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COVID-19 Update – Mortgages and PPP

We are hoping this finds you safe and healthy! Right now, the CDC is reporting over 213,000 cases of COVID-19 in the United States. The number of cases is constantly changing but we do see COVID-19 sticking around for a while with a significant impact in the 2nd quarter.

Looking at the markets, we are concerned about the following four trends as it relates to the stock markets heading into April and May.  You will see from the attached chart that we have rebounded well off the initial lows, but look to be susceptible to more of a downside from here.

  1. Rising Unemployment – Unemployment benefits are coming in high and projected to continue.  With that, the PPP program does appear to be robust and helpful.  Mark Cuban tweeted it was a great piece of legislation that will actually help businesses and employees.  Many of our business owner clients are applying as we speak and are encouraged by the opportunity to fund the payroll for 8 weeks.  We will include links for you to get more information at the end of this document, including the application.
  2. Corporate Earnings – We have not had a corporate earnings season with COVID-19.  Later this month we will be getting some updates from the largest companies about how COVID-19 is impacting operations, revenue, cash-flow and forward-looking estimates.  We don’t see how any news could be positive as most companies have seen a negative impact to their revenue.  They also will have trouble giving guidance about the future revenue and cash flow because of the rapid pace of this disease, with no end in sight.
  3. Schools closing and shelter-in-place – With schools closing from now until the end of April and potentially longer, it is putting a big strain on families and changing environments.  With the shelter-in-place requirements being extended, we think the reality is going to set in for a lot of investors that this is not going to be a quick recovery and that equity markets could be susceptible to further downdrafts.
  4. Rising mortality is going to happen as more and more reports are coming in of people passing away from COVID-19.  It appears that regionally, COVID-19 is hitting some communities harder than others.  We are heartbroken to think that mortality will be higher in the days to come.

Mortgages

One of the benefits to all of this, as we try and find the silver lining, has been lower mortgage rates.  We continue to check in with trusted sources on the mortgage environment as it relates to your financial plans.  We are hearing that rates are extremely volatile right now due to the low confidence of the investors. Lenders are increasing overlays on qualifying for mortgages. The bottom line, it’s getting tougher to get financing. Hopefully, by mid-summer we will see these guidelines relax.

So, if you would benefit from refinancing, now may be a good time rate-wise and since more people are home you may have the bandwidth to jump through the additional hoops.

Payroll Protection Program (PPP)

The payroll protection program (PPP) seems like a good fit for small businesses.  We have talked with several business owners this week that are applying and are very encouraged about what it can do for their business, their employees and the sustainability of their operations.  We have attached a bunch of resources to this program that we have come across to help you assess if that would be helpful to you.  The legislation has allocated $375 billion for companies with less than 500 employees.

Take a look at the resources provided to learn more or forward to a business owner that you may know.

PPP SBA Interim Final Rule, Thursday 4-2-20

Paycheck Protection Program Information Sheet

What you need to Provide to apply for a PPP

CARES ACT Loans Not Available Yet

We hope you find this information helpful and please don’t hesitate to reach out if you have any questions!