Governor Andrew M. Cuomo today announced that Fannie Mae and Freddie Mac - in response to a request from the Cuomo Administration - are unveiling a new mortgage relief program to protect victims of Superstorm Sandy from large spikes in their mortgage payments.
Sandy victims who received forbearance will be eligible for a special mortgage relief program that allows those homeowners to lower their monthly payments and avoid sudden payment spikes. Fannie and Freddie's previous guidelines could have resulted in a typical family being forced to make an immediate balloon mortgage payment of more than $6,000 or see a monthly payment spike of more than $500 or 50 percent. By contrast, the typical family participating in this new program would not only avoid a payment spike, but could also see a more than $200 reduction in their monthly mortgage payment from pre-storm levels.
"I applaud Fannie Mae, Freddie Mac, and the Federal Housing Finance Agency for acting swiftly and unveiling this new program to protect Sandy victims from sudden mortgage payment spikes," said Governor Cuomo. "Delivering this additional relief is vital to helping ensure Sandy victims can continue to rebuild and recover in the wake of this terribly damaging storm."
Benjamin M. Lawsky, Superintendent of Financial Services, said, "Fannie and Freddie have done the right thing by responding to Governor Cuomo's request and unveiling this new program to protect Sandy victims. It is critical that Fannie and Freddie now follow through on their commitment by issuing clear instructions to banks and mortgage servicers to quickly implement this new program so that no Sandy victim gets tripped up by red tape and hit with an unexpected payment spike."
Last month, Superintendent of Financial Services Benjamin M. Lawsky sent letters to the chief executive officers of Fannie Mae and Freddie Mac - as well as their regulator, FHFA - urging them to address restrictive guidelines that could have hit Sandy victims with large mortgage payment spikes.
In response, FHFA, Fannie Mae, and Freddie Mac have communicated to DFS that a special mortgage relief program will be available to Sandy victims with Fannie or Freddie mortgages who were current on their mortgage payments before the storm. Among other provisions, the program will lower the homeowners' interest rate to as low as 4 percent, extend the term of the mortgage, and also provide additional forbearance to homeowners who are severely underwater on their mortgages (owe more on their loan than the market value of their home). Fannie Mae and Freddie Mac back more than 65 percent of mortgages in New York.
While this new program provides critical relief to Sandy victims, the Cuomo Administration continues to believe that impacted homeowners should also have the additional option of repaying their forbearance relief at the end of the term of their loan. This additional option would help those borrowers who cannot afford a spike in payments, but also do not want to start a new loan term. The Cuomo Administration will continue to work with FHFA, Fannie Mae, and Freddie Mac on this issue so that Sandy victims have that additional support and flexibility as they rebuild and recover from this catastrophic storm.
The Cuomo Administration has worked hard to cut red tape for homeowners impacted by Superstorm Sandy. Last week, at Governor Cuomo's direction, Superintendent Lawsky sent letters to FICO, TransUnion, Experian, Equifax, and the Consumer Data Industry Association (CDIA) requesting that they promptly move to protect Sandy victims from unfair black marks on their credit scores if they missed payments due to the storm.
A DFS investigation also found that many Superstorm Sandy victims receiving insurance claim checks face a hurdle that they often hadn't anticipated: the check is issued jointly to the homeowner and that homeowner's bank or mortgage servicer, thus requiring the bank's endorsement of the check before the homeowner may access the funds. In December 2012, the Department of Financial Services and major banks reached an agreement that improved the situation by speeding advance checks to homeowners. The Department also sent a letter to banks and mortgage servicers in February 2013 proposing a set of best practices to help get relief to homeowners more quickly.
While most banks and servicers responded to these changes and picked up the pace, DFS conducted a further investigation in March 2013 and identified the ten banks with the worst statistics relating to the payout of insurance claims to Superstorm Sandy victims and urged them to speed the disbursement of those funds to affected homeowners. At that time, Superintendent Lawsky also again urged banks and servicers to implement the best practices DFS put forward in its February 2012 letter.
Those best practices include:
- Publishing clear, easily accessible information on their websites describing the procedures required to release funds, providing copies of required forms, and listing direct contact information for consumer representatives.
- Designating a single point of contact for homeowners.
- Immediately releasing all funds designated by the insurance company as "emergency" or "advance" funds.
- Permitting submission of required documentation via fax and email. Storm Sandy-related faxes and emails should have a separate, designated fax number and email address to expedite processing.
- Minimizing the amount of documentation required during each phase of repair.
- Holding all insurance proceeds in an interest bearing escrow account for the homeowner's benefit.
- Processing all mail on the day of receipt.
- Upon receipt of complete documentation, releasing proceeds the day of receipt.
- In the event that they receive incomplete documentation, notifying the homeowner immediately with detailed instructions on additional requirements.
- For those with branches, accepting paperwork and endorse checks at all branch locations.
- Where proceeds cannot be released in person at a branch location, dispersing funds via electronic transfer or overnight delivery.
- Requiring inspection only if specifically required by investor guidelines.
- Where inspection is required, deploying inspectors within two days of becoming aware of the homeowner's request for such inspection.
- Conducting all inspections at the servicer's own expense.
- Upon receipt of proof that homeowner is seeking only reimbursement for money already expended on home repairs, issuing check or electronic transfer directly and exclusively to the homeowner.
- Maintaining sufficient staff to comply with all of the above practices.