Homeowners fear having to pay a hefty lump sum for mortgages

Fred Loera is scared. The Washington state resident is struggling to pay his mortgage after losing his job as a medical assistant earlier this month and now has to pay $ 6,600 in house payments. And that’s after receiving what is supposed to be a helping hand from the US government.

Loera’s loan servicer, New Residential Investment, is giving you a three-month mortgage pass under the $ 2.2 trillion Coronavirus Relief, Relief and Economic Security Act, or CARES. However, the real estate investment firm told him that he will owe the full amount once the forbearance period ends, he said.

“I kind of panic,” said Loera, 48. “This is not what I had in mind when I was looking for a little help.”

The American Enterprise Institute estimates that 4 million home loans in the US are already in “forbearance,” as industry jargon calls the pre-foreclosure step. As more people fall behind, consumer protection groups say they are receiving complaints from other homeowners who, like Loera, have obtained a measure of federal mortgage relief but are also concerned about owing a hefty lump sum in late payments.

Federal guidelines give homeowners other options after the forbearance ends, but consumer advocates express concern that mortgage servicers are forcing homeowners to make a balloon payment they cannot afford.

“They are not listening to the full range of their post-indulgence options,” said Christina Tetreault, manager of financial policy at Consumer Reports, which is pressing The nation’s largest mortgage lenders to work with homeowners more actively. “What they are hearing is, ‘We will contact you before your tolerance ends,’ and it is not entirely clear why this is happening.”

A provision of the CARES Act allows homeowners to request reduced or suspended mortgage payments for up to 12 months with no surcharges or penalties if their mortgages are backed by Fannie Mae and Freddie Mac. Once the initial forbearance period is over, a homeowner can apply for an extension, reinstate their mortgage or come up with a long-term payment plan to pay off the old balance, according to Fannie Mae. guidelines.

Loera said she was not aware of those options. Instead, he said a New Residential customer service representative told him he had to make three-month payments on his 30-year mortgage by the end of July. Any late payments will be reported to the credit bureaus.

“If I applied because I didn’t have the money this month, what makes you think I’m going to have three months of money in three months?” Loera asked. “And I am someone who has been financially responsible and hard-working in the medical field for 21 years.”

New Residential did not respond to a request for comment.

Alfredo Loera was allowed to defer his mortgage for three months after losing his job as a medical assistant, but says he was told he had to pay $ 6,600 in a lump sum to catch up.

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The Consumer Financial Protection Bureau, a federal agency charged with protecting Americans from financial abuse, has received hundreds of anonymous complaints from homeowners who say they face pressure from lenders and loan servicers to make late payments on their loans in a lump sum.

“What they are doing now is not necessarily helping consumers because now I am concerned that if I cannot get back $ 6,000 in late payments, they will foreclose on me,” said one Oklahoma homeowner. He said the Bureau.

New York Attorney General Letitia James asked mortgage servicers in a letter to “provide a complete and accurate description of all post-forbearance options for reinstatement by informing clients that they have been automatically placed on a forbearance plan due to late payments.”

“We want to work with mortgage servicers to ensure that all homeowners are treated fairly, regardless of who owns or serviced their loan, and that homeowners are seamlessly back to making affordable monthly payments when the forbearance plans end. related to COVID19, “the April letter read.

Andre Barnett, 43, of Hyde Park, New York, obtained a six-month reprieve on his mortgage from Flagstar Bank after recently losing income as his small business began to suffer the economic impact of the coronavirus. Barnett said he called his lender to find out more about the possibility of mortgage relief, only to be transferred to the collections department.

“The collections told me that their option is a lump sum, a balloon payment, in the end,” Barnett said. “They said ‘If you can’t return it, then we’ll see what other options are available to us.’

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Additional deferral of your mortgage payment under the CARES Act it would be the last resort, Barnett said he was told.

A Flagstar Bank executive said the bank presents a range of options for homeowners seeking mortgage relief, including lump-sum payments and paying overdue amounts in installments.

“The message we tell you is leniency is the first step in a two-step plan,” said Courtney Thompson, senior vice president of default mortgage at Flagstar, who helped write the banking script that customer service representatives read to homeowners. . “The first step is a time out right now for peace of mind, and the second step is that we have to alleviate crime.”

Thompson also said the company will contact any customer who believes they were not fully informed about their payment options.

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