As previously reported, a bipartisan group of seven U.S. Senators sent a letter, dated April 8, 2020, to U.S. Department of Treasury Secretary Steven Mnuchin, in his capacity as Chair of the Financial Stability Oversight Council (FSOC), urging prompt action to provide liquidity assistance to residential mortgage loan servicers.

The Senators stated that because mortgage loan servicers often must advance scheduled principal and interest payments to investors regardless of whether the borrowers actually make the payments, the advance obligation that results from borrowers obtaining mortgage loan payment forbearances under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), presents “an existential threat to these companies, and thus to the broader mortgage market.”

Shortly after the Senators sent their letter to Secretary Mnuchin, a group of 21 Republican members of the U.S. House of Representatives sent a letter, dated April 10, 2020, to Secretary Mnuchin similarly urging action to meet the liquidity needs of the mortgage servicing industry. The members state that “the unforeseeable nature of the present liquidity strain on the mortgage market, similar to many other sectors of our economy, is of a systemic nature, including the inability of the servicing industry to manage billions of dollars in principal and interest advances mandated by regulators and Congress . . . .” The members also note that once homeowners can return to their jobs and make their mortgage payments “it may become appropriate to talk about larger structural reforms to better handle events like this in the future. However, the current priority must be this liquidity crunch.” Twenty of the Representatives signing the letter are members of the House Financial Services Committee (HFSC).

And in a letter dated April 15, 2020, to Secretary Mnunchin and Federal Reserve Chairman Jerome Powell, Senator Sherrod Brown (D-OH), Ranking Member of the Senate Committee on Banking, Housing and Urban Affairs, and Representative Maxine Waters (D-CA), Chairwoman of the HFSC, sounded a similar theme. The letter provides that “[t]he government must be prepared to respond quickly to prevent a liquidity shortfall in the single-family and multi-family mortgage markets, and to ensure that consumers are equitably served by that response.” The letter notes that the Federal Reserve and Department of Treasury have established or announced that they will establish funding facilities to support corporate debt, asset-backed securities, small and mid-sized businesses, and states and localities.

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