried analysis says that perhaps 8% of mortgagors could fit the profile, but the profile matches the threshold for affordable assistance, and loans too small to benefit from a small rate reduction versus thousands of dollars in closing costs. Calabria’s announcement is more a cruel joke than program.
Heloc shortage? Abysmal coverage of mortgages continues in financial media, this week a WSJ piece asserting a shortage of new home equity lines of credit. The story dug no farther than the megabanks, Chase, Wells, and BoA. HELOCs are readily available at smaller banks and credit unions, their terms recovered to pre-Covid ease. Aggregate balances are flat, but given the flood of cash into deposit accounts, few need to borrow. Existing HELOCs have been extinguished by the equity-rich housing market, rolled up into refis, or closed altogether by home sales and proceeds so big that the seller does not need a new one.
Money politics. The whole world of politics and public policy is strange in 2021. After four years of hyperactive what’s-his-name, the quiet alone is disconcerting. The neo-secessionist movement, perhaps a quarter of the nation is unchanged but less visible. Joe is a thoroughly nice man, but old and frail, the Veep still without a voice.
At the outset, Joe marginalized the radicals in his own party, a relief. Warren, Bernie, AOC not invited. The focus was all-Covid, and to let the government begin to function again without tweet-and-firing fright, and appointments of bad actors. Joe knows the game cold, fully able to blow smoke at his own extremists without intending serious effort.
New presidents are always in a hurry. Doubly so if margins in Congress are thin. Quadrupled if personal time is short. Getting any Congress to pay attention is fleeting, its focus shifting to mid-terms by the end of the first year.
Hurry creates mistakes. Bill Clinton nearly crashed in his first year before a hasty retreat from lefty exuberance toward the best budget deal in a half-century, annoying the hell out of his own party by abandoning “investment” spending.
Joe in the last few weeks... I don’t know whose line it is, but I see its effects more and more often. “As we age, we become more completely who we have always been.”
Fritz Mondale died this month, also a thoroughly nice man. His pitch for end-stage Great Society big government was an easy target for Ron Reagan in ’84. Government grew briskly and well under Reagan despite Republican myth, but Ron understood and spoke constantly to us about governmental intrusion, misbehavior, and the Democrats’ ceaselessly grabbing money from anyone who had made any.
Joe in April has reverted to Mondaleism. Maybe posturing to his left, but missing the three big things, specific targets, not just a bigger swamp. First, go to the non-urban non-suburban outer darkness. Explore with the locals their fury, the reasons to be a nation, and what kind. Second, an all-out effort to discover and repair the effects of the information and trade economy. Third, with Congress and the nation discuss and negotiate priorities for fiscal soundness, much easier if progress on the first two.

The 10-year T-note in the last year, nicely contained this spring:

Oxford University’s engine https://ourworldindata.org/covid-vaccinations, pick your nations and regions. Germany’s curve is at last steepening, but the US about to enter the flattening of the big successes, Israel and the UK: