Pinnacle Rock Capital
COVID-19 MORTGAGE INDUSTRY IMPACT
The purpose of this temporary addition to our website is to provide perspective on the mortgage industry as it relates to servicers and investors in the space. The idea of "flattening the curve" has become an accepted concept in the fight against COVID-19. "Flattening the curve" took a complicated concept of fighting a virus and showed results based on social distancing within the American society. The papers and articles aggregated here are meant to simplify the dense and complex facts facing mortgage servicers and investors in an effort to show clear concise ways to "bend the curve" in an economic recovery. As an industry, we should learn from the 2008 Subprime Crisis. Both servicers and investors will ultimately play a pivotal role in the economic recovery to the COVID-19 pandemic. If we work together as a country we can “flatten the curve” of the COVID-19 pandemic and going forward if we work together as an industry we can help “bend the curve” of the American economic recovery.
PINNACLE ROCK - COVID-19 PAPERS
2008 Subprime Mortgage Crisis vs. 2020 COVID-19 Economic Collapse
March 30, 2020
The cause of the of the 2008 Crisis was fundamentally different than the current 2020 COVID-19 Economic Collapse. However, the technical mechanics that exist within the mortgage market today combined with outside economic pressures produced by COVID-19 will result in the destabilization of the US mortgage market. The economic conditions that have emerged will require stabilization activities that the US mortgage market used during the 2008 Crisis in order to manage the expected tsunami of residential borrower delinquencies and return financial health to lenders and borrowers. CONTINUE READING HERE.
Mortgage Default Rate Impact & Mortgage Servicing
April 8, 2020
The mortgage servicers that were rebuilt and that have been successful following the 2008 Subprime Crisis have a keen understanding of what the increased default volumes will have among all departments due to the rising mortgage default rates. These servicers with a strong balance sheet and a transparent risk based approach will be the ones to effectively manage through this “black swan event.” CONTINUE READING HERE.
A Case Study – The Building Default Rate and Resolution Curve
May 18, 2020
The short term plan of curing the default on each asset will be key but doing so while treating each homeowner with dignity and respect will be important in a crisis that has not been caused by financial malfeasance. What does the recovery side of that mortgage default curve look like over time? It’s reasonable to assume, as the economy recovers, the recovery phase of mortgage default curve will likely see an initial downward trend that has an equally sharp decent in the first few months of a recovery as borrowers return to work and work out modifications. Once these the new modifications are complete the delinquency curve will look more like what the industry saw in 2008. The size and slope of the recovery in the mortgage default curve will depend on the pace at which workers return to their old jobs or find new employment if those jobs no longer exist. CONTINUE READING HERE.