Mortgage Credit News by Louis S Barnes - November 13, 2020

It took until last Saturday to declare a winner and for all sides to resume breathing, and then to enter another form of suspended animation. Political curare: we can think but not move, and have no prior experience with the disorder.
New countdowns: December 8 for state resolution of election disputes, December 14 for the state-level meetings of electors, December 23 for delivery of elector ballots to the Senate, and January 6 for Congress to count the elector ballots.
The virus pays no attention to these things, and moves ahead by its own rules. The economy and markets likewise, although their range of motion is limited by the two months of political unknown ahead.
Interest rates are reasonably stable. The 10-year T-note jumps when the stock market says “jump,” but bonds are not Air Jordan, still trading below 0.90% despite worries about huge Treasury borrowing, $126 billion in this last week. So long as Republicans hold the Senate, the threat of a Pelosi stimulus nuke is gone. Mortgages are in the same general place, just under 3.00%, but over-priced refis have come down, inescapable discount points are now escapable, and even Jumbo flow is better, though underwriting is still miserable.
Scattered points of data...
-- CPI shot way up in summer and is now shooting down, the core unchanged in October and up only 1.2% year-over-year. We will not know the inflation (or deflation) risk of the pandemic and its various rescues until months after a vaccine and semblance of normality.
-- Weekly claims for unemployment insurance “improved.” Right. Down to 709,000, three-and-a-half times the level prior to Covid, and pandemic assistance expires during the week Congress counts electors.
-- The National Multifamily Housing Council reported more tenants behind on rent in October, but only 1.1% below the same period in 2019. Amazing.
-- Residential mortgage delinquency is stuck above 7%, but only double the pre-Covid figures, and far under the multi-year highs of the Great Recession. However, there are a bunch of different measures of delinquency, and this time we don’t have the big subprime segment of lost gambles by lenders and borrowers. We are several months away from knowing the foreclosure pull-through.
-- Commercial real estate is nearly opaque because of the wide scatter of property types, and loans buried in securitization not reported in the aggregate like residential ones. We can see tenants failing, restaurants by the many thousands, but can’t see the survivors’ rate of burn through reserves or landlord forbearance, nor landlord reserves and lender forbearance. Fuses sputtering.
“Recovery.” We all have our likes and dislikes. James Bullard has been president of the St. Louis Fed, and like most illnesses and things stuck to shoes someday will be gone. Today he compared the pandemic effect on the economy to prior recessions and expressed his pleasure that recovery has been so fast, and that stimulus has been excessive and will last into next year. “And then we can assess the situation in the first quarter.” That’s cold, dude. Let them eat virus.
Our condition since March has not been a “recession,” which is economic shrinkage following overextension of credit, or overheated by inflation, or inflation from a supply shock. Entirely different, the 2020 economy has suffered from intentional partial closure from which we cannot recover until virus abatement lets us open.
The “recovery” we have had has been from the well-intended, had-to-try, and completely failed springtime lockdowns, the failure nobody’s fault except human nature. We won’t do that again, but the recovery from lockdown is stalling now, as it must, and we don’t know the amount of damage ahead as reserves dwindle, let along from blowing above 150,000 new cases per day.
The presidential transition. Time passes and brings change. As we age we must let go of things, but some are worth the insistence to preserve.
My parents made this 11-year-old go to bed before the 1960 results were complete. JFK carried Illinois by only 8,800 votes, which urban legend then and now attributed to Chicago Mayor Daley conspiring with Kennedy family money to raise the dead. Nixon felt skinned, but conceded and then went to work to pry the South away from Democrats.
Historians give JFK’s uneven presidency average grades, although during a dangerous time. But his ability to laugh at himself beats all except Lincoln. Those who are blind to their own absurdity tend to fail. Kennedy had been accused of too much family assistance ever since he first ran for Congress. In 1958 at the traditional Gridiron dinner in which the press and the important needle each other, Kennedy pretended to read a telegram. “Dear Jack: Don't buy a single vote more than necessary. I'll be damned if I'm going to pay for a landslide. Love, Dad.”
Mr. Trump has refused to attend the Gridiron, and only once attended the NYC Al Smith needle-dinner, insulted and churlish.
Yesterday the Chair of the Joint Chiefs of Staff, General Milley spoke about military duty in a way experienced in the US only once before. As Nixon became visibly unstable in his last months in office, overmedicated as we know now, the JCS confidentially messaged all commands, reminding them that the JCS is in the chain of command for release of nuclear weapons.
Milley yesterday: "We are unique among militaries. We do not take an oath to a king or a queen, a tyrant or a dictator. We do not take an oath to an individual. No, we do not take an oath to a country, a tribe or religion. We take an oath to the Constitution.”
Change comes. Morality changes, and with it the codes of personal conduct. The current interval will pass, and when it has perhaps we will remember the value of what has been lost, and find it again.

Recovery? Stall. The Fed will keep rates down, but the race is on between virus, vaccine, and collateral damage:


The NYT today mapped state-level mask requirements. Correlation is not cause, but it’s not an accident that the most virulent outbreaks now largely coincide with mask resistance: