Paying your mortgage after a natural disaster -- Page 2

Utimately it is up to the borrower to bring the extenuating circumstances to the lender's attention.

"Hopefully with Katrina, no one is out of touch and the lender will take into consideration your situation," says Claus, whose South Florida company is well-acquainted with the aftermath of tropical storms.

"But you don't want assume anything, of course. Some of the servicers are out in the Midwest. They don't always understand what we go through. We're local, so we know it, we see it, we feel it."

Finding mortgage help
If you find you are going to have trouble making your mortgage payments following a disaster, you have some options.

The federal government removes the threat of foreclosure, at least temporarily. After Hurricane Dennis struck Alabama, Mississippi and Florida in July, the U.S. Department of Housing and Urban Development reminded mortgage servicers that whenever a region is designated a disaster area by the president, properties within that area cannot be foreclosed upon for 90 days. Even if your home is not directly damaged, HUD officials note that if you can show financial difficulties related to the catastrophe, such as job loss, your mortgage also is covered under the foreclosure moratorium.

You can take advantage of the grace period to track down payment help. Last year, the Federal Emergency Management Agency provided mortgage assistance to homeowners who were victims of catastrophic natural disasters, but that program has been discontinued. A homeowner's best bet now for help in making house payments is usually from state and local resources.

Pennsylvania's 23-year-old Housing and Emergency Mortgage Assistance Program, or HEMAP, for example, is the prototype for federal housing-assistance legislation pending in the U.S. House of Representatives. Other more-local governmental jurisdictions nationwide also offer some limited mortgage payment help, as do many religious organizations and social service groups.

But if after three months, you are still struggling to pay your loan and cannot find sufficient help from mortgage-assistance programs, it's time to talk with your lender.

"We can modify their note and get them back on schedule again, get them current," says Claus. "You've got to be able to work with people. The whole objective is not take people's homes."

The borrower's responsibilities
But a lender won't make loan term changes unilaterally. And you can be assured that banks and other financial institutions aren't going to call every customer to check on his finances.

It's up to you, the borrower, to get your loan restructuring started. The sooner you start the process, the better chance you have to stave off the ultimate worst-case scenario of foreclosure.

Keep in mind, Claus says, that while lenders are generally willing to work with borrowers in difficult times, it's not a one-way process.

"A lot of the directives regarding the handling of loans in disaster areas are based on the understanding that the loan is current, that it's not already 90 days past due," says Claus. "Then it's a whole different ballgame."