Mark Calabria, director of the Federal Housing Finance Agency (FHFA), regulator of government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, said there will be no liquidity facility available for mortgage servicers struggling to deal with an avalanche of forbearance requests under the CARES Act – at least in the short term – according to CNBC.
Calabria further added that the FHFA will, if needed, step in an assist struggling Fannie and Freddie servicers by transferring servicing rights to other, more-well-capitalized companies.
Calabria’s recent comments on the topic prompted a direct response from the Mortgage Bankers Association (MBA), which, as part of a coalition of industry groups, has been calling for a liquidity facility to help servicers cover potentially tens of billions of dollars in payments to bondholders as they implement forbearance plans for borrowers who have lost their jobs as a result of the coronavirus pandemic.
“The FHFA director’s recent statements send a troubling message to borrowers, lenders, and the mortgage market,” says Robert Broeksmit, president and CEO of the MBA. “Servicers are required to offer borrowers widespread forbearance under a plan devised and approved first by FHFA and then codified by the CARES Act.
“Fannie Mae and Freddie Mac are contractually obligated for the payments to investors,” Broeksmit says. “Since Fannie Mae and Freddie Mac will eventually reimburse mortgage servicers for the payments they must advance during forbearance, Director Calabria should advocate for the creation of a liquidity facility at the Fed to ensure the stability of the housing finance market.
“We also strongly disagree with his characterization of the customer experience as it relates to the size of a mortgage servicer,” Broeksmit says. “Millions of Americans are well-served by their local independent mortgage bank, community bank, or credit union, and many chose to obtain their mortgage from those institutions for that precise reason. In the director’s own words, ‘Fannie and Freddie were created to provide small lenders, community banks, and credit unions with access to the market.’ We urge the director to follow that principle in responding to this crisis.
“The director’s unwillingness to offer support from Fannie Mae and Freddie Mac for the very firms that he and Congress asked to execute his agency’s forbearance plan only reinforces why the Federal Reserve and U.S. Treasury must create a financing program to help residential and commercial/multifamily mortgage servicers who will have to provide unprecedented levels of mortgage payment forbearance,” Broeksmit adds. “Servicers are eager to provide this help, and while we all hope that the duration and severity of the economic dislocation caused by the pandemic will be manageable, we must plan now for a more extended disruption …”