New York Gov. Andrew Cuomo announced that the state’s financial regulators will review post-Sandy mortgage practices by banks and mortgage servicers. The review is intended to examine whether homeowners who were impacted by Superstorm Sandy and were allowed more time with their mortgage payments are now being unfairly required to make up all past payments in immediate lump sum repayments.
The state’s Department of Financial Services is asking banks to allow more time for homeowners to make back payments and checking if banks have delivered on their promise not to use late payments to start foreclosure proceedings or hurt homeowners’ credit ratings.
The state regulators obtained agreements in November and December from major banks and servicers promising to offer forbearance on mortgage payments to certain homeowners who were struggling to make their payments after Sandy.
The banks agreed to let these homeowners go without making payments for three to six months and without requiring lump sum balloon payments at the end of the forbearance period. The banks and servicers also agreed that homeowners’ credit ratings would not be negatively impacted.
But now that the initial three-month forbearance periods are expiring, the Department said it is receiving reports from some homeowners saying they are being asked for full lump sum payments.
In addition, some homeowners say they are receiving pre-foreclosure notices based on missed payments during the forbearance period and are being reported to credit agencies for missed payments.
“Many New Yorkers were hit hard by Superstorm Sandy and couldn’t pay their bills due to lost income, home repair expenses, or relocation costs, so banks offered relief to homeowners in the form of forbearance on mortgage payments,” Gov. Cuomo said.
”It would be illogical to offer that relief and now expect lump sum payments from financially-strapped homeowners. A homeowner who could come up with three months in mortgage payments all at once probably didn’t need forbearance in the first place. Everyone else needs more time to repay,” Cuomo said.
New York’s Financial Services Superintendent Benjamin Lawsky said, “We are investigating to determine if the complaints we have received are isolated incidents or part of a disturbing trend. Banks can’t just say they will help homeowners hurt by Sandy, they must deliver.”
In letters to the institutions, Superintendent Lawsky asked for information on the number of homeowners who asked for and received forbearance, lenders’ forbearance-related policies and practices, how the institutions implemented forbearances internally, and whether they would consider offering forgiveness of principal and interest payments for up to 12 months post-storm and under what circumstances.
In its survey, the Department is asking banks and mortgage servicers to provide information to the state regulators by March 12. The specific information the Department is seeking includes:
• How lenders changed their internal processes so that homeowners receiving forbearance would not receive erroneous customer statements or pre-foreclosure notices, and would not be reported as being late on payments to credit agencies.
• Whether the institutions provided a written description of forbearance terms to borrowers.
• Foreclosure and pre-foreclosure activity taken or suspended by the institutions during the forbearance period.
Homeowners participating in forbearance programs — as well as all other homeowners with banking or insurance questions related to the storm — can visit disaster assistance centers staffed by the Department of Financial Services or call the Department’s storm hotline at (800) 339-1759. Assistance centers are listed on the Department’s website, www.dfs.ny.gov.