NPR: 3.4 Million Homeowners Skip Payments. But Many Are Scared, Say Congress Needs To Act

Ana

Well-known member
Member
Joined
Dec 12, 2018
Messages
1,169
Trophies
0
More than 3.4 million homeowners are temporarily skipping their mortgage payments because they've lost income during the pandemic. Under the CARES Act rescue package passed by Congress, affected homeowners can skip or delay payments for up to a year.

Esposito-Gullo's husband, Frank Gullo, works for the Long Island Rail Road, which cut back his hours. Even with Esposito-Gullo's unemployment money, the couple says they're still making thousands of dollars less a month. So they called up their lender, Freedom Mortgage.

"They told me, yes, you can skip three months' payments," Gullo says. "But then they told me there was a balloon payment at the end of it." He was told that after three months, they'd have to come up with all the money for those skipped payments. So they'd suddenly owe four months of mortgage payments all at once — $14,000.

"$14,000 in one shot!" he says. "To come up with a balloon payment of that much."


"It's impossible," Esposito-Gullo says. "This pile of money is just going to magically appear from somewhere?"

Gullo says it made no sense to him just how this was supposed to help anybody in the middle of the pandemic. "If everyone's lost their job at this point," he says, "how is that helping? That's doing the exact opposite. That's putting people in further debt once we get out of this."

Meanwhile, Gullo has already had to use some of his 401(k) retirement money to pay bills.
Lenders demanding giant balloon payments is not how this program is supposed to be working. Under the admittedly complex rules from various regulators, there's actually a much better option to make up the missed payments. And some other homeowners are being told they can get it.
"In the vast majority of cases, what should happen at the end of the CARES Act forbearance period is that homeowners should be given the opportunity to have those missed payments put on the back end of their mortgage," says Diane Thompson, a former attorney with the Consumer Financial Protection Bureau.

So if you have a 30-year mortgage and skip six months of payments, then you'd get six months of payments tacked onto the back end of that 30-year term.

That means when you get back on your feet financially, you can just return to making your regular monthly mortgage payment — your payment doesn't go up, and you don't get socked with a giant bill that you can't afford.

Thompson, who is now working with the National Consumer Law Center, says Congress should make this the default option that homeowners get automatically.
The Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac, says that borrowers in forbearance whose loans are backed by the two mortgage giants "are not required to repay the missed payments in one lump sum." The CARES Act mortgage forbearance covers all types of government-guaranteed mortgages, or about 70% of all home loans.

The way the major banks are handling the issue appears to be a work in progress. For example, several weeks ago, Bank of America told NPR that homeowners could choose to have the payments added to the end of the loan. The bank now has a more complicated answer depending on what type of loan a customer has. But a Bank of America spokesman also tells NPR that the company won't require a balloon payment for anyone who can't afford it because they've been hurt financially during the pandemic.

Derek Reich, who lives in Washoe Valley, Nev., has lost all his income as a freelance video cameraman. He says his mortgage company, Mr. Cooper, first told him he had to make a big balloon payment. Then he was told it might be possible to modify the loan to move the missed payments to the back, but that wouldn't get decided until he started paying his mortgage again.

Reich says the call representative also told him, "If you didn't make a big lump sum and you didn't qualify for modification, you're going into foreclosure."

"I am completely uncomfortable being at the mercy of the mortgage company at the end of this," Reich says. "I don't trust them. I mean, I get different answers every time I talk to somebody."
 
Sounds like people were not saving their money or were taking a risk when buying their home. Can't say I feel sorry for them.
 

Latest content

General chat
Help Show users
  • No one is chatting at the moment.
      There are no messages in the chat. Be the first one to say Hi!
      Back
      Top