Yesterday marked the six-month anniversary of Superstorm Sandy, an unprecedented disaster that has left many New Yorkers still struggling to recover. Homeowners now face another unexpected hurdle: imminent default on mortgage payments, and with default, the possibility of foreclosure.
The origins of this pending crisis, ironically, trace back to measures mortgage servicers implemented in the immediate aftermath of the storm to alleviate the financial strain of repairing storm-ravaged homes. Mortgage forbearances, which allowed homeowners to defer mortgage payments for three to six months, provided some borrowers with breathing room to start rebuilding.
But as those deferred payments now come due in one lump sum, many borrowers find themselves once again at the precipice of financial insolvency.
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In the days following Superstorm Sandy, a natural disaster quickly turned into a financial one.
The storm struck a broad swath of homes throughout New York. Data from the Federal Emergency Management Agency’s Individual Assistance Program, which provides grants for home repairs, indicates that over 90,000 New York homeowners sustained damage.
For some homeowners, this damage was catastrophic: nearly 10,000 homeowners suffered damage in excess of half the value of their property.
And though homeowners could turn to insurance and FEMA for assistance, securing these funds has too often entailed a protracted struggle against unresponsive agencies. Insurance adjusters and FEMA inspectors persistently undervalued damage and often denied payments, while what funds were forthcoming trickled in.
Shortly after the storm, mortgage servicers set in motion a series of policies that now imperil homeowners struggling to rebuild. At Gov. Andrew Cuomo’s prodding, state chartered banks and state registered mortgage servicers agreed on November 7 to offer forbearances of 90 days or more to these cash-strapped homeowners.
As the Superintendent of the Department of Financial Services, Benjamin Lawsky, noted at the time: “Too many people have already lost their homes or are facing difficult repairs … [w]e don’t want to add to the problem by having people lose their homes or develop financial problems because they can’t make timely mortgage payments due to the storm.”
The financial reckoning that Cuomo and Lawsky sought to stave off came anyway, though delayed.
This month many homeowners are receiving notice that their forbearances are coming to an end. And with the end of the forbearance comes a bill for up to six months worth of delayed mortgage payments.
Recognizing this impending crisis, Cuomo fired back in early March, announcing a review of mortgage servicer practices and issuing a harsh rebuke: “It would be illogical to offer that relief and now expect lump sum payments from financially-strapped homeowners … [a] homeowner who could come up with three months in mortgage payments all at once probably didn't need forbearance in the first place … [e]veryone else needs more time to repay.”
But as the deadline for repayment fast approaches, the servicers’ message to homeowners has become clear: default.
Wells Fargo, for example, requires nearly all homeowners whose forbearances are coming to an end, and who cannot afford the lump sum payment, to submit a mortgage modification application. As part of this application package, homeowners must cobble together a dizzying array of documents: signed tax returns from the past two years; proof of one month’s income; two months of bank statements; and a host of other papers, forms and certifications.
Homeowners who lost everything in the storm are scrambling to piece together an application that would be cumbersome under normal circumstances. And given what we know about delays in the servicers’ application review process, even if homeowners submit applications before their forbearances end, default still remains all but unavoidable.
Servicers like Wells Fargo, who simply recycled their regular mortgage modification procedures for Sandy-affected homeowners, have an abysmal track record in reviewing these applications, with response times usually measured in months, not weeks. Sandy-impacted homeowners can reasonably expect even greater delays.
As Cuomo said, homeowners who can afford to pay three to six months’ worth of mortgage payments did not need the forbearance in the first place. For those who did, mortgage servicers’ policies have been less than helpful. Mass default, however, can be avoided.
The Department of Housing and Urban Development recently announced extended forbearances and streamlined modifications for some homeowners. And Governor Cuomo has called on Fannie Mae and Freddie Mac to ease restrictive guidelines and permit banks and mortgage servicers to extend forbearances or offer non-interest bearing payments due at the end of the loan.
This latter policy in particular would provide genuine financial relief for homeowners. But with crushing payments looming, the time to act is now.
Christopher Fasano is an attorney in the New York Legal Assistance Group's Storm Response Unit. Image of homes in the Rockaways destroyed and damaged by the hurricane. Photo: Cristian Salazar.
Job creation, economic development, and neighborhood revitalization will likely be at the top of the next mayor’s agenda, as will the city’s schools, New Yorkers’ health and safety, and environmental protection.
Critical to tackling all of these issues will be a proven method for making a positive impact: the provision of stable, safe, and affordable housing is shown to have a profound effect on childhood development, educational performance, and health outcomes. It can also be the key to community revitalization.
New York’s next mayor must prioritize affordable housing construction as a catalyst both for economic development, and improvement in the well-being of low, moderate and middle income New Yorkers.
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New York City currently ranks near the bottom of the list of major US metro areas in housing affordability-21st out of 25, according to the Center for Housing Policy.
Without bold action, the affordability crisis will only worsen.
New York City’s growing prosperity and appeal is driving up not only the cost of rent, but also the cost of land for new affordable housing.
Most recently, Superstorm Sandy aggravated the city’s housing emergency, displacing thousands of residents from homes that were damaged or destroyed by the storm’s impact.
And while 65% of New Yorkers are renters, about 80% spend over 30% of their gross income (the minimum acceptable standard for affordability) on rent.
These severe rent burdens mean too many low and middle-income households lack safe, affordable housing options, which in turn impedes buying power, economic activity, and community development in too many of our neighborhoods.
The benefits of a strong affordable housing program are clear. A recent HR&A Advisors report, Economic Impact of Affordable Housing on New York State’s Economy, serves as the basis for recommending increased new construction in underserved areas.
According to the report, each year New York City develops over 15,000 units of affordable housing, generating nearly 27,000 jobs during construction, and $2.3 billion in economic spinoff activity. These impacts are lasting, with 4,800 new permanent jobs and $550 million in additional economic activity sustained by the city’s annual affordable housing development.
Building on the affordable housing industry’s legacy of local hiring, the new mayor should implement policies and programs that support using community-based subcontractors, minority- and women-owned enterprises and others small businesses on affordable housing projects.
The New York State Association for Affordable Housing, an association of 300 developers, architects, funders, and others active in the development and management of affordable housing, has created a New York City Mayoral Agenda, available at www.nysafah.org.
This platform proposes sound affordable housing and community development policy for the next mayoral administration. NYSAFAH’s recommendations are based on the unique perspective and expertise of New York’s City’s affordable housing development community, who have been investing in the city’s neighborhoods for over two decades. Our policy proposals will ensure the long-term sustainability of affordable housing, and the responsible use of limited public dollars.
Every New Yorker deserves access to safe, high quality affordable housing. It is imperative that our next mayor make a strong commitment to support the production and preservation of affordable housing as the city continues to grow. These investments will create jobs, grow New York City’s economy, help revitalize neighborhoods, and provide tens of thousands of residents with an affordable place to call home.
Alison Badgett is Executive Director of NYSAFAH. Martin Dunn, Founder and President of Dunn Development Corp. and Kirk Goodrich, Director of Development at Monadnock Construction, are co-chairs of NYSAFAH’s Mayoral Agenda Committee.
If you've ever tried to hail a cab in Manhattan during rush hour, you know it can be frustrating. Add some rain, and it's almost impossible.
But the next time you find yourself fuming over the apparent dearth of cabs, remind yourself of this: of New York City's 13,000 cabs, only 233 are wheelchair accessible. They don't have the option of hailing a cab on a rainy day, or when running late, or simply when they need to get away from the hustle-and-bustle for a few minutes.
We New Yorkers boast that our city is made for everyone, but we fall short when it comes to accessibility. Too many of our streets, sidewalks, playgrounds, places of business, and modes of transportation are difficult to navigate from a wheelchair, or even a walker. As a longtime advocate for accessibility on the West Side, I strongly support Councilman Oliver Koppell's long overdue bill to replace every retiring taxi in the fleet with a new wheelchair-accessible model.
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In addition to having a fleet that is entirely wheelchair accessible, we need to keep improving and expanding the Accessible Dispatch Service, a pilot program that allows people with disabilities to call for an accessible cab. Rather than endure the excessive wait-times and high costs associated with Access-A-Ride, we could move to one taxi service that effectively serves all of us.
Comprehensive accessibility would not only improve the lives of disabled people, it would make our city better for everyone. People who use walkers, strollers, shopping carts, and luggage rollers will all have an easier time getting around. Businesses would benefits from new customers. The city would benefit from more tourists. And as our resident population ages, people would find it easier to stick around.
I am pleased that there appears to be momentum in the City Council to move toward a more wheelchair accessible taxi fleet. It's a great step toward living up to our promise: that New York is truly a city built for everyone.
Mel Wymore is co-founder of Citizens for an Accessible West Side and a candidate for New York City Council, 6th District, Upper West Side. Image by May Michaely, used under Creative Commons license.