Testifying before the Senate Banking Committee today, FHFA Director Mark Calabria said that he has been “encouraged” by incoming data on the state of the mortgage markets, including forbearance rates, as the coronavirus pandemic persists in the U.S. “Following some contraction in mortgage market activity in March and April, the purchase market appears to be rebounding, and combined purchase and refinance mortgage application activity has increased to levels last seen in 2013,” Calabria noted.
With respect to loans in forbearance, Calabria indicated that initial estimates in the early days of the pandemic suggested that forbearance rates could reach as high as 25% to 50%. However, “data developed internally at the enterprises and by industry groups indicate that enterprise forbearance rates remain manageable,” he said. “The 30- and 60-day combined delinquency rate remains below the estimated rate of forbearance as some borrowers who have requested forbearance are nonetheless continuing to make payments on their loan.”
Calabria added that he is considering an extension of the current moratorium on foreclosures of GSE-backed loans that is set to expire on June 30. “At a minimum, we’d want to extend it a month, at a maximum I don’t think we’d want it to be any more than two months, just because we can always extend it again as we start to see how the economy evolves,” he said.
Finally, he emphasized that the pandemic has underscored the need for housing finance reform and to build capital at the GSEs. “Fannie Mae and Freddie Mac lack the capital to withstand a serious housing downturn. This undermines their countercyclical role and jeopardizes their important mission.” FHFA last month re-proposed changes to the existing capital framework for Fannie and Freddie, and Calabria noted that additional legislative changes will likely be needed to end the conservatorships and to ensure that FHFA has adequate tools and authorities to regulate the enterprises going forward.
