State probe eyes banks pressuring Sandy victims on mortgages
Related mediaAerial views of Sandy damage LI's Sandy deaths: A look at the victims Helping Sandy victims Sandy's impact on Long Island Surviving Sandy Complete Sandy coverage
State officials have launched a probe into whether banks are unfairly forcing homeowners to make large lump payments on their mortgages after being granted grace periods because their houses were ravaged by superstorm Sandy.
After the Oct. 29 storm, most major lenders told Sandy victims they could forgo their mortgage payments for up to six months without facing late fees or being forced to make up all the payments up at once. Yet, now that some of those grace periods are ending, homeowners are complaining some banks are demanding full payment immediately, state officials said.
"It doesn't make sense. If someone couldn't pay for three months because of Sandy, there is no way they are going to be able to make three months' worth of payments today," said Benjamin Lawsky, superintendent of the state Department of Financial Services, which is heading the probe.
PHOTOS: LI damage | Then and now | Aerial views
VIDEOS: Recovery still in progress | Desperate for buyout
DATA: Federal aid to victims | Storm damage | Infrastructure proposals | LI storm damage | How LI reps voted on Sandy funding
MORE: Year after Sandy interactive | Complete coverage
As part of the inquiry, officials are also examining if lenders have improperly reported the skipped payments to credit agencies or used them as an excuse to start foreclosure proceedings. State officials did not name the banks that triggered the probe.
Pete Mills of the Mortgage Bankers Association, a national trade group, said federal housing guidelines give lenders flexibility on how to collect missed payments at the end of a forbearance. If borrowers can't afford a single large payment, they should negotiate a repayment schedule or loan modification with their bank, he said.
Among the lenders that granted forbearances to Sandy victims is JPMorgan Chase, which Wednesday said it is allowing borrowers to make up missed payments when the term of the loan expires. "We will automatically adjust their loan with no documentation required and at no cost to them," said Kevin Watters, Chase's chief executive of mortgage banking.
Carol Yopp of the Long Island Housing Partnership said other lenders should follow Chase's lead. Homeowners rebuilding from the storm are already under enough financial pressure without having to come up with three months of mortgage payments, she said.
"People can't just cough up $12,000," Yopp said.