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Mortgage forbearance? Lump-sum bill could come due before crisis ends

Cassandra and Alex Benvenuto, with Lulu, said the

Cassandra and Alex Benvenuto, with Lulu, said the suspension of their jobs will require them to ask their lender for forbearance on their house payments.  Credit: Cassandra Benvenuto

Long Island homeowners who are struggling to pay their mortgages say they have asked lenders about federal and state mortgage reprieve programs, only to learn any missed payments would be due all at once in a few months.

Burdened with some of the nation’s highest housing costs and hit hard by a pandemic that has shut down all nonessential work and thrown more than 100,000 Long Islanders out of work, some homeowners say the mortgage forbearance programs that are intended to help homeowners could instead force them to default on their mortgages and risk losing their homes.

“That's the scary part for me, that they're saying, ‘Oh, well, don't worry about it right now, we'll suspend them at your request,’” said Veronica Dockery, 50, who lives with her husband and the three youngest of their six children in West Babylon. Dockery’s husband’s work as a driver for Uber has all but evaporated since the pandemic began, and Dockery is on disability from her job as a store manager due to a heart attack and collapsed vertebrae that required spinal surgery, she said.

Dockery said her lender, Freedom Mortgage, told her the family could miss up to three monthly payments without penalties, but then all the missed payments would be due in a lump sum in four months.

“Am I going to go into foreclosure because I'm not going to be able to give them $10,000 or $11,000 at one shot?” said Dockery, who said her monthly payment is about $2,640. “As a mother with children, it's kind of a scary thing, because you definitely don't want to … go into foreclosure, especially being on disability and [potentially] not having a home for your children.”

Dockery said they would keep making payments for as long as they can. Less than an hour after Newsday contacted Freedom Mortgage to ask about Dockery's loan, a company representative called Dockery to say she could take up to a year, or possibly longer, to make up the missed payments. Freedom declined to comment on the family's loan, citing privacy concerns.

The Mortgage Bankers Association reported that requests for loan reprieves skyrocketed last month, with lenders receiving 270 times more forbearance requests at the end of March than they had at the beginning of the month. The share of loans in forbearance — that is, a temporary suspension of payments — was about 15 times higher in early April than it had been a month before, surging from 0.25% to 3.74%.  

Some Island homeowners said they were surprised to learn that if they get a loan reprieve, they would be required to make up the missed payments in a lump sum at the end of the forbearance period, rather than stretching out the repayments over a longer term or adding them to the end of the loan period. The forbearance periods are up to six months, with the option of an additional six-month extension, for federally backed loans, including those backed by the Federal Housing Administration and government-sponsored mortgage giants Fannie Mae and Freddie Mac, or three months for loans from New York-regulated companies.

Fannie Mae has sent lenders a script to use with homeowners impacted by the pandemic, which suggests extended repayment plans for those who cannot make up all the missed payments at once. Freddie Mac is allowing servicers to offer loan modifications that are normally only available during natural disasters.

But not all homeowners are offered those options.

Tony Giametta, 64, who lives with his wife in Oceanside, said he is current on his mortgage payments but he called his lender, U.S. Bank, to see what his options would be if he starts to encounter financial problems. He was “taken aback,” he said, to learn that if he were to miss any payments due to the pandemic, all the missed payments would be due in a lump sum in August.

“When I heard that I said, ‘You’ve got to be kidding me, how can you even pass that off as a relief program?’” said Giametta, a retiree who formerly worked at Kennedy Airport. “I’m not looking for a handout, nobody’s looking for that, but at least work with the people.”

Lenders "are being very quick to offer immediate forbearance to people where they can forgo mortgage payments for a period of time," said Guy Cecala, publisher of Inside Mortgage Finance. "But we're not really thinking about how we're going to get them to catch up or resume making mortgage payments down the road. And that's going to be problematic."

Two-thirds of mortgage loans are bundled into securities and sold to investors who are guaranteed timely payment of principal and interest, Cecala said. It can be difficult to get large groups of investors — typically hedge funds and institutional investors — to agree to give homeowners a break, he said. Plus, if there is a wave of missed payments, the companies known as servicers, which collect mortgage payments and send funds to investors, could end up needing help from the federal government, he said.

Ordinarily, forbearance programs are intended for people who are coping with short-term problems, said Keith Gumbinger, vice president at HSH.com, a mortgage information website. With no way to know when the pandemic will end, "the pressure has been on servicers," and a growing number seem to be giving borrowers more time to pay back missed payments, Gumbinger said.

Homeowners seeking help from lenders should make a strong case for themselves, writing a letter that describes their family's medical and financial hardships and what they have done to cut costs, said Michael Grannum, a real estate agent with Exit Realty Premier in Massapequa Park and retired banker, who said he helped homeowners get loan modifications during the housing crisis.

Grannum said homeowners should push lenders for a longer repayment period, as well as other forms of assistance such as a lower interest rate, and they should keep careful notes on every phone call — including dates and names — and save copies of every document they submit. "You have to keep very, very good records of everything," he said. Those who are still working could consider seeking a loan modification or refinancing their loan, he said.

If homeowners can find any way to keep making mortgage payments, they should do so, one mortgage broker advised. In addition to the fact that the missed payments could be due in a few short months, missing payments could look bad on credit reports, which include lists of all recent payments, said Warren Goldberg, president of Mortgage Wealth Advisors in Plainview. “Even if they tell you this is not going to affect your credit, no one can really be certain yet,” he said. Goldberg said he advises his clients to avoid seeking forbearance, if they possibly can.  

Some homeowners may not have a choice, though, especially if they are struggling to pay for food and other bills, Goldberg said.

“We’ve got to worry about the necessities first, before we worry about credit,” he said. “Credit can be rebuilt.”


Even before the coronavirus pandemic hit, Nassau and Suffolk homeowners faced some of the highest levels of housing distress in the country, a new report shows. In Suffolk County, the typical resident would need to pay 55% of their annual income to afford a home valued at $415,000, the median sale price in the first three months of 2020, California-based Attom Data Solutions reported this month. At the end of 2019, 6.6% of Suffolk homeowners with an outstanding mortgage owed more than their home was worth, and 0.2% of homes were in the foreclosure process.

Nassau County residents needed an even higher share — 65% — of their income to afford a median-priced home valued at $535,000, Attom reported. Of those with mortgages, 6.9% were underwater on their loans and 0.16% were in foreclosure, the report shows.

Of all counties in the nation with sufficient data to analyze, Nassau and Suffolk ranked in the top 75 most vulnerable to the pandemic’s financial hit, Attom found.

For some local homeowners, the pandemic wiped out the income that made it possible to afford the Island’s high cost of living.  

“If we're talking about individuals that were paying roughly 45% of their actual income towards their mortgage and their income has been decimated … there's no way for people to make those payments,” said Gwen O’Shea, chief executive of the Community Development Corp. of Long Island in Centereach. “We don't want to see them move into any foreclosure process or proceedings, or have that even be a possibility.”

The $2.2 trillion federal stimulus for individuals and businesses should help, as long as it gets rolled out quickly and gets into the hands of those who need it, she said: “Does it take a month to start seeing resources? Or are we talking about six months, which obviously has very different ramifications.”

Islip resident Cassandra Benvenuto, 32, said she and her husband expect to ask Bethpage Federal Credit Union for a forbearance on their $3,018 monthly house payments. Benvenuto’s work as a private investigator dried up last month when the courts and many attorneys’ offices closed due to the pandemic. Her husband’s work as a plumbing supervisor was suspended around the same time due to a lack of protective equipment. The Benvenutos have a 1-½-year-old daughter, Lulu, and Cassandra is eight months pregnant.

“Besides our mortgage we still have our other expenses and bills, and now we have a new baby coming in a few weeks,” she said, in a text message interview while she was on hold seeking unemployment benefits. “If we could do the forbearance it could ease some of our financial troubles and stress."

But they would not be able to make up all those missed payments at once, she said. If lenders can make the missed payments due at the end of the loan term, she said, “I think that is the only way it would be helpful to everyone.”

A spokeswoman for Bethpage, Linda Armyn, said the lender is offering temporary forbearance, with options for extensions or more significant changes in loan terms for those who need them.

Changes such as moving missed payments to the end of the term would require a loan modification, Armyn said. She said most of Bethpage’s loans are sold to Fannie Mae, but the credit union is offering forbearance to all its mortgage borrowers, including those with non-government-backed loans.

“We’re really here to help, it’s just that every person’s situation is going to be unique,” she said. “We want to work with each member individually and help them through this process.”

It remains to be seen whether all lenders will provide enough support to help local homeowners navigate the crisis without losing their homes.

Michelle Abreu, director of counseling at the Long Island Housing Partnership in Hauppauge, said several of the group’s clients have asked lenders about reprieves, and they’ve been told either that all their missed payments would be due as soon as the forbearance period ends, or they would need to prove hardships to get loan modifications.

Lenders, Abreu said, “are quick to do a forbearance without receiving any supporting documents, but they are not deferring the payments to the end of the loan term, they are requiring full payment.”

David Hernandez, 56, teaches physical education, coaches sports in an after-school program, works at a day camp during the summer and drives for Uber at night and on weekends, and his wife works as a leadership consultant for school administrators and teachers. “That’s what we have to do to live on Long Island,” said Hernandez, who lives in Floral Park with his wife and their 17-year-old son.

Hernandez said he has already lost his after-school work, and his wife’s consulting work ceased when schools closed last month. The job losses will “reduce our income significantly, to the point where we're going to have a hard time paying the mortgage,” he said. He said his mortgage servicer, Planet Home Lending, approved a temporary forbearance for the family’s monthly mortgage payments until June 1, at which point any missed payments will be due. If the family cannot pay, the company wrote to Hernandez, it would review the situation and consider “an extended forbearance, a payment plan, a modification or other loss mitigation option,” depending on “investor guidelines at that time.”  

Hernandez said he is glad to have the temporary forbearance, but it doesn’t ease his worries.

Making the payments due on June 1 “is not going to help,” Hernandez said. “We don’t want to deal with any stress of having a foreclosure, eviction, three months from now, six months from now.”

Resources

Learn more about federal mortgage forbearance programs, and find out if your loan is backed by Fannie Mae or Freddie Mac: nwsdy.li/federal


Find out if your lender is regulated by New York State: nwsdy.li/statereg

Find a federally approved housing counselor: nwsdy.li/counselor

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