at the Hr?teh gtatea
$01 20515

April 6, 2020

The Honorable Jerome Powell

Chairman

Board of Governors of the Federal Reserve System
20th Street and Constitution Avenue NW
Washington, DC. 20551

Dear Chairman Powell,

As we work on stabilization programs for our country, there are many variables to consider. The
current crisis is combining pressures in many and various sectors of our economy. Our
housing sector faces dire consequences if we cannot avoid the risks now present in our markets
We sincerely appreciate your diligence in these times. We want to bring a dif?cult balancing act
to light for your consideration after listening to the concerns of both lenders and borrowers across
many sectors. Our housing ?nance system is at the center of our concern, and stability is the goal,
as we ultimately would like to limit the impact for hardworking Americans.

Mortgage?backed securities (MB S), including private label commercial mortgage?backed
securities (CMB S) and commercial real estate CLOs (CRE CLOs), provide strength to the sector
by offering liquidity to both bank and non-bank lenders. These securities, by virtue of their link to
capital support from Treasury, can provide a buoyancy factor to our nation?s economy that must
not be lost due to the downward pressure we are currently experiencing caused by rapidly declining
prices, an overabundance of sellers, and insolvency. We must take actions at this time that are well
balanced in the overall scheme of the ?nancial regulatory structure and must take into account all
of the current market conditions.

Of particular concern are two factors which may lead to instability in the mortgage servicing space:
required liquidity to advance scheduled payments for borrowers who avail themselves of
forbearance options due to such as those outlined in the Coronavirus Aid, Relief, and
Economic Security (CARES) Act of 2020, and the pressures that continued margin calls from
existing repurchase and warehouse lenders make on market participants as the value of M88,
CMBS and CRE ?uctuate wildly in these unprecedented times. As stated by the Mortgage
Bankers Association in a March 22 letter to the Federal Reserve and the Treasury Department,
?Mortgage servicers maintain liquid reserves to cover these advances when borrowers miss their
payments, but virtually no servicer, regardless of its business model or size, will be able to make
sustained advances during a large-scale pandemic when a significant portion of borrowers could
cease making their payments for an extended period of time.? While this does not apply broadly
to every servicer, it is likely that some servicers may ultimately become unable to advance
payments on MBS, CMBS, and CRE CLOs. We are of the mindthat the Federal Reserve, in
coordination with the Department of the Treasury in administering the Emergency Stabilization
Fund set forth in CARES, should prioritize ensuring adequate liquidity for the mortgage servicing
market for single? and multi?family residential as well as commercial mortgages. It is important

PRINTED ON RECYCLED PAPER

that the Federal Reserve and the Department of the Treasury use all available tools to maintain
market liquidity.

Furthermore, it is vital that the Federal Reserve?s Term Asset-Backed Securities Loan Facility
(TALF) program be expanded to include investment grade MBS and CMB both agency and
private label? as well as CRE CLOs as TALF-eligible collateral. The investment grading should
be based on the rating at the date of issuance, as it was for assets that were included later as the
2008 TALF program expanded collateral eligibility. By providing ?nancing to securities
purchasers, the TALF program will help stabilize prices for these securities, limit margin calls and
?re sales, and preserve liquidity for servicers and lenders. In addition, these actions will bring
prices for these securities to par levels and encourage lenders to write new loans to ensure the
continued functioning of our affordable housing and commercial real estate markets, as they did
in the successful version of TALF during the 2008 ?nancial crisis. Currently, these securities are
only pricing for liquidity, and if only securities are accepted as eligible investments at TALF,
the market will experience additional liquidity pressures in the likely event that ratings agencies
downgrade all securities in the coming months.

We urge that all factors be considered when making this determination, as servicers, bank and non-
bank lenders, and homeowners are of the utmost importance because of their interconnections and
role in our economy.

Sincerely,
we?
Vicente Gonzalez Barry Louderrnilk I
Member of Congress Member of Congress

ad 

Josh Gottheimer Ted Budd
Member of Congress Member of Congress