This is just a quick follow up on the mortgage relief post I wrote on April 4th. Yesterday, I read an NPR article about issues with mortgage relief . It featured a couple from Maui. Like many island residents, the couple is experiencing a massive loss of income due to the impact on COVID-19. They are one of the many homeowners pursuing mortgage relief that are finding the terms offered by their lenders to be onerous.
In the case of the Maui couple, their loan is through Freedom Mortgage. While the lender offered to defer their loan payments for three months, Freedom Mortgage required a balloon payment at the end of that period. Even under the most optimistic scenarios, it seems unlikely that the borrowers would be able to come up with that balloon payment.
The Consumer Finance Protection Bureau website indicates that federally backed mortgages should be able request forbearance for up to six months. The CARES Act creates mechanisms to move deferred payments to to the end of the mortgage. Freedom Mortgage originally claimed that the balloon payment was the only option they could offer for deferred payments. They claimed they could not defer the amount of the forbearance to the end of the loan. NPR brought this to the attention of federal regulators. On a subsequent follow up, Freedom Mortgage changed its tune with NPR. The Maui Couple is still trying to get clarification on their options.
Takeways
To be clear, not all borrowers are running into the roadblocks encountered by this Maui couple. A number of lenders are making adjustments that allow for six month deferments with deferred payments at the end of the mortgage. That said, borrowers should expect prolonged long wait times and filing an application to get the forbearance. Forbearance terms can also vary depending on your loan program.
The biggest takeaway is that borrowers should be cautious if they are seeking mortgage relief. Make sure you read the terms of any relief offer closely. Reach out to a housing councilor (800) 569-4287 if the terms offered by your lender are confusing or not financially feasible.
