In the face of increasing calls to help mortgage servicers facing financial distress because they have to advance principal and interest payments to investors on loans that are in forbearance, Department of the Treasury Secretary Steve Mnuchin said the government is “very aware” of the issue and will “make sure” the mortgage market continues to function.
“Quite frankly, we’ve been studying this issue way before COVID and had concerns about some of these nonbank servicers not being well-capitalized, but we’re going to make sure that the market functions properly,” Mnuchin said Monday at the White House during a press briefing.
Mnuchin was responding to a question about the letter sent Friday by a group of Republican members of the House of Representatives, who asked Mnuchin to set up a forbearance liquidity facility for mortgage servicers.
The Republicans’ letter was the latest in a growing push from the housing industry and beyond to create a federally backed liquidity facility for servicers to address the increase in forbearance due to the coronavirus. A bipartisan group of senators also asked Mnuchin last week to set up a liquidity facility.
Mnuchin said Monday that the government is acutely aware of the issues facing mortgage servicers.
“We had a subcommittee task force at FSOC (the Financial Stability Oversight Council) that specifically studied this issue,” Mnuchin said Monday. “We have all the appropriate people on it.”
Mnuchin noted the actions Ginnie Mae has taken in setting up a liquidity facility for Federal Housing Administration and Department of Veterans Affairs loans and said the Treasury has had discussions with the Federal Housing Finance Agency on taking additional steps.
“Ginnie Mae has automatically taken some action,” Mnuchin said. “We’ve had conversations with the FHFA as to what they’re going to do for Fannie and Freddie and we’ve said that to the extent that they need certain authorities from the Treasury, we will accommodate that.”
Last week, FHFA Director Mark Calabria told HousingWire that the agency and the GSEs do not plan to create a liquidity facility themselves but that they may pull servicing from struggling companies and transfer it to more stable ones.
While Mnuchin did not comment on the FHFA’s plans or directly say that the Treasury or the Federal Reserve is planning to create a facility, it appears that the mortgage business could be nearing some form of resolution on the servicer issue. What that ends up being is a different question.