PPP Loans & Weekly Updates

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Anthony: Next, I want to discuss mortgage forbearances. In the CARES Act, the Treasury and the President; they were talking very strong a month ago about we’re going to have forbearances. We’re going to make it so loans owned by Fannie and Freddie, people can have 90 days to pay, 90 days that they don’t need to pay, and it sounded really good, but some of it didn’t work out as good as they thought for the last few weeks, and now I think we might be getting a reprieve, but let me just break it down.

First and foremost, realtors. Make sure your clients have a good understanding of what they are getting themselves into if they go for a forbearance. If they can afford to pay, my recommendation, tell them to keep paying because remember, you pay interest on how much you owe. The more you owe, the more interest you’re going to pay. You’re going to pay the money eventually anyway. Also, some forbearances, particularly with the Fannie Mae and Freddie Mac own loans, we’re finding that they’re being told, “Oh, you have to pay it at the end of 90 days.” To me it’s insane.

How if someone loses their job, and doesn’t pay their mortgage for 90 days, how in God’s name are they going to pay 90 days of mortgage plus the fourth month all at once in four months? It’s lunacy. It’s not going to happen. We’ve been arguing. You could tell I’m pretty passionate about it. National Association of Realtors has been all over it. I’ve been talking with some folks there about that, and we’ve been encouraging the mortgage servicers to make it more reasonable, make it so that it spread out over a couple of years, make it so that preferably it goes on the end of the mortgage, and that’s what the state of Massachusetts did in that bill, but again, I’m not convinced that every mortgage servicer is going to follow that bill, and I wouldn’t be surprised if someone sued our state. Just a small prediction, but moving on.

The reason that I felt we were on a collision course, and I’m getting into the weeds, but I don’t mind doing it because I’ve got a realtor audience here. Remember, there’s government-sponsored enterprises; Fannie Mae, Freddie Mac, and Federal Housing Administration, which sits under HUD. They own about 65% of all mortgages. On March 1st, 0.25%, a quarter of a percent of mortgages were in forbearance nationally. As of this, well, yesterday, 6.25%. They’ve had 6% increase in mortgage forbearances in five weeks.

Imagine being a mortgage company, that is millions. When this first started, people said, “Oh, it will only be about a million people.” What? What planet are you on? Mark Calabria, who is the head of the FHFA. They’re the government regulator that oversees Fannie and Freddie. He said, “We’re not going to help mortgage services. If people don’t pay, mortgage services have to fulfill their obligation and pay off the investor, or pay their mortgage-backed security investors, blah, blah, blah.

When I heard that, I said, “Okay. How is that going to work if a mortgage company has millions of people that don’t pay?” These mortgage companies, they don’t have endless money, especially the non-bank mortgage companies. If you’re a bank, your ability to borrow from the fed is greater. If you’re a company like Quicken, or a company like Mr. Cooper that used to be Nationstar, they’re a non-bank servicer. They’re a very big servicer. They can’t just endlessly borrow money from the Federal Reserve, so there’s been arguing that’s been going on.

Initially, Mr. Calabria said, “Oh, there will only be a million people that go into forbearance.” Yes, well, guess what? It was three million as of last Wednesday, I believe, or over five million right now. There’s going to be more. You can’t have this many people losing their jobs and not have it substantially hit mortgages. The good news is, as of yesterday at noontime, breaking news, it was breaking news in the real estate world, they gave in and they said, “Fine, mortgage services are only on the hook for four months. If people don’t pay for four months, the mortgage servicer has to continue to pay the investor, but once they get to four months, they don’t have to, the investor will eat it.”

Now, I know there are a lot of people that were like, “Well, that’s pretty deep. How does that work?” Here’s my overarching message. It’s good news. I was very concerned, as were many policy wonks like me, people that are obsessed with this stuff, that these servicers were going to be incentivized to not work with borrowers. Imagine being the mortgage servicer. Every month you take the money, you pass it on, you take the money, you pass it on, take the money, pass it on, you take your little fee. If all of a sudden, four months in a row, five million of your customers don’t give you money, but you still have to pass on money, nothing, pass on, nothing, pass on.

At some point, you go broke. I don’t care who you are. I don’t care if you’re a billionaire. At some point, if there’s millions of people not paying you and you have to pay bills, you go broke, so they put an end to it, and they said mortgage servicers are only on the hook for four months. That’s a big deal. That will really help homeowners across our country because it’ll incentivize mortgage servicers to be more amicable and work things out with borrowers more. That is another reason now that I can add to why I don’t think there’ll be another 2008. Remember number four, in my four reasons, I said government intervention, and I said bank intervention or mortgage servicing intervention, number three, and I was saying how fast they jumped on things, and how many changes that they made. It was significant.

This was the last one. This week, I started losing hope, and then I emailed someone who’s very in the know, who I hadn’t talked to in years, and he responded and said, “It’s looking good,” and bang. Yes, sir. They did it. This is a big deal. It’s a good thing. Recommendation to summarize this; if you have clients who are concerned, if I was a realtor, well, I am a realtor. If I was someone who was out selling homes to buyers over the last three, four, or five years, I would call every single buyer and make sure they’re doing okay, and if anyone even mentions, or you get any sniff of them having trouble with their mortgage, get them information, help them get in touch with their mortgage servicer, make sure they get a workout. You don’t want people to lose their homes. That’s our number one job as realtors is homeownership.

It’s a very big deal, and it means a lot to people. It’s been going on for a long time in the United States. Our homeownership rate is higher than any other country in the world. In my opinion, that directly ties to why we’re the most successful company in the world because people have a sense of staking their ground and having their own space. Homeownership is a great thing, so make sure you’re in touch with your clients. I hope that gives you a better understanding of what’s going on in the mortgage servicing world that will affect your clients.