1 1 (April 7, 2020)

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               Researh Sevice

COVID-19: Support for Mortgage Lenders and


April 7, 2020
The coronavirus (COVID- 19) pandemic has affected the economy in numerous ways. Many states have
issued some variation of a lockdown, restricting when citizens can leave their home and limiting business
operations to critical services, such as groceries or pharmacies. Many businesses have closed operations,
while others have reduced their workforce considerably. As a result, jobless claims have increased since
the outbreak, leaving many consumers struggling to meet their financial obligations. One of the most
significant financial obligations consumers are struggling to meet is their mortgage or rent payments.
In the past three weeks, banking regulators have taken measures to provide consumers relief through
payment deferral and loan modification plans. (See CRS Insight 1N11244, COVID-19.: The Financial
Industry and Consumers Struggling to Pay Bills, by Cheryl R. Cooper.) Federal housing agencies issued a
60-day moratorium on foreclosures and evictions on March 18. In addition, Congress passed the CARES
Act (P.L. 116-136), which contains provisions allowing consumers to enter into forbearance (payment
deferment) agreements on certain qualifying mortgages and temporarily suspend certain foreclosures and
If, however, missed loan payments generate mounting losses on depository institutions (i.e., banks and
credit unions), their capital can erode quickly. (See CRS Insight Ni 1278, Banking Regulators 'Response
to COVID-19, by Andrew P. Scott and David W. Perkins for a summary of measures regulators have taken
to ensure that financial institutions have sufficient liquidity and capital.) For this reason, the federal
housing finance regulators and agencies have taken measures to support mortgage market liquidity.

Federal Housing Measures to Facilitate Liquidity During


Many federal agencies are involved in housing finance:
       Fannie Mae and Freddie Mac, commonly referred to as the government-sponsored
       enterprises (GSEs), provide liquidity to the housing finance market by purchasing
       mortgages from lenders and subsequently guaranteeing the default risk linked to their
       issuances of mortgage-backed securities (MBS, a process known as securitization.) In
                                                               Congressional Research Service

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