Struggling homeowners are flooding their mortgage companies with requests for help as the coronavirus pandemic wrecks the economy. Many are having a hard time getting it.
Homeowners say they are waiting hours on the phone just to reach a real person. When they do, some are told that getting an answer could take weeks. That is a troublesome timeline for the many borrowers whose mortgage payments are due in the first half of April.
“I’m frustrated and scared,” said Chris Colgan, a real-estate agent from Northern Virginia. He said he called his servicer some 15 times in the past month.
The $2 trillion stimulus package is supposed to make it easier for homeowners to suspend their monthly payments and temper a potential foreclosure crisis. The difficulty in doing so threatens to squeeze Americans further just as the pandemic puts millions of people out of work.
The stimulus legislation that was signed by President Trump says homeowners hurt by the coronavirus or its fallout can ask their mortgage servicer for a so-called forbearance, in which their monthly payments are interrupted for up to six months, and can also request an additional six months.
Borrowers don’t have to show documented proof that they have been hurt by the coronavirus. If the loan is backed by the government, the mortgage servicer is generally supposed to grant the request. About 70% of U.S. mortgages are backed or insured by a federal agency.
Some borrowers fear that help might not come soon enough. David Jenkins, a product manager for a tech company, said he asked
Fifth Third Bancorp
about a forbearance last week. His wife’s job teaching Pilates exercises has become less certain, weighing on the family’s income. The bank told him that if he qualifies, he should receive written approval in the mail.
“Snail mail of forbearance approval is ridiculous,” Mr. Jenkins said.
A Fifth Third spokesman said that any borrower who “tells one of our customer-service representatives that they have been impacted by the coronavirus” will be accepted as eligible for mortgage forbearance.
The law says nothing about when borrowers have to make up the missed payments, fueling some of the confusion. Some borrowers are assuming, wrongly, that they don’t have to make up the payments later, industry officials and regulators say.
Some regulators say borrowers should have the option to make up the payments at the end of their loan. Homeowners say mortgage companies generally haven’t offered that option. Instead, many say they are being told they must make up their missed payments in one big lump sum as soon as the relief period is over.
“The messaging has not matched what’s established in policy yet,” said David Stevens, a former head of the Federal Housing Administration, which mostly insures loans for first-time home buyers. “The confusion level is extremely high.”
The Department of Housing and Urban Development sought to clear up some of the confusion this week, telling servicers they can compile the missed payments into a second, interest-free home loan for the borrower to pay off after the original mortgage. The guidelines apply to FHA-insured mortgages, which make up about 15% of all active mortgages in the U.S.
The federal regulator for Fannie Mae and Freddie Mac, the mortgage finance companies that back about half of the U.S. mortgage market, has instructed servicers to work with borrowers and to consider letting them tack their missed payments on to the end of their loan.
The AT&T store in downtown Washington, D.C., where Reggie Matthews works, was shut down about two weeks ago. He said United Wholesale Mortgage, the servicer on his FHA loan, said that he was eligible for a short-term forbearance but that he couldn’t defer missed payments by tacking them on to the end of his loan.
Mr. Matthews isn’t sure what he will do. He has asked United Wholesale Mortgage to turn off the autopay feature on his loan. The company didn’t comment.
Allowing a flood of borrowers to stop their payments temporarily could bring about a massive cash crunch for mortgage companies, which are generally still on the hook to make payments to mortgage investors even if borrowers are in arrears. (Taxpayers, though, are ultimately on the hook for federally backed loans.)
That has proved daunting to the companies, many of which are nonbanks and don’t have deposits or other business lines to cushion them. Nonbank lenders originate about 60% of U.S. mortgages.
It’s unclear how much money the companies will need, but the industry anticipates tens of billions of dollars. Ginnie Mae, a government agency that backs some $2 trillion of mortgages, announced last week it would work with nonbank lenders to help them stay afloat.
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“Until the funding is more certain…they’re going to tend to be less generous to the borrower,” said Ted Tozer, a former head of Ginnie Mae who is now a senior fellow at the Milken Institute.
Adding to the confusion, many servicing call centers have been shut down, meaning customer-service reps are working from home and juggling child-care and technical difficulties. Average hold times for some of the largest mortgage companies are between three and four hours, according to estimates by Digital Risk, a technology and risk firm that advises mortgage lenders. Call volume is six times higher than mid-March levels.
Mr. Colgan, the Northern Virginia real-estate agent, started calling his mortgage company, NewRez LLC, in early March. He filled out an online form about three weeks ago explaining that his commission-based job might be put on hold as potential home buyers stay out of the market. Someone would get back to him within three days, the company’s website said, but Mr. Colgan said he never heard from anyone.
The Wall Street Journal contacted NewRez about Mr. Colgan’s mortgage on Thursday. NewRez called Mr. Colgan later that day and offered to suspend payments for April and May, both to be paid July 1. He has decided to make his payment this month, but is unsure what he will do after that.
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