Posted To: MBS Commentary

The initial House draft of the CARES Act included a provision that Fed and Treasury would "extend credit to mortgage servicers that have liquidity needs due to the COVID-19 emergency or due to delinquency/default on mortgages due to the COVID-19 emergency." That was fairly important because the CARES Act also effectively encourages homeowners to seek out forbearances and arguably suggests there's no downside to doing so. To be sure, there was (and still is) a risk that servicers and the GSEs could run out of money if the forbearance issue gets big enough. But that would just be the sensational headline for a few companies. If the GSEs were affected, they'd take a draw from Treasury and life would go on. By far the bigger issue is the generally defensive response that it's…(read more)

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Source: Mortgage News Daily