Best automation opportunities for loan processing

Join our expert panelists to learn how lenders can achieve their goals using the integration of intelligent document automation and RPA technology.

4 Strategies to Strengthen Customer Relationships

Discover the right strategies to execute fast-acting campaigns, track results and improve your bottom line – all while strengthening customer relationships.

HousingWire's 2021 Spring Summit

We’ve gathered four of the top housing economists to speak at our virtual summit, a new event designed for HW+ members that’s focused on The Year-Round Purchase Market.

An Honest Conversation on minority homeownership

In this episode, Lloyd interviews a senior research associate in the Housing Finance Policy Center at the Urban Institute about the history and data behind minority homeownership.

Opinion

[PULSE] A federal liquidity solution for the mortgage servicing industry

The CARES Act can provide the solution for the industry and for homeowners

Policymakers are considering ways to ensure the mortgage servicing industry –– the central plumbing of the U.S. housing financial system –– remains functional during the COVID-19 crisis. 

Policies established by various federal housing agencies and augmented in the $2 trillion CARES Act that offer homeowners affected by the crisis forbearance on their monthly mortgage payments could cost the industry $75 billion – $100 billion, according to the Mortgage Bankers Association. This could cause lasting damage to the housing market that will make the coming economic recovery longer and harder. 

Any solution to this crisis needs to go beyond temporary forbearance on foreclosures. It must also prevent homeowners who cannot pay their mortgage payments from eventually defaulting and facing complex loan modifications with potentially higher monthly payments, or losing their homes.

The system needs a clean and simple way to protect homeowners, cover the payments they currently are unable to meet, and defer such unpaid amounts at 0% interest until they pay off their mortgages. Such a solution also needs to maintain the financial integrity of the servicing industry and the secondary mortgage market.

The CARES Act creates the opportunity for a fast, efficient, and cost-effective federal program that, in protecting servicers, protects America’s homeowners for the long term.

We envision a program that would create a Federal Reserve funding facility for single-family servicers of Ginnie Mae, Fannie Mae, Freddie Mac and state and local housing finance agency home mortgage portfolios. It would enable up to 6.75 million low- and moderate-income homeowners to avoid default on their mortgages despite layoffs and unemployment due to the pandemic.

Here’s how it would work:

  • A Fed commitment of $19.25 billion combined with $16.25 billion in Treasury equity investment of the $425 billion authorized in the stimulus, creates $35 billion of liquidity for regular principal and interest advances on mortgage-backed securities.
  • This money is provided through a Federal Reserve facility for mortgage servicers.
  • The Fed receives full repayment with interest at 2%; the Treasury investment enables the Fed to provide funding at 0% on behalf of homeowners throughout the country.
  • Funding runs through commercial bank intermediaries to servicers to cover the costs they incur each month on behalf of borrowers to make scheduled payments on mortgage-backed securities and bonds and escrow deposits for borrowers’ taxes, homeowners’ insurance, and mortgage insurance.
  • Treasury receives up to 75% of its investment back (roughly $12 billion) when borrowers pay off their mortgages. The Treasury’s net investment of approximately $4 billion prevents foreclosure losses on millions of federally insured and guaranteed mortgages, as happened during the financial crisis.

Under the program we envision, targeted federal investment enables borrowers to avoid loan default despite missing up to three monthly payments during their forbearance periods; they simply pay this money back at 0% interest, whenever they pay off their loan. 

And the program enables servicers to stay in business and helps keep the housing system intact under highly stressful conditions — and avoid untold amounts in foreclosure losses by the federal housing agencies and GSEs down the line.

If the Presidential emergency lasts longer, the program can be scaled up to cover additional missing monthly payments through larger investments by the Federal Reserve and Treasury.

More details on how the proposed Mortgage Servicer Funding Facility would work are here.

Most Popular Articles

Chopra warns of post-COVID housing market fallout

Rohit Chopra warned of housing market fallout and said he would focus on helping struggling homeowners at his Senate Confirmation hearing.

Mar 03, 2021 By

Latest Articles

CFPB delays QM compliance date to October 2022

The Consumer Financial Protection Bureau released a notice of proposed rulemaking on Tuesday to delay the mandatory compliance date of the Qualified Mortgage final rule from July 1, 2021 to October 1, 2022.

Mar 04, 2021 By
3d rendering of a row of luxury townhouses along a street

Log In

Forgot Password?

Don't have an account? Please