Written by Jasir Jawaid and Tim Weatherhead
The Financial Stability Oversight Council announced at its July 14 meeting that it will begin a review of the secondary mortgage market that will assess risks it poses to the stability of the financial system as well as the effectiveness of certain risk mitigants.
"I applaud Secretary Mnuchin and the Financial Stability Oversight Council for initiating an activities-based review of the secondary mortgage market," Federal Housing Finance Agency Director Mark Calabria said in a statement.
"As demonstrated by the 2008 financial crisis and again by COVID-19, Fannie Mae and Freddie Mac must be well capitalized in order to support the mortgage market during a stressed environment."
The FSOC also discussed coronavirus-related developments and their impacts on markets and financial institutions. Specifically, FSOC members discussed efforts they are making to monitor the financial system. Additionally, the council received information from the Federal Reserve on its latest round of stress tests, including its "sensitivity analysis" that gauged banks' performances under three recovery scenarios in the wake of the COVID-19 pandemic.
Lastly, the FSOC also released minutes of its May meeting. The first agenda item in that meeting was an update on the FSOC's Nonbank Mortgage Liquidity Task Force.
Seth Appleton, principal executive vice president of the Government National Mortgage Association and assistant secretary for policy development and research at the Department of Housing and Urban Development, described actions Ginnie Mae had taken related to mortgage forbearance. He also noted the potential risks of an increase in required advances stemming from forbearance relief.
Next, Brian Montgomery, the federal housing commissioner at the Federal Housing Administration within HUD, described the markets for FHA-backed mortgages and securities, noting that credit market tightening had impacted FHA borrowers.
FHFA Director Calabria then noted that the liquidity of nonbank mortgage servicers had increased since March. He also stated that a servicer would no longer be obligated to advance scheduled payments after that servicer had advanced four months of missed payments on a loan.
Finally, the FSOC also discussed COVID-19, and council members provided updates regarding their agencies' efforts to respond to the outbreak, according to the May minutes.
This article was published by S&P Global Market Intelligence on the S&P Capital IQ Pro platform.
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