The Mortgage Field Services Industry is one of the most heavily dependent consumers of US government funds today. In upwards of 80 percent of all payments originate from a US government agency or insurance policy implemented by the US government. And with the St Louis Federal Reserve Board’s FRED data pegging the current default rate for Q2FY2023 — the latest data available — and confirmed by Reuter’s at 3.37% that equates to $2.37 Billion in serviceable distressed assets. That is not the value of the assets, but the money out there currently being paid to service them at all levels. Building on that is the tsunami of defaults in commercial real estate is in a perpetual doom loop. In fact, office REIT’s have fallen the most since 2020.
The reality is that a government shutdown on Saturday is virtually inevitable. Technically, we call this a lapse in Appropriations Payments. The White House already has a page up showing the contingency plans located here. Bearing in mind that FHA – HUD, USDA, and VA are all quintescential US government agencies whom pump in money to pay for both pre and post conveyance, the reality is that it is far different than in 2018 as one reader asked me earlier. Interest is currently hovering between 6 – 8 percent depending what level of loan you are working with. In fact, it was the interest rates on loans that forced MCS to default on over $400 Million in debt during COVID — interest was around 3 percent then. Second, FEMA is funding multiple large scale disasters and no replenishment in sight as multiple hurricanes are barreling towards the US and two have already hit the east coast in the past week. And when it comes to Congress and its polarization vis-à-vis Gaetz, et al., threatening a Motion to Vacate against the House Speaker, no matter what the Senate may push out, the House will kill it on arrival.
So, do the Big Boys have the money to weather a storm? It is a good question and one that virtually no one seems to care about — that are not rich NAMFS members. Government shutdown-related Google searches on Social Security, veterans benefits spike over 5,000% Monday morning. Building on that, many of the people I have been speaking with since 0530 EDT today simply assumed that the money just magically appears in accounts somewhere and then Prime Vendors pay it out. But it doesn’t work that way. In fact, in 2018 when one of the longest modern US government shutdown happened, the lack of payments to National Field Network by Fannie Mae kicked off the first Involuntary Bankruptcy — against National Field Network — in the history of our Industry.
Whether or not the company you work for wants to answer the question, the law requires that they do. And bluntly, whether or not you ask the question depends on whether you have a pair or not. The reality is that there is no safe space to go run to and weather the storm. And the reality is that if you are fearful of asking a basic question like will you pay me if you are not being paid it is a perpetual sword of Damocles hanging above your head.
Fact of the matter is that even if the Senate sends the House a CR this week, McCarthy is unlikely to bring it up for a vote. And building on that, the only other alternative is a Discharge Petition wherein only two in history have ever become law. To that point, there simply is not enough time to enact a Discharge Petition before 01 October 2023.
Now, what the Prime Vendors are hoping is that you do not read the news let alone understand finance. Because it is far easier to tell you after the fact that HUD did this or Fannie Mae did that. Or, perhaps, the Prime Vendor uses AI — they all do now — and it kicks back your work for weeks for unneeded extra photos based upon the Prime Vendor’s inability to get credit at EIGHT PERCENT to pay you what they owe. The reality is that these companies only pay when paid and do not have the capital reserves to float what they owe you for more than 72 hours or so without incurring extreme debt loads.
Thus far, not a single NAMFS member has committed to paying Labor if the US government shutdown occurs. The entirety of the International Association of Field Service Technicians (IAFST) has. It shows you the light years of distance between the two Associations.
Of all Prime Vendors queried, only Guardian Asset Management stated that they will continue paying Labor during a government shutdown. This is a most concerning thing as they are the ones with direct Doctrine of Privity. Building on this, Labor needs to be extremely careful of whom they work with over the next several weeks as we are anticipating an extremely high margin of chargebacks, requests for more photos, and ultimately non payments. If Prime Vendors choose to advise us of their commitment to pay, we will add it to this article as an edit below.