%1

A federal housing regulator announced a plan yesterday to provide financial relief to dozens of mortgage servicing firms caught between investors looking to get paid and homeowners who don’t have money because of the coronavirus crisis, the New York Times reported. The Federal Housing Finance Agency said that the firms had to make just four months of cash payouts to bond investors in mortgages that homeowners have stopped paying. After the four-month period, Fannie Mae and Freddie Mac — the government mortgage firms regulated by the agency — will assume that obligation, for up to eight more months, if necessary. The agency and the Treasury Department have faced pressure from mortgage industry lobbyists and legislators on Capitol Hill to come up with a way to make sure mortgage servicing firms do not go bankrupt while providing financial relief to millions of unemployed homeowners. Servicers collect monthly payments from homeowners and use that money to pay property taxes and insurance for the borrower and then send principal and interest payments to the investors in securities that are backed by those mortgages. The structured-finance industry has feared that it could be on the hook for a full year of payments to bond investors, because the federal government’s $2 trillion economic relief package permits homeowners who lose their jobs during the COVID-19 crisis to avoid making mortgage payments for 12 months.

With stores shuttered, struggling retailers are skipping rent and asking for concessions, while landlords are demanding payment and having their own tricky conversations with lenders, Bloomberg News reported. So far this month, some mall owners and other retail landlords collected as little as 15 percent of what they were owed, according to one estimate. And it’s expected to get worse, with more than $20 billion in rent payments coming due in May. “It’s all over the map what’s happening out there,” said Tom Mullaney, a managing director in restructuring at Jones Lang LaSalle Inc. “More and more defaults are coming in every single day.” Companies across the U.S. — from small mom-and-pop operations to giant corporations — have missed April payments or sent out relief requests citing store closures because of the pandemic. Landlords have been pitching rent deferment, saying tenants can make reduced payments now as long as they pay the balance at some point. Some businesses are pushing back on that option and asking for rent cuts even after stores are open again. U.S. retail landlords typically collect more than $20 billion in rent each month, according to data from CoStar Group Inc. So far, April rent collection has ranged from 15 percent to 30 percent for landlords with higher concentrations of shuttered businesses, according to an estimate from brokerage firm Marcus & Millichap. Landlords, who are facing their own debt defaults, are getting frustrated. Some are complaining that large corporations are using the crisis to skip out on rent. Others say that they’re not responsible for bailing out tenants and that the federal government or insurance companies should cover the costs instead.

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. 

A top U.S. housing-market regulator said that he isn’t likely to heed mortgage companies’ calls to help ease the cash-flow crunch they are expecting when Americans who lose their jobs stop making mortgage payments, the Wall Street Journal reported. Mark Calabria, who leads the Federal Housing Finance Agency, described industry concerns as “spin.” He also said yesterday that he doesn’t see it as the role of government-backed housing-finance giants Fannie Mae and Freddie Mac, which he oversees, to help the mortgage companies. “I’ve seen zero [evidence] to suggest that there’s a systemic crisis across the nonbank servicers,” Calabria said. “If this goes on for a year, maybe. But I think the frustration here is a lot of just misrepresentation.”

Struggling homeowners are flooding their mortgage companies with requests for help as the coronavirus pandemic wrecks the economy. Many are having a hard time getting it, the Wall Street Journal reported. Homeowners say they are waiting hours on the phone just to reach a real person. When they do, some are told that getting an answer could take weeks. That is a troublesome timeline for the many borrowers whose mortgage payments are due in the first half of April. The $2 trillion stimulus package is supposed to make it easier for homeowners to suspend their monthly payments and temper a potential foreclosure crisis. The difficulty in doing so threatens to squeeze Americans further just as the pandemic puts millions of people out of work. The stimulus legislation that was signed by President Trump says that homeowners hurt by the coronavirus or its fallout can ask their mortgage servicer for a forbearance, in which their monthly payments are interrupted for up to six months, and can also request an additional six months. Borrowers don’t have to show documented proof that they have been hurt by the coronavirus. If the loan is backed by the government, the mortgage servicer is generally supposed to grant the request. About 70 percent of U.S. mortgages are backed or insured by a federal agency.

With measures to halt the spread of the novel coronavirus intensifying, the U.S. is embarking on its sharpest downturn since at least the end of World War II, the Wall Street Journal reported. The states where nonessential businesses are shut down, including California, New York and Ohio, account for more than 40 percent of U.S. gross domestic product. Many of those workers and businesses will face severe constraints quickly, surveys suggest. In two weeks time — the period of a typical paycheck — many workers will struggle to make ends meet. After a month, more than half of them could be in trouble. At that point, a fifth of small businesses with lost sales could be on the brink. The stimulus the Federal Reserve announced Monday, including its planned program to support lending to small and midsize businesses, will help. So, too, will the fiscal spending package Congress is hammering out — when it comes. For the economy, the most important questions are how soon help will arrive, how ample it will eventually be and, above all, how long the coronavirus crisis will last. Between the big stimulus likely to come out of Washington, D.C., and plans by lenders to extend loans or offer grace periods on payments, consumers and businesses can manage a shutdown lasting several weeks. Beyond that is uncharted territory, and with the crisis at an intense point right now, few people are thinking that far out. Most economists think the economy will shrink more than 10 percent in the second quarter, at an annual rate, a larger decline than that at the start of the financial crisis and one that would mark the worst contraction since quarterly measurements began shortly after World War II. But most are assuming that by the start of summer, the spread of the virus will have been contained and activity will begin to bounce back. That is no sure thing, with many epidemiological models suggesting containment won’t occur until later.

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.