Here is the the full picture of the first payment forbearance issue from my perspective. If the numbers increase in the months ahead, this could get pricey.
The CARES Act is clear about forbearance: “If a furnisher makes an accommodation with respect to one or more payments on a credit obligation or account of a consumer, and the consumer makes the payments or is not required to make one or more payments pursuant to the accommodation, the furnisher shall (I) report the credit obligation or account as current.”
In this morning’s Federal Housing Finance Agency announcement – they are limiting otherwise saleable loans that are performing, “current” according to the law just passed, or charging exorbitant delivery fees.
This is unacceptable. These are GSE-eligible loans as they are performing/current according to the law just passed, unless they were delinquent at time of going into forbearance. The GSEs need to buy these loans and either hold them on balance sheet, or pool them in TBAs if that is an option (likely not).
When the borrower finishes forbearance and begins an agreed-upon repayment plan, then they are still performing/current according to the new law. If they default, the GSEs own that risk anyway, as that is what they guarantee.
This idea of rejecting these loans or charging these outrageous fees to deliver is almost obstructionist especially given that this is a national crisis and the need to follow the CARES Act – as that is the law.
Furthermore, if a loan originated is not saleable to the GSEs, then it is not government-guaranteed, and not eligible for forbearance. Should a borrower suddenly experience job loss after a loan is closed, but before sale to Fannie or Freddie, they may only have the option of foreclosure at worst if they cannot find a way to stay current.
The behavior of FHFA these past weeks has been incredible. They are putting confusion and uncertainty into the market where they should join other federal agencies and leverage these tools of government to help the economy and provide a cushion as they are able to.
David H. Stevens, CMB, is a Mortgage Media Advisor, and former SVP of Single Family at Freddie Mac, former EVP at Wells Fargo Home Mortgage, former President and COO of the Long and Foster Realty Companies, former Assistant Secretary of Housing and FHA Commissioner, former CEO of the Mortgage Bankers Association.