Lenders often allow homeowners hit by disaster a payment grace period, but they sometimes fail to complete the paperwork and owners find their homes in foreclosure.

GAINESVILLE, Fla. – Following a natural disaster such as storms, wildfires, floods or hurricanes, mortgage companies usually step in to help borrowers with damaged homes by allowing them to miss a specified number of mortgage payments. But that help may end up hurting some homeowners.

Faye Feazell said that Hurricane Irma struck Gainesville, Fla., in 2017, and her mortgage lender told her that she could skip mortgage payments for up to 90 days. Three months after she called to resume her payments, the lender told her the home was in foreclosure.

“It was heartbreaking, because I have never been behind on anything in my life,” Feazell told The Wall Street Journal.

Hundreds of homeowners have submitted complaints to the Consumer Financial Protection Bureau (CFPB) about mortgage forbearance programs. Consumer lawyers told The Wall Street Journal that they’re seeing an increase in homeowners being reported as delinquent to credit reporting agencies after they use one of the programs following a disaster in their area.

Mortgage servicers are not supposed to report borrowers who are using disaster-relief mortgage plans to credit bureaus as delinquent, according to servicing guidelines from Fannie Mae, Freddie Mac and the Federal Housing Administration.

The problem is usually due to an administrative error. The companies may offer help over the phone and then not record that the borrower will be stopping mortgage payments during the recovery from the natural disaster. The lenders may also leave it unclear as to when the payments need to resume.

Borrowers who use assistance programs after a natural disaster should be extra vigilant, housing experts say. Consumers who skip payments following a disaster and use a lender’s forbearance program to do so should continually check their credit reports to make sure their missed payments haven’t incorrectly been reported as delinquent.

Consumer lawyers say that borrowers should accept payment relief only if they have no other ways to pay their mortgage. They should also call their servicers regularly until a final repayment plan is worked out.

As for Feazell, she was able to stay in her home after all. But she told The Wall Street Journal that she had to hire a lawyer to fight the wrongful foreclosure, and she’s on the hook for more than $7,000 in attorney fees because she had to dispute her lender’s foreclosure.

Source: “After a Disaster, Some Homeowners’ Next Misfortune Is Mortgage Relief,” The Wall Street Journal (Feb. 29, 2020)

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Author: kerrys