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The mortgage market is a mess. A short thread.
Congress allowed borrowers to suspend payments for up to a year, saddling lenders with the cost --- and straining the mortgage-market infrastructure. @BenEisen's story from earlier this month: https://www.wsj.com/articles/the-mortgage-market-never-got-fixed-after-2008-now-its-breaking-again-11588977078
Congress allowed borrowers to suspend payments for up to a year, saddling lenders with the cost --- and straining the mortgage-market infrastructure. @BenEisen's story from earlier this month: https://www.wsj.com/articles/the-mortgage-market-never-got-fixed-after-2008-now-its-breaking-again-11588977078
The process of obtaining forbearance has been inconsistent and messy. Lots of borrowers told for weeks they would have a repay their missed payments in one lump sum -- a solution for nobody. https://www.wsj.com/articles/getting-a-mortgage-payment-break-isnt-the-boon-many-expected-11587634200
Since that @pkwsj story ran a month or so ago, regulators have clarified borrowers don't need to make a lump sum payment. But lenders still say the call sheet scripts are confusing
Meanwhile, credit has contracted sharply, creating a drag for the eventual recovery. Though interest rates are at record lows, only well-off borrowers with perfect credit can refinance or get a new loan. https://www.wsj.com/articles/mortgage-credit-tightens-creating-drag-on-any-economic-recovery-11590431459?mod=searchresults&page=1&pos=2
It's hard to disentangle bungled federal policy from macro-economic contributions to the contraction in credit, but policy is a key driver.
For instance, the hig fees Fannie and Freddie require to buy certain loans in forbearance force lenders to sell at losses, making them cautious on all new loans.
The FHFA “has agreed to buy loans in forbearance on terms which no one can accept,” said Lou Barnes, a third-generation mortgage banker in Boulder, Colo.
The Urban Institute think tank says nearly two out of three loans made in 2019 would fail to meet at least one of the stricter standards certain lenders have imposed since March.
