March 23, 2020
Orion’s brokers are understandably concerned. In the capital markets, no one wants to buy certain types of loans, primarily non-QM. Prices for securities backed by all mortgages have become erratic, and no longer move in tandem with U.S. Treasury securities. Investors who were paying higher-than-market prices for loans in 2019, and for the rights to service those loans, are watching those same loans refinance and the expected servicing income vanish. And the bond market is not the only financial sector that has “come off the rails.” Russia and Saudi Arabia are engaged in an oil price war, driving prices down. Stock markets everywhere are experiencing volatility never seen before. And the U.S. Congress is attempting to agree on legislation to help U.S. citizens that satisfies everyone. What is Orion telling our brokers to watch?
The bond market, and therefore interest rates, continues to be worried about jobless claims, which might be understated as small companies (restaurants, retail etc.) are not offering employees hours. These do not technically count as layoffs. Initial jobless claims will begin to show higher unemployment. In most recessions continuing claims usually take approximately 9-12 months to normalize. In the ‘08 recession normalization took much longer, but some analysts believe they will snap back quicker than normal this time depending on the length of the pandemic.
The Federal Reserve has put swap lines in place to enhance liquidity in the currency markets. Our brokers know that when there is stress in the world economy, central banks need liquidity as the demand for dollars skyrockets, and these swap lines will enable other currencies to remain supported. Orion helped brokers by applying 30-day pricing to 45-day locks, and is covering the calendar drop in price.
There is very little liquidity in the bond market right now, which, if you think about it, creates opportunities for long term investors who are willing to wait it out. But in this type of market and economy, the big fear lies in delinquencies and foreclosures. Put another way, rates are great, but if a borrower can’t make their payment, what difference does it make? We could easily see delinquencies reach 2008-2010 levels.
Our brokers should pay attention to news regarding liquidity. Can a position trade at a fair price? Does a lender have adequate warehouse lines? Is the lender solvent? And will the cash in the bank continue? And a government stimulus… Who is getting it, who isn’t, and under what conditions? And how will it help your borrowers?
Economists everywhere are lowering their forecasts for global economic growth to include a global recession that we can expect will be short but deep. This recession, while helping keep rates low, will hurt millions of potential borrowers across the United States in terms of their credit, and thus in qualifying for a refinance or purchase.
Over 50% of Orion’s workforce is already working remotely, but we have a team of 25 for essential elements that remain at the corporate offices. We are expanding our east coast footprint via an office in Charlotte, NC. Training is conducted virtually, and each and every payoff request and inquiry is pushed back to our broker partners through our LeadGen program. And Orion has STRIKEPRICE built into our STAR Broker portal, allowing brokers to set their desired price, credit, or range, on every one of their loans and are notified (they select notification method) when it hits the desired range. Intuitive to check their entire pipeline every when reprices occur!
Throughout all of this, Orion’s management and staff wish that you and your family be safe and maintain your health: in the end that is all that matters.