Despite growing calls from the housing industry for a federally backed liquidity facility for servicers to address the increase in forbearance due to the coronavirus, Federal Housing Finance Agency Director Mark Calabria told HousingWire Tuesday that no such facility is coming.
But that doesn’t mean the FHFA doesn’t have a plan to help servicers that find themselves in financial distress due to advancing principal and interest payments to investors on loans that are in forbearance.
When asked by HousingWire whether the FHFA, Fannie Mae and Freddie Mac have plans to address the concerns being raised by the mortgage business over servicers’ ability to handle widespread forbearance, Calabria said they have a plan, but it’s not the one that the industry is calling for.
“Yes and no is the answer,” Calabria told HousingWire when asked whether FHFA has a plan similar to that of Ginnie Mae, which recently announced a program to aid servicers dealing with forbearance on loans backed by the Federal Housing Administration, Department of Agriculture, and the Department of Veterans Affairs.
Instead of setting up a liquidity facility, Calabria said that GSEs may transfer servicing away from companies that are struggling to deal with the advances.
“The yes is we continue to monitor Fannie and Freddie servicers,” Calabria said. “We are, at this point, comfortable with our ability to deal with any servicers that may be distressed so that we can either turn them into subservicers or transfer their servicing to other parties. And we believe at this point, given the number on uptake of forbearance, we’ve seen that we can transfer servicing in a way that’s not too disruptive.
“So, the yes is we have contingency plans and procedures put in place were this distress to happen,” Calabria continued. “So that’s the yes part. The no part is, do we have a liquidity facility that we will be providing via Fannie and Freddie? The answer’s no. We don’t have the resources at Fannie and Freddie to do that.”
Calabria said that the GSEs have seen an uptick in forbearance requests over the last few days, but said that the figures they are seeing so far are nowhere near the 20%-50% that some observers are suggesting may happen.
Calabria noted a new report from the Mortgage Bankers Association, which surveyed mortgage servicers over the last few weeks to determine how many borrowers are requesting forbearance.
The MBA report stated that 1.69% of the loans in the GSEs’ portfolio have been placed in forbearance, a figure that Calabria agreed with.
“That is very much in the neighborhood that we have,” Calabria said, cautioning that the MBA data is as of April 1. Calabria added that the figure has increased since April 1, but stated the MBA data is in line with the GSEs’ actual data.
“Nobody that we’re talking to is seeing 25%, 30%, 40%, 50% take out (in forbearance requests),” Calabria said. “So, I don’t know where those estimates are coming from, because they just don’t match anything we’re seeing at all.”
Meanwhile, there are some servicers that are modeling for delinquencies in the 20% or higher range. When asked whether he thinks that is possible, Calabria said it depends on the nature of the servicer’s portfolio.
“If you’re a servicer and 100% of your business is Ginnie and this goes on for six months, maybe I see you in the 25% range,” Calabria said.
“But we don’t see any expectation of that in the Fannie, Freddie book,” Calabria continued. “So, I do think it’s important in all of these conversations to separate out the Ginnie footprints and the Fannie and Freddie footprint. We’re not seeing any scenario where we think the take up rate at Fannie and Freddie is going to be 30%. We’re just not seeing that.”
As for transferring servicing, Calabria said that the GSEs are “very closely monitoring” mortgage servicers at this point. Beyond that, Calabria said the FHFA and the GSEs are in discussions with servicers about their capacity and ability to deal with forbearance and other issues moving forward.
To that point, Calabria said that the FHFA and GSEs feel confident that some of the “large players” in the industry will be able to absorb whatever servicing transfers are necessary from smaller companies that may end up struggling.
“We’ve had regular calls with a number of servicers in talking about capacity, and there are a number of very large players, both bank and nonbank, who have a capacity to take over what we think is almost the entire range of what’s likely to happen,” Calabria said.
“But, there were a number of large nonbank servicers who have right out told us they have capacity to take additional servicing,” Calabria continued. “Certainly, we’ve heard that among depositories as well. And I would say, I’ve been shocked at the amount of capacity people tell us they have.”
However, Calabria noted the disruptive nature of servicing transfers on borrowers, citing an experience from his past where his own mortgage servicing was transferred and his new servicer neglected to pay his property taxes.
But Calabria said that the borrower experience would be “better” when moving from a smaller servicer to a larger one.
“Transferring servicing is…not without disruption,” Calabria said. “But I would say, by and large, given that we would be transferring servicing from smaller players to more reputable larger players, it probably means that the consumer experience will be better, not worse.”