While borrowers are getting a break on mortgage payments, financial intermediaries are still on the hook
A broad coalition of organizations representing the financial industry and affordable housing advocates released a statement over the weekend calling on lawmakers to provide a source of liquidity to mortgage servicers. The coalition includes the Mortgage Bankers Association, National Association of REALTORS, National Multifamily Housing Council and U.S. Mortgage Insurers, among others.
The statement says that while the established framework is appropriate, neither mortgage servicers nor lawmakers could have anticipated the scale of the forbearance program:
“It is therefore incumbent upon the government to provide the final piece of the puzzle – a liquidity facility for single-family and multifamily servicers – to ensure that the entire industry can deliver much-needed economic relief to consumers through this unprecedented forbearance plan.”
Servicers have been inundated with phone calls from borrowers who are asking for more information on what’s available to them and may be looking to exercise the forbearance option. While borrowers are now able to postpone mortgage payments, servicers still have the responsibility of advancing those payments, so that bond investors are ultimately receiving the cash flows that they require. For instance, under the Ginnie Mae MBS program, approved issuers are still required to pay scheduled principal and interest (P&I) and other various payments connected to these loans.
“This is putting a tremendous amount of pressure on servicers because we don’t know when we will be able to recoup those payments, and bond investors will ultimately feel pressure as well,” said Allen Price, senior vice president and head of sales and marketing at BSI Financial Services.
While the uncertainty of the situation is cause for concern across the entire mortgage industry, Price says the government’s actions so far, as well as the promise of additional support, is encouraging. Ginnie Mae recently addressed some servicer liquidity concerns surrounding COVID-19 in a blog post, noting the strain that issuers are facing is being considered.
“Ginnie Mae has the authority to make changes to the requirements of our program, and we are using those powers to tailor the existing disaster pass-through assistance programs to more suitable scale to the needs of this National Emergency,” stated Seth Appleton, principal executive vice president of Ginnie Mae.
For Price, concern is somewhat mitigated by how quickly the government sprung into action when it came to building the stimulus package, approving it and then getting it out into the marketplace. Like many other servicers, Price says BSI Financial is applying for programs in the stimulus package that were designed to help financial intermediaries. What’s important at this point, he says, is how efficient the administrative aspect will be.
“There are a lot of mortgage and other financial services companies, of every scale and type, that will be coming to the government for some level of assistance,” said Price.
While government support has servicers hopeful, Bloomberg is reporting that U.S. regulators may be holding off on helping mortgage servicing firms. According to the report, members of the Financial Stability Oversight Council, have discussed holding off on setting up such a program to see if other policies would suffice in easing liquidity shortfalls.
“Some officials involved in the talks want to know how many consumers seek mortgage forbearance that servicers have been encouraged to offer before moving to extend credit to companies,” Bloomberg reported.
Operational Challenges
Mr. Cooper, one of the nation’s largest non-bank mortgage servicers and a leading mortgage lender recently predicted 1 in 4 Americans could ultimately request mortgage payment deferrals. The company’s chief executive officer Jay Bray told the Washington Post they have already seen a 50% increase in borrowers seeking assistance.
At BSI Financial, Price said they are experiencing incredibly high call volumes and longer wait times as well; an issue that is being seen across the board. “We have a very robust, tech-forward customer care system with most calls being taken remotely, as most of our employees work from home.” BSI Financial also offers real-time, user-friendly online portals where borrowers can access information and fill our online forms as part of the forbearance process. Because of the uncertainty surrounding the pandemic, Price says it’s difficult to project what call volume will be like two weeks or two months from now, but servicers are doing their best with the information that’s available.
Servicers know one thing is for sure: there will be a spike in delinquencies and foreclosures. But with so much unknown surrounding how long the pandemic will last, Price says it’s near impossible to predict the magnitude.
“Borrowers who have lost their job or wages will access their forbearance right and will legitimately go into a delinquent or foreclosure state, which will have to be carried out,” he added. “The government has to be willing to provide necessary support to keep the economy, specifically the mortgage sector, moving in the right direction.”
At this stage, Price says servicers are just doing what they can to support homeowners and make their commitments to investors.
“The entire mortgage industry just wants to keep our employees and their families safe, make sure borrowers have the accurate information they need, and ultimately, keep everyone in their homes.”
