Some homeowners’ next disaster after a disaster is mortgage relief
Hurricane Irma passed through Gainesville, Florida in 2017, displacing some of the clients Faye Feazell worked with as a home aide. Ms Feazell, unsure of how she would make her monthly mortgage payments, called her mortgage company for help.
She said the company, AmeriHome Mortgage Co., told her not to worry – she could skip payments for 90 days. But three months later, when she called to inquire about resuming payments, she learned she was foreclosed, she said. The AmeriHome employee she spoke to knew nothing about the back-up plan Ms Feazell said she was offered.
“It was heartbreaking,” Ms. Feazell said. “Because I’ve never been late on anything in my life.”
Mortgage companies often offer help to borrowers after natural disasters, but the programs can hurt them in the end.
The magnitude of the problem is difficult to quantify. Hundreds of homeowners have complained to the Consumer Financial Protection Bureau about problems with so-called mortgage forbearance programs. Consumer lawyers in areas hard hit by natural disasters say they have seen more homeowners reported in default by credit reporting companies after accepting payment assistance.
“We’re just a law firm in a disaster in part of Florida and we’ve seen this happen a number of times,” said Mike Ziegler, consumer lawyer at Clearwater.
How these programs work and their potential pitfalls could become even more important in light of the coronavirus outbreak. If the disease spreads across the United States and puts some Americans out of work, lenders will likely struggle over how and whether to offer borrower assistance.
Problems with assistance programs often start with administrative errors that lead to bigger problems later.
After storms, wildfires and other natural disasters, companies sometimes offer help over the phone, but don’t record that they did, according to interviews with consumer lawyers and homeowners . Businesses might not be clear about when or if borrowers should make the payments.
A business that tells borrowers that they may be missing payments may report them as overdue to credit reporting companies when they do. This in turn can lower their credit rating and make it more difficult for them to buy a car, rent an apartment or other chores after a storm. People with a lower credit score before a natural disaster are more seriously affected by credit damage afterwards, which further compounds their disadvantage, the Urban Institute found.
Service agents say they are doing their best to help borrowers and have made efforts to improve their disaster response.
Credit reporting companies
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API,
Equifax Inc.
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and
did not comment.
While such programs help many borrowers, reports of problems underscore the need for consumer vigilance. A trade group that represents credit reporting companies says consumers who skip payments after a disaster with the permission of their mortgage company should check their credit reports to make sure they haven’t been wrongly reported as delinquent.
Consumer lawyers say borrowers should only accept payment relief if they have no other way to pay their mortgage and should call their agents regularly until a final repayment plan is made.
A law firm has helped Ms Feazell, 67, stay at home. But she still has to pay more than $ 7,000 for the lawyer AmeriHome hired to handle the planned foreclosure. She wishes she had never called the company for help.
AmeriHome declined to comment.
Susan Tellem’s house burned down when the Woolsey fire ravaged her Malibu, Calif., Neighborhood in November 2018. Her mortgage agent, Select Portfolio Servicing Inc., agreed to let her skip payments for four months while ‘she was calculating the amount of her insurance. pay to rebuild, she said.
Ms Feazell’s mortgage lender, AmeriHome Mortgage Co., was preparing to foreclose when she called to resume payments.
Photo:
Charlotte Kesl for the Wall Street Journal
Less than two months later, she received a letter from the company saying she was in default for missing a payment. Ms Tellem, a senior partner at a public relations firm, told the company she no longer wanted the relief and started paying off the mortgage again, she said.
But her agent reported her as a delinquent, according to a copy of her credit report. Ms. Tellem’s credit score quickly plunged. The company eventually sent the correct information to the credit bureaus, she said, but their interactions were frustrating.
“It’s like a revolving door,” Ms. Tellem said. “We never talk to the same person.
Select Portfolio Servicing did not respond to requests for comment.
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Mortgage agents are required to give borrowers the option of skipping payments for up to 12 months in the event of a natural disaster, although the policy only applies under certain conditions. For example, the area must be declared a major disaster by the president. The Woolsey Fire fell into this category, as did Hurricane Dorian in North Carolina and severe flooding in Nebraska and Iowa last year.
By the same rules, duty officers are not supposed to report borrowers as delinquents to the credit bureaus while they are on disaster relief plans. They’re supposed to check in with homeowners on a regular basis and have a payment transition plan in place.
A similar policy applies to Federal Housing Administration mortgages.
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Some borrowers said their service agent told them they could skip several months of payments and postpone them until the loan was over, but were told a few months later that they had to repay the money immediately. .
Cheryl and Garrett Bowles said that’s what happened to them with
M. Cooper Group Inc.,
formerly known as Nationstar Mortgage, after Hurricane Irma brought down several trees on their property in Citra, Florida.
The Bowles couldn’t afford to make up for a lump sum payment, so an employee of Mr. Cooper came up with what they hoped was a way out. Ms Bowles said she was told she could file documents requesting that the skipped payments be added at the end of the loan.
She said she applied right away, but an agent for Mr. Cooper later told her the company lost the documents and needed to reapply.
A spokesperson for Mr Cooper said on Wednesday the company had offered the Bowles family a loan modification but would not specify the terms or date of the offer.
Ms. Bowles applied again. Mr. Cooper told him in a December letter that he could not modify his loan because his family had “insufficient disposable income”.
The family moved from their 1982 Catalina double-width mobile home in January. Ms. Bowles has found a buyer and expects the sale to cover the $ 40,000 still owed to Mr. Cooper. So far, they’ve moved in with Mrs. Bowles’ sister.
Mr Cooper settled charges with the Florida attorney general in 2018 that he misled borrowers after Hurricane Irma. The company has not admitted to wrongdoing, but its chief executive said in a press release that its communication with some customers “was far from perfect.”
Write to Orla McCaffrey at [email protected]
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