Brief A Liquidity Vehicle for Mortgage Servicing Advances Is in Consumers' Best Interest
Karan Kaul
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In response to the COVID-19 crisis, federal mortgage agencies have rolled out up to 12 months of mortgage forbearance for consumers facing hardships. The scale of these programs is monumental, covering 33.4 million loans with an unpaid principal balance of $6.9 trillion. Unfortunately, while borrowers are not making mortgage payments during forbearance, mortgage servicers are still contractually required to pick up the tab and send payments to the end investor. This obligation threatens to create cash-flow problems for servicers, creating a liquidity crunch. We need the federal government to establish a liquidity facility to finance these payments. Left unaddressed, this situation will quickly erode servicer finances in a matter of weeks, pushing many firms into insolvency and leaving vulnerable borrowers stranded at the worst possible time.

Research Areas Economic mobility and inequality Wealth and financial well-being Housing finance
Tags COVID-19 Finance
Policy Centers Housing Finance Policy Center