How Coronovaris Crisis Affects Mortgages

Performance Property Real Estate Question

Q: How will the Coronavirus crisis affect mortgages? Diane, Scotch Plains, NJ

A: The Director of FHFA said that Fannie Mae & Freddie Mac which guarantee almost half of US mortgages said they have resources to last through a quarantine lockdown of 12 weeks–he said that a lockdown longer than 2-3 months would be a real stress to the mortgage market like what we saw during the great recession. One big potential problem in the mortgage market lies with mortgage servicers who collect mortgage payments from borrowers and pass them onto investors. Mortgage servicers are required to pay mortgages even when borrowers are granted forbearance–Fannie & Freddie aren’t required to repay servicers for 6 months which may create liquidity problems for mortgage servicers. I suspect that Congress or the Fed will step in with assistance if the lockdown lasts more than 3 months. Thanks for your question, Diane.

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