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Regulators Concerned Banks May Be Reneging on Relief for Sandy Victims

Wednesday, March 06, 2013

New York Governor Andrew Cuomo announced Wednesday that the state Department of Financial Services will launch a review to determine whether large, well-known banks are reneging on a promise to provide homeowners affected by Sandy mortgage relief. The state's move comes after WNYC reported on Staten Island Sandy victims facing threats of foreclosure.

The banks had agreed to allow Sandy victims to miss up to six months' worth of payments on their mortgages. But WNYC found that banks were sending struggling homeowners threatening notices and required that all missed payments be paid in one large lump sum, many of which are coming due now.

The Department of Financial Services says it has received similar complaints about how banks are treating Sandy victims.

"They should not be looking to push people over the foreclosure cliff just as they are starting to get back on their feet after storm Sandy," said Benjamin Lawsky, the state's Superintendent of Financial Services.

Officials said they would try to determine whether the complaints about banks were isolated incidents or part of a disturbing trend. The department has requested that banks provide information such as how many balloon payments they requested from homeowners as well as their policies surrounding the mortgage relief.

In addition, banks were asked whether they provided borrowers with the written terms of forbearance agreements. Attorneys in Staten Island have complained that banks were refusing to provide written terms to their clients making it difficult to hold banks accountable if they attempted to foreclose on them for missing payments. The banks were given until March 12th to respond.

"I expect that most of the banks will hopefully almost immediately agree to put people on payment plans," Lawsky said. "That's better for the homeowners and frankly that's better for the banks."

At least one bank is on board. JP Morgan Chase, said after the governor's announcement that it would allow homeowners affected by Sandy to defer missed payments until the end of a loan term. Homeowners must have been in good standing prior to the storm and their loans must be owned by Chase.  A spokeswoman said the bank had made the decision a few weeks ago.

Several other banks did not respond to WNYC's inquiry.

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