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Mike Fratantoni on MBA’s 2022 mortgage market forecast

The MBA 2022 forecast includes higher mortgage rates, more purchase volume and tighter margins for lenders.
The post Mike Fratantoni on MBA’s 2022 mortgage market forecast appeared first on HousingWire.



The last two years have been a wild ride. We’ve had the sharpest and yet also the shortest recession in history, record-low mortgage rates leading to record origination volumes, and record home prices as housing demand far outstripped supply. Let’s not forget the substantial fiscal and monetary policy that provided extraordinary levels of support for households, businesses, and markets here and abroad.

The latest news regarding the Omicron variant has many cautious about whether the recovery that began in the second half of 2020 and blossomed in 2021 can continue. Odds are that this turn in the pandemic will likely be just a temporary setback. Public health officials note that we have many more tools to address this latest — and likely not the last — challenge.

Nevertheless, while we view the trends described below as the most likely path for the economy and mortgage market in 2022, this news highlights the elevated level of uncertainty we’ve all been living with the past few years. The pandemic, as well as policymakers, continue to have the ability to send shocks through the system.

The main takeaway from Mortgage Bankers Association forecast is that we see 2022 as a transition year, moving from a refinance market to a purchase market. Industry veterans know that past similar transitions have posed challenges as the industry works to match origination capacity to the new level of demand. A silver lining is that we are expecting both 2022 and 2023 to be record years for purchase originations.

In thinking about the year ahead, I am going to frame my comments around five questions I often hear from lenders.

How will the Federal Reserve respond to economic developments in 2022, and what will be the impact on mortgage rates?

The Federal Reserve aims to meet three goals: reach full employment, keep inflation low and maintain a stable financial system. More specifically, that means targeting an unemployment rate close to 4%, inflation close to 2%, and using regulatory tools to prevent unsound lending or other financial imbalances.

In response to the pandemic, the Fed brought short-term rates to zero while also more than doubling the size of their balance sheet, adding trillions of dollars in Treasuries and MBS to their holdings.

When this article was published, the unemployment rate is at 4.2%, inflation is above 6%, and both stock market and housing market values are elevated. MBA forecasts that the unemployment rate will dip below 4% next year, ending the year at 3.5%. Businesses across the country have more than 11 million job openings and are raising wages to try to fill them. 

The only outstanding question is to what extent individuals who have dropped out of the labor force will be pulled back in as employers continue to push up their offers. Given that the decline in labor force participation has been largest for older workers, some of whom may have retired, at least temporarily, it may take more than a small raise to draw them back into the job market. 

The improving job market is all to the positive. However, inflation running much higher than the Fed’s target is troubling, as higher inflation expectations are getting baked into consumer and business decision-making. The Fed and other central banks around the world are already responding to this trend with their words and are beginning to change their actions. The Fed began to taper their asset purchases in November, and at their December meeting announced that they would double the speed of their taper beginning in January, which means they will no longer be adding to their MBS holdings after March.

Also at the December meeting, the median FOMC (Federal Open Market Committee) member indicated three rate hikes in 2022, although this is dependent upon a forecast of still strong growth and elevated inflation. Lenders should expect a much faster pace of hikes over the next few years than what was experienced following the 2009 recession.

A more hawkish Fed, a strongly recovering economy, and large federal budget deficits are all likely to put upward pressure on longer-term rates, including mortgage rates. MBA forecasts that 30-year mortgage rates, averaging about 3.3% today, will reach 4% by the end of 2022.

Source: FOMC Summary of Economic Projections, December 2021

Will home price growth slow in 2022? (What if it doesn’t?)

While the market has struggled with a lack of inventory in 2021 and builders have reported ongoing supply chain challenges, there are more than 700,000 homes under construction right now, and a growing inventory of new homes for sale. The inventory of existing homes remains quite tight at less than 2.5 months, but the addition of new homes to the mix should lead to more choices for potential buyers in 2022, including many who had hesitated to list their homes in 2021. This should lead to an increase in the number of existing homes listed.

This additional inventory is sorely needed. In the most recent readings, home prices nationally have been increasing at about an 18% rate compared to last year, with double-digit growth in almost every part of the country, and growth even faster in parts of the Mountain West. Per the chart below, this rate of growth is more than four times the pace of income growth. That’s clearly not sustainable, particularly for potential first-time homebuyers. 

While existing homeowners can cash in their equity gains and use that gain toward a down payment for their next home, first-time buyers are seeing their chance to buy decrease, or at least are having to re-think the types and locations of properties that they might be able to afford.

The encouraging news? MBA’s forecast for an increase in housing starts and home sales, coupled with our expectation of somewhat higher mortgage rates, should together lead to deceleration in home-price growth to around 5% in 2022. Note that this is a deceleration — a slowing in the rate of growth, not a decline in the level of home prices. 

Could home prices actually decline next year? Yes, if we were to get a spike in mortgage rates or some other shock that leads to an abrupt drop in demand right when the new supply arrives. However, I am frankly less worried about that scenario, and more worried that for other reasons, perhaps ongoing supply-chain constraints impacting homebuilders, the additional supply does not arrive. In that case, there is certainly a chance that home prices could continue to rise at unsustainable levels, increasing the risk that the market could run into a wall at some point next year with respect to purchase demand, showing up as a sharp drop in purchase applications.

Sources: BLS and FHFA

Will we really move into a purchase market next year?

Refinance volume will have totaled more than $5 trillion between 2020 and 2021, roughly half of mortgage debt outstanding, and representing 15 million refinance loans. Of course, that means that 15 million homeowners now have remarkably low mortgage rates. Will those who did not refinance when rates were below 3% be interested in doing so if rates rise to 4%? While there will be borrowers who will be interested in cash-out refinances given the rapid growth in home equity the past few years, MBA is forecasting a sharp drop in total refinance volume in 2022 and expects that volume to stay lower in 2023.

However, while total origination volume is forecast to drop from $3.9 trillion in 2021 to $2.6 trillion in 2022, perhaps the bigger shift is the transition from a refi to a purchase market. Purchase loans present different challenges and opportunities for lenders, both in respect to the mix of business and the need to maintain strong relationships with real estate agents, builders, and others in the housing market.

Given our outlook for home sales and housing starts outlined earlier, MBA forecasts a record year for purchase volume in 2022, driven by millennials reaching peak first-time homebuyer age, a strong job market, and continued increases in home prices.

Source: MBA Forecast

Will there be an increase in foreclosures next year as the remaining borrowers in forbearance exit?

When the unemployment rate spiked to almost 15% last year as the economy was shut down to protect against the first wave of COVID-19, policymakers and servicers moved incredibly quickly to offer forbearance to millions of homeowners. In June 2020, more than 8.5% of all homeowners with a mortgage were in forbearance. While mortgage delinquency rates spiked in concert with the jump in the unemployment rate, these forbearance plans and foreclosure moratoria enabled homeowners impacted by the pandemic to weather the storm.

The foreclosure moratoria have now been lifted, and many homeowners are reaching the expiration of their forbearance terms. Most borrowers exiting forbearance to date have been able to resume making their original payments, while some borrowers have entered modifications, needing lowered payments for a time. MBA’s Weekly Forbearance and Call Volume Survey and new Monthly Loan Monitoring Survey track the performance of these workouts, which have been positive thus far.

Prior to the pandemic, foreclosure levels were extremely low. In 2021, with the moratoria in place, they dropped even lower, with foreclosure starts and foreclosure inventory rates at or near all-time lows. These levels are bound to increase to some extent, but given the success of forbearance exits thus far, we expect the levels to remain extremely low in 2022.

Source: MBA’s National Delinquency Survey

With the expected decline in origination volume next year, will margins tighten (further)?

2020 was a record origination volume year and a profitable year for mortgage originators, as shown by the triple-digit margins in MBA’s Quarterly Performance Report data. As had been typical in prior refinance waves, when the industry is operating at or beyond capacity, margins increase, but this time, expenses were elevated as lenders moved to remote work and staffing shortages abounded across many roles.

In 2021, as refinance volume crested and began to wane, margins have trended downwards as well. The higher personnel and operational costs taken on to meet the record volume remain, but the industry now has some extra capacity, and that is showing up as a drop in margin. It is important to highlight that the third quarter of 2021 margin of 89 basis points is still above the historical average of 56 basis points, when looking at data going back to 2008.

Of course, purchase volumes display large seasonal swings, leading margins in the fourth and first quarters of each year to typically be much lower than those in the middle of the year.

While MBA does not forecast industry-level margins, it is reasonable to expect more tightening in the year ahead given our forecast of a move to a purchase market coupled with a sharp drop in refinances.  We’ve already seen tightening to an even greater extent in third-party channels, as lenders lean more heavily there, perhaps to make up for lost volume through the retail channel. If we look back to 2018 or early 2019, there’s typically a time of below-average profitability as the industry right-sizes following a refinance wave.

Source: MBA’s Quarterly Performance Report

2022 should be a year of higher mortgage rates, fewer refinances, more purchase volume, a more sustainable rate of home-price growth, an increased, but still low level of foreclosures, and tighter margins for originators. This part of the cycle is always a challenge for lenders, but mortgage bankers have been through this before.

The post Mike Fratantoni on MBA’s 2022 mortgage market forecast appeared first on HousingWire.

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Are Voters Recoiling Against Disorder?

Are Voters Recoiling Against Disorder?

Authored by Michael Barone via The Epoch Times (emphasis ours),

The headlines coming out of the Super…



Are Voters Recoiling Against Disorder?

Authored by Michael Barone via The Epoch Times (emphasis ours),

The headlines coming out of the Super Tuesday primaries have got it right. Barring cataclysmic changes, Donald Trump and Joe Biden will be the Republican and Democratic nominees for president in 2024.

(Left) President Joe Biden delivers remarks on canceling student debt at Culver City Julian Dixon Library in Culver City, Calif., on Feb. 21, 2024. (Right) Republican presidential candidate and former U.S. President Donald Trump stands on stage during a campaign event at Big League Dreams Las Vegas in Las Vegas, Nev., on Jan. 27, 2024. (Mario Tama/Getty Images; David Becker/Getty Images)

With Nikki Haley’s withdrawal, there will be no more significantly contested primaries or caucuses—the earliest both parties’ races have been over since something like the current primary-dominated system was put in place in 1972.

The primary results have spotlighted some of both nominees’ weaknesses.

Donald Trump lost high-income, high-educated constituencies, including the entire metro area—aka the Swamp. Many but by no means all Haley votes there were cast by Biden Democrats. Mr. Trump can’t afford to lose too many of the others in target states like Pennsylvania and Michigan.

Majorities and large minorities of voters in overwhelmingly Latino counties in Texas’s Rio Grande Valley and some in Houston voted against Joe Biden, and even more against Senate nominee Rep. Colin Allred (D-Texas).

Returns from Hispanic precincts in New Hampshire and Massachusetts show the same thing. Mr. Biden can’t afford to lose too many Latino votes in target states like Arizona and Georgia.

When Mr. Trump rode down that escalator in 2015, commentators assumed he’d repel Latinos. Instead, Latino voters nationally, and especially the closest eyewitnesses of Biden’s open-border policy, have been trending heavily Republican.

High-income liberal Democrats may sport lawn signs proclaiming, “In this house, we believe ... no human is illegal.” The logical consequence of that belief is an open border. But modest-income folks in border counties know that flows of illegal immigrants result in disorder, disease, and crime.

There is plenty of impatience with increased disorder in election returns below the presidential level. Consider Los Angeles County, America’s largest county, with nearly 10 million people, more people than 40 of the 50 states. It voted 71 percent for Mr. Biden in 2020.

Current returns show county District Attorney George Gascon winning only 21 percent of the vote in the nonpartisan primary. He’ll apparently face Republican Nathan Hochman, a critic of his liberal policies, in November.

Gascon, elected after the May 2020 death of counterfeit-passing suspect George Floyd in Minneapolis, is one of many county prosecutors supported by billionaire George Soros. His policies include not charging juveniles as adults, not seeking higher penalties for gang membership or use of firearms, and bringing fewer misdemeanor cases.

The predictable result has been increased car thefts, burglaries, and personal robberies. Some 120 assistant district attorneys have left the office, and there’s a backlog of 10,000 unprosecuted cases.

More than a dozen other Soros-backed and similarly liberal prosecutors have faced strong opposition or have left office.

St. Louis prosecutor Kim Gardner resigned last May amid lawsuits seeking her removal, Milwaukee’s John Chisholm retired in January, and Baltimore’s Marilyn Mosby was defeated in July 2022 and convicted of perjury in September 2023. Last November, Loudoun County, Virginia, voters (62 percent Biden) ousted liberal Buta Biberaj, who declined to prosecute a transgender student for assault, and in June 2022 voters in San Francisco (85 percent Biden) recalled famed radical Chesa Boudin.

Similarly, this Tuesday, voters in San Francisco passed ballot measures strengthening police powers and requiring treatment of drug-addicted welfare recipients.

In retrospect, it appears the Floyd video, appearing after three months of COVID-19 confinement, sparked a frenzied, even crazed reaction, especially among the highly educated and articulate. One fatal incident was seen as proof that America’s “systemic racism” was worse than ever and that police forces should be defunded and perhaps abolished.

2020 was “the year America went crazy,” I wrote in January 2021, a year in which police funding was actually cut by Democrats in New York, Los Angeles, San Francisco, Seattle, and Denver. A year in which young New York Times (NYT) staffers claimed they were endangered by the publication of Sen. Tom Cotton’s (R-Ark.) opinion article advocating calling in military forces if necessary to stop rioting, as had been done in Detroit in 1967 and Los Angeles in 1992. A craven NYT publisher even fired the editorial page editor for running the article.

Evidence of visible and tangible discontent with increasing violence and its consequences—barren and locked shelves in Manhattan chain drugstores, skyrocketing carjackings in Washington, D.C.—is as unmistakable in polls and election results as it is in daily life in large metropolitan areas. Maybe 2024 will turn out to be the year even liberal America stopped acting crazy.

Chaos and disorder work against incumbents, as they did in 1968 when Democrats saw their party’s popular vote fall from 61 percent to 43 percent.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times or ZeroHedge.

Tyler Durden Sat, 03/09/2024 - 23:20

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Veterans Affairs Kept COVID-19 Vaccine Mandate In Place Without Evidence

Veterans Affairs Kept COVID-19 Vaccine Mandate In Place Without Evidence

Authored by Zachary Stieber via The Epoch Times (emphasis ours),




Veterans Affairs Kept COVID-19 Vaccine Mandate In Place Without Evidence

Authored by Zachary Stieber via The Epoch Times (emphasis ours),

The U.S. Department of Veterans Affairs (VA) reviewed no data when deciding in 2023 to keep its COVID-19 vaccine mandate in place.

Doses of a COVID-19 vaccine in Washington in a file image. (Jacquelyn Martin/Pool/AFP via Getty Images)

VA Secretary Denis McDonough said on May 1, 2023, that the end of many other federal mandates “will not impact current policies at the Department of Veterans Affairs.”

He said the mandate was remaining for VA health care personnel “to ensure the safety of veterans and our colleagues.”

Mr. McDonough did not cite any studies or other data. A VA spokesperson declined to provide any data that was reviewed when deciding not to rescind the mandate. The Epoch Times submitted a Freedom of Information Act for “all documents outlining which data was relied upon when establishing the mandate when deciding to keep the mandate in place.”

The agency searched for such data and did not find any.

The VA does not even attempt to justify its policies with science, because it can’t,” Leslie Manookian, president and founder of the Health Freedom Defense Fund, told The Epoch Times.

“The VA just trusts that the process and cost of challenging its unfounded policies is so onerous, most people are dissuaded from even trying,” she added.

The VA’s mandate remains in place to this day.

The VA’s website claims that vaccines “help protect you from getting severe illness” and “offer good protection against most COVID-19 variants,” pointing in part to observational data from the U.S. Centers for Disease Control and Prevention (CDC) that estimate the vaccines provide poor protection against symptomatic infection and transient shielding against hospitalization.

There have also been increasing concerns among outside scientists about confirmed side effects like heart inflammation—the VA hid a safety signal it detected for the inflammation—and possible side effects such as tinnitus, which shift the benefit-risk calculus.

President Joe Biden imposed a slate of COVID-19 vaccine mandates in 2021. The VA was the first federal agency to implement a mandate.

President Biden rescinded the mandates in May 2023, citing a drop in COVID-19 cases and hospitalizations. His administration maintains the choice to require vaccines was the right one and saved lives.

“Our administration’s vaccination requirements helped ensure the safety of workers in critical workforces including those in the healthcare and education sectors, protecting themselves and the populations they serve, and strengthening their ability to provide services without disruptions to operations,” the White House said.

Some experts said requiring vaccination meant many younger people were forced to get a vaccine despite the risks potentially outweighing the benefits, leaving fewer doses for older adults.

By mandating the vaccines to younger people and those with natural immunity from having had COVID, older people in the U.S. and other countries did not have access to them, and many people might have died because of that,” Martin Kulldorff, a professor of medicine on leave from Harvard Medical School, told The Epoch Times previously.

The VA was one of just a handful of agencies to keep its mandate in place following the removal of many federal mandates.

“At this time, the vaccine requirement will remain in effect for VA health care personnel, including VA psychologists, pharmacists, social workers, nursing assistants, physical therapists, respiratory therapists, peer specialists, medical support assistants, engineers, housekeepers, and other clinical, administrative, and infrastructure support employees,” Mr. McDonough wrote to VA employees at the time.

This also includes VA volunteers and contractors. Effectively, this means that any Veterans Health Administration (VHA) employee, volunteer, or contractor who works in VHA facilities, visits VHA facilities, or provides direct care to those we serve will still be subject to the vaccine requirement at this time,” he said. “We continue to monitor and discuss this requirement, and we will provide more information about the vaccination requirements for VA health care employees soon. As always, we will process requests for vaccination exceptions in accordance with applicable laws, regulations, and policies.”

The version of the shots cleared in the fall of 2022, and available through the fall of 2023, did not have any clinical trial data supporting them.

A new version was approved in the fall of 2023 because there were indications that the shots not only offered temporary protection but also that the level of protection was lower than what was observed during earlier stages of the pandemic.

Ms. Manookian, whose group has challenged several of the federal mandates, said that the mandate “illustrates the dangers of the administrative state and how these federal agencies have become a law unto themselves.”

Tyler Durden Sat, 03/09/2024 - 22:10

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The Coming Of The Police State In America

The Coming Of The Police State In America

Authored by Jeffrey Tucker via The Epoch Times,

The National Guard and the State Police are now…



The Coming Of The Police State In America

Authored by Jeffrey Tucker via The Epoch Times,

The National Guard and the State Police are now patrolling the New York City subway system in an attempt to do something about the explosion of crime. As part of this, there are bag checks and new surveillance of all passengers. No legislation, no debate, just an edict from the mayor.

Many citizens who rely on this system for transportation might welcome this. It’s a city of strict gun control, and no one knows for sure if they have the right to defend themselves. Merchants have been harassed and even arrested for trying to stop looting and pillaging in their own shops.

The message has been sent: Only the police can do this job. Whether they do it or not is another matter.

Things on the subway system have gotten crazy. If you know it well, you can manage to travel safely, but visitors to the city who take the wrong train at the wrong time are taking grave risks.

In actual fact, it’s guaranteed that this will only end in confiscating knives and other things that people carry in order to protect themselves while leaving the actual criminals even more free to prey on citizens.

The law-abiding will suffer and the criminals will grow more numerous. It will not end well.

When you step back from the details, what we have is the dawning of a genuine police state in the United States. It only starts in New York City. Where is the Guard going to be deployed next? Anywhere is possible.

If the crime is bad enough, citizens will welcome it. It must have been this way in most times and places that when the police state arrives, the people cheer.

We will all have our own stories of how this came to be. Some might begin with the passage of the Patriot Act and the establishment of the Department of Homeland Security in 2001. Some will focus on gun control and the taking away of citizens’ rights to defend themselves.

My own version of events is closer in time. It began four years ago this month with lockdowns. That’s what shattered the capacity of civil society to function in the United States. Everything that has happened since follows like one domino tumbling after another.

It goes like this:

1) lockdown,

2) loss of moral compass and spreading of loneliness and nihilism,

3) rioting resulting from citizen frustration, 4) police absent because of ideological hectoring,

5) a rise in uncontrolled immigration/refugees,

6) an epidemic of ill health from substance abuse and otherwise,

7) businesses flee the city

8) cities fall into decay, and that results in

9) more surveillance and police state.

The 10th stage is the sacking of liberty and civilization itself.

It doesn’t fall out this way at every point in history, but this seems like a solid outline of what happened in this case. Four years is a very short period of time to see all of this unfold. But it is a fact that New York City was more-or-less civilized only four years ago. No one could have predicted that it would come to this so quickly.

But once the lockdowns happened, all bets were off. Here we had a policy that most directly trampled on all freedoms that we had taken for granted. Schools, businesses, and churches were slammed shut, with various levels of enforcement. The entire workforce was divided between essential and nonessential, and there was widespread confusion about who precisely was in charge of designating and enforcing this.

It felt like martial law at the time, as if all normal civilian law had been displaced by something else. That something had to do with public health, but there was clearly more going on, because suddenly our social media posts were censored and we were being asked to do things that made no sense, such as mask up for a virus that evaded mask protection and walk in only one direction in grocery aisles.

Vast amounts of the white-collar workforce stayed home—and their kids, too—until it became too much to bear. The city became a ghost town. Most U.S. cities were the same.

As the months of disaster rolled on, the captives were let out of their houses for the summer in order to protest racism but no other reason. As a way of excusing this, the same public health authorities said that racism was a virus as bad as COVID-19, so therefore it was permitted.

The protests had turned to riots in many cities, and the police were being defunded and discouraged to do anything about the problem. Citizens watched in horror as downtowns burned and drug-crazed freaks took over whole sections of cities. It was like every standard of decency had been zapped out of an entire swath of the population.

Meanwhile, large checks were arriving in people’s bank accounts, defying every normal economic expectation. How could people not be working and get their bank accounts more flush with cash than ever? There was a new law that didn’t even require that people pay rent. How weird was that? Even student loans didn’t need to be paid.

By the fall, recess from lockdown was over and everyone was told to go home again. But this time they had a job to do: They were supposed to vote. Not at the polling places, because going there would only spread germs, or so the media said. When the voting results finally came in, it was the absentee ballots that swung the election in favor of the opposition party that actually wanted more lockdowns and eventually pushed vaccine mandates on the whole population.

The new party in control took note of the large population movements out of cities and states that they controlled. This would have a large effect on voting patterns in the future. But they had a plan. They would open the borders to millions of people in the guise of caring for refugees. These new warm bodies would become voters in time and certainly count on the census when it came time to reapportion political power.

Meanwhile, the native population had begun to swim in ill health from substance abuse, widespread depression, and demoralization, plus vaccine injury. This increased dependency on the very institutions that had caused the problem in the first place: the medical/scientific establishment.

The rise of crime drove the small businesses out of the city. They had barely survived the lockdowns, but they certainly could not survive the crime epidemic. This undermined the tax base of the city and allowed the criminals to take further control.

The same cities became sanctuaries for the waves of migrants sacking the country, and partisan mayors actually used tax dollars to house these invaders in high-end hotels in the name of having compassion for the stranger. Citizens were pushed out to make way for rampaging migrant hordes, as incredible as this seems.

But with that, of course, crime rose ever further, inciting citizen anger and providing a pretext to bring in the police state in the form of the National Guard, now tasked with cracking down on crime in the transportation system.

What’s the next step? It’s probably already here: mass surveillance and censorship, plus ever-expanding police power. This will be accompanied by further population movements, as those with the means to do so flee the city and even the country and leave it for everyone else to suffer.

As I tell the story, all of this seems inevitable. It is not. It could have been stopped at any point. A wise and prudent political leadership could have admitted the error from the beginning and called on the country to rediscover freedom, decency, and the difference between right and wrong. But ego and pride stopped that from happening, and we are left with the consequences.

The government grows ever bigger and civil society ever less capable of managing itself in large urban centers. Disaster is unfolding in real time, mitigated only by a rising stock market and a financial system that has yet to fall apart completely.

Are we at the middle stages of total collapse, or at the point where the population and people in leadership positions wise up and decide to put an end to the downward slide? It’s hard to know. But this much we do know: There is a growing pocket of resistance out there that is fed up and refuses to sit by and watch this great country be sacked and taken over by everything it was set up to prevent.

Tyler Durden Sat, 03/09/2024 - 16:20

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