In just days, tens of millions of people across the United States will have to make fresh payments on their mortgages. Their lenders have come up with a plan to help borrowers who can’t pay because of the economic fallout from the coronavirus — and they want the federal government to backstop it.
Such help would cost tens of billions of dollars, and groups representing the mortgage industry warned that their efforts to help homeowners could cause the entire industry to collapse without the government’s help.
“The more consumers we help through forbearance, and the longer this goes on, the greater the strain on the servicers needed to foot the bill,” the groups, including the Housing Policy Council, the American Bankers Association and the Mortgage Bankers Association, said in a letter to Treasury Secretary Steven T. Mnuchin and other federal officials on Monday.
Last week, federal housing regulators took steps to prevent foreclosures on millions of homeowners with mortgages backed by either the Federal Housing Administration or the giant mortgage finance firms — Fannie Mae and Freddie Mac. Those mortgages make up a large percentage of the country’s home loans, but the industry plan offered Monday would cover all borrowers, including almost $3 trillion in home loans over which the government has less control.
The finance industry groups, which together represent the banks, finance companies, servicers and mortgage investors that make up the totality of the United States mortgage industry, want to give borrowers a three-month break from making mortgage payments — and possibly extend the break to 12 months — if the coronavirus crisis has reduced their income, sickened them or kept them from working.
The industry’s plan would let borrowers call or go online to temporarily freeze their payments and modify their loans with less paperwork than normal. It would not offer any forgiveness on the loans, which means the borrowers would eventually have to make up the lost payments, although they would have some flexibility in how they did so.
In return, the industry says, it needs comprehensive support from the government as soon as possible. That help could potentially include access to loans and liquidity programs provided by the Federal Reserve, which would require Congress to loosen rules governing the Fed’s emergency powers.
The industry groups said the most vulnerable companies were dozens of nonbank lenders, which sprouted up in the aftermath of the 2008 financial crisis and make home loans that are often pooled by Ginnie Mae, a government-sponsored company that, unlike Fannie Mae and Freddie Mac, does not help backstop mortgage servicers. The servicers are still required to make regular payments to mortgage investors if borrowers miss payments.
David H. Stevens, a housing official under President Barack Obama and a former chief…