As more and more borrowers explore the possibility of requesting forbearance from their mortgages, a coalition of lending and real estate organizations has released a statement pushing for the government to provide a source of liquidity to servicers.
The statement comes in response to the recently enacted CARES (Coronavirus Aid, Relief, and Economic Security) Act, which aims to provide financial relief during the ongoing COVID-19 outbreak. In addition to offering support for the unemployed and for small businesses, the legislation codifies forbearance provisions for homeowners so they don’t lose their homes as the pandemic continues.
“Policymakers rightly chose to respond, but made mortgage servicers responsible for delivering these government-mandated benefits, and the industry is prepared to supply that relief,” wrote the coalition, made up of 15 financial, mortgage and real estate trade organizations and advocacy groups. “The established forbearance framework is appropriate, as it gets help to the most people as quickly as possible.
“But the scale of this forbearance program could not have been foreseen by mortgage servicers, or fully anticipated by regulators.”
The full scope of forbearance requests due to the ongoing coronavirus outbreak has yet to be known, though many mortgage organizations have been expressing their concerns about a potential tidal wave of forbearances for weeks. A different letter, penned by another group of organizations to the White House last month, estimated that “if 25% of the nation receives forbearance for only 3 months, servicers will have to cover payments of roughly $36 billion. If they received it for 9 months, then the cost would exceed $100 billion.”
Some organizations who co-signed that March 22 letter, including the Mortgage Bankers Association (MBA) and National Association of Realtors (NAR), are also part of this new coalition.
“It is therefore incumbent upon the government to provide the final piece of the puzzle — a liquidity facility for single-family and multifamily servicers — to ensure that the entire industry can deliver much-needed economic relief to consumers through this unprecedented forbearance plan,” the coalition’s statement continued. “While some servicers will not need assistance, many others will require temporary support to deliver forbearance at the scale and for the duration required.”
The coalition also acknowledged and lauded the new payment advance program in the works at Ginnie Mae, though the statement implies that more assistance will be needed as the pandemic stretches into spring. It also brings up comments from lawmakers such as Idaho Sen. Mike Crapo, chairman of the Senate Committee on Banking, Housing, and Urban Affairs, and California Rep. Maxine Waters, chairwoman of the House Committee on Financial Services, referencing the need to prioritize facilities to support the mortgage market during the coronavirus crisis.
“Any further delay,” the coalition said, “could lead to greater uncertainty and volatility in the market. The undersigned organizations strongly urge the Treasury Department, the Federal Reserve, and FHFA (Federal Housing Finance Agency) to establish a strong, reliable source of liquidity for mortgage forbearance — and to do so quickly.”
Full text of the coalition’s statement can be found on the MBA’s website. In addition to the MBA and NAR, other coalition members include the Independent Community Bankers of America, Leading Builders of America, Local Initiatives Support Corporation, National Apartment Association, National Association of Affordable Housing Lenders, National Association of Home Builders, National Council of State Housing Agencies, National Housing Conference, National Multifamily Housing Council, The Real Estate Roundtable, Structured Finance Association, Up for Growth Action and U.S. Mortgage Insurers.