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[PULSE] Passing the hot potato of forbearance

[PULSE] Passing the hot potato of forbearance

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So, what do you do if you are an arm of the federal government that has to manage your own balance sheet and yet implement the Congressional mandate under the CARES Act to provide forbearance to borrowers with federally-backed loans? Add to that, these borrowers only need to state they are experiencing a negative impact resulting directly or indirectly, from COVID-19.

Do you assume all of the financial risk because your very existence is predicated on furthering public policy to promote single-family homeownership? Do you allocate all, or a portion of, the financial risk through either higher pricing to consumers or mortgage lenders or sharing credit losses with those lenders? 

We recently have addressed some of the consequences to mortgage servicers resulting from the COVID-19-related grant of forbearance. 

But, what about post-origination, pre-loan sale/insurance endorsement consequences resulting from borrowers who qualified for a loan as of loan closing but then seek forbearance soon thereafter? 

Complications:

Laurence Platt
Guest Author

Under the CARES Act, the borrower does not have to prove a financial hardship due to COVID-19 that materially impaired the borrower’s ability to make mortgage payments. Nor does the borrower have to attest to or document a material change in financial circumstances post-closing, such as the loss of a job or an extended illness.  

The CARES Act is crystal clear on the borrower’s right during the “covered period” to forbearance on a federally backed loan based solely on an attestation of financial hardship due to COVID-19. This means that a borrower has a statutory right to forbearance the day after loan closing if the borrower makes the required attestation. 

The CARES Act does not make it a crime for a borrower to make a false attestation. Indeed, given the percentage of loans in CARES Act forbearance status that remains contractually current under the loan terms, it appears that many borrowers are seeking forbearance as a form of insurance to protect them in the case they ultimately are unable to make regular mortgage payments due to COVID-related economic issues. They are not trying to scam the system. Rather, they are trying to build their defenses in case of subsequent adverse consequences based on existing negative impacts of COVID-19 that may impact their ability to make timely mortgage payments in the future.  

Federal entity responses:

FHA and FHFA each recently confronted this conundrum in determining whether to insure or permit purchase of residential mortgage loans that a lender in good faith closed based on a borrower’s documented income, but then the borrower sought forbearance in accordance with the CARES Act soon after loan closing.  FHFA first declared that the GSEs could not purchase loans in forbearance, but then back-tracked and instead permitted the purchase of forborne loans subject to hefty loan-level pricing adjustments

FHFA did not extend this new direction to cash-out re-financings that are in forbearance at the time of sale.  FHA recently announced that it would insure loans in forbearance, but the lender has to agree to indemnify HUD for the losses. That could amount to 20% of the initial loan amount if the borrower fails to make two or more payments when due under the terms of the mortgage at any point within two years from the date of endorsement and the borrower remains in default until the FHA insurance claim filing, unless the forborne loans reinstate or are modified

In both cases, the federal entity at some level sought to share the risks of forbearance with the mortgage originator or seller. 

But this approach begs the question of why should a lender or seller share any of the risk of a borrower’s exercise of a statutory right to forbearance? 

Should the lender share any risk?

Think about it. As written, forbearance only is available to borrowers under federally backed mortgage loans, which term is defined in the CARES Act to mean loans sold to the GSEs or insured or guaranteed by FHA, VA or RHS. 

But, a loan originated with the specific intent to become a federally backed mortgage loan does not enter through the gate of federal backing under the CARES Act unless and until the loan actually is sold to the GSEs or insured or guaranteed by the FHA, VA or RHS. If these federal entities choose to post a “keep out/no trespassing” sign to forborne loans, they may be violating the spirit of the CARES Act but not its explicit provisions. Given their own balance sheet concerns and constraints, why should they voluntarily assume the risk of potential losses on loans for which a borrower has attested to financial hardship due to COVID-19, even if the borrower did not either document this hardship or attest to its impact on the borrower’s ability to make regular monthly mortgage payments? 

After all, the lender owns the loan, shouldn’t it bear the risk?

On the other hand, the lender or seller did not do anything wrong either. If it did fail to underwrite the loan properly in the first place, that is a separate issue, and all of the federal agencies and GSEs have remedies in place, such as indemnification or repurchase, for such origination defects.  But, if the lender did originate the loan in accordance with investor/insurer requirements, why should a post-closing change in circumstance resulting directly from a Congressional act impair the lender’s or seller’s ability to fulfill the original intent to cause the loan to be a federally backed mortgage loan? 

Law often addresses who should bear the risk as between two innocent parties, and public policy often is the driving force. So, what’s the operative public policy in this case? 

One point to note is that the FHA and the GSEs would fully bear the risk of forborne loans if the loans were insured or sold simultaneously with their closing. Unfortunately, there usually is a timing gap between closing and insurance or sale, depending on the applicable approvals of the lender or the time to conduct post-closing quality reviews and the mechanics of closing, purchasing and selling loans. Maybe lenders or sellers can mitigate the risk by seeking to shorten this timing gap, but an overly exuberant quest to “mind the gap” may undermine the lender’s or seller’s post-closing quality reviews. That result is not in the interest of any of the relevant stakeholders.

Reasonable people may differ on this one but, for my money, the federal government should bear the risk of a borrower seeking forbearance soon after loan closing in accordance with the CARES Act. The alternative creates an unhealthy disincentive for lenders not to lend or selectively increase prices at the very time the economy needs to foster lending to help the economy. 

Let’s take the FHA for example. Requiring the lender to bear a portion of the credit risk of loss for two years on a loan that went into forbearance after closing but before insurance endorsement essentially converts the full insurance program of the FHA to a co-insurance program.  Yet, the FHA keeps the entire mortgage insurance premium. This is akin to a reinsurance arrangement where the risk of loss slice is based, not on the amount of the loss, but the timing of a forbearance election–and, again, without a sharing of the mortgage insurance premiums to compensate the lender for assuming this risk of loss. By the way, the FHA eliminated its co-insurance program for single-family mortgage loans many years ago. 

Front-end loan level pricing adjustments required by FHFA on GSE loans may be even worse than back-end partial indemnities because this cost immediately is absorbed in full while an economic loss under an indemnity is realized only if the loan does not reinstate or is not modified. By definition, there will be fewer forborne loans that fail to reinstate or get modified than there are forborne loans. This means that the dollars may not be great in the FHA context, but no one reliably can predict the magnitude of potential losses to be covered by the partial indemnity while the COVID-19 pandemic still rears its ugly head.  Moreover, one can’t help but wonder whether this uncompensated risk-sharing arrangement may serve as a template for future efforts to insulate the Mutual Mortgage Insurance Fund from credit losses through a re-allocation of risk to the lender. 

Maybe it is commercially reasonable for a governmental entity to avoid the risk associated with buying or insuring/guaranteeing a loan in forbearance when it is not legally required to do so. But, is it right from a public policy perspective?  FHA is not a private mortgage insurer. It exists solely to promote a public purpose. Similarly, as much as FHFA may want the GSEs ultimately to be privatized, they presently rely on their quasi-governmental status for a number of benefits and must meet public policy housing goals in its purchase of loans. 

If mortgage lenders and servicers were entitled to act in a purely commercial manner, they would not grant forbearance to borrowers who fail to demonstrate need and they would synchronize the duration of any such forbearance with the duration of the demonstrated need. 

Unfortunately, by virtue of the CARES Act, private lenders and sellers do not have the luxury to operate in a commercially reasonable manner—they must afford borrowers the rights granted to them under federal law. 

Furthering the public purpose behind the CARES Act should prevent the federal government from asserting that it has no responsibilities to take on a loan that is intended to be a federally backed mortgage loan, as defined by the CARES Act, but, because of some short-term timing delays, has not yet achieved that status.

All of the housing-related federal entities deserve kudos for many of their quick and decisive initiatives to help borrowers in light of COVID-19 and the CARES Act.  This, however, in my judgment, is not one of them. 

The post [PULSE] Passing the hot potato of forbearance appeared first on HousingWire.

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Mike Pompeo Doesn’t Rule Out Serving In 2nd Trump Administration

Mike Pompeo Doesn’t Rule Out Serving In 2nd Trump Administration

Authored by Jack Phillips via The Epoch Times (emphasis ours),

Former Secretary…

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Mike Pompeo Doesn't Rule Out Serving In 2nd Trump Administration

Authored by Jack Phillips via The Epoch Times (emphasis ours),

Former Secretary of State Mike Pompeo said in a new interview that he’s not ruling out accepting a White House position if former President Donald Trump is reelected in November.

“If I get a chance to serve and think that I can make a difference ... I’m almost certainly going to say yes to that opportunity to try and deliver on behalf of the American people,” he told Fox News, when asked during a interview if he would work for President Trump again.

I’m confident President Trump will be looking for people who will faithfully execute what it is he asked them to do,” Mr. Pompeo said during the interview, which aired on March 8. “I think as a president, you should always want that from everyone.”

Then-President Donald Trump (C), then- Secretary of State Mike Pompeo (L), and then-Vice President Mike Pence, take a question during the daily briefing on the novel coronavirus at the White House in Washington on April 8, 2020. (Mandel Ngan/AFP via Getty Images)

He said that as a former secretary of state, “I certainly wanted my team to do what I was asking them to do and was enormously frustrated when I found that I couldn’t get them to do that.”

Mr. Pompeo, a former U.S. representative from Kansas, served as Central Intelligence Agency (CIA) director in the Trump administration from 2017 to 2018 before he was secretary of state from 2018 to 2021. After he left office, there was speculation that he could mount a Republican presidential bid in 2024, but announced that he wouldn’t be running.

President Trump hasn’t publicly commented about Mr. Pompeo’s remarks.

In 2023, amid speculation that he would make a run for the White House, Mr. Pompeo took a swipe at his former boss, telling Fox News at the time that “the Trump administration spent $6 trillion more than it took in, adding to the deficit.”

“That’s never the right direction for the country,” he said.

In a public appearance last year, Mr. Pompeo also appeared to take a shot at the 45th president by criticizing “celebrity leaders” when urging GOP voters to choose ahead of the 2024 election.

2024 Race

Mr. Pompeo’s interview comes as the former president was named the “presumptive nominee” by the Republican National Committee (RNC) last week after his last major Republican challenger, former South Carolina Gov. Nikki Haley, dropped out of the 2024 race after failing to secure enough delegates. President Trump won 14 out of 15 states on Super Tuesday, with only Vermont—which notably has an open primary—going for Ms. Haley, who served as President Trump’s U.S. ambassador to the United Nations.

On March 8, the RNC held a meeting in Houston during which committee members voted in favor of President Trump’s nomination.

“Congratulations to President Donald J. Trump on his huge primary victory!” the organization said in a statement last week. “I’d also like to congratulate Nikki Haley for running a hard-fought campaign and becoming the first woman to win a Republican presidential contest.”

Earlier this year, the former president criticized the idea of being named the presumptive nominee after reports suggested that the RNC would do so before the Super Tuesday contests and while Ms. Haley was still in the race.

Also on March 8, the RNC voted to name Trump-endorsed officials to head the organization. Michael Whatley, a North Carolina Republican, was elected the party’s new national chairman in a vote in Houston, and Lara Trump, the former president’s daughter-in-law, was voted in as co-chair.

“The RNC is going to be the vanguard of a movement that will work tirelessly every single day to elect our nominee, Donald J. Trump, as the 47th President of the United States,” Mr. Whatley told RNC members in a speech after being elected, replacing former chair Ronna McDaniel. Ms. Trump is expected to focus largely on fundraising and media appearances.

President Trump hasn’t signaled whom he would appoint to various federal agencies if he’s reelected in November. He also hasn’t said who his pick for a running mate would be, but has offered several suggestions in recent interviews.

In various interviews, the former president has mentioned Sen. Tim Scott (R-S.C.), Texas Gov. Greg Abbott, Rep. Elise Stefanik (R-N.Y.), Vivek Ramaswamy, Florida Gov. Ron DeSantis, and South Dakota Gov. Kristi Noem, among others.

Tyler Durden Wed, 03/13/2024 - 17:00

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Riley Gaines Explains How Women’s Sports Are Rigged To Promote The Trans Agenda

Riley Gaines Explains How Women’s Sports Are Rigged To Promote The Trans Agenda

Is there a light forming when it comes to the long, dark and…

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Riley Gaines Explains How Women's Sports Are Rigged To Promote The Trans Agenda

Is there a light forming when it comes to the long, dark and bewildering tunnel of social justice cultism?  Global events have been so frenetic that many people might not remember, but only a couple years ago Big Tech companies and numerous governments were openly aligned in favor of mass censorship.  Not just to prevent the public from investigating the facts surrounding the pandemic farce, but to silence anyone questioning the validity of woke concepts like trans ideology. 

From 2020-2022 was the closest the west has come in a long time to a complete erasure of freedom of speech.  Even today there are still countries and Europe and places like Canada or Australia that are charging forward with draconian speech laws.  The phrase "radical speech" is starting to circulate within pro-censorship circles in reference to any platform where people are allowed to talk critically.  What is radical speech?  Basically, it's any discussion that runs contrary to the beliefs of the political left.

Open hatred of moderate or conservative ideals is perfectly acceptable, but don't ever shine a negative light on woke activism, or you might be a terrorist.

Riley Gaines has experienced this double standard first hand.  She was even assaulted and taken hostage at an event in 2023 at San Francisco State University when leftists protester tried to trap her in a room and demanded she "pay them to let her go."  Campus police allegedly witnessed the incident but charges were never filed and surveillance footage from the college was never released.  

It's probably the last thing a champion female swimmer ever expects, but her head-on collision with the trans movement and the institutional conspiracy to push it on the public forced her to become a counter-culture voice of reason rather than just an athlete.

For years the independent media argued that no matter how much we expose the insanity of men posing as women to compete and dominate women's sports, nothing will really change until the real female athletes speak up and fight back.  Riley Gaines and those like her represent that necessary rebellion and a desperately needed return to common sense and reason.

In a recent interview on the Joe Rogan Podcast, Gaines related some interesting information on the inner workings of the NCAA and the subversive schemes surrounding trans athletes.  Not only were women participants essentially strong-armed by colleges and officials into quietly going along with the program, there was also a concerted propaganda effort.  Competition ceremonies were rigged as vehicles for promoting trans athletes over everyone else. 

The bottom line?  The competitions didn't matter.  The real women and their achievements didn't matter.  The only thing that mattered to officials were the photo ops; dudes pretending to be chicks posing with awards for the gushing corporate media.  The agenda took precedence.

Lia Thomas, formerly known as William Thomas, was more than an activist invading female sports, he was also apparently a science project fostered and protected by the athletic establishment.  It's important to understand that the political left does not care about female athletes.  They do not care about women's sports.  They don't care about the integrity of the environments they co-opt.  Their only goal is to identify viable platforms with social impact and take control of them.  Women's sports are seen as a vehicle for public indoctrination, nothing more.

The reasons why they covet women's sports are varied, but a primary motive is the desire to assert the fallacy that men and women are "the same" psychologically as well as physically.  They want the deconstruction of biological sex and identity as nothing more than "social constructs" subject to personal preference.  If they can destroy what it means to be a man or a woman, they can destroy the very foundations of relationships, families and even procreation.  

For now it seems as though the trans agenda is hitting a wall with much of the public aware of it and less afraid to criticize it.  Social media companies might be able to silence some people, but they can't silence everyone.  However, there is still a significant threat as the movement continues to target children through the public education system and women's sports are not out of the woods yet.   

The ultimate solution is for women athletes around the world to organize and widely refuse to participate in any competitions in which biological men are allowed.  The only way to save women's sports is for women to be willing to end them, at least until institutions that put doctrine ahead of logic are made irrelevant.          

Tyler Durden Wed, 03/13/2024 - 17:20

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RFK Jr. Reveals Vice President Contenders

RFK Jr. Reveals Vice President Contenders

Authored by Jeff Louderback via The Epoch Times,

New York Jets quarterback Aaron Rodgers and former…

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RFK Jr. Reveals Vice President Contenders

Authored by Jeff Louderback via The Epoch Times,

New York Jets quarterback Aaron Rodgers and former Minnesota governor and professional wrestler Jesse Ventura are among the potential running mates for independent presidential candidate Robert F. Kennedy Jr., the New York Times reported on March 12.

Citing “two people familiar with the discussions,” the New York Times wrote that Mr. Kennedy “recently approached” Mr. Rodgers and Mr. Ventura about the vice president’s role, “and both have welcomed the overtures.”

Mr. Kennedy has talked to Mr. Rodgers “pretty continuously” over the last month, according to the story. The candidate has kept in touch with Mr. Ventura since the former governor introduced him at a February voter rally in Tucson, Arizona.

Stefanie Spear, who is the campaign press secretary, told The Epoch Times on March 12 that “Mr. Kennedy did share with the New York Times that he’s considering Aaron Rodgers and Jesse Ventura as running mates along with others on a short list.”

Ms. Spear added that Mr. Kennedy will name his running mate in the upcoming weeks.

Former Democrat presidential candidates Andrew Yang and Tulsi Gabbard declined the opportunity to join Mr. Kennedy’s ticket, according to the New York Times.

Mr. Kennedy has also reportedly talked to Sen. Rand Paul (R-Ky.) about becoming his running mate.

Last week, Mr. Kennedy endorsed Mr. Paul to replace Sen. Mitch McConnell (R-Ky.) as the Senate Minority Leader after Mr. McConnell announced he would step down from the post at the end of the year.

CNN reported early on March 13 that Mr. Kennedy’s shortlist also includes motivational speaker Tony Robbins, Discovery Channel Host Mike Rowe, and civil rights attorney Tricia Lindsay. The Washington Post included the aforementioned names plus former Republican Massachusetts senator and U.S. Ambassador to New Zealand and Samoa, Scott Brown.

In April 2023, Mr. Kennedy entered the Democrat presidential primary to challenge President Joe Biden for the party’s 2024 nomination. Claiming that the Democrat National Committee was “rigging the primary” to stop candidates from opposing President Biden, Mr. Kennedy said last October that he would run as an independent.

This year, Mr. Kennedy’s campaign has shifted its focus to ballot access. He currently has qualified for the ballot as an independent in New Hampshire, Utah, and Nevada.

Mr. Kennedy also qualified for the ballot in Hawaii under the “We the People” party.

In January, Mr. Kennedy’s campaign said it had filed paperwork in six states to create a political party. The move was made to get his name on the ballots with fewer voter signatures than those states require for candidates not affiliated with a party.

The “We the People” party was established in five states: California, Delaware, Hawaii, Mississippi, and North Carolina. The “Texas Independent Party” was also formed.

A statement by Mr. Kennedy’s campaign reported that filing for political party status in the six states reduced the number of signatures required for him to gain ballot access by about 330,000.

Ballot access guidelines have created a sense of urgency to name a running mate. More than 20 states require independent and third-party candidates to have a vice presidential pick before collecting and submitting signatures.

Like Mr. Kennedy, Mr. Ventura is an outspoken critic of COVID-19 vaccine mandates and safety.

Mr. Ventura, 72, gained acclaim in the 1970s and 1980s as a professional wrestler known as Jesse “the Body” Ventura. He appeared in movies and television shows before entering the Minnesota gubernatorial race as a Reform Party headliner. He was a longshot candidate but prevailed and served one term.

Former pro wrestler Jesse Ventura in Washington on Oct. 4, 2013. (Brendan Smialowski/AFP via Getty Images)

In an interview on a YouTube podcast last December, Mr. Ventura was asked if he would accept an offer to run on Mr. Kennedy’s ticket.

“I would give it serious consideration. I won’t tell you yes or no. It will depend on my personal life. Would I want to commit myself at 72 for one year of hell (campaigning) and then four years (in office)?” Mr. Ventura said with a grin.

Mr. Rodgers, who spent his entire career as a quarterback for the Green Bay Packers before joining the New York Jets last season, remains under contract with the Jets. He has not publicly commented about joining Mr. Kennedy’s ticket, but the four-time NFL MVP endorsed him earlier this year and has stumped for him on podcasts.

The 40-year-old Rodgers is still under contract with the Jets after tearing his Achilles tendon in the 2023 season opener and being sidelined the rest of the year. The Jets are owned by Woody Johnson, a prominent donor to former President Donald Trump who served as U.S. Ambassador to Britain under President Trump.

Since the COVID-19 vaccine was introduced, Mr. Rodgers has been outspoken about health issues that can result from taking the shot. He told podcaster Joe Rogan that he has lost friends and sponsorship deals because of his decision not to get vaccinated.

Quarterback Aaron Rodgers of the New York Jets talks to reporters after training camp at Atlantic Health Jets Training Center in Florham Park, N.J., on July 26, 2023. (Rich Schultz/Getty Images)

Earlier this year, Mr. Rodgers challenged Kansas City Chiefs tight end Travis Kelce and Dr. Anthony Fauci to a debate.

Mr. Rodgers referred to Mr. Kelce, who signed an endorsement deal with vaccine manufacturer Pfizer, as “Mr. Pfizer.”

Dr. Fauci served as director of the National Institute of Allergy and Infectious Diseases from 1984 to 2022 and was chief medical adviser to the president from 2021 to 2022.

When Mr. Kennedy announces his running mate, it will mark another challenge met to help gain ballot access.

“In some states, the signature gathering window is not open. New York is one of those and is one of the most difficult with ballot access requirements,” Ms. Spear told The Epoch Times.

“We need our VP pick and our electors, and we have to gather 45,000 valid signatures. That means we will collect 72,000 since we have a 60 percent buffer in every state,” she added.

The window for gathering signatures in New York opens on April 16 and closes on May 28, Ms. Spear noted.

“Mississippi, North Carolina, and Oklahoma are the next three states we will most likely check off our list,” Ms. Spear added. “We are confident that Mr. Kennedy will be on the ballot in all 50 states and the District of Columbia. We have a strategist, petitioners, attorneys, and the overall momentum of the campaign.”

Tyler Durden Wed, 03/13/2024 - 15:45

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