I’ve collected this over the past few weeks. Thought I would share considering the controversy about current market valuations.
- (04/17) 2.9 million US home loans are in forbearance (payments delayed without penalties). This equates to 5.5% of all active mortgages equivalent to $651 billion in principal; 4.9% are Fannie & Freddie loans and 7.6% through the VA and FHA. – www.bloomberg.com/news/articles/2020-04-17/more-u-s-homeowners-skip-mortgage-payments-with-jobs-vanishing
- “While Ginnie Mae, which backs FHA/VA loans, has set up a relief fund to help its servicers, there is nothing currently available for Fannie Mae and Freddie Mac. FHFA Director Mark Calabria, the regulator of the two, has held steadfast against setting a relief fund up, claiming it is not necessary. ” – www.cnbc.com/2020/04/17/nearly-3-million-borrowers-have-filed-for-mortgage-relief.html
- Forecasts of up to 30% homeowners could stop paying their mortgages.
- (04/05) 3.74% of active mortgages were in forbearance, up 1.01% from the previous week.
- (04/05) Analysts at JP Morgan advised that many mortgage servicers couldn’t sustain 6 months of forbearance on 10 to 20% of loans on their books. – www.bloomberg.com/news/articles/2020-04-13/homeowners-seeking-mortgage-relief-with-u-s-economy-shuttered
- Collateralized Loan Obligation (they’re just like CDOs) – $1.4 trillion market.
- Fitch Ratings expects an 8-9% default rate by the end of 2021.
- Cumulative impact expected to exceed $200 billion or 15% of CLOs.
- CLOs can only hold 7.5% of CCC rated debt, 8% of them exceeded this amount earlier this year.
- 30% of CLOs likely exceed that now.
- The Fed, FDIC, and OCC have limited reach into CLOs. I know the Fed included them in the recent $2.3 trillion package, however a-lot of the lower rated stuff is financed by credit funds and shadow banks. They don’t regulate these entities.
- All the big banks play, as well as pension funds and insurance companies.
- Revolving credit lines are providing liquidity.
– For above: www.forbes.com/sites/mayrarodriguezvalladares/2020/03/27/distress-in-the-leveraged-loan-and-clo-markets-will-significantly-hurt-lenders-and-investors/#50abafe07e10 , www.bloomberg.com/news/articles/2020-04-18/moody-s-may-downgrade-22-billlion-of-clo-bonds-on-covid-risk , www.bloomberg.com/news/articles/2020-04-03/why-leveraged-loans-clos-feed-worries-in-virus-slump-quicktake