The hope for a dedicated facility for federally backed liquidity has been crushed after Federal Housing Finance Agency (FHFA) Director Mark Calabria revealed there will not be one.
In an interview, Calabria did offer some sign of positivity by revealing that GSEs may pull servicing from companies that are struggling with servicer demands, as part of a developing plan.
“We are, at this point, comfortable with our ability to deal with any servicers that may have distressed so that we can either turn them into sub-servicers or transfer their servicing to other parties. And we believe at this point, given the number on uptake of forbearance, we’ve seen that we can transfer servicing in a way that’s not too disruptive," said Calabria in an interview with HousingWire.
Calabria revealed that they are continuing to monitor Fannie and Freddie servicers.
"Calabria said that the GSEs have seen an uptick in forbearance requests over the last few days, but said that the figures they are seeing so far are nowhere near the 20-50 percent that some observers are suggesting may happen," according to the report.
He added that the only way he could see a servicer in the 20-25 percent range is if 100 percent of its business is with Ginnie Mae and this type of forbearance continues for six months.
"We’ve had regular calls with a number of servicers in talking about capacity, and there are a number of very large players, both bank and non-bank, who have a capacity to take over what we think is almost the entire range of what’s likely to happen," said Calabria, according to the report.
Moody’s Associate Managing Director Luisa De Gaetano stated: "Rising borrower delinquencies will strain non-banks’ liquidity, amplifying the risk that these firms will breach agreements to advance collateral payments, but backup advancing requirements and other structural features will shield RMBS from immediate liquidity risk. However, in a scenario in which multiple servicers failed concurrently, servicing transfers would be more difficult to execute, creating additional risk to servicing quality and transaction performance."
Mortgage Bankers Associaiton (MBA) President and CEO Robert D. Broeksmit, CMB weighed in on Calabria's comments and categorized the the FHFA Director's words to be troubling.
"The FHFA Director’s recent statements 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," said Broeksmit. “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."
Brokesmit also commented on the FHFA's stance on the GSEs during this time of overwhelming strain on the servicing sector.
“The Director’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," continued Brokesmit. "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.”
to read more from Calabria's interview.