The problem is they didn’t grant forbearance to mortgage servicers, the companies who collect payments, handle tax escrows, etc. They also take risk as mortgages wind through the system from origination to the investors who actually own them. The servicer must make payments to Fannie Mae, Freddie Mac, and especially Ginnie Mae, even if the mortgage is delinquent. Normally the risk is small. Suddenly it is not.
The problem is that the mortgage service providers are the fan belt of the economic engine. It is a $3 part (or was when I was a kid and installed them myself) but the entire engine freezes up if it breaks. The mortgage belt has snapped and we are weeks away from the entire housing engine collapsing. This morning we learned that Treasury Secretary Mnuchin is aware of this “minor issue” and is trying to decide what to do. He needs to decide quickly.
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