Treasury Secretary Steven T. Mnuchin said Monday that all mortgage lenders should work to find ways to allow borrowers to pause their mortgages during the coronavirus pandemic and tack the payments on at the end of their loans.
Mnuchin appeared on CNBC’s Squawk on the Street to discuss the government’s economic response to the pandemic – and said he is “quite pleased” about how support for mortgage borrowers is working.
Jim Cramer of CNBC asked Mnuchin, “Could you please tell the mortgage companies, `Look, we think you ought to do mortgage forbearance, perhaps lengthen what the mortgages are.’ … What a great opportunity to be able to say, `Come on, this is a time for forbearance. This is a time where you must lose some money in order to save our country.’”
Mnuchin responded, “Jim, I completely agree with you.”
The $2 trillion CARES Act includes a moratorium on foreclosures and the right to forbearance on federally backed mortgages. Forbearance allows borrowers to put off payments for at least 180 days if they suffer economic hardship during the pandemic.
But not all loans are backed by the federal government and therefore were not automatically eligible for forbearance, something people learned about their mortgages throughout the month of April – as complaints poured into the Consumer Financial Protection Bureau. Each lender must determine how to handle forbearance requests for non-government backed loans.
As of last week, an estimated 4.1 million mortgages were in forbearance – or 7.7 percent of all mortgages. That’s up from 0.25 percent in early March.
Mnuchin praised the Department of Housing and Urban Development and the Federal Housing Finance Agency for the work they have done to educate lenders and borrowers on payment options available to them – and encouraged private lenders to offer forbearance.
“We’ve encouraged private market lenders and banks to follow,” Mnuchin said. “Now, obviously, we are not going to tell them what to do because these are private contracts. But I think a majority of the banks are following these for their own portfolios. On a lot of these loans, I think what they’re doing is tacking on the payment to the end.
“We understand it’s going to be hard for many borrowers to make up two or three payments, so it will get tacked on to the end. We’re monitoring the mortgage markets very carefully. I’m quite pleased how this is working.”
Watch the full interview here: