A coalition of 31 consumer, civil rights, housing and real estate organizations have called on the Treasury and financial regulators to immediately provide a liquidity facility for all mortgage servicers to help cover the costs of COVID-19-related borrower assistance.
The coalition is just the latest group to call for a liquidity facility to keep servicers viable as they provide government-mandated mortgage forbearance. Earlier this month, more than a dozen trade organizations, including the Mortgage Bankers Association and the National Association of Realtors, said such a facility was necessary to help servicers shoulder the cost of COVID-19 relief. According to the Urban Institute, the cost of forbearance on owner-occupied mortgages could range from $33 billion to $66 billion over six months.
The new coalition includes advocacy groups like the Leadership Conference on Civil and Human Rights, the National Consumer Law Center and the National Fair Housing Alliance. The coalition insists that any liquidity facility for servicers must be linked to actual borrower assistance, not bonus or dividend payouts. The coalition also said that the facility should be conditioned on public data reporting on the assistance provided to borrowers.
“A failure to act to provide liquidity access to servicers in the conventional and government insured markets will expose consumers, lenders of all types and independent mortgage servicers to unnecessary and unacceptable risks,” the coalition said in a letter to regulators. “…[T]he entire housing financing system could face a liquidity crisis that would threaten a very large part of the economy.”
The coalition outlined five borrower protections it said should be included in any liquidity facility:
- Liquidity payments must be used for borrower assistance, not for other purposes like executive bonuses or stock dividends
- Servicers that access the liquidity facility should be required to offer uniform forbearance terms to all borrowers, regardless of the investor to whom the payments are owed. Those offered terms should be at least those required for forbearance on federally backed mortgages under the CARES Act, and should apply equally to non-federally backed mortgages
- Servicers should be required to offer “a patch to sustainable reinstatement at the conclusion of the forbearance period” so that no borrower is left worse off for taking advantage of forbearance
- Servicers should be required to adopt, implement and monitor policies to ensure strict compliance with the Equal Credit Opportunity Act, the Fair Housing Act, and all federal protections for consumers in protected classes. Assistance should be available to all borrowers on the same terms regardless of race, ethnicity or other characteristics and should support borrowers in all communities and housing markets
- The provider of the facility should “engage in robust data collection and reporting on loss mitigation and foreclosures during and immediately after the national emergency.”