In 30 Seconds or Less …

• Agreement Reached over the weekend in the Oil Price War – U.S. crude prices rose to $23.53 a barrel this morning on the good news. Now, that the global industry is not fighting amongst themselves, they can simply watch and wait for demand to return like the rest of us!
• Never Bet Against the Fed – The Chairman has declared war on the virus and is providing support to new parts of the credit market. Rock-On!
• Paycheck Protection Plan – The $350B is set to run out this week.  Congress negotiating a second act to support small businesses & self-employed. They will figure it out!
• Mortgage Credit Gets Harder to Get – Chase announces tighter credit requirements while forbearance requests go through the roof. Mortgage Servicers continue to scream for help as they have to fund principal & interest advances on the loans in forbearance.  (Sorry, there had to be some shade.)

In The Weeds …

Agreement Reached in the Oil Price War  – As the Coronavirus took off globally, Russia and Saudi Arabia went head to head in an oil price war. 10 years ago, we in the U.S. were importers of oil and would have been thrilled. As prices rose, the U.S. Shale industry took off and now we are the world’s largest producer/ exporter of crude (Axios 4/13) with our shale production costs at roughly $35 a barrel for newer, more efficient fields. (Reuters 3/16)  Prior to the pricing war, U.S crude was trading around $63 a barrel in January. With the combination of the pricing war AND the absence of demand with the global economic shut down, prices plunged to $20 a barrel in March. Over the weekend, Russia, OPEC, Mexico and the U.S. agreed to cut 9.7 million barrels per day in production. Today, U.S. crude prices rose 3.38% to $ 23.53 a barrel on the news of an agreement. While it’s heading in the right direction, prices are still below the $26.90 a barrel that even the largest U.S. producers like Exxon Mobil need to turn a profit. (Reuters 3/16) But it’s one less thing for the oil sector to stress about. Now, they like the rest of us must watch & wait until the Global Economy comes back on line and demand returns to raise prices.

Never Bet Against the Fed – Thursday the Fed announced another $ 2.3 trillion dollars in support across the credit markets. “The Chairman of the Fed has declared War on the Virus” were the headlines over the weekend. “People undertaking these sacrifices for the common good, we need to make them whole.” Chairman Jerome Powell said on Thursday when talking about shutting down the economy. Consequently, the Fed has now exceeded the Quantitative Easing (QE) Programs used in the Great Recession and has stepped in to support medium & small business loans with $600B in a Main Street Lending Fund. Another new first includes a $500B fund to buy short-term notes for states, counties, and cities to help with local government liquidity. Most remarkably, the Corporate Bond Fund which was set up to buy investment grade corporate bonds in the first QE wave will now go beyond investment grade and buy Fallen Angel bonds, too. (Corporate bonds that were originally issued as investment-grade debt but because of deteriorating credit the bond is now considered sub-investment level or “junk bond” status.) This is a Chairman that is pulling out all the stops. The Fed is actively monitoring all segments of the credit market. Thank you!

Paycheck Protection Plan for Small Businesses – Lawmakers continue to work through the details of the 4^th stimulus package as funding for the Paycheck Protection Plan (PPP) for Small Businesses and Self Employed which is run through the Small Business Administration in concert with banks is set to run out of funding later this week. The two parties agree that more funds are needed to support the PPP.  The question on the table is what else will be included? Negotiations continue today.

Mortgage Market Update –  Credit requirements continue to go up for new mortgage loans as forbearance requests on existing mortgages go through the roof and unemployment hits all levels of employees. JP Morgan Chase announced changes to their underwriting guidelines today raising the minimum credit score to 700 and requiring a 20% down payment. So far only Ginnie Mae is helping directly support servicer liquidity on their FHA loans. The lack of liquidity driven by advances of P&I on mortgage loans in forbearance is putting the whole servicing industry at risk. The Fed task force is still early in its assessment of the situation as many industry experts, particularly those associated with non-bank servicers, are begging for relief. (CNBC 4/13)  

What to do?

As always, stay healthy, stay positive, help those in your community in need, and be your amazing selves!   We are leading our way through this crisis!

#BeTheCalm!!! #RealLeadership!!!!

Happy Spring! Susie

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