FHFA Stops Evictions, Plans for Delinquency Spikes
NEW YORK – Some of the nation’s biggest mortgage lenders are already receiving calls from borrowers worried that they won’t be able to make their monthly payments due to the coronavirus pandemic, and the government and independent mortgage regulators are working on plans to ward off another foreclosure crisis.
On Wednesday, the Federal Housing Finance Agency (FHFA) directed Fannie Mae and Freddie Mac (the Enterprises) to suspend foreclosures and evictions for at least 60 days due to the coronavirus national emergency. The two federally backed agencies buy loans from private banks and help keep the mortgage market liquid. Together they hold over half of all U.S. mortgages.
“As a reminder, borrowers affected by the coronavirus who are having difficulty paying their mortgage, should reach out to their mortgage servicers as soon as possible,” says FHFA Director Mark Calabria. Fannie Mae and Freddie Mac “are working with mortgage servicers to ensure that borrowers facing hardship because of the coronavirus can get assistance.”
Mortgage delinquencies currently are near record lows, but the numbers are expected to rise as a result of the current COVID-19 crisis.
Fannie Mae and Freddie Mac already have loan forbearance programs in place to help at-risk homeowners. However, those forbearance programs are usually used following some type of natural disaster, and the current situation is neither local nor momentary.
“We’re on the front end of this. We don’t know,” says Calabria. “If this goes more past the summer, certainly it’s going to call for a different set of responses.”
Right now, borrowers do not need to have been sickened by the virus to qualify, only to show financial hardship.
“You could be working somewhere, you’ve lost your job, that is a hardship that we will count. You can just be adversely impacted economically,” says Calabria. “Ultimately, whether there is a broad based suspension of mortgage payments, the White House or Congress would have to lead on that. I think that they’re moving on these issues.”
Meanwhile, there are concerns about delinquencies hitting the FHA, as the vast majority of FHA lenders are now non-banks and don’t have the same liquidity. If they offer forbearance to borrowers, their investors still need to be paid, and it’s uncertain whether non-bank lenders can handle that.
Source: CNBC (03/17/20) Olick, Diana
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