Fannie Mae and Freddie Mac are helping to provide additional relief to Hurricane Sandy victims who received a temporary reprieve from paying their mortgage after the storm but are still struggling financially.
Fannie and Freddie have directed servicers to reduce rates of interest, extend payment terms or give borrowers further breaks on repayments of principal. With temporary reprieves coming to an end, thousands of borrowers whose homes were damaged by the storm face the prospect of their monthly payments mushrooming.
"The bottom line is we want people who are affected by the storm to get the help that's appropriate for their situation and we want them to get it quickly," Fannie spokesman Andrew Wilson told American Banker. "That's been the goal of everything we've done to date."
New York officials, who had urged the mortgage giants to give servicers flexibility in demanding repayment of principal and interest that had been suspended while borrowers rebuild homes and businesses, applauded the move.
"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," Gov. Andrew Cuomo said Thursday in a press release.
Benjamin Lawsky, the state's superintendent of financial services, called on the companies to issue "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."
The Cuomo administration also said that homeowners should have the freedom to make forbearance repayments at the end of the term of their loan and pledged to continue to work with Fannie, Freddie and their regulator, the Federal Housing Finance Agency, to bring about that aid.
The relief ties to an initiative announced by Fannie and Freddie in March that speeds modifications to borrowers who are at least three months delinquent on their loans. The program allows servicers to modify loans that meet the program's requirements without requiring borrowers to document their request.
Though the program is slated to take effect throughout the nation this July, Fannie and Freddie have directed servicers to make the modifications available now to homeowners in communities throughout the Northeast that were hard hit by Sandy.
Homeowners who can document their need for a longer suspension of repayment obligations might qualify for added relief, Wilson added.
In New York, the forbearance relief follows a series of steps by state officials to shield owners of homes and businesses in areas walloped by Sandy from further financial hardship. The governor recently called on consumer credit rating agencies to refrain from dinging the credit scores of people who took a financial hit from the storm. In March, Cuomo called on 10 banks and mortgage servicers to speed their reviews of insurance payouts due Sandy victims.