Brief A New Mortgage Penalty Is Blocking Homeownership and Refinancing Opportunities for 255,000 Borrowers
Laurie Goodman, Michael Neal
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The current unprecedented pandemic-related surge in mortgage forbearances recently prompted the Federal Housing Administration (FHA) and the government-sponsored enterprises (GSEs) to impose a new penalty on lenders whose loans go into forbearance before they are delivered to Ginnie Mae or the GSEs to be packaged into securities. In response, lenders have added additional filters to their underwriting process in an attempt to weed out any borrowers who might quickly go into forbearance on their new mortgages and trigger this penalty. The recent addition of these overlays has significantly constricted the credit box in the past three months, threatening to block approximately 255,000 borrowers from mortgage access. We estimate that the total income the government could derive from this penalty is $53.4 million, an amount too low to be worth blocking access to historically low mortgage rates for more than a quarter of a million borrowers at this time of severe financial instability.

Research Areas Wealth and financial well-being Housing finance Housing
Tags Federal housing programs and policies Asset and debts Housing and the economy Agency securitization Homeownership Financial products and services
Policy Centers Housing Finance Policy Center