WASHINGTON—CUNA has sent a number of letters to Capitol Hill regarding mortgage forbearances, the CARES Act & the PPP, housing assistance proposals, and FHA-insured loans.
Among the letters sent by CUNA:
Concern Over Mortgage Forbearances
CUNA said it is increasingly concerned about the effect a large number of mortgage forbearances will have on the liquidity of mortgage servicers.
CUNA shared its concerns in a letter to the Senate Banking Committee for a committee hearing on the oversight of housing regulators. CUNA also called for guidance or clarity on several issues.
“The longer that mortgage servicers, especially non-bank servicing companies like credit union service organizations (CUSOs), are expected to deliver scheduled payments while the borrowers themselves are in deferment, the greater the likelihood that servicers will start to experience liquidity issues,” the letter reads. “We recommend policymakers act to provide a funding source accessible to mortgage servicers as the financial disruption becomes prolonged. We believe FHFA should support and work with Congress to create a financing program, or liquidity facility, for mortgage servicers in need of assistance in order to preserve their ability to respond to the unprecedented levels of payment forbearance required to help families affected by COVID-19.
‘Unprecedented’ Situation
“Credit unions have encountered an unprecedented number of distressed borrowers seeking assistance requests and flooding call centers. As forbearance requests increase, so too do the questions surrounding the process and procedures,” the letter adds.
CUNA is recommending FHFA and the government sponsored entities (GSE) issue guidance and additional resources addressing the treatment of:
- Escrow
- Private mortgage insurance
- Credit life
- Credit disability
- Interest during the period of loan deferment and after the deferment concludes
“Specific guidance on collections and servicing practices would also be helpful as lenders are attempting to comply with the myriad of executive orders and foreclosure and collection moratoriums/limitations regarding real property loans from various new state and local laws and regulations and federal government actions,” the letter reads.
CUNA said it also supports any down payment assistance, provided by the housing finance agencies, to enable minority and low- to moderate-income homebuyers to become homeowners.
CARES Act & PPP
CUNA wrote to Senate Small Business Committee leadership related to a hearing implementation of Title I of the CARES Act. Credit unions were able to use the Paycheck Protection Program (PPP) to help their member small businesses meet important financial needs.
“With funds still available, it appears businesses are reluctant to borrow. Some reasons for this might be confusion over aspects of the program, such as loan forgiveness, which still are not sufficiently developed,” CUNA said. “As the PPP will likely run out of funds again, CUNA is advocating that the SBA further refine its process to ensure equal access by borrowers regardless of the financial institution they choose as their lender.”
Housing Assistance
CUNA wrote in support of several housing assistance bills as the House Financial Services subcommittee on housing, community development and insurance conducted a hearing on pandemic-related evictions. “Millions of renters and homeowners are at risk because of the pandemic. We know this because many of them are credit union members. It is imperative to ensure that they can stay in their homes as the economy recovers,” the letter reads. “We must also take into account that all stakeholders throughout the mortgage and rental pipelines are supported as well.”
CUNA said it backs the legislation, which includes:
- Emergency Rental Assistance and Rental Market Stabilization Act of 2020 (H.R. 6820), which would establish a $100 billion emergency rental assistance program that is direct to the states
- Protect Rural Renters Act of 2020 (H.R. 6376), which would authorize $700 million for the U.S. Department of Agriculture’s rental assistance program which provides assistance to more than 270,000 households
- Emergency Housing Assistance for Older Adults Act of 2020 (H.R. 6873), which would authorize $1.2 billion for the Supportive Housing for the Elderly program
- Emergency Housing Voucher Act of 2020 (H.R. 7084), which would authorize $10 billion in vouchers for individuals experiencing the risk of homelessness and survivors of domestic violence.
FHA-Insured Loans
CUNA and more than a dozen organizations wrote to Department of Housing and Urban Development leadership this week noting that a recent Federal Housing Administration policy will hamper access to FHA-insured loans during the COVID-19 crisis.
CUNA noted the FHA recently announced a policy requiring lenders to provide 20% indemnification (of the original loan amount) for up to two years in relation to borrowers that enter forbearance due to pandemic-related hardship after closing and prior to the FHA insuring the loan.
The organizations believe that the excessive indemnification requirements in the mortgagee letter will “will effectively force lenders to impose higher credit and financial overlays to protect against risks that they cannot control” during the underwriting process, CUNA said.