As of April 23 more than 3.4 million homeowners – or 6.4% of all mortgages – had entered into COVID-19 mortgage forbearance plans, according to Black Knight.
This population represents $754 billion in unpaid principal and includes 5.6% of all GSE-backed loans and 8.9% of all FHA/VA loans, according to the firm’s McDash Flash data set.
At this level (which keeps growing) mortgage servicers were bound to advance $2.8 billion of principal and interest payments per month to holders of government-backed securities on COVID-19-related forbearances.
The Federal Housing Finance Agency (FHFA) recently implemented a plan to help address a looming liquidity gap that Fannie Mae and Freddie Mac mortgage servicers face as a result of a flood of forbearance requests resulting from the coronavirus pandemic and subsequent passage of the CARES Act. The plan relinquishes mortgage servicers from having to make payments to investors after four months of missed payments on a loan.
Some industry groups, however, feel the measure does not go far enough.
“This change limits the length of time that a servicer would need to advance principal and interest payments, but servicers are still responsible for advancing payments for property taxes, homeowners insurance, and mortgage insurance if the borrower does not pay them separately,” said Robert Broeksmit, CMB, president and CEO of the MBA, in a statement last week. “While this news reduces servicers’ worst-case cash flow demands considerably, we continue to stress the need for Treasury and the Federal Reserve to create a liquidity facility for those servicers who need it in order to continue to make payments to investors, municipalities, and insurers on behalf of borrowers who have been granted forbearance required under the CARES Act.”
In March, Ginnie Mae instituted a special program that solves for the liquidity gap issue for servicers of its loans.
Anthony Jabbour, CEO of Black Knight, says although the FHFA’s plan is helpful, “with today’s number of forbearance plans, servicers are still looking at more than $7 billion dollars in advances over those four months.”
“And the forbearance numbers are climbing steadily, day by day,” he adds. “Clearly, this remains a challenging situation all around.”