Mortgage protections expire soon, and distressed homeowners need to be ready
Nearly one in 10 Long Island homeowners have fallen behind on their mortgages, and housing advocates and attorneys are urging them to seek help before the situation gets worse.
More than 60,000 Long Island homeowners had missed at least one mortgage payment by July — a nearly threefold increase from a year earlier, according to figures provided to Newsday by Black Knight Inc., a mortgage industry technology and data provider. That means almost 9.5% of local borrowers were delinquent, up from 4% a year before, the company said.
More than 41,000 of those borrowers had missed at least three payments, almost seven times as many as last July, Black Knight reported. Of all local homeowners with mortgages, 6% were at least three months behind, up from 1% a year earlier. The figures include borrowers in forbearance, Black Knight said.
As the COVID-19 pandemic continues, lenders’ forbearance programs are allowing many homeowners to skip at least three mortgage payments. Federally backed mortgages typically offer more flexible terms such as allowing borrowers to delay payments until the end of the loan term, but many privately held mortgages require a lump-sum payment as soon as the forbearance ends. Nationwide, 7.16% of mortgage borrowers were in forbearance, the Mortgage Bankers Association reported Tuesday.
For those who have fallen behind, "what will hurt is if they do nothing and keep their head in the sand," said Gale D. Berg, director of pro bono attorney activities at the Nassau County Bar Association. Once the forbearance periods end, she said, "the floodgates are going to open and there's going to be a mess."
Homeowners struggling to make payments should contact their lender to discuss the situation, and they should also reach out to nonprofit housing groups — in particular, those approved by the federal Department of Housing and Urban Development or included in the state Homeowner Protection Program — that provide free help from housing counselors and attorneys, as well as legal groups such as the Nassau County Bar Association that can put homeowners in touch with volunteer attorneys, Berg said.
Expecting a 'tsunami'
Gale D. Berg, the Nassau County Bar Association's director of pro bono attorney activities, helps homeowners in the parking lot of the bar association in Mineola. Credit: Newsday/J. Conrad Williams Jr.
Once lenders start to take more action on delinquent mortgages, "it's going to be a wave, but one of those huge tsunami waves, that's how bad this is going to be," said Kathleen Maher, a Hempstead-based staff attorney with the nonprofit legal advocacy group Nassau Suffolk Law Services.
Among Maher’s clients is Nagelande Lerebours, a special-education teacher and mother of three children, ages 11 to 15. Lerebours said she has been trying to save her Baldwin home from foreclosure since 2018, after going through a difficult divorce.
She said her mortgage servicer, a Dallas-based company called Mr. Cooper, formerly known as Nationstar Mortgage, offered her a trial loan modification earlier this year, and she made all three trial payments of $2,480.
"It hasn’t been easy, but we did it and we did it on time," Lerebours said of the modified payments. She said she and her fiance, Dwayne Evans, a track and field event consultant and coach whose income has declined due to the COVID-19 shutdown, "just want stability for the children. We’re adults, we could always do something for ourselves, but when there’s children involved it’s a different story."
She said Maher has been "our backbone" as they have faced foreclosure. "You need someone who’s thorough ... who is supportive," she said. She said she is still waiting for final approval on a permanent modification.
In a statement, Mr. Cooper said it does not comment on individual situations but it is following guidelines set by the loan investor and working to find a resolution for Lerebours.
How it adds up
After the 2007-2009 Great Recession, Linda and Ron Schneider worked with their mortgage company to modify their loan. "It made it affordable to stay in the house," Ron said. Credit: Barry Sloan
For those who cannot pay their housing bills, the missed payments add up fast.
Monthly mortgage payments average about $3,290 in Nassau County and $2,883 in Suffolk County, the most recent available figures show. That includes an average mortgage principal and interest payment of $2,006 in Nassau County and $1,823 in Suffolk County, according to Black Knight. Plus, homeowners paid average monthly property taxes of $1,175 in Nassau and $951 in Suffolk in 2017, the Internal Revenue Service reported. In New York, homeowners’ insurance adds an average $109 to the monthly payment, according to the Insurance Information Institute.
Once that debt catches up with homeowners, "I think it's going to be the worst economic crisis that we possibly have seen," said Gwen O’Shea, president and CEO of the Community Development Corp. of Long Island. "People are hurting desperately right now," she said. "It’s human nature to sort of drag it out as long as possible. I think we're all hoping that there's an end in sight. But that's potentially not the case, right? ... I don't think we've seen the full impact from a jobs perspective and an earnings perspective."
Long Island’s unemployment rate rose to 13.8% in July, an increase of 1 percentage point from a month earlier as more people entered the labor market in search of jobs, state figures show.
Now that COVID-19 restrictions on foreclosures are ending, attorneys say lenders are gradually resuming work on pre-pandemic foreclosure cases and starting to file a small number of new foreclosure lawsuits. The shutdown that started in March halted work on nonessential cases such as foreclosures. State officials began lifting foreclosure restrictions in June. Now, work on many foreclosure cases can proceed as long as lenders abide by certain rules, though foreclosure sales are banned until Oct. 15.
For homeowners with loans backed by Fannie Mae or Freddie Mac, the Federal Housing Finance Agency has imposed a moratorium on single-family foreclosures and evictions from bank-owned homes until Dec. 31.
'Eerie' quiet for now
Homeowners take advantage of the assistance given by American Debt Resources and other agencies under the Home Owners Protection program in the parking lot of the Nassau County Bar Association in Mineola in August. Credit: Newsday/J. Conrad Williams Jr.
With lenders only gradually filing new cases, the share of borrowers facing foreclosure declined by about 0.3 percentage points in July from a year earlier, to 1.3% in Nassau and 1.9% in Suffolk, Black Knight reported. Lenders filed only 17 new foreclosure notices on Long Island in July, down from 311 a year earlier, according to California-based Attom Data Solutions.
Before the pandemic, O’Shea said her group would get 50 to 75 calls a month from people facing foreclosure, but lately the phones have been so quiet it’s "eerie," she said.
O’Shea said homeowners can benefit from options ranging from temporary solutions such as forbearance to longer-term measures for those who do not believe they can continue to pay their bills. In addition, O’Shea’s group is working with local government agencies to try to fund assistance for those who have fallen behind on their mortgages.
"Someone doesn't have to wait until they're three months behind in their mortgage to call us, they can call us even when they're concerned about where they may be next month," O’Shea said. "We could talk and look at budgeting and financing and resources that are available."
How to get help
For those facing hardships — or who fear they could — here is an overview of options to discuss with housing counselors or attorneys.
If you’ve hit a temporary rough patch…
Mortgage forbearance programs can offer temporary respites for homeowners suffering financial hardships due to the coronavirus pandemic.
For mortgages backed by Fannie Mae, Freddie Mac or the Federal Housing Administration, homeowners can request a six-month reprieve, with the possibility of an additional six-month extension. In May, Fannie Mae announced that borrowers would have the option of moving those payments to the end of the loan term rather than owing a lump sum at the end of the forbearance period.
For loans with SONYMA (State of New York Mortgage Agency) or a mortgage company that is regulated by New York State, homeowners also can get a six-month forbearance plus a six-month extension upon request. SONYMA allows borrowers to move payments to the end of the loan term. For information about the rules governing a particular mortgage, homeowners should contact their lender, housing advocates said.
For loans held by private investors, borrowers typically can get a temporary forbearance, but they might not have the option of moving payments to the end of the loan term. For those homeowners, nonprofit groups “have to maybe get legal services involved, to work something out that keeps the homeowner in the house,” said Michelle Abreu, director of counseling at Hauppauge-based Long Island Housing Partnership (631-435-4710, lihp.org).
For longer-term troubles…
Those who can no longer afford to make their mortgage payments due to a job loss or other difficulties can ask lenders for a loan modification, which can lower the interest rate and extend the loan term, among other changes. Eligibility standards vary, though a homeowner’s income “has to be able to support the modification,” and many lenders require the new mortgage payment to be no more than 33% to 38% of the homeowner's income, Abreu said.
For homeowners who have fallen several months behind, “just going back to work isn't the solution to becoming current, so our job as counselors is to help them work directly with the servicer,” said Julie Stern, senior manager for homeownership at Community Housing Innovations, which has offices in Patchogue and White Plains (631-475-6390, communityhousing.org).
Modifications can make all the difference, in some cases. In the aftermath of the 2007-2009 Great Recession, Lido Beach homeowners Linda and Ron Schneider endured the closing of their Rockville Centre art gallery, a temporary bout of unemployment for Linda and a house fire, among other hardships. After a monthslong process, their mortgage company modified their loan, moving nearly $100,000 in debt to the end of their term, interest-free, said Ron, 63, a certified public accountant, and Linda, 59, who is getting her doctorate and teaching nursing. “It made it affordable to stay in the house,” Ron said.
In other cases, a bankruptcy can help a borrower keep their home, whether by setting up a five-year payment plan, helping a borrower get a court-ordered modification or granting more time before a foreclosure sale, said Craig Robins, an attorney based in Commack. “Any consumer should really consult a bankruptcy attorney before they start going through their savings and retirement accounts, because some of these assets can be protected in the bankruptcy,” he said.
If a homeowner cannot afford to stay in the home, in some cases they can negotiate a "cash for keys" agreement, also known as a deed in lieu of foreclosure, Robins said. The amounts lenders will pay can range from "token" amounts such as $2,500 to "tens of thousands of dollars," depending on the circumstances and house value, he said. Or, in a short sale, a lender will agree to let the house be sold for less than the outstanding mortgage debt, though in some cases homeowners can face hefty tax bills for the forgiven debt, he said.
In some instances, lenders will agree to a short sale that does not result in an onerous tax bill for homeowners, said Nick Sakalis, a Syosset-based real estate agent with Coldwell Banker Realty who works on short sales. "That needs to be negotiated during the process," he said.
For seniors, vets, people with disability or lower income...
Many nonprofit groups have federally certified housing counselors who provide free help. Counselors can help homeowners apply for federal and state funding for weatherization, home repairs and other assistance for seniors, veterans, people with disabilities and people with low or moderate incomes. The eligibility limits vary. Some programs set a maximum income of 60% of the median income for the state, or $57,564 for a family of four, while another program serves veterans earning up to 120% of the median income for the area, or $151,900 for a family of four, according to the Community Development Corp. of Long Island (631-471-1215, cdcli.org).
The state Department of Homes and Community Renewal’s board last month approved a $1.75 million grant for the Community Development Corp. of Long Island to help provide home repairs that “are critical during the pandemic to ensure that homeowners can safely shelter in their homes,” a state spokeswoman said.
Danie Mentor-Dorvil, 31, an in-home personal care assistant who lives in Deer Park with her three children, ages 3, 5 and 11, said the Community Development Corp. of Long Island recently provided grant-funded insulation, new windows, a new boiler and water heater and other upgrades to her home.
“I’ve been trying to fix some of those issues with the house, and I haven’t been able to save and get the money I needed to do it,” she said. The upgrades will lower her utility bills, and this winter her 5-year-old son won’t have to huddle under extra blankets in his room, she said: “It’s a blessing.”
More resources
- Request free help from a federally certified housing counselor or attorney through the state-funded Homeowner Protection Program: 855-HOME-456 or homeownerhelpny.com.
- Find a federally approved housing counselor: nwsdy.li/counselor.
- Learn more about federal mortgage relief options, and find out who owns your loan: nwsdy.li/federal.
- Find out if your lender is regulated by New York State: nwsdy.li/statereg.
- Contact your lender to discuss your hardship and learn more about your options.
- Keep all documents proving financial hardship, and make detailed notes about phone conversations, including dates, names and extension numbers.
- Nassau County Bar Association (516-747-4070, nassaubar.org).
- Nassau Suffolk Law Services (516-292-8100, nslawservices.org).
- Open all mail from lenders, courts and attorneys.
- Monitor your credit reports; if you're in a forbearance, it shouldn't affect your credit score.
- Beware of scams, especially if a caller claims to be a lender demanding an upfront payment.
Maura McDermott covers health care and other business news on Long Island.
