MORTGAGE CREDIT NEWS BY LOUIS S BARNES - May 8, 2020

First, brand new economic data from our post-virus world, then in order: mortgages, my lab coat, and Happy V-E Day!
Early each month the Bureau of Labor Statistics releases the change in payrolls in the immediately prior month -- today from April, the first full month of shutdown. Headlines blaring in all media this morning: “20 MILLION JOBS LOST!” Which is not right. We didn’t lose those jobs, we told those people not to come to work.
In a comet-fall like this, we have no basis for comparison or trend. But snippets help with understanding. As suspected, this first wave of shutdown has fallen on the least of us, the low-wage job-winners of the last ten years, hospitality, retail, and custodial health care. Each month the BLS reports the change in average hourly wages, and the multi-year trend has been a pokey 0.3% per month gain. Last month so many low-wage people were sent home that the hourly wages of the remainder leaped 4.7%, an illustration by an all-time quirk in math.
Good news... yes, there is, and more below. Also early in each month we get the twin surveys from purchasing managers, the ISM manufacturing and service sector, April a lot better than feared, respectively 41.5 and 41.8. “50” is breakeven, 44 is recession, which is what we have, but not yet a catastrophe. In these better-than-could-be figures, a bit of Wile E. Coyote running off the cliff and not yet looking down, businesses still active on momentum and hope.
America’s top economic strength is adaptability. We do not wait for orders from upstairs. We don’t like orders from upstairs. Our Federal government was structured to do nothing without broad and deep national support. Our local governments have tight turning radii, quick and responsive to local populations in close touch.
44 states are now suddenly beginning to reopen because we must. Testing still inadequate, the virus tamped down or isolated but certain to recur -- we must reopen. California’s budget for annual spending is $147 billion. Its current deficit forecast is $54 billion. Every state faces the same thing, and if we do not reopen quickly the next wave of layoffs will begin and spread: government layoffs will beget more private layoffs and so on. We cannot allow that to happen, and the governors know it. If we don’t reopen college campuses in the fall, a housing crisis will erupt by mid-summer as landlords try to unload empty houses and apartments in every college town in the country.
Mortgages. The nation is so preoccupied by the virus that it has not noticed the public policy adventure in mortgageland. In April’s shutdown there were few new applicants to get the news. Rates are low, but most of one percent higher than they should be. Lower would help morale. Worse, mortgage products are steadily disappearing and the survivors with tightened standards, in several ways more hurtful than 2008.
One cause was the financial panic in March, the capital collapse and run to cash. Another is growing: lenders and investors of all kinds can see the second wave above, just off shore. The third is mangled public policy, which may be fixable.
The CARE Act gave any mortgage borrower permission to stop making payments for up to one year without providing evidence of hardship. As of yesterday’s count, 4.1 million homeowners have done so, 7.7% of mortgages outstanding.
Light has been slow to dawn in mortgageland, but now is burning up the place. Who would want to make a loan or invest in one if the payments are optional?
Lab Coat. From the outset, the virus has been politicized. The fanatics of left and right wings behave like fanatics: instead of changing their minds, or grudgingly growing closer in crisis and mutual support, the opposing wings have dug in.
The left wants to wait to reopen until it’s “safe.” The right, in its secession resists anti-virus instruction from government, no matter how deathly self-destructive its resistance bickering against masks and distance. The left says to trust the scientists. Terrific: we can find a reputable scientist to support or oppose any plan of action. Two studies this week found Covid-19 mutating, one more dangerous, the other a fizzle. Anyone advocating reopening is condemned as uncaring about life, or worse... is a Trumpist.
The best I can see from a thinly populated center: we know that social distance works, but we don’t know the minimum distance necessary, which also involves duration and ventilation. The absolute necessity to reopen, each state, county and town embarking on its own rules has launched one of the great experiments of all time, calibrated to local density and politics.
Since we are out of time, we are going to find out how to deal with the virus the hard way: open something, many things, wait three weeks and we’ll know how it went. I hate the traffic and congestion which has overtaken my small home town, but nothing would make me happier than to see it, drive in it, fight it on Monday morning.
We each get to pick our own science. Scott Atlas at Stanford, Purdue’s plan to reopen... the no-BS epidemiologists have it right. Protect the vulnerable (really, elders, is that not our own job?), and since a mountain of hard data says the risk to those under age 35 is zero, and under 50 minimal, and even at 70 manageable if healthy -- open everything. Maintain social distance where possible, but no-BS epidemiology says that closing schools and campuses was exactly wrong, impeding the spread of immunity.
V-E Day. Today is the 75th anniversary. We did not achieve the V in V-E by being timid. We had leadership, although leadership involves the willingness to be led.
Today we suffer from anti-leadership. Mr. Trump could attempt a fireside chat, inclusive and relieving fear and half the country would hate him even more. Poor Joe Biden used to be telegenic, had an Ike-quality grin but now looks like Tutankhamen.
Media institutions should be all-out to provide accurate information. Instead, Tuesday’s NYT front page: “The country is still in the firm grip of a pandemic with little hope of release. For every indication of improvement in controlling the virus, new outbreaks have emerged elsewhere, leaving the nation stuck in a steady, unrelenting march of deaths and infections.” That is Fox-quality claptrap, designed to alarm, joined now by the ceaseless emotive and political garbage at CNN.
V-E Day... Reopening without adequate testing or knowledge of consequences requires intestinal fortitude. The kids who flew the 8th Air Force bombers over Europe knew their odds. In 1943 one in three came home. They knew and still climbed aboard.
Destroy the US economy for a generation or more, just to protect some old folks, fuses lit? Goof grief.
Leadership and V-E Day... most leaders then saw themselves as less important than the led, and grateful to them. When Germany surrendered, Eisenhower’s staff drafted several versions of grandiose announcements. Ike, exasperated, told them to send this:

“The mission of this Allied Force was fulfilled at 0241, local time, May 7th, 1945.”

Virus data from Colorado could not be more reassuring. The virus is still here, still a community contagion and will likely re-heat in spots. The deep data and visuals are here. The virus is localized to 170 nursing homes and a few food plants. New hospitalizations and deaths in the last week have fallen close to zero. In this snip, note the very different vertical scales, but matching bell curves, and some recent information delayed a few days. Note further: the absence of testing missed thousands of cases February-March, and although the virus is in retreat, ramped and hot-spot testing has found disproportionately more, likely true nationwide:

Then three slides with testing data. The top one from the inspired www.calculatedriskblog.com , and the other two from CO public health. We are testing more and finding fewer cases, perhaps the most important trend to watch, and to hope falling below 5%. The serology tests and sampling of people are questionable but underway everywhere, and in a couple of weeks we’ll have a good idea how many of us have been infected and likely carry useful immunity. In CO so far, fair consistency at 10%: