A top U.S. regulator is considering taking steps to ease strains on mortgage companies facing a cash crunch as millions of Americans struggling with fallout from the coronavirus suspend their monthly payments, the Wall Street Journal reported. The Federal Housing Finance Agency is weighing whether to allow Fannie Mae and Freddie Mac, the government-controlled mortgage-finance giants, to buy home loans that recently entered forbearance, meaning borrowers have stopped making payments, the people said. That would help nonbank mortgage companies that lend to home buyers and then quickly sell the loans to Fannie and Freddie. The strategy was upended recently when Fannie and Freddie announced that they would no longer buy loans in forbearance, leaving the debt piling up on the books of the lightly regulated companies that both originate and service home loans. Details were still being ironed out, though FHFA was expected to announce a change as early as this week. The agency has resisted pressure from the industry and members of Congress to help the servicers, saying that it wants to see more data on the number of borrowers who are skipping their monthly payments. The mortgage companies are facing a severe cash crunch for another reason: they must continue paying investors in the loans even if homeowners suspend their monthly payments. Read more. (Subscription required.)
In related news, more than 2.9 million homeowners have taken advantage of a program designed to provide relief to holders of government-backed mortgages, part of the coronavirus CARES Act relief package, CNBC.com reported. This represents 5.5 percent of all active mortgages, according to Black Knight, a mortgage data and analytics company that is now tracking the growing numbers daily. The program allows borrowers to delay their monthly payments for a year. Those payments are then tacked on to the end of the loan, or paid back over time in a mortgage modification. Borrowers must tell their mortgage servicers that they have had financial hardship due to the coronavirus pandemic, but they do not have to provide any proof. The 2.9 million loans in forbearance as of Thursday account for $651 billion in unpaid principal and include 4.9 percent of all government-sponsored enterprise loans (Fannie Mae and Freddie Mac) and 7.6 percent of all FHA/VA loans. Read more.
