Some of America’s largest banks have agreed to suspend mortgage payments and provide other forms of relief to customers in California over the next three months. Announced by California Governor Gavin Newsom, this latest development will help to protect those who are unable to work as the Coronavirus spreads throughout communities.
The entire state of California is currently under stay at home orders. Only those working in essential businesses and industries are exempt from the lockdown.
Big Banks Are On Board, More Could Join
Newsom announced on Wednesday that one million Californian residents have filed for employment benefits in the last two weeks. Businesses have shut down temporarily or are scaling back their operations to protect public health and comply with the stay at home order.
Banks that have agreed to defer mortgage payments are Wells Fargo, US Bank, Citi, and JP Morgan Chase. Payments will be deferred for three months. Foreclosures and evictions will be halted over the same period. The banks have also agreed not to report on any late payments during this time.
Every Californian is eligible for these relief benefits, regardless of income. Banks have said that homeowners will need to provide documentation when applying for deferment, but details around the process are yet to be finalized.
Smaller Californian credit unions will also offer deferrals while the economy is essentially shut down.
Bank of America has announced that it will defer payments for a month, but its policy could change as the situation evolves. Newsom said in a press conference that “I hope they will reconsider and join those other banks that are willing to do the right thing.”
Banks could create similar initiatives in other states in the coming days.
Banks Must Work Carefully to Minimize Economic Impact
By deferring payments, banks can reduce the long term strain on the economy and potentially prevent foreclosures and default payments during the Coronavirus crisis.
While some economists have predicted that the economy will contract by up to 30% in the second quarter, a recently introduced bill could offer a fast track to recovery. The United States Senate has introduced a $2 trillion stimulus package aimed at supporting businesses, individuals, federal agencies, and the healthcare system during the crisis.
The stock market finished in the green on Wednesday, indicating that efforts by the government and the financial industry are helping to restore confidence
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