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54 COVID-19 | Special Report FHFA ADDRESSES MORTGAGE SERVICER LIQUIDITY CONCERNS e Federal Housing Finance Agency (FHFA) announced the alignment of Fannie Mae's and Freddie Mac's (the Enterprises) policies regarding servicer obligations to advance scheduled monthly principal and interest payments for single-family mortgage loans. e policy states once a servicer has advanced four months of missed payments on a loan, it will have no further obligation to advance scheduled payments. is policy applies to all GSE servicers. "e four-month servicer advance obligation limit for loans in forbearance provides stability and clarity to the $5 trillion Enterprise-backed housing finance market," said FHFA Director Dr. Mark A. Calabria. "Mortgage servicers can now plan for exactly how long they will need to advance principal and interest payments on loans for which borrowers have not made their monthly payment." e release states that when a mortgage is in a mortgage-backed security (MBS), Fannie Mae servicers with a scheduled payment are responsible for advancing the principal and interest payment regardless of borrower payments. Freddie Mac servicers are only obligated to advance four months of missed borrower interest payments. Today's instruction establishes a four-month advance obligation limit for Fannie Mae scheduled servicing for loans and servicers which is consistent with the current policy at Freddie Mac. e FHFA is also instructing the GSEs to maintain loans in COVID-19 forbearance plans in MBS pools for at least the duration of the forbearance plan. Mortgages that are delinquent for more than four months, historically, were purchased out of MBS pools by the GSEs. Loans with COVID-19 payment forbearance shall be treated "like a natural disaster event" and will remain in the MBS pool. e FHFA says this change reduces the potential liquidity demands on the GSEs from loans in forbearance and delinquent loans. David M. Dworkin, President and CEO, National Housing Conference, said the announcement by the FHFA is an "important first step." "Ensuring servicers can move payments to the end of the loan term and get reimbursed in four months is progress," he said. "But requests by consumers for help in paying their home mortgages are already very high and growing. at is no surprise given the skyrocketing unemployment numbers. As forbearance requests continue to rise, we will have to do more. Dworkin added that the federal government should not hesitate to support the nation's housing finance system, so mortgage providers can continue helping at-risk homeowners. "Without that support, a deteriorating situation in housing and homeownership will increase the likelihood of a COVID-19 recession becoming a depression," Dworkin said.