Hannah Lang

Fannie Mae and Freddie Mac are now able to buy loans in forbearance to alleviate pressure on the sector, but the fees charged by the mortgage giants to assume more risk could turn away some originators.

The policy move will allow small institutions participating in the Paycheck Protection Program to pledge business loans as collateral to obtain advances.

The FHFA will allow Fannie Mae and Freddie Mac, for a limited time, to purchase loans for which the borrower has sought to postpone payments because of the economic effects of the coronavirus.

Efforts to calm lenders’ fears about coronavirus-related forbearance may not offset tightening standards, and the FHA is less likely to boost volume than it was during the financial crisis.

Tenants have threatened to suspend payments during the pandemic to pressure officials into providing rental assistance, but the effects on multifamily loans would compound concerns about servicers' liquidity and, ultimately, lenders' performance.

The Fed's actions are designed to ensure the flow of credit to midsize businesses and state and local governments hit hard by the economic impact of the coronavirus pandemic.

The central bank is creating a facility to provide financing to banks participating in the Small Business Administration’s Paycheck Protection Program.

The agencies will give the industry another month to submit feedback on the so-called covered fund portion of the rule "in light of potential disruptions resulting from the coronavirus.”

Federal Housing Finance Agency Director Mark Calabria said a virus-induced financial crisis might give rise to more delinquencies and foreclosures than the 2007 subprime mortgage meltdown.

After budget cuts and a strategic transition, the interagency body conceived by Dodd-Frank to identify systemic threats has largely been silent as the pandemic roils the economy.

While analysts agree banks are in better shape than in 2008, lawmakers are dusting off a crisis-era tool used by the Federal Deposit Insurance Corp. to soothe potential liquidity fears during the coronavirus pandemic.

The central bank's sweeping actions suggest a cash shortage gripping sectors directly hit by the pandemic. Banks were supposed to be protected by Dodd-Frank but are still vulnerable to a funding domino effect.

The Federal Reserve committed Monday to conducting more asset purchases of Treasury securities and mortgage-backed securities and announced $300 billion in new financing for credit facilities.

Accommodations for borrowers affected by the coronavirus pandemic, such as payment delays and fee waivers, are "positive and proactive actions that can manage or mitigate adverse impacts," the regulators said.

Mark Calabria said Fannie Mae and Freddie Mac are currently equipped to handle elevated delinquencies, but they might need congressional or Federal Reserve help if fallout from the coronavirus persists.

FHFA Director Mark Calabria said the health crisis will complicate the release of a proposal establishing new capital requirements for Fannie Mae and Freddie Mac.

The temporary foreclosure moratorium on loans backed by HUD, Fannie Mae and Freddie Mac comes after lawmakers and housing advocates had pushed for steps to avoid consumers getting booted from their homes.

The central bank said it was establishing the Commercial Paper Funding Facility to "support the flow of credit to households and businesses."

The actions include cutting the federal funds rate to between 0% and 0.25% and other steps to ease economic stress from the spread of the coronavirus.

Banks may be protected from a direct hit, but they have invested in vehicles that include such loans, potentially exposing them to defaults.