Mortgage bankers renew push for a market-wide liquidity facility
Mortgage Bankers Association President and CEO Robert Broeksmit on Tuesday reiterated his call for a broad coronavirus-related liquidity facility akin to Ginnie Mae's, which could assist the industry at large.
"We continue to push for a similar facility for the whole market, including Fannie and Freddie servicers," he said during the MBA's virtual event. "We helped lay the groundwork for one in the stimulus bill that passed congress in late March, since then we've been in constant conversation with FHFA, Treasury and the Federal Reserve. We’ve told them that without their intervention, the economic consequences could be severe."
Federal officials are unlikely to provide a last-resort liquidity facility exactly like Ginnie Mae's to the GSEs because of differences between the two entities and the markets that they serve.
However, the general idea could be adapted to meet the needs of mortgage companies that work with Fannie Mae and Freddie Mac. Mortgage companies in the private market have been looking for more sources of liquidity as well.
Among the avenues the MBA is exploring to this end is a proposal in the Health and Economic Recovery Omnibus Emergency Solutions Act, which would direct the Federal Reserve credit facility authority enacted under March bill to be utilized, as needed, by mortgage servicers and residential rental property owners. While the Republican-controlled Senate is considered unlikely to approve the HEROES Act recently passed by the Democrat-controlled House, some aspects of it could receive bipartisan support and move forward.
Broeksmit acknowledged that Federal Housing Finance Agency Director Mark Calabria and other federal officials have not been quick to offer a liquidity facility to the GSE market. But he noted that the FHFA has taken several other steps to address challenges mortgage companies are facing due to the need to temporarily suspend payments on government-related loans under the terms of the March bill.
"The administration hasn't activated a broad liquidity facility yet as they wait to see how forbearance take-up rates change," he said. "The situation is evolving and discussions are ongoing. In the meantime, with our support, policymakers have provided relief in other important ways."
The MBA continues to work with government officials on ways to make that relief go further, Broeksmit said. This includes potentially expanding a measure that allows mortgage lenders to sell new home loans that go into the forbearance to the GSEs. Currently the measure excludes cash-out refinances, prompting calls to change the exemption in order to make these loans available to consumers.
"The MBA is now working with Director Calabria to expand this program to cover cash-out refis," Broeksmit said.
In a speech at the same virtual event, Calabria confirmed that he considers the current 6.25% forbearance rate for Fannie Mae and Freddie Mac loans "manageable," but is monitoring it with an eye toward maintaining the GSEs’ financial soundness ahead of an exit from conservatorship that was in play before the coronavirus spread to the United States. Calabria said he wants to move ahead with this exit, although he acknowledged coronavirus-related challenges have set back the timetable for it.
On Monday, the FHFA laid out ground rules for how forbearance affects borrowers' ability to refinance. The MBA worked with the FHFA on this initiative and plans to continue to work with Fannie Mae and Freddie Mac’s regulator as new challenges for the market arise, Broeksmit said.
Those challenges could be considerable, he added.
"In many respects, this crisis is worse than the Great Recession," Broeksmit said. "Then the crisis played out over two plus years, now everything is happening in less than two months."