As Forbearance Requests Rise, NAR Dispels Myths
April 8, 2020
Forbearance requests, which delay mortgage payments, have increased exponentially over the past month, according to new data released by the Mortgage Bankers Association Tuesday.
Following a 1,270% increase between the weeks of March 2 and March 16, latest figures show an even more dramatic spike—a 1,896% increase in forbearance requests over the most recent two-week period—from borrowers who are seeking mortgage payment assistance.
While these numbers are undeniably concerning, many unsubstantiated claims have circulated over recent days. The National Association of REALTORS® has increased regular communication with its members to help separate fact from fiction.
Specifically, NAR is notifying REALTORS® that claims implying the Federal Housing Administration, Fannie Mae, and Freddie Mac have raised rates and fees on borrowers with lower credit scores or smaller down payments are not true.
To date, neither the FHA nor the government-sponsored enterprises have made any changes to credit scoring or down payment requirements. The only change they have made for borrowers is to allow more flexibility in how a lender can verify employment.
Some individual lenders have started adding their own higher standards on these products, justifying the decisions using the corresponding increases in loan servicing risks in the face of mortgage forbearance. While forbearance requires servicers to continue making on-time payments to investors, the unprecedented loss of jobs and income has this crisis nearly unmanageable for many lenders.
The $2 trillion stimulus package signed into law at the end of March ensures that borrowers of government-backed mortgages can request up to 360-day payment forbearance without proof of hardship, during which no additional fees, interest, or penalties can be assessed for the forbearance.
As almost two-thirds of all first-lien mortgages are seen in the government-backed mortgage space, the much-needed relief granted to homeowners across the country has added foreseen challenges for lenders.
NAR called on the Treasury Department, Federal Reserve, and Federal Housing Finance Agency to help servicers dealing with the unprecedented demands on funds due to broad forbearance requests. Improving servicing is one key to improving the flow of funds to borrowers and homeowners, NAR contends.
“Any further delay could lead to greater uncertainty and volatility in the market,” the letter reads. We “strongly urge the Treasury Department, the Federal Reserve, and the FHFA to establish a strong, reliable source of liquidity for mortgage forbearance—and to do so quickly.”
NAR has not received a direct response from the FHFA on this, but Director Mark Calabria did make public comments Tuesday indicating that the FHFA would not be creating a servicing facility but would continue to monitor the situation. The director has also expressed optimism that the instances of issues arising with forbearance and servicing would be minimal.
At a Virtual Education Expo training session sponsored by Coldwell Banker on Tuesday, Guaranteed Rate Affinity CEO Victor Ciardelli said he’s optimistic there will be pent up demand in the housing market after the outbreak subsides. Millions are unemployed due to stay-at-home and shelter-in-place orders and will likely return to work once cities open back up, he suggested.
“We went into this with a very stable market and an economy that was roaring and unemployment at historic lows,” Ciardelli said. “When you have shelter-in-place restrictions, businesses are unable to operate and of course more people will be unemployed. … We’re hopeful social distancing works in the near future … and then we can see a historic number of people going back to work. I think the housing market will be on fire” when the pandemic is over.
For more information, please continue to monitor NAR’s evolving COVID-19 Mortgage and Personal Finance FAQs.
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Updated: September 18, 2020