MBA Takes Issue with Calabria’s Downplay of Need for Servicer Liquidity Facility
The Mortgage Bankers Association called “troubling” comments by Federal Housing Finance Agency Director Mark Calabria in which he dismissed the immediate need for a federally backed liquidity facility to assist mortgage servicers with forbearance efforts resulting from the coronavirus pandemic.
In Apr. 7 comments to HousingWire (https://www.housingwire.com/articles/calabria-no-servicer-liquidity-facility-coming-but-gses-may-pull-servicing-from-struggling-companies/), Calabria appeared to be dismissive of the need for a liquidity facility, saying while FHFA has a “plan” to help servicers that find themselves in financial distress due to advancing principal and interest payments to investors on loans that are in forbearance, it is not of the type the real estate finance industry is calling for.
“We continue to monitor Fannie [Mae] and Freddie [Mac] servicers,” Calabria told HousingWire. “Do we have a liquidity facility that we will be providing via Fannie and Freddie? The answer’s no. We don’t have the resources at Fannie and Freddie to do that.”
MBA President and CEO Robert Broeksmit, CMB, took issue with Calabria’s comments to HousingWire, saying they “send a troubling message to borrowers, lenders and the mortgage market.”
“Servicers are required to offer borrowers widespread forbearance under a plan devised and approved first by FHFA and then codified by the CARES Act. Fannie Mae and Freddie Mac are contractually obligated for the payments to investors. Since Fannie Mae and Freddie Mac will eventually reimburse mortgage servicers for the payments they must advance during forbearance, Director Calabria should advocate for the creation of a liquidity facility at the Fed to ensure the stability of the housing finance market.
“We also strongly disagree with his characterization of the customer experience as it relates to the size of a mortgage servicer. Millions of Americans are well-served by their local independent mortgage bank, community bank, or credit union, and many chose to obtain their mortgage from those institutions for that precise reason. In the Director’s own words, ‘Fannie and Freddie were created to provide small lenders, community banks, and credit unions with access to the market.’ We urge the Director to follow that principle in responding to this crisis.
Broeksmit added Calabria’s unwillingness to offer support from Fannie Mae and Freddie Mac “for the very firms that he and Congress asked to execute his agency’s forbearance plan” only reinforces why the Federal Reserve and U.S. Treasury must create a financing program to help residential and commercial/multifamily mortgage servicers who will have to provide unprecedented levels of mortgage payment forbearance. “Servicers are eager to provide this help, and while we all hope that the duration and severity of the economic dislocation caused by the pandemic will be manageable, we must plan now for a more extended disruption, as I made clear to the Director this evening,” he said.
This past weekend (https://newslink.mba.org/mba-newslinks/2020/april/mba-trade-groups-release-statement-urging-regulators-to-establish-liquidity-facility/), MBA and a broad coalition of organizations representing financial industry and affordable housing advocates on Saturday released a statement calling on government regulators to provide a source of liquidity to those mortgage servicers that may need additional capacity to support homeowners and renters impacted by COVID-19. They emphasized because of the sheer scale of forbearance required during the coronavirus pandemic, many servicers will require a government-backed liquidity facility to assist borrowers and remain financially viable. The statement also warns that delays could lead to greater market uncertainty and volatility.
“It is…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,” the statement said. “While some servicers will not need assistance, many others will require temporary support to deliver forbearance at the scale and for the duration required.”
The statement noted any further delay “could lead to greater uncertainty and volatility in the market” and urged the Treasury Department, the Federal Reserve and FHFA to “establish a strong, reliable source of liquidity for mortgage forbearance – and to do so quickly.”