FHFA Director Mike Calabria, said today that they were going to "pause" on setting up any kind of liquidity facility for conventional loans. Unlike Ginnie Mae, which last week, set up a liquidity facility for government-backed loans...FHA, VA, USDA loans. Ginnie Mae said they were going to help support the Servicers of these loans to pay investors, property tax, homeowners insurance and mortgage insurance for borrowers who couldn't make their payment
Typically, Servicers are able to handle changes in the market and handle a situation where a small percentage of borrowers don't make their payment. But, they are NOT able to withstand the magnitude of borrowers seeking Forbearance. if 25% of all mortgage holders take advantage of Forbearance, that could cost the Servicers up to $25 BILLION a month. No Servicer is set up to handle that massive amount of liquidity needs to satisfy investors, property tax and homeowners insurance.
Mark Calabria stated he prefers to "wait and see" if liquidity facilities are needed, perhaps, in early 2021. Well, Mark, by then it may be too late because mortgage lenders and servicers need the ability to originate and service loans. And without liquidity support, it could put a halt on the ability to provide conventional loans for buyers. Mr. Calabria does not feel things are "not that bad yet". Not that bad yet? Just in the first week alone, there was a 1,270 percent increase in borrowers seeking forbearance. In the second week, there was an increase of 1,896 percent increase. Looking at just one servicer. During the first week available, Mr. Cooper allowed over 86,000 loans to go into forbearance. The second week there were 219,000 loans that went into forbearance, the third week 717,000 went into forbearance. There is no immediate sign of slowing down.
The Big Question Remains: Is Real Estate Essential?
CAR released a letter last essentially stating that they are needing to re-look at whether real estate is an "essential business". The 3rd update of the Colorado Public Health Order it did NOT include open houses or in-house showings as essential. The definitions are currently being debated among lawyers and said a formal position will be made available soon. As of the writing of this post, that position has not been released.
Transactions are still considered essential. So contract transactions, loan origination, appraisals, and closing are still able to be completed.
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Nicole RuethThe Rueth Team of Fairway Independent Mortgage Corporation750 W Hampden Avenue, Suite 500 Englewood, CO 80110303-214-6393www.TheRuethTeam.com
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