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DS News December 2020

DSNews delivers stories, ideas, links, companies, people, events, and videos impacting the mortgage default servicing industry.

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69 "As long as we can view this as more of a pandemic- induced economic crisis, then some banks may be willing to renew some of these forbearance plans with borrowers who may have a particular problem in light of the pandemic." PPP, supplemental unemployment insurance, and various other programs and packages to help businesses. But the latest numbers, however, also show weaknesses. e latest report shows yet again an increase to about 3.7 million people permanently unemployed and an increase in the number of long-term unemployed by 1.2 million people to 3.6 million. at has been steadily increasing while the general unemployment numbers have been declining. One could say the decline in the official unemployment rate, even with the misclassification error, represents the low- hanging fruit. However, because of continued delays in congressional action and all the surrounding uncertainty, people are concerned about their own balance sheets and less likely to spend money. is puts continued pressure on the retail sector (especially in bricks and mortar retail sales), even though we've seen some increases in that area. So, I would not be surprised if we see permanent unemployment numbers continue to increase yet again another month, excluding holiday seasonality. It would not be a surprise if it goes over four million in the absence of a federal relief package. When we look at the general environment and the recent announcements from Disney and the airline industry opting for further layoffs in the absence of a relief package, this will all put pressure on businesses and individuals. WHAT IMPACT DO YOU EXPECT AS HOMEOWNERS BEGIN TO COME OUT OF THEIR FORBEARANCE PLANS IN THE NEW YEAR? As we have an absence of a relief package, there's continued downward pressure. e banks holding these mortgages, some of which they are selling, that keeps the train running on the banks' balance sheets. However, banks ultimately must make the decision, as these plans come to an end: do they wish to extend the plan? What does it mean if they do not extend the plan? Does that mean they're going to wind up acquiring all these housing assets for which there's no market out there for purchase? en we'll see downward pressure on housing prices. If we can view this as more of a pandemic-induced economic crisis, then some banks may be willing to renew some of these forbearance plans with borrowers in light of the pandemic based upon the expectation that things will revert to "normal." At the end of the day, banks will be balancing this out. It does not mean some of them will not provide an extension. Some will provide and some will not, I suspect. However, it shows a general weakness in the markets, which leads us to start looking at bankruptcy filings. A bank, whether it's for a corporation or an individual, could wind up pushing individuals into bankruptcy, which may not serve anyone's purpose. WHAT DO YOU ANTICIPATE AS FAR AS BANKRUPTCY TRENDS IN THE NEW YEAR? On the bankruptcy front, I'm not particularly optimistic. In particular, we could look at Chapter 11 bankruptcies. Based on the data through September, it appears that our Chapter 11 bankruptcies, which involves reorganizations, already exceeds the number of bankruptcies filed in 2019. It does not come as a surprise. We started off the year with several retail bankruptcies, pre-COVID-19. Brick and mortar retail operations are dealing with the further increase of online sales. With COVID-19 and stay at home orders, further pressure was added to brick-and-mortar operations. As a result, I believe as of now, we've seen a report of 29 major retail bankruptcies. When you think of it, that's quite significant, but not a surprise. We could anticipate even more as we move forward through the end of the year. I would expect we are going to easily exceed the number of bankruptcies from 2019 to 2020 in the Chapter 11 arena. Further complicating matters is the absence of a relief package. Absent any relief, I think we're going to see prolonged and delayed recovery, and that will further push more individuals to file for bankruptcy. I'm now talking about personal bankruptcy, as well as corporate reorganizations. What we may also see is certain conversions of Chapter 11 to Chapter seven liquidations. is will all have a cascading effect. As we move forward with uncertainty, consumer spending, though it has shown improvement, may experience weakness as

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