One of the nation's top housing regulators said about two weeks ago that many mortgage servicing firms could fail if the coronavirus pandemic lasts for more than two months.
Now Mark Calabria, head of the Federal Housing Finance Agency, which oversees the government-sponsored entities (GSEs), has significantly changed his tune.
Calabria told The Wall Street Journal on Tuesday that he doesn't see a need for GSEs such as Fannie Mae and Freddie Mac to step in to aid the mortgage companies right now.
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"I've seen zero [evidence] to suggest that there's a systemic crisis across the nonbank servicers," Calabria told the Journal. "If this goes on for a year, maybe. But I think the frustration here is a lot of just misrepresentation."
In late March, U.S. Treasury Secretary Steven Mnuchin convened a panel of top financial regulators to try and find solutions for a liquidity crunch that had surfaced among mortgage companies.
Non-bank mortgage lenders such as Quicken Loans immediately sell mortgages to Fannie Mae and Freddie Mac, who then package them into securities and sell them to investors. As a result, the mortgage companies need to consistently collect payments from borrowers and pass those on to investors.
Because the government is allowing borrowers to defer payments or request forbearance as a result of the coronavirus pandemic, many of those mortgage companies have said liquidity could dry up quickly. These firms, which are still on the hook for payments to investors, do not have access to the Federal Reserve like banks do, and no deposit base either.
Calabria said he hasn't seen crazy levels of forbearance requests -- 2% of Fannie and Freddie borrowers have requested it as of April 1.
But the lack of government clarity has been a problem for large mortgage aggregator PennyMac (NYSE: PMT).
The company recently told originators it would not buy any loan that is currently in forbearance. The company also said originators may need to buy back a loan that goes into forbearance within 15 days of PennyMac purchasing it.
Calabria said it would be difficult for the GSEs to provide financial assistance to the mortgage firms right now.
"I'm trying to preserve their safety and soundness," he said. "They simply don't have the capital to do this."
