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As America heads into a deep recession, the $11 trillion residential-mortgage market is in crisis. Investors who buy home loans packaged into bonds are dumping even those with federal backing because of panic that millions might not make their payments, Bloomberg News reported. Yet one risky sector had started to show cracks long before the coronavirus pandemic sparked the worst financial meltdown in 12 years: the federal government’s largest affordable-housing program, whose lenient terms are geared toward marginal borrowers. As real estate prices soared in recent years, working-class adults everywhere have increasingly relied on mortgages backed by the Federal Housing Administration — and U.S. taxpayers. Since 2007, the FHA’s portfolio has tripled in value to more than $1.2 trillion, almost 11 percent of the market. While private lenders make these loans, they are packaged into Ginnie Mae bonds, common in mutual funds and pensions. FHA borrowers are likely to struggle even more than other homeowners. Before Covid-19 started roiling China, a November FHA report found that 27 percent of borrowers last year spent more than half their incomes on debt, a level it describes as “unprecedented.” The share of FHA loans souring in their first six months has doubled over the last three years to almost 1 percent. 

Mortgage companies are bracing for a severe cash crunch when Americans who lose jobs and income because of the coronavirus pandemic stop making payments on their home loans, the Wall Street Journal reported. The companies, such as Quicken Loans Inc. and Cooper Group Inc., expect a wave of missed payments from borrowers as early as next month that will force them to come up with tens of billions of dollars on short notice. “It’s going to be a liquidity tsunami,” said Jay Bray, chief executive of Mr. Cooper, one of the biggest such companies, which process mortgage payments on behalf of investors. The mortgage firms are on the hook to continue paying principal and interest on the mortgages they service even if homeowners are in arrears. They are lobbying Congress and the Trump administration to establish a lending facility to help finance the billions of dollars of payments they will be obligated to make. Such a facility would ensure that millions of Americans could obtain “forbearance” agreements allowing them to miss some mortgage payments and make them up at a later date. Fannie Mae and Freddie Mac announced last week that they would suspend for at least 60 days foreclosures and evictions of homeowners who fall behind on their mortgage payments. They have also set up plans for borrowers harmed by the virus to work out a repayment plan over the course of up to a year.

The financial shock from the coronavirus pandemic threatens the housing security of millions of Americans, prompting federal, state and local officials — and even judges and the police — to move quickly to ward off foreclosures and evictions, the New York Times reported. Yesterday, the federal agency overseeing Fannie Mae and Freddie Mac, the giant government-run finance firms that back the mortgages of 28 million homeowners, ordered a suspension of foreclosures and foreclosure-related evictions for at least two months. The move is meant to keep people in their homes and avoid a housing squeeze like the one that followed the mortgage-fueled financial crisis of 2008. And over the past week, there has been a groundswell across the country to protect renters as well. The Miami-Dade police in Florida said that they wouldn’t carry out evictions during the health crisis. A high-ranking New York State judge declared that the courts would consider no eviction cases until further notice. Gov. Gavin Newsom of California issued an executive order allowing cities to impose eviction moratoriums.

The Trump administration and congressional leaders rushed on Wednesday to assemble a massive stimulus package aimed at preventing the U.S. economy from plummeting into its worst collapse since the Great Depression, as fears about the coronavirus pandemic brought much of American life to a standstill, the Washington Post reported. The administration’s $1 trillion proposed rescue plan, which forms the basis for fast-moving negotiations on Capitol Hill, includes sending two large checks to many Americans and devoting $300 billion toward helping small businesses avoid mass layoffs. Priorities laid out in a two-page Treasury Department document also include $50 billion to help rescue the airline industry and $150 billion to prop up other sectors, which could include hotels. The White House is vetting these proposals with Senate GOP leaders before engaging more fully with Democrats, so the package is certain to evolve in coming days. Democrats, meanwhile, are eyeing their own priorities, largely aiming to shore up safety-net programs and the public health infrastructure, as well as send money directly to American taxpayers, while shunning corporate bailouts. Rep. Maxine Waters (D-Calif.) proposed on Wednesday having the Federal Reserve send $2,000 to every American adult and $1,000 to every American child until the crisis ends.

The Trump administration wants to send direct cash payments to Americans in the coming weeks to help them cope with the economic ravages of the coronavirus, Treasury Secretary Steven Mnuchin said yesterday, part of a massive economic stimulus package taking shape between the White House and Capitol Hill, the Washington Post reported. The overall price tag of the package could be around $1 trillion, Mnuchin told reporters on Capitol Hill after meeting with GOP senators, making it one of the largest federal emergency fiscal packages ever assembled. He also gave lawmakers a dire warning if they failed to act, saying the unemployment rate could spike to nearly 20 percent from the roughly 3.5 percent level it notched in February, according to three people familiar with his comments, who spoke on the condition of anonymity to reveal internal deliberations.

Behind a flurry of activity in Washington, D.C., yesterday was an increasingly urgent problem for a nation grappling with the novel coronavirus pandemic: the growing risk that millions of businesses and households won’t be able to pay their everyday bills — rent, payroll, utilities — as business activity grinds to an unprecedented halt, the Wall Street Journal reported. The Federal Reserve launched a program to provide short-term loans to businesses in commercial paper markets, while White House officials and lawmakers scrambled for ideas to get funds into the private sector, and the Treasury postponed one of the biggest bills coming due for anyone: individual income taxes. “Americans need cash now, and the president wants to give cash now. And I mean now, in the next two weeks,” said Treasury Secretary Steven Mnuchin. Privately with lawmakers, however, he said that checks might not be available until the end of April. As restaurants close, airlines stop flying and streets go empty, businesses and households have a similar and pressing problem: The money just isn’t coming in, but bills still have to get paid. The financial system typically serves as a backstop. Businesses tap credit lines to alleviate short-term funding squeezes. A household might draw from savings or tap a home equity line. But those systems are becoming overloaded. The problem is especially pressing for millions of low- and middle-income households. Nearly four in 10 Americans don’t have the savings in hand to cover an unexpected, $400 expense with cash, according to Fed surveys.

Businesses across the country have ground to a halt because of the coronavirus outbreak, leaving millions of Americans wondering how they will make their next mortgage payments. Their lenders may soon say they don’t have to worry — for a while, at least, the New York Times reported. A broad group of bankers and other mortgage industry participants is working on a plan to offer a temporary pause in payments on home loans, according to the Housing Policy Council, a trade group that includes Citigroup, Wells Fargo, JPMorgan Chase and Quicken Loans. Details were still being decided, but the plan would allow borrowers to stop paying for as long as the public health and economic disruptions lasted, said Ed DeMarco, the chief executive of the council. Once the economy gets going again, borrowers would resume making payments. DeMarco said that he had been talking with banks, servicers and mortgage bond investors to complete the details of the policy. He said that it was not clear when the plan would be announced, but that the group wanted it in place by April 1.