Fannie Mae and Freddie Mac have agreed to honor New York Gov. Andrew Cuomo’s request for new rules to accelerate the release of insurance proceeds to homeowners affected by Hurricane Sandy.
Fannie and Freddie will reduce restrictions on how banks and mortgage servicers release insurance money to homeowners.
Following the agreement the New York Department of Financial Services has sent letters to banks and mortgage services pledging “they take full advantage” of the GSEs new discretion by adjusting their policies “and immediately disburse money to New Yorkers for home repairs.”
Cuomo said he expects the agreement will eliminate much of the red tape that has delayed recovery efforts in the past months and speed up the release of home repair money.
“Over the past three months, banks and mortgage servicers have told us that they could release much more insurance money” to Sandy victims if Fannie and Freddie “gave them the discretion to do so,” said New York superintendent of financial services, Benjamin Lawsky.
Earlier this month the Department of Financial Services found that banks were holding more than $200 million in insurance funds from Sandy victims and asked Fannie and Freddie—who jointly own approximately 65% of New York mortgages—to revise their rules in order “to provide banks and mortgage servicers with even more discretion to release funds.”
“Fannie and Freddie have now held up their end of the bargain. It is time for the servicers to keep their promise,” Lawsky said.
So far JPMorgan Chase, Bank of America and CitiMortgage have already informed the department they will now advance 50% of the total insurance proceeds directly to all current borrowers.
JPMorgan Chase will immediately disburse an additional $5 million to $7 million to its customers. Wells Fargo, which has advanced 50% of the total insurance proceeds up front, has now pledged to advance 75% of the proceeds to current borrowers without requiring documentation or an inspection, or $40,000, whichever is greater.