Rep. Grimm to Mortgage Entities: Don’t Force Sandy Victims into Default

Mar 2, 2013 Issues: Financial Services

STATEN ISLAND, NY – Today, Rep. Michael G. Grimm (R-Staten Island/Brooklyn) joined  Staten Island homeowners impacted by Superstorm Sandy in calling on federal home mortgage entities to help them keep their homes and avoid default. Homeowners impacted by Superstorm Sandy were permitted to defer mortgage payments for 90-days, which was then extended to 180-days.  Deferred payments must be paid back in one lump sum. Rep. Grimm sent a letter to mortgage entities yesterday asking that the lump sum be spread out over the life of the mortgage to ease the financial burden on homeowners.

“The people of Staten Island have suffered a tremendous financial burden in the aftermath of Superstorm Sandy – some going deep in to debt to find the resources to rebuild, while paying for temporary housing while they repair their damaged homes,” said Rep. Grimm. “The mortgage deferment has provided some relief to homeowners; however, a dark cloud looms over their heads as they anticipate the deadline when six months of deferred mortgage must be paid at once. This is simply unfeasible for many, who worry about the risk of default. I am calling on federal home mortgage entities to ease the financial burden of homeowners impacted by Superstorm Sandy by spreading out the deferred payments over the course of the mortgage.”

On March 1, 2013, Rep. Grimm sent a letter to Fannie Mae, Freddie Mac, FHFA, HUD, and the Department of Veterans Affairs to adopt a solution that will help ease the financial burden on homeowners impacted by Superstorm Sandy.

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The text of the letter is below:

March 1, 2013

Dear Messrs. DeMarco, Donovan, Shinseki, Mayopoulos and Layton,

I would like to take this opportunity to thank you for listening to the concerns of those impacted by Superstorm Sandy, which I have been relaying to you on their behalf since the storm hit. In response to our concerns, you have helped provide desperately needed mortgage relief to homeowners whose lives have been devastated; however, there is more work to be done. 

The initial 90-day payment moratorium, as well as the additional 90 days that have recently been granted, have provided tremendous relief to those who find themselves in a situation where their primary residences are uninhabitable and need to use their limited resources to pay for temporary rental accommodations and home repairs to ensure that their families have a roof over their heads. Unfortunately, now that the 90-day period is over, those impacted by Superstorm Sandy still find themselves in tough financial situations as they struggle to rebuild.

Many of those affected by the storm are using the funds that would normally go toward paying their mortgages toward temporary housing and other essential expenses.  It would be impractical, if not impossible, to expect these affected homeowners to be able to correct their arrearage in a single lump sum payment. To do so would force many of these homeowners into immediate default, victimizing them a second time, and damaging their prospects of being able to purchase a new home in near future.

To rectify this situation, I am requesting that the creation of a long-term repayment plan that would allow these homeowners to become current on their loans over time. In my opinion, one viable option would be to amortize the arrearage over the remaining life of the loan. For example, for a loan that had an original balance of $300,000 and a 5% interest rate, the monthly payments would be approximately $1610 a month. After a six-month moratorium the homeowner would owe $9,660. If the loan had 20 years remaining, amortizing that $9,660 at 5% interest over the life of the loan would add approximately $64 to the monthly payment, an amount far more manageable than a $9,660 lump sum payment.

Again, I would to thank you for all of your cooperation thus far as my constituents work to rebuild their lives after this devastating storm. I look forward to working with you in the future and thank you in advance for your consideration in this matter.

Sincerely,

Michael G. Grimm
Member of Congress