Picking up the pieces after a natural disaster can be confusing and frustrating, and that’s only compounded now with the ongoing pandemic.
For homeowners facing property damage after a hurricane, there might be questions about making mortgage payments, especially if you have additional housing costs because your home is uninhabitable after a storm.
The good news is that most mortgage lenders will work with homeowners, and with new rules as a result of COVID-19, some relief applies to nearly all, no questions asked. Options include:
- A temporary mortgage payment hold
- Special financing to rebuild a damaged home
- Freeze of a foreclosure in progress
Find the right financial relief program quickly
As soon as you can, take these steps to ensure you’re getting all the benefits available to you and to avoid problems down the road.
Prepare to call your lender
Before you call the bank or other financial institution that holds your mortgage, try to gather as much information about your financial situation and mortgage as possible. It’s important to lead the conversation knowing how much help you need and what you can afford to pay on your mortgage each month. This not only helps the lender assess what you qualify for, but also prevents you from taking on unnecessary debt.
Keep in mind, many lenders are currently offering flexible mortgage repayment options as part of their ongoing coronavirus response.
Once you have your information in hand, track down and call your lender for help. It’s safer than clicking on an “apply here” link in a spam email advertising mortgage relief, and more direct.
The lender that closed your loan may not be the company that services it today, so check your most recent mortgage statement to get that information. Once you figure out who services your loan, go to the lender’s home page or news release section to see whether it has made an announcement about providing disaster relief services, or call customer service.
Know your mortgage payment options after a disaster
Homeowners affected by a natural disaster such as a flood, hurricane, fire or tornado might be eligible for some mortgage relief options. Here are some key answers to questions about how they can get help:
1. What is mortgage payment forbearance and how do I get it?
In a forbearance, your loan servicer will suspend payments for up to 12 months, particularly if you have a government-backed mortgage through Fannie Mae or Freddie Mac. Typically, lenders offer 90 days of mortgage forbearance after a major storm, with an option for some homeowners to extend further based on their situation and if their loan was previously in good standing, says Sara Singhas, director of Loan Administration for the Mortgage Bankers Association.
Some lenders put forbearance into effect immediately while others require homeowners to opt in, Singhas says.
Again, many lenders have expanded forbearance policies because of the pandemic, so be sure to talk to your mortgage servicer about which policies provide the most flexibility in your situation.
2. Will mortgage forbearance hurt my credit?
Under the new COVID-19 rules, you won’t incur late fees or have a delinquency reported to the major credit bureaus during a forbearance period. Make sure to ask your lender about this before you accept assistance.
3. Will I have to make up the missed mortgage payments after forbearance?
Some lenders combine mortgage forbearance with reinstatement or a repayment plan to bring you current on your loan. Reinstatement requires a lump-sum payment by a certain date to become current. A repayment plan lets you make up missed payments over a fixed period by adding a portion of your past-due mortgage payments to your regular monthly payment when your forbearance period ends.
4. What is a loan modification?
After your forbearance period is up, you might be unable to afford your monthly mortgage payments. This can happen if your workplace was damaged in the storm or you lost significant business (which can affect your income), or your home repair costs are greater than anticipated, Singhas says.
As a result, your lender may agree to a loan modification, which changes the terms of your mortgage to make repayment more affordable. A modification may lower your principal amount or interest rate or add extra time to your loan term, depending on your situation.
5. Can my house be foreclosed on after a disaster?
It’s typical after a natural disaster for a foreclosure moratorium to kick in for 90 days in areas with a federal disaster declaration, Singhas says. This means a lender halts foreclosure starts for defaulted loans, or stops activity for foreclosures already in progress.
Most lenders make loans through Fannie Mae and Freddie Mac, which means your loan is likely eligible for relief programs offered by the government as long as you’re in a disaster area declared by the Federal Emergency Management Agency (FEMA).
If you have a loan insured by the Federal Housing Administration (FHA), you may be eligible for forbearance, a loan modification or a 90-day delay in foreclosure to help you catch up on payments.
Note that there is currently a foreclosure moratorium in effect through at least the end of August as a result of a presidential executive order in response to the pandemic.
Here are key government disaster resources:
- If Fannie Mae services your loan, visit this link for more information.
- If Freddie Mac services your loan, visit this link for more information.
- If you’re not sure whether Fannie or Freddie backs your mortgage, this government website has information to help you make a determination.
- If your mortgage is FHA-insured, call the National Servicing Center at (877) 622-8525. For home loans backed by the U.S. Department of Veterans Affairs, call (877) 827-3702 to speak with a loan technician.
- The Consumer Financial Protection Bureau (CFPB) also offers a helpful resource page for homeowners impacted by natural disasters.
What not to do after a natural disaster
“Relief” doesn’t mean your lender is forgiving your mortgage debt. Even with the forbearance programs backed by the government, the amount that is deferred will still be owed.
Here are a few things homeowners should not do if they’re impacted by a natural disaster:
Don’t stop making mortgage payments without talking to your lender
If your home is not livable or your job was affected by a natural disaster and you can’t make mortgage payments, the worst thing you can do is to ignore the bills without talking to your lender. Don’t assume they know the condition of your home or your employment status.
If you stop making payments without making a plan with your lender, it will affect your credit, you’ll rack up late fees and it can put your house on the foreclosure track.
Talk to your lender as soon as possible, as you might qualify for an assistance program or forbearance.
Don’t fall for mortgage scams
Scammers try to capitalize on natural disasters to trick consumers into paying them with promises of mortgage help that will never come. Be cautious of calls from people claiming to offer mortgage relief on behalf of a government agency or lender, or asking for fees upfront for a loan or service.
Government employees never charge fees to discuss assistance options, and will never ask for payment or financial information, according to the CFPB.
When talking with your lender, ask for written confirmations and contact information if you have any follow-up questions or concerns to reduce your potential wait time. Always get contracts for relief programs in writing and, when possible, store a copy digitally (in the cloud) so you can access it on the go.