Gov. Andrew M. Cuomo is urging finance giants Fannie Mae and Freddie Mac to ease their guidelines requiring homeowners to make large lump mortgage payments after being granted grace periods in the wake of superstorm Sandy.
In the weeks after the storm, most major banks told Sandy victims they could skip mortgage payments for up to six months without penalty. But under Fannie and Freddie's policies, those homeowners could be hit with immediate balloon mortgage payments of more than $6,000 when that grace period ends, state officials said.
"Fannie and Freddie's own policies would let banks suddenly spike mortgage payments for thousands of Sandy victims who are still struggling to recover, rebuild and stay in their homes," Cuomo said. "If no action is taken, these homeowners will be put at risk of falling off the foreclosure cliff."
The New York State Department of Financial Services Tuesday sent letters to Fannie, Freddie and the their government regulator, the Federal Housing Finance Agency, urging them to revamp their policies.
Last month, several lenders including JPMorgan Chase, Bank of America, Wells Fargo and CitiMortgage agreed at the behest of state officials to allow borrowers to make up missed payments when the term of the loan expires. But banks cannot offer that option for mortgages owned by Fannie and Freddie.
Instead, borrowers who cannot afford single balloon payments must apply to the agencies for loan modifications or enter into repayment programs. Fannie and Freddie, which own about 65 percent of all home mortgages, will also extend forbearance for up to a year, spokesmen for the agencies said.
"The idea is to have flexibility for people," Fannie spokesman Andrew Wilson said.
State officials, however, contend that applying for Fannie's and Freddie's loan modification and repayment programs adds another painful twist to the bureaucratic labyrinth that Sandy victims have already endured.
"It's critical that these companies take immediate action so that Sandy victims don't get tripped up by red tape as they continue the hard work of repairing their homes and rebuilding their lives," said Benjamin Lawsky, the state's superintendent of financial services.