We noted yesterday that the interagency IFR deferring appraisals and evaluations actually puts lenders in a most difficult position. Here, we disentangle them to conclude that portfolio lenders face a sudden, severe regulatory risk sure to drop portfolio lending below already sharply-reduced crisis levels. HELOCs, seconds, and other equity-extractors also face even greater obstacles that, in the near term, could reduce debt-service capacity at some households for non-mortgage debt in ways that, if sustained during a prolonged crisis, create contagion risk for mortgage repayment when forbearance ends. Mortgage credit enhancement could be more welcome than usual at big-bank lenders.
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