Standing on the Precipice?

"The administration, Federal Housing Finance Agency, and regulators have put policy in place that could wreak long-term havoc on the entire #mortgage market if they don’t finish what they started." (David Stevens on Housingwire)

The unintended consequences of a "trust, but don't verify" mortgage forbearance policy include: (1) a liquidity crisis as mortgage servicers must continue to make good on the principal + interest payments to investors, not to mention property taxes, insurance and sundry other payments; (2) the disappearance of mortgage options for consumers as the originators, wary of moral hazard attendant to the forbearance policy, vacate large swaths of the market; and (3) the post-forbearance period crisis when home owners, stretched during the best of times, must somehow make good on the forborne portions.

It's as if the policy makers are now determined to achieve victory in the last war, one that emanated outward from the housing balance sheet, causing a lasting crisis of solvency.  This coronavirus pandemic is driving a crisis of liquidity as incomes evaporate, but if policy makers don't finish what they started, we may be revisiting the long-tenured morass from the last period.