◼ FINANCE27PHOTOGRAPH
BY
LEXEY
SWALL
FOR
BLOOMBERG
BUSINESSWEEK.
DATA:
COMPILED
BY
BLOOMBERG
administration goal of reprivatizing Fannie
and Freddie, which came into the government’s
grip after being rescued during the financial crisis.
Using the companies to help mortgage servicers
could deplete what little capital they have, mak-
ing it harder for the companies to go it alone. Some
hedge funds and mutual fund companies that
bought shares in Fannie and Freddie—which con-
tinued to trade after the rescue—have long pushed
for privatization.
Calabria says his decisions aren’t being guided
by his politics or his desire for mortgage-finance
reform. Still, it seems inevitable that the virus will
have an impact on any plans the administration has
to take Fannie and Freddie out of federal control.
“Any steps that are taken now, there will be policy
implications when we’re past this crisis,” says Chris
Campbell, a former Treasury official under Mnuchin
who’s now at investment advisory Duff & Phelps.
It’s not up to just Calabria whether mortgage
servicers receive a bailout—the Fed and Treasury
can start a lending facility without his sign-off. But
Fannie and Freddie are in the spotlight because
they stand between some mortgage servicers and
bondholders, and they have at least some capital
that could be tapped to help the servicers, even
if it wouldn’tsolvealltheirproblems.Fanniehad
$14.6billionincapitalattheendof2019,while
Freddiehad$9.1billion.
The Washington-based Mortgage Bankers
Association,whichlobbiesonbehalfofnonbank
servicersandotherlenders,blastedhimina press
releaseafterhesaidhehadn’tyetseenrequests
formortgage-paymentforbearancethatwereso
alarmingastowarranta Fedrescue.“TheFHFA
Director’srecentstatementssenda troublingmes-
sagetoborrowers,lenders,andthemortgagemar-
ket,”MBAPresidentRobertBroeksmitsaidinthe
April7 statement.
Calabriaacknowledgesthatthe outlookfor
someservicersis grim.That’sbecauseaspartofthe
$2trillionstimulusbillCongresspassedinMarch,
lawmakersmandatedthatborrowersbeallowedto
delaypaymentsongovernment-backedmortgages
foraslongasa year.
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 and
Freddie, but they can face cash crunches while
waiting. The issue could be especially acute for
nonbank servicers, which don’t have the deposits
or other sources of liquidity banks do. The number
of Fannie and Freddie loans in forbearance rose to
2.44% during the week ended April 5, up from 1.7%thepreviousweek,accordingtotheMBA.Roughly
3.7%ofallmortgagesareinforbearance.A spokes-
manforQuicken,onethebignonbankservicers,
saysthecompanyneitherneedsgovernmenthelp
noris askingforit.
GinnieMae,a whollygovernmentownedcorpo-
rationwhichalsobacksa lotofloansservicedby
nonbanks,announcedlastmonthit plannedtostep
inwithitsownfixtotheliquidityproblem.(Ginnie
isn’toverseenbyCalabria.)Officialsinvolvedindis-
cussionsabouttheFedandTreasurysettingup
theirownloanprogramhaveconsideredwaiting
toseewhetherGinnie’sdecisionhelpsrelievesome
mortgage-market stress first, according to people
familiar with the matter.
But servicers aren’t beloved in Washington. The
companies spent years lobbying against tougher
oversight and stricter capital requirements. The
hesitancy to rescue the industry may foreshadow
future fights. “The question is whether and how
much the government will use Fannie and Freddie
to be a source of support,” former Freddie CEO Don
Layton says. “That’s going to continue to be the
caseasthisgoeson.”�ElizabethDexheimer▲ Calabria oversees
a key part of the U.S.
mortgage marketTHE BOTTOM LINE The head of the Federal Housing Finance
Agency isn’t convinced there’s a systemic problem caused by too
many borrowers missing payments.