Large banks that offered homeowners mortgage relief during the pandemic have come under renewed criticism for the rules they are enforcing to keep borrowers resuming their monthly payments.
A report released Tuesday found that banks are addressing the issue of how borrowers should compensate for missed payments in a variety of ways. Some homeowners have pinned these payments at the end of their loan term while others are offered loan modifications, and still others are told they owe the money in an upfront payment that may be prohibitive.
The outcome can depend on a dizzying array of factors, including whether the US government has secured the mortgage, what options the bank offers, whether the borrower is aware of all of these options, and what financial resources the borrower needs.
"With millions of Americans at risk of losing their roofs during a pandemic, it's not surprising that big banks seem to be benefiting," said Nick Weiner, co-organizing the Committee for Better Banks, who wrote the report a press release. He argued that some arrangements could be financially risky for borrowers.
The Better Banks Committee's report recommends that banks should offer all affected customers the option to extend the term of the loan rather than making a balloon payment at the end of the grace period.
The stimulus bill, passed by Congress in March, required government-sponsored mortgage servants to grant deferrals and apply for relief to homeowners affected by the pandemic. However, the Coronavirus Aid, Relief and Economic Security Act says nothing about what should happen at the end of the grace period of often 180 days.
The US mortgage forbearance percentage rose from 0.25% in March to 8.5% in June and has since fallen to 6.9%, according to the latest available data from the Mortgage Bankers Association.
At a congressional hearing in July, the president of the Housing Policy Council, an industry group, stated that there is no one-size-fits-all solution for borrowers stepping out of indulgence. The House Democrats passed laws that include mandatory post-forbearance repayment options, but that bill did not get a Senate vote.
The new report from the union-backed Committee for Better Banks sheds light on some of the situations that troubled homeowners may face when their leniency periods expire.
Weiner said in an interview that the group decided to write the report after some customer service reps at banks raised concerns about scripts that would allow them to make offers based on questions asked by consumers.
He argued that banks' communications with homeowners in need is often not as clear as they should be, and said better training of staff would help.
Borrowers on mortgages backed by Fannie Mae, Freddie Mac, the Federal Housing Administration, or any other government agency cannot be required to make lump sum payments at the end of a grace period, said Alys Cohen, a lawyer with the National Consumer Law Center.
But she added, "The communication has been bad enough that many homeowners still believe there is a flat rate."
Certain banks, spearheaded by the Better Banks Committee, have defended the measures they have taken to help borrowers during the COVID-19 pandemic.
"Our employees have been trained on the guidelines set out in the CARES Act and are available to educate borrowers of their options during this challenging time," said Ryan Bailey, executive vice president, Bank of the West, $ 100 billion US dollars, in an email.
The San Francisco-based bank, a unit of French banking giant BNP Paribas, says on its website that it will consider multiple options after the grace period expires and that they may include a lump sum and a repayment schedule for a period or a loan modification.
A Bank of America spokesman said the Charlotte, NC-based company is working with more than 200,000 homeowners to help them with forbearance and said there are no balloon payment requests.
The BofA website offers a more nuanced picture. It states that options for borrowers who have more than one payment due on their loans may include repayment of the deferred payments at the end of the grace period. The same goes for mortgages owned by other companies but serviced by Bank of America with assets of $ 2.2 trillion.
HSBC explains on its website that it can reinstate the overdue payments at the end of the grace period in a lump sum. The bank's website also states, "Since most customers cannot afford immediate repayment, we also have options to make up for missed payments over time."
Julia Gordon, president of the National Community Stabilization Trust, which advocates the transfer of foreclosed real estate from financial institutions to nonprofits, said the picture is especially bleak for homeowners whose mortgages are not supported by the US government.
"All servicers are currently facing a public awareness and messaging challenge," she said. “This is complicated stuff. There are a lot of rumors and misinformation. "