Key Highlights

  • Federal Housing Finance Agency (FHFA) moving to help servicers that collect payments on loans backed by Fannie Mae and Freddie Mac
  • FHFA changing policies to limit number of payments to four months
  • After four months of payments, servicers not required “to advance scheduled payments” 

Mortgage servicers have been completely overwhelmed with the volume of loans requesting forbearance relief since the COVID pandemic and its economy hit American households with mortgages. Mark Calabria, director of the Federal Housing Finance Agency (FHFA), had originally estimated that one million households would need forbearance relief by May 1. Instead, nearly 3 million households had requested such forbearance by mid-April.

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Mortgage servicers had lobbied for the F’HFA to set up a liquidity facility to help servicers cover the principal and interest payments they are required buy law to send to investors on loans that are in forbearance. Instead, the FHFA is limiting the number of payments servicers will be required to make to four months of missed payments for loans in forbearance. After four months, the policy states, the mortgage servicers has “no further obligation to advance scheduled payments.”

This new policy applies to all GSE servicers regardless if those servicers are banks or nonbanks. Prior to this FHFA policy change, Freddie Mac’s policies reflected such payment limitations…now, Fanny Mae’s policies are consistent.

Director Calabria said, “Mortgage servicers can now plan for exactly how long they will need to advance principal and interest payments on loans for which borrowers have not made their monthly payment…this limit for loans in forbearance provides stability and clarity to the $5T Enterprise-backed housing finance market.”

Coupled with this policy change is one relating to buyback policies that now directs GSEs to keep loans in forbearance in respective MBS pools “for at least the duration of the forbearance plan” rather than purchasing them after four months of delinquency. The FHFA stated this change to the buyback policy “clarifies that mortgage loans with COVID-19 payment forbearances shall be treated like a natural disaster event and will remain in the MBS pool.”

Both the Mortgage Bankers Association and the Structured Finance Association, both of which had lobbied for servicers’ relief via a liquidity facility, welcomed the four month limitation policy change while still emphasizing the call for a liquidity facility.

Michael Bright, CEO of the Structured Finance Association, said, “…I am glad the FHFA is taking these steps, and I hope that FHFA, Treasury and the Federal Reserve will monitor the uptake rate of this program and provide additional liquidity assistance if it becomes necessary as this economic crisis continues.”

Thanks to HousingWire’s Ben Lane.

Also read: Escalating War of Words @ Mortgage Servicer Relief, Homebuilder Confidence Index Takes Biggest One-Month Dive Ever, Will $2.2T CARES Act Sustain Economy or Are Relief Provisions Even Barely Enough?


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