Key Democrats urge Mnuchin, Powell to rescue mortgage servicers
Key Democrats in the U.S. House and Senate are calling on Treasury Secretary Steven Mnuchin and Federal Reserve Chairman Jerome Powell to provide a lifeline to mortgage servicing firms that are bracing for a wave of missed payments.
The Fed and Treasury should use powers given to them under recent stimulus measures to provide liquidity to servicers facing shortfalls, House Financial Services Chairwoman Maxine Waters and Sherrod Brown, the top Democrat on the Senate Banking Committee, said in a letter Wednesday. Steps that government-sponsored Ginnie Mae have taken may not be enough, the lawmakers wrote.
“Mortgage servicers are expected to face increased strain as millions of homeowners and renters lose jobs, are furloughed, or see reduced hours, all of which will keep them from making mortgage and rent payments, as a result of this public health crisis,” the lawmakers wrote. “We must not allow the pandemic to destabilize critical markets, including our housing market.”
The letter is the latest in a fight in Washington about what steps regulators should take to save nonbank mortgage servicers such as Quicken Loans, Freedom Mortgage and Mr. Cooper Group Inc. It’s a boost to Wall Street lobbying efforts seeking to quell the fallout of the coronavirus crisis on the mortgage market.
Servicers collect payments from borrowers and make sure investors in trillions of dollars of government-backed bonds get paid each month. With millions of homeowners predicted to start missing payments, the industry says it needs a lifeline to head off servicer failures that could threaten the housing market.
Powell said last week that the Fed is watching the situation carefully, and Mnuchin said earlier this week that Treasury is “going to make sure that the market functions properly.”