senators plead for help with liquidity for mortgage agents | Ballard Spahr srl

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A bipartisan group of US senators sent a letter dated April 8, 2020 to U.S. Treasury Secretary Steven Mnuchin, in his capacity as Chairman of the Financial Stability Supervisory Board (FSOC), urging swift action to provide liquidity assistance to residential mortgage lending services.

Senators address mortgage loan forbearance relief provided for in the Coronavirus Aid, Relief and Economic Security Act (CARES Law) and state that it is likely that many families will not be able to make their mortgage payments as planned, resulting in widespread participation in the CARES law forbearance program. Senators note that up to 25 percent of borrowers can ask for help. Because mortgage loan managers are often required to advance scheduled principal and interest payments to investors, whether or not borrowers make the payments, Senators caution that the advance obligation that results from abstentions from the CARES Act presents “an existential threat to these companies, and therefore to the larger mortgage market.” Senators refer to an estimate by the Mortgage Bankers Association (MBA) that the advance obligation could reach $ 100 billion.

Responding to concern that “some non-bank lenders may have adopted practices that made them particularly sensitive to constraints on their liquidity during a severe recession,” senators argue that this is no reason to refrain from providing financial support. help with cash now. Specific points affirmed by senators include that (1) “even though there are service providers whose limited capital and poor risk management structure make them unsuitable for assistance, ignore the broader cash flow strain on the market. market at this time would risk experiencing strains far beyond these companies ”and (2)“ the focus should not now be on longer term reform. [with regard to servicer liquidity], but ensuring that the current crisis does as little damage as possible to the economy. “

Senators signing the letter to Secretary Mnuchin are Mark R. Warner (D-VA), Mr. Michael Rounds (R-SD), Robert Menendez (D-NJ), Thom Tillis (R-NC), Tim Kaine (D- VA), Jerry Moran (R-KS) and Tim Scott (R-SC).

The position of the senators contrasts sharply with the position of the director of the Federal Housing Finance Agency (FHFA), Mark Calabria, as evidenced by a report by Wire Housing. According to the report, the director of Calabria estimates that the level of abstentions will be far from the level of 20 to 50 percent that some suggest, and that if there are providers who have difficulty in meeting the obligation to In advance, the FHFA would not provide liquidity assistance. , but Fannie Mae and Freddie Mac would use their capacity to transfer service to another repairman. And regarding the transfer of service, the director of Calabria indicated that the borrower’s experience would be better when moving from a small service to a large service. The director’s statements attracted critical MBA President and CEO Robert Broeksmit, CMB.

In an MBA statement, Mr. Broeksmit said “[s]the services are required to offer borrowers general abstention under a plan designed and approved first by the FHFA, then codified by the CARES law. Fannie Mae and Freddie Mac are contractually obligated to pay investors. Given that Fannie Mae and Freddie Mac will eventually reimburse mortgage agents for payments they have to advance during forbearance, the Calabria manager is expected to advocate for the creation of a liquidity facility with the Fed to ensure the stability of the housing finance market. Mr Broeksmit also said that “[w]e. . . strongly disagree with [the Director’s] characterization of the customer experience according to the size of a mortgage agent. Millions of Americans are well served by their local independent mortgage bank, community bank, or credit union, and many have chosen to obtain their mortgages from these institutions for this very reason. On April 4, 2020, the MBA joined a group of finance and housing advocates in issuing a declaration calling on government regulators to provide a source of liquidity to mortgage agents given the upfront obligation associated with abstentions from the CARES Act.

FHA approved lenders may request access to the FHA catalyst case binding module and complaints module via the FHA Resource Center at [email protected] or 1-800-Call FHA (1-800-225-5342).


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