FHA Disaster Relief Options
Investsor Update: On November 29, the Federal Housing Administration (FHA) provided consumer-friendly advice to homeowners with FHA-insured mortgages whose homes were damaged or destroyed, in a release entitled Disaster Relief Options for FHA Homeowners. (Please note this is not new guidance.)
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 is committed to assisting borrowers whose lives and livelihoods are thrown into turmoil by a disaster.
If you can't pay your mortgage because of what happened, 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. Just follow the four steps below to see if help may be available to you. You are strongly encouraged to contact your lender for further information, and to see if you are eligible for relief.
Step One - Answer Four Basic Questions
1. Did my expenses rise or income fall?
2. Were these changes in my finances caused directly or substantially by
3. Have I missed any mortgage payments?
4. Am I without other resources, such as insurance settlements, to catch up?
If you answered "yes" to all of these questions, and you have a conventional or VA mortgage, contact your lender. If you have an FHA-insured mortgage, please continue reading.
Step Two - See If and How You Can Participate in FHA Disaster Relief
The next step is to determine if you are one of the affected borrowers as described below. You must be in one of three basic groups in order to qualify for a moratorium on foreclosure:
1. You or your family live within the geographic boundaries of a Presidentially
declared disaster area, you are automatically covered by a 90-day
2. You are a household member of someone who is deceased, missing or
injured directly due to the disaster, you qualify for a moratorium.
3. Your financial ability to pay your mortgage debt was directly or substantially
affected by a disaster, you qualify for a moratorium.
If Your FHA Loan Was Current before the Disaster but Now You Can't Make Your Next Month's Payment
This special program is designed to help borrowers who are at risk of imminent foreclosure, so a moratorium won't apply to your situation. However, if your inability to pay your loan resulted from the disaster, your lender may waive any late fees normally charged and let you know about other options. Also, if you foresee ongoing problems in making your mortgage payments resulting from changes in your financial status, you should contact your lender immediately.
How Can This FHA Disaster Relief Help Me?
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 special forbearance plan, or execute a loan modification or a partial claim, if these actions are likely to help reinstate your loan.
- If saving your home is not feasible, lenders have some flexibility in using the preforeclosure sales program or may offer to accept a deed-in-lieu of foreclosure.
Step Three - Take Action to Qualify for Foreclosure Relief
A foreclosure moratorium applies only to borrowers who are delinquent on their FHA loan. If you are current on your loan payments, then you should continue to make them. When contacting your lender for further instructions, please be prepared to provide them information about disability or other insurance that may be available to assist you in making your payments.
FHA lenders will automatically stop all foreclosure actions against families with delinquent loans on homes within the boundaries of a Presidentially declared disaster area.
If you were physically or financially impacted by the disasters and are in default or foreclosure, contact your lender immediately to request assistance.
Borrowers who were injured or whose income relied on individuals who were injured or died in the disaster will be asked for documentation such as medical records or death certificates, if available. Your lender will ask you for financial information to help evaluate what assistance can be provided to you to reinstate your loan.
FHA Loans Already in Foreclosure
It is very important that you notify your lender to be sure that they realize you are an affected borrower. Your lender may request supporting documentation and use it to determine if you meet the relief criteria. Once identified as an affected borrower, foreclosure action may be stopped for the duration of the moratorium period.
Step Four -If Your Lender Is Unable to Assist You
HUD is confident that your mortgage lender will make every attempt possible to assist you. If you are not satisfied after discussing possible relief actions with your lender, please call a HUD-approved counseling agency toll free at (800) 569-4287 or contact HUD's National Servicing Center.
To view the online release, please click here.
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