Tuesday, July 27, 2021
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The Economics Of Mortgage Field Services

Did You Know Our Industry Had A VIX?

If anyone is currently watching the meteoric rise of GameStop on the stock exchange, you are bound and determined to have scratched your head trying to figure out where the push is coming from. I’ll save you the research and tell you it is primarily driven by chat discussions in Reddit. With that said, we generally call this flash in the pan activity. Since the COVID pandemic there has been a virtual disconnect from the stock market and the real world economy. The Mortgage Field Services Industry is not all that dissimilar. To that point, Foreclosurepedia created the MFSI VIX. Similar to its stock market companion, Foreclosurepedia gauges Risk and Volatility. Both are fairly easy to track and our calculation, while other factors are thrown in on the STDEVP() function, it is not that different. We chart 500 different firms and rely both on aggregated data such as from Dun and Bradstreet, and by additionally tracking current portfolios as well as debt-to-income (DTI) ratios readily available through UCC, Moody’s and S&P.

Foreclosurepedia stands by its belief that, at least through May 1st, there will be little to no movement with respect to increased volumes on the Field Service Technician’s side. And while the Biden Administration is pushing for September 1st, we do not believe that the yardstick will be adjusted that far.

An example of how we score both the VIX overall and as we look at company’s independently for ratings associated with Hermes Express, is the recent sale of Mortgage Contracting Services (MCS) — the third known, thus far. This latest sale was a direct result of their defaulting on hundreds of millions of dollars in loans. And while many look at the sale as nothing more than restructuring debt, the devil is in the details. During the sale, there were not a lot of firings at the already to heavy C Level. That does not bode well for Labor in the field actually performing the work. And while Foreclosurepedia is not going to divulge its proverbial secret sauce of mathematical formulas, our predictions over the past decade have not been wrong yet.

The recent consolidation of top tier National Association of Mortgage Field Services (NAMFS) members, has both contributed to volatility as well as triggered other Industry watches. The process of buying a turn key company, while simple from the pricing point-of-view, is extremely complicated when predicting the long term effects. A great example is the purchase of Guardian Asset Management by New Residential Investment Corp. The deal was actually part of a larger move which included buy pieces of half a dozen other firms including Chronos Solutions.

In the instant case, the purchase of Guardian by New Residential brought pressure on Ocwen whom owned the MSRs — Mortgage Servicing Rights. New Residential, in turn, went to Ocwen and demanded that they begin to use Guardian, as the preferred vendor, on the field servicing side. Altisource estimated that they lost $58 Million when Ocwen turned off the spigot. So, theoretically, one may develop a formula that translates something like Ocwen controls X amount of MSRs pertaining to New Residential. And X translates into $58 Million in field services — bearing in mind that this is extremely simplistic and there are a lot of other variables.

Now, that tidbit of information may be interesting to many, but this next one is something you should tattoo on your brain: For every 1% in delinquencies in the mortgage sector, $700 Million in servicing comes down the pike in our Industry. Now, from a quantitative point-of-view, the delinquency rate is extremely skewed. First, 40% of the market, on the residential side, is under a moratorium. That number, on the FHA side, is sitting at roughly 15.6% as of the last major round of reporting. Problem is that while that would translate into tens of billions of dollars in work, any firm attempting to get inside the asset gets labeled a persona non grata. The other 60% of residential mortgages are not QM or agency backed and are primarily only bound by state and municipal moratoria. Overall, here are the numbers,

For all mortgages, the delinquency rate at the end of September was 7.6%, down from about 8% in June. That compared with a range of about 4% to 6% from 2014 to March 2020, a Great Recession peak above 10% in 2009 and 2010. FHA loan delinquencies leaped to 15.6% by Sept. 30 — its highest rate since at least 1979.

On the commercial side, which many in the Foreclosurepedia Nation do not service even though it is a higher paying side, the delinquency rates (30+ days delinquent or in foreclosure or REO) for the commercial mortgage-backed securities (CMBS) market decreased to 7.9%, which is down from the record of 9.6% in the second quarter of 2020.

All of this said, we also have another contributing factor to how Foreclosurepedia gauges the VIX:  COVID. A leading medical journal, medRxiv, had this to say,

Using death records from the California Department of Public Health, we estimated excess mortality among Californians 18–65 years of age by occupational sector and occupation, with additional stratification of the sector analysis by race/ethnicity. During the COVID-19 pandemic, working age adults experienced a 22% increase in mortality compared to historical periods. Relative excess mortality was highest in food/agriculture workers (39% increase), transportation/logistics workers (28% increase), facilities (27%) and manufacturing workers (23% increase).

And to that point, neither NAMFS members nor the US Department of Housing and Urban Development (HUD) appear willing to fast track Inspectors and Field Service Technicians for vaccinations even though both assigned Essential Worker Status to all field service personnel. This is what a Senior HUD Official had to say when speaking on condition of anonymity,

The M&M contracts are considered essential to HUD, and were not ordered to stop work during the pandemic.  As such, it may qualify contractor employees/subcontractors access to early vaccinations.  As you know, state laws differ in regard to the vaccination rollouts, so it likely will not be uniform across the board.  For instance, here in Georgia, the only essential employees currently receiving the vaccine are healthcare workers.  I would ask that qualifying individuals follow any state/local regulations regarding registering for the vaccine, and if open to all essential workers, then they would likely qualify.

Foreclosurepedia has reported upon COVID infections within our Industry. And our challenge, here, is to attempt to extrapolate both tangible numbers of infected and at-risk workers, while additionally calculating the palpable fear factor with respect to infection, the costs thereof, and death. Other factors, such as scarcity of Labor, the organizing of Labor, and both material and energy pricing are calculated, as well.

Foreclosurepedia’s Private Label VIX has been relied upon by both Labor and Management since 2013. If your firm has a need for access or an interest in any of our other Products, please reach out to discuss pricing as listed below.


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Paul Williamshttps://foreclosurepedia.org
Linux addict buried deep in the mountains of East Tennessee.

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