Mortgage choices after a pure catastrophe

Borrowers have options during the State of Emergency

Tornadoes, hurricanes, earthquakes, floods, forest fires …

As natural disasters become more common and severe, it is advisable to have a plan in place to deal with emergencies.

While this is secondary to personal health and safety, so is your pledged property. If your home is damaged or destroyed, there are options available to help you reduce or suspend monthly payments.

But what are the right steps? Who should you call? How do you prove that you are affected? Here's what you should know.

In this article (continue to …)

Ask for help after a natural disaster

As a general starting point, if you are affected by a natural disaster, you should follow the directions from your local Red Cross or the Federal Emergency Management Agency (FEMA).

Once at risk, homeowners can shift their focus to their property and their mortgage. The first step would be to contact your servicer to report any trouble or damage and get help.

"We encourage residents to seek housing assistance as soon as possible," said Cyndi Danko, chief credit officer for single-family homes at Fannie Mae. "Homeowners should contact their mortgage service providers to discuss forbearance options."

"Both homeowners and renters can learn more about disaster relief resources and receive free personalized assistance by contacting Fannie Mae's Disaster Response Network."

The Disaster Response Network is open to everyone, whether your mortgage is covered by Fannie Mae or not. The network has advisors expertly trained in disaster recovery and HUD approved to assess each borrower's individual situation. According to Fannie Mae, borrowers who call will receive the following:

A needs assessment and personalized recovery plan help you apply for financial assistance from FEMA, insurance and other sources Web resources and ongoing guidance for up to 18 months from experienced disaster relief advisors

Note: In all likelihood, your mortgage company is not the same as your lender. You can almost always find the name of your service provider on your monthly invoice.

Home insurance and remodeling

In addition to reaching out to service providers, borrowers should also check their insurance policy and see what their coverage offers.

After a disaster, homeowners may choose to rebuild rather than move on, and insurance could cover part or all of the repair costs. Homeowners can get a partial payout initially to help with temporary or urgent repairs and to replace damaged items for the full amount, depending on the type of insurance, coverage amount and deductible.

If the borrower decides to pay off the mortgage, the insurance company can write checks to the homeowner and his / her steward. Some lenders may offer to use these funds on the homeowner's mortgage balance. However, repaying your mortgage with these funds is only required under certain circumstances.

If the borrower uses the insurance proceeds to pay off their mortgage and then chooses to rebuild, they may need to take out a construction loan. Home loans usually require a strong credit rating and another permanent mortgage once construction is complete.

Homeowners who choose to do a remodel may be able to apply for adjustments to their insurance benefit if they can demonstrate that the repair costs are higher than originally planned.

Homeowners should work with their servicer to identify their options and develop their best plan. If Fannie Mae owns the borrower's mortgage, its manager will hold the insurance proceeds in an interest-bearing account pending a decision on whether and how to rebuild.

How to get mortgage relief after a natural disaster

Borrowers must face the financial consequences of a devastating weather event.

Similar to the CARES Act programs for Covid-19 sufferers, homeowners affected by a natural disaster are often entitled to injunctive relief. Forbearance is a temporary reduction or suspension of mortgage payments, usually for up to 12 months.

After the payment interruption, borrowers can make up for the missed payments through a number of options, including Disaster Payment Deferral. This allows borrowers to defer payments until their mortgage due date or sooner when the property is sold or transferred, refinancing, or paying out the interest-bearing unpaid principal.

Borrowers will not incur any late payment fees or the risk of foreclosure or other legal proceedings during the forbearance. Your mortgage company can help you find the right program.

Fannie Mae also says that she has authorized servicers to indulge up to 90 days – even without contacting the homeowner – if the servicer believes a home has been affected by a natural disaster.

Homeowners who currently have a coronavirus-related leniency plan who later suffer damage from a natural disaster may still be eligible for assistance. Borrowers in this situation should contact their mortgage service provider to discuss the options.

The bottom line is that borrowers should contact their insurance provider and service provider after any weather-related emergency in their home. And all homeowners and renters can call 877-542-9723 or visit for free access to Fannie Mae's Disaster Response Network.

The information contained on The Mortgage Reports website is for informational purposes only and is not intended to be an advertisement for the products offered by Full Beaker. The views and opinions expressed are those of the author and do not reflect the policies or position of Full Beaker, its officers, parents or affiliates.

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