The mortgage market has been disrupted by millions of borrowers postponing payments because of coronavirus. But lenders and veterans of the 2008 financial crisis warn the real chaos won’t start until the pandemic passes.
The problem is confusion over what will happen when borrowers have to make up those payments. Federal agencies that back most of the market have introduced policies, some of which could require documentation that overwhelms servicers, leading to lengthy wait times and, in extreme cases, foreclosures.
Industry executives say Fannie Mae, Freddie Mac and their regulator are attempting to unveil a program in coming weeks that could alleviate many of the problems. Mortgage lenders say they hope the companies and their watchdog come up with a plan that prevents a repeat of the turmoil that followed the 2008 financial crisis, when confusion and delays hindered borrowers in trying to resume payments.
But unless there are dramatic changes, Americans should “expect even more chaos when forbearance ends,” said Michael Stegman, who served as a senior housing adviser during the Obama administration.
A Fannie spokesman referred a request for comment to the regulator, the Federal Housing Finance Agency. An FHFA spokesman didn’t comment on whether there is a fix in the works. A Freddie spokesman didn’t respond to requests for comment.
The $2.2 trillion stimulus package passed by Congress last month requires mortgage companies to let borrowers delay payments for at least six months if they have been hurt by the pandemic. Because the government wanted to provide help quickly, borrowers merely need to say they face a hardship to receive aid. – READ MORE
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