The $2 trillion stimulus could be of great use to mortgagors who, in some cases, might be able to defer mortgage payments for up to 12 months. On the other hand, as it stands now, non-bank mortgagees are placed in a difficult situation because there’s no federal help for them.
As CNN Business reports, the wave of missed mortgage payments threatens to spark a crippling cash crunch in the real estate finance industry unless the Federal Reserve steps in with even more emergency lending. Analysts expect the Fed to step in soon after the stimulus package becomes law.
However, the House of Representatives still hasn’t approved the stimulus package. That step is expected to be taken today, Friday, March. 27.
As the CNN Business piece details, mortgage servicers still have to pay their investors when potentially there’s a cash crunch up to $75 billion. The Mortgage Bankers Association determined that number based on an assumption of one-quarter of borrowers request forbearance for six months or longer.
"You would see widescale failures within the servicing system," said Ed Mills, Washington analyst at Raymond James, told CNN Business. "That would raise real questions about the plumbing of the housing finance system going forward."
Read more about the stimulus and its effect on mortgage servicers.