Skip mortgage payments? | House and garden
Mortgage managers took their time last spring to inform clients affected by the pandemic of their right to press the pause button to make payments with no paperwork required and no penalty to get back on track.
Now that most of these borrowers are getting ready to start making payments again, mortgage managers are once again being criticized for not being candid with their clients about their options.
Since these borrowers typically have less equity to work with, consumer advocates say they will need to take the initiative to develop a repayment resumption plan with their mortgage managers – who include traditional banks and non-bank payment processors. If they are not satisfied with the answers they get, help is available from volunteer legal aid organizations and federally funded housing counselors.
“It’s often very complicated things,” said Mike McArdle, deputy director of mortgage markets for the Consumer Financial Protection Bureau. “What is a postponement? What is a modification? What are term extensions? It is important that borrowers understand what is going on with their loans. “
Kim Henderson, president and CEO of South Florida Neighborhood Housing Services, one of the region’s federally licensed housing counseling providers with offices in Miami and Fort Lauderdale, said that his organization had yet to see a surge in requests for help – likely because the Biden administration extended the forbearance period until September 30 and the moratorium on foreclosures until June 30.
“It’s happening, but not yet,” Henderson said. “We prepare ourselves. It’s one of those things that people don’t worry about until the party is over. When that happens, she says, her organization and many others will be ready to help, she said.
Complaints about mortgage loan managers on the rise
In a report released last week, the Consumer Financial Protection Bureau said in March it had received the highest number of consumer mortgage complaints since April 2018. Complaints about forbearance or related conditions reached their monthly average highest since March and April 2020, when consumers seeking forbearance protection available to federally guaranteed loan borrowers began complaining about getting inaccurate information from their mortgage managers . The report did not identify the subjects of the most recent complaints.
Andrea Bopp Stark, a lawyer at the nonprofit National Consumer Law Center, says some mortgage managers are again providing confusing and conflicting information about borrowers’ options to resume payments on federally guaranteed loans. Some private market loan managers not subject to federal requirements require borrowers to repay missed payments in a lump sum or make monthly payments over a few years, she said.
Although bound by the foreclosure moratorium, private market lenders are not required to provide affordable post-forbearance options, Stark said. She knows a consumer who had to borrow $ 30,000 to upgrade and another who had to dip into his retirement account.
Meanwhile, some Federal Housing Administration loan managers do not properly offer to defer missed payments at the end of loans or do not offer modifications that could reduce borrowers’ monthly payments if they cannot make up. allow the pre-pandemic amount to be paid, she said. .
The opportunity for the roughly 70% of borrowers with federally guaranteed loans to suspend mortgage payments for up to one year was part of the first pandemic relief law passed by Congress and the President last March. . In February, it was extended until September by the entities that control loans, including Fannie Mae, Freddie Mac, the Department of Agriculture, the Federal Housing Administration and the Department of Housing and Urban Development.
During the nationwide shutdown last spring, financially devastated Americans took advantage of this unprecedented opportunity. According to the Mortgage Bankers Association, about 6.5 million home loan borrowers have missed at least one payment since March. In July, about 8.5% of US borrowers were participating in forbearance programs.
Both abstention and delinquency rates have steadily declined since the economy began to reopen last summer. In January, the most recent month for which data was available, 5.6% of borrowers in the United States were still behind on their payments.
The consumer protection office monitors
Federal officials have said they plan to take a close look at how mortgage managers handle their communications with borrowers with limited English proficiency.
In March, consumers reported experiencing communication issues about their forbearance plans and the options available at the end of forbearance periods, according to the Consumer Financial Protection Bureau report. Some have reported long delays in obtaining loan modifications to help them lower their monthly payments.
The bureau released its report about a month after issuing a newsletter warning mortgage managers “to start taking the right steps now to avoid a wave of preventable foreclosures once borrowers start leaving mortgage plans. ‘abstention from COVID-19 later this fall. “
Mortgage managers, the bulletin said, are expected to prepare for the expected increase in loans coming out of forbearance programs, as well as requests for relief from borrowers who are past due but not in. an abstention program.
He warned the office would closely monitor mortgage managers’ compliance with obligations to contact borrowers before their forbearance periods expire to give them time to seek help, work with them to ensure they have all the necessary documents for assistance, will respond to inquiries promptly. and assess income fairly.
In addition, the office said it will carefully review how mortgage managers handle communications with borrowers with limited English proficiency.
Where to find help
HUD-certified housing counseling agencies can be found at consumerfinance.gov/find-a-housing-counselor. Enter your postal code to find the nearest one.
To file a complaint about your mortgage manager, go to the Consumer Financial Protection Bureau’s website: consumerfinance.gov/complaint.
Options for borrowers of federally guaranteed loans
About 70% of all borrowers have home loans guaranteed by one of the federal entities. These borrowers should be offered a range of options suited to their financial situation. Although the details may differ depending on the entity backing the loan, borrowers will usually be asked if they can upgrade to one of these options:
—Can you pay off the missed mortgage payments in a lump sum?
– If not, can you repay it in monthly installments over the next year?
– If not, can you start paying the same amount again that you paid before the pandemic?
—If so, you can defer those missed payments at the end of the loan, either by extending the loan by the number of months missed or by adding up the sum of the missed payments due at the end of the loan. This is called a deferral.
—If you can’t pay the same amount, you can get a loan modification that will lower your rates by lowering the interest rate and / or extending the term of the loan.
Stark said borrowers planning to exit forbearance, as well as those who did not forbear and missed payments, must take the lead now – before the federal moratorium on loans expires. foreclosures on June 30 – contact their mortgage managers and inquire about their options.
With more than 2 million borrowers still on hold and planning to opt out, mortgage managers are unlikely to deliberately release bad information, Stark said. “I think they’re bombarded and overwhelmed by the amount of forbearance and post-abstention options. There are probably hundreds of thousands of people who abstain every week.
Borrowers who are in the 30% whose loans are privately guaranteed and not federally guaranteed should seek help from a housing counselor licensed by the US Department of Housing and Urban Development, a local department of legal aid or private attorney if their agent refuses to answer. or offer affordable options, she said.
Henderson, of the South Florida Neighborhood Housing Services, said she expects additional federal assistance to be announced to help delinquent borrowers avoid foreclosure. If none come to fruition, “then it comes down to good self-advocacy and old-fashioned negotiation,” she said.
But borrowers won’t have to go it alone. “We can be a third party. Borrowers can sign a document to give us the opportunity to speak on their behalf. We can be on the phone when they call their service agent. We can negotiate for them, or with them, and help them discover their options. “