A group of senators called on the Financial Stability Oversight Council to support mortgage servicers, and Federal Reserve Chairman Jerome Powell said policymakers were closely monitoring the situation.
Mortgage servicers are facing liquidity concerns as the COVID-19 pandemic has triggered widespread forbearance on mortgage payments. The Federal Housing Finance Agency directed the government-sponsored enterprises it oversees to suspend foreclosures and offer payment forbearance. Certain state governments have issued similar orders for lenders operating in their states. But servicers are contractually obligated to advance payments to bondholders of mortgage-backed securities, leading to several calls for liquidity help.
FHFA Director Mark Calabria threw a wrench in the market's expectations in an April 7 interview with HousingWire, saying that only "a small minority of firms are experiencing stress" and that the FHFA should not be expected to bail out any nonbank servicers.
On April 8, a bipartisan group of senators sent a letter to the Financial Stability Oversight Council encouraging "urgent and immediate action to avoid an impending crisis in the housing finance system." The senators noted that missed mortgage payments could reach $100 billion, compared to net profits for the servicing industry of less than $10 billion last year. The senators wrote that nonbank mortgage servicers account for half of the mortgage market and would likely face solvency issues in the near term.
The Fed chairman appeared sympathetic to the argument. On April 9, Powell said policymakers were paying attention to the issue, calling the mortgage market "at the very center of our economy."
"We're watching carefully the situation with the mortgage servicers and I will just tell you that we certainly have our eyes on that as a key market," he said.