Usually a mortgage company can resist a few borrowers who fail to make their payments, but the scale of the coronavirus pandemic has triggered industry estimates that between 25% and 50% of borrowers are unable to make payments. to pay.
This “could threaten the ability of a mortgage agent, especially non-bank agents, to remain in business,” the Conference of State Bank Supervisors said. warned Fed Chairman Jerome Powell and Mnuchin in a March 25 letter.
State regulators wanted to intervene because “our members are the primary regulators of non-bank services,” said Margaret Liu, senior vice president and deputy general counsel of CSBS.
If 25% of borrowers fail to make their mortgage payments, the industry would need $ 40 billion to cover three months of payments, according to Jay Bray, CEO of service company Mr. Cooper. Depending on how long the situation lasts, Broeksmit said demands on operators “could exceed $ 75 billion and could well exceed $ 100 billion.”
And if mortgage companies fail at every level, “the system goes down,” said Andrew Jakabovics, vice president for policy development at Enterprise Community Partners, a non-profit affordable housing organization.
“The kind of relief we did during the foreclosure crisis – it all had to do with the fact that we wanted to make sure that investors around the world continued to treat US mortgage-backed securities as an incredibly safe investment,” Jakabovics said. . “This would have very serious ramifications for the availability and price of mortgage credit.”
Bright, who previously managed the $ 2 trillion portfolio of government-run mortgage financier Ginnie Mae, said he believed the Fed would implement an emergency lending program for the industry.
“Even if this language was not included [in the Senate bill], I think it’s likely that this could be part of [the Fed’s Term Asset-Backed Loan Facility Program] at the end, ”he said.
Federal Housing Finance Agency director Mark Calabria – which regulates Fannie Mae and Freddie Mac, the two government-sponsored mortgage giants who support roughly half of the nation’s $ 11 trillion market – said this week in an interview with Bloomberg TV that he was convinced that the big banks would continue to extend credit to mortgage agents for the time being.
Always, he said, “If we come to a situation where this lasts longer than two months, there is absolutely going to be a need for a bigger solution.”
Broeksmit said some mortgage companies won’t last that long, depending on the share of loans in their portfolios located in areas of the country where the virus has hit particularly hard.
“Some providers will need cash sooner than others, so we hope the facility will be put in place immediately,” Broeksmit said.
Liu also said that the banks’ credit lines would not be enough to keep the system afloat.
“The mortgage market is one of the many intricately interconnected elements of our financial system. So these guarantees are very important, but I think the role of government as a reliable and available source of credit for the mortgage market and mortgage agents during a crisis is even more important, ”she said.
In the meantime, the industry is keeping its fingers crossed that the individual cash relief in the Senate bill will reduce the number of people having to seek forbearance from their payments.
“We hope that the turnout will not be too high and the duration will not be extended, but we have to prepare for both,” Broeksmit said.