July 30, 2021

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Mortgage News

North suburban Chicago man’s COVID mortgage forbearance nightmare

Like millions of homeowners, Beach Park’s Gregg Pupecki accepted leniency on mortgages – an interest-free pause in his payments – during the coronavirus pandemic.

As a first-time homeowner, Pupecki loves his two-story house, which he bought in 2012. So he paid attention when he received a note from his credit servicer in February demanding an immediate payment of $ 12,475 “to update your loan.”

“Failure … can result in fees and the loss of your home due to foreclosure,” the document reads.

His original lender, Chase Bank, offered forbearance – essentially a hiatus to make payments on his 30-year mortgage without charging additional interest or affecting his credit – on his FHA-sponsored loan.

Some time later, the loan was transferred to Midland Mortgage, Oklahoma City, and required that all forbearance payments be made immediately.

After the Chicago Sun-Times contacted Midland’s parent company, MidFirst Bank, the loan service provider withdrew the claim and offered Pupecki what federal law required in his case: either end the forbearance and put the unpaid payments on the back of his To set loan interest. free or indulgent for another three months, with the option, if Pupecki wanted, for another three months.

After consulting a housing consultant, he decided to stay at least 90 days while he waited for his industry to come back to life.

“It should help you,” the far north suburb says of the indulgence on COVID-19 mortgages it accepted last spring after losing his job at a marina last year when the economy collapsed.

When he saw that his new credit servicer was demanding a lump sum repayment, he said, “I thought, this is not helpful.”

Beach Park homeowner Gregg Pupecki.

Beach Park homeowner Gregg Pupecki.
Provided

The bank did not respond to requests for comment.

Pupecki is hardly the only homeowner to face a confusing situation after accepting forbearance on COVID-19 mortgages. The Bund Consumer Financial Protection Office got more than 3,400 Customer complaints in March about mortgages. The database contains complaints about immediate payment requests, poor communication from credit service providers, and even people who have forbeared their mortgages without asking.

The agency, which estimates there could be 1.7 million defaulted loans by September, is proposing rule changes to lending to prevent this from being labeled as avoidable foreclosures.

“Since the height of the Great Recession, more borrowers have fallen behind on their mortgages than ever before,” said Dave Uejio, acting director of the agency. “Color communities have been hard hit by the pandemic, and the latest data shows that many borrowers are still injured.”

Congress incorporated the mortgage forbearance provision into the CARES bill, which was passed in March 2020 following the outbreak of the coronavirus pandemic. Under the law, homeowners on government-secured mortgages – like those of Fannie Mae, Freddie Mac, the Federal Housing Department, the Department of Housing and Urban Development, the Department of Veterans Affairs, or the Department of Agriculture – could indulge for up to a year without compromising their creditworthiness or receive additional interest.

In February, HUD extended that one-year limit for certain borrowers, letting them apply for two additional three-month extensions.

Diane Cipollone, a real estate expert and advisor to the National Fair Housing AllianceSays borrowers need to understand that after they resume their normal monthly mortgage payments, the unpaid amount of money from the indulgence period will be at the end of their loan and due as a balloon payment.

However, this balloon can be handled relatively easily if the homeowner decides to sell it before the mortgage is completed or refinanced.

The hardest part for some homeowners is finding a job in time to resume their regular monthly payments.

Cipollone urges people to take advantage of this free weekly credit reports offered by Equifax, Experian and TransUnion through April 20, 2022. Typically, consumers can receive one free report per year from each agency. During the pandemic, that number increased to one every week.

“This is important in that some mortgage service providers mistakenly report borrowers as being ‘late’ in their payments when they are on a COVID-related forbearance plan,” she says.

About 70% of home loans are secured by the state. Many consumers with home loans held by banks or in private securities also accepted leniency offers, but these are not covered by the CARES Act.

Attorney Sarah Bolling Mancini of the National Consumer Law Center worries that borrowers could reach the end of forbearance without a clear idea of ​​what comes next.

With privately held mortgages in particular, Mancini says, “It feels like they suit the whims of the lender or servicer.”