Mortgage service providers took the time last spring to inform customers affected by the pandemic of their right to hit the pause button when payments are made with no documentation and no penalty for getting back on track.
Now that most of these borrowers are preparing to resume payments, mortgage service providers are once again being criticized for not speaking directly to their customers about their options.
Because these borrowers tend to have less equity to hand, consumer advocates say they need to take the initiative to work with their mortgage servicers on a payment resumption plan – which includes traditional banks and non-bank payment processors. If they’re not satisfied with the answers they’re getting, help from voluntary legal aid organizations and government-funded housing advisors.
“It’s often very complicated,” said Mike McArdle, assistant director of mortgage markets at the Consumer Financial Protection Bureau. “What is a procrastination? What is a modification? What are term extensions? It is important for borrowers to understand what is going on with their loans. “
Kim Henderson, president and CEO of Neighborhood Housing Services in South Florida, one of the state-audited housing counseling providers with offices in Miami and Fort Lauderdale, said her organization has not seen a surge in requests for help – likely because of the Biden administration extended the time Grace period until September 30th and the enforcement moratorium until June 30th.
“It’s coming, but not yet,” said Henderson. “We are preparing. It’s one of those things that people won’t worry about until it hits them in the face that the party’s over. “When that happens, she says, her organization and numerous others will be ready to help, she said.
Complaints about mortgage service providers are on the rise
In a report released last week, the Bureau of Consumer Financial Protection said in March that it had received the most consumer complaints about mortgages since April 2018. Complaints about forbearance or related conditions reached their highest monthly average since March and April 2020, when consumers looked for the forbearance protection provided to borrowers of federal-supported loans initially began to complain that their mortgage service providers had received inaccurate information. The report did not mention any issues related to the recent complaints.
Andrea Bopp Stark, an attorney for the not-for-profit National Consumer Rights Center, says some mortgage service providers are once again providing confusing and conflicting information about borrowers’ options to resume payments on government-secured loans. Some non-federal private market loan service providers require borrowers to make a lump sum repayment of missed payments or to make monthly payments over a couple of years, she said.
While tied to the foreclosure moratorium, lenders in the private market are not required to offer affordable post-forbearance options, Stark said. She is aware of one consumer who had to borrow $ 30,000 to keep up to date and another who had to withdraw into their retirement account.
Meanwhile, some Federal Housing Administration loan service providers improperly offer to postpone missed payments until the end of the loan or to offer changes that could lower borrowers’ monthly payments if they cannot afford the amount prior to the loan Pandemic to pay, she said.
The ability for around 70% of borrowers on government-secured loans to suspend mortgage payments for up to a year was part of the first pandemic relief bill passed by Congress and the President last March. In February, it was extended to September by those who control the loans, including Fannie Mae, Freddie Mac, the Department of Agriculture, the Federal Housing Department, and the Department of Housing and Urban Development.
During the national shutdown last spring, financially ruined Americans seized the unprecedented opportunity. An estimated 6.5 million borrowers have missed at least one payment since March, according to the Mortgage Bankers Association. As of July, approximately 8.5% of US borrowers were in forbearance programs.
Forbearance and crime rates have gradually declined since the economy reopened last summer. As of January, the last month for which data was available, 5.6% of borrowers in the US were behind on their payments.
The consumer protection bureau is watching
Federal agencies have announced that they will be closely examining how mortgage service providers manage their communications with borrowers with limited English language skills.
In March, consumers said they had communication problems regarding their forbearance plans and options available at the end of the forbearance periods, the report by the Consumer Financial Protection Bureau said. Some reported long delays in applying for loan modifications in order to lower monthly payments.
The office released its report about a month after a bulletin was issued warning mortgage servicers to “take appropriate action now to avoid a wave of avoidable foreclosures once borrowers exit the COVID forbearance plans later this fall” 19 begin “.
According to the bulletin, mortgage servicers should prepare for the expected increase in loans from forbearance programs, as well as requests for relief from borrowers who are criminals but are not in an forbearance program.
It warned that the office would closely monitor compliance with the requirements for contacting borrowers before their grace periods expired to give them time to apply for help, work with them to ensure they have all the necessary documentation, to get help and promptly respond to inquiries and evaluate income fairly.
The office also said it will carefully consider how mortgage service providers manage communications with borrowers with limited English language skills.
Options for borrowers of federal loans
About 70% of all borrowers have home loans that are secured by one of the federal agencies. These borrowers must be given a number of options that suit their financial situation. While the details may vary depending on the company backing the loan, borrowers are generally asked if they can use any of the following options:
• Can you repay the missed mortgage payments in a lump sum?
• If not, can you repay it in monthly installments over the next year or so?
• If not, can you repay the amount you paid before the pandemic?
• If so, you can postpone these missed payments until the end of the loan by either extending the loan for the number of months missed or by adding the total of the missed payments due at the end of the loan. This is known as postponement.
• If you cannot pay the same amount, you can qualify for a loan modification that will lower your interest rates by lowering the interest rate and / or extending the term of the loan.
Stark said borrowers planning to end the forbearance, as well as those who do not forbear and have missed payments, must take the initiative now – before the federal foreclosure moratorium expires on June 30th – to contact their mortgage servants and inquire about their options.
With more than 2 million borrowers still lenient and planning to exit, mortgage servants are unlikely to be deliberately spreading bad information, Stark said. “I think they are being bombed and overwhelmed with the amount of forbearance and forbearance options. Probably hundreds of thousands come every week out of Forbearance. “
Borrowers who are among the 30% whose loans are private and not federally secured should contact a U.S. Department of Housing and Urban Development certified housing advisor, local legal aid department, or private attorney if their servicer refuses to grant answer or offer affordable options, she said.
Henderson of Neighborhood Housing Services in South Florida expects more government aid to be announced to help criminal borrowers avoid foreclosure. If none occurs, “it boils down to good old-fashioned self-advocacy and negotiation,” she said.
But borrowers don’t have to go it alone. “We can be a third party. Borrowers can sign a paper so we can speak on their behalf. We can make a phone call when you call your servicer. We can negotiate for or with them and help them go through their options. “
Where can I find help?
You can find HUD-certified housing advice centers at consumerfinance.gov/find-a-housing-counselor. Enter your zip code to find one near you.
To file a complaint about your mortgage service provider, visit the Consumer Financial Protection Bureau website: consumerfinance.gov/complaint.
The number of homeowners skipping mortgage payments, as allowed under pandemic laws, is about half what it was at the height of last summer. Borrowers need to be aware of their options when it comes time to get back on track, proponents say.