The mortgage market is on the brink of collapse as thousands of borrowers suddenly pour into the government bailout without any proof of any hardship. CNBC’s Diana Olick reports.
A broad coalition of mortgage and finance industry leaders on Saturday sent a plea to federal regulators, asking for desperately needed cash to keep the mortgage system running, as requests from borrowers for the federal mortgage forbearance program are pouring in at an alarming rate.
The Cares Act mandates that all borrowers with government-backed mortgages — about 62% of all first lien mortgages according to Urban Institute — be allowed to delay at least 90 days of monthly payments and possibly up to a year’s worth.
Those payments would then have to be made at a later time through a payment plan. Servicers are granting the payment deferrals to borrowers with no questions asked, as is required by the law, but the servicers still have to pay mortgage bond holders.
In normal times, they have enough to cover these payments, and, in fact, at the end of last year the mortgage delinquency rate was near a record low, according to CoreLogic. Now that rate is skyrocketing, and servicers do not have nearly enough cash to cover those payments to bondholders.
The coalition, which includes the Mortgage Bankers Association, the National Association of Home Builders, the National Association of Realtors, the Independent Community Bankers of America, U.S. Mortgage Insurers and the National Apartment Association, issued a press release Saturday saying, “The scale of this forbearance program could not have been foreseen by mortgage servicers, or fully anticipated by regulators … it is therefore incumbent upon the government to provide a liquidity facility for single-family and multifamily servicers … any further delay could lead to greater uncertainty and volatility in the market.”
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