Bloomberg reports that several Democrats with the U.S. House and Senate are requesting Treasury Secretary Steven Mnuchin and Federal Reserve Chair Jerome Powell to provide funds to mortgage servicers.
“The Fed and Treasury should use powers given to them under recent stimulus measures to provide liquidity to servicers facing shortfalls,” House Financial Services Chairwoman Maxine Waters and Sherrod Brown, the top Democrat on the Senate Banking Committee, said in a letter Wednesday.
Steps that government-sponsored Ginnie Mae has taken may not be enough, the lawmakers wrote.
“Mortgage servicers are expected to face increased strain as millions of homeowners and renters lose jobs, are furloughed, or see reduced hours, all of which will keep them from making mortgage and rent payments, as a result of this public health crisis,” the letter states. “We must not allow the pandemic to destabilize critical markets, including our housing market.”
Ginnie Mae recently announced an All Participants Memorandum (APM)], expanding its servicer assistance program in response to the spread of COVID-19.
The APM introduces a new version of the existing Pass-Through Assistance Program (PTAP) for servicers facing a temporary liquidity shortfall related to coronavirus.
Ginnie Mae states the application of the PTAP to the COVID-19 National Emergency allows servicers to apply for assistance meeting their contractual obligations to make “timely and full principal and interest payments” due to mortgage-backed securities (MBS) holders without being held in default.
“This assistance is intended to minimize disruptions in the mortgage servicing and MBS capital markets as borrower forbearance and loss mitigation programs are implemented to provide relief to homeowners affected by the COVID-19 National Emergency,” the release states.
Democrats aren’t the only ones requesting funds to aid servicers, as 20 Republican members of the House of Representatives also sent a letter to Mnuchin requesting assistance to servicers.
“The mortgage industry cannot shoulder the entire onus of government actions to protect American homeowners impacted by COVID-19 when it does not have access to needed liquidity to execute on those government actions,” the letter states. The letter continued by saying, “the best way to protect the American taxpayer would be to create a facility now—in hope that it never needs to be used—than to wait for a market disruption when it may be too late. The mere creation of such a facility may provide a level of support to the market without its even being utilized.”
Bloomberg reports that Powell said last week that the Fed is watching the situation carefully, and Mnuchin said earlier this week that the Treasury is “going to make sure that the market functions properly.”
Additionally, Benjamin Carson, Secretary of the U.S. Housing and Urban Development said that money should be set aside to help mortgage-servicing companies that are at risk due to millions of borrowers missing payments.
“Obviously, we want there to be money to help the servicers of these mortgages because some of them don’t have deep pockets,” Carson said in a Thursday interview with Fox News. “The housing-finance structure needs to be maintained. It’s not just the people who took out the mortgage.”
A new survey by the Mortgage Bankers Association (MBA) found that the number of home loans in forbearance rose from 2.73% to 3.74% during the week of March 30 to April 5.