MORTGAGE CREDIT NEWS BY LOUIS S BARNES - March 27, 2020

In this space every Friday since 1988... find the heart of the matter. Some Fridays are easier than others -- and with apologies, some with more words. First a mortgage update, and then the tale of three panics.
New mortgages are available, 90% of the mainstream products. Rates are not so much high as fee-heavy, Freddie’s weekly survey about right, 3.50% with .7% point -- structured to hold back excessive refi demand, and fearful of quick defaults on payments via well-intended forbearance programs. Our appetite for new loans will improve as the February refi pig moves though the python, and the Fed’s heroics take effect.
The first panic appeared in financial markets in late January; governments ignored the China breakout, but markets knew. Panic intensified until last weekend, paused now by the Fed, exhaustion, and most important, many of the losing trades and firms have been exposed and damage settled. In markets and everywhere, the worst is the fear of the unknown, calm restored by light.
This is not a recession; it is an intentional pull of the national circuit breaker. Much of the economy continues on automatic: Social Security, Medicare and Medicaid; the Defense Department, and every other government program and job, sent home but paid. Toss in a few trillion from Congress and the Fed, and with its engines off the ship still moves.
Some propose rent, mortgage, and interest holidays. The advocates have some glimmer of supply chains, but not money flowing to and through pension funds, life insurance companies, mutual funds, and retirement investments, all damaged daily the longer we are shut down. Markets can stabilize for a while, but the choice is here: economy, or virus?
We must address both at the same time.
The worst hurt are cash-income households now shut down, only days from not being able to feed their children. The academics and politicians who snoot at Wall Street rarely know the names of the people who clean their offices at night.
The second panic came to us, the public. Many were slow to get the physical-distance word, but the media has gotten our attention. Modern media make their living by encouraging us to lose our marbles in an excess of compassion or fear. By last week the nation was awake and afraid, and struggling against vulnerabilities deep in all of us.
We are easily and terribly frightened by invisible risk. After WW I, the Geneva Convention banned poison gas. Not machine guns or artillery, just gas. Today half the country fears climate change more than anything except radiation, and so forbids a nuclear component to carbon substitution.
We suffer from “innumeracy,” the word invented from illiteracy to describe our difficulties with math. We struggle to compute risk -- for that matter, our best mathematicians began to understand risk only about as long ago as we understood germs.
Just within my lifetime our fear and avoidance of the elderly and death has grown far beyond prior custom, growing alongside our belief in all-out medical salvation unto our last hour. Unlike Italy, we rarely live in three-and four-generation households, our elders dispatched to facilities which my Okie forbears called “those places.”
We do have heroes, who will help us to stifle the urge to run. Outside of Bergamo, Father Giuseppe Berardelli aged 72 was ill with the virus. His parishioners dug deep and bought a ventilator for him, which he insisted be given to a young person nearby whom he did not know. A few days later, last week Father Berardelli died.
The third panic began this week. In the Federal vacuum and media hysteria, state and local governments began to shut down the nation. Which may be good news, marking the crest of panic, if not the virus. Denver caused a run on liquor stores and marijuana dispensaries before re-designating them “essential” and open. Denver’s website still says that citizens may not drive out of town, even to hike.
I care about two things above all others. Where is testing -- in two forms, to discover contagion and immunity? And what are the true mortality rates of Covid-19, adjusted for age, health, density of local society, testing lag, and triage, as in Italy when ICUs are full?
Our testing failure has been astounding. I assume that in a few weeks we’ll be buried in test kits, but one week would be a hell of a lot better than four. A White House report please, every hour on testing progress.
Mortality? Even if no epidemic, nobody wants to talk about mortality, but we are vulnerable to media-induced bejabbers. Italian physicians, their testing now intense, suspect an eight to ten multiplier of detected to undetected cases, and asymptomatic ones a little less than half the total. If we don’t know the number of infected, how can we compute the percentage of mortality? What is our real level of the ultimate risk?
We can estimate by working backward from the most unfortunate, those who have died. Their count is likely to be accurate in the US, and in most Western nations. Then compare that figure to the known infected adjusted upward by the Italian multiplier for the undetected.
Focus on Colorado, accurate reports in Denver Post plain sight, and we are an interesting test case: a big metro area, suburbs, rural, resort, and travel-hub DIA. NYC has roughly 28,000 people per square mile. Next most-dense: San Francisco at 17,000. The City of Denver is 4,626, and Boulder 3,715 -- until two weeks ago, when Boulder sent one-fifth of its population elsewhere by closing the CU campus. We closed all of our schools then.
We are tech-intensive, easily working from home which began in mass three or four weeks ago. We have hot spots in nine elder-care facilities, but the others are now sealed from the outside and from each other inside. Our ski resorts have been virus-hot, thanks to an Australian invasion, and no better transmission on a cruise ship than in a basement bar in Breckenridge. We closed all of our ski areas on the 15th, whole valleys in self-quarantine.
As of this morning among Boulder County’s 322,000 people we’ve detected 71 cumulative infections, five now hospitalized, 28 known recovered, and one has died, that person otherwise health-compromised. The director of our Health Department says he estimates fifty times as many actually infected as detected. Seems a little rich. But good news: the more the actual count of infected, the lower the rate of mortality. If 71 are known, possibly 700 actual and thus a County mortality rate about 0.14% -- fourteen times the seasonal flu, but nothing resembling the 3%-4% suspected after Wuhan, pushed so high by fantastic undercount of the infected and high fatalities because of overwhelmed hospitals, themselves self-reinforcing infection zones undisturbed for nearly two months.
Among Colorado’s 5.8 million the known infected today are 1,430, 184 hospitalized, and 27 fatalities. Math hell: that total-case figure jumped 344 overnight as results of swabs collected last week arrived. And there is a lag of perhaps two weeks between infection and demise. So, a wild guess at actual infections two weeks ago by a fivefold multiplier of today’s discovered infections...? Mortality by that measure would be 0.3%.
From the March 22 NYT: Dr. John Ioannidis, epidemiologist and co-director of Stanford’s Meta-Research Innovation Center, suspects that mortality may be under 1%. “If that is the true rate, locking down the world with potentially tremendous consequences may be totally irrational. It’s like an elephant being attacked by a house cat. Frustrated and trying to avoid the cat, the elephant accidentally jumps off a cliff and dies.’’
New York governor Andrew Cuomo said yesterday that his stay-at-home order for the whole state was “probably not the best strategy,” and the smartest way forward would be a health strategy combined with a ”get-back-to-work strategy.”

The US 10-year T-note is calming down, a good sign:

Our national reaction to the need for physical distance has already been astounding, if highly variable by region. Colorado’s low mortality and rate of infection may be due to citizens’ extraordinary compliance, ranking third of all states in the study linked here. BTW: the NYT has put virus news in front of its paywall.

www.nytimes.com

Father Giuseppe Berardelli: