November 20, 2012
Whenever a natural disaster strikes and a federal disaster area is declared in the affected zone, the FHA and HUD have issued guidance about foreclosure moratoriums, assistance for those trying to recover from the disaster and other details. These announcements are usually issued as Mortgagee Letters and come out on an as-needed basis.
But now the FHA has codified its position on federally declared disaster areas in general, thanks to the new FHA/HUD Mortgagee Letter, 12-23, “Guidance for FHA-Approved Mortgagees Originating and Servicing Mortgages in Presidentially-Declared Major Disaster Areas”.
According to the announcement, “This Mortgagee Letter (“ML”) provides general guidance to FHA-approved mortgagees with loans in any Presidentially-Declared Major Disaster Areas (“Disaster Areas”). Further specific guidance for individual disasters may be communicated as necessary.” This general guidance includes, “A moratorium on foreclosures on properties located in Disaster Areas is in effect for a ninety (90) day period from the date of the Disaster Area declaration. The moratorium applies to the initiation of foreclosures AND foreclosures already in process. For additional guidance, see ML 05-33.”
The FHA adds extra consideration above and beyond the foreclosure moratorium, instructing lenders, “servicers should consider affected mortgagors for the full range of loss mitigation options such as special forbearance, mortgage modification, partial claim, FHA HAMP or other refinance options, and waiver of late charges to assist FHA homeowners affected by the disaster.”
“After the expiration of the foreclosure moratorium, lenders are encouraged to consider alternatives to foreclosure such as pre-foreclosure sales and deeds in lieu of foreclosure if the homeowner is not in a position to ‘cure’ the mortgage delinquency. Refer to ML 00-5 for FHA program requirements and incentive payments associated with the above referenced servicing approaches.”
The new Mortgagee Letter makes the as-needed guidance issued by the FHA and HUD a more permanent set of instructions borrowers and lenders may count on in times of a natural disaster. For more information on these changes or to request more information about FHA help following a natural disaster, contact the FHA directly at 1-800 CALL FHA.
Do you have questions about how FHA loans work? Ask us in the comments section.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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