{"id":1320302,"date":"2020-06-01T23:16:00","date_gmt":"2020-06-02T05:16:00","guid":{"rendered":"https:\/\/www.postindependent.com\/dalrymple-column-mortgages-in-the-time-of-covid\/"},"modified":"2020-06-01T23:16:00","modified_gmt":"2020-06-02T05:16:00","slug":"dalrymple-column-mortgages-in-the-time-of-covid","status":"publish","type":"post","link":"https:\/\/alwaysmountaintime.com\/kske\/local-news\/dalrymple-column-mortgages-in-the-time-of-covid\/","title":{"rendered":"Dalrymple column: Mortgages in the time of COVID"},"content":{"rendered":"
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Big banks aren\u2019t the biggest players in residential mortgage lending anymore. When the financial crisis hit in 2008, they were, and got whacked the hardest. But not now; rather the big dogs are mortgage companies that originate, underwrite, fund and then sell the loans to Fannie Mae and Freddie Mac, where the paper is packaged into mortgage backed securities (MBS), and a federal government guarantee attached to the investments. After marketing the mortgages, they then service the loans, remitting the payments to the securities administrator.<\/p>\n

The rise of these enterprises has been dramatic. In 2010, they originated around 10% of residential mortgages funded; in 2019, that figure was up to a whopping 50%. Following the 2008 Great Meltdown, these non-bank lenders serviced around 5% of outstanding home loans. The percentage has sky-rocketed to 49% in 2019.<\/p>\n

These operations are very big, but they\u2019re not too big to fail, and they know it. Many will have a tough time surviving the current depression, especially if it lasts for long. That\u2019s because they service loans that don\u2019t belong to them anymore.<\/p>\n

It\u2019s a big job. The mortgage company gets paid for it by collecting an override of around one quarter of one percent gross, which shrinks to between .10 and .12 after expenses. That\u2019s a very thin margin when things are going well. It\u2019s an encounter with an iceberg when they\u2019re not. One problem is that servicers have to keep sending payments to the MBS administrator when a borrower stops paying the mortgage. In April servicers, banks and mortgage companies alike, coughed up close to $4.8 billion in past due payments. After the property is foreclosed, they get made whole, but that takes a long, long time.<\/p>\n

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