April 1, 2015
With the advent of spring comes melting snow, and in some areas that can mean flooding or worse. Some homeowners may find themselves in the way of rising flood waters because of spring showers, storms and other events. What can an FHA borrower do to prepare in case natural disaster strikes near them?
The first thing to do is become familiar with the FHA loan natural disaster policy, found on the FHA official site at FHA.gov. That policy page includes the following introduction:
“Was your home or your ability to make your mortgage payments harmed by an event that the President declared a disaster? You may qualify for relief to help you keep your home. Much of the mortgage industry and The United States Department of Housing and Urban Development are committed to assisting borrowers whose lives and livelihoods are thrown into turmoil by a disaster.”
That turmoil definitely includes financial difficulty for many. “If you can’t pay your mortgage because of the disaster, your lender may be able to help you. If you are at risk of losing your home because of the disaster, your lender may stop or delay initiation of foreclosure for 90 days. Lenders may also waive late fees for borrowers who may become delinquent on their loans as a result of the disaster.”
How does the FHA work with lenders to give borrowers the help they need? According to the FHA official site, it’s a matter of communicating with the lender, in the same way that the borrower should talk to the lender when they know they have been affected by a disaster.
“HUD has instructed FHA lenders to use reasonable judgment in determining who is an “affected borrower.” Lenders are required to reevaluate each delinquent loan until reinstatement or foreclosure and to identify the cause of default. Contact your lender to let them know about your situation. Some of the actions that your lender may take are:
–During the term of a moratorium, your loan may not be referred to foreclosure if you were affected by a disaster.
–Your lender will evaluate you for any available loss mitigation assistance to help you retain your home.
–Your lender may enter into a forbearance plan, or execute a loan modification or a partial claim, if these actions will help retain and pay for your home.
–If saving your home is not feasible, lenders have some flexibility in using the pre-foreclosure sales program or may offer to accept a deed-in-lieu of foreclosure.”
Being proactive and contacting your loan officer as soon as you know your home has been affected by a natural disaster is the best, first step. After that you may need to discuss issues with your insurance company, FEMA (where applicable) and contractors in the event the damage to your home is repairable.
Do you have questions about FHA loans? 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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