On Friday, March 27, Ginnie Mae announced that it would – within two weeks – implement an assistance program for lenders whose customers can’t make mortgage payments due to the coronavirus pandemic.
The two weeks is up Friday, and a spokesman said the agency has “no definitive timetable for this program, but it is expected to be rolled out shortly. Please keep an eye on our website.”
Lenders will begin to face liquidity challenges starting next week – Wednesday to be precise – as they need to pay creditors for loans they carry. The problem is: Nearly 16 million people have applied for unemployment over the last three weeks, and huge numbers of borrowers are seeking forbearance on their mortgages.
Forbearance allows borrowers with a federally backed mortgage to put off payments for at least six months if they suffer economic hardship during the pandemic under the $2 trillion CARES Act.
Forbearance requests grew by 1,270 percent between the week of March 2 and the week of March 16, and another 1,896 percent between the week of March 16 and the week of March 30, according to the Mortgage Bankers Association. The share of loans in forbearance grew from 0.25 percent to 2.66 percent between March 2 and April 1.
In announcing the program, Ginnie Mae made it clear they understood the issue.
“We have heard from our issuer and servicing partners that borrower forbearance arrangements that are nationwide in scope could place an enormous strain on issuers,” said Seth D. Appleton, Ginnie Mae’s principal executive vice president. “This strain would be caused by the immediate need to advance required pass-through payments to investors, or other entities entitled to receive payments, and the later reimbursement of those advances by borrowers or the agencies who insure the loans (HUD, VA and USDA under the Ginnie Mae program).
“Please know that we are taking action to address these concerns and potential liquidity challenges faced by Ginnie Mae issuers. Ginnie Mae has the authority to make changes to the requirements of our program, and we are using those powers to tailor the existing disaster pass-through assistance programs to more suitably scale to the needs of this National Emergency.”
He concluded, “market participants should be assured that Ginnie Mae is acting expeditiously and forcefully to support relief for American homeowners and meet its statutory responsibility to provide stability and liquidity in the secondary market for residential mortgages.”