A coalition of housing advocacy groups, national and regional civil rights organizations and minority-focused real estate trade associations, joined by former Mortgage Bankers Association chief executive David Stevens, urged the federal government to create one or more liquidity facilities so that mortgage servicers “covering forborne consumer payments can obtain funding to cover potential shortfalls of advances to bondholders and other parties.”
In a letter to the heads of the federal financial regulatory agencies, Treasury Secretary Steve Mnuchin and Housing and Urban Development Secretary Ben Carson, the coalition noted that while the Coronavirus Aid, Relief, and. Economic Security Act (CARES Act) offered temporary forbearance of mortgage payments for consumers whose finances were impacted by the COVID-19 pandemic, mortgage servicers will face acute liquidity problems in their handling of this unprecedented wave of consumer forbearance.
The coalition also warned that this situation would severely impact low-income households, nonwhite borrowers and veterans because a disproportionately high percentage of their home loans are guaranteed by Ginnie Mae.
“The Urban Institute estimates that the cost of forbearance on owner-occupied mortgages could range from $33 billion to $66 billion over six months,” the coalition wrote. “Without access to liquidity to help cover the contractually obligated advance payments associated with this National Emergency, the lending industry will not be able to consistently advance these payments at the extraordinary rate projected, undermining the existing relief efforts and requiring yet more government intervention.”
The coalition also recommended that any new facility created to address this problem must follow five key criteria:
- Servicers must use liquidity payments for borrower assistance by covering the funds not collected from borrowers that must be passed through to third parties.
- Servicers must agree to offer uniform forbearance terms to all borrowers in their book, regardless of the investor to whom the payments are owed.
- Servicers must be required to offer a path to sustainable reinstatement at the conclusion of the forbearance period for borrowers willing and able to pay, so that no borrower is left worse off because of the forbearance.
- Servicers must agree to adopt, implement and monitor policies and practices to assure strict compliance with the Equal Credit Opportunity Act, Fair Housing Act, and all federal protections for consumers in protected classes.
- Servicers must agree to collect and report to the provider of the liquidity facility data on loss mitigation and foreclosures during and immediately after pandemic crisis has passed, ensuring this data includes information on borrowers’ race, gender, ethnicity, census tract, age, disability status and other pertinent demographic considerations.
Among the organizations joining Stevens, who signed the letter in his capacity as CEO of Mountain Lake Consulting, were the Asian American Real Estate Association, Center for Responsible Lending, Consumer Federation of America, NAACP, National Association of Hispanic Real Estate Professionals, National Association of Real Estate Brokers, National Fair Housing Alliance and The Leadership Conference on Civil and Human Rights.