In the week ahead, tune into the latest edition of DS5: Inside the Industry. Hear from Federal Housing Finance Agency (FHFA) Director Dr. Mark A. Calabria, as well as Robert Caruso, CEO of Service Mac and Allen Price, SVP, BSI Financial on how business is being done in the age of COVID-19, and what regulators are doing to assist homeowners, lenders, and servicers, including the mortgage forbearance programs being offered to homeowners.
Calabria recently spoke on how forbearance programs will impact servicers, in particular, urging borrowers to "be honest" as borrowers do not need to show any proof of financial hardship in order to skip payments for up to a year.
“We’re operating on the honor system,” Calabria said. “We are asking and we’re putting together a script for servicers. This is supposed to be limited to if you’ve lost your job, you’ve lost income. Please, if you haven’t lost your job, continue paying. If you can pay your mortgage please do so because we really need to focus on the people who can’t.”
Despite the honor system in place, borrowers will still have to provide documentation when setting up their repayment plans.
According to Calabria, up to 2 million borrowers could be applying for loan forbearance by May and said that mortgage servicers, as well as Fannie and Freddie, could handle that if it was just for a few months.
HA loans, CNBC reports are more vulnerable than the rest of the relatively healthy market.
“The truth is that subprime really didn’t as much go away as it went into FHA, so you have a lot of FHA borrowers who I think are vulnerable. The real question is the duration of this,” Calabria said.
“If this is something that goes on for six months or more, then I think you’re going to continue to see a lot of stress, and I would really emphasize the place to look right now is the FHA market, with the credit quality of their borrowers,” he adds. “They’re really going to be the first canary in the coal mine in terms of what the broader implications are going to be.”
Here's what else is happening in The Week Ahead:
- FOMC Meetings (April 8)
- Consumer Sentiment Index (April 9)
- Primary Mortgage Market Survey (April 9)