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| Excluded From Bailouts, Mortgage Servicers Face Cash Crunch | Excluded From Bailouts, Mortgage Servicers Face Cash Crunch |
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| WASHINGTON — Federal policymakers have rushed to backstop nearly every corner of the financial system as the coronavirus exacts a bruising toll on the U.S. economy. But there is growing concern that a critical corner of the housing industry has been overlooked, putting mortgage companies in a precarious position as millions of borrowers delay payments. | WASHINGTON — Federal policymakers have rushed to backstop nearly every corner of the financial system as the coronavirus exacts a bruising toll on the U.S. economy. But there is growing concern that a critical corner of the housing industry has been overlooked, putting mortgage companies in a precarious position as millions of borrowers delay payments. |
| The strain is expected to intensify in the coming weeks, as businesses shed millions of workers who will have little choice but to seek a hardship payment waiver or forbearance from their lenders. That could put a large swath of the mortgage industry in jeopardy, with firms that are not banks but make loans and collect payments facing a severe cash crunch and potential insolvency. | The strain is expected to intensify in the coming weeks, as businesses shed millions of workers who will have little choice but to seek a hardship payment waiver or forbearance from their lenders. That could put a large swath of the mortgage industry in jeopardy, with firms that are not banks but make loans and collect payments facing a severe cash crunch and potential insolvency. |
| Lawmakers in both parties have begun warning about a looming crisis and are urging the Federal Reserve chair, Jerome H. Powell, and Treasury Secretary Steven Mnuchin to take swift action. This month, a bipartisan group of senators warned Mr. Mnuchin that $100 billion of mortgage payments could be delayed this year and that standalone mortgage servicers, whose annual net profits they estimated amounted to less than $10 billion combined, could become insolvent. House Democrats have echoed those concerns. | Lawmakers in both parties have begun warning about a looming crisis and are urging the Federal Reserve chair, Jerome H. Powell, and Treasury Secretary Steven Mnuchin to take swift action. This month, a bipartisan group of senators warned Mr. Mnuchin that $100 billion of mortgage payments could be delayed this year and that standalone mortgage servicers, whose annual net profits they estimated amounted to less than $10 billion combined, could become insolvent. House Democrats have echoed those concerns. |
| “Mortgage servicers are expected to face increased strain as millions of homeowners and renters lose jobs, are furloughed, or see reduced hours, all of which will keep them from making mortgage and rent payments, as a result of this public health crisis,” Representative Maxine Waters, the Democratic chairwoman of the House Financial Services Committee, and Senator Sherrod Brown, the top Democrat on the Senate Banking Committee, wrote in a letter this week. | “Mortgage servicers are expected to face increased strain as millions of homeowners and renters lose jobs, are furloughed, or see reduced hours, all of which will keep them from making mortgage and rent payments, as a result of this public health crisis,” Representative Maxine Waters, the Democratic chairwoman of the House Financial Services Committee, and Senator Sherrod Brown, the top Democrat on the Senate Banking Committee, wrote in a letter this week. |
| Yet there is little agreement among policymakers about what, if anything, the government should do to help these firms. Mr. Mnuchin, along with Mark Calabria, the head of the Federal Housing Finance Agency, have played down the risks to this industry. The Fed has been clear that it is watching, but has yet to signal that it is ready to step in. | Yet there is little agreement among policymakers about what, if anything, the government should do to help these firms. Mr. Mnuchin, along with Mark Calabria, the head of the Federal Housing Finance Agency, have played down the risks to this industry. The Fed has been clear that it is watching, but has yet to signal that it is ready to step in. |
| As a result, a game of chicken has ensued between federal regulators and dozens of mortgage firms that are not affiliated with any bank but play a big role in keeping the $11 trillion residential mortgage market humming. | As a result, a game of chicken has ensued between federal regulators and dozens of mortgage firms that are not affiliated with any bank but play a big role in keeping the $11 trillion residential mortgage market humming. |
| These firms, which both originate mortgages and collect loan payments, have grown after the 2008 housing crisis, as big banks backed away from what was perceived as a risky and expensive business. Today, nonbank mortgage firms, such as Quicken Loans, Freedom Mortgage and Mr. Cooper (formerly Nationstar), account for nearly 60 percent of all mortgages issued in the United States and service over half of the nation’s outstanding mortgages. | These firms, which both originate mortgages and collect loan payments, have grown after the 2008 housing crisis, as big banks backed away from what was perceived as a risky and expensive business. Today, nonbank mortgage firms, such as Quicken Loans, Freedom Mortgage and Mr. Cooper (formerly Nationstar), account for nearly 60 percent of all mortgages issued in the United States and service over half of the nation’s outstanding mortgages. |
| It is a cash-intensive business: The servicers collect payments from mortgage borrowers and then funnel it back to the investors who own the bonds backed by those loans. When borrowers are given forbearance and allowed to stop making mortgage payments, the servicer has less cash coming in the door. Yet it is still obligated to make payouts to investors, along with paying property taxes and insurance bills on behalf of property owners. And unlike banks, these firms are not required to have large financial cushions that would allow them to withstand losses. | It is a cash-intensive business: The servicers collect payments from mortgage borrowers and then funnel it back to the investors who own the bonds backed by those loans. When borrowers are given forbearance and allowed to stop making mortgage payments, the servicer has less cash coming in the door. Yet it is still obligated to make payouts to investors, along with paying property taxes and insurance bills on behalf of property owners. And unlike banks, these firms are not required to have large financial cushions that would allow them to withstand losses. |
| Nearly three million homeowners have already sought forbearance, according to the real estate data firm Black Knight, meaning that 5.5 percent of all mortgage holders asked to delay their monthly payments. The industry expects those numbers to jump in the coming months, especially if unemployment continues to soar as many economists expect. | Nearly three million homeowners have already sought forbearance, according to the real estate data firm Black Knight, meaning that 5.5 percent of all mortgage holders asked to delay their monthly payments. The industry expects those numbers to jump in the coming months, especially if unemployment continues to soar as many economists expect. |
| The result could be a cash crisis in May, as many of those principal and interest payments to bond investors come due. | The result could be a cash crisis in May, as many of those principal and interest payments to bond investors come due. |
| “I do think there are going to be financial problems coming because mortgage servicers are going to have trouble, big time,” said Barry Eichengreen, a University of California, Berkeley, economist who is a scholar of the Great Depression. | “I do think there are going to be financial problems coming because mortgage servicers are going to have trouble, big time,” said Barry Eichengreen, a University of California, Berkeley, economist who is a scholar of the Great Depression. |
| Policymakers have taken significant steps to insulate the financial system and individuals against economic pain, including placing restrictions on foreclosures. A law passed last month allows borrowers with federally backed mortgages — covering the overwhelming majority of home loans — to seek forbearance without penalty for up to a year if they are experiencing financial hardship from the virus. | Policymakers have taken significant steps to insulate the financial system and individuals against economic pain, including placing restrictions on foreclosures. A law passed last month allows borrowers with federally backed mortgages — covering the overwhelming majority of home loans — to seek forbearance without penalty for up to a year if they are experiencing financial hardship from the virus. |
| But so far the government has not devised a plan to ensure the financial stability of mortgage servicers. The companies and their lobbyists want a federal lifeline. | But so far the government has not devised a plan to ensure the financial stability of mortgage servicers. The companies and their lobbyists want a federal lifeline. |
| “They mandated forbearance,” said Michael Bright, chief executive of the Structured Finance Association, a trade group that supports investors in securitized mortgages and other loans. “It would be like telling restaurants they had to prepare food for the unemployed but not paying the restaurants to do so.” | “They mandated forbearance,” said Michael Bright, chief executive of the Structured Finance Association, a trade group that supports investors in securitized mortgages and other loans. “It would be like telling restaurants they had to prepare food for the unemployed but not paying the restaurants to do so.” |
| The Mortgage Bankers Association has been lobbying for a lending facility. | The Mortgage Bankers Association has been lobbying for a lending facility. |
| “What we really want is a statement from the Fed and Treasury that they will create such a facility and it will take time to work out operational details but it will be in place when it’s needed,” said Robert D. Broeksmit, president of the Mortgage Bankers Association. | “What we really want is a statement from the Fed and Treasury that they will create such a facility and it will take time to work out operational details but it will be in place when it’s needed,” said Robert D. Broeksmit, president of the Mortgage Bankers Association. |
| The risk for servicers has been well-known among regulators, who have routinely cited their shaky business models yet done little to address the vulnerabilities. | The risk for servicers has been well-known among regulators, who have routinely cited their shaky business models yet done little to address the vulnerabilities. |
| As recently as December, the Financial Stability Oversight Council, headed by Mr. Mnuchin, warned in its annual report that nonbank mortgage companies “could transmit risk to the financial system should they experience financial stress.” | As recently as December, the Financial Stability Oversight Council, headed by Mr. Mnuchin, warned in its annual report that nonbank mortgage companies “could transmit risk to the financial system should they experience financial stress.” |
| “The largest nonbank servicers have limited liquidity, often just enough cash and securities held for sale to cover a few months of operating and interest expenses.” | “The largest nonbank servicers have limited liquidity, often just enough cash and securities held for sale to cover a few months of operating and interest expenses.” |
| Some housing regulators began expressing concern in 2016 that nonbank mortgage firms operated with less regulatory oversight than banks and might not be financially equipped to withstand an economic crisis. One regulator, the Government National Mortgage Association, or Ginnie Mae, took some steps last year to require nonbank mortgage firms to increase their capital levels and undergo stress tests. | Some housing regulators began expressing concern in 2016 that nonbank mortgage firms operated with less regulatory oversight than banks and might not be financially equipped to withstand an economic crisis. One regulator, the Government National Mortgage Association, or Ginnie Mae, took some steps last year to require nonbank mortgage firms to increase their capital levels and undergo stress tests. |
| Ginnie Mae is an important regulator in the housing market, as it guarantees payments to bond investors on mortgages written by many nonbank firms. Recently, Ginnie Mae took its own steps to quiet concern in the mortgage market by saying it would set up a financing vehicle to provide cash advances to mortgage-servicing firms. | Ginnie Mae is an important regulator in the housing market, as it guarantees payments to bond investors on mortgages written by many nonbank firms. Recently, Ginnie Mae took its own steps to quiet concern in the mortgage market by saying it would set up a financing vehicle to provide cash advances to mortgage-servicing firms. |
| But the industry is looking for even broader relief and pressure has been mounting on Mr. Mnuchin and Mr. Calabria, whose agency oversees Fannie Mae and Freddie Mac, two giant government-controlled mortgage finance firms. | But the industry is looking for even broader relief and pressure has been mounting on Mr. Mnuchin and Mr. Calabria, whose agency oversees Fannie Mae and Freddie Mac, two giant government-controlled mortgage finance firms. |
| Mr. Calabria said he was not ready to embrace the “apocalyptic” predictions of mortgage servicers and industry lobbyists. | Mr. Calabria said he was not ready to embrace the “apocalyptic” predictions of mortgage servicers and industry lobbyists. |
| He said he had seen some “insane numbers” predicting that mortgage servicers would need tens of billions of dollars in financial help and said he was skeptical that so many homeowners would seek mortgage relief. Many people are still working from home, he said, and he anticipates some parts of the economy will start to reopen this summer. | He said he had seen some “insane numbers” predicting that mortgage servicers would need tens of billions of dollars in financial help and said he was skeptical that so many homeowners would seek mortgage relief. Many people are still working from home, he said, and he anticipates some parts of the economy will start to reopen this summer. |
| “Our expectation is the overwhelming majority of people who take forbearance will be for two or three months and not 12 months,” he said. | “Our expectation is the overwhelming majority of people who take forbearance will be for two or three months and not 12 months,” he said. |
| Mr. Calabria set off widespread concern in the mortgage industry two weeks ago, when he said he did not see the need for Fannie and Freddie to provide additional financial support to mortgage servicing firms, and in particular nonbank servicers. | Mr. Calabria set off widespread concern in the mortgage industry two weeks ago, when he said he did not see the need for Fannie and Freddie to provide additional financial support to mortgage servicing firms, and in particular nonbank servicers. |
| Updated June 22, 2020 | |
| A commentary published this month on the website of the British Journal of Sports Medicine points out that covering your face during exercise “comes with issues of potential breathing restriction and discomfort” and requires “balancing benefits versus possible adverse events.” Masks do alter exercise, says Cedric X. Bryant, the president and chief science officer of the American Council on Exercise, a nonprofit organization that funds exercise research and certifies fitness professionals. “In my personal experience,” he says, “heart rates are higher at the same relative intensity when you wear a mask.” Some people also could experience lightheadedness during familiar workouts while masked, says Len Kravitz, a professor of exercise science at the University of New Mexico. | |
| The steroid, dexamethasone, is the first treatment shown to reduce mortality in severely ill patients, according to scientists in Britain. The drug appears to reduce inflammation caused by the immune system, protecting the tissues. In the study, dexamethasone reduced deaths of patients on ventilators by one-third, and deaths of patients on oxygen by one-fifth. | The steroid, dexamethasone, is the first treatment shown to reduce mortality in severely ill patients, according to scientists in Britain. The drug appears to reduce inflammation caused by the immune system, protecting the tissues. In the study, dexamethasone reduced deaths of patients on ventilators by one-third, and deaths of patients on oxygen by one-fifth. |
| The coronavirus emergency relief package gives many American workers paid leave if they need to take time off because of the virus. It gives qualified workers two weeks of paid sick leave if they are ill, quarantined or seeking diagnosis or preventive care for coronavirus, or if they are caring for sick family members. It gives 12 weeks of paid leave to people caring for children whose schools are closed or whose child care provider is unavailable because of the coronavirus. It is the first time the United States has had widespread federally mandated paid leave, and includes people who don’t typically get such benefits, like part-time and gig economy workers. But the measure excludes at least half of private-sector workers, including those at the country’s largest employers, and gives small employers significant leeway to deny leave. | The coronavirus emergency relief package gives many American workers paid leave if they need to take time off because of the virus. It gives qualified workers two weeks of paid sick leave if they are ill, quarantined or seeking diagnosis or preventive care for coronavirus, or if they are caring for sick family members. It gives 12 weeks of paid leave to people caring for children whose schools are closed or whose child care provider is unavailable because of the coronavirus. It is the first time the United States has had widespread federally mandated paid leave, and includes people who don’t typically get such benefits, like part-time and gig economy workers. But the measure excludes at least half of private-sector workers, including those at the country’s largest employers, and gives small employers significant leeway to deny leave. |
| So far, the evidence seems to show it does. A widely cited paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,” but she later walked back that statement. | So far, the evidence seems to show it does. A widely cited paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,” but she later walked back that statement. |
| Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks. | Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks. |
| A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study. | A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study. |
| The unemployment rate fell to 13.3 percent in May, the Labor Department said on June 5, an unexpected improvement in the nation’s job market as hiring rebounded faster than economists expected. Economists had forecast the unemployment rate to increase to as much as 20 percent, after it hit 14.7 percent in April, which was the highest since the government began keeping official statistics after World War II. But the unemployment rate dipped instead, with employers adding 2.5 million jobs, after more than 20 million jobs were lost in April. | The unemployment rate fell to 13.3 percent in May, the Labor Department said on June 5, an unexpected improvement in the nation’s job market as hiring rebounded faster than economists expected. Economists had forecast the unemployment rate to increase to as much as 20 percent, after it hit 14.7 percent in April, which was the highest since the government began keeping official statistics after World War II. But the unemployment rate dipped instead, with employers adding 2.5 million jobs, after more than 20 million jobs were lost in April. |
| States are reopening bit by bit. This means that more public spaces are available for use and more and more businesses are being allowed to open again. The federal government is largely leaving the decision up to states, and some state leaders are leaving the decision up to local authorities. Even if you aren’t being told to stay at home, it’s still a good idea to limit trips outside and your interaction with other people. | States are reopening bit by bit. This means that more public spaces are available for use and more and more businesses are being allowed to open again. The federal government is largely leaving the decision up to states, and some state leaders are leaving the decision up to local authorities. Even if you aren’t being told to stay at home, it’s still a good idea to limit trips outside and your interaction with other people. |
| Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days. | Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days. |
| If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.) | If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.) |
| If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others. | If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others. |
| If you’re sick and you think you’ve been exposed to the new coronavirus, the C.D.C. recommends that you call your healthcare provider and explain your symptoms and fears. They will decide if you need to be tested. Keep in mind that there’s a chance — because of a lack of testing kits or because you’re asymptomatic, for instance — you won’t be able to get tested. | If you’re sick and you think you’ve been exposed to the new coronavirus, the C.D.C. recommends that you call your healthcare provider and explain your symptoms and fears. They will decide if you need to be tested. Keep in mind that there’s a chance — because of a lack of testing kits or because you’re asymptomatic, for instance — you won’t be able to get tested. |
| He said his job is to make sure Fannie and Freddie — which were placed into a government conservatorship at the start of the last financial crisis — have enough money to avoid financial trouble this time around. Mr. Calabria also said he did not believe the collapse of any one mortgage servicer would pose a systemic risk to the financial system. | He said his job is to make sure Fannie and Freddie — which were placed into a government conservatorship at the start of the last financial crisis — have enough money to avoid financial trouble this time around. Mr. Calabria also said he did not believe the collapse of any one mortgage servicer would pose a systemic risk to the financial system. |
| Mr. Mnuchin, who recently set up a task force on nonbank mortgage liquidity, has tried to allay fears that the United States will leave servicers to fend for themselves. | Mr. Mnuchin, who recently set up a task force on nonbank mortgage liquidity, has tried to allay fears that the United States will leave servicers to fend for themselves. |
| “We’re going to make sure that the market functions properly,” he said at a White House briefing last week. | “We’re going to make sure that the market functions properly,” he said at a White House briefing last week. |
| Fed officials, who have taken other steps to ease strain in the mortgage market, have indicated a willingness to consider a mortgage servicer facility. But the institution may be unwilling to put one in place when housing authorities do not want it. | Fed officials, who have taken other steps to ease strain in the mortgage market, have indicated a willingness to consider a mortgage servicer facility. But the institution may be unwilling to put one in place when housing authorities do not want it. |
| “We’re watching carefully the situation with mortgage servicers,” Mr. Powell said at the Brookings Institution on April 9. Mortgages are a “key market” that supports households and consumer spending, he said. | “We’re watching carefully the situation with mortgage servicers,” Mr. Powell said at the Brookings Institution on April 9. Mortgages are a “key market” that supports households and consumer spending, he said. |
| If the Fed does do more, it would most likely stem from the $454 billion that Congress gave the Fed and Treasury to stand up emergency lending programs. The Fed has earmarked about 40 percent of those funds for lending and bond-buying that will benefit companies and state and local governments, but has been clear that more could come. | If the Fed does do more, it would most likely stem from the $454 billion that Congress gave the Fed and Treasury to stand up emergency lending programs. The Fed has earmarked about 40 percent of those funds for lending and bond-buying that will benefit companies and state and local governments, but has been clear that more could come. |
| But a bailout for the mortgage industry would most likely fuel calls for more regulation. | But a bailout for the mortgage industry would most likely fuel calls for more regulation. |
| “Policymakers were well aware heading into this crisis that these firms were vulnerable to shocks, but didn’t do anything to improve their resiliency,” said Gregg Gelzinis, a senior policy analyst at the left-leaning Center for American Progress. “We should only bail them out if we simultaneously institute a more stringent regulatory framework for them going forward.” | “Policymakers were well aware heading into this crisis that these firms were vulnerable to shocks, but didn’t do anything to improve their resiliency,” said Gregg Gelzinis, a senior policy analyst at the left-leaning Center for American Progress. “We should only bail them out if we simultaneously institute a more stringent regulatory framework for them going forward.” |