LEW SICHELMAN
THE MORTGAGE SCENE
Take A Deep Dive Beyond The Headlines Housing and mortgage stats don’t give you the real story unless you learn to read between the lines BY LEW SICHELMAN | CONTRIBUTING WRITER, NATIONAL MORTGAGE PROFESSIONAL
T
he headlines couldn’t have been more different, yet the stories below them were pretty much the same. “Home sales Up In March,” blared one. “March Home Sales Falter,” read another. And they were both right – in their own way. By the time you read this, the numbers will be out for April or maybe even May and they will likely be dismal, so the March reports are all but useless now. But I use them here, not just to make a deadline, but to make the point you must read beyond the headlines. And sometime, behind the stories themselves. In the case of the March home sales, the National Association of Realtors reported that existing home sales were indeed higher than they were for the same month last year. But at the same time, they
were lower than the month before. So again, both headlines had it correct. This kind of thing happens all the time, and it does a disservice to anyone searching, hoping, praying for some good news. Take the announcement by the Federal Housing Finance Agency that Fannie Mae and Freddie Mac would buy closed loans that had not yet been delivered to the GSEs it was appointed to oversee postGreat Recession. Or the decision that lifted the weight off servicers’ shoulders about forwarding principal and interest payments to investors. Beyond the headlines, if you read far enough, you find out that not every agency loan that moves into forbearance before it can be transferred to the agencies qualifies. Indeed, there were some pretty significant exceptions. And even if a loan did qualify, steep loan-level price adjustments were required: 500 basis points for loans to first-time buyers and 700 for “all other loans.” Not so great, huh? And it means originators would be incurring a steep loss. Bose George, a research analyst with Keefe, Bruyette & Woods, thinks the charge won’t do much to help borrowers with weaker credit profiles. Furthermore, George said in a research note
that the fee is likely to result in “material” losses for lenders on eligible loans, adding that he sees the announcement as a modest negative for originators and servicers.
AN INCOMPLETE RESCUE No so great, either, was the FHFA announcement that it was coming to the rescue of servicers of GSE loans to borrowers impacted by COVID-19. Before Fannie and Freddie will take over regularly scheduled payments, though, servicers have to advance four months of principal and interest. Yikes, that’s a lot of money. And what about insurance and tax payments? “Having an end date is extremely helpful,” Black Knight CEO Anthony Jabbour said in late April. “Still, even knowing that time limit, with today’s number of forbearance plans, servicers are still looking at more than $7 billion dollars in advances over those four months. And the forbearance numbers are climbing steadily, day by day.” “Forbearance takes a lot of liquidity,” agreed David Stevens, the former president of the Mortgage Bankers Association and a former Federal Housing Administration commissioner, who noted that four months is “much longer” than even during the Great
