September 4, 2019
The Department of Housing and Urban Development is reminding homeowners of the disaster resources available from federal agencies including HUD, the FHA, FEMA, and more.
Those in federally declared disaster areas are eligible for special FHA home loan forbearance and other foreclosure avoidance measures. But loan forbearance and foreclosure avoidance are NOT automatic.
All
Lenders cannot help borrowers who do not do so, and it pays to be proactive, especially where FHA mortgages are concerned.
FHA Foreclosure and Loss Mitigation Policy
FHA lenders are given
When it comes to FHA loan forbearance and foreclosure avoidance in the wake of a natural disaster, the HUD official site advises, “Lenders are required to reevaluate each delinquent loan until reinstatement or foreclosure and to identify the cause of default”.
By getting in touch with your loan officer after a disaster, you can work out your needs and take steps to avoid foreclosure, which may include:
- A moratorium period where your FHA loan may not be referred to foreclosure “if you were affected by a disaster”;
- A mortgage loan forbearance plan, or loan modification;
- A “partial claim” may be an option if doing so will help save the home;
- Pre-foreclosure sales are not uncommon for those who may not have other feasible options;
- Deed-in-lieu of foreclosure may be appropriate in certain cases.
For FHA mortgages, the more quickly you act the bigger your choices are for dealing with missed payments, disaster recovery, etc.
If your home has been damaged or destroyed by a natural disaster in a federally-declared disaster area, you may be able to apply for a home loan to repair or replace such
This loan is known as the FHA 203(h) Rehabilitation Mortgage for disaster victims. The FHA 203(h) can be a new purchase loan or a refinance loan depending on the borrower’s needs.
The FHA official site lists several ways this 203(h) Rehab Mortgage can help homeowners trying to recover:
- No downpayment.
- 100 percent financing.
- Closing costs and prepaid expenses are paid by the borrower in cash OR “paid through premium pricing or by the seller, subject to a six percent limitation on seller concessions” according to the FHA.
The FHA official site advises borrowers to consider applying for an FHA 203(h) Rehabilitation Mortgage in conjunction with an FHA 203(k) Rehab loan (the kind meant for any borrower and not just those in a federal disaster area) as these two types of loans can be used together under the right circumstances.
Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.
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