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Whalen Talks Mortgage Rates, Liquidity And More

Navi Persaud
Oct 22, 2020
Photo of Chris Whalen and a quote from Oct. 21 MLO.

R. Christopher Whalen, chairman of Whalen Global Advisors LLC, appeared on Wednesday’s Mortgage Leadership Outlook. He joined series' host Andrew Berman, head of engagement and outreach for National Mortgage Professional Magazine, as they discussed mortgage rates, liquidity, housing and more.

Whalen is an investment banker and author based in New York City. His company focuses on the mortgage finance, financial services and technology sectors. Whalen is also a regular guest on CNBC.

Whalen made some significant predictions for 2021, including rates of 1.5% by the middle of next year, as the Federal Reserve looks to use housing to pull the economy “out of the mud.”

Highlights from the interview:

  • “In 2008 we had a market problem; this is more like the 1930s. It’s bad particularly for people with low income who are vulnerable and it is terrible for small business,” said Whalen of the current economic recession. “In our industry think about all of the people who process foreclosures. Think about all of the people who are part of the infrastructure of our industry. They’re all out of work.”
  • Whalen forecasts a run rate of over $4.4 trillion for 2020. “I think we’re going to go into the end of the year pretty strong, based on what my friends are telling me about the demand for kind of incremental financings going into this month. A lot of people they deal with are in there for $200-$300 million for gestation and they’re coming back from the 50s and 100s, partly because the banks haven’t expanded to meet the volume. So, people have had to be much more careful about which loans they do and turn them really fast.”
  • “We have way too much liquidity in some respects but it’s not particularly helpful. The banks are up to their earlobes in extra cash but what are they going to do with it? You know, it’s basically short-term flow.”
  • “Unlike 2018 where we had a problem at year-end, this time around my sense is it’ll be alright, but the treasury has been borrowing all of this money in anticipation of more legislation for stimulus. If they don’t get that, let’s say the Republicans hold the Senate or it’s split or maybe the Democrats have one seat, well there are four or five Southern Democrats who will not vote for the crazies. You know, they will not follow the AOC’s and the rest of them on social legislation or taxes. So, we could have Treasury redeeming securities next year because if they don’t reauthorize the leeway they get them on the debt ceiling to go out and borrow, to fund the crisis, then they have to give the money back.”
  • “The reality is that the huge boom we have in lending is covering a lot of sins and is covering a lot of vulnerabilities for the industry going forward.”
  • “We serve America. There’s no industry in this country that serves America more than the housing sector.”
  • “If volumes flow down then we could potentially have a problem. That’s what I know people at the FHA and the Fed have been thinking about. They’re like, ‘This is great; this is good.’ They’re hoping next year continues at the same level. I’m actually bullish on next year. What are people selling their production into right now? Twos, two and halves. What are they going to do next year when [Fed Chair Jerome] Powell pushes the liquidity down to one-and-a-halves? They’re going to refinance all of those loans.”

Check out the entire interview between Whalen and Berman below.

Click here to check out last week's MLO with Daniel Habib, executive vice president and one of the founders of MBS Highway. Previous guests include Robert Broeksmit, Josh Friend, Joe Dahleen, Tim Nguyen, Kristy Fercho, Tony Thompson, Mat Ishbia, David Luna, Barry Habib, Rob Chrisman and more.

See all the interviews from the Mortgage Leadership Outlook series on its YouTube channel.

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