Fred Loera is scared. The Washington state resident has trouble paying his mortgage after losing his job as a medical assistant earlier this month and is now ready to pay $ 6,600 in house payments. And that after the US government got a helping hand.
Loera’s loan servicer, New Residential Investment, gives him a $ 2.2 trillion mortgage passport under the Coresavirus Aid, Relief and Economic Security (CARES) Act for three months. However, the real estate investment firm told him that he would owe the full amount once the grace period expired, he said.
“I kind of feel panicked,” said Loera, 48. “I didn’t have that in mind when I was looking for some help.”
The American Enterprise Institute estimates that 4 million home loans in the United States are already “forgiving,” as the jargon calls the step before foreclosure. As more and more people are behind schedule, consumer protection groups report receiving complaints from other homeowners who, like Loera, have received some mortgage relief but are also concerned about a substantial lump sum for additional payments.
Federal guidelines give homeowners other options after the end of leniency, but consumer advocates are concerned that mortgage service providers are causing homeowners to make a lump-sum payment they can’t afford.
“They don’t listen to the full range of their options indulgently,” said Christina Tetreault, financial policy manager at Consumer Reports, who is pushing the country’s largest mortgage lenders to work more actively with homeowners. “What you hear is ‘we will contact you before your indulgence ends’ and it is not entirely clear why this is happening.”
Allows homeowners to request reduced or suspended mortgage payments for up to 12 months with no late fees or penalties if their mortgages are supported by Fannie Mae and Freddie Mac. After the initial grace period, a homeowner can request an extension, have his mortgage resumed, or work out a long-term payment plan to pay the balance according to Fannie Mae’s guidelines.
Loera said he hadn’t noticed these options. Instead, he said he was informed by a New Residential customer service representative that he had to submit payments for his 30-year three-month mortgage by the end of July. Missed payments are reported to the credit bureaus.
“If I applied because I had no money this month, why do you think I will have three months in three months?” Loera asked. “And I’m someone who is financially responsible and has worked hard in the medical field for 21 years.”
New Residential did not respond to a request for comment.
The Consumer Financial Protection Bureau, a federal agency tasked with protecting Americans from financial abuse, has received hundreds of anonymous complaints from homeowners that they are under pressure from lenders and credit service providers to repay their loans across the board.
“What they’re doing now doesn’t really help consumers, because now I’m concerned if I can’t make up for $ 6,000 in missed payments that I am excluded from,” an Oklahoma homeowner told the office.
Letter from New York Attorney General Letitia James asked mortgage service providers to “provide a complete and accurate description of all options for re-indulgence when forgiving customers when they are informed that they will automatically be included in a forbearance plan due to late payments.”
“We want to work with mortgage service providers to ensure that all homeowners, regardless of who owns or serves their loan, are treated fairly, and that homeowners seamlessly make affordable monthly payments when the reunification plans for COVID19 end,” it said in April -Letter.
43-year-old Andre Barnett from Hyde Park, New York, received a six-month mortgage loan from Flagstar Bank after he recently lost income when his small business began to suffer from the economic effects of the corona virus. Barnett said he called his lender to find out more about mortgage relief options just to be forwarded to the debt collection agency.
“Collections told me that in the end your option was a one-time balloon payment,” said Barnett. “You said, ‘If you can’t pay it back, we’ll check what other options we have.'”
Further postponement of his mortgage payment under the CARES law would be the last resort, said Barnett.
A senior executive at Flagstar Bank said the bank offers a number of options to homeowners seeking mortgage relief, including lump sum payments and overdue payments in installments.
“The message we tell them is leniency is the first step in a two-step plan,” said Courtney Thompson, senior vice president of standard mortgage at Flagstar, who helped create the bank script that customer service representatives read to homeowners. “Step one is a time out for peace of mind, and step two is that we have to alleviate crime.”
Thompson also said the company will reach any customer who believes they are not fully informed about their payment options.