Mark Calabria, who heads the government’s watchdog agency overseeing Fannie Mae and Freddie Mac, told the Senate Banking Committee on Tuesday that forbearance requests for loans backed by the GSEs have begun to level off.
The forbearance rate for the GSEs, which back more than half of U.S. mortgages, have plateaued at about 6.6%, a level that’s “manageable,” said Calabria, the director of the Federal Housing Finance Agency.
“We’ve seen over the last few weeks those numbers start to stabilize,” Calabria said. “Within the GSE portfolio, you see as many borrowers canceling their forbearance programs as you see rolling on.”
In response to a question from Chairman Mike Crapo (R-ID), Calabria said he had been concerned about a jump in the forbearance rate as conditions deteriorated in April, but said he no longer expects the rate to climb any higher.
“I was certainly concerned that going into May and going into June that we would see spikes in the forbearance rates in Frannie/Freddie’s books, and we did not,” Calabria said “We have seen a stabilization.”
About a third of borrowers who receive a forbearance agreement, meaning they’ve received approval to suspend mortgage payments because they’ve suffered an economic hit stemming from the COVID-19 pandemic, continue to make payments, Calabria said.
“I think that’s a positive,” the FHFA director said.
Calabria said the increase in so-called purchase applications, meaning loans to finance the purchase of a home, bode well for the health of the housing market for the balance of 2020. In the final week of May, purchase applications reached a level that was 18% higher than a year earlier, according to the Mortgage Bankers Association.
“I certainly over the last few months have been concerned about what the direction of the housing market would be coming out of COVID-19,” Calabria said. “I’ve been very pleasantly surprised.”
Being quarantined for weeks in their homes seems to have given some Americans the urge to go shop for new digs, he said.
“The home sales activity and the mortgagee purchase activity have been far stronger than anyone projected,” Calabria said. “Apparently a lot of people in quarantine spent their time looking at homes online because a number of them decided to buy homes, coming out of this.”
