Lenders have been told to give the benefit of the doubt to borrowers who have mortgages on homes in areas affected by Superstorm Sandy.
The guidelines come from Fannie Mae, Freddie Mac and the Federal Housing Administration, which back about 90 percent of new mortgages.
In places where a major disaster has been declared and federal aid to individuals is offered (including all or parts of Connecticut, New Jersey and New York), the following rules apply:
- Case by case, lenders are urged to offer loan forbearance. In a forbearance plan, the lender agrees to let the homeowner make reduced payments (or even no payments at all) for a specified period -- usually six months or less. After the homeowner resumes making full house payments, the borrower must repay the past-due amount by adding extra money to the monthly mortgage payments. Typically, lenders want this delinquency repaid quickly -- in Fannie's words, "as soon as possible without imposing undue hardship on the borrower."
- Lenders must waive late-payment charges if the borrower is late because of lost income or added expenses due to the disaster, or if the borrower is awaiting an insurance settlement. On a related note, lenders may not report delinquencies to credit bureaus if the late payments are attributed to disaster hardship.
- FHA-insured mortgages in the affected area are under a 90-day foreclosure moratorium. The FHA will offer 203(h) mortgage insurance to homeowners who lost their homes and want to rebuild either on the same lot or elsewhere, and 203(k) rehabilitation mortgages, which include loan money to pay for home repairs.
We'll have more on mortgages and how Sandy's aftermath is affecting homeowners, homebuyers and home sellers later in the week. If you have any questions about how Sandy might affect you, feel free to tweet at me @HoldenL.