Ken Shinoda Joins This Week’s Market Round-Up with His Review of the Housing and Mortgage Sectors
DoubleLine Portfolio Manager Ken Shinoda, appears as a guest on this episode of The Sherman Show to explain the state of the housing market and housing finance system in the wake of the national economic shutdown. This episode is part of the podcast’s weekly round-up of the major markets, including equities, fixed income and commodities; monetary and fiscal measures; and the macroeconomic data.
In their macro and markets round-up, podcast hosts Jeffrey Sherman and Samuel Lau comment on the big disconnect between the sharp rebound in stocks, which has lifted the Nasdaq Composite Index into positive territory year-to-date, versus economic data telling a story of malaise. In particular, Sherman points out the deep hit to personal consumption in the first quarter – trouble which will carry over into the month of April.
A veteran of DoubleLine’s mortgage-backed securities team, Mr. Shinoda walks listeners through the mechanics for the mortgage servicing systems for loans in pools of Agency mortgage-backed securities (Agency MBS) and for those of non-Agency (aka private label) mortgage-backed securities. He also reviews the price action of non-Agency MBS, which initially declined, although much less due to fears over rising delinquencies than to forced selling by mortgage real estate investment trusts and hedge funds. Mortgage REITs and some hedge funds were caught in a vicious cycle of margin calls, deleveraging, forced selling and declining asset prices, he notes. The non-Agency market has since bottomed and partly rebounded. It will be a couple months before data on mortgage remittance clarifies the default picture. However, Mr. Shinoda says the data on forbearance requests (whereby homeowners seek to miss payments with the idea of later making up those payments) so far paints a picture which should be manageable by the mortgage servicers. Mr. Shinoda also reviews rental collections within the multi-family housing market. Here too, the rise in missed collections appears to be manageable thus far.
This episode of The Sherman Show was recorded on April 29, 2020.
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