The Cares Act mandates that lenders allow borrowers with government-backed mortgages to delay monthly payments for at least 90 days and up to a year. In theory, deferring mortgage payments in a time of national emergency will help stave off an avalanche of foreclosures, but lenders are deeply concerned about one key detail: They still have to pay bond holders, and many do not have enough cash available. The mortgage delinquency rate was just near a record low, and lenders say that the sudden wave of mortgage deferrals will put an immense strain on their resources. Now, a coalition of mortgage and finance industry leaders is calling on the government to find a solution to avoid what one CEO calls “complete chaos.”
A broad coalition of mortgage and finance industry leaders on Saturday sent a plea to federal regulators, asking for desperately needed cash to keep the mortgage system running during the coronavirus pandemic, as requests from borrowers for the federal mortgage forbearance program are pouring in at an alarming rate.
The Cares Act, which seeks to limit the economic damage from COVID-19, mandates that all borrowers with government-backed mortgages — about 62% of all first lien mortgages according to Urban Institute — be allowed to delay at least 90 days of monthly payments and possibly up to a year’s worth.