Sunday July 23, 2006
Flood victims fear drowning in debt
Some Tier banks offer leniency on loans, payments

TALKING TO CREDITORS

Prepare yourself. Be prepared to explain why you can't make payments, your income and future prospects for income, and other current obligations.

Consider alternatives. Reduced or deferred payments, refinancing or temporarily paying only the interest on a loan may be viable options.

Keep records. Keep track of who you talked to and the agreement.

Stick to it. After negotiating payment plans, stick to your schedule. If you don't, creditors will be less willing to work with you in the future. Creditors also may hire a collection agency to obtain your payments.

Source: University of Arizona Norton School of Family and Consumer Sciences

By My-Ly Nguyen
Press & Sun-Bulletin

The flood waters have receded. Tim and Maureen Syron's two-bedroom, one-story home in Kirkwood was destroyed. And the bills are piling up fast.

"The water reached almost to the ceiling," said Maureen Syron about her home on Kirkwood Gardens Road. "Our whole street is like a war zone."

Her co-workers took up a collection. Relatives gave the family some money. The Red Cross provided $485 for emergency clothing and a week's worth of groceries. The Federal Emergency Management Agency supplied $540, what it considered one month's rent. And though the couple has flood insurance, payment is still weeks or months away, she said.

"Immediately, we were using our credit cards for everything," said Maureen Syron, who with her husband and 15-year-old son have been living with family members in Binghamton since June 28, just after the flooding occurred. "We had to buy toiletries and basic clothing. ... It definitely puts a strain on you. You don't even know what bills you have because everything has been destroyed. I'm paying for things I don't even have now. ... What are you going to do? You don't expect all of a sudden one day to be homeless."

When disaster strikes, some mortgage lenders and other creditors will cut customers some slack, adjusting terms of existing loans, reducing or suspending payments, waiving late fees, offering reduced loan rates and temporarily suspending the report of delinquencies to credit bureaus, to name a few examples.

But there are no guarantees. Consumers must act quickly to notify creditors they may be late on payments due to flood-related circumstances, said John Hall, spokesman for the American Bankers Association.

"If you wait and let them call you, you aren't in control, and they aren't as willing to work with you because you have let it lapse," he said. "When you call, you are showing good will. The creditor is going to want to work with you because it's in their advantage to.

The last thing they want to do is foreclose."

Hall added that lenders outside Greater Binghamton may not even know about the flood disaster affecting the region.

"Put yourself in their shoes," he said. "If you're an 800 number and you're in South Dakota, you may not know anything about the flooding. ... That goodwill makes a difference in how they will move forward. It may stop you from being turned over to a collection agency."

Other penalties for failing to make expected payments include late-payment fees, damage to credit ratings and possibly home foreclosure before repairs or rebuilding even start.

"The bank holds their house as collateral for that mortgage," said Val Sherwood, Binghamton branch manager of the nonprofit Consumer Credit Counseling Service of Central New York. "If they owe a mortgage on the house, they just can't stop paying it just because the house is gone. They're still responsible for that mortgage. We're going to see people forced into bankruptcy."

The New York State Banking Department said it encourages its supervised institutions to "make reasonable efforts to alter or adjust payment terms, to waive fees under extraordinary circumstances, or to grant new loans to borrowers affected by disasters."

Several Greater Binghamton financial institutions are giving flood victims some leniency and leeway in light of extenuating circumstances. The accommodations vary by organization:

* M&T Bank said existing auto, home equity and personal loan customers who are unable to meet their monthly payment due to flooding can call the bank at 1-800-724-2525 and request a loan-payment deferral. All fees will be waived for this service. Small business customers who need to defer payment should contact their business banking relationship manager or branch manager. The bank also is working with mortgage customers, waiving late fees and not reporting payments as late to credit bureaus. Reduced rates on new home equity and personal loans also are available throughout July. Special rates on small business revolving lines of credit are being offered as well.

* GHS Federal Credit Union and SEFCU are promoting disaster relief loans to consumers. GHS' ad says no payments are due for three months, though interest accumulates during that period. SEFCU's ad says its "emergency loan" has an annual percentage rate as low as 5 percent and five months deferred payment. SEFCU said existing home, auto and personal loan customers also can call 1-866-733-2880, ext. 5225, to see if they can defer current loan payments.

* Visions Federal Credit Union said members can apply for a forbearance program that enables them to avoid late charges and defer payments for three to 18 months depending on need. The credit union also is offering a mortgage program with no closing costs and expediting the availability of members' FEMA and insurance checks. In addition, Visions is advertising disaster relief loans with 4.7 percent and 3.7 percent APRs, depending on the term of the loan. Other options exist, Visions said.

"We've got some of our top management people looking into special requests," Visions President and CEO Frank Berrish said. "Based on the situation, there's flexibility."

Sherwood, of the consumer credit counseling agency in Binghamton, urged consumers to focus on their immediate needs first, then contact creditors if necessary.

"You have to prioritize," Sherwood said. "No. 1 is a roof over your head, food in your stomach, transportation to and from work, medical care. It's inevitable that if somebody's paying rent someplace to keep a roof over their head, their mortgage is probably going to go into default. That's why they've got to contact the lender and find out if there is any kind of assistance they can offer. ... Long-term, they'll need to take a long look at their personal situation and make some really tough decisions."

Maureen Syron said she expects her insurance adjuster to deem her house a total loss.

"We'll go on," she said. "We always tried to live within our means. But when I think about starting over, home prices are a lot more expensive than the home we were living in."


2005 Binghamton Press & Sun-Bulletin