Some credit-risk transfer deals explicitly exempt forbearance losses due to natural disasters. Freddie Mac clarified that it considers the coronavirus a natural disaster. Fannie Mae has yet to provide guidance.
Economists at Fannie and Freddie are “relatively optimistic” about mortgage originations in 2020, despite the economic impact of COVID-19. But not if social distancing remains in place beyond May.
Regulators have acknowledged that the lack of legal clarity and the speedy implementation of the new forbearance requirements may set the stage for exploitation by unscrupulous or ill-informed servicers.
Of course, early this spring, the FHFA, in trying to aid consumers economically impacted by the pandemic, requested that servicers provide forbearance.
The $13 million Milbank contract, which follows the agency’s February selection of Houlihan Lokey as its capital markets advisor, suggests the FHFA remains committed to recap-and-release.
The new “flexibilities” cover both originations and appraisals. On the origination front, Fannie and Freddie will reduce the acceptable age of income documentation on most loans to 60 days from 120...