May 11, 2011

Special mortgage relief for FHA borrowers in disaster areas

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In the wake of disaster, the last thing you should be thinking about is a pending foreclosure.  The Federal Housing Administration (FHA) is reminding all of its mortgage lenders that a 90-day freeze on foreclosures automatically goes into effect on FHA-insured homes in Presidentially Declared Disaster Areas.  President Obama has declared certain counties in Alabama, Oklahoma, Mississippi, Georgia, Tennessee, Arkansas, Iowa, Missouri and the Commonwealth of Kentucky major disaster areas.  Not only does this allow HUD to place a 90-day freeze on FHA-insured homes in foreclosure but it allows the Department to speed federal disaster assistance to the affected areas.

 Here’s what it means to you, the homeowner.  If you…

  • live in one of the areas that has been declared a disaster by the President
  • have an FHA-insured mortgage loan
  • have problems making your mortgage payments

your lender cannot foreclose for any reason for at least 90 days and must make special efforts to help you keep your mortgage and your home.  If you have questions, contact your lender/servicer or call HUD’s National Servicing Center Hotline: 877 – 622 – 8525.

Homeowners in the affected areas are also eligible for HUD’s Section 203(h) program which provides FHA insurance to disaster victims who have lost their homes and face the task of rebuilding or buying another home.  The Section 203(k) program allows homeowners who have a damaged home to finance the rehabilitation of their existing single-family home.

HUD also offers the Section 108 program to state and local governments for housing rehabilitation, economic development and repair of public infrastructure.  State and local government are also given the flexibility to redirect millions of dollars from the Community Development Block Grant and HOME program to address critical needs, including housing and services for disaster victims.

Read about these and other HUD program designed to assist disaster victims.

3 Responses to Special mortgage relief for FHA borrowers in disaster areas

  1. Interesting situation. No mention of the homeowner’s insurance and involvement in the circle of ownership. Had not given much thought to it before this new situation. Those already foreclosed on and moved out of course would not benefit directly but if the mortgage holder receives the replacement value of the home they could benefit beyond what they were owed. If the loan was then paid off through the insurance purchased and paid by the homeowner (it is an annual payment) all those previously “bad” loans should have to be reported as paid in full, creditwise. And what of the excess insurance coverage payment? On the one hand, the bank owned the home, on the other the coverage was paid for by the borrower. Unless of course the insurance is cancelled at the time of foreclosure and the banks have to obtain their own insurance. In which case any unused premium should have been returned to the borrower.

    If not, any excess coverage should be paid to the homeowner who was foreclosed on.

    Then there is the question of those foreclosures that are in the various pipelines. Being turned over to the insurer, either government or private. Although the apparent slowness of the process makes it doubtful there would be any homeowner’s policy on those.

    While the mortgagor has an interest in the policies, their interest is legally limited to the amount due from the borrower. So the question is who will benefit from the overinlated, overpriced insurance policies they have been selling to homeowners the past few years? Will it be a windfall for the banks, an escape for the insurers, or God’s hand of help for the suffering? My bet is it will be a fight between the insurers and the banks. They are the ones who have all the on staff attorneys at hand. The beleagured home owners will need some class action attorneys on their side if they have any chance of competing in the battle.

    Of course then there is always the fact that the banks and insurers own each other. Travelers/Citibank, etc. so they are likely in a win-win situation where their accountants just have to decide how to divide up the windfall.

    Of course God never has the intention of helping corporations. Regardless of how our Courts rule they truly do not exist in his eyes.

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