Our Chief Executive Officer, Li Chang, was invited by the Finding Genius Podcast to talk about the concept of “data democratization” in the mortgage big data space. Li shared how her career path and work experience led her to start Recursion Co. She also described how Recursion rearranges and normalizes “messy” data into business insights, what achievements Recursion has attained, and what types of customers Recursion is seeking currently.
Source: Finding Genius Podcast
Unlike the situation during the Global Financial Crisis, imbalances in the housing market are not the root cause of the Covid-19 economic downturn. Instead, housing is helping to pull the economy out of its pandemic-induced swoon. House price rises have accelerated, due both to low interest rates, as well as to household relocations away from high-density areas. This is leading to increased construction, and improved household balance sheets. Moreover, a surge in refinances improves household cash flow. How long can this trend continue?
The answer to this question depends crucially on many varied policy settings that influence lender and borrower behavior. The chart below shows 1-month CPR for 30-yr MBS securities broken down between the 30-Year GSEs and 30-Year FHA for the 2017cohort. A number of fundamental and policy factors come into play.
Our monitoring of the US housing and mortgage markets tends to focus on details obtained from a micro view of the market. This post takes a quite different perspective of treating the US as a single point across an international perspective. This is part of a long tradition in economics, including at the Federal Reserve, but is used infrequently as the market focus is generally directed more narrowly. But interesting patterns do emerge by stepping back and taking a big picture view.
For example, here is a scatter diagram of cumulative real house prices vs GDP from 2010-2019 for 45 countries using data from the OECD.
Recursion’s Chief Executive Officer Li Chang and Chief Research Officer Richard Koss spoke at the Mortgage Servicing Rights Virtual Forum hosted by Information Management Network (IMN) on October 29th.
Recursion’s Chief Executive Officer Li Chang joined the Servicing In-House vs Outsource panel and discussed mortgage delinquency and servicing costs.
The video can be access through
Chief Research Officer Richard Koss joined the Modeling and Stress Tests panel, and discussed the impact of forbearance in these areas.
The video can be access through
In a previous post, we noted that a key component of the implementation of unconventional monetary policy is the selection of coupons in its MBS purchase programs. As coupons in these securities occur only in steps of 0.5%, obtaining liquidity in new lower coupons is important in establishing a basis for mortgage rates to move lower. For example, 2.5% 30-year coupons were issued in 2013 and 2016, but never to the extent that liquidity was firmly established, limiting declines in the rate that borrowers paid at those times. This changed dramatically with the onset of the Covid-19 crisis. In March 2020 the Fed restarted its MBS purchase program after six years, including the 2.5% coupon, and this soon became the dominant coupon.
Since that time, the Fed has picked up its activity on this front. The GSE’s started issuing 2.0’s shortly after the crisis hit, and the Fed began buying them in May. Then 1.5% came on the scene this summer and this week sure enough the central bank validated this activity by adding them to their portfolios.
Can 1.0’s be far behind?
As we careen towards 2021, it’s getting to be time to look down from the top of the roller coaster towards the abyss below. The view is extremely hazy, but fortunately we have big data tools at our disposal to help clarify things. In mortgage space the single main question is what’s going to happen when forbearance expires. This program was designed to run out after a year, and that will be coming up starting next spring. If you are in forbearance and your time runs out, you have three choices:
Like all things related to mortgages, this is far more complicated than it appears. According to the Mortgage Bankers Association, 5.9% of mortgages are in a forbearance program. The NY Fed tells us that outstanding mortgages amount to about $10 trillion. So large numbers are involved.
The main market focus is on the distribution of outcomes when forbearance ends. This depends on a number of factors including the strength of the economy and the effectiveness of public health policy, as well as the financial condition of mortgage lenders and servicers. None of these are easy to predict.
Our Chief Research Officer, Richard Koss, was invited by the Urban Innovation Working Group of the School of International and Public Affairs (SIPA) at Columbia University to discuss post-COVID affordable housing. This event was organized as part of UN-Habitat’s Urban October initiative. Richard talked about recent trends in the housing market and the impact on low income groups.
Besides his work at Recursion Co, Richard also serves as Adjunct Professor at Columbia SIPA.
The panel discussion can be found at: