Banks institution in Puerto Rico are offering moratorium programs to homeowners to deal with the financial hardship that Hurricane Maria has inflicted to the Puerto Rico's fragile economy. If you are a mortgagor, here there are some tips before you stop paying your mortgage.
In the past 4 weeks, I have been receiving phone calls from clients asking for legal advice on the moratorium programs offered by bank institutions in Puerto Rico to help manage mortgage loan payments that may be in delay as a consequence of Hurricane Maria. While legal advice will vary on a case by case basis, there are some general tips that everyone should consider prior to deciding to participate in any moratorium programs offered by a bank. Below I list a few general tips that will help you evaluate whether joining your bank’s moratorium programs is the right decision for you and your family on the long term:
Before you stop making payments
“you should ask your mortgage banker if your mortgage loan qualifies.”
Before you stop making payments on your mortgage, you must know that not all mortgage loans qualify for the moratorium programs. As a first step, you should ask your mortgage banker if your mortgage loan qualifies.
Once you know that your mortgage loan qualifies, you need to ask who is your mortgage investor. As you may know, usually your mortgage banker is not the real owner of your mortgage. Instead, the mortgage banker acts as a provider of service to the investor who is the one that has the final word on what they may offer you and how to act over your mortgage. Therefore, the types of moratorium programs that a mortgage banker may offer will depend mostly on what the investor is willing to offer or not. It is important to understand that a moratorium is a period where you are not going to be making payments towards your mortgage. In addition, you must understand what payment plans will your mortgage banker be able to offer once the moratorium period ends.
Before joining a moratorium program
"What are the terms and conditions for each available options?"
Thus, before joining a moratorium program, ask your mortgage banker directly what are the available options for the long term and what are the terms and conditions for each one. This should give you a clear picture of what your financial commitments will be once the moratorium ends.
Two of the most commonly sought programs that clients are requesting legal advice on are:
Installment payment plans
Deferment payment to the last term of the mortgage
Installment payment plans
For Installment payment plans you should make sure to ask your mortgage banker about how many installments will the payment plan be divided into. Remember that the total number of installments is going to directly impact your future monthly mortgage payment.
Deferment payment plans
The Deferment payment plans are the most attractive options available since you will not have to deal with the unpaid balance right away. However, you should ask your mortgage banker if that deferment requires a modification of your loan. If that is the case, you should evaluate the new terms and conditions of the modification. Keep in mind that a modification it might require to perform a new closing. Therefore, ask your mortgage banker who is going to cover the closing cost of the modification. Also be aware the current status of the property insurance policy and taxes in case that the new modification will required changes or additional payments for unpaid taxes.
Credit Report
"Different investors have different rules on how they report to th
e credit agencies"
Another important aspect that you need to consider is how your participation in the moratorium program affect your credit record. Different investors have different rules on how they manage these and on how to report it on your credit history. Therefore, keep this in mind and ask your mortgage banker directly about it. These and other questions must be assessed prior to making the decision of stopping your payments on your mortgage loan. It is very important that you contact your bank institution and become well informed about the long term effects these programs may have on your future mortgage payment plan and credit history. For further questions you may contact our legal services at 787-764-5517 or email despachotimothee@gmail.com.
Francisco J. Timothée-Vega, ESQ, MBA