New York lawmakers and officials are demanding that Fannie Mae and Freddie Mac change their guidelines for handling borrowers affected by Hurricane Sandy when the forbearance period ends on their mortgages.
Governor Andrew Cuomo and The New York State Department of Financial Services sent letters to the heads of the government-sponsored enterprises, as well as the Federal Housing Finance Agency, urging them to change existing policies that could result in large spikes in Sandy victim's mortgage payments, the Cuomo’s Administration alleged Tuesday.
Cuomo claims the GSE guidelines generally lead to a quick uptick in mortgage payments for storm victims when a loan forbearance-period ends. Put more simply, when a typical family reaches the end of forbearance, Cuomo fears they could face a balloon payment as high as $6,000 or a monthly payment spike of $500.
Essentially, Cuomo believes the GSEs’ current guidelines could force Sandy victims — that have received temporary forbearance periods on their mortgage payments — to make "immediate balloon repayments for the entire amount of relief received" or see an immediate spike in their monthly payments.
"My administration is calling on Fannie Mae and Freddie Mac to take immediate steps to change these unfair guidelines so that Sandy victims can continue moving forward on the path to recovery, instead of being sent back to square one," Cuomo said.
In February, Freddie Mac changed its process for helping servicers deliver insurance proceeds to borrowers who need to fix their homes secured by the GSE.
The goal was to simplify, as well as clarify, policies so servicers can put insurance proceeds to work by assisting distressed borrowers impacted by natural disasters.
Brad German, spokesperson for Freddie Mac, said the GSE shares Cuomo's commitment to helping borrowers in eligible major disaster areas.
"After Hurricane Sandy struck, we authorized lenders to suspend mortgage payments for up to 12 months and to collect the missed payments through individually tailored repayment plans or loan modifications. We also instructed lenders to expedite the distribution of insurance proceeds so families would have the money to start repairs and pay for emergency shelter and living expenses," he said.
In 2012, the Cuomo Administration came to an agreement with various banks and mortgage servicers to offer a forbearance period on mortgage payments to borrowers hit by Superstorm Sandy.
However, the initial forbearance periods are starting to end, sparking new fears.
"We’ve worked with Fannie Mae and Freddie Mac in the past to address instances when their guidelines would have unfairly harmed Sandy victims, and we expect that they’ll do the right thing again this time," said Benjamin Lawsky, superintendent of Financial Services.
Although Fannie Mae declined to respond to the claims launched by the Cuomo Administration, the GSE told HousingWire that there are various resolutions for distressed borrowers, including an extension on forbearance of up to a year or a loan modification.
"We’ve designed the options for borrowers who have been affected by national disasters so homeowners and servicers can have flexibility to get to a solution that is right for the homeowner," Andrew Wilson, spokesperson for Fannie Mae, told HousingWire.