Mnuchin Offers Reassurances on Stability of Mortgage Market

(Bloomberg) -- Treasury Secretary Steven Mnuchin offered reassurances Monday on the stability of the U.S. mortgage market amid the coronavirus pandemic and the squeeze it has put on mortgage servicers.

“We’re going to make sure that the market functions properly,” he told reporters at a White House briefing. He added that the Treasury Department has had discussions with the Federal Housing Finance Agency about the mortgage market.

“We have all the appropriate people on it,” he said. “We’re very aware of the issue.”

Mnuchin said a Financial Stability Oversight Council task force had specifically studied the issue of mortgage servicer liquidity.

The problems faced by mortgage servicers have been highlighted in recent weeks. As part of the $2 trillion stimulus bill that Congress passed in March, lawmakers mandated that borrowers be allowed to delay payments on government-backed mortgages for as long as a year.

But when homeowners go into forbearance, servicers must still advance payments to mortgage-bond investors. They will eventually be reimbursed by federal agencies or by Fannie Mae and Freddie Mac, but could face cash crunches while waiting. The issue could be especially acute for nonbank servicers, which don’t have deposits or other sources of liquidity that banks do.

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