Editorial: Sandy victims need help from Fannie and Freddie
The last thing federally backed mortgage giants Freddie Mac and Fannie Mae need is more foreclosed homes. That's one reason the companies should let up on superstorm Sandy victims whose grace periods are ending, and forgo immediate repayment of six months of mortgage arrears. Common sense and common decency are two others.
The storm hit 51/2 months ago, damaging or destroying about 100,000 homes on Long Island. After the storm, most banks, and Fannie and Freddie, told victims they could skip payments for as long as six months. But they also expected that at the end of the grace period, the arrears would be made up promptly. This was unreasonable. After Gov. Andrew M. Cuomo and Sen. Charles Schumer pleaded publicly, several banks, including JPMorgan Chase, Bank of America, Wells Fargo and CitiMortgage, agreed to let borrowers make up the missed payments at the end of the loans' terms. It's a decision that was good for the banks' reputations, their customer relations, the communities they operate in, and their books.
Another group of close to 300,000 owners of damaged homes in New York and New Jersey can also get more mortgage and balloon-payment relief, the federal government said Friday, if they show they are still repairing their homes. But 65 percent of mortgages are held by Fannie and Freddie, which have not agreed to defer missed payments to the end of loans' terms for the approximately 3,000 New York mortgage holders they granted forebearance. Borrowers who cannot afford single balloon payments must apply for loan modifications or repayment programs, another pile of paperwork that must be handled through loan servicers who have reportedly been extremely difficult to get cooperation from.
These homeowners ought to automatically have the payments from that period tacked to the end of their loans, rather than owing them immediately. If the banks can do it, Fannie and Freddie should, too.