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May 5th, 2011 (Modified on June 2nd, 2011)

Tornado victims to get mortgage relief

by Peter Miller


tornadoThe news from Alabama, Mississippi and other states hit by the April tornadoes is hardly good. As this is written, more than 300 people have died and property damages will total billions of dollars. Utilities are out and may well be out for weeks in the worst-hit areas, meaning that it will take a substantial amount of time to recover.

During events such as these, most mortgage lenders and servicers extend as much help as possible to victims in order to re-establish local communities.

Both HUD and Freddie Mac have issued press releases outlining the types of mortgage relief that will be made available to those affected by the tornadoes.

Help is available

According to Freddie Mac, “Freddie Mac and the nation’s mortgage servicers will work together to advance available mortgage relief to homeowners affected by these devastating storms,” said Freddie Mac Executive Vice President of Single-Family Business, Operations and Technology, Anthony Renzi. “We have instructed our servicers to work with borrowers with Freddie Mac-owned mortgages affected by these terrible storms to grant forbearance on their mortgage payments for up to one year.”

According to HUD, “Families who may have been forced from their homes need to know that help is available to begin the rebuilding process,” said [HUD Secretary Shaun] Donovan. “Whether it’s foreclosure relief for FHA-insured families or helping these counties to recover, HUD stands ready to help in any way we can.”

There’s little doubt that Fannie Mae will announce similar mortgage relief measures soon.

Assistance is not automatic

If you live in an impacted area–or you know someone who is–it’s important to understand that mortgage help is not automatic. There are some steps that need to be taken:

1. Contact the lender or servicer. They likely can work from your address but it would be helpful to have loan numbers on hand.

2. Know the type of assistance that’s available. In the Freddie Mac press release they talk about no payments for up to 12 months, suspending foreclosures and evictions for up to 12 months, waiving penalties and late fees, and not reporting delinquencies caused by the storm to the credit bureaus.

In practice there are a wider range of options available. In effect, mortgage lenders and servicers may be empowered to work things out when standardized options are impractical, but you need to know which questions to ask.

For instance:

Can I get a mortgage payment suspension? If so, for how long?

Can I obtain lower monthly payments? Again, if so, for how long?

What happens to the payments I can’t make? Will they be added to the back of my mortgage?

What about any unpaid interest? Again, will this be added to the back of my mortgage?

How about late fees? Will they be waived\?

How will my credit be impacted?

When will you get insurance money?

Lenders typically will not file negative items which are plainly related to a disaster, but you need to find out for sure.

As for insurance coverage, this depends on the type of coverage you have and the ability of insurance adjusters to evaluate damage. Lenders require that you carry fire, theft and liability insurance as a condition of getting a mortgage so victims have some coverage. This is property insurance, not mortgage insurance. What exactly is covered is a matter to discuss with your insurer. In the best case scenario, property insurance will provide funds to rebuild or replace the existing property plus all related expenses.

Can mortgage insurance help?

Mortgage insurance may come into play if the mortgage debt is not fully paid. If you bought with less than 20 percent down, contact your private mortgage insurance (PMI) company–they may be able to negotiate with your lender or servicer on your behalf. Also, if you have funding insured by the FHA, you can speak with a HUD-approved counselor at https://www.hud.gov//offices/hsg/sfh/hcc/hcs.cfm or by calling (800) 569-4287. VA borrowers may have special protections under the Servicemembers Civil Relief Act. For specifics, go to www.benefits.va.gov/homeloans or call (877) 827-3702.

More questions you need to get answered

Who gets the property insurance money, me or the lender? For that, you must speak with your insurance agent.

What about temporary living quarters? This expense may be covered by your homeowner’s insurance.

Where’s your evidence? Take as many pictures of the property as possible to document losses.

How about evictions? In disaster areas there are no sheriffs available for evictions because there are bigger concerns.

Can you get a loan modification? If you’ve been looking for a loan modification, ask your lender if better terms are available given current mortgage rates, especially if you’ve also lost your job.

In the end, one of the best things you can do is to contact FEMA–go to the Federal Emergency Management Agency or call them at (800) 621-3362 or TTY (800) 462-7585 for individuals with speech or hearing disabilities.

Peter G. Miller is syndicated to more than 100 newspapers and operates the real estate news site, OurBroker.com.

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