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Broad coalition of mortgage industry and housing associations call for liquidity facility for servicers

Joint statement urges government to follow up on CARES Act mortgage forbearance

Fifteen financial industry trade associations and affordable housing advocate groups issued a joint statement on Saturday calling on the Federal Housing Finance Agency, the Federal Reserve and the Department of the Treasury to establish a liquidity facility for servicers as a follow up to the mortgage forbearance provided by the CARES Act.

Under the CARES Act, signed into law on March 27, homeowners with federally backed mortgages are provided with a foreclosure moratorium of at least 60 days starting on March 18, and the ability to get mortgage forbearance for up to 12 months.  

The Mortgage Bankers Association, National Association of Realtors and the National Association of Home Builders were among the groups sending the following statement:

“Congress recently enacted the CARES Act to provide relief to families impacted by the global health pandemic caused by the COVID-19 virus. In addition to providing support for unemployed workers and small businesses, Congress codified forbearance actions closely aligned with those announced by the Federal Housing Finance Agency (FHFA) and taken by Fannie Mae and Freddie Mac in March to ensure that both homeowners and renters can maintain a roof over their heads during the crisis.

“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. 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.

“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. While some servicers will not need assistance, many others will require temporary support to deliver forbearance at the scale and for the duration required.

“Recent statements by leaders in Congress have echoed this position. Senator Mike Crapo (RID), Chairman of the Senate Committee on Banking, Housing, and Urban Affairs, urged the Treasury Department and the Federal Reserve to prioritize facilities that stabilize key markets, such as the mortgage servicing market. Similarly, Representative Maxine Waters (D-CA), Chairwoman of the House Committee on Financial Services, clarified that ‘Congress expects the Fed[eral Reserve] will act promptly to establish and implement this facility.’ These comments clearly illustrate that it is the intent and design of Congress that regulators establish a liquidity facility to support the delivery of extended mortgage forbearance to borrowers by mortgage servicers.

“Ginnie Mae’s recent announcement that it intends to establish a liquidity facility for single- and multifamily mortgage forbearance is appreciated and follows congressional intent. However, it will not address servicing advances associated with loans backing Fannie Mae, Freddie Mac, or private-label securities, nor will it address advances of taxes and insurance on loans backing Ginnie Mae securities.

“Any further delay could lead to greater uncertainty and volatility in the market. The undersigned organizations strongly urge the Treasury Department, the Federal Reserve, and FHFA to establish a strong, reliable source of liquidity for mortgage forbearance – and to do so quickly.”

Other groups who signed on to the statement were:

Independent Community Bankers of America, Leading Builders of America, Local Initiatives Support Corporation, National Apartment Association, National Association of Affordable Housing Lenders, 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.

This letter follows one on March 22, before the CARES Act passed, where seven financial services trade association groups sent a statement to regulators expressing their support for mortgage forbearance and outlining recommendations for a streamlined process.

Those groups included some of those above, including the MBA and the Structured Finance Association, in addition to the American Bankers Association, The Consumer Data Industry Association and the Housing Policy Council. This letter noted the need for liquidity for mortgage servicers extending the forbearance, specifically for non-depository institutions:

“Without some access to liquidity so that they can cover that cost, non-depository mortgage servicers will not have enough liquidity to advance these payments at the extraordinary rate that we are going to need, undermining the relief efforts and requiring yet more government intervention,” the groups wrote.

The March 22 statement also urged the government to encourage homeowners who are still employed and can make payments to do so:

“And finally, it is critical that we continue to message that all those who can pay their mortgage, should pay their mortgage. We cannot emphasize enough the need for a close partnership between industry and the federal government on the messaging surrounding this borrower assistance.

“For example, a ‘.gov’ website reinforcing the standards and terms of the borrower assistance program would aid consistency in messaging, reinforcing that this assistance is available to those in actual economic distress due to the pandemic and that others should continue to make their mortgage payments, a message that will target critical resources to those in need and bolster consumer confidence in the approach.”

As of April 5, the house financial services .gov website outlines the benefits homeowners can receive, but does not specifically address homeowners who are still able to make payments. In the FAQ section, in answer to the question, Who is eligible for homeowner assistance under this bill? the site states: “Homeowners with ‘federally backed mortgages’ are eligible for assistance under this bill.”

And under the question, What do eligible homeowners need to do to access this assistance? the site states: “Homeowners who are suffering financial hardship, directly or indirectly related to COVID-19 should contact their servicer to request a forbearance. Homeowners will have to attest to financial hardship caused directly or indirectly by COVID-19 to receive a forbearance but are not required to provide any further documentation to prove such financial hardship.”

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