USDA RD Relief to Borrowers Affected by Sandy
Investor Update: On November 8, the United States Department of Agriculture (USDA) Rural Development released an announcement entitled Relief to Borrowers Affected by Hurricane Sandy.
Relief to Borrowers Affected by Hurricane Sandy
This announcement describes measures loan holders, servicers, or mortgagees (loan servicers) may employ to provide relief to USDA Rural Development Section 502 Guaranteed Loan Program (GLP) borrowers affected by Hurricane Sandy. Homeowners impacted by the storm may be eligible for temporary relief and the determination of eligibility may require a property inspection. Due to the magnitude and aftermath of the hurricane, loan servicers should inspect properties that secure GLP loans to ascertain the extent of damage and the occupancy status, particularly if contact has not yet been made with the borrower. This is especially true if an appraisal or broker's price opinion was completed before the disaster, or if the property is located in a declared disaster area.
Loan servicers seeking to assist GLP borrowers may pursue any of the relief options referenced in the following USDA recommendations.
1. FORBEARANCE REQUEST: USDA Rural Development encourages GLP loan servicers to extend forbearance alternatives to borrowers in distress as a result of Hurricane Sandy. Careful and precise communication with borrowers should help determine whether their difficulties are directly or indirectly related to Hurricane Sandy, or whether they stem from other sources which must be addressed.
2. FORECLOSURE MORATORIUM: Although the loan servicer is ultimately responsible for determining when to initiate foreclosure, USDA Rural Development requests that holders establish a 90-day moratorium from the date the President declared the disaster on foreclosure actions involving properties affected by Hurricane Sandy. The properties should also be in Presidentially declared disaster areas designated through the Federal Emergency Management Agency (FEMA) as eligible for individual assistance. The foreclosure moratorium applies to the initiation of new foreclosure actions and to foreclosure actions already in process.
Due to the national impact of the hurricane, loan servicers should ensure that all foreclosures scheduled in areas affected by Hurricane Sandy during the moratorium are reviewed prior to sale to ensure that borrowers have not been affected significantly enough by the storms to justify postponement. If a determination is that the property or the borrower has been affected by a hurricane-related circumstance, the initiation of a foreclosure, or the continuation of a foreclosure currently in the liquidation process, should be delayed during the 90-day moratorium period. Loan servicers should exercise good judgment in ensuring the property is not vacant or abandoned before granting a foreclosure moratorium under this authority.
3. LATE CHARGE WAIVERS: USDA Rural Development encourages all loan servicers to waive late charges on loans in the disaster areas.
4. DOCUMENTATION: Holders and servicers should fully document their decisions when loss mitigation servicing actions are provided.
For questions, please contact the Single Family Housing Guaranteed Loan Division by dialing (202) 720-1452 or the Centralized Servicing Center by dialing (866) 550-5887.
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