As Congress and the Federal Housing Finance Agency (FHFA) work to ensure the safety and well-being of consumers through mortgage forbearance options during the coronavirus pandemic, NAFCU President and CEO Dan Berger raised concerns to FHFA Director Dr. Mark Calabria about the consequences of these forbearances on credit unions and the mortgage industry as a whole.
Under the CARES Act, borrowers are able to request forbearance on single-family and multifamily loans sold to the GSEs. However, credit union mortgage servicers are required “to continue to make payments to investors on the interest, with respect to Freddie Mac mortgages, and interest and principal, with respect to Fannie Mae mortgages, on [mortgage-backed securities (MBS)], based on a calculation of the unpaid principal balance of the loan after the last payment was received from the borrower,” Berger noted.
The CARES Act does not provide relief for mortgage servicers.
“Unlike for-profit banks, credit unions are uniquely limited in their sources of regulatory capital, so a large increase in the number of forbearance requests from borrowers affected by the novel coronavirus (COVID-19) pandemic could significantly strain credit unions’ liquidity needs,” Berger wrote. To address these concerns, Berger called on the FHFA to “assist credit unions facing large monthly payments on nonperforming loans sold to the [government-sponsored enterprises (GSEs)] and also protect credit unions from the secondary impacts of liquidity issues threatening their third-party servicers.”
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