by
CNN
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Wildfires, raging floods, tornadoes and hurricanes can destroy your home, but not your mortgage.
The harsh reality is that even if you live in a federally declared disaster area — like those devastated by wildfires in Los Angeles County or battered by hurricanes in North Carolina and other states — you still owe the bank even what’s left on your loan , even though your house no longer exists or is uninhabitable.
However, there are some disaster-related relief programs that can temporarily reduce or suspend your mortgage payment for up to a year and sometimes beyond, depending on your circumstance.
Here’s what you need to know.
The servicer is listed on your mortgage statement and is the first place you should call to learn about your options, which usually involve some form of forbearance.
The types of mortgage relief a servicer can provide are controlled in part by the entity that backs or holds your mortgage. Usually that’s an individual bank or a government agency (e.g. Fannie Mae, Freddie Mac, the Federal Housing Administration, the Veterans’ Administration, etc.) If you’re not sure what it is, your servicer can tell you.
Specific eligibility rules to qualify for forbearance may differ depending on which entity holds or backs your loan, but even if you are delinquent on your loan prior to the disaster, you can still receive forbearance. In the case of Fannie Mae, for example, servicers are expected to provide relief to borrowers in cases of financial hardship, even if they had been delinquent prior to the disaster, said Jenise Hight, vice president of the agency’s lone credit risk policy.
Typically, with a federally backed loan, you will likely get between three and 12 months of forbearance, during which your mortgage payments will be suspended or reduced.
During the forbearance period, you should not be subject to late fees or legal proceedings such as foreclosure.
(For those affected by the Los Angeles area Wildfires, California Gov. Gavin Newsom announced on January 18 that five major banks—Bank of America, Citi, JPMorgan Chase, US Bank and Wells Fargo—will automatically impose a 90-day moratorium on will offer this moment. That will not rule out further relief.
If you don’t name your servicer right away: Check the rules of the entity backing your loan, but Fannie Mae also expects servicers of the loans it backs to automatically provide 90 days of forbearance if they haven’t heard from a borrower, but know The person’s home is located in a presidentially declared major disaster area.
However, during that 90-day period, such borrowers should make it a top priority to call their servicer to explain their situation and achieve longer forbearance.
“It’s very important that the borrower reaches out and stays in constant contact with the servicer,” Hight said.
You will still owe the money for the months your payments were suspended or reduced. But you don’t necessarily have to pay back those arrears as a lump sum when your forbearance expires.
You may be able to work out a new arrangement with your servicer to spread out those back payments over a longer period of time.
“It all depends on a borrower’s facts and circumstances,” Hight said. For example, she explained, if you have a job and can make your regular mortgage payments but simply need more time to pay off the arrears, you may be able to work out a new forbearance plan or spread out the amount you owe forbearance period. for a certain number of months on top of your regular payments.
Or, if you’re still struggling financially and can’t even make your regular payments after forbearance, you can work out a loan modification with the servicer, which could potentially lower your monthly payments in the future, extend the loan term and spread out the delinquencies over the new life of the loan.
Mortgage relief rules for loans backed by Freddie Mac are similar. And that agency notes that even if your home survives a disaster but your job does not, you may still be able to gain forbearance.
When your physical and financial life is turned upside down by an external disaster, it can be difficult to think straight. So if you need help dealing with your mortgage and other disaster-related financial issues, you can find free, experienced help.
Individual lenders and mortgage conveyances can offer you the services of free home advisors. And the Federal Emergency Management Agency (FEMA) and other emergency response organizations can direct you to trusted partners in the arena.
One such group is Operation Hope, which works out of recovery centers set up by FEMA and the American Red Cross. It also offers online services online and via mobile app.
The person helping you can act as an approved third-party representative to negotiate a mortgage settlement with your servicer and help you complete any necessary applications and obtain copies of destroyed documents.
In previous disasters where the group has worked, including Hurricane Helene and the Maui Fires, Operation Hope has found that lenders typically make a decision within 48 to 72 hours of forbearance, said Lance Triggs, president of program operations for the organization. That timeline squares off with a statement sent to CNN by Chase Home Lending, for example: “Once a customer requests to tolerate a disaster, requests will be reviewed within 2 business days and protections will be put in place immediately.”
Operation Hope can also help you negotiate with other creditors and help you secure insurance money.
“Historically, we find that at least 40% of people [we’ve worked with after a disaster are] Underinsured or uninsured,” Triggs said.
If your homeowners insurance policy was revoked or expired just before the disaster, Operation Hope can get on the phone with your old insurer to see if they can retroactively reinstate it or connect you with other resources to try to fill the gap. fill.
