Sudden stop in mortgage payments

There's another 'epidemic' ripping through America that, for many on Wall Street, is just as terrifying as COVID-19... and this time The Fed is to blame.

We reported last week on the multitude of mortgage companies that were facing an existential threat from massive margin calls:

First, its was AG Mortgage Investment Trust which on Friday said it failed to meet some margin calls and doesn’t expect to be able to meet future margin calls with its current financing. Then it was TPG RE Finance Trust which also hit a liquidity wall and could not repay its lenders. Then, on Monday it was first Invesco, then ED&F Man Capital, and  now the mortgage mayhem that erupted as a daisy-chain of mortgage REITs suddenly imploded, has taken down MFA Financial, whose crashing stock was halted after the company reported that "due to the turmoil in the financial markets resulting from the global pandemic of the COVID-19 virus, the Company and its subsidiaries have received an unusually high number of margin calls from financing counterparties, and have also experienced higher funding costs in respect of its repurchase agreements."

So the price of the mortgage debt held is dropping way below expectations based on short term debt in these holders.  How can the Fed deny the bailout?

My virus model says things normalize in two quarters, the virus has found its place.  The Fed buys their distressed debt at a bit of a premium, things approach normal? No, this, like I say, was a regularly scheduled recession, the piling on will be enormous. Everyone wants to settle old accounts. This is especially the millennial moment, like the young teachers stuck at the bad end of a two tiered union structure. This group is looking at forty more years of this and saying, no, let us settle some long term issues.