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Housing Outlook Maybe Not as ‘Rosy’ as it Seems

neighborhoodIn 2021, America will experience a shift in the housing market, as millions of borrowers will emerge from forbearance plans.  RealtyBid and parent company Covius Tuesday hosted a webinar entitled "A 2021 Housing and REO Outlook: What to Expect and How to Prepare."

The presentation featured a panel of industry veterans who discussed how to think ahead to and prepare for this development, what macro-economic factors will influence the 2021 housing market, appreciating and depreciating MSAs, how to consider modeling for borrower in-flows and out-flows, needed operational capacity, and best practices to test now for 2021 REO inventory.

The panel included Allan Weiss, founder of Case-Shiller Weiss and of Weiss Analytics; Sean Ryan, founder and CEO of Aspen Grove Solutions; Joe Chappell EVP at Covius; and Pete Pannes, Chief Business Officer of Covius.

The housing outlook might seem "rosy," Weiss began, but tracking particular data—namely interest rates, forbearance numbers, and stimulus developments—"will give people a better sense of the news."

Weiss, shared macro-economic factors likely to influence the 2021 housing market and discussed how servicers and investors can evaluate properties for underlying appreciating or depreciating indicators. He has lived through and tracked a few major housing market disruptions in his career, and he says this "shock" is like no other.

Rates are remarkably low, especially in relation to inflation, he said, but warned, "If and when rates adjust, the party will be over."

He used the term "forbearance," he said, to describe all the things banks do to impact homeowners. He went on to note that, while loan mitigation has the potential to help situations for homeowners, "help prevent worst case scenarios," certain actions by banks can cause homeowners who are "facing a liquidity crisis" to "throw in the towel." Something like that, happening in bulk, and across the nation, would lead to the risk of prices falling and, worst case scenario, America could experience a $450 billion loss, he said.

"Any sort of price reducing meltdown could set off a chain of events that needs to be managed now and not later," he said. The course of COVID-19 and related stimulus provisions to Americans, he said, would "inextricably" correlate with the housing market's trajectory.

An in-depth interview with Weiss about the current recession can be read at Millionacres.com.

Ryan also led off with the direct ties that bind the path of a pandemic to developments in housing and default servicing, an industry in which he has served 20 years.

He agrees with Weiss, saying that "Covid 19’s impact on the mortgage servicing industry is unlike anything we have seen before, not just in the magnitude of the economic downturn but also in its suddenness."

Ryan quoted and backed Federal Reserve Bank of St. Louis President James Bullard, who said in September, "Simple mortality risk-mitigation strategies hold the promise of delivering higher household incomes along with lower fatalities from Covid-19, thus improving outcomes along both dimensions. The downside risk remains substantial and continued execution of a granular, risk-based health policy will be critical in the months ahead.”

White Papers penned by Ryan in April, July and September—on modeling default projections and measures that servicers might take to prepare—were widely recognized for their cogency.

He co-authored "Mastering the Hard Part: Creating Positive Forbearance Outcomes From COVID-19," in which he helps "evaluate current trends and asses a likely range of outcomes using a novel approach based on forward-looking market segmentation, outlines how servicers can leverage technology to address these segments ... and offers a new baseline trajectory given updated assumptions on the progress of efforts against the disease and the level of government unemployment support."

He's also penned papers on "Digital Borrower Engagement" and contributed to "Forbearance in the CARES Act: A Review of Issues, Impact, and Mitigation Strategies," to name a few.

His papers can be read in full on Aspen Grove Solutions' website.

Chappell who said, the pandemic is driving the "need for ongoing calibration" inside the industry,  took an operator’s view of designing processes and modeling capacity to assist borrowers exiting forbearance, using leading borrower indicators as well as external data, including MBA data, and models like Aspen Grove's.

Pannes said that while REO inventory is at historic lows, now is the time to test the readiness of teams, tactics, and strategies.

Learn more about the contact of this webinar at Covius.com.

About Author: Christina Hughes Babb

Christina Hughes Babb is a reporter for DS News and MReport. A graduate of Southern Methodist University, she has been a reporter, editor, and publisher in the Dallas area for more than 15 years. During her 10 years at Advocate Media and Dallas Magazine, she published thousands of articles covering local politics, real estate, development, crime, the arts, entertainment, and human interest, among other topics. She has won two national Mayborn School of Journalism Ten Spurs awards for nonfiction, and has penned pieces for Texas Monthly, Salon.com, Dallas Observer, Edible, and the Dallas Morning News, among others. Contact Christina at [email protected].

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