The offer of mortgage payment assistance was received with great enthusiasm as the financial impact of COVID-19 continues to grow.
The idea of losing your home, ruining your credit or even incurring a late fee is something most Americans would like to avoid. But is it really what you think it is? Did the banks do it to be magnanimous or is it just an empty gesture to make themselves look good?
I am writing this article as my personal opinion. In this article II will be sharing information that I have found regarding how mortgage payment assistance works and what you should keep in mind if you choose to use it. I am also going to share my experience with one bank in particular – Wells Fargo.
An empty gesture?
Don’t get me wrong. I think that if you are unable to make your full mortgage paying, being offered any kind of options is definitely great. But, in this particular situation, my opinion is that yes, it is an empty gesture. The 5 banks that made big announcements about the dedication to the customers and their commitment to help us out during these tough times. But I think they did it to sound magnanimous when in reality they continue to be nothing more than a money hungry machine interested only in their bottom line.
The $2 trillion Coronavirus Aid, Relief and Economic Security Act (CARES Act) includes $454 billion provided to the Federal Reserve to support its lending facilities. In letter sent on Monday to Treasury Secretary Steven T. Mnuchin and other federal officials, groups that include Housing Policy Council, the American Bankers Association and the Mortgage Bankers Association, essentially asked for a cut of the $454 billion.
They argue that establishing a Business and Employee Continuity and Recovery Fund is necessary in order for them to retain and rehire employees and maintain work benefits. The claim is that servicers are too cash-strapped to withstand the loss of revenue if people don’t make their mortgage payments. But how can they claim that when their reported profits are in the billions? It kind of sounds like a blackmail thing. “Give us money so that we don’t lose 1 cent of our billions or we will lay people off”.
|Company||Reported 2019 Revenue||Reported 2019 Profit|
|Wells Fargo||$82.4 Billion||$19.55 Billion|
|JP Morgan Chase||$110.04 Billion||$36.43 Billion|
|Mr. Cooper Group||$2 Billion||$270 Million|
|US Bancorp||$22.88 Billion||$6.9 Billion|
|PennyMac||$2.04 Billion||$392 Million|
They go on to say that they pinky swear that they will be transparent with what they do with the funds and that they are totally open to continuous audits and oversight. Really? We are suppose to trust companies like Wells Fargo who has been fined and/or sued for
- 1992-conspiring to fix the interest rates on millions of credit card accounts- $43 million
- 2009-discriminating against African-American and Hispanic borrowers – $175 million fine
- 2013- gauging and profiteering on overdraft fees- $203 million
- 2013- inflating premiums on forced-place home insurance
- 2016-2020 establishing fake accounts- over $4 billion is settlements and fines
- 2018 or auto and mortgage loan abuses -$1 Billion
Those are just a few examples and don’t include their multiple violations of SEC rules and proper consumer disclosure requirements. And then there is HSBC Bank.
HSBC Bank has been repeatedly were fined and sued by the federal and state government for lax enforcement of the anti-money laundering laws. The allowed drug cartels and terrorist groups to use our banking system to continue to fund and grow their illicit organizations.
Check out Dirty Money on Netflix. Wells Fargo and HSBC Bank are “featured” in some very revealing episodes focusing on corporate greed and corruption
Companies like HSBC Bank and Wells Fargo, and many others on the list above, obviously believe that paying fines is just the cost of business. So why would we believe them this time when they say that they are not going to misuse the funds if they can get their dirty little hands on a chunk of the CARES Act?
Now, let’s talk about my experience with Wells Fargo.
Wells Fargo has held my mortgage for the last 16 years or so. I know that sale of the servicing of a loan is not uncommon. What I am bothers by is that they DID NOT follow proper procedure. Both Wells Fargo and the new servicer should have sent a letter in enough time so that I can make the payment to the right company. I never received anything.
About 4 days ago, I received a voice mail from what turned out to be my new servicer, HSBC Bank (yay me!). The voicemail said that I could set up an online account to view my account activity. I thought it was a spam/scam call. Today I logged into my Wells fargo account to see what my options were regarding payment assistance and this is what I saw.
Really Wells Fargo? No call, no letter? I guess they assumed I would either check on my automatic payment or attempt to ask for assistance and I would figure it out then.
I find the timing to be very suspect. Just as they pledge to provide mortgage payment assistance, my servicing is transferred. Curious timing, right?
Wells Fargo offers to ride in on their fancy red stagecoach to save the day but in reality you are dumping us out the back so that we don’t weigh you. Typical!
OK, I’m done with the personal opinion part, now for the mortgage payment assistance clarification part
What is mortgage payment assistance?
The very basic answer is that is a way for a borrower to work with their servicer when they are unable to make their monthly payments. Sometimes it means a temporary payment reduction or a suspension of payments for a period of time. In many cases, the assistance will also help a borrower avoid late fees and having late payments reported on their credit report when they are unable to make their monthly mortgage payment on time.
What is it not?
Receiving payment assistance DOES NOT mean that someone is going to make your payment for you or that you don’t have to make up the missed payments.
News outlets, some which should know better, such as American Banker, wrote that JP Morgan Chase, Wells FArgo, Citigroup and US Bankcorp along with 200 state chartered banks and credit unions had agreed to WAIVE mortgage payments for Californians affected by COVID-19.
Ed DeMarco, president of the Housing Policy Council referred to the plan as a “temporary payment deferment“. NEITHER OF THOSE TERMS ARE ACCURATE.
WAIVE- to refrain from enforcing, to forgo. A waived payment or fee is one that is forgiven and will never have to be paid back
DEFER- to delay or postpone. The term of the loan is extended to make up for the deferred payments. If your loan would have been paid off January 2021 but you deferred 3 payments, now your loan will be paid off 3 months later.
All of the banks mentioned above are using the term forbearance. Is it that the same thing as defer? No. this mortgage payment forbearance means that you are being allowed to temporarily suspend or reduce your mortgage payments for the period of time that was agreed upon by your loan servicer.
How long will the forbearance period be?
It depend on who owns your loan.
You can request a forbearance for up to 180 days If your loan is owned or backed by a federally backed agency, You can also request an extension of that forbearance for an additional 180 days. You will need to request this mortgage payment assistance by contacting your loan servicer, that is the company that you are making your payments to. The servicer should not charge you any late payment fees and your credit report should not be affected.
List of federal agencies and entities
- U.S. Department of Housing and Urban Development (HUD)
- U. S. Department of Agriculture
- Federal Housing Administration (FHA) (Includes reverse mortgages)
- U.S. Department of Veterans Affairs (VA)
- Fannie Mae
- Freddie Mac
How do you know which one applies to you? With government loans, it’s easy. FHA/HUD back all FHA loans. The US Department of Veterans Affairs back all VA loans. And you guessed it. USDA loans are backed by USDA.
Conventional loans are a different story. Fannie Mae and Freddie Mac own the majority of “regular” conventional loans.. However, if your loan was a jumbo loan or a program that was a bit out of the box (think interest only, stated income or no documentation type of loan), then your loan might not be owned by either one.
What if your loan is not a government loan and not owned by Fannie or Freddie? Then you will need to contact your servicer and find out what options are available. Most will at least give you the 90 day options that many are talking about in the media but you need to confirm. Make sure you are clear on when the forbearance will end, if you will be subject to any late fees and if your credit report history will be affected. Make sure you get it in writing.
What happens after the mortgage payment forbearance period?
Who owns the loan and the individual policy of your loan servicer will determine what happens once the forbearance period is over.
FannieMae and FreddieMac are indicating that the servicer must work with the borrower on a permanent plan to help maintain or reduce the monthly payments as necessary. The government agencies have also asked servicers to do the same but it will be up to that loan servicer. In many cases, you will have to pay the FULL AMOUNT of the payments missed in one lump sum or apply for a loan modification.
So, don’t think of the mortgage payment assistance as a gift with no strings attached. Think of the forbearance as vacation from your mortgage payment which, like all vacation costs, will eventually need to be paid.
I hope this way too article helped to answer some of your questions regarding mortgage payment assistance. If nothing else, I know that it told you exactly what I think about Wells Fargo.