A Fight Brews Over Mortgages

Home loan companies say they are in trouble, and a key regulator is resisting a bailout

- By Elizabeth Dexheimer

With the coronavirus crisis crushing the real estate market, some on Wall Street are assailing a U.S. official they blame for blocking a bailout of mortgage lenders. It’s not Treasury Secretary Steven Mnuchin or Federal Reserve Chairman Jerome Powell, who are leading Washington’s effort to rescue the economy. Rather, the target of their ire is Federal Housing Finance Agency Director Mark Calabria, a libertarian economist whose job is regulating mortgage giants Fannie Mae and Freddie Mac.

The issue is whether the U.S. should step in now to save nonbank mortgage servicers, firms including Quicken Loans, Freedom Mortgage, and Mr. Cooper Group that collect payments from borrowers and make sure investors in trillions of dollars of government-backed bonds get paid each month. With millions of homeowners expected to start missing payments, the industry says it needs an immediate lifeline to head off service failures that could trigger nothing less than the collapse of the housing market.

Calabria argues that’s hyperbole. He’s refused to let government-controlled Fannie and Freddie provide support for servicers, saying there are more pressing uses of their limited capital to help bondholders and borrowers. His stance has made him a target of criticism for trade groups such as the Mortgage Bankers Association and some financial analysts. “The president should fire Mark Calabria,” says Chris Whalen, a bank analyst at Whalen Global Advisers in New York. “He is taking a childish, naive approach right now that is bordering on negligence,” Whalen says he’s been fielding phone calls from financial executives complaining about the FHFA leader.