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Action taken by the states will temporarily halt foreclosure proceedings and allow residents to defer mortgage payments.
Home owners in California and New York will have additional protection against foreclosure and eviction after officials announced new measures to help residents cope with the economic crisis brought on by the coronavirus outbreak.
California Gov. Gavin Newsom announced Wednesday that five major banks and nearly 200 other financial institutions agreed to temporarily suspend foreclosure proceedings and to defer mortgage payments for homeowners financially affected by the crisis.
“Millions of California families will be able to take a sigh of relief,” Newsom said. “These new financial protections will provide relief to California families and serve as a model for the rest of the nation.”
Meanwhile regulators in New York issued guidance that would similarly require state-chartered banks and credit unions to offer residents who suffer financial hardship from the outbreak mortgage forbearance for three months.
The announcements come after governors in both states sought to slow the spread of the coronavirus in their communities by ordering non-essential businesses to close and for residents to stay home as much as possible. But these efforts to stop the outbreak carry severe economic consequences, with shuttered businesses laying off workers. More than 3.3 million people filed for unemployment last week.
The Federal Housing Finance Agency previously announced a 60-day stop on evictions and foreclosures for federally-backed mortgages for single-family homes. To ensure renters are not displaced, FHFA also directed Fannie Mae and Freddie Mac to offer mortgage forbearance to multifamily property owners on the condition they suspend all evictions for tenants unable to pay their rent as a result of the coronavirus outbreak.
About 60% of mortgages nationwide are federally backed and would fall under the FHFA protections, said Adam DeSanctis, a spokesman for the Mortgage Bankers Association.
Orders like the one issued in California will provide protection for the remaining 40% of homeowners, he said.
Given the Department of Labor’s announcement that unemployment claims across the country increased by 3.3 million last week, DeSanctis said he expects other states will take similar steps to provide protection to homeowners.
“I’m sure we will start to see more of these,” he said.
Cities have also undertaken efforts to halt evictions while the economy grinds to a halt.
Under California’s agreement, banks including Wells Fargo, JPMorgan Chase, Citibank and US Bank will allow homeowners to defer mortgage payments without accruing penalties for up to 90 days, or possibly longer. They will also halt foreclosures or evictions for 60 days. Those rules will only apply to California customers who have been directly impacted by the pandemic.
The emergency regulations issued by New York’s Department of Financial Services require state-regulated banks and mortgage-servicing firms to allow 90-day mortgage deferrals on residential mortgages for any resident “who demonstrates financial hardship as a result of the COVID-19 pandemic.” Banks will also be required to waive ATM and overdraft fees, as well as credit card late fee payments, for those financially impacted by the pandemic.
The New York regulations do not extend to banks with federal charters, such as JPMorgan Chase and Citigroup Inc.