Governor Andrew M. Cuomo said last week that the Department of Financial Services is initiating a review of practices by banks and mortgage servicers to determine whether homeowners hit hard by Superstorm Sandy and allowed to forgo mortgage payments are now being unfairly burdened by being required to make up all past payments in immediate lump sum repayments. The Department 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 Department obtained agreements in November and December from major banks and servicers promising to offer forbearance on mortgage payments to certain homeowners struggling to make their payments as a result of Superstorm 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.
Now that the initial three-month forbearance periods are expiring, the Department 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,” Governor 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.”