With tens of thousands of homeowners in four states displaced by Hurricane Katrina, some banks and finance companies are allowing customers to forgo monthly mortgage payments for 90 days without incurring late fees or other penalties.
This forbearance, as the industry calls it, is also being extended by some banks to home equity lines, credit card balances and student and auto loans.
Banks are, in some cases, waiving ATM fees.
The Mortgage Bankers Association, an industry trade group, estimated that 360,000 single-family mortgages in the four states were affected by the hurricane and its floods.
With many homeowners unsure how they’ll make their payments in the months ahead, banks are setting up toll-free phone numbers to allow customers to call in and get a reprieve. In some cases, banks will increase credit lines on credit cards or home equity lines of credit.
Customers will be able to get through to their banks by phone even if they do not have specific account information. They should be prepared to offer personal data like names, addresses and social security numbers.
Banks and other lenders may already have a good idea about which home loan payments may be late because they cull mortgage data by postal ZIP code.
“We are coding up all of our credit card accounts and mortgage loans. If they are in affected ZIP codes, we are flagging them,” said Thomas Kelly, spokesman for the consumer division of JPMorgan Chase & Co. “We realize these are extraordinary circumstances but we will work with you.”
“Forbearance is being urged. This means a ’beneficial departure from existing practices’ to benefit people hurt by a natural disaster,” said Douglas Duncan, chief economist at the Mortgage Bankers Association.
Lenders are being encouraged to suspend loan payments for borrowers for up to three months. Also, mortgage payments can be lowered for up to 18 months and, in some cases, lenders can create longer payback plans.
The Federal Deposit Insurance Corp., which insures deposits at nearly 9,000 banks and savings associations, this week asked banks to allow customers to restructure loans, ease terms for new loans and help customers get short-term loans for living expenses until insurance proceeds are received.
Some banks like Wells Fargo & Co., which has 24 mortgage bank branches in Alabama, Florida, Louisiana and Mississippi, are setting up special customer call centers. Wells Fargo said it is increasing home equity lines of credit for customers affected by the hurricane.
“We have a special team that has been receiving calls since Wednesday. These are staffers who are trained with customers in disaster situations,” said Deborah Blume, spokeswoman for Wells Fargo’s mortgage business.
Blume said customers should be prepared for “many financial related questions,” but the bank has copies of financial paperwork such as tax forms that borrowers may have lost in the storm.
At AmSouth Bancorp, communications are in a disarray, but the bank’s spokesman said some branches have been reopened in neighborhoods without power. The bank was able to truck in large generators to power its offices.
A spokesman for AmSouth, which has offices in Alabama, Florida, Mississippi, Louisiana, Georgia and Tennessee, said the bank is offering ATM fee waivers and customers with home equity lines of credit do not have to make a minimum payment. Also, AmSouth customers with an installment loan can skip a payment without incurring a fee.
AmSouth’s spokesman said some consumers scattered from their homes, are using public libraries to contact banks or find out about branch locations.
While many borrowers may be tempted to contact housing agencies Freddie Mac and Fannie Mae, they are actually better off going directly to their lender because that lender will be able establish the forbearance and set up any new loan terms.