Some credit-risk transfer deals explicitly exempt forbearance losses due to natural disasters. Freddie Mac clarified that it considers the coronavirus a natural disaster. Fannie Mae has yet to provide guidance.
The Division of FHLBank Regulation’s decision to accept PPP loans as collateral is based on the Small Business Administration’s 100% guarantee of the unpaid principal balance.
Mortgage bankers have been clamoring for liquidity help from the FHFA. This week, the agency delivered on the issue of the GSEs buying COVID-19-related forbearance loans, but then lenders read the fine print.
Economists at Fannie and Freddie are “relatively optimistic” about mortgage originations in 2020, despite the economic impact of COVID-19. But not if social distancing remains in place beyond May.
Regulators have acknowledged that the lack of legal clarity and the speedy implementation of the new forbearance requirements may set the stage for exploitation by unscrupulous or ill-informed servicers.
Of course, early this spring, the FHFA, in trying to aid consumers economically impacted by the pandemic, requested that servicers provide forbearance.
When it comes to pandemic-related bailouts, the Fed is running the table. But the mortgage industry would like to hear something concrete on servicer liquidity.