The Future of Forbearance and GSEs under Biden Presidency

The campaign period was crazy, but the voting period was even more dramatic. As of this writing, events had turned out to look like the Republicans will have the Senate, while the Democrats will have the White House and a majority of the House of Representatives. Supposing it remains that way, it means there will be changes in government leadership that will come in with the Democrats regime. Consequently, with leadership changes, there is a high probability that mortgage forbearance and GSE conservatorship will be affected. Let’s have a look at how they could be impacted.

Mortgage forbearance.

Since the economy was reopened and the recovery process kicked off, the population of homeowners participating in forbearance plans has been fading with time. This can be attributed to homeowners regaining their jobs and opting to get out of forbearance. The U.S economy has recently recovered over 12 million jobs leaving 10 million more to go before attaining the pre-pandemic period employment level. With so much remaining before achieving the pre-pandemic level, the government-backed forbearance plans are highly likely to be extended fully into 2021.

However, some may argue that an extension of the government-backed forbearance plans would have occurred regardless of who won the polls, perhaps because the housing market has played a crucial role during the recovery from the impacts of the pandemic.

GSEs conservatorship.

Let’s face it; we’re lucky that the GSEs (Fannie Mae and Freddie Mac) remained under conservatorship prior to and during the pandemic period. I mean, imagine the magnitude of havoc the pandemic would wreak on the housing market if the two GSEs were not under conservatorship. The housing market would not be as active amid the pandemic as it was. People would not have been able to afford mortgages amid the pandemic; the rate of homelessness would uncontrollably shoot up. It would not have been pleasant, folks.

The COVID-19 crisis is a wake-up call and further challenges the plans to privatize the GSEs. If the GSEs were privatized to solely benefit shareholders, without government backing, they would be of no help to homeowners during the pandemic.

As the pandemic wreaked havoc on the economy, one of the significant economic successes was that credit was never tightened. The lending market remained stable amid the pandemic throughout the country. With the addition of the government-backed forbearance plans, struggling homeowners could retain their homes, which further stabilized the market. This further gives more reasons why the GSEs should remain under conservatorship for the benefit of all Americans.

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Disclaimer: The views and opinions of Eric Lawrence Frazier are his own and do not necessarily represent First Bank or any organization affiliated with Eric Lawrence Frazier, or the Power Is Now Media Inc. First Bank is an Equal Credit Opportunity Lender. Eric Lawrence Frazier, MBA, is also a Vice President and Mortgage Advisor with First Bank. NMLS#461807 and a California Licensed Real Estate Broker DRE# 01143482. Email: Eric.frazier@fbol.com. Ph: 714- 475-8629.

Eric Lawrence Frazier MBA

President and CEO

The Power Is Now Media Inc.

Work cited.

https://www.housingwire.com/articles/with-biden-win-heres-what-to-expect-on-mortgage-forbearance-and-student-loan-forgiveness-in-2021/.

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