Ever since Superstorm Sandy, we’ve seen the phenomenon of storm-washing from our finance sector. That’s when banks decide to capitalize on the storm and generate some good PR by offering extended reliefto homeowners in the storm’s path.
Banks are offering extended relief to homeowners in areas affected by superstorm Sandy in the form of loan forbearance and fee waivers, making a small dent into the billions of dollars in damages that are expected.
Fannie Mae and Freddie Mac reminded mortgage servicers last week that homeowners in places that are declared disaster areas by President Obama were eligible for federal assistance programs. In some cases mortgage payments could be delayed for up to one year, Freddie Mac said [...]
Fannie Mae encouraged homeowners with homes that were damaged by Sandy or those who have difficulty paying their mortgage to reach out to their mortgage servicers, which are the companies listed on their monthly mortgage statement. Fannie Mae said some may qualify for a 90-day mortgage forbearance, which can temporarily suspend or reduce mortgage payments in some cases.
Banks like Chase and Wells Fargo are helping waive fees and assisting homeowners for everything from overdraft fees to mortgages.
“To help our customers focus on their safety and recover from the impact of Hurricane
Sandy, we are proactively waiving all mortgage related fees and absorbing any costs associated with delayed closings,” said Kevin Watters, head of mortgage originations at Chase.
The critical part about this is that the most affected areas – New York, New Jersey, and Connecticut – were already frustrating banks with rules that, in New York and New Jersey, force lawyers to personally attest to the veracity of foreclosure documents, and in Connecticut, mandate person-to-person mediation between borrower and lender before foreclosure proceedings. Foreclosures had already slowed to a trickle in these areas. Fannie and Freddie wanted to increase their fees in these states because they took too long to foreclose. So the storm actually forced banks to do what they should have been doing all along – extend relief to families that can afford a payment, rather than punishing states that protect due process under the law.
What I find striking is that storm-washing has extended from the GSEs and major servicers to the Department of Housing and Urban Development. HUD Secretary Shaun Donovan has also mandated a 90-day foreclosure moratorium in the area affected by Sandy. Donovan specifically said on a conference call yesterday: “People have already suffered one disaster, they don’t need two.” So one disaster, i.e. being thrown out of your home with illegal documents that no more prove ownership of the property than a Burger King receipt, is OK, as long as the weather stays nice. I see.
Come back in 84 days, and you’ll see those same shenanigans, and HUD will be fine with it, because, you know, no storm.
Photo by Randy LeMoine Photography under Creative Commons license