A Look at How the Corona Virus Upset the Mortgage Industry

For those of you that have followed my journey for a while, including the times when these emails were under the umbrella of Trinity National Holdings, you know I like to write these in my own words. Only once before, that I recall, was an entire column not originally crafted. But, I ran across something earlier today that I wanted to share, as it is well written and takes a high-level look at how the Coronavirus has disrupted, at least temporarily, the mortgage industry. As you know, I run a mortgage investment company; I purchase promissory notes secured by residential real estate. In essence, I am part of the secondary market. You are aware that Fannie Mae is the most well-know secondary market mortgage purchaser. What you might not be aware of is the people like you and me can purchase mortgages as an investment. If you’d like to hear more about investing in promissory notes, or mortgages, for yourself, please replay back to this email and we’ll talk.

This link is to an article written by a mortgage guy back in Michigan. I do not know him, nor am I endorsing him. I get nothing for linking to this article. I thought it might provide a good overview of the volatility with interest rates over the past 60+ days. We all heard about the Fed lowering the rates to 0.00%, and wondered if that affected mortgage rates. We also wondered how rates were so low, only to spring back up very quickly, and asked ourselves if we missed the window for these low rates. The article explains what happened. All credit to the author.

https://spark.adobe.com/page/uMzfR8BqamyTT/?fbclid=IwAR3rZpRk4kBnkWdYHdzaUUv5byHrnNd8cf5AuQg2-MBSK0aE8vkFzVBQzUQ

Now, I don’t think the mortgage industry is broke. I do think it went through some massive gyrations, and its probably not finished yet. Further, this might provide an opportunity for mortgage investors, like me, to do what we do best: help borrowers keep their homes. I think what we’ll see is many current mortgage holders will start selling portions of their portfolio for liquidity. Meaning, they need cash to maintain their operations. Smaller investors will be able to purchase these loans at acceptable discounts and be able to work with these borrowers. I hope that makes sense on the opportunity to invest in these notes, and be in a position to help the homeowners. If that doesn’t make sense, shoot me an email.

As I write, we just were informed earlier today that the national stay at home order was extended until the end of April. Stocks have taken a hit and futures are still slumping. We hope the stimulus checks arrive soon and that the measures in the stimulus legislation help keep the economy from crashing further. (If you want to read the bill, all the pages, here is a link:)

https://www.congress.gov/bill/116th-congress/house-bill/6379/text?fbclid=IwAR1OdX2afLbU1P4IjROZ6vy_fOI4TD3RT4E5GEdaOnwB4mVH_lv3yZTTXW0#toc-H21924168682D42459F008CC29ED68C66)

Thanks for reading. Touch base back if you would like to chat. I guess we didn’t realize where we set our clock ahead early in March we would go from Standard time to the Twilight Zone.


Cody Cox
Fund Manager

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