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Homeowners Say Some Lenders Are Offering Relief With A Side Of Retribution


Over 6 million Americans have filed for unemployment benefits over the past two weeks, many of them homeowners with mortgage payments due. Some tell NPR their lenders are demanding punishing terms if they take part in what's supposed to be a government effort to help them. NPR's Chris Arnold reports.

CHRIS ARNOLD, BYLINE: It looked good on paper. In order to avoid a wave of home loan defaults, Congress and regulators told lenders that they had to let homeowners who lost their income defer some mortgage payments. Some homeowners say that's actually working really well, but others say that their lenders are making outrageous demands.

JULIA HANSEN: All we're looking for is help.

ARNOLD: Julia Hansen and her husband, Jim, live in Maui and lost their incomes as the tourism business shut down. Jim managed a restaurant. So they call their lender, Freedom Mortgage, to ask about deferring their payments. That's called a forbearance.

HANSEN: And they said, yes, but if you get the three-month extension forbearance, then you're paying one big balloon payment at the end, including your fourth month. At that point, if you don't pay it, you go into foreclosure.

ARNOLD: In other words, the couple was told they'd have to come up with a lump sum of about $8,000 all at once, which seemed crazy since Jim had lost his job, and until they start getting unemployment benefits, they have no income. On top of that, Jim's mom passed away last year. And the couple says caring for her depleted almost all of their savings.

HANSEN: I feel that the government is trying to help us, and I feel like Freedom Mortgage is trying to rip us off. Again, I'm very disappointed and angry at them.

ARNOLD: Several other Freedom Mortgage customers also complained to NPR. The company said in a statement that, quote, "we are working hard to help our customers." But other homeowners tell NPR that their lenders agreed to much better terms without a big balloon payment to catch up. They could just tack those missed payments on to the end of the loan. That's how it's supposed to work, says Mike Calhoun. He's with the Center for Responsible Lending.

MIKE CALHOUN: If you've had a financial hardship, you're not likely to suddenly have a large sum of money to catch up many months' or even a year's worth of mortgage payments.

ARNOLD: In fact, he says the rules require that for the vast majority of home loans, borrowers who get hurt financially in this crisis can defer mortgage payments and then get back on track without their payments going up.

CALHOUN: It is clear that borrowers should get relief. And at the end of the period of forbearance, they are not required to pay in a lump sum unless for some reason they are able to do so at that time, which will likely be very rare for borrowers, given this kind of crisis.

ARNOLD: And at least some banks appear to be getting on track with that. Susan Schwartz is self-employed and lost her income. She lives near Nashville. And she says Bank of America first told her that she'd be hit with one of these big lump-sum payments to catch up.

SUSAN SCHWARTZ: My reaction to that was just like, what? Why am I hearing this? This is just nothing. Nothing is being offered.

ARNOLD: But a week or so later, she says the bank told her that the policy had changed - no lump sum. She could just tack those deferred payments onto the end of her loan, so her payments wouldn't go up.

SCHWARTZ: It was a relief to me. And it was a relief, probably, to thousands and thousands and thousands of other individuals.

ARNOLD: Bank of America confirms that people can choose that option, so their monthly payments stay the same. But homeowners are still getting different answers from different lenders. And Calhoun says one big issue that's at play here is that the government ordered this payment relief but without a good way to pay for it.

CALHOUN: Exactly. That is very much what it is, and the size of this is enormous.

ARNOLD: OK, here's the simple version. If you're a homeowner, the company that you send your mortgage check to - that's often just a middleman. You hand them a check, and they hand it to somebody else, to investors. If you don't hand them a check, that company has got to keep paying those investors. And if they don't, they're in trouble.

CALHOUN: There is panic among particularly small lenders and servicers. It desperately needs a solution to cover that, so they're in a position where they can help the borrowers without going bankrupt.

ARNOLD: The mortgage industry is lobbying hard for the federal government to give these companies a lifeline - access to the money that they need. Meanwhile, a lot is changing quickly here, so if you tried to get help from your lender and couldn't, if you try back a week later, you might get a better answer. Chris Arnold, NPR News. Transcript provided by NPR, Copyright NPR.

NPR correspondent Chris Arnold is based in Boston. His reports are heard regularly on NPR's award-winning newsmagazines Morning Edition, All Things Considered, and Weekend Edition. He joined NPR in 1996 and was based in San Francisco before moving to Boston in 2001.