Ginnie Mae prepares to offer relief in servicing liquidity nightmare

Mortgage forbearance opportunities, while beneficial to borrowers impacted by COVID-19, are putting an enormous strain on mortgage servicers of all sizes.
Within the last couple of weeks, Fannie Mae and Freddie Mac, along with other lending institutions, quickly stepped up to respond to the millions of people the COVID-19 pandemic has financially impacted. The White House and the Federal Housing Finance Agency even called for up to 12 months of mortgage forbearance for Americans who can’t pay their bills because of the COVID-19 pandemic.
But the challenge with mortgage forbearance is that someone has to pay the bill. According to Ginnie Mae, which currently holds 29.6% of the outstanding securities in the agency market, the cornerstone of their MBS Guaranty program “has been and will always be that the investors who support access to affordable mortgage credit for the U.S. Department of Housing and Urban Development, the U.S. Department of Agriculture, and the U.S. Department of Veterans Affairs borrowers by purchasing Ginnie Mae securities will receive payments of principal and interest on time and in full.”
It’s easier for servicers to follow this rule when there’s a handful of borrowers who need mortgage forbearance, but when the entire nation is fighting against the Coronavirus, it becomes a much larger and more concerning issue. 
The mortgage industry’s biggest trade and lobbying groups crunched the numbers for the White House and top federal agencies last week to help them understand the gravity of the situation. In their letter, they stated, “To give one a sense of scale, if 25% of the nation receives forbearance for only 3 months, servicers will have to cover payments of roughly $36 billion. If they received it for 9 months, then the cost would exceed $100 billion.” For added context, the total value of the U.S. housing market came in at $30.9 trillion in the Q4 2019, according to the Federal Reserve’s Flow of Funds report.
In an effort to address the growing concerns and potential liquidity challenges faced by issuers, Ginnie Mae issued a statement on Friday that it would assert its authority to make changes to the requirements of its program. Ginnie Mae’s mortgage-backed securities program requires approved issuers who service MBS to send scheduled principal and interest (P&I) to investors and make various other payments in connection with mortgage loans. 
Here’s where the problem lies for servicers when the entire nation could need mortgage forbearance. Issuers are required to make monthly payments to investors even when they don’t receive a borrower payment. In response to the challenges caused by the immediate need to advance required pass-through payments to investors, Ginnie Mae stated that it is using its power to tailor the existing disaster pass-through assistance programs to more suitably scale to the needs of this National Emergency.

Comments

Post a Comment

Popular posts from this blog

34 Trends That Will Define Home Design In 2020

Image
Kitchens 1. Three-tone kitchens.  Two-tone kitchen cabinets — meaning the upper cabinets are one color and the lower cabinets another color, or the perimeter cabinets are one color and the island is a different color — dominated kitchens in the past couple of years. So it’s only natural that designers are building on the trend rather than doing away with it. In a three-tone kitchen, one more color or material is introduced to create an asymmetry in the palette that helps define zones or functions and keeps the eye moving. Here, designer Janina Cabrera of  J Style at Home  designed a gorgeous kitchen with white perimeter cabinets, a light wood island base and a knockout powder-blue hutch. In this kitchen by  Hutker Architects , a deep navy defines the refrigerator and pantry wall to the left, joining white perimeter cabinets and a superlight wood island base. Wood via the beams, ceiling, shelves and flooring adds to the diverse three-tone palette. ...
Read more

10 Things You Should Buy Now To Get Through COVID-19 Cabin Fever This Winter

  1. Outdoor gear Dave Labbe , senior vice president at Kittery Trading Post, saw record sales this summer of items like kayaks, camping gear, and bicycles. He expects the trend to continue for the winter. "Our anticipation is that all winter categories will see the same trend," he says. "Snowshoeing, cross-country skiing, downhill skies, snowboarding, and winter camping and hiking will boom as people continue to participate in anything outdoor-related." And outdoor activities aren't just for weekends, either. Kids who are still learning from home will need outdoor breaks. Store inventories of  backyard ice rink kits ,  backyard snowboards , skates, sleds, and snowman kits may melt away quickly. 2. Outdoor clothing Coats, hats, and mittens are popular every winter season, but this year you might have trouble finding what you want as more people brave the cold and snow to fend off cabin fever. "People want to continue spending time together safely this winte...
Read more

Black Homeownership Plunges To Record Low

The homeownership rate of black Americans hit an all-time low in the first quarter of this year as black communities continue struggling to recover financially from the housing crisis a decade ago, recent U.S. Census Bureau data shows. The black homeownership rate has dropped 8.6 percentage points since peaking in 2004. “We can see that discrimination is still there, although it has changed its form,” Michela Zonta, a senior policy analyst at the Center for American Progress, told  The Wall Street Journal . Zonta released a study this week that found higher-income black homeowners are more likely to purchase homes in predominantly minority neighborhood, which have mostly failed to see home values rise since the foreclosure crisis. In comparison, neighborhoods with predominantly white borrowers have seen homes appreciate 3% between 2006 to 2017, while homes in predominantly black neighborhoods tended to be worth 6% less than they were in 2006, according to Zonta’s study. ...
Read more