MBA fires back at FHFA head's incendiary comments
The Mortgage Bankers Association, in a pointed response to comments from Federal Housing Finance Agency Director Mark Calabria, called on the regulator to advocate for a Federal Reserve funding facility for conforming loan servicer advances.
So far, the Fed has declined to create a funding source that Fannie Mae and Freddie Mac mortgage servicers can access to make principal and interest payments to bond holders if borrowers receive a forbearance as per the CARES Act.
As of now, only Ginnie Mae is supplying servicers with additional liquidity so they can make advances to holders of those securities when borrowers receive payment forbearances.
In an interview on Tuesday, Calabria downplayed the concerns from players in the market.
In comments made to HousingWire on Tuesday, Calabria claimed any financial stresses on nonbank servicers were not having a negative impact on the industry as a whole, just on a minority of firms. Nor should nonbank lenders expect the FHFA to bail them out, he said.
The MBA's president and chief executive, Robert Broeksmit, on Tuesday evening released a statement in reaction to Calabria's comments.
"The FHFA director's recent statements send a troubling message to borrowers, lenders, and the mortgage market," he wrote. "Since Fannie Mae and Freddie Mac will eventually reimburse mortgage servicers for the payments they must advance during forbearance, Director Calabria should advocate for the creation of a liquidity facility at the Fed to ensure the stability of the housing finance market."
It was highly unlikely that the FHFA, most likely through the government-sponsored enterprises, would offer a funding facility similar to what Ginnie Mae is doing.
As talk about the mass granting of forbearances was starting, Keefe, Bruyette & Woods analyst Bose George said Fannie Mae and Freddie Mac were not good sources to provide servicer advance funding.
If the money came from the agencies, "they would essentially have to turn around and finance it by issuing GSE debt and the market is probably not prepared to absorb that much GSE debt at a reasonable price given the current market volatility," George said.
George reiterated his position in a report issued Wednesday morning, but added that a Fed funding facility was "unlikely to happen until the GSEs start seeing a meaningful increase in forbearance activity."
But the money to support the government's forbearance program will have to come from somewhere, if not the GSEs, the MBA said.
"The director's unwillingness to offer support from Fannie Mae and Freddie Mac for the very firms that he and Congress asked to execute his agency's forbearance plan only reinforces why the Federal Reserve and U.S. Treasury must create a financing program to help residential and commercial/multifamily mortgage servicers who will have to provide unprecedented levels of mortgage payment forbearance," Broeksmit said.
Calabria also made comments regarding the transfer of servicing rights to larger companies from smaller ones that might be struggling because of the advances that the MBA had a harsh reaction to.
"We also strongly disagree with his characterization of the customer experience as it relates to the size of a mortgage servicer," Broeksmit wrote. "Millions of Americans are well-served by their local independent mortgage bank, community bank, or credit union, and many chose to obtain their mortgage from those institutions for that precise reason. In the director's own words, 'Fannie and Freddie were created to provide small lenders, community banks, and credit unions with access to the market.' We urge the director to follow that principle in responding to this crisis."